As filed with the Securities and Exchange Commission on March 3, 1997
1933 Act File No. 33-64872; 1940 Act File No. 811-7820
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 __X__
Pre-Effective Amendment No. _____
Post-Effective Amendment No. __7__ __X__
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__
Amendment No. __7__
(Check appropriate box or boxes.)
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
American Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (816) 531-5575
James E. Stowers III
American Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Name and address of Agent for Service)
Approximate Date of Proposed Public Offering September 3, 1996
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
__X__ on May 21, 1997 pursuant to paragraph (a) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the
fiscal year ended March 31, 1996, was filed on May 30, 1996.
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The Investor Class Prospectus of American Century Value Fund and American
Century Equity Income Fund dated September 3, 1996 (revised January 1, 1997) is
incorporated herein by reference to the Registrants filing pursuant to Rule
497(e) on December 23, 1996 (accession #0000908186-96-000011).
The Institutional Class Prospectus of American Century Value Fund and American
Century Equity Income Fund dated September 3, 1996 (revised January 1, 1997) is
incorporated herein by reference to the Registrants filing pursuant to Rule
497(e) on January 15, 1997 (accession #0000908186-97-000001).
The Advisor Class Prospectus of American Century Value Fund and American Century
Equity Income Fund dated September 3, 1996 (revised January 1, 1997) is
incorporated herein by reference to the Registrants filing pursuant to Rule
497(e) on January 15, 1997 (accession #0000908186-97-000002).
<PAGE>
================================================================================
CROSS REFERENCE SHEET
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N-1A Item No. Location
------------- --------
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Operating
Expense Table
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Investment Policies of
Registrant the Funds; Other Investment
Practices, Their Characteristics
and Risks; Performance
Advertising; Distribution
of Fund Shares; Further
Information About
American Century
Item 5. Management of the Management
Fund
Item 6. Capital Stock and Further Information About
Other Securities American Century
Item 7. Purchase of Securities How to Open An Account;
Being Offered How to Exchange From One
Account to Another;
Share Price; Distribution
Item 8. Redemption How to Redeem Shares;
Signature Guarantee
Item 9. Pending Legal N/A
Proceedings
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PART B
- --------------------------------------------------------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information N/A
Item 13. Investment Objectives Investment Objectives of
and Policies the Funds; Fundamental Policies
of the Funds; Additional
Investment Restrictions;
Forward Currency Exchange
Contracts; An Explanation of
Fixed Income; Securities Ratings
Short Sales; Portfolio Turnover;
Interest Rate Futures Contracts
and Related Options;
Municipal Leases
Item 14. Management of the Officers and Directors;
Registrant Management;
Custodians
Item 15. Control Persons Capital Stock
and Principal
Holders of Securities
Item 16. Investment Advisory Management;
and Other Services Custodians
Item 17. Brokerage Allocation Brokerage;
Performance Advertising
Item 18. Capital Stock and Capital Stock;
Other Securities Multiple Class Structure
Item 19. Purchase, Redemption N/A
and Pricing of
Securities Being
Offered
Item 20. Tax Status N/A
Item 21. Underwriters N/A
Item 22. Calculation of Yield Performance Advertising
Quotations of Money
Market Funds
Item 23. Financial Statements Financial Statements
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 21, 1997
AMERICAN
CENTURY
GROUP
Real Estate Fund
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
Real Estate Fund
PROSPECTUS
MAY 21, 1997
REAL ESTATE FUND
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. The fund that invests primarily
in securities of real estate investment trusts is described in this Prospectus.
Its investment objective is 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 fund 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 May 21, 1997, 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.
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY REAL ESTATE FUND
The investment objective of American Century Real Estate Fund is long-term
capital appreciation. Income is a secondary objective. The fund seeks to achieve
its objective by investing primarily in securities issued by real estate
investment trusts. In addition, the fund may invest in the securities of
companies which are principally engaged in the real estate industry.
There is no assurance that the fund will achieve its investment objective.
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.
TABLE OF CONTENTS
Transaction and Operating Expense Table.......................
Financial Highlights..........................................
INFORMATION REGARDING THE FUND
Investment Policies of the Fund...............................
Investment Objective..........................................
Proposed Transaction..........................................
Investment Strategy...........................................
Investments in Real Estate....................................
Investment Philosophy.........................................
Other Investment Practices, Their Characteristics
and Risks................................................
U.S. Fixed Income Securities...............................
Diversification............................................
Portfolio Lending..........................................
When-Issued Securities.....................................
Rule 144A Securities.......................................
Borrowing..................................................
Portfolio Turnover.........................................
Repurchase Agreement.......................................
Performance Advertising.......................................
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments..................................
Investing in American Century.................................
How to Open an Account........................................
By Mail..................................................
By Wire..................................................
By Exchange..............................................
In Person................................................
Subsequent Investments.....................................
By Mail..................................................
By Telephone.............................................
By Online Access.........................................
By Wire..................................................
In Person................................................
Automatic Investment Plan..................................
How to Exchange from One Account to Another...................
By Mail..................................................
By Telephone.............................................
By Online Access.........................................
How to Redeem Shares..........................................
By Telephone.............................................
By Mail..................................................
By Check-A-Month.........................................
Other Automatic Redemptions..............................
Redemption Proceeds........................................
By Check.................................................
By Wire and ACH..........................................
Special Requirements for Large Redemptions.................
Redemption of Shares in Low-Balance
Accounts...................................................
Signature Guarantee...........................................
Special Shareholder Services..................................
Automated Information Line...............................
Online Account Access....................................
Open Order Service.......................................
Tax-Qualified Retirement Plans...........................
Important Policies Regarding Your Investments.................
Reports to Shareholders.......................................
Employer-Sponsored Retirement Plans and
Institutional Accounts.....................................
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................
When Share Price Is Determined.............................
How Share Price Is Determined..............................
Where to Find Information About Share Price................
Distributions.................................................
Taxes.........................................................
Tax-Deferred Accounts......................................
Taxable Accounts...........................................
Management....................................................
Investment Management......................................
Code of Ethics.............................................
Transfer and Administrative Services.......................
Distribution of Fund Shares...................................
Further Information About American Century....................
TRANSACTION AND OPERATING EXPENSE TABLE
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.............................................. _____
12b-1 Fees.................................................... _____
Other Expenses(2)............................................ _____
Total Fund Operating Expenses................................ _____
EXAMPLE
You would pay the following expenses on a ..............1 year $____
$1,000 investment, assuming a 5% annual return and ....3 years $____
redemption at the end of each time period:.............5 years $____
.....................................................10 years $____
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
Shares of the fund exchanged or redeemed within 1 year of their purchase
are subject to a redemption fee of 2.0% of the value of the shares
exchanged or redeemed. This redemption fee is retained by the fund. See
"How to Exchange from One American Century Fund to Another", page--- and
"How to Redeem Shares", page---.
(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 ------ of 1% of average net
assets of the corporation 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 fund offers
two other classes of shares, primarily to institutional investors, that have
different fee structures than the Investor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services. A
difference in fees will result in different performance for the other classes.
For additional information about the various classes, see "Further Information
About American Century," page ___.
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The fund currently has no assets. The manager and RREEF Real Estate
Securities Advisers L.P., the investment advisor of the RREEF Real Estate
Securities Fund, have proposed that the RREEF fund be merged into the fund. It
is expected that the shareholders of the RREEF fund will consider the
reorganization proposal at a meeting to be held June 13, 1997. Failure of the
RREEF fund shareholders to approve the merger transaction will delay
indefinitely the offer of shares of the fund to the public.
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES
OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, and any other
investment policies designated as "fundamental" in this Prospectus or in the
Statement of Additional Information, cannot be changed without shareholder
approval. The fund has implemented additional investment policies and practices
to guide its activities in the pursuit of its 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.
INVESTMENT OBJECTIVE
The fund's primary investment objective is long-term capital appreciation.
Current income is a secondary consideration. The fund seeks to achieve its
objective by investing primarily in securities issued by real estate investment
trusts. In addition, the fund may invest in the securities of companies which
are principally engaged in the real estate industry. There is no assurance that
the fund will achieve its investment objective.
PROPOSED TRANSACTION
The manager has proposed that the RREEF Real Estate Securities Fund be
merged into the fund, and that the advisor of the RREEF fund, RREEF Real Estate
Securities Advisers L.P., serve as the fund's subadvisor and be responsible for
its day-to-day investment management operations. It is expected that
shareholders of the RREEF fund will consider the reorganization proposal at a
meeting to be held June 13, 1997. Failure of the RREEF fund shareholders to
approve the merger transaction will delay indefinitely the offer of shares of
the fund to the public.
INVESTMENT STRATEGY
Under normal conditions, the fund will invest not less than 65% of its
total assets in equity securities of companies which are principally engaged in
the real estate industry. Equity securities include common stock, preferred
stock and securities convertible into common stock. A company will be considered
to be "principally engaged in the real estate industry" if, in the opinion of
the manager, at the time its securities are purchased by the fund, at least 50%
of its revenues or at least 50% of the market value of its assets is
attributable to the ownership, construction, management or sale of residential,
commercial or industrial real estate. Companies principally engaged in the real
estate industry may include, among others, equity REITs and real estate master
limited partnerships, mortgage REITs, and real estate brokers and developers.
See "Investments in Real Estate," page ______.
The fund may also invest up to 35% of its total assets in other securities.
Other securities may include debt securities and equity securities of companies
not principally engaged in the real estate industry.
(See "U.S. Fixed Income Securities," page --.)
REITs pool investors' funds for investment primarily in income producing
real estate or real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with various requirements
relating to its organization, ownership, assets and income and with the
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. REITs can generally
be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents. Equity REITs can also realize capital gains by
selling property that has appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both equity REITs and mortgage REITs.
INVESTMENTS IN REAL ESTATE
The fund may be subject to certain risks similar to those associated with
the direct ownership of real estate because of its policy of concentration in
the securities of companies which are principally engaged in the real estate
industry. The risks of direct ownership of real estate include: risks related to
general, regional and local economic conditions and fluctuations in interest
rates; overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; heavy cash flow dependency; possible
lack of availability of mortgage funds; losses due to natural disasters;
regulatory limitations on rents; variations in market rental rates; and changes
in neighborhood values. In addition, the fund may incur losses due to
environmental problems. If there is historic contamination at a site, the
current owner is one of the parties that may be responsible for clean up costs.
Equity REITs may be affected by changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by default or
payment problems relating to underlying mortgages, the quality of credit
extended and self-liquidation provisions by which mortgages held may be paid in
full and distributions of capital returns may be made at any time. Equity and
mortgage REITs are dependent upon the skill of their individual management
personnel and generally are not diversified. In addition, equity and mortgage
REITs could be adversely affected by failure to qualify for tax-free
pass-through of income under the Internal Revenue Code, or to maintain their
exemptions from registration under the Investment Company Act. By investing in
REITs indirectly through the fund, a shareholder will bear not only a
proportionate share of the expenses of the fund, but also indirectly, similar
expenses of the REITs, including compensation of management.
To the extent the fund is invested in debt securities (including
asset-backed securities) or mortgage REITs, it will be subject to credit risk
and interest rate risk. Credit risk relates to the ability of the issuer to meet
interest and principal payments when due. Interest rate risk refers to the
fluctuations in the net asset value of any portfolio of fixed income securities
resulting solely from the inverse relationship between the price and yield of
fixed income securities; that is, when interest rates rise, bond prices
generally fall and, conversely, when interest rates fall, bond prices generally
rise. In general, bonds with longer maturities are more sensitive to interest
rate changes than bonds with shorter maturities.
The fund, as a non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment company. Therefore,
an investment in the fund may present greater risk and volatility to an investor
than an investment in a diversified investment company.
INVESTMENT PHILOSOPHY
The investment philosophy of the fund is premised upon the belief that
successful investing in real estate securities requires in-depth knowledge of
the securities market and a complete understanding of the factors influencing
the performance of real estate assets. The fund strives to provide superior
performance via investment in a select group of real estate securities which are
attractively valued and have strong growth prospects.
The investment process generally begins with property type sector
allocations. This may, among other things, include reviewing, analyzing and
ranking REIT securities based on certain financial ratios and relative valuation
measures. The financial analysis process includes a review of the capital
structure and the on-going capital needs of the company. Finally, particular
emphasis is placed on analyzing each company's cash flow stream and its dividend
safety, predictability and prospects for growth.
The fundamental real estate analysis provided to the fund will depend on
extensive, localized research on property markets across the United States,
direct inspection of individual property assets and familiarity with company
management, operating styles and investment strategies. Assuming consummation of
the merger with the RREEF fund, it is expected that a nationwide network of real
estate professionals employed by RREEF America L.L.C. and its affiliates will be
used to assist in evaluating and monitoring properties held by public REITs.
(See "Investment Management," page __.)
OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
U.S. FIXED INCOME SECURITIES
The fund may invest in fixed income securities for income or as a defensive
strategy when the manager believes adverse economic or market conditions exist.
As a temporary defensive strategy, the manager may invest part or all of the
fund's assets in debt securities. Fixed income securities are affected primarily
by changes in interest rates. The prices of these securities tend to rise when
interest rates fall, and conversely fall when interest rates rise. Generally,
the debt securities in which the fund may invest are investment grade
securities. These are securities rated in the four highest grades assigned by
Moody's Investors Service, Inc. or Standard and Poor's Corporation or that are
unrated but deemed to be of comparable quality by the manager. For a description
of fixed income securities ratings, see "An Explanation of Fixed Income
Securities Ratings" in the Statement of Additional Information.
Securities rated in the lowest investment-grade category may have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher grade bonds. The fund may
invest in securities below investment grade although the fund will not purchase
such bonds if such investment would cause more than 5% of its net assets to be
so invested. Such bonds are considered speculative. In the event of a downgrade
of a debt security held by the fund to below investment grade, the fund is not
automatically required to sell the issue, but the manager will consider this in
determining whether to hold the security. However, if such a downgrade would
cause more than 5% of net assets to be invested in debt securities below
investment grade, sales will be made as soon as practicable to reduce the
proportion of debt below investment grade to 5% of net assets or less. When the
manager believes that economic or market conditions require a more defensive
strategy, the fund's assets may be invested without limitation in cash or cash
equivalents such as obligations issued or guaranteed by the U.S. government, its
agencies and/or instrumentalities or high quality money market instruments such
as notes, certificates of deposit or bankers' acceptances.
DIVERSIFICATION
The fund is classified as a "non-diversified" investment company under the
Investment Company Act of 1940, which means the fund is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. However, the fund intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Internal Revenue Code, so that it will not be subject to U.S. federal income
tax on income and capital gain distributions to shareholders. (See
"Distributions," page __, and "Taxes," page __.) To so qualify, among other
requirements, the fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the market value of the
fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities of
a single issuer and the fund will not own more than 10% of the outstanding
voting securities of a single issuer. The fund's investments in U.S. government
securities are not subject to these limitations.
PORTFOLIO LENDING
In order to realize additional income, the 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 fund 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 fund 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 the fund's net assets valued at market.
WHEN-ISSUED SECURITIES
The 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 the 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.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
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 fund has delegated they 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 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 the fund's liquidity. The fund may not 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).
BORROWING
The fund's investment restrictions allow the fund to borrow money, for
temporary or emergency purposes (not for leveraging or investment), in an amount
not exceeding 33 1/3% of the fund's total assets (including the amount borrowed)
less liabilities (other than borrowings).
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
or RREEF determines a change is in order to achieve those objectives and,
accordingly, the annual portfolio turnover rate cannot be accurately predicted.
However, because of its long term growth emphasis, the manager expects that
total portfolio turnover rates generally will not exceed 100% annually.
The portfolio turnover of the fund 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 fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the fund since short-term capital
gains are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may enter into 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 its investment policies. A repurchase
agreement occurs when the 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.
The 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 fund will enter into repurchase agreements only with those commercial
banks and broker-dealers whose creditworthiness has been reviewed and found
satisfactory by the manager pursuant to criteria adopted by the fund's Board of
Directors.
PERFORMANCE ADVERTISING
From time to time, the fund 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 fund.
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.
The 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 Lehman Brothers
REIT Index, NAREIT Equity-Less Health Care Index, Standard & Poor's 500
Composite Stock Price Index and Wilshire REIT Only Index. The performance of the
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 fund 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.
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The fund offered by this Prospectus is 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 ___.
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
___). 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
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 ___ 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
(see "When Share Price is Determined," page ___).
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 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___).
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 ___) 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 ___).
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 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 the fund's 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:
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.
(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.
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 fund,
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.
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. For all American Century funds, except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for Target Maturities is determined one hour prior to the
close of the Exchange.
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 net asset value of the
fund is determined are effective on, and will receive the price determined, that
day. Investment, redemption and exchange requests received thereafter are
effective on, and receive the price determined 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 net asset value is determined.
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 before the net asset value is determined 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 fund's transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the fund's procedures or any contractual arrangement with the
funds or the fund's 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 the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. 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.
WHERE TO FIND INFORMATION
ABOUT SHARE PRICE
The net asset value of Investor Class shares of the fund will be published
in leading newspapers daily when the fund has met the minimum requirements for
such listing. The net asset value of each fund in the American Century family of
funds may 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 twice each
year (usually in June and December). Distributions from net realized securities
gains, if any, generally are declared and paid annually, usually in December,
but the fund 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 59 1/2 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
The 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 fund 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 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.
