PROSPECTUS
[american century logo]
American
Century(sm)
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
AMERICAN
CENTURY
GROUP
Value
Equity Income
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 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Value o Equity Income
PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
Value o Equity Income
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. Two of the funds that invest
primarily in equity securities are described in this Prospectus. Their
investment objectives are listed on page 2 of this Prospectus. The other funds
are described in separate prospectuses.
Each fund's 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 funds' 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 funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference.
To obtain a copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 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.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY VALUE FUND
The investment objective of Value is long-term capital growth. Income is a
secondary objective. The fund seeks to achieve its investment objectives by
investing in securities that management believes to be undervalued at the time
of purchase.
AMERICAN CENTURY EQUITY INCOME FUND
The investment objective of Equity Income is the production of current
income. Capital appreciation is a secondary objective. The fund attempts to
achieve its objectives by investing primarily in income-producing equity
securities. In the pursuit of its objectives, the fund seeks a yield that
exceeds the yield of securities comprising the Standard & Poor's 500 Composite
Stock Price Index.
There is no assurance that the funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Transaction and Operating Expense Table.......................4
Financial Highlights..........................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds..............................7
Value......................................................7
Equity Income..............................................7
Policies Applicable to Both Funds..........................7
Other Investment Practices, Their Characteristics
and Risks..................................................8
Foreign Securities.........................................8
Equity Securities..........................................9
Forward Currency Exchange Contracts........................9
Portfolio Turnover.........................................10
Repurchase Agreements......................................10
Index Futures Contracts....................................10
Derivative Securities......................................11
Portfolio Lending..........................................12
When-Issued Securities.....................................12
Short Sales................................................12
Rule 144A Securities.......................................12
Performance Advertising.......................................13
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments..................................14
Investing in American Century.................................14
How to Open an Account........................................14
By Mail..................................................14
By Wire..................................................14
By Exchange..............................................14
In Person................................................14
Subsequent Investments.....................................15
By Mail..................................................15
By Telephone.............................................15
By Wire..................................................15
In Person................................................15
Automatic Investment Plan..................................15
Minimum Investment............................................15
How to Exchange from One Account to Another...................15
By Mail..................................................16
By Telephone.............................................16
How to Redeem Shares..........................................16
By Mail..................................................16
By Telephone.............................................16
By Check-A-Month.........................................16
Other Automatic Redemptions..............................16
Redemption Proceeds........................................16
By Check.................................................16
By Wire and ACH..........................................16
Special Requirements for Large Redemptions.................16
Signature Guarantee...........................................17
Special Shareholder Services..................................17
Open Order Service.......................................17
Tax-Qualified Retirement Plans...........................17
Important Policies Regarding Your Investments.................18
Reports to Shareholders.......................................18
Customers of Banks, Broker-Dealers
and Other Financial Intermediaries.........................19
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................20
When Share Price Is Determined.............................20
How Share Price Is Determined..............................20
Where to Find Information About Share Price................21
Distributions.................................................21
Taxes.........................................................21
Tax-Deferred Accounts......................................21
Taxable Accounts...........................................21
Management....................................................22
Investment Management......................................22
Code of Ethics.............................................23
Transfer and Administrative Services.......................23
Distribution of Fund Shares...................................24
Further Information About American Century....................24
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Value and
Equity Income
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases........................ none
Maximum Sales Load Imposed on Reinvested Dividends............. none
Deferred Sales Load............................................ none
Redemption Fee................................................. none
Exchange Fee................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees............................................... 0.80%
12b-1 Fees.................................................... none
Other Expenses(1)............................................. 0.00%
Total Fund Operating Expenses................................. 0.80%
EXAMPLE
You would pay the following expenses on a 1 year $ 8
$1,000 investment, assuming a 5% annual return and 3 years 26
redemption at the end of each time period: 5 years 44
10 years 99
(1) 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 .00111 of 1% of average net
assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Institutional Class shares. The
funds offer three other classes of shares, one of which is primarily made
available to retail investors and two that are primarily made available to
institutional investors. The other classes have different fee structures than
the Institutional Class, resulting in different performance for those classes.
For additional information about the various classes, see "Further Information
About American Century," page 24.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VALUE
The Institutional Class of the fund was established September 3, 1996. The
financial information in this table regarding selected per share data for the
fund reflects the performance of the fund's Investor Class of shares, which has
a total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been
examined by Ernst & Young LLP, independent auditors, whose report thereon
appears in the fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The annual report contains additional
performance information and will be made available upon request and without
charge. The information presented is for a share outstanding throughout the
years ended March 31, except as noted.
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ................................... $5.46 $4.98 $5.01
Income from Investment Operations
Net Investment Income(2) ............................................. .13 .12 .08
Net Realized and Unrealized Gain (Loss) on Investment Transactions ... 1.34 .75 (.04)
Total from Investment Operations ..................................... 1.47 .87 .04
Distributions
From Net Investment Income ........................................... (.12) (.12) (.07)
In Excess of Net Investment Income ................................... (.01) -- --
From Net Realized Gains on Investment Transactions ................... (.48) (.27) --
Total Distributions .................................................. (.61) (.39) (.07)
Net Asset Value, End of Period .......................................... $6.32 $5.46 $4.98
Total Return(3) ...................................................... 28.06% 18.56% 0.83%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ................... .97% 1.00% 1.00%(4)
Ratio of Net Investment Income to Average Net Assets ................. 2.17% 2.65% 3.37%(4)
Portfolio Turnover Rate .............................................. 145% 94% 79%
Average Commission Paid per Investment Security Traded ............... $.0409 --(5) --(5)
Net Assets, End of Period (in thousands) ............................. $881,885 $348,281 $87,798
</TABLE>
(1) September 1, 1993 (inception) through March 31, 1994.
