PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
AMERICAN
CENTURY
GROUP
Value
Equity Income
INVESTOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP(R) AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS GROWTH FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS INTERNATIONAL FUNDS
Value o Equity Income
PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
VALUE o EQUITY INCOME
INVESTOR CLASS
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
American Century Capital Portfolios, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Two of the funds that invest
primarily in equity securities are described in this Prospectus. Their
investment objectives are listed on page 2 of this Prospectus. The other funds
are described in separate prospectuses.
Through its Investor Class of shares, American Century offers investors a
full line of no-load funds, investments that have no sales charges or
commissions.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference.
To obtain a copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY VALUE FUND
The investment objective of Value is long-term capital growth. Income is a
secondary objective. The fund seeks to achieve its investment objectives by
investing in securities that management believes to be undervalued at the time
of purchase.
AMERICAN CENTURY EQUITY INCOME FUND
The investment objective of Equity Income is the production of current
income. Capital appreciation is a secondary objective. The fund attempts to
achieve its objectives by investing primarily in income-producing equity
securities. In the pursuit of its objectives, the fund seeks a yield that
exceeds the yield of securities comprising the Standard & Poor's 500 Composite
Stock Price Index.
There is no assurance that the funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Transaction and Operating Expense Table.......................4
Financial Highlights..........................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds..............................7
Value......................................................7
Equity Income..............................................7
Policies Applicable to Both Funds..........................7
Other Investment Practices, Their Characteristics
and Risks..................................................8
Foreign Securities.........................................8
Equity Securities..........................................9
Forward Currency Exchange Contracts........................9
Portfolio Turnover.........................................10
Repurchase Agreements......................................10
Index Futures Contracts....................................10
Derivative Securities......................................11
Portfolio Lending..........................................12
When-Issued Securities.....................................12
Short Sales................................................12
Rule 144A Securities.......................................12
Performance Advertising.......................................13
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments..................................14
Investing in American Century.................................14
How to Open an Account........................................14
By Mail..................................................14
By Wire..................................................14
By Exchange..............................................15
In Person................................................15
Subsequent Investments.....................................15
By Mail..................................................15
By Telephone.............................................15
By Online Access.........................................15
By Wire..................................................15
In Person................................................15
Automatic Investment Plan..................................15
How to Exchange from One Account to Another...................15
By Mail..................................................16
By Telephone.............................................16
By Online Access.........................................16
How to Redeem Shares..........................................16
By Telephone.............................................16
By Mail..................................................16
By Check-A-Month.........................................16
Other Automatic Redemptions..............................16
Redemption Proceeds........................................16
By Check.................................................16
By Wire and ACH..........................................16
Special Requirements for Large Redemptions.................17
Redemption of Shares in Low-Balance
Accounts...................................................17
Signature Guarantee...........................................17
Special Shareholder Services..................................17
Automated Information Line...............................18
Online Account Access....................................18
Open Order Service.......................................18
Tax-Qualified Retirement Plans...........................18
Important Policies Regarding Your Investments.................18
Reports to Shareholders.......................................19
Employer-Sponsored Retirement Plans and
Institutional Accounts.....................................20
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................21
When Share Price Is Determined.............................21
How Share Price Is Determined..............................21
Where to Find Information About Share Price................22
Distributions.................................................22
Taxes.........................................................22
Tax-Deferred Accounts......................................22
Taxable Accounts...........................................22
Management....................................................23
Investment Management......................................23
Code of Ethics.............................................24
Transfer and Administrative Services.......................24
Distribution of Fund Shares...................................25
Further Information About American Century....................25
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Value
Equity Income
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases....................... none
Maximum Sales Load Imposed on Reinvested Dividends............ none
Deferred Sales Load........................................... none
Redemption Fee(1)............................................. none
Exchange Fee.................................................. none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees.............................................. 1.00%
12b-1 Fees.................................................... none
Other Expenses(2)............................................ 0.00%
Total Fund Operating Expenses................................ 1.00%
EXAMPLE
You would pay the following expenses on a 1 year $10
$1,000 investment, assuming a 5% annual return and 3 years 32
redemption at the end of each time period: 5 years 55
10 years 122
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Other expenses, which includes the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were 0.0111 of 1% of average net
assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The funds offer
three other classes of shares, primarily to institutional investors, that have
different fee structures than the Investor Class, resulting in different
performance for the other classes. For additional information about the various
classes, see "Further Information About American Century," page 25.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
VALUE
The Financial Highlights for each of the periods presented have been
audited by Ernst & Young LLP, independent auditors, whose report thereon appears
in the fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The annual report contains additional
performance information and will be made available upon request and without
charge. The information presented is for a share outstanding throughout the
years ended March 31, except as noted.