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.
The fund may invest in REITs that hold residual interests in real estate
mortgage investment conduits. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the fund's income from a REIT
that is attributable to the REIT's residual interest in a REMIC will be subject
to federal income tax in all events. (See "Additional Information on Tax
Issues-Taxation of Certain Mortgage REITs" in the Statement of Additional
Information.)
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 fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. 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.
Subject to approval by the RREEF fund shareholders of the merger with the
fund, RREEF Real Estate Securities Advisers L.P., as subadvisor, will make
investment decisions for the fund in accordance with the fund's investment
objective, policies, and restrictions under the supervision of the manager and
the Board of Directors.
The portfolio manager members of the team managing the fund described in
this Prospectus and their work experience for the last five years are as
follows:
Kim G. Redding, Portfolio Manager, RREEF, is one of the fund's primary
portfolio managers. Mr. Redding has served as the President of RREEF's
general partner since inception in 1993, is currently a member of RREEF
America L.L.C. and is a Senior Vice-President of RREEF Management Company.
From 1990 to 1993, he was a principal in K.G. Redding & Associates, an
investment advisor, and prior thereto he was the President of Redding, Melchor
& Company, an investment advisor. Mr. Redding has been professionally
managing portfolios of real estate securities since 1987.
Karen J. Knudson, Portfolio Manager, RREEF, is one of the fund's primary
portfolio managers. Ms. Knudson is a Vice President of RREEF. Prior to joining
RREEF, she was Senior Vice President and Chief Financial Officer of Security
Capital Group, an investment advisor, and prior thereto she was the President,
Director of Real Estate Research and Portfolio Manager of Bailard, Biehl and
Kaiser Real Estate Investment Trust. Ms. Knudson has 14 years of real estate
experience, specializing in the area of real estate investment trusts.
__________, Portfolio Manager, American Century Investment Management,
Inc. oversees the subadvisor's operation of the fund.
The activities of the manager and the subadvisor are subject only to
directions of the fund's Board of Directors. The manager pays all the expenses
of the fund 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 fund, the manager
receives an annual fee of _____% of the average net assets of the fund.
On the first business day of each month, the 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 _____% of the aggregate average
daily closing value of the 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).
For subadvisory services, the manager pays RREEF an annual fee of .___% of
the average net assets of the fund.
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics, as has the
subadvisor, which restricts personal investing practices by employees of the
manager and its affiliates. Among other provisions, the fund and manager's Code
of Ethics requires that employees with access to information about the purchase
or sale of securities in the fund 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 the fund. [Information to be inserted regarding the subadvisor's Code of
Ethics.]
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer and dividend-paying agent for the fund. It
provides facilities, equipment and personnel to the fund 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 fund 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 fund, transactions in
shares of the fund may be executed by brokers or investment advisors who charge
a 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 the American Century 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 fund's shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
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 fund, 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 manager and RREEF Real Estate Securities Advisers L.P., the investment
advisor of the RREEF Real Estate Securities Fund, have proposed that the RREEF
fund be merged into the fund. It is expected that the shareholders of the RREEF
fund will consider the reorganization proposal at a meeting to be held June 13,
1997. If the RREEF fund shareholders approve the merger transaction, it is
expected that the merger would be effective on June 13, 1997.
The principal office of the fund 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, and if the merger of the RREEF fund and the fund occurs, a third
series of $0.01 par value shares will be issued. 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 three classes of the fund offered by this
Prospectus: an Investor Class, an Institutional 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 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 fund 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 fund's bylaws, the holders of at least 10% of the votes
entitled to be cast may request the fund 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.
NOTES
NOTES
NOTES
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
[american century logo]
American
Century(sm)
9609 [recycled logo]
SH-BKT-6585 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 21, 1997
AMERICAN
CENTURY
GROUP
Real Estate Fund
INSTITUTIONAL 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
Real Estate Fund
PROSPECTUS
MAY 21, 1997
REAL ESTATE FUND
INSTITUTIONAL 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. The fund that invests primarily
in securities of real estate investment trusts is described in this Prospectus.
Its investment objective is listed on page 2 of this Prospectus.
The other funds are described in separate prospectuses.
The shares offered in this Prospectus (the Institutional Class shares) are
sold at their net asset value with no sales charges or commissions.
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
endowments, foundations and financial advisors that meet the fund's minimum
investment requirements. Institutional Class shares are not available for
purchase by insurance companies or participant-directed employer-sponsored
retirement plans.
This Prospectus gives you information about the fund 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 May 21, 1997, 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 419385
Kansas City, Missouri 64141-6200 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
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.
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY REAL ESTATE FUND
The investment objective of American Century Real Estate Fund is long-term
capital appreciation. Income is a secondary objective. The fund seeks to achieve
its objective by investing primarily in securities issued by real estate
investment trusts. In addition, the fund may invest in the securities of
companies which are principally engaged in the real estate industry.
There is no assurance that the fund will achieve its investment objectives.
NO PERSON IS AUTHORIZED BY THE FUND 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 FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
TABLE OF CONTENTS
Transaction and Operating Expense Table.......................
Financial Highlights..........................................
INFORMATION REGARDING THE FUND
Investment Policies of the Fund...............................
Investment Objective.......................................
Proposed Transaction.......................................
Investment Strategy........................................
Investments in Real Estate.................................
Investment Philosophy......................................
Other Investment Practices, Their Characteristics
and Risks..................................................
Portfolio Lending..........................................
When-Issued Securities.....................................
Rule 144A Securities.......................................
U.S. Fixed Income Securities...............................
Diversification............................................
Borrowing..................................................
Portfolio Turnover.........................................
Repurchase Agreements......................................
Performance Advertising.......................................
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments..................................
Investing in American Century.................................
How to Open an Account........................................
By Mail..................................................
By Wire..................................................
By Exchange..............................................
In Person................................................
Subsequent Investments.....................................
By Mail..................................................
By Telephone.............................................
By Wire..................................................
In Person................................................
Automatic Investment Plan..................................
How to Exchange from One Account to Another...................
By Mail..................................................
By Telephone.............................................
How to Redeem Shares..........................................
By Mail..................................................
By Telephone.............................................
By Check-A-Month.........................................
Other Automatic Redemptions..............................
Redemption Proceeds........................................
By Check.................................................
By Wire and ACH..........................................
Special Requirements for Large Redemptions.................
Signature Guarantee...........................................
Special Shareholder Services..................................
Open Order Service.......................................
Tax-Qualified Retirement Plans...........................
Important Policies Regarding Your Investments.................
Reports to Shareholders.......................................
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................
When Share Price Is Determined.............................
How Share Price Is Determined..............................
Where to Find Information About Share Price................
Distributions.................................................
Taxes.........................................................
Tax-Deferred Accounts......................................
Taxable Accounts...........................................
Management....................................................
Investment Management......................................
Code of Ethics.............................................
Transfer and Administrative Services.......................
Distribution of Fund Shares...................................
Further Information About American Century....................
TRANSACTION AND OPERATING EXPENSE TABLE
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases....................... none
Maximum Sales Load Imposed on Reinvested Dividends............ none
Deferred Sales Load........................................... none
Redemption Fee................................................ none
Exchange Fee.................................................. none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees.............................................. _____
12b-1 Fees.................................................... _____
Other Expenses(1)............................................ _____
Total Fund Operating Expenses................................ _____
EXAMPLE
You would pay the following expenses on a ..............1 year $____
$1,000 investment, assuming a 5% annual return and ....3 years $____
redemption at the end of each time period:.............5 years $____
.....................................................10 years $____
(1) Shares of the fund exchanged or redeemed within 1 year of their purchase
are subject to a redemption fee of 2.0% of the value of the shares
exchanged or redeemed. This redemption fee is retained by the fund. See
"How to Exchange from One American Century Fund to Another", page--- and
"How to Redeem Shares", page---.
(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 ------ of 1% of average net
assets of the corporation 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 fund 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 Institutional Class shares. The
fund offers two other classes of shares, one of which is primarily made
available to retail investors and one that is primarily made available to
institutional investors. The difference in the fee structures among the classes
is the result of their separate arrangements for shareholder and distribution
services and not the result of any difference in amounts charged by the manager
for core investment advisory services. A difference in fees will result in
different performance for the other classes. For additional information about
the various classes, see "Further Information About American Century," page ___.
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The fund currently has no assets. The manager and RREEF Real Estate
Securities Advisers L.P., the investment advisor of the RREEF Real Estate
Securities Fund, have proposed that the RREEF fund be merged into the fund. It
is expected that the shareholders of the RREEF fund will consider the
reorganization proposal at a meeting to be held June 13, 1997. Failure of the
RREEF fund shareholders to approve the merger transaction will delay
indefinitely the offer of shares of the fund to the public.
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES
OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, and any other
investment policies designated as "fundamental" in this Prospectus or in the
Statement of Additional Information, cannot be changed without shareholder
approval. The fund has implemented additional investment policies and practices
to guide its activities in the pursuit of its 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.
INVESTMENT OBJECTIVE
The fund's primary investment objective is long-term capital appreciation.
Current income is a secondary consideration. The fund seeks to achieve its
objective by investing primarily in securities issued by real estate investment
trusts. In addition, the fund may invest in the securities of companies which
are principally engaged in the real estate industry. There is no assurance that
the fund will achieve its investment objective.
PROPOSED TRANSACTION
The manager has proposed that the RREEF Real Estate Securities Fund be
merged into the fund, and that the advisor of the RREEF fund, RREEF Real Estate
Securities Advisers L.P., serve as the fund's subadvisor and be responsible for
its day-to-day investment management operations. It is expected that
shareholders of the RREEF fund will consider the reorganization proposal at a
meeting to be held June 13, 1997. Failure of the RREEF fund shareholders to
approve the merger transaction will delay indefinitely the offer of shares of
the fund to the public.
INVESTMENT STRATEGY
Under normal conditions, the fund will invest not less than 65% of its
total assets in equity securities of companies which are principally engaged in
the real estate industry. Equity securities include common stock, preferred
stock and securities convertible into common stock. A company will be considered
to be "principally engaged in the real estate industry" if, in the opinion of
the manager, at the time its securities are purchased by the fund, at least 50%
of its revenues or at least 50% of the market value of its assets is
attributable to the ownership, construction, management or sale of residential,
commercial or industrial real estate. Companies principally engaged in the real
estate industry may include, among others, equity REITs and real estate master
limited partnerships, mortgage REITs, and real estate brokers and developers.
See "Investments in Real Estate," page ______.
The fund may also invest up to 35% of its total assets in other securities.
Other securities may include debt securities and equity securities of companies
not principally engaged in the real estate industry.
(See "U.S. Fixed Income Securities," page --.)
REITs pool investors' funds for investment primarily in income producing
real estate or real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with various requirements
relating to its organization, ownership, assets and income and with the
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. REITs can generally
be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents. Equity REITs can also realize capital gains by
selling property that has appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both equity REITs and mortgage REITs.
INVESTMENTS IN REAL ESTATE
The fund may be subject to certain risks similar to those associated with
the direct ownership of real estate because of its policy of concentration in
the securities of companies which are principally engaged in the real estate
industry. The risks of direct ownership of real estate include: risks related to
general, regional and local economic conditions and fluctuations in interest
rates; overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; heavy cash flow dependency; possible
lack of availability of mortgage funds; losses due to natural disasters;
regulatory limitations on rents; variations in market rental rates; and changes
in neighborhood values. In addition, the fund may incur losses due to
environmental problems. If there is historic contamination at a site, the
current owner is one of the parties that may be responsible for clean up costs.
Equity REITs may be affected by changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by default or
payment problems relating to underlying mortgages, the quality of credit
extended and self-liquidation provisions by which mortgages held may be paid in
full and distributions of capital returns may be made at any time. Equity and
mortgage REITs are dependent upon the skill of their individual management
personnel and generally are not diversified. In addition, equity and mortgage
REITs could be adversely affected by failure to qualify for tax-free
pass-through of income under the Internal Revenue Code, or to maintain their
exemptions from registration under the Investment Company Act. By investing in
REITs indirectly through the fund, a shareholder will bear not only a
proportionate share of the expenses of the fund, but also indirectly, similar
expenses of the REITs, including compensation of management.
To the extent the fund is invested in debt securities (including
asset-backed securities) or mortgage REITs, it will be subject to credit risk
and interest rate risk. Credit risk relates to the ability of the issuer to meet
interest and principal payments when due. Interest rate risk refers to the
fluctuations in the net asset value of any portfolio of fixed income securities
resulting solely from the inverse relationship between the price and yield of
fixed income securities; that is, when interest rates rise, bond prices
generally fall and, conversely, when interest rates fall, bond prices generally
rise. In general, bonds with longer maturities are more sensitive to interest
rate changes than bonds with shorter maturities.
The fund, as a non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment company. Therefore,
an investment in the fund may present greater risk and volatility to an investor
than an investment in a diversified investment company.
INVESTMENT PHILOSOPHY
The investment philosophy of the fund is premised upon the belief that
successful investing in real estate securities requires in-depth knowledge of
the securities market and a complete understanding of the factors influencing
the performance of real estate assets. The fund strives to provide superior
performance via investment in a select group of real estate securities which are
attractively valued and have strong growth prospects.
The investment process generally begins with property type sector
allocations. This may, among other things, include reviewing, analyzing and
ranking REIT securities based on certain financial ratios and relative valuation
measures. The financial analysis process includes a review of the capital
structure and the on-going capital needs of the company. Finally, particular
emphasis is placed on analyzing each company's cash flow stream and its dividend
safety, predictability and prospects for growth.
The fundamental real estate analysis provided to the fund will depend on
extensive, localized research on property markets across the United States,
direct inspection of individual property assets and familiarity with company
management, operating styles and investment strategies. Assuming consummation of
the merger with the RREEF fund, it is expected that a nationwide network of real
estate professionals employed by RREEF America L.L.C. and its affiliates will be
used to assist in evaluating and monitoring properties held by public REITs.
(See "Investment Management," page __.)
OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
U.S. FIXED INCOME SECURITIES
The fund may invest in fixed income securities for income or as a defensive
strategy when the manager believes adverse economic or market conditions exist.
As a temporary defensive strategy, the manager may invest part or all of the
fund's assets in debt securities. Fixed income securities are affected primarily
by changes in interest rates. The prices of these securities tend to rise when
interest rates fall, and conversely fall when interest rates rise. Generally,
the debt securities in which the fund may invest are investment grade
securities. These are securities rated in the four highest grades assigned by
Moody's Investors Services, Inc. or Standard and Poor's Corporation or that are
unrated but deemed to be of comparable quality by the manager. For a description
of fixed income securities ratings, see "An Explanation of Fixed Income
Securities Ratings" in the Statement of Additional Information.
Securities rated in the lowest investment-grade category may have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher grade bonds. The fund may
invest in securities below investment grade although the fund will not purchase
such bonds if such investment would cause more than 5% of its net assets to be
so invested. Such bonds are considered speculative. In the event of a downgrade
of a debt security held by the fund to below investment grade, the fund is not
automatically required to sell the issue, but the manager will consider this in
determining whether to hold the security. However, if such a downgrade would
cause more than 5% of net assets to be invested in debt securities below
investment grade, sales will be made as soon as practicable to reduce the
proportion of debt below investment grade to 5% of net assets or less. When the
manager believes that economic or market conditions require a more defensive
strategy, the fund's assets may be invested without limitation in cash or cash
equivalents such as obligations issued or guaranteed by the U.S. government, its
agencies and/or instrumentalities or high quality money market instruments such
as notes, certificates of deposit or bankers' acceptances.
DIVERSIFICATION
The fund is classified as a "non-diversified" investment company under the
Investment Company Act of 1940, which means the fund is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. However, the fund intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Internal Revenue Code, so that it will not be subject to U.S. federal income
tax on income and capital gain distributions to shareholders. (See
"Distributions," page __, and "Taxes," page __.) To so qualify, among other
requirements, the fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the market value of the
fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities of
a single issuer and the fund will not own more than 10% of the outstanding
voting securities of a single issuer. The fund's investments in U.S. government
securities are not subject to these limitations.
PORTFOLIO LENDING
In order to realize additional income, the 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 fund 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 fund 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 the fund's net assets valued at market.
WHEN-ISSUED SECURITIES
The 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 the 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.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
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 fund has delegated they 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 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 the fund's liquidity. The fund may not 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).
BORROWING
The fund's investment restrictions allow the fund to borrow money, for
temporary or emergency purposes (not for leveraging or investment), in an amount
not exceeding 33 1/3% of the fund's total assets (including the amount borrowed)
less liabilities (other than borrowings).
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
or RREEF determines a change is in order to achieve those objectives and,
accordingly, the annual portfolio turnover rate cannot be accurately predicted.
However, because of its long term growth emphasis, the manager expects that
total portfolio turnover rates generally will not exceed 100% annually.
The portfolio turnover of the fund 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 fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the fund since short-term capital
gains are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may enter into 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 its investment policies. A repurchase
agreement occurs when the 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.
The 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 fund will enter into repurchase agreements only with those commercial
banks and broker-dealers whose creditworthiness has been reviewed and found
satisfactory by the manager pursuant to criteria adopted by the fund's Board of
Directors.
PERFORMANCE ADVERTISING
From time to time, the fund 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 Institutional Class and the other classes
offered by the fund.
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.
The 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 Lehman Brothers
REIT Index, NAREIT Equity-Less Health Care Index, Standard & Poor's 500
Composite Stock Price Index and Wilshire REIT Only Index. The performance of the
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 fund 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.
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The fund offered by this Prospectus is 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
1-800-345-3533 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 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 "Minimum Investment," page ___, and "Customers of Banks,
Broker-Dealers and Other Financial Intermediaries," page ___.
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.
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
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 1-800-345-3533 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 Institutional Service Representative.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page ___ 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 Institutional Service Representatives.
MINIMUM INVESTMENT
The minimum investment is $5 million ($3 million for endowments and
foundations). If you invest with us through a bank, broker-dealer or other
financial intermediary, the minimum investment requirement may be met by
aggregating the investments of various clients of your financial intermediary.
The minimum investment requirement may be waived if you or your financial
intermediary, if applicable, has an aggregate investment in our family of funds
of $10 million or more ($5 million for endowments and foundations). If your
balance or the balance of your financial intermediary, if applicable, falls
below the minimum investment requirements due to redemptions or exchanges, we
reserve the right to convert your shares to Investor Class shares of the same
fund. The Investor Class shares have a unified management fee that is 0.20%
higher than the Institutional Class shares.
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 fund's net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for the American Century
Target Maturities Trust, and at the close of the Exchange for all of our other
funds (see "When Share Price is Determined," page ___).
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 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___).
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 telephone if you have authorized us to
accept telephone instructions. You can authorize this by selecting "Full
Services" on your application or by calling us one of our Institutional Service
Representatives at 1-800-345-3533 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. For large redemptions, please read "Special Requirements for Large
Redemptions," page ___.
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 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 ___).
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Institutional Service Representative.
BY CHECK-A-MONTH
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
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 Institutional Service 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 may be received up to seven days after transmission.
Once the funds are transmitted, the time of receipt and the fund's 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 the fund's 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.
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 shareholder services include:
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.
(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.
CUSTOMERS OF BANKS, BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through a
bank, broker-dealer or other financial intermediary.
If you own or are considering purchasing fund shares through a bank,
broker-dealer 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 financial intermediary.
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. For all American Century funds, except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for Target Maturities is determined one hour prior to the
close of the Exchange.
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 net asset value of the
fund is determined are effective on, and will receive the price determined, that
day. Investment, redemption and exchange requests received thereafter are
effective on, and receive the price determined 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 net asset value is determined.
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 before the net asset value is determined 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 a bank, financial advisor or other
financial intermediary, it is the responsibility of your financial intermediary
to transmit your purchase, exchange and redemption requests to the fund's
transfer agent prior to the applicable cut-off time for receiving orders and to
make payment for any purchase transactions in accordance with the fund's
procedures or any contractual arrangement with the fund or the fund's
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 the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. 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.
WHERE TO FIND INFORMATION
ABOUT SHARE PRICE
The net asset value of Investor Class shares of the fund will be published
in leading newspapers daily when the fund has met the minimum requirements for
such listing. The net asset value of the Institutional Class of each fund may be
obtained by calling us.
DISTRIBUTIONS
Distributions from net investment income are declared and paid twice each
year (usually in June and December). Distributions from net realized securities
gains, if any, generally are declared and paid annually, usually in December,
but the fund 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 59 1/2 years old or permanently and totally
disabled. Distribution checks normally are mailed within seven days after the
record date.
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
The 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 (excluding
participant-directed employer-sponsored retirement plans, which are ineligible
to invest in Institutional Class shares), income and capital gains distributions
paid by the fund will generally not be subject to current taxation, but will
accumulate in your account on a tax-deferred basis.
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 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.
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. See "Distributions," page ___.
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.
The fund may invest in REITs that hold residual interests in real estate
mortgage investment conduits. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the fund's income from a REIT
that is attributable to the REIT's residual interest in a REMIC will be subject
to federal income tax in all events. (See "Additional Information on Tax
Issues-Taxation of Certain Mortgage REITs" in the Statement of Additional
Information.)
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 fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. 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.
Subject to approval by the RREEF fund shareholders of the merger with the
fund, RREEF Real Estate Securities Advisers L.P., as subadvisor, will make
investment decisions for the fund in accordance with the fund's investment
objective, policies, and restrictions under the supervision of the manager and
the Board of Directors.
The portfolio manager members of the team managing the fund described in
this Prospectus and their work experience for the last five years are as
follows:
Kim G. Redding, Portfolio Manager, RREEF, is one of the fund's primary
portfolio manager. Mr. Redding has served as the President of RREEF's general
partner since inception in 1993, is currently a member of RREEF America L.L.C.
and is a Senior Vice-President of RREEF Management Company. From 1990 to
1993, he was a principal in K.G. Redding & Associates, an investment adviser,
and prior thereto he was the President of Redding, Melchor & Company, an
investment adviser. Mr. Redding has been professionally managing portfolios
of real estate securities since 1987.
Karen J. Knudson, Portfolio Manager, RREEF, is one of the fund's primary
portfolio managers. Ms. Knudson is a Vice President of RREEF. Prior to joining
RREEF, she was Senior Vice President and Chief Financial Officer of Security
Capital Group, an investment advisor, and prior thereto she was the President,
Director of Real Estate Research and Portfolio Manager of Bailard, Biehl and
Kaiser Real Estate Investment Trust. Ms. Knudson has 14 years of real estate
experience, specializing in the area of real estate investment trusts.
____________, Portfolio Manager, American Century Investment Management,
Inc., oversees the subadvisor's operation of the fund.
The activities of the manager and the subadvisor are subject only to
directions of the fund's Board of Directors. The manager pays all the expenses
of the fund 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 Institutional Class of the fund, the
manager receives an annual fee of _____% of the average net assets of the fund.
On the first business day of each month, the 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 _____% 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).
For subadvisory services, the manager pays RREEF an annual fee of .____% of
the average net assets of the fund.
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics, as has the
subadvisor, which restricts personal investing practices by employees of the
manager and its affiliates. Among other provisions, the fund and manager's Code
of Ethics requires that employees with access to information about the purchase
or sale of securities in the fund 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 the fund. [Information to be inserted regarding the subadvisor's Code of
Ethics.]
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer agent and dividend-paying agent for the fund.
It provides facilities, equipment and personnel to the fund 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 fund 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.
Although there is no sales charge levied by the fund, transactions in
shares of the fund may be executed by brokers or investment advisors who charge
a 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 fund 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 the American Century 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 fund's shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
manager. The manager pays all expenses for promoting and distributing the
Institutional Class of fund shares offered by this Prospectus. The Institutional
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 fund, was
organized as a Maryland corporation on June 14, 1993.
The manager and RREEF Real Estate Securities Advisers L.P., the investment
advisor of the RREEF Real Estate Securities Fund, have proposed that the RREEF
fund be merged into the fund. It is expected that the shareholders of the RREEF
fund will consider the reorganization proposal at a meeting to be held June 13,
1997. If the RREEF fund shareholders approve the merger transaction, it is
expected that the merger would be effective on June 13, 1997.
The principal office of the fund is American Century Tower, 4500 Main
Street, P.O. Box 419385, Kansas City, Missouri, 64141-6385. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-3533.
(international calls: 816-531-5575.)
American Century Capital Portfolios, Inc. issues two series of $0.01 par
value shares, and if the merger of the RREEF Fund and the fund occurs, a third
series of $0.01 par value shares will be issued. 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 three classes of the fund offered by this
Prospectus: an Investor Class, an Institutional Class, and an Advisor Class. The
shares offered by this Prospectus are Institutional Class shares and have no
up-front charges, commissions, or 12b-1 fees.
The Investor Class is primarily made available to retail investors. The
Advisor Class is 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 Institutional Class. Different fees and
expenses will affect performance. For additional information concerning the
Investor Class of shares, call one of our Investor Services Representatives at
1-800-345-2021. For information concerning the other classes of shares offered
by this Prospectus, call one of our Institutional Service Representatives 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 Investor 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 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 fund 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 fund's bylaws, the holders of at least 10% of the votes
entitled to be cast may request the fund 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.
NOTES
NOTES
NOTES
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9609 [recycled logo]
SH-BKT-6585 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 21, 1997
AMERICAN
CENTURY
GROUP
Real Estate Fund
ADVISOR 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
Real Estate Fund
PROSPECTUS
MAY 21, 1997
REAL ESTATE FUND
ADVISOR 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. The fund that invests primarily
in securities of real estate investment trusts is described in this Prospectus.
Its investment objective is listed on page 2 of this Prospectus.
The other funds are described in separate prospectuses.
The shares offered in this Prospectus (the Advisor Class shares) are sold
at their net asset value with no sales charges or commissions. The Advisor Class
shares are subject to a Rule 12b-1 shareholder services and distribution fees as
described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the fund 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 May 21, 1997, 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 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
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.
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY REAL ESTATE FUND
The investment objective of American Century Real Estate Fund is long-term
capital appreciation. Income is a secondary objective. The fund seeks to achieve
its objective by investing primarily in securities issued by real estate
investment trusts. In addition, the fund may invest in the securities of
companies which are principally engaged in the real estate industry.
There is no assurance that the fund will achieve its investment objective.
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.
TABLE OF CONTENTS
Transaction and Operating Expense Table.......................
Financial Highlights..........................................
INFORMATION REGARDING THE FUND
Investment Policies of the Fund...............................
Investment Strategy
Investments in Real Estate
Investment Philosophy
Other Investment Practices, Their Characteristics
and Risks..................................................
U.S. Fixed Income Securities...............................
Diversification ...........................................
Portfolio Lending..........................................
When-Issued Securities.....................................
Rule 144A Securities.......................................
Borrowing..................................................
Portfolio Turnover.........................................
Repurchase Agreements......................................
Performance Advertising.......................................
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American Century Funds...............
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY FUND TO ANOTHER
HOW TO REDEEM SHARES
Special Requirements for Large Redemptions.................
Telephone Services.........................................
Investors Line.............................................
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................
When Share Price Is Determined.............................
How Share Price Is Determined..............................
Where to Find Information About Share Price................
Distributions.................................................
Taxes.........................................................
Tax-Deferred Accounts......................................
Taxable Accounts...........................................
Management....................................................
Investment Management......................................
Code of Ethics.............................................
Transfer and Administrative Services.......................
Distribution of Fund Shares...................................
Service and Distribution Fees.................................
Further Information About American Century....................
TRANSACTION AND OPERATING EXPENSE TABLE
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.............................................. _____
12b-1 Fees (1)................................................ _____
Other Expenses(2)............................................ _____
Total Fund Operating Expenses................................ _____
EXAMPLE
You would pay the following expenses on a ..............1 year $____
$1,000 investment, assuming a 5% annual return and ....3 years $____
redemption at the end of each time period:.............5 years $____
.....................................................10 years $____
(1) Shares of the fund exchanged or redeemed within 1 year of their purchase
are subject to a redemption fee of 2.0% of the value of the shares
exchanged or redeemed. This redemption fee is retained by the fund. See
"How to Exchange from One American Century Fund to Another", page--- and
"How to Redeem Shares", page---.
(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion issued to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page ___.
(3) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were ------- of 1% of average net
assets of the corporation 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 fund 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 Advisor Class shares. The fund
offers two other classes of shares, one of which is primarily made available to
retail investors and one that is primarily made available to institutional
investors. The difference in the fee structures among the classes is the result
of their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. A difference in fees will result in different
performance for the other classes. For additional information about the various
classes, see "Further Information About American Century," page ___.
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The fund currently has no assets. The manager and RREEF Real Estate
Securities Advisers L.P., the investment advisor of the RREEF Real Estate
Securities Fund, have proposed that the RREEF fund be merged into the fund. It
is expected that the shareholders of the RREEF fund will consider the
reorganization proposal at a meeting to be held June 13, 1997. Failure of the
RREEF fund shareholders to approve the merger transaction will delay
indefinitely the offer of the shares of the fund to the public.
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES
OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, and any other
investment policies designated as "fundamental" in this Prospectus or in the
Statement of Additional Information, cannot be changed without shareholder
approval. The fund has implemented additional investment policies and practices
to guide its activities in the pursuit of its 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.
INVESTMENT OBJECTIVE
The fund's primary investment objective is long-term capital appreciation.
Current income is a secondary consideration. The fund seeks to achieve its
objective by investing primarily in securities issued by real estate investment
trusts. In addition, the fund may invest in the securities of companies which
are principally engaged in the real estate industry. There is no assurance that
the fund will achieve its investment objective.
PROPOSED TRANSACTION
The manager has proposed that the RREEF Real Estate Securities Fund be
merged into the fund, and that the advisor of the RREEF Fund, RREEF Real Estate
Securities Advisers L.P., serve as the fund's subadvisor and be responsible for
its day-to-day investment management operations. It is expected that
shareholders of the RREEF fund will consider the reorganization proposal at a
meeting to be held June 13, 1997. Failure of the RREEF fund shareholders to
approve the merger transaction will delay indefinitely the offer of shares of
the fund to the public.
INVESTMENT STRATEGY
Under normal conditions, the fund will invest not less than 65% of its
total assets in equity securities of companies which are principally engaged in
the real estate industry. Equity securities include common stock, preferred
stock and securities convertible into common stock. A company will be considered
to be "principally engaged in the real estate industry" if, in the opinion of
the manager, at the time its securities are purchased by the fund, at least 50%
of its revenues or at least 50% of the market value of its assets is
attributable to the ownership, construction, management or sale of residential,
commercial or industrial real estate. Companies principally engaged in the real
estate industry may include, among others, equity REITs and real estate master
limited partnerships, mortgage REITs, and real estate brokers and developers.
See "Investments in Real Estate," page ______.
The fund may also invest up to 35% of its total assets in other securities.
Other securities may include debt securities and equity securities of companies
not principally engaged in the real estate industry.
(See "U.S. Fixed Income Securities," page --.)
REITs pool investors' funds for investment primarily in income producing
real estate or real estate related loans or interests. A REIT is not taxed on
income distributed to shareholders if it complies with various requirements
relating to its organization, ownership, assets and income and with the
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. REITs can generally
be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs
invest the majority of their assets directly in real property and derive their
income primarily from rents. Equity REITs can also realize capital gains by
selling property that has appreciated in value. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both equity REITs and mortgage REITs.
INVESTMENTS IN REAL ESTATE
The fund may be subject to certain risks similar to those associated with
the direct ownership of real estate because of its policy of concentration in
the securities of companies which are principally engaged in the real estate
industry. The risks of direct ownership of real estate include: risks related to
general, regional and local economic conditions and fluctuations in interest
rates; overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; heavy cash flow dependency; possible
lack of availability of mortgage funds; losses due to natural disasters;
regulatory limitations on rents; variations in market rental rates; and changes
in neighborhood values. In addition, the fund may incur losses due to
environmental problems. If there is historic contamination at a site, the
current owner is one of the parties that may be responsible for clean up costs.
Equity REITs may be affected by changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by default or
payment problems relating to underlying mortgages, the quality of credit
extended and self-liquidation provisions by which mortgages held may be paid in
full and distributions of capital returns may be made at any time. Equity and
mortgage REITs are dependent upon the skill of their individual management
personnel and generally are not diversified. In addition, equity and mortgage
REITs could be adversely affected by failure to qualify for tax-free
pass-through of income under the Internal Revenue Code, or to maintain their
exemptions from registration under the Investment Company Act. By investing in
REITs indirectly through the fund, a shareholder will bear not only a
proportionate share of the expenses of the fund, but also indirectly, similar
expenses of the REITs, including compensation of management.
To the extent the fund is invested in debt securities (including
asset-backed securities) or mortgage REITs, it will be subject to credit risk
and interest rate risk. Credit risk relates to the ability of the issuer to meet
interest and principal payments when due. Interest rate risk refers to the
fluctuations in the net asset value of any portfolio of fixed income securities
resulting solely from the inverse relationship between the price and yield of
fixed income securities; that is, when interest rates rise, bond prices
generally fall and, conversely, when interest rates fall, bond prices generally
rise. In general, bonds with longer maturities are more sensitive to interest
rate changes than bonds with shorter maturities.
The fund, as a non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment company. Therefore,
an investment in the fund may present greater risk and volatility to an investor
than an investment in a diversified investment company.
INVESTMENT PHILOSOPHY
The investment philosophy of the fund is premised upon the belief that
successful investing in real estate securities requires in-depth knowledge of
the securities market and a complete understanding of the factors influencing
the performance of real estate assets. The fund strives to provide superior
performance via investment in a select group of real estate securities which are
attractively valued and have strong growth prospects.
The investment process generally begins with property type sector
allocations. This may, among other things, include reviewing, analyzing and
ranking REIT securities based on certain financial ratios and relative valuation
measures. The financial analysis process includes a review of the capital
structure and the on-going capital needs of the company. Finally, particular
emphasis is placed on analyzing each company's cash flow stream and its dividend
safety, predictability and prospects for growth.
The fundamental real estate analysis provided to the fund will depend on
extensive, localized research on property markets across the United States,
direct inspection of individual property assets and familiarity with company
management, operating styles and investment strategies. Assuming consummation of
the merger with the RREEF fund, it is expected that a nationwide network of real
estate professionals employed by RREEF America L.L.C. and its affiliates will be
used to assist in evaluating and monitoring properties held by public REITs.