<TABLE>
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.................................. $5.46 $4.98 $5.01
Income from Investment Operations
Net Investment Income(2) ........................................... .13 .12 .08
Net Realized and Unrealized Gain (Loss) on Investment Transactions.. 1.34 .75 (.04)
Total from Investment Operations.................................... 1.47 .87 .04
Distributions
From Net Investment Income.......................................... (.12) (.12) (.07)
In Excess of Net Investment Income.................................. (.01) -- --
From Net Realized Gains on Investment Transactions.................. (.48) (.27) --
Total Distributions................................................. (.61) (.39) (.07)
Net Asset Value, End of Period......................................... $6.32 $5.46 $4.98
Total Return(3).....................................................28.06% 18.56% 0.83%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets................... .97% 1.00% 1.00%(4)
Ratio of Net Investment Income to Average Net Assets................ 2.17% 2.65% 3.37%(4)
Portfolio Turnover Rate............................................. 145% 94% 79%
Average Commission Paid per Investment Security Traded..............$.0409 --(5) --(5)
Net Assets, End of Period (in thousands)............................$881,885 $348,281 $87,798
</TABLE>
(1) September 1, 1993 (inception) through March 31, 1994.
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gains distribution, if
any.
(4) Annualized.
(5) Not computed for the period indicated.
Prospectus Financial Highlights 5
FINANCIAL HIGHLIGHTS
EQUITY INCOME
The Financial Highlights for each of the periods presented have been
audited by Ernst & Young LLP, independent auditors, whose report thereon appears
in the fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The annual report contains additional
performance information and will be made available upon request and without
charge. The information presented is for a share outstanding throughout the
years ended March 31, except as noted.
<TABLE>
1996 1995(1)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period.................................. $5.42 $5.00
Income from Investment Operations
Net Investment Income(2) ........................................... .20 .09
Net Realized and Unrealized Gain (Loss) on Investment Transactions.. 1.13 .44
Total from Investment Operations.................................... 1.33 .53
Distributions
From Net Investment Income.......................................... (.19) (.09)
In Excess of Net Investment Income.................................. (.01) --
From Net Realized Gains on Investment Transactions.................. (.45) (.02)
Total Distributions................................................. (.65) (.11)
Net Asset Value, End of Period......................................... $6.10 $5.42
Total Return(3)..................................................... 25.67% 10.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets................... .98% 1.00%(4)
Ratio of Net Investment Income to Average Net Assets................ 3.51% 4.04%(4)
Portfolio Turnover Rate............................................. 170% 45%
Average Commission Paid per Investment Security Traded.............. $.0378 --(5)
Net Assets, End of Period (in thousands)............................ $116,692 $52,213
</TABLE>
(1) August 1, 1994 (inception) through March 31, 1995.
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gains distribution, if
any.
(4) Annualized.
(5) Not computed for the period indicated.
6 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES
OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without the
approval of the shareholders entitled to cast a majority of the outstanding
votes of the corporation, as defined by the Investment Company Act. The funds
have implemented additional investment policies and practices to guide their
activities in the pursuit of their respective investment objectives. These
policies and practices, which are described throughout this Prospectus, are not
designated as fundamental policies and may be changed without shareholder
approval.
VALUE
The investment objective of Value is long-term capital growth. Income is a
secondary objective. The fund seeks to achieve its objectives by investing
primarily in equity securities of well-established companies with
intermediate-to-large market capitalizations that are believed by management to
be undervalued at the time of purchase.
Securities may be undervalued because they are temporarily out of favor in
the market due to market decline, poor economic conditions, or actual or
anticipated unfavorable developments affecting the issuer of the security or its
industry, or because the market has overlooked them. Under normal market
conditions, the fund expects to invest at least 80% of the value of its total
assets in equity securities. The fund's investments will typically be
characterized by lower price-to-earnings, price-to-cash flow and/or
price-to-book value ratios relative to the equity market in general. Its
investments also may have above-average current dividend yields.