(See "Investment Management," page __.)
OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
U.S. FIXED INCOME SECURITIES
The fund may invest in fixed income securities for income or as a defensive
strategy when the manager believes adverse economic or market conditions exist.
As a temporary defensive strategy, the manager may invest part or all of the
fund's assets in debt securities. Fixed income securities are affected primarily
by changes in interest rates. The prices of these securities tend to rise when
interest rates fall, and conversely fall when interest rates rise. Generally,
the debt securities in which the fund may invest are investment grade
securities. These are securities rated in the four highest grades assigned by
Moody's Investors Service, Inc. or Standard and Poor's Corporation or that are
unrated but deemed to be of comparable quality by the manager. For a description
of fixed income securities ratings, see "An Explanation of Fixed Income
Securities Ratings" in the Statement of Additional Information.
Securities rated in the lowest investment-grade category may have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher grade bonds. The fund may
invest in securities below investment grade although the fund will not purchase
such bonds if such investment would cause more than 5% of its net assets to be
so invested. Such bonds are considered speculative. In the event of a downgrade
of a debt security held by the fund to below investment grade, the fund is not
automatically required to sell the issue, but the manager will consider this in
determining whether to hold the security. However, if such a downgrade would
cause more than 5% of net assets to be invested in debt securities below
investment grade, sales will be made as soon as practicable to reduce the
proportion of debt below investment grade to 5% of net assets or less. When the
manager believes that economic or market conditions require a more defensive
strategy, the fund's assets may be invested without limitation in cash or cash
equivalents such as obligations issued or guaranteed by the U.S. government, its
agencies and/or instrumentalities or high quality money market instruments such
as notes, certificates of deposit or bankers' acceptances.
DIVERSIFICATION
The fund is classified as a "non-diversified" investment company under the
Investment Company Act of 1940, which means the fund is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. However, the fund intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Internal Revenue Code, so that it will not be subject to U.S. federal income
tax on income and capital gain distributions to shareholders. (See
"Distributions," page __, and "Taxes," page __.) To so qualify, among other
requirements, the fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the market value of the
fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities of
a single issuer and the fund will not own more than 10% of the outstanding
voting securities of a single issuer. The fund's investments in U.S. government
securities are not subject to these limitations.
PORTFOLIO LENDING
In order to realize additional income, the 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 fund 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 fund 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 the fund's net assets valued at market.
WHEN-ISSUED SECURITIES
The 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 the 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.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
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 fund has delegated they 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 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 the fund's liquidity. The fund may not 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).
BORROWING
The fund's investment restrictions allow the fund to borrow money, for
temporary or emergency purposes (not for leveraging or investment), in an amount
not exceeding 33 1/3% of the fund's total assets (including the amount borrowed)
less liabilities (other than borrowings).
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
or RREEF determines a change is in order to achieve those objectives and,
accordingly, the annual portfolio turnover rate cannot be accurately predicted.
However, because of its long term growth emphasis, the manager expects that
total portfolio turnover rates generally will not exceed 100% annually.
The portfolio turnover of the fund 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 fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the fund since short-term capital
gains are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may enter into 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 its investment policies. A repurchase
agreement occurs when the 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.
The 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 fund will enter into repurchase agreements only with those commercial
banks and broker-dealers whose creditworthiness has been reviewed and found
satisfactory by the manager pursuant to criteria adopted by the fund's Board of
Directors.
PERFORMANCE ADVERTISING
From time to time, the fund 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 Advisor Class and the other classes
offered by the fund.
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.
The 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 Lehman Brothers
REIT Index, NAREIT Equity-Less Health Care Index, Standard & Poor's 500
Composite Stock Price Index and Wilshire REIT Only Index. The performance of the
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 fund 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.
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the fund offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN CENTURY FUNDS
The fund offered by this Prospectus is available as an investment option under
your employer-sponsored retirement or savings plan or through or in connection
with a program, product or service offered by a financial intermediary, such as
a bank, broker-dealer or an insurance company. Since all records of your share
ownership are maintained by your plan sponsor, plan recordkeeper, or other
financial intermediary, all orders to purchase, exchange and redeem shares must
be made through you employer or other financial intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
how to select American Century funds.
If you have questions about a fund, see "Investments Policies of the
Funds," page __, or call one of our Institutional Service Representatives at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price is Determined," page __.
We may discontinue offering shares generally in the fund (including any
class of shares of the fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY
FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of a fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
Exchanges are made at the respective net asset value, next computed after
receipt of the exchange instruction by us. If in any 90-day period, the total of
the exchanges and redemptions from the account of any one plan participant or
financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's
assets, further exchanges maybe subject to special requirements to comply with
our policy on large equity fund redemptions. See "Special Requirements for Large
Redemptions," page __.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan of
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price is Determined," page __. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company
Act, which obligates each fund to redeem shares in cash, with respect to any one
participant account 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 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 to the
redeeming plan participant or financial intermediary in lieu of cash without
prior notice.
If you expect to make a large redemption and would like to avoid any
possibility of being paid in securities, you may do so by providing 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.
Receipt of your instruction 15 days prior to the transaction provided the fund
with sufficient time to raise the cash in an orderly manner to pay the
redemption and thereby minimizes the effect of the redemption on the fund and
its remaining shareholders.
Despite the fund's 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 redemption's 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 din 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.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
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. For all American Century funds, except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 0p.m. central
time. Net asset value for Target Maturities is determined one hour prior to the
close of the Exchange.
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 net asset value of the
fund is determined, are effective on, and will receive the price determined,
that day. Investment, redemption and exchange requests received thereafter are
effective on, and receive the price determined on, 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 net asset value is determined.
It is the responsibility of your plan recordkeeper or financial
intermediary to transmit your purchase, exchange and redemption requests to the
fund's transfer agent prior to the applicable cut-off time for receiving orders
and to make payment for any purchase transactions in accordance with the fund's
procedures or any contractual arrangement with the fund or the fund's
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:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. 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.
WHERE TO FIND INFORMATION
ABOUT SHARE PRICE
The net asset value of Investor Class shares of the fund will be published
in leading newspapers daily when the fund has met the minimum requirements for
such listing. Because the total expense ratio for the Advisor Class is 0.25%
higher than the Investor Class, their net asset values will be lower than the
Investor Class. The Advisor Class of each fund may be obtained by calling us.
DISTRIBUTIONS
Distributions from net investment income are declared and paid twice each
year (usually in June and December). Distributions from net realized securities
gains, if any, generally are declared and paid annually, usually in December,
but the fund 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 59 1/2 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
The 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 Advisor Class 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 fund 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 Advisor Class 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 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.
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. See "Distributions", page ______.
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.
The fund may invest in REITs that hold residual interests in real estate
mortgage investment conduits. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the fund's income from a REIT
that is attributable to the REIT's residual interest in a REMIC will be subject
to federal income tax in all events. (See "Additional Information on Tax
Issues-Taxation of Certain Mortgage REITs" in the Statement of Additional
Information.)
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 fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. 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.
Subject to approval by the RREEF fund shareholders of the merger with the
fund, REEF Real Estate Securities Advisers L.P., as subadvisor, will make
investment decisions for the fund in accordance with the fund's investment
objective, policies, and restrictions under the supervision of the manager and
the Board of Directors.
The portfolio manager members of the team managing the fund described in
this Prospectus and their work experience for the last five years are as
follows:
Kim G. Redding, Portfolio Manager, RREEF, is one of the fund's primary
portfolio manager. Mr. Redding has served as the President of RREEF's general
partner since inception in 1993, is currently a member of RREEF America L.L.C.
and is a Senior Vice-President of RREEF Management Company. From 1990 to
1993, he was a principal in K.G. Redding & Associates, an investment adviser,
and prior thereto he was the President of Redding, Melchor & Company, an
investment adviser. Mr. Redding has been professionally managing portfolios
of real estate securities since 1987.
Karen J. Knudson, Portfolio Manager, RREEF, is one of the fund's primary
portfolio managers. Ms. Knudson is a Vice President of RREEF. Prior to joining
RREEF, she was Senior Vice President and Chief Financial Officer of Security
Capital Group, an investment advisor, and prior thereto she was the President,
Director of Real Estate Research and Portfolio Manager of Bailard, Biehl and
Kaiser Real Estate Investment Trust. Ms. Knudson has 14 years of real estate
experience, specializing in the area of real estate investment trusts.
__________, Portfolio Manager, American Century Investment Management,
Inc., oversees the subadvisor's operation of the fund.
The activities of the manager and the subadvisor are subject only to
directions of the fund's Board of Directors. The manager pays all the expenses
of the fund 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 Advisor Class of the fund, the manager
receives an annual fee of _____% of the average net assets of the fund.
On the first business day of each month, the 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 _____% of the aggregate average
daily closing value of the 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).
For subadvisory services, the manager pays RREEF an annual fee of .__% of
the average net assets of the fund.
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics, as has the
subadvisor, which restricts personal investing practices by employees of the
manager and its affiliates. Among other provisions, the fund and manager's Code
of Ethics requires that employees with access to information about the purchase
or sale of securities in the fund 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 the fund. [Information to be inserted regarding the subadvisor's Code of
Ethics.]
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer and dividend-paying agent for the fund. It
provides facilities, equipment and personnel to the fund and is paid for such
services by the manager.
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 fund's shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
manager. As agent for the fund and the manager, the distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries with respect to the sale of the fund's shares and/or
the use of the fund's shares in various financial services. The manager or an
affiliate pays all expenses incurred in promoting sales of, and distributing,
the Advisor Class and in securing such services out of the Rule 12b-1 fees
described in the Section that follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange commission under the
Investment company Act permits investment companies that adopt a written plan to
pay certain expenses associated with the distribution of their shares. Pursuant
to that rule, the fund's Board of Directors and the initial shareholder of the
fund's Advisor Class shares have approved and adopted a Master Distribution and
Shareholder Services Plan (the "Plan"). Pursuant to the Plan, the fund pays the
manager a shareholder services fee and a distribution fee, each equal to 0.25%
(for a total of 0.50%) per annum of the average daily net assets of the shares
of the fund's Advisor Class. The shareholder services fee is paid for the
purpose of paying the costs of securing certain shareholder and administrative
services, and the distribution fee is paid for the purpose of paying the costs
of providing various distribution services. All or a portion of such fees are
paid by the manager to the banks, broker-dealers, insurance companies or other
financial intermediaries through which such shares are made available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information abut the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
FURTHER INFORMATION
ABOUT AMERICAN CENTURY
American Century Capital Portfolios, Inc. the issuer of the fund, 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 manager and RREEF Real Estate Securities Advisers L.P., the investment
advisor of the RREEF Real Estate Securities Fund, have proposed that the RREEF
fund be merged into the fund. It is expected that the shareholders of the RREEF
fund will consider the reorganization proposal at a meeting to be held June 13,
1997. If the RREEF fund shareholders approve the merger transaction, it is
expected that the merger would be effective on June 13, 1997.
The principal office of the fund 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, and if the merger of the RREEF Fund and the fund occurs, a third
series of $0.01 par value shares will be issued. 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 three classes of the fund offered by this
Prospectus: an Investor Class, an Institutional Class, and an Advisor Class.
The shares offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Institutional Class is 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 Investor
Class of shares, call one of our Investor Services Representatives at
1-800-345-2021. For information concerning the Institutional Class of shares
call one of our Institutional Services Representatives 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 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 fund 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 fund's bylaws, the holders of at least 10% of the votes
entitled to be cast may request the fund 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.
NOTES
NOTES
NOTES
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9609 [recycled logo]
SH-BKT-6585 Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(sm)
MAY 21, 1997
AMERICAN
CENTURY
GROUP
Value
Equity Income
Real Estate Fund
[front cover]
STATEMENT OF ADDITIONAL INFORMATION
MAY 21, 1997
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
This is the Statement of Additional Information for the American Century
Value Fund, American Century Equity Income Fund and American Century Real Estate
Fund. This Statement is not a prospectus but should be read in conjunction with
the current prospectuses of American Century Capital Portfolios, Inc., dated May
21, 1997. Please retain this document for future reference. To obtain a
Prospectus, call American Century toll-free at 1-800-345-2021 (international
calls: 816-531-5575), or write P.O. Box 419200, Kansas City, Missouri
64141-6200.
TABLE OF CONTENTS
Investment Objective of the Funds...............................................
Investment Restrictions.........................................................
Forward Currency Exchange Contracts.............................................
Index Futures Contracts.........................................................
An Explanation of Fixed Income Securities Ratings...............................
Short Sales.....................................................................
Portfolio Turnover..............................................................
Officers and Directors..........................................................
Management......................................................................
Custodians......................................................................
Independent Auditors............................................................
Capital Stock...................................................................
Multiple Class Structure........................................................
Taxes...........................................................................
Brokerage.......................................................................
Performance Advertising.........................................................
Redemptions in Kind.............................................................
Holidays........................................................................
Financial Statements............................................................
INVESTMENT OBJECTIVE OF THE FUNDS
The investment objective of each fund comprising American Century Capital
Portfolios, Inc. is described on page 2 of the applicable prospectus. In
achieving its objective, a fund must conform to certain policies, some of which
are designated in its prospectus or in this Statement of Additional Information
as "fundamental" and cannot be changed without shareholder approval. The
following paragraph is also a statement of fundamental policy with respect to
selection of investments for Value and Equity Income.
In general, within the restrictions outlined herein, American Century has
broad powers with respect to investing funds or holding them uninvested.
Investments are varied according to what is judged advantageous under changing
economic conditions. It is our policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described below. It is the manager's intention that each fund will generally
consist of equity securities. However, subject to the specific limitations
applicable to a fund, the manager may invest the assets of a fund in varying
amounts in other instruments and in senior securities, such as bonds,
debentures, preferred stocks and convertible issues, when such a course is
deemed appropriate in order to attempt to attain its financial objective.
Neither the Securities and Exchange Commission nor any other federal or
state agency participates in or supervises the management of the funds or their
investment practices or policies.
INVESTMENT RESTRICTIONS
Additional fundamental policies that may be changed only with shareholder
approval provide that each of Value and Equity Income:
(1) Shall not invest more than 15% of its assets in illiquid investments.
(2) Shall not invest in securities of companies that, including
predecessors, have a record of less than three years of continuous
operation.
(3) Shall not lend its portfolio securities except to unaffiliated persons
and subject to the rules and regulations adopted under the Investment
Company Act of 1940. No such rules and regulations have been issued,
but it is our policy that such loans must be secured continuously by
cash collateral maintained on a current basis in an amount at least
equal to the market value of the securities loaned or by irrevocable
letters of credit. During the existence of the loan, a fund 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 fund 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. To comply with the regulations of certain state securities
administrators, such loans may not exceed one-third of the fund's net
assets valued at market.
(4) Shall not, with regard to 75% of its portfolio, purchase the security
of any one issuer if such purchase would cause more than 5% of the
fund's assets at market to be invested in the securities of such
issuer, except U.S. government securities, or if the purchase would
cause more than 10% of the outstanding voting securities of any one
issuer to be held in a fund's portfolio.
(5) Shall not invest for control or for management or concentrate its
investment in a particular company or a particular industry. No more
than 25% of the assets of a fund, exclusive of cash and U.S. government
securities, will be invested in securities of any one industry.
(6) Shall not buy securities on margin or sell short (unless it owns or by
virtue of its ownership of other securities has the right to obtain
securities equivalent in kind and amount to the securities sold without
additional cost); however, a fund may make margin deposits in
connection with the use of any financial instrument or any transaction
in securities permitted by its fundamental policies.
(7) Shall not invest in the securities of other investment companies except
by purchases in the open market involving only customary brokers'
commission and no sales charges.
(8) Shall not issue any senior security.
(9) Shall not underwrite any securities.
(10)Shall not borrow any money, except in an amount not in excess of 5% of
the total assets of the series and then only for emergency and
extraordinary purposes. Note: This investment restriction does not
prohibit escrow and collateral arrangements in connection with
investment in futures contracts and related options by a fund.
(11)Shall not purchase or sell real estate, except that a fund may purchase
securities of issuers that deal in real estate and may purchase
securities that are secured by interests in real estate.
Additional fundamental policies that may be changed only with shareholder
approval provide that Real Estate Fund:
(1) Shall not lend any security or make any other loan if, as a result,
more than 33 1/3% of its total assets, would be lent to other parties,
but this limitation does not apply to purchase of debt securities to
repurchase agreements.
(2) Shall not invest for control or for management.
(3) Shall not issue any senior security except as permitted under the
Investment Company Act of 1940.
(4) Shall not underwrite any securities except as permitted by the
Investment Company Act of 1940.
(5) Shall not borrow any money, except that a fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in
an amount not exceeding 33 1/3% of the fund's total assets (including
the amount borrowed) less liabilities (other than borrowings).
(6) Shall not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments, provided that
this limitation will not prohibit the fund from purchasing and selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities.
(7) Shall not purchase or sell real estate except the fund may invest in
securities secured by real estate interests or securities issued by
companies that invest in real estate or interests therein, including
real estate investment trusts. (This does not prevent the fund from
owning and liquidating real estate or real estate interests incident to
a default or portfolio securities.)