It is management's intention that the fund will primarily consist of
domestic equity securities. However, the fund also may invest in other types of
domestic or foreign securities consistent with the accomplishment of the fund's
objective. The other securities the fund may invest in are convertible
securities (see "Other Investment Practices, Their Characteristics and
Risks--Equity Securities," page 9), preferred stocks, bonds, notes and debt
securities of companies and debt obligations of governments and their agencies.
Investments in these securities will be made when the manager believes that the
total return potential on these securities equals or exceeds the potential
return on common stocks.
EQUITY INCOME
The investment objective of Equity Income is the production of current
income. Capital appreciation is a secondary objective of the fund. The fund
seeks to achieve its objectives by screening companies primarily for favorable
dividend paying history (yield) and prospects for continuing and/or increasing
dividend paying ability and secondarily for capital appreciation potential. The
fund seeks a yield that exceeds the yield of securities comprising the S&P 500.
Total return for the fund will consist primarily of dividend income and
secondarily of capital appreciation (or depreciation).
Under normal circumstances, the fund will invest at least 65% of the fund's
total assets in equity securities and at least 85% of the fund's total assets
will be invested in income-paying securities. The fund's portfolio will consist
primarily of domestic securities.
POLICIES APPLICABLE TO BOTH FUNDS
Each fund's holdings will be spread among industry groups that meet its
investment criteria to help reduce certain of the risks inherent in common stock
investments. These investments will primarily be securities listed on major
exchanges or traded in the over-the-counter markets.
Income is a primary or secondary objective of each fund. As a result, a
portion of the portfolio of each fund may consist of fixed income securities.
The value of fixed income securities fluctuates based on changes in
interest rates and in the credit
Prospectus Information Regarding the funds 7
quality of the issuer. Debt securities that comprise part of a fund's fixed
income portfolio will primarily be limited to "investment grade" obligations.
However, each fund may invest up to 5% of its assets in "high yield" securities.
"Investment grade" means that at the time of purchase, such obligations are
rated within the four highest categories by a nationally recognized statistical
rating organization (for example, at least Baa by Moody's Investors Service,
Inc. or BBB by Standard & Poor's Corporation), or, if not rated, are of
equivalent investment quality as determined by the investment manager. According
to Moody's, bonds rated Baa are medium-grade and possess some speculative
characteristics. A BBB rating by S&P indicates S&P's belief that a security
exhibits a satisfactory degree of safety and capacity for repayment, but is more
vulnerable to adverse economic conditions and changing circumstances.
"High yield" securities, sometimes referred to as "junk bonds," are higher
risk, non-convertible debt obligations that are rated below investment grade
securities, or are unrated, but with similar credit quality.
There are no credit or maturity restrictions on the fixed income securities
in which the high yield portion of fund's portfolio may be invested. Debt
securities rated lower than Baa by Moody's or BBB by S&P or their equivalent are
considered by many to be predominantly speculative. Changes in economic
conditions or other circumstances are more likely to lead a weakened capacity to
make principal and interest payments on such securities that is the case with
higher quality debt securities. Regardless of rating levels, all debt securities
considered for purchase by the fund are analyzed by the investment manager to
determine, to the extent reasonably possible, that the planned investment is
sound, given the investment objective of the fund (see "An Explanation of Fixed
Income Securities Ratings" in the Statement of Additional Information).
The funds will not necessarily dispose of high yield securities if the
aggregate value of such securities exceeds 5% of a fund's assets if such level
is exceeded as a result of market appreciation of the value of such securities
or market depreciation of the value of the other assets of the fund. Rather, the
manager will cease purchasing any additional high yield securities until the
value of such securities is less than 5% of the fund's assets and will monitor
such investments to determine whether continuing to hold such investments is
likely to assist the fund in meeting its investment objectives.
In addition, the value of a fund's investments in fixed income securities
will change as prevailing interest rates change. In general, the prices of such
securities vary inversely with interest rates. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis rise.
When prevailing interest rates rise, bond prices fall. These changes in value
may, depending upon the particular amount and type of fixed income securities
holdings of a fund, impact the net asset value of that fund's shares.
Notwithstanding the fact the funds will primarily invest in equity
securities, under exceptional market or economic conditions, the funds may
temporarily invest all or a substantial portion of their assets in cash or
investment grade short-term securities (denominated in U.S. dollars or foreign
currencies).
To the extent that a fund assumes a defensive position, it will not be
investing for capital growth.
OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
FOREIGN SECURITIES
Each fund may invest up to 25% of its assets in the securities of foreign
issuers, including debt securities of foreign governments and their agencies,
when these securities meet its standards of selection. The manager defines
"foreign issuer" as an issuer of securities that is domiciled outside the United
States, derives at least 50% of its total revenue from production or sales
outside of the United States, and/or whose principal trading market is outside
the United States. The principal business activities of such issuers will be
located in developed countries.
The funds may make such investments either directly in foreign securities
or indirectly by purchasing depositary receipts or depositary shares of similar
instruments ("DRs") for foreign securities. DRs are securities that are listed
on exchanges or quoted in
8 Information Regarding the Funds American Century Investments
the domestic over-the-counter markets in one country but represent shares of
issuers domiciled in another country. Direct investments in foreign securities
may be made either on foreign securities exchanges or in the over-the-counter
markets.
Subject to its investment objective and policies, each fund may invest in
common stocks, convertible securities, preferred stocks, bonds, notes and other
debt securities of foreign issuers and debt securities of foreign governments
and their agencies. The credit quality standards applicable to domestic
securities purchased by each fund are also applicable to its foreign securities
investments.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
EQUITY SECURITIES
In addition to investing in common stocks, the funds may invest in other
equity securities and equity equivalents. Other equity securities and equity
equivalents include securities that permit the fund to receive an equity
interest in an issuer, the opportunity to acquire an equity interest in an
issuer, or the opportunity to receive a return on its investment that permits
the fund to benefit from the growth over time in the equity of an issuer.
Examples of equity securities and equity equivalents include preferred stock,
convertible preferred stock and convertible debt securities.
Each fund will limit its purchase of convertible debt securities to those
that, at the time of purchase, are rated at least B- by S&P or B3 by Moody's, or
if not rated by S&P or Moody's are of equivalent investment quality as
determined by the manager. Debt securities rated below the four highest
categories are not considered "investment grade" obligations. These securities
have speculative characteristics and present more credit risk than investment
grade obligations. For a description of the S&P and Moody's ratings categories,
see "An Explanation of Fixed Income Securities Ratings," in the Statement of
Additional Information. Equity equivalents may also include securities whose
value or return is derived from the value or return of a different security.
Depositary receipts are an example of the type of derivative security in which
the fund might invest.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the securities held by the funds may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars
but have a value that is dependent on the performance of a foreign security, as
valued in the currency of its home country. As a result, the value of a fund's
portfolio may be affected by changes in the exchange rate between foreign
currencies and the U.S. dollar, as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
U.S. dollar may be a factor in the overall performance of a fund.
To protect against adverse movements in exchange rates between currencies,
the funds may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates a fund to purchase or
sell a specific currency at a future date at a specific price.
Each fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
funds can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." Each fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the dollar, the funds may enter into forward currency exchange
contracts to sell an amount of foreign currency equal to the value of some or
all of a fund's portfolio securities either denominated in, or whose value is
tied to, that currency. This practice is sometimes referred to as "portfolio
hedging." A fund may not enter into a portfolio hedging transaction where the
fund would
Prospectus Information Regarding the Funds 9
be obligated to deliver an amount of foreign currency in excess of the aggregate
value of the fund's portfolio securities or other assets denominated in, or
whose value is tied to, that currency.
The funds will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the funds will enter
into portfolio hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of a fund's
assets will be committed to a segregated account in connection with portfolio
hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the funds against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S.
dollar.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial
Highlights table on pages 5 and 6 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and, accordingly,
the annual portfolio turnover rate cannot be accurately predicted.
The portfolio turnover of the funds may be higher than other investment
companies with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest up to 20% of its assets in repurchase agreements when
such transactions present an attractive short-term return on cash that is not
otherwise committed to the purchase of securities pursuant to the fund's
investment policies.