The Investment Company Act imposes certain additional restrictions upon
acquisition by the fund of securities issued by insurance companies, brokers,
dealers, underwriters or investment advisers, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership.
Neither American Century Value nor American Century Equity Income may
invest more than 25% of their assets in the securities of issuers engaged in a
single industry. In determining industry groups for purposes of this standard,
the SEC ordinarily uses the Standard Industry Classification codes developed by
the United States Office of Management and Budget. In the interest of ensuring
adequate diversification, the funds monitor industry concentration using a more
restrictive list of industry groups that the recommended by the SEC. The funds
believe that these classifications are reasonable and are not so broad that the
primary economic characteristics of the companies in a single class are
materially different. The use of these more restrictive industry classifications
may, however, cause the funds to forego investment possibilities which may
otherwise be available to them under the Investment Company Act.
Neither the SEC nor any other agency of the federal or state government
participates in or supervises the funds' management or their investment
practices or policies.
FORWARD CURRENCY EXCHANGE CONTRACTS
A fund conducts its foreign currency exchange transactions either on a spot
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into forward currency exchange contracts to purchase or sell
foreign currencies.
A fund expects to use forward contracts under two circumstances:
(1) When the manager wishes to "lock in" the U.S. dollar price of a
security when a fund is purchasing or selling a security denominated in
a foreign currency, the fund would be able to enter into a forward
contract to do so;
(2) When the manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, a
fund would be able to enter into a forward contract to sell foreign
currency for a fixed U.S. dollar amount approximating the value of some
or all of its portfolio securities either denominated in, or whose
value is tied to, such foreign currency.
As to the first circumstance, when a fund enters into a trade for the
purchase or sale of a security denominated in a foreign currency, it may be
desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering
into forward contracts in U.S. dollars for the purchase or sale of a foreign
currency involved in an underlying security transaction, the fund will be able
to protect itself against a possible loss between trade and settlement dates
resulting from the adverse change in the relationship between the U.S. dollar
and the subject foreign currency.
Under the second circumstance, when the manager believes that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will place cash or high-grade liquid securities
in a separate account with its custodian in an amount equal to the value of the
forward contracts entered into under the second circumstance. If the value of
the securities placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account equals the amount of the fund's commitments with respect to such
contracts.
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible since the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The manager does not intend to enter into such
contracts on a regular basis. Normally, consideration of the prospect for
currency parities will be incorporated into the long-term investment decisions
made with respect to overall diversification strategies. However, the manager
believes that it is important to have flexibility to enter into such forward
contracts when it determines that a fund's best interests may be served.
Generally, a fund will not enter into a forward contract with a term of
greater than one year. At the maturity of the forward contract, the fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate the obligation to deliver the foreign
currency by purchasing an "offsetting" forward contract with the same currency
trader obligating the fund to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for a fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency the fund is obligated to deliver.
INDEX FUTURES CONTRACTS
As described in the applicable Prospectus, Value and Equity Income may
enter into domestic stock index futures contracts. Unlike when a fund purchases
securities, no purchase price for the underlying securities is paid by the fund
at the time it purchases a futures contract. When a futures contract is entered
into, both the buyer and seller of the contract are required to deposit with a
futures commission merchant ("FCM") cash or high-grade debt securities in an
amount equal to a percentage of the contract's value, as set by the exchange on
which the contract is traded. This amount is known as "initial margin" and is
held by the fund's custodian for the benefit of the FCM in the event of any
default by the fund in the payment of any future obligations.
The value of the index futures is adjusted daily to reflect the fluctuation
of the value of the underlying securities that comprise the index. This is a
process known as marking the contract to market. If the value of a party's
position declines, that party is required to make additional "variation margin"
payments to the FCM to settle the change in value. The party that has a gain may
be entitled to receive all or a portion of this amount. The FCM may have access
to a fund's margin account only under specified conditions of default.
The funds maintain from time to time a percentage of their assets in cash
or high-grade liquid securities to provide for redemptions or to hold for future
investment in securities consistent with the funds' investment objectives. The
funds may enter into index futures contracts as an efficient means to expose the
funds' cash position to the domestic equity market. The manager believes that
the purchase of futures contracts is an efficient means to effectively be fully
invested in equity securities.
The funds intend to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the
Commodity Futures Trading Commission and the National Futures Association, which
regulate trading in the futures markets. To do so, the aggregate initial margin
required to establish such positions may not exceed 5% of the fair market value
of a fund's net assets, after taking into account unrealized profits and
unrealized losses on any contracts it has entered into.
The principal risks generally associated with the use of futures include:
o the possible absence of a liquid secondary market for any particular
instrument may make it difficult or impossible to close out a position when
desired (liquidity risk);
o the risk that the counter party to the contract may fail to perform its
obligations or the risk of bankruptcy of the FCM holding margin deposits
(counter party risk);
o the risk that the index of securities to which the futures contract relates
may go down in value (market risk); and
o adverse price movements in the underlying index can result in losses
substantially greater than the value of a fund's investment in that
instrument because only a fraction of a contract's value is required to be
deposited as initial margin (leverage risk); provided, however, that the
funds may not purchase leveraged futures, so there is no leverage risk
involved in the funds' use of futures.
A liquid secondary market is necessary to close out a contract. The funds
seek to manage liquidity risk by investing only in exchange-traded futures.
Exchange-traded index futures pose less risk that there will not be a liquid
secondary market than privately negotiated instruments. Through their clearing
corporations, the futures exchanges guarantee the performance of the contracts.
Futures contracts are generally settled within a day from the date they are
closed out, as compared to three days for most types of equity securities. As a
result, futures contracts can provide more liquidity than an investment in the
actual underlying securities. Nevertheless, there is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Liquidity may also be influenced by an exchange-imposed daily
price fluctuation limit, which halts trading if a contract's price moves up or
down more than the established limit on any given day. On volatile trading days
when the price fluctuation limit is reached, it may be impossible for a fund to
enter into new positions or close out existing positions. If the secondary
market for a futures contract is not liquid because of price fluctuation limits
or otherwise, a fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until liquidity in the market is re-established. As a result, such
fund's access to other assets held to cover its futures positions also could be
impaired until liquidity in the market is re-established.
The funds manage counter-party risk by investing in exchange-traded index
futures. In the event of the bankruptcy of the FCM that holds margin on behalf
of a fund, that fund may be entitled to the return of margin owed to such fund
only in proportion to the amount received by the FCM's other customers. The
manager will attempt to minimize the risk by monitoring the creditworthiness of
the FCMs with which the funds do business.
The prices of futures contracts depend primarily on the value of their
underlying instruments. As a result, the movement in market price of index
futures contracts will reflect the movement in the aggregate market price of the
entire portfolio of securities comprising the index. Since the funds are not
index funds, a fund's investment in futures contracts will not correlate
precisely with the performance of such fund's other equity investments. However,
the manager believes that an investment in index futures will more closely
reflect the investment performance of the funds than an investment in U.S.
government or other highly liquid, short-term debt securities, which is where
the cash position of the funds would otherwise be invested.
The policy of the manager is to remain fully invested in equity securities.
There may be times when the manager deems it advantageous to the funds not to
invest excess cash in index futures, but such decision will generally not be the
result of an active effort to use futures to time or anticipate market movements
in general.
AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS
As described in the applicable Prospectus, the funds may invest in fixed
income securities. With the exception of convertible securities and all fixed
income investments of Real Estate Fund, the funds may invest only in investment
grade obligations.
Fixed income securities ratings provide the investment manager with current
assessment of the credit rating of an issuer with respect to a specific fixed
income security. The following is a description of the rating categories
utilized by the rating services referenced in the prospectus disclosure:
The following summarizes the ratings used by Standard & Poor's Corporation
for bonds:
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA--Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only to a small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions, which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C--The rating C typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
To provide more detailed indications of credit quality, the ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the ratings used by Moody's Investors Service,
Inc. for bonds:
Aaa--Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risk appear somewhat larger than the Aaa
securities.
A--Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment some time in the future.
Baa--Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba--Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds that are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa through B. The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
SHORT SALES
Value and Equity Income 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.
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. There will be certain additional transaction
costs associated with short sales, but the fund will endeavor to offset these
costs with income from the investment of the cash proceeds of short sales.
A fund may make a short sale, as described above, 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. In such a case, all or some part of any future losses in
the fund's long position in substantially identical securities may not become
deductible for tax purposes until all or some part of the short position has
been closed.
PORTFOLIO TURNOVER
In order to achieve each fund's investment objective, the manager will
purchase and sell securities without regard to the length of time the security
has been held. Accordingly, the funds' rate of portfolio turnover may be
substantial.
The funds intend to purchase a given security whenever the manager believes
it will contribute to the stated objective of a fund, even if the same security
has only recently been sold. In selling a given security, the manager keeps in
mind that (1) profits from sales of securities held less than three months must
be limited in order to meet the requirements of Subchapter M of the Internal
Revenue Code, and (2) profits from sales of securities are taxed to
shareholders. Subject to those considerations, the corporation will sell a given
security, no matter for how long or how short a period it has been held in the
portfolio and no matter whether the sale is at a gain or at a loss, if
management believes that the security is not fulfilling its purpose, either
because, among other things, it did not live up to the manager's expectations,
or because it may be replaced with another security holding greater promise, or
because it has reached its optimum potential, or because of a change in the
circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
When a general decline in security prices is anticipated, a fund may
decrease or eliminate entirely its equity position and increase its cash
position, and when a rise in price levels is anticipated, a fund may increase
its equity position and decrease its cash position. It should be expected,
however, that the funds will, under most circumstances, be essentially fully
invested in equity securities and equity equivalents.
Since investment decisions are based on the anticipated contribution of the
security in question to a fund's objectives, management believes that the rate
of portfolio turnover is irrelevant when management believes a change is in
order to achieve those objectives.
OFFICERS AND DIRECTORS
The principal officers and directors of the corporation, their principal
business experience during the past five years, and their affiliations with the
fund's investment manager, American Century Investment Management, Inc. and its
transfer agent, American Century Services Corporation, are listed below. Unless
otherwise noted, the business address of each director and officer is American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111. All persons named
as officers of the Corporation also serve in similar capacities for other funds
advised by the manager. Those directors that are "interested persons" as defined
in the Investment Company Act of 1940 are indicated by an asterisk(*).
JAMES E. STOWERS JR.,* Chairman of the Board and Director; Chairman of
the Board, Director and controlling shareholder of American Century Companies,
Inc., parent corporation of American Century Investment Management, Inc. and
American Century Services Corporation; Chairman of the Board and Director of
American Century Investment Management, Inc. and American Century Services
Corporation; father of James E. Stowers III.
JAMES E. STOWERS III,* President, Chief Executive Officer and Director;
President, Chief Executive Officer and Director, American Century Companies,
Inc. American Century Investment Management, Inc. and American Century
Services Corporation.
THOMAS A. BROWN, Director; 2029 Wyandotte, Kansas City, Missouri; Chief
Executive Officer, Associated Bearing Company, a corporation engaged in the
sale of bearings and power transmission products.
ROBERT W. DOERING, M.D., Director; 6420 Prospect, Kansas City, Missouri;
general surgeon.
D. D. (DEL) HOCK, Director; 1225 Seventeenth Street #900, Denver,
Colorado; Chairman, President and Chief Executive Officer, Public Service
Company of Colorado.
LINSLEY L. LUNDGAARD, Vice Chairman of the Board and Director; 18648 White
Wing Drive, Rio Verde, Arizona; retired; formerly Vice President and National
Sales Manager, Flour Milling Division, Cargill, Inc.
DONALD H. PRATT, Director; P.O. Box 419917, Kansas City, Missouri;
President, Butler Manufacturing Company.
LLOYD T. SILVER JR., Director; 2300 West 70th Terrace, Mission Hills,
Kansas; President, LSC, Inc., manufacturer's representative.
M. JEANNINE STRANDJORD, Director; 908 West 121st Street, Kansas City,
Missouri; Senior Vice President and Treasurer, Sprint Corporation.
WILLIAM M. LYONS, Executive Vice President, Chief Operating Officer,
Secretary and General Counsel; Executive Vice President, Chief Operating
Officer and General Counsel, American Century Companies, Inc., American
Century Investment Management, Inc. and American Century Services Corporation.
ROBERT T. JACKSON, Executive Vice President and Principal Financial
Officer; Executive Vice President and Treasurer, American Century Companies,
Inc., American Century Investment Management, Inc. and American Century
Services Corporation; formerly Executive Vice President, Kemper Corporation.
MARYANNE ROEPKE, CPA, Vice President, Treasurer and Principal Accounting
Officer; Vice President, American Century Services Corporation.
PATRICK A. LOOBY, Vice President; Vice President, American Century
Services Corporation.
MERELE A. MAY, Controller.
C. JEAN WADE, CPA, Controller.
The Board of Directors has established four standing committees, the
Executive Committee, the Audit Committee, the Compliance Committee and the
Nominating Committee.
Messrs. Stowers Jr., Stowers III, and Lundgaard constitute the Executive
Committee of the Board of Directors. The committee performs the functions of the
Board of Directors between meetings of the Board, subject to the limitations on
its power set out in the Maryland General Corporation Law, and except for
matters required by the Investment Company Act to be acted upon by the whole
Board.
Messrs. Lundgaard (chairman), Doering and Hock and Ms. Strandjord
constitute the Audit Committee. The functions of the Audit Committee include
recommending the engagement of the funds' independent accountants, reviewing the
arrangements for and scope of the annual audit, reviewing comments made by the
independent accountants with respect to internal controls and the considerations
given or the corrective action taken by management, and reviewing nonaudit
services provided by the independent accountants.
Messrs. Brown (chairman), Pratt and Silver constitute the Compliance
Committee. The functions of the Compliance Committee include reviewing the
results of the funds' compliance testing program, reviewing quarterly reports
from the manager to the Board regarding various compliance matters and
monitoring the implementation of the funds' Code of Ethics, including violations
thereof.
The Nominating Committee has as its principal role the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the Board, management and shareholders. This
committee also reviews and makes recommendations to the Board with respect to
the composition of Board committees and other Board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Pratt
(Chairman), Lundgaard and Stowers III.
The Directors of the corporation also serve as Directors for other funds
advised by the manager. Each Director who is not an "interested person" as
defined in the Investment Company Act receives for service as a member of the
Board of six of such companies an annual director's fee of $44,000, a fee of
$1,000 per regular Board meeting attended and $500 per special Board meeting and
committee meeting attended. In addition, those Directors who are not "interested
persons" who serve as chairman of a committee of the Board of Directors receive
an additional $2,000 for such services. These fees and expenses are divided
among the six investment companies based upon their relative net assets. Under
the terms of the management agreement with the manager, the funds are
responsible for paying such fees and expenses. For the most recent fiscal year,
Value's share of such fees and expenses was $6,570 and Equity Income's share was
$950.
Set forth below is the aggregate compensation paid for the periods
indicated by the corporation and by the American Century family of funds as a
whole to each director of the corporation who is not an "interested person" as
defined in the Investment Company Act.
Aggregate Total Compensation from
Compensation the American Century
Director from the corporation1 Family of Funds2
Thomas A. Brown $ 986.73 $44,000
Robert W. Doering, M.D. 975.64 44,000
Linsley L. Lundgaard 1,019.99 46,000
Donald H. Pratt 853.69 28,000
Lloyd T. Silver Jr. 975.64 44,000
M. Jeannine Strandjord 964.56 44,000
John M. Urie 1,019.99 46,000
1 Includes compensation actually paid by the corporation during the fiscal
year ended March 31, 1996.
2 Includes compensation paid by the fifteen investment company members of
the American Century family of funds for the calendar year ended December 31,
1995.
Those Directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a Director. The salaries of
such individuals, who also are officers of the funds, are paid by the manager.
MANAGEMENT
A description of the responsibilities and method of compensation of fund's
investment manager, American Century Investment Management, Inc. appears in each
prospectus under the caption "Management."
During the fiscal years ended March 31, 1994, 1995 and 1996, the management
fees paid by Value and Equity Income to the manager were:
Fund Year Ended March 31
1996 1995 1994
Value
Management fees $5,747,940 $1,514,154 $309,388*
Average net assets 590,608,755 151,415,400 30,938,800*
Equity Income
Management fees 831,887 145,270**
Average net assets 84,610,230 14,527,000**
*Since inception (September 1, 1993) through March 31, 1994.
**Since inception (August 1, 1994) through March 31, 1995.
The management agreements between Value, Equity Income and the manager and
between Real Estate Fund and the manager shall continue in effect until the
earlier of the expiration of two years from the date of its execution or until
the first meeting of shareholders following such execution and for as long
thereafter as its continuance is specifically approved at least annually by (i)
the funds' Board of Directors or by the vote of a majority of outstanding votes
(as defined in the Investment Company Act) and (ii) by the vote of a majority of
the Directors who are not parties to the agreement or interested persons of the
manager, cast in person at a meeting called for the purpose of voting on such
approval.
Each management agreement provides that it may be terminated at any time
without payment of any penalty by the funds' Board of Directors, or by a vote of
the funds' shareholders, on 60 days' written notice to the manager and that it
shall be automatically terminated if it is assigned.