A repurchase agreement occurs when a fund purchases an interest-bearing
obligation from a bank or broker-dealer registered under the Securities Exchange
Act of 1934 and simultaneously agrees to sell it back on a specified date in the
future (usually less than one week later) at a higher price. The repurchase
price reflects an agreed-upon interest rate during the time the fund's money is
invested in the security and is considered by the staff of the SEC to be a loan
by the fund.
A fund's risk in connection with repurchase agreements is the ability of
the seller to pay the repurchase price on the repurchase date. If the seller
defaults, the fund may incur costs, delays or losses. Management monitors the
creditworthiness of sellers.
The funds will not invest more than 15% of their respective assets in
repurchase agreements maturing in more than seven days.
The funds will enter into repurchase agreements only with those commercial
banks and broker-dealers whose creditworthiness has been reviewed and found
satisfactory by the funds' management pursuant to criteria adopted by the funds'
Board of Directors.
INDEX FUTURES CONTRACTS
Each fund may enter into domestic stock index futures contracts. An index
futures contract is an agreement to take or make delivery of an amount of cash
based on the difference between the value of the index at the beginning and at
the end of the contract period. Rather than actually purchasing the securities
of an index, the manager may purchase a futures contract, which reflects the
value of such underlying securities. For example, S&P 500 futures reflect the
value of the underlying companies that comprise the S&P 500 Composite Stock
Price Index. If the aggregate market value of the underlying index securities
increases or decreases during the contract period, the
10 Information Regarding the Funds American Century Investments
value of the S&P 500 futures can be expected to reflect such increase or
decrease. As a result, the manager is able to expose to the equity markets cash
that is maintained by the funds to meet anticipated redemptions or held for
future investment opportunities. Because futures generally settle within a day
from the date they are closed out (compared with three days for the types of
equity securities primarily invested in by the funds) the manager believes that
this use of futures allows the funds to effectively be fully invested in equity
securities while maintaining the liquidity needed by the funds.
When a fund enters into a futures contract, it must make deposit of cash or
high-quality debt securities, known as "initial margin," as partial security for
its performance under the contract. As the value of the index fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. Assets set aside by a fund as initial or variable margin may not be
disposed of so long as the fund maintains the contract.
The funds may not purchase leveraged futures. A fund will deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fluctuating market value of the index contracts it has
purchased, less any margin deposited on its position. The funds will only invest
in exchange-traded futures. In addition, the value of index futures contracts
purchased by a fund may not exceed 5% of the fund's total assets.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts or S&P 500 futures), currencies, interest rates, indices
or other financial indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the S&P 500 Index would
be a permissible investment since each of the funds may invest in the securities
of companies comprising the S&P 500 Index (assuming they otherwise meet the
other requirements for the fund), while a security whose underlying value is
linked to the price of oil would not be a permissible investment since the funds
may not invest in oil and gas leases or futures.
The return of a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or
other financial asset will not move in the direction the portfolio
manager anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the
exchange, either of which may make it difficult or impossible to close
out a position when desired;
o the risk that adverse price movements in an instrument can result in a
loss substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
Prospectus Information Regarding the Funds 11
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash, collateral or by
irrevocable letters of credit maintained on a current basis in an amount at
least equal to the market value of the securities loaned. During the existence
of the loan, the funds must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The funds must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of either fund's net assets valued at market. The portfolio
lending policy described in this paragraph is fundamental policy that may be
changed only by a vote of a majority of the fund's shareholders.
WHEN-ISSUED SECURITIES
Each fund may purchase new issues of securities on a when-issued basis
without limit when, in the opinion of management, such purchases will further
the investment objectives of such fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur 15 to 45 days after the commitment
to purchase. Market rates of interest on debt securities at the time of delivery
may be higher or lower than those contracted for on the when-issued security.
Accordingly, the value of such security may decline prior to delivery, which
could result in a loss to the fund. A separate account consisting of cash or
high-quality liquid debt securities in an amount at least equal to the
when-issued commitments will be established and maintained with the custodian.
No income will accrue to the fund prior to delivery.