Each management agreement provides that the manager shall not be liable to
the funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
Each management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
The management agreement between Real Estate Fund and the manager
contemplates the retention of a subadvisor by the manager.
Certain investments may be appropriate for the funds and also for other
clients advised by the manager. Investment decisions for the funds and other
clients are made with a view to achieving their respective investment objectives
after consideration of such factors as their current holdings, availability of
cash for investment, and the size of their investment generally. A particular
security may be bought or sold for only one client, or in different amounts and
at different times for more than one but less than all clients. In addition,
purchases or sales of the same security may be made for two or more clients on
the same date. Such transactions will be allocated among clients in a manner
believed by the manager to be equitable to each. In some cases this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by a fund.
The manager may aggregate purchase and sale orders of the funds with
purchase and sale orders of its other clients when the manager believes that
such aggregation provides the best execution for the funds. The funds' Board of
Directors has approved the policy of the manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
manager will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The manager
receives to additional compensation or remuneration as a result of such
aggregation.
In addition to managing the funds, on August 1, 1996, the manager was also
acting as an investment adviser to nine institutional accounts and to six
registered investment companies: American Century Mutual Funds, Inc., American
Century Premium Reserves, Inc., American Century World Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc., and TCI Portfolios, Inc.
American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the funds and the manager pays American Century Services
Corporation, for such services.
As stated in each prospectus, all of the stock of American Century
Investment Management, Inc. and American Century Services Corporation is owned
by American Century Companies, Inc.
CUSTODIANS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York
10003-9598, and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105,
each serves as custodian of the assets of the funds. The custodians take no part
in determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds, however, may invest in
certain obligations of the custodians and may purchase or sell certain
securities from or to the custodians.
INDEPENDENT AUDITORS
At a meeting held on December 12, 1996, the Board of Directors of the
corporation appointed Deloitte & Touche LLP, 1010 Grand Avenue, Suite 400,
Kansas City, Missouri 64106, as the independent auditors of the funds to examine
the financial statements of the funds for the fiscal year ending March 31, 1998.
The appointment of Deloitte & Touche was recommended by the Audit Committee of
the Board of Directors. As the independent auditors of the funds, Deloitte &
Touche will provide services including (1) audit of the annual financial
statements, (2) assistance and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed for each fund by
American Century.
Ernst & Young LLP, One Kansas City Place, 1200 Main Street, Kansas City,
Missouri 64105, served as independent auditors for the funds and examined the
financial statements of Value and Equity Income for all fiscal years ending
prior to March 31, 1998.
CAPITAL STOCK
The fund's capital stock is described in the prospectuses under the caption
"Further Information About American Century."
The corporation currently has two series of shares outstanding, and a third
series is planned to be authorized. Each series of shares is further divided
into four classes. The funds may in the future issue one or more additional
series or class of shares without a vote of the shareholders. The assets
belonging to each series or class of shares are held separately by the custodian
and the shares of each series or class represent a beneficial interest in the
principal, earnings and profits (or losses) of investment and other assets held
for that series or class. Your rights as a shareholder are the same for all
series or classes of securities unless otherwise stated. Within their respective
series or class, all shares will have equal redemption rights. Each share, when
issued, is fully paid and non-assessable. Each share, irrespective of series or
class, is entitled to one vote for each dollar of net asset value represented by
such share on all questions.
In the event of complete liquidation or dissolution of the funds,
shareholders of each series or class of shares will be entitled to receive, pro
rata, all of the assets less the liabilities of that series or class.
As of ---- --, 19--, in excess of 5% of the outstanding shares of either
series of the funds were owned of record as follows: Charles Schwab & Co., San
Francisco, California, owned ____% of Value and ____% of Equity Income.
As of June 30, 1996, the shares of the corporation owned beneficially and
of record by the officers and directors of the corporation in the aggregate were
less than 1% of either series of shares offered by the funds.
MULTIPLE CLASS STRUCTURE
The funds' Board of Directors has adopted a multiple class plan (the
"Multiclass Plan") pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the funds may issue up to four classes of shares: an Investor Class, an
Institutional Class, a Service Class and an Advisor Class.
The Investor Class is made available to investors directly by the
investment manager through its affiliated broker-dealer, American Century
Investment Services, Inc., for a single unified management fee, without any load
or commission. The Institutional, Service and Advisor Classes are made available
to institutional shareholders or through financial intermediaries that do not
require the same level of shareholder and administrative services from the
manager as Investor Class shareholders. As a result, the manager is able to
charge these classes a lower management fee. In addition to the management fee,
however, Service Class shares are subject to a Shareholder Services Plan
(described below), and the Advisor Class shares are subject to a Master
Distribution and Shareholder Services Plan (also described below). Both plans
have been adopted by the funds' Board of Directors and initial shareholder in
accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act.
RULE 12B-1
Rule 12b-1 permits an investment company to pay expenses associated with
the distribution of its shares in accordance with a plan adopted by the
investment company's Board of Directors and approved by its shareholders.
Pursuant to such rule, the Board of Directors and initial shareholder of the
funds' Service Class and Advisor Class have approved and entered into a
Shareholder Services Plan, with respect to the Service Class, and a Master
Distribution and Shareholder Services Plan, with respect to the Advisor Class
(collectively, the "Plans"). Both Plans are described beginning on this page.
In adopting the Plans, the Board of Directors (including a majority of
directors who are not "interested persons" of the funds (as defined in the
Investment Company Act), hereafter referred to as the "independent directors")
determined that there was a reasonable likelihood that the Plans would benefit
the funds and the shareholders of the affected classes. Pursuant to Rule 12b-1,
information with respect to revenues and expenses under the Plans is presented
to the Board of Directors quarterly for its consideration in connection with its
deliberations as to the continuance of the Plans. Continuance of the Plans must
be approved by the Board of Directors (including a majority of the independent
directors) annually. The Plans may be amended by a vote of the Board of
Directors (including a majority of the independent directors), except that the
Plans may not be amended to materially increase the amount to be spent for
distribution without majority approval of the shareholders of the affected
class. The Plans terminate automatically in the event of an assignment and may
be terminated upon a vote of a majority of the independent directors or by vote
of a majority of the outstanding voting securities of the affected class.
All fees paid under the plans will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers.
SHAREHOLDER SERVICES PLAN
As described in the Prospectus, the funds' Service Class of shares is made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. In such circumstances, certain record
keeping and administrative services that are provided by the funds' transfer
agent for the Investor Class shareholders may be performed by a plan sponsor (or
its agents) or by a financial intermediary. To enable the funds' shares to be
made available through such plans and financial intermediaries, and to
compensate them for such services, the funds' investment manager has reduced its
management fee by 0.25% per annum with respect to the Service Class shares and
the funds' Board of Directors has adopted a Shareholder Services Plan. Pursuant
to the Shareholder Services Plan, the Service Class shares pay a shareholder
services fee of 0.25% annually of the aggregate average daily net assets of the
funds' Service Class shares.
American Century Investment Services, Inc. (the "Distributor") enters into
contracts with each financial intermediary for the provision of certain
shareholder services and utilizes the shareholder services fees under the
Shareholder Services Plan to pay for such services. Payments may be made for a
variety of shareholder services, including, but are not limited to, (1)
receiving, aggregating and processing purchase, exchange and redemption request
from beneficial owners (including contract owners of insurance products that
utilize the funds as underlying investment medium) of shares and placing
purchase, exchange and redemption orders with the Distributor; (2) providing
shareholders with a service that invests the assets of their accounts in shares
pursuant to specific or pre-authorized instructions; (3) processing dividend
payments from a fund on behalf of shareholders and assisting shareholders in
changing dividend options, account designations and addresses; (4) providing and
maintaining elective services such as check writing and wire transfer services;
(5) acting as shareholder of record and nominee for beneficial owners; (6)
maintaining account records for shareholders and/or other beneficial owners; (7)
issuing confirmations of transactions; (8) providing subaccounting with respect
to shares beneficially owned by customers of third parties or providing the
information to a fund as necessary for such subaccounting; (9) preparing and
forwarding shareholder communications from the funds (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to shareholders and/or other beneficial owners;
(10) providing other similar administrative and sub-transfer agency services;
and (11) paying "service fees" for the provision of personal, continuing
services to investors, as contemplated by the Rules of Fair Practice of the NASD
(collectively referred to as "Shareholder Services"). Shareholder Services do
not include those activities and expenses that are primarily intended to result
in the sale of additional shares of the funds.
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectus, the funds' Advisor Class of shares is also
made available to participants in employer-sponsored retirement or savings plans
and to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. The Distributor enters into contracts
with various banks, broker-dealers, insurance companies and other financial
intermediaries with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
As with the Service Class, certain record keeping and administrative
services that are provided by the funds' transfer agent of the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for shareholders in the Advisor Class. In addition to
such services, the financial intermediaries provide various distribution
services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
investment manager has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares and the funds' Board of Directors has
adopted a Master Distribution and Shareholder Services Plan (the "Distribution
Plan"). Pursuant to such Plan, the Advisor Class shares pay a fee of 0.50%
annually of the aggregate average daily net assets of the funds' Advisor Class
shares, 0.25% of which is paid for Shareholder Services (as described above) and
0.25% of which is paid for distribution services.
Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (1) the payment of sales
commission, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant to
Selling Agreements; (2) compensation to registered representatives or other
employees of Distributor who engage in or support distribution of the funds'
Advisor Class shares; (3) compensation to, and expenses (including overhead and
telephone expenses) of, Distributor; (4) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (5) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' shareholders and prospective
shareholders; (6) receiving and answering correspondence from prospective
shareholders including distributing prospectuses, statements of additional
information, and shareholder reports; (7) the providing of facilities to answer
questions from prospective investors about fund shares; (8) complying with
federal and state securities laws pertaining to the sale of fund shares; (9)
assisting investors in completing application forms and selecting dividend and
other account options: (10) the providing of other reasonable assistance in
connection with the distribution of fund shares; (11) the organizing and
conducting of sales seminars and payments in the form of transactional
compensation or promotional incentives; (12) profit on the foregoing; (13) the
payment of "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD and (14)
such other distribution and services activities as the manager determines may be
paid for by the funds pursuant to the terms of this Agreement and in accordance
with Rule 12b-1 of the 1940 Act.
TAXES
Each fund has elected to be taxed under the Internal Revenue Code as a
regulated investment company. If they qualify, they will not be subject to U.S.
federal income tax on net investment income and net capital gains, which are
distributed to its shareholders within certain time periods specified in the
Code. Amounts not distributed on a timely basis would be subject to federal and
state corporate income tax and to a nondeductible 4% excise tax.
Each fund intends to distribute annually all of its net ordinary income and
net capital gains.
Distributions from net investment income and net short-term capital gains
are taxable to shareholders as ordinary income. The dividends received deduction
available to corporate shareholders for dividends received from a fund will
apply to ordinary income distributions only to the extent that they are
attributable to the fund's dividend income from U.S. corporations. In addition,
the dividends received deduction will be limited if the shares with respect to
which the dividends are received are treated as debt-financed or are deemed to
have been held less than 46 days by a fund.
Distributions from net long-term capital gains are taxable to a shareholder
as long-term capital gains regardless of the length of time the shares on which
such distributions are paid have been held by the shareholder. However,
shareholders 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 the shareholder
with respect to such shares.
Redemption of shares of a fund 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 will generally 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 Internal Revenue Code, resulting in a postponement of
the recognition of such loss for federal income tax purposes.
In addition to the federal income tax consequences described above relating
to an investment in shares of the funds, there may be other federal, state or
local tax considerations that depend upon the circumstances of each particular
investor. Prospective shareholders are therefore urged to consult their tax
advisers with respect to the effect of this investment on their own situations.
Taxation of Certain Mortgage REITs
The funds may invest in REITs that hold residual interests in real estate
mortgage investment conduits. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of a fund's income from a REIT
that is attributable to the REIT's residual interest in a REMIC (referred to in
the Code as an "excess inclusion") will be subject to Federal income tax in all
events. These regulations are also expected to provide that excess inclusion
income of a regulated investment company, such as a fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by them with the same consequences as if the shareholders held the
related REMIC residual interest directly. In general, excess inclusion income
allocated to shareholders (i) cannot be offset by net operating losses (subject
to a limited exception for certain thrift institutions) and (ii) will constitute
unrelated business taxable income to entities (including a qualified pension
plan, an individual retirement account, a 401(k) plan, a Keogh plan or other
tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might be required to file a tax return, to file a tax return and
pay tax on some income. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment company
will be subject to a tax equal to that portion of its excess inclusion income
for the taxable year that is allocable to the disqualified organization,
multiplied by the highest Federal income tax rate imposed on corporations.
Taxation of Debt Instruments
For Federal income tax purposes, debt securities purchased by the funds may be
treated as having original issue discount. Original issue discount can generally
be defined as the excess of the stated redemption price at maturity of a debt
obligation over the issue price. Original issue discount is treated as interest
earned by the fund for Federal income tax purposes, whether or not any income is
actually received, and therefore is subject to the distribution requirements of
the Code. However, original issue discount with respect to tax-exempt
obligations generally will be excluded from a fund's taxable income. Original
issue discount with respect to tax-exempt securities is accrued and added to the
adjusted tax basis of such securities for purposes of determining gain or loss
upon sale or at maturity. Generally, the amount of original issue discount for
any period is determined on the basis of a constant yield to maturity which
takes into account the compounding of accrued interest. Under section 1286 of
the Code, an investment in a stripped bond or stripped coupon will result in
original issue discount.
A fund may purchase debt securities at a discount which exceeds the original
issue price plus previously accrued original issue discount remaining on the
securities, at the time of purchase. This additional discount represents market
discount for income tax purposes. Generally, market discount is accrued on a
daily basis.
A fund may purchase debt securities at a premium, i.e., at a purchase price in
excess of face amount. With respect to tax-exempt securities, the premium must
be amortized to the maturity date but no deduction is allowed for the premium
amortization. Instead, the amortized bond premium will reduce the fund's
adjusted tax basis in the securities. For taxable securities, the premium may be
amortized if the fund so elects. The amortized premium on taxable securities is
allowed as a deduction, and, generally for securities issued after September 27,
1985, must be amortized under an economic accrual method.
Foreign Holders
A foreign holder is a person or entity that, for U.S. Federal income tax
purposes, is a nonresident alien individual, a foreign corporation, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust. If a
distribution of a fund's taxable income (without regard to its net capital gain)
to a foreign holder is not effectively connected with a U.S. trade of business
carried on by the investor, such distribution will be subject to withholding tax
at a 30% rate or such lower rate as may be specified by an applicable income tax
treaty. In addition, distributions from the Fund will generally be subject to
information reporting.
If at least 50% of the value of the Real Estate Fund is represented by shares of
REITs that are "domestically controlled" within the meaning of Section 897(h) of
the Code, or is represented by shares of classes of REIT stock that (i)
represent not more than 5% of such classes and (ii) are "regularly traded on an
established securities market" within the meaning of Section 897(c)(3) of the
Code, a foreign holder should not be subject to withholding tax under the
Foreign Investment in Real Property Tax Act with respect to gain arising from
the sale or redemption of units. In addition, based upon advice of counsel as to
existing law, the fund does not intend to withhold under FIRPTA on distributions
of the fund's net capital gain (designated as capital gain by the fund). Such
income generally will not be subject to Federal income tax unless the income is
effectively connected with a trade or business of such foreign holder in the
United States. In the case of a foreign holder who is a non-resident alien
individual, however, gain arising from the sale or redemption of shares or
distributions of the fund's net capital gain ordinarily will be subject to
Federal income tax at a rate of 30% if such individual is physically present in
the U.S. for 183 days or more during the taxable year and, in the case of the
gain arising from the sale or redemption of units, either the gain is
attributable to an office or other fixed place of business maintained by the
holder in the United States or the holder has a "tax home" in the United States.
In addition, shares held by individual who is not a citizen or resident of the
United States at the time of his death will generally be subject to United
States federal estate tax.
The tax consequences to a foreign holder entitled to claim the benefits of an
applicable tax treaty may be different from those described herein. Foreign
Holders should consult their own tax advisers to determine whether investment in
the Fund is appropriate.
BROKERAGE
Under the terms of the Management Agreements between Value and Equity
Income and the manager, the manager has the responsibility of selecting brokers
to execute portfolio transactions. The funds' policy is to secure the most
favorable prices and execution of orders on its portfolio transactions. So long
as that policy is met, the manager may take into consideration the factors
discussed below when selecting brokers.
For brokerage services related to the Real Estate Fund, the manager has
delegated responsibility for selecting brokers to execute portfolio transactions
to the subadvisor under the terms of the Subadvisory Agreement.
The manager or the subadvisor, as the case may be, receives statistical and
other information and services without cost from brokers and dealers. The
manager or the subadvisor evaluates such information and services, together with
all other information that it may have, in supervising and managing the
investments of the funds. Because such information and services may vary in
amount, quality and reliability, their influence in selecting brokers varies
from none to very substantial. The manager and the subadvisor propose to
continue to place some of the funds' brokerage business with one or more brokers
who provide information and services. Such information and services provided to
the manager and the subadvisor will be in addition to and not in lieu of the
services required to be performed for the funds by the manager and subadvisor.
Neither the manager nor the subadvisor utilizes brokers who provide such
information and services for the purpose of reducing the expense of providing
required services to the funds.