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at
a current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional buyers rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the SEC has taken the position that the liquidity of such securities in the
portfolio of a fund offering redeemable securities is a question of fact for the
board of directors to determine, such determination to be based upon a
consideration of the readily available trading markets and the review of any
contractual restrictions. Accordingly, the Board of Directors is responsible for
developing and establishing the guidelines and procedures for determining the
liquidity of Rule 144A securities. As allowed by Rule 144A, the Board of
Directors of the funds has delegated the day-to-day function of determining the
liquidity of Rule 144A securities to the manager. The Board retains the
responsibility to monitor the implementation of the guidelines and procedures it
has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional buyers, the
12 Information Regarding the Funds American Century Investments
liquidity of such securities may be limited accordingly and a fund may, from
time to time, hold a Rule 144A security that is illiquid. In such an event, the
fund's manager will consider appropriate remedies to minimize the effect on such
fund's liquidity. Neither fund may invest more than 15% of its assets in
illiquid securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of fund shares).
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return. Performance
data may be quoted separately for the Investor Class and the other classes
offered by the funds.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on its shares or the income reported
in the fund's financial statements.
Each fund also may include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services) and publications that monitor the performance of
mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to well-known indices of market performance, such as the
Standard & Poor's 500 Index, the Dow Jones Industrial Average, the S&P/Barra
Value Index (with regard to Value) and the Lipper Equity Income Fund Index (with
regard to Equity Income). The performance of a fund may also be compared, on a
relative basis, to other funds in our fund family. This relative comparison,
which may be based upon historical or expected fund performance, volatility or
other fund characteristics, may be presented numerically, graphically or in
text. Fund performance may also be combined or blended with other funds in our
fund family, and that combined or blended performance may be compared to the
same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 13
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest with American Century
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 20.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 [$1,000 for IRA and Uniform
Gifts/Transfers to Minors Acts ("UGMA/UTMA") accounts]. These minimums will be
waived if you establish an automatic investment plan to your account that is the
equivalent of at least $50 per month (see "Automatic Investment Plan," page 15).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI or Free Form Text):
o Taxpayer identification or Social Security number
14 How To Invest with American Century Investments American Century Investments
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 14 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum initial investment requirements, you may
exchange your fund shares to our other funds up to six times per year per
account. An exchange request will be processed the same day it is received if it
is received before the funds' net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for the Benham Target
Maturities Trust, and at the close of the Exchange for all of our other funds.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our
Prospectus How To Invest with American Century Investments 15
Investor Services Guide for further information about exchanges.
If, in any 90-day period, the total of your exchanges and your redemptions
from any one account exceeds the lesser of $250,000 or 1% of the fund's assets,
further exchanges will be subject to special requirements to comply with our
policy on large redemptions (see "Special Requirements for Large Redemptions,"
page 17).
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the phone (either with an Investor Services
Representative or using our Automated Information Line -- see page 18) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee (see "Signature
Guarantee," page 17).
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check in an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call and request our Check-A-Month
brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds to you or your
account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of
transmission. Funds transferred by ACH
16 How To Invest with American Century Investments American Century Investments
may be received up to seven days after transmission. Wired funds are subject to
a $10 fee to cover bank wire charges, which is deducted from redemption
proceeds. Once the funds are transmitted, the time of receipt and the funds'
availability are not under our control.
SPECIAL REQUIREMENTS FOR
LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company
Act, which obligates each fund make certain redemptions in cash. This
requirement to pay redemptions in cash applies to situations where one
shareholder redeems, during any 90-day period, up to the lesser of $250,000 or
1% of the assets of the fund. Although redemptions in excess of this limitation
will also normally be paid in cash, we reserve the right under unusual
circumstances to honor these redemptions by making payment in whole or in part
in readily marketable securities (a "redemption-in-kind").
If payment is made in securities, the securities will be selected by the
fund, will be valued in the same manner as they are in computing the fund's net
asset value and will be provided without prior notice.
If your redemption would exceed this limit and you would like to avoid
being paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
Despite its right to redeem fund shares through a redemption-in-kind, we do
not expect to exercise this option unless a fund has an unusually low level of
cash to meet redemptions and/or is experiencing unusually strong demands for its
cash. Such a demand might be caused, for example, by extreme market conditions
that result in an abnormally high level of redemption requests concentrated in a
short period of time. Absent these or similar circumstances, we expect
redemptions in excess of $250,000 to be paid in cash in any fund with assets of
more than $50 million if total redemptions from any one account in any 90-day
period do not exceed one-half of 1% of the total assets of the fund.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum or to establish an
automatic investment that is the equivalent of at least $50 per month. If action
is not taken within 90 days of the letter's date, the shares held in the account
will be redeemed and the proceeds from the redemption will be sent by check to
your address of record. We reserve the right to increase the investment
minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee would be
required when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special investor services include:
Prospectus How To Invest with American Century Investments 17
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
Each fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts (IRAs)
o 403(b) plans for employees of public school systems and non-profit
organizations
o Profit sharing plans and pension plans for corporations and other
employers
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING
YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares
for a period of time, or to reject any specific purchase order
(including purchases by exchange). Additionally, purchases may be
refused if, in the opinion of the manager, they are of a size that
would disrupt the management of the fund.