In the years ended March 31, 1996, 1995 and 1994, the brokerage commissions
of Value and Equity Income were as follows:
Fund Years Ended March 31,
1996 1995 1994
Value $2,929,681 $607,139 $175,983(1)
Equity Income $325,185 $51,427(1)
(1) Since inception.
The brokerage commissions paid by the funds may exceed those that another
broker might have charged for effecting the same transactions because of the
value of the brokerage and/or research services provided by the broker. Research
services furnished by brokers through whom the funds effect securities
transactions may be used by the manager in servicing all of its accounts, and
not all such services may be used by the manager in managing the portfolios of
the funds.
The staff of the SEC has expressed the view that the best price and
execution of over-the-counter transactions in portfolio securities may be
secured by dealing directly with principal market makers, thereby avoiding the
payment of compensation to another broker. In certain situations, the officers
of the funds and the manager believe that the facilities, expert personnel and
technological systems of a broker enable the funds to secure as good a net price
by dealing with a broker instead of a principal market maker, even after payment
of the compensation to the broker. The funds normally place their
over-the-counter transactions with principal market makers but also may deal on
a brokerage basis when utilizing electronic trading networks or as circumstances
warrant.
On occasions when the manager deems the purchase or sale of a security to be in
the best interests of the funds as well as other fiduciary accounts, the manager
may aggregate the security to be sold or purchased for the fund with those to be
sold or purchased for other accounts in order to obtain the best net price and
most favorable execution. In such event, the allocation will be made by the
manager in the manner considered to be most equitable and consistent with its
fiduciary obligations to all such fiduciary accounts, including the funds.
PERFORMANCE ADVERTISING
FUND PERFORMANCE
Individual fund performance may be compared to various indices, including
the Standard & Poor's 500 Index, the Consumer Price Index, the Dow Jones
Industrial Average and the S&P/Barra Value (with regard to Value) and the Lipper
Equity Income Fund Index (with regard to Equity Income). Fund performance also
may be compared to the rankings prepared by Lipper Analytical Services, Inc.
The following table sets forth the average annual total return of the funds
for the periods indicated. Average annual total return is calculated by
determining each fund's cumulative total return for the stated period and then
computing the annual compound return that would produce the cumulative total
return if the fund's performance had been constant over that period. Cumulative
total return includes all elements of return, including reinvestment of
dividends and capital gains distributions. Annualization of a fund's return
assumes that the partial year performance will be constant throughout the
period. Actual return through the period may be greater or less than the
annualized data.
Average Annual
VALUE Total Return
Year ended March 31, 1996 28.06%
September 1, 1993 (Inception)
through March 31, 1996 17.94%
Average Annual
EQUITY INCOME Total Return
Year Ended March 31, 1996 25.67%
August 1, 1994 (Inception)
through March 31, 1996 21.92%
The funds also may elect to advertise cumulative total return and average
annual total return, computed as described above, over periods of time other
than one, five and 10 years and cumulative total return over various time
periods. The following table shows the cumulative total returns and the average
annual returns for the funds since their respective dates of inception.
Cumulative Total Average Annual
Fund Return Since Inception Compound Rate
Value 53.10% 17.94%
Equity Income 39.12% 21.92%
ADDITIONAL PERFORMANCE COMPARISONS
Investors may judge the performance of the funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as the EAFE(R) Index, NAREIT Equity-Less Health Care
Index and Wilhire REIT Only Index, and those prepared by Dow Jones & Co., Inc.,
Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and The Russell
2000 Index, and to data prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc. and the Consumer Price Index. Comparisons may also be made to
indices or data published in Money, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, Pensions and Investments, USA Today, Realty
Stock Review, Changing Times, Institutional Investor, and other similar
publications or services. In addition to performance information, general
information about the funds that appears in a publication such as those
mentioned above or in the applicable prospectus under the heading "Performance
Advertising" may be included in advertisements and in reports to shareholders.
PERMISSIBLE ADVERTISING INFORMATION
From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (6) descriptions or comparisons of various savings and investment
products (including, but not limited to, qualified retirement plans and
individual stocks and bonds), which may or may not include the funds; (7)
comparisons of investment products (including the funds) with relevant market or
industry indices or other appropriate benchmarks; (8) discussions of fund
rankings or ratings by recognized rating organizations; and (9) testimonials
describing the experience of persons that have invested in one or more of the
funds. The funds may also include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of assumptions and are
not indicative of the performance of any of the funds.
[Distribution Rates
In its sales literature, the Real Estate Fund may also quote its distribution
rate along with the above described standard total return and yield information.
The distribution rate is calculated by annualizing the latest distribution and
dividing the result by the offering price per share as of the end of the period
to which the distribution relates. A distribution can include gross investment
income from debt obligations purchased at a premium and in effect include a
portion of the premium paid. A distribution can also include gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by the fund even though
such option income is not considered investment income under generally accepted
accounting principals.
Because a distribution can include such premiums, capital gains and option
income, the amount of the distribution may be susceptible to control by the
manager through transactions designed to increase the amount of such items.
Also, because the distribution rate is calculated in part by dividing the latest
distribution by net asset value ,the distribution rate will increase as the net
asset value declines. A distribution rate can be greater than the yield rate
calculated as described above.]
REDEMPTIONS IN KIND
In order to protect the investments of the remaining shareholders, the
funds have adopted a policy regarding large redemptions. That policy is
described in detail in the applicable fund prospectuses under the heading
"Special Requirements for Large Redemptions."
The funds have elected to be governed by Rule 18f-1 under the Investment
Company Act, pursuant to which the funds are obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of a fund
during any 90-day period for any one shareholder. Should redemptions by any
shareholder exceed such limitation, the funds will have the option of redeeming
the excess in cash or in kind. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets to cash. The
securities delivered will be selected at the sole discretion of the manager.
Such securities will not necessarily be representative of the entire portfolio
and may be securities that the manager regards as least desirable. The method of
valuing securities used to make redemptions in kind will be the same as the
method of valuing portfolio securities described in the Prospectus under the
heading "How Share Price is Determined," and such valuation will be made as of
the same time the redemption price is determined.
HOLIDAYS
The funds do not determine the net asset value of their shares on days when
the New York Stock Exchange is closed. Currently, the Exchange is closed on
Saturdays and Sundays and on holidays, namely New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
FINANCIAL STATEMENTS
The financial statements of the funds for the fiscal year ended March 31,
1997, are included in the Annual Report to shareholders, which is incorporated
herein by reference. In addition, the funds' unaudited financial statements for
the six months ended September 30, 1996, are included in the Semiannual Report
to shareholders which is incorporated herein by reference. With respect to the
unaudited financial statements incorporated herein, all adjustments, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operation for the periods indicated have been made. The
results of operations of the funds for the respective periods indicated are not
necessarily indicative of the results for the entire year. You may receive
copies of the Annual and Semiannual Reports without charge upon request to the
funds at the address and phone numbers shown on the cover of this Statement.
NOTES
American Century Investments
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
[american century logo]
American
Century(sm)
9612 [recycled logo]
SH-BKT-6587 Recycled
<PAGE>
PART C OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
(i) Financial Statements filed in Part A of Registration Statement:
1. Financial Highlights
(ii) Financial Statements filed in Part B of the Registration
Statement (each of the following financial statements is
contained in the Registrant's Annual Report dated March 31, 1996,
and which are incorporated by reference in Part B of this
Registration Statement):
1. Statements of Assets and Liabilities at March 31, 1996.
2. Statements of Operations for the year ended March 31, 1996.
3. Statements of Changes in Net Assets for the year ended
March 31, 1996.
4. Notes to Financial Statements as of March 31, 1996.
5. Schedule of Investments at March 31, 1996.
6. Report of Independent Auditors dated April 26, 1996.
(b) Exhibits (all exhibits not filed herein are being incorporated
herein by reference).
1. (a) Articles of Incorporation of Twentieth Century Capital
Portfolios, Inc., dated June 11, 1993 (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(b) Articles Supplementary of Twentieth Century Capital
Portfolios, Inc., dated March 11, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(c) Articles of Amendment of Twentieth Century Capital
Portfolios, Inc., dated December 2, 1996 (filed herein
as EX-99.B1c).
(d) Articles Supplementary of American Century Capital
Portfolios, Inc., dated December 2, 1996 (filed herein
as EX-99.B1d).
2. By-Laws of Twentieth Century Capital Portfolios, Inc.
(filed electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
3. Voting Trust Agreements - None.
4. Specimen securities (filed as an exhibit to Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-1A
of the Registrant, File No. 33-64872).
5. (a) Management Agreement dated as of August 1, 1993,
between Twentieth Century Capital Portfolios, Inc. and
Investors Research Corporation (filed electronically as
an exhibit to Post-Effective Amendment No. 5 on Form
N-1A on July 31, 1996, File No. 33-64872).
(b) Addendum to Management Agreement dated as of May 11,
1994, between Twentieth Century Capital Portfolios,
Inc. and Investors Research Corporation (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(c) Management Agreement - Advisor Class between Twentieth
Century Capital Portfolios, Inc., and Investors
Research Corporation dated September 1, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 6 on Form N-1A on August 14, 1996, File
No. 33-64872).
(d) Management Agreement - Service Class between Twentieth
Century Capital Portfolios, Inc., and Investors
Research Corporation dated September 1, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 6 on Form N-1A on August 14, 1996, File
No. 33-64872).
(e) Management Agreement - Institutional Class between
Twentieth Century Capital Portfolios, Inc. and
Investors Research Corporation dated September 1, 1996
(filed electronically as an exhibit to Post-Effective
Amendment No. 6 on Form N-1A on August 14, 1996, File
No. 33-64872).
(f) Management Agreement between American Century Capital
Portfolios, Inc. and American Century Investment
Management, Inc., dated May --, 1997 (to be filed by
amendment).
(g) Subadvisory Agreement between American Century
Investment Management, Inc. and RREEF Real Estate
Securities Advisers L.P., dated May --, 1997 (to be
filed by amendment).
6. Distribution Agreement between TCI Portfolios, Inc.,
Twentieth Century Capital Portfolios, Inc., Twentieth
Century Investors, Inc., Twentieth Century Premium Reserves,
Inc., Twentieth Century Strategic Asset Allocations, Inc.,
Twentieth Century World Investors, Inc., and Twentieth
Century Securities, Inc. dated September 3, 1996 (filed
electronically as an exhibit to Post-Effective Amendment No.
75 on form N-1A of Twentieth Century Investors, Inc., File
No. 2-14213).
7. Bonus and Profit Sharing Plan, Etc. - None.
8. (a) Custodian Agreement, dated as of August 1, 1993, by and
between Twentieth Century Capital Portfolios, Inc. and
United States Trust Company of New York (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(b) Custodian Agreement, dated as of August 1, 1993, by and
between Twentieth Century Capital Portfolios, Inc. and
Boatmen's First National Bank of Kansas City (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(c) Custodian Agreement, dated as of September 21, 1994, by
and between Twentieth Century Capital Portfolios, Inc.
and United Missouri Bank, N.A. (filed electronically as
an exhibit to Post-Effective Amendment No. 5 on Form
N-1A on July 31, 1996, File No. 33-64872).
(d) Custody Agreement dated September 12, 1995, between
UMB Bank, N.A., Investors Research Corporation,
Twentieth Century Investors, Inc., Twentieth Century
World Investors, Inc., Twentieth Century Premium
Reserves, Inc. and Twentieth Century Capital
Portfolios, Inc. (filed as an exhibit to Pre-Effective
Amendment No. 4 on Form N-1A of Twentieth Century
Strategic Asset Allocations, Inc., File No. 33-79482).
(e) Amendment No. 1 to Custody Agreement dated January 25,
1996, between UMB Bank, N.A., Investors Research
Corporation, Twentieth Century Investors, Inc.,
Twentieth Century World Investors, Inc., Twentieth
Century Premium Reserves, Inc. and Twentieth Century
Capital Portfolios, Inc. (filed as an exhibit to
Pre-Effective Amendment No. 4 on Form N-1A of Twentieth
Century Strategic Asset Allocations, Inc., File No.
33-79482).
9. Transfer Agency Agreement, dated as of August 1, 1993, by
and between Twentieth Century Capital Portfolios, Inc. and
Twentieth Century Services, Inc. (filed electronically as
an exhibit to Post-Effective Amendment No. 5 on Form N-1A on
July 31, 1996, File No. 33-64872).
10. Opinion and consent of Counsel (filed herein as EX-99.B10).
11. Consent of Ernst & Young LLP (filed herein as EX-99.B11).
12. (a) Annual Report of the Registrant dated March 31, 1996
(filed electronically on May 17, 1996).
(b) Semiannual Report of the Registrant dated September 30,
1995 (filed electronically on November 27, 1995).
13. Agreements for Initial Capital, Etc. - None.
14. Model Retirement Plans (filed as Exhibits 14(a)-(d) to
Pre-Effective Amendment No. 2 to the Registration Statement
on Form N-1A of Twentieth Century World Investors, Inc.,
File No. 33-39242, filed on May 6, 1991).
15. (a) Master Distribution and Shareholder Services Plan of
Twentieth Century Capital Portfolios, Inc. Twentieth
Century Investors, Inc., Twentieth Century Strategic
Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. (Advisor Class) dated September 3, 1996
(filed electronically as an exhibit to Post-Effective
Amendment No. 75 on Form N-1A of Twentieth Century
Investors, Inc., File No. 2-14213).
(b) Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc.,
Twentieth Century Strategic Asset Allocations, Inc.,
and Twentieth Century World Investors, Inc. (Service
Class) dated September 3, 1996 (filed electronically
as an exhibit to Post-Effective Amendment No. 75 on
Form N-1A of Twentieth Century Investors, Inc., File
No. 2-14213).
16. Schedule of Computation for Performance Advertising
Quotations (filed herein as EX-99.B16).
17. Power of Attorney (filed electronically as an exhibit to
Post-Effective Amendment No. 5 on Form N-1A on July 31,
1996, File No. 33-64872).
18. Multiple Class Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century
World Investors, Inc. dated September 3, 1996, (filed
electronically as an exhibit to Post-Effective Amendment
No. 75 on Form N-1A of Twentieth Century Investors, Inc.,
File No. 2-14213).
27. (a) Financial Data Schedule for American Century Value,
(EX-27.1.1).
(b) Financial Data Schedule for American Century Equity
Income (EX-27.1.2).
ITEM 25. Persons Controlled by or Under Common Control with Registrant - None.
ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Series As of June 30, 1996
--------------- ------------------------
American Century Value 62,707
American Century Equity Income 11,131
ITEM 27. Indemnification.
The Registrant is a Maryland corporation. Section 2-418 of the
Maryland General Corporation Law allows a Maryland corporation to
indemnify its officers, directors, employees and agents to the extent
provided in such statute.
Article XIII of the Registrant's Articles of Incorporation, Exibit 1,
requires the indemnification of the Registrant's directors and
officers to the extent permitted by Section 2-418 of the Maryland
General Corporation Law, the Investment Company Act of 1940 and all
other applicable laws.
The Registrant has purchased an insurance policy insuring its officers
and directors against certain liabilities which such officers and
directors may incur while acting in such capacities and providing
reimbursement to the Registrant for sums which it may be permitted or
required to pay to its officers and directors by way of
indemnification against such liabilities, subject in either case to
clauses respecting deductibility and participation.
ITEM 28. Business and Other Connections of Investment Advisor.
American Century Investment Management, Inc. (formerly known as
Investors Research Corporation), the investment advisor, is engaged in
the business of managing investments for registered investment
companies, deferred compensation plans and other institutional
investors.
ITEM 29. Principal Underwriters
None.
ITEM 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder,
are in the possession of Registrant, American Century Services
Corporation and American Century Investment Management, Inc., all
located at 4500 Main Street, Kansas City, Missouri 64111.
ITEM 31. Management Services - None.
ITEM 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) The Registrant hereby undertakes that it will, if requested to
do so by the holders of at least 10% of the Registrant's
outstanding votes, call a meeting of shareholders for the purpose
of voting upon the question of the removal of a director and to
assist in communication with other shareholders as required by
Section 16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 7 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Kansas City, State of Missouri on the 3rd day of March, 1997.
American Century Capital Portfolios, Inc.
(Registrant)
By: /s/ James E. Stowers III
James E. Stowers III, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
*James E. Stowers, Jr. Chairman of the Board, March 3, 1997
- ------------------------- Director and Principal
James E. Stowers, Jr. Executive Officer
/s/ James E. Stowers III President and Director March 3, 1997
- -------------------------
James E. Stowers, III
*Robert T. Jackson Executive Vice President-Finance March 3, 1997
- ------------------------- and Principal
Robert T. Jackson Financial Officer
*Maryanne Roepke Treasurer and Principal March 3, 1997
- ------------------------- Accounting Officer
Maryanne Roepke
*Thomas A. Brown Director March 3, 1997
- -------------------------
Thomas A. Brown
*Robert W. Doering, M.D. Director March 3, 1997
- -------------------------
Robert W. Doering, M.D.