(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we may also alter, add to or terminate any
investor services and privileges. Any changes may affect all
shareholders or only certain series or classes of shareholders.
18 How To Invest with American Century Investments American Century Investments
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open
orders, will be refused. Once you have mailed or otherwise transmitted
your transaction instructions to us, they may not be modified or
canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require
evidence satisfactory to us of the authority of the individual making
the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include
requesting personal identification from callers, recording telephone
calls, and providing written confirmations of telephone transactions.
These procedures are designed to protect shareholders from
unauthorized or fraudulent instructions. If we do not employ
reasonable procedures to confirm the genuineness of instructions, then
we may be liable for losses due to unauthorized or fraudulent
instructions. The company, its transfer agent and investment advisor
will not be responsible for any loss due to instructions they
reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as Mary
Elizabeth Jones, she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an
increase in the number of shareholder telephone calls. If you
experience difficulty in reaching us during such periods, you may send
your transaction instructions by mail, express mail or courier
service, or you may visit one of our Investors Centers. You may also
use our Automated Information Line if you have requested and received
an access code and are not attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research
fee of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
Prospectus How To Invest with American Century Investments 19
EMPLOYER-SPONSORED RETIREMENT
PLANS AND INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
20 How To Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. Net asset value for the funds offered by this Prospectus is
determined at the close of regular trading on each day that the New York Stock
Exchange is open.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents before the close of business on the
New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will
receive the price determined, that day as of the close of the Exchange.
Investment, redemption and exchange requests received thereafter are effective
on, and receive the price determined, as of the close of the Exchange on the
next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the close of business on the Exchange.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the close of business on the Exchange will receive that day's
price. Investments and instructions received after that time will receive the
price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the funds' procedures or any contractual arrangement with the
funds or the funds' distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
Portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
price is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices or at
the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the
Prospectus Additional Information You Should Know 21
value of a security was established, but before the net asset value per share
was determined, which was likely to materially change the net asset value, then
that security would be valued at fair value as determined in accordance with
procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION
ABOUT SHARE PRICE
The net asset values of Investor Class of the funds are published in
leading newspapers daily. The net asset value of each fund may also be obtained
by calling us or by accessing our Web site at www.americancentury.com.
DISTRIBUTIONS
Distributions from net investment income are declared and paid quarterly.
Distributions from net realized securities gains, if any, generally are declared
and paid annually, usually in December, but the funds may make distributions on
a more frequent basis to comply with the distribution requirements of the Code,
in all events in a manner consistent with the provisions of the Investment
Company Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders in taxable accounts, distributions
will be reinvested unless you elect to receive them in cash. Distributions of
less than $10 generally will be reinvested. Distributions made shortly after
purchase by check or ACH may be held up to 15 days. You may elect to have
distributions on shares of Individual Retirement Accounts and 403(b) plans paid
in cash only if you are at least 591/2 years old or permanently and totally
disabled. Distribution checks normally are mailed within seven days after the
record date. Please consult our Investor Services Guide for further information
regarding your distribution options.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time, the value of your shares
includes the undistributed net gains, if any, realized by the fund on the sale
of portfolio securities and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed, the value of your
shares will be reduced by the amount of the distribution. If you buy your shares
through a taxable account just before the distribution, you will pay the full
price for your shares and then receive a portion of the purchase price back as a
taxable distribution. See "Taxes," this page.
TAXES
Each fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code, which means that to the extent its
income is distributed to shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account on a tax-deferred basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless
22 Addition Information You Should Know American Century Investments
of the length of time you have held the shares on which such distributions are
paid. However, you should note that any loss realized upon the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of any distribution of long-term capital gain to you
with respect to such shares.