D. D. (Del) Hock Director March 3, 1997
- -------------------------
D. D. (Del) Hock
*Linsley L. Lundgaard Director March 3, 1997
- -------------------------
Linsley L. Lundgaard
*Donald H. Pratt Director March 3, 1997
- -------------------------
Donald H. Pratt
*Lloyd T. Silver, Jr. Director March 3, 1997
- -------------------------
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director March 3, 1997
- -------------------------
M. Jeannine Strandjord
*John M. Urie Director March 3, 1997
- -------------------------
John M. Urie
*By /s/ James E. Stowers III
James E. Stowers III
Attorney-in-Fact
</TABLE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER
EX-99.B1a Articles of Incorporation of Twentieth Century Capital
Portfolios, Inc. (filed electronically as Exhibit 1a to
Post-Effective Amendment No. 5 on Form N-1A, filed on July 31,
1996, and incorporated herein by reference).
EX-99.B1b Articles Supplementary of Twentieth Century Capital Portfolios,
Inc. (filed electronically as Exhibit 1b to Post-Effective
Amendment No. 5 on Form N-1A, filed on July 31, 1996, and
incorporated herein by reference).
EX-99.B1c Articles of Amendment of Twentieth Century Capital Portfolios,
Inc., dated December 2, 1996.
EX-99.B1d Articles Supplementary of American Century Capital Portfolios,
Inc., dated December 2, 1996.
EX-99.B2 By-Laws of Twentieth Century Capital Portfolios, Inc. (filed
electronically as Exhibit 2 to Post-Effective Amendment No. 5 on
Form N-1A, filed on July 31, 1996, and incorporated herein by
reference).
EX-99.B4 Specimen certificate representing shares of common stock of
Twentieth Century Capital Portfolios, Inc. (filed as Exhibit 4 to
Pre-Effective Amendment No. 2 to the Registration Statement,
filed on August 18, 1993, and incorporated herein by reference).
EX-99.B5a Management Agreement, dated as of August 1, 1993, between
Twentieth Century Capital Portfolios, Inc. and Investors Research
Corporation (filed electronically as Exhibit 5a to Post-Effective
Amendment No. 5 on Form N-1A, filed on July 31, 1996, and
incorporated herein by reference).
EX-99.B5b Addendum to Management Agreement, dated as of May 11, 1994,
between Twentieth Century Capital Portfolios, Inc. and Investors
Research Corporation (filed electronically as Exhibit 5b to
Post-Effective Amendment No. 5 on Form N-1A, filed on July 31,
1996, and incorporated herein by reference).
EX-99.B5c Management Agreement - Advisor Class between Twentieth Century
Capital Portfolios, Inc. and Investors Research Corporation
dated September 1, 1996 (filed electronically as Exhibit 5c to
Post-Effective Amendment No. 6 on Form N-1A, filed on August 14,
1996, and incorporated herein by reference).
EX-99.B5d Management Agreement - Service Class between Twentieth Century
Capital Portfolios, Inc. and Investors Research Corporation dated
September 1, 1996 (filed electronically as Exhibit 5d to
Post-Effective Amendment No. 6 on Form N-1A, filed on August 14,
1996, and incorporated herein by reference).
EX-99.B5e Management Agreement - Institutional Class between Twentieth
Century Capital Portfolios, Inc. and Investors Research
Corporation dated September 1, 1996 (filed electronically as
Exhibit 5e to Post-Effective Amendment No. 6 on Form N-1A, filed
on August 14, 1996, and incorporated herein by reference).
EX-99.B5f Management Agreement between American Century Capital Portfolios,
Inc. and American Century Investment Management, Inc., dated May
--, 1997 (to be filed by amendment).
EX-99.B5g Subadvisory Agreement between American Century Investment
Management, Inc. and RREEF Real Estate Securities Advisers L.P.,
dated May --, 1997 (to be filed by amendment).
EX-99.B6 Distribution Agreement between TCI Portfolios, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century
Strategic Asset Allocations, Inc., Twentieth Century World
Investors, Inc. and Twentieth Century Securities, Inc. dated
September 3, 1996 (filed electronically as Exhibit 6 to
Post-Effective Amendment No. 75 on Form N-1A of Twentieth Century
Investors, Inc., File No. 2-14213, and incorporated herein by
reference).
EX-99.B8a Custodian Agreement, dated as of August 1, 1993, by and between
Twentieth Century Capital Portfolios, Inc. and United States
Trust Company of New York (filed electronically as Exhibit 8a to
Post-Effective Amendment No. 5 on Form N-1A, filed on July 31,
1996, and incorporated herein by reference).
EX-99.B8b Custodian Agreement, dated as of August 1, 1993, by and between
Twentieth Century Capital Portfolios, Inc. and Boatmen's First
National Bank of Kansas City (filed electronically as Exhibit 8b
to Post-Effective Amendment No. 5 on Form N-1A, filed on July 31,
1996, and incorporated herein by reference).
EX-99.B8c Custodian Agreement, dated as of September 21, 1994, by and
between Twentieth Century Capital Portfolios, Inc. and United
Missouri Bank, N.A. (filed electronically as Exhibit 8c to
Post-Effective Amendment No. 5 on Form N-1A, filed on July 31,
1996, and incorporated herein by reference).
EX-99.B8d Custody Agreement dated September 12, 1995, between UMB Bank,
N.A., Investors Research Corporation, Twentieth Century
Investors, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Premium Reserves, Inc. and Twentieth Century
Capital Portfolios, Inc. (filed as an Exhibit to Pre-Effective
Amendment No. 4 on Form N-1A of Twentieth century Strategic Asset
Allocations, Inc., Commission File No. 33-79482, filed February
5, 1996, and incorporated herein by reference).
EX-99.B8e Amendment No. 1 to Custody Agreement dated January 25, 1996,
between UMB Bank, N.A., Investors Research Corporation, Twentieth
Century Investors, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Premium Reserves, Inc. and Twentieth Century
Capital Portfolios, Inc. (filed as an Exhibit to Pre-Effective
Amendment No. 4 on Form N-1A of Twentieth Century Strategic
Asset Allocations, Inc., Commission File No. 33-79482, filed
February 5, 1996, and incorporated herein by reference).
EX-99.B9 Transfer Agency Agreement dated as of August 1, 1993, by and
between Twentieth Century Capital Portfolios, Inc. and Twentieth
Century Services, Inc (filed electronically as Exhibit 9 to
Post-Effective Amendment No. 5 on Form N-1A, filed July 31, 1996,
and incorporated herein by reference).
EX-99.B10 Opinion and Consent of Counsel.
EX-99.B11 Consent of Ernst & Young LLP.
EX-99.B12a Annual Report of the Registrant dated March 31, 1996 (filed
electronically on May 17, 1996, and incorporated herein by
reference).
EX-99.B12b Semiannual Report of the Registrant dated September 30, 1995
(filed electronically on November 27, 1995, and incorporated
herein by reference).
EX-99.B14 Model Retirement Plans (filed as Exhibits 14(a),14(b),14(c) and
14(d) to Pre-Effective Amendment No. 2 to the Registration
Statement and incorporated herein by reference).
EX-99.B15a Master Distribution and Shareholder Services Plan of Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century World Investors, Inc. (Advisor Class) dated
September 3, 1996 (filed electronically as Exhibit 15a to
Post-Effective Amendment No. 75 on Form N-1A of Twentieth Century
Investors, Inc., File No. 2-14213, and incorporated herein by
reference).
EX-99.B15b Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth
Century Strategic Asset Allocations, Inc. and Twentieth Century
World Investors, Inc. (Service Class) dated September 3, 1996
(filed electronically as Exhibit 15b to Post-Effective Amendment
No. 75 on Form N-1A of Twentieth Century Investors, Inc., File
No. 2-14213, and incorporated herein by reference).
EX-99.B16 Schedule for Computation of Advertising Performance Quotations.
EX-99.B17 Power of Attorney (filed electronically as Exhibit 17 to
Post-Effective Amendment No. 5 on Form N-1A, filed July 31, 1996,
and incorporated herein by reference).
EX-99.B18 Multiple Class Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. dated September 3, 1996 (filed electronically as
Exhibit 18 to Post-Effective Amendment No. 75 on Form N-1A of
Twentieth Century Investors, Inc., File No. 2-14213, and
incorporated herein by reference).
EX-27.1.1 Financial Data Schedule for American Century Value.
EX-27.1.2 Financial Data Schedule for American Century Equity Income.
ARTICLES OF AMENDMENT
OF
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
The undersigned, William M. Lyons, in accordance with the Maryland General
Corporation Law, does hereby certify that:
1. He is the duly elected Executive Vice President of Twentieth Century
Capital Portfolios, Inc., a Maryland corporation (the "Corporation").
2. The amendment to the Articles of Incorporation of the Corporation, which
was approved as of November 23, 1996 by the Board of Directors of the
Corporation at a meeting pursuant to Section 2-605(a)(4) of the Maryland General
Corporation Law, is as follows:
The Articles of Incorporation of the Corporation are hereby amended by
deleting all of the present Article SECOND and inserting in lieu therefor
the following Article SECOND:
"SECOND: The name of the Corporation is
American Century Capital Portfolios, Inc."
3. The amendment shall be effective January 1, 1997.
IN WITNESS WHEREOF, the undersigned hereby acknowledges that these Articles
of Amendment are the act of the Corporation and states, that to the best of his
knowledge, information and belief, the matters and facts stated herein are true
in all material respects, and that this statement is made under penalties of
perjury.
Dated this 2nd day of December, 1996.
/s/ William M. Lyons
William M. Lyons
Executive Vice President
Witness:
/s/ Charles A. Etherington
Charles A. Etherington
Assistant Secretary
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
ARTICLES SUPPLEMENTARY
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC., a Maryland corporation whose
principal Maryland office is located in Baltimore, Maryland (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SECOND: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Section 2-605(a)(4) of the Maryland General Corporation Law,
the Board of Directors of the Corporation has renamed the duly established and
allocated series of the Corporation's stock as follows:
New Series Name Prior Series Name
American Century Equity Income Fund Twentieth Century Equity Income
American Century Value Fund Twentieth Century Value
The name changes shall be effective on January 1, 1997.
THIRD: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or Class or any unissued
shares that have not been allocated to a Series or Class, and to fix or alter
all terms thereof, to the full extent provided by the Articles of Incorporation
of the Corporation.
FOURTH: A description of the series and classes of shares, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions for
redemption is set forth in the Articles of Incorporation of the Corporation and
is not changed by these Articles Supplementary, except with respect to the
creation and/or designation of the various Series.
FIFTH: The Board of Directors of the Corporation duly adopted resolutions
renaming the Series, as set forth in Article SECOND.
IN WITNESS WHEREOF, AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. has caused
these Articles Supplementary to be signed and acknowledged in its name and on
its behalf by its Executive Vice President and its corporate seal to be hereunto
affixed and attested to by its Secretary on this 2nd day of December, 1996.
AMERICAN CENTURY CAPITAL
ATTEST: PORTFOLIOS, INC.
/s/ Patrick A. Looby By: /s/ William M. Lyons
Name: Patrick A. Looby Name: William M. Lyons
Title: Secretary Title: Executive Vice President
THE UNDERSIGNED Executive Vice President of AMERICAN CENTURY CAPITAL
PORTFOLIOS, INC., who executed on behalf of said Corporation the foregoing
Articles Supplementary to the Charter, of which this certificate is made a part,
hereby acknowledges, in the name of and on behalf of said Corporation, the
foregoing Articles Supplementary to the Charter to be the corporate act of said
Corporation, and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects under the penalties of
perjury.
Dated: December 2, 1996 /s/ William M. Lyons
William M. Lyons
Executive Vice President
DAVID H. REINMILLER
Attorney At Law
4500 Main Street, P.O. Box 418210
Kansas City, Missouri 64141-9210
Telephone (816)340-4046
Telecopier (816)340-4964
March 3, 1997
American Century Capital Portfolios, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to American Century Capital Portfolios, Inc., I am generally
familiar with its affairs. Based upon this familiarity, and upon the examination
of such documents as I have deemed relevant, it is my opinion that the shares of
the Corporation described in Post-Effective Amendment No. 7 to its Registration
Statement on Form N-1A to be filed with the Securities and Exchange Commission
on March 3, 1997, will, when issued, be validly issued, fully paid and
nonassessable.
For the record, it should be stated that I am an officer and employee of
American Century Services Corporation, an affiliated corporation of American
Century Investment Management, Inc. , the investment adviser of American Century
Capital Portfolios, Inc.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 7.
Very truly yours,
/s/David H. Reinmiller
David H. Reinmiller
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" and "Independent Auditors" in the Post-Effective Amendment No. 7 to
the Registration Statement (Form N-1A) and related Prospectus of American
Century Capital Portfolios, Inc. (formerly Twentieth Century Capital Portfolios,
Inc.) and to the incorporation by reference therein of our report dated April
26, 1996, with respect to the financial statements of American Century Capital
Portfolios, Inc. included in its Annual Report to Shareholders for the year
ended March 31, 1996.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Kansas City, Missouri
March 3, 1997
SCHEDULE OF COMPUTATION OF PERFORMANCE ADVERTISING QUOTATIONS
Set forth below are representative calculations of each type of total
return performance quotation included in the Statement of Additional Information
of Twentieth Century Capital Portfolios, Inc.
1. AVERAGE ANNUAL TOTAL RETURN. The average one-year annual total
return of Twentieth Century Value for the fiscal year ended March 31, 1996,
as quoted in the Statement of Additional Information, was 28.06%.
This return was calculated as follows:
n
P(1+T) = ERV
where,
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 payment at the
end of the period.
Applying the actual return figures of the fund for the one year period
ended March 31, 1996:
1
1,000 (1+28.06%) = $1,280.60
1
T = (1,280.60)
------------ - 1
1,000
T = 28.06%
2. CUMULATIVE TOTAL RETURN. The cumulative total return of Twentieth
Century Value from September 1, 1993 (inception) to March 31, 1996 as
quoted in the Statement of Additional Information, was 53.10%
This return was calculated as follows:
(ERV - P)
C = ---------
P
where,
C = cumulative total return
P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of the hypothetical $1,000 payment at the end
of the period.
Applying the actual return figures of the fund for the period September 1,
1993 through March 31, 1996.
(1,531-1,000)
C = ---------------
1,000
C = 53.10%
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUTAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL CLASSES,
EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATE). IN THOSE
CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CAPITAL PORTFOLIOS- VALUE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 824640952
<INVESTMENTS-AT-VALUE> 881924376
<RECEIVABLES> 46788343
<ASSETS-OTHER> 2249064
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 930961783
<PAYABLE-FOR-SECURITIES> 47325446
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1751097
<TOTAL-LIABILITIES> 49076543
<SENIOR-EQUITY> 1396082
<PAID-IN-CAPITAL-COMMON> 775215617
<SHARES-COMMON-STOCK> 139608208
<SHARES-COMMON-PRIOR> 63735844
<ACCUMULATED-NII-CURRENT> 44482
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48078497
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57150562
<NET-ASSETS> 881885240
<DIVIDEND-INCOME> 15209513
<INTEREST-INCOME> 3387482
<OTHER-INCOME> 0
<EXPENSES-NET> 5754510
<NET-INVESTMENT-INCOME> 12842485
<REALIZED-GAINS-CURRENT> 93357747
<APPREC-INCREASE-CURRENT> 42011788
<NET-CHANGE-FROM-OPS> 148212020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13540711
<DISTRIBUTIONS-OF-GAINS> 47886954
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108909750
<NUMBER-OF-SHARES-REDEEMED> 43370111
<SHARES-REINVESTED> 10332725
<NET-CHANGE-IN-ASSETS> 533604189
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3521148
<OVERDISTRIB-NII-PRIOR> 170736
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5747940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5754510
<AVERAGE-NET-ASSETS> 590608755
<PER-SHARE-NAV-BEGIN> 5.46
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.34
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.32
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUTAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL CLASSES,
EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATE). IN THOSE
CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> CAPITAL PORTFOLIOS- EQUITY INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 108789923
<INVESTMENTS-AT-VALUE> 115495318
<RECEIVABLES> 4249895
<ASSETS-OTHER> 629626
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120374839
<PAYABLE-FOR-SECURITIES> 3310183
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 372298
<TOTAL-LIABILITIES> 3682481
<SENIOR-EQUITY> 191431
<PAID-IN-CAPITAL-COMMON> 104823922
<SHARES-COMMON-STOCK> 19143127
<SHARES-COMMON-PRIOR> 9627797
<ACCUMULATED-NII-CURRENT> 22485
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4974092
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6680428
<NET-ASSETS> 116692358
<DIVIDEND-INCOME> 2575445
<INTEREST-INCOME> 1228449
<OTHER-INCOME> 0
<EXPENSES-NET> 832837
<NET-INVESTMENT-INCOME> 2971057
<REALIZED-GAINS-CURRENT> 11637714
<APPREC-INCREASE-CURRENT> 4726626
<NET-CHANGE-FROM-OPS> 19335397
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3070813
<DISTRIBUTIONS-OF-GAINS> 6912073
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14703393
<NUMBER-OF-SHARES-REDEEMED> 6860307
<SHARES-REINVESTED> 1672244
<NET-CHANGE-IN-ASSETS> 64479518
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 389558
<OVERDISTRIB-NII-PRIOR> 18866
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 831887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 832837
<AVERAGE-NET-ASSETS> 84640230
<PER-SHARE-NAV-BEGIN> 5.42
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 1.13
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0.45
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.10
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