Dividends and interest received by the funds on foreign securities, and, in
limited circumstances capital gains realized by the funds upon the sale of such
securities, may give rise to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Foreign countries generally do not impose taxes
on capital gains in respect of investments by non-resident investors. The
foreign taxes paid by a fund will reduce its dividends.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations, which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed. This charge is not refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
Prospectus Additional Information You Should Know 23
In June, 1995, American Century Companies, Inc. ("ACC"), the parent
corporation of the manager, acquired Benham Management International, Inc. In
the acquisition, Benham Management Corporation ("BMC"), the investment advisor
to The Benham Group of mutual funds, became a wholly owned subsidiary of ACC.
Certain employees of BMC provide investment management services to the funds
while certain employees of the manager provide investment management services to
funds managed by BMC.
The manager supervises and manages the investment portfolio of each fund
and directs the purchase and sale of its investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the funds' portfolios as it deems appropriate in pursuit of the
funds' investment objectives. Individual portfolio manager members of the team
may also adjust portfolio holdings of the funds as necessary between team
meetings.
The portfolio manager members of the team managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:
PETER A. ZUGER, Vice President and Portfolio Manager, joined American
Century in June 1993 as a Portfolio Manager. Prior to joining American
Century, Mr. Zuger served as an investment manager in the Trust Department of
NBD Bancorp in Detroit, Michigan.
PHILLIP N. DAVIDSON, Vice President and Portfolio Manager, joined
American Century in September 1993 as a Portfolio Manager. Prior to joining
American Century, Mr. Davidson served as an investment manager for Boatmen's
Trust Company in St. Louis, Missouri.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Investor Class of the funds, the manager
receives an annual fee of 1% of the average net assets of each fund offered by
this Prospectus.
On the first business day of each month, each fund pays the management fee
to the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying 1% of the aggregate average daily
closing value of each fund's net assets during the previous month by a fraction,
the numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer and dividend-paying agent for the funds. It
provides facilities, equipment and personnel to funds and is paid for such
services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs. The manager
or an affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a
24 Additional Information You Should Know American Century Investments
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the funds or the
manager. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., Chairman of the Board of Directors
of the funds, controls American Century Companies by virtue of his ownership of
a majority of its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
funds' investment manager. The manager pays all expenses for promoting and
distributing the Investor Class of fund shares offered by this Prospectus. The
Investor Class of shares does not pay any commissions or other fees to the
Distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
FURTHER INFORMATION
ABOUT AMERICAN CENTURY
American Century Capital Portfolios, Inc. the issuer of the funds, was
organized as a Maryland corporation on June 14, 1993.
American Century Capital Portfolios, Inc. is a diversified, open-end
management investment company whose shares were first offered for sale September
1, 1993. Its business and affairs are managed by its officers under the
direction of its Board of Directors.
The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri, 64141-6200. All inquiries may
be made by mail to that address, or by phone to 1-800-345-2021. (international
calls: 816-531-5575.)
American Century Capital Portfolios, Inc. issues two series of $0.01 par
value shares. Each series is commonly referred to as a fund. The assets
belonging to each series of shares are held separately by the custodian.
American Century offers four classes of each of the funds offered by this
Prospectus: an Investor Class, an Institutional Class, a Service Class, and an
Advisor Class. The shares offered by this Prospectus are Investor Class shares
and have no up-front charges, commissions, or 12b-1 fees.
The other classes of shares are primarily offered to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Investor Class.
Different fees and expenses will affect performance. For additional information
concerning the other classes of shares not offered by this Prospectus, call us
at 1-800-345-3533 or contact a sales representative or financial intermediary
who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of another class of the
same fund.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters that must be voted on separately by the series or class of
shares affected. Matters affecting
Prospectus Additional Information You Should Know 25
only one series or class are voted upon only by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining less than 50% of the votes will not be able to elect any person or
persons to the Board of Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' bylaws, the holders of at least 10% of the votes
entitled to be cast may request the funds to hold a special meeting of
shareholders. We will assist in the communication with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
26 Additional Information You Should Know American Century Investments
NOTES
Prospectus Notes 27
NOTES
28 Notes American Century Investments
NOTES
Prospectus Notes 29
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
9609 [recycled logo]
SH-BKT-6585 Recycled
[American Century logo]