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gains distribution, if
any.
(4) Annualized.
(5) Not computed for the period indicated.
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
EQUITY INCOME
The Institutional Class of the fund was established September 3, 1996. The
financial information in this table regarding selected per share data for the
fund reflects the performance of the fund's Investor Class of shares, which has
a total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expense.
The Financial Highlights for each of the periods presented have been
examined by Ernst & Young LLP, independent auditors, whose report thereon
appears in the fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The annual report contains additional
performance information and will be made available upon request and without
charge. Information presented is for a share outstanding throughout the years
ended March 31, except as noted.
1996 1995(1)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period .................................. $5.42 $5.00
Income from Investment Operations
Net Investment Income(2) ............................................ .20 .09
Net Realized and Unrealized Gain (Loss) on Investment Transactions .. 1.13 .44
Total from Investment Operations .................................... 1.33 .53
Distributions
From Net Investment Income .......................................... (.19) (.09)
In Excess of Net Investment Income .................................. (.01) --
From Net Realized Gains on Investment Transactions .................. (.45) (.02)
Total Distributions ................................................. (.65) (.11)
Net Asset Value, End of Period ......................................... $6.10 $5.42
Total Return(3) ..................................................... 25.67% 10.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ................... .98% 1.00%(4)
Ratio of Net Investment Income to Average Net Assets ................ 3.51% 4.04%(4)
Portfolio Turnover Rate ............................................. 1.70% 45%
Average Commission Paid per Investment Security Traded .............. $.0378 --(5)
Net Assets, End of Period (in thousands) ............................ $116,692 $52,213
</TABLE>
(1) August 1, 1994 (inception) through March 31, 1995.
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gains distribution, if
any.
(4) Annualized.
(5) Not computed for the period indicated.
6 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objective of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
VALUE
The investment objective of Value is long-term capital growth. Income is a
secondary objective. The fund seeks to achieve its objectives by investing
primarily in equity securities of well-established companies with
intermediate-to-large market capitalizations that are believed by management to
be undervalued at the time of purchase.
Securities may be undervalued because they are temporarily out of favor in
the market due to market decline, poor economic conditions, or actual or
anticipated unfavorable developments affecting the issuer of the security or its
industry, or because the market has overlooked them. Under normal market
conditions, the fund expects to invest at least 80% of the value of its total
assets in equity securities. The fund's investments will typically be
characterized by lower price-to-earnings, price-to-cash flow and/or
price-to-book value ratios relative to the equity market in general. Its
investments also may have above-average current dividend yields.
It is management's intention that the fund will primarily consist of
domestic equity securities. However, the fund also may invest in other types of
domestic or foreign securities consistent with the accomplishment of the fund's
objective. The other securities the fund may invest in are convertible
securities (see "Other Investment Practices, Their Characteristics and
Risks--Equity Securities," page 9), preferred stocks, bonds, notes and debt
securities of companies and debt obligations of governments and their agencies.
Investments in these securities will be made when the manager believes that the
total return potential on these securities equals or exceeds the potential
return on common stocks.
EQUITY INCOME
The investment objective of Equity Income is the production of current
income. Capital appreciation is a secondary objective of the fund. The fund
seeks to achieve its objectives by screening companies primarily for favorable
dividend paying history (yield) and prospects for continuing and/or increasing
dividend paying ability and secondarily for capital appreciation potential. The
fund seeks a yield that exceeds the yield of securities comprising the S&P 500.
Total return for the fund will consist primarily of dividend income and
secondarily of capital appreciation (or depreciation).
Under normal circumstances, the fund will invest at least 65% of the fund's
total assets in equity securities and at least 85% of the fund's total assets
will be invested in income-paying securities. The fund's portfolio will consist
primarily of domestic securities.
POLICIES APPLICABLE TO BOTH FUNDS
Each fund's holdings will be spread among industry groups that meet its
investment criteria to help reduce certain of the risks inherent in common stock
investments. These investments will primarily be securities listed on major
exchanges or traded in the over-the-counter markets.
Income is a primary or secondary objective of each fund. As a result, a
portion of the portfolio of each fund may consist of fixed income securities.
The value of fixed income securities fluctuates based on changes in
interest rates and in the credit quality of the issuer. Debt securities that
comprise part of a fund's fixed income portfolio will primarily be limited to
"investment grade" obligations. However,
Prospectus Information Regarding the Funds 7
each fund may invest up to 5% of its assets in "high yield" securities.
"Investment grade" means that at the time of purchase, such obligations are
rated within the four highest categories by a nationally recognized statistical
rating organization (for example, at least Baa by Moody's Investors Service,
Inc. or BBB by Standard & Poor's Corporation), or, if not rated, are of
equivalent investment quality as determined by the manager. According to
Moody's, bonds rated Baa are medium-grade and possess some speculative
characteristics. A BBB rating by S&P indicates S&P's belief that a security
exhibits a satisfactory degree of safety and capacity for repayment, but is more
vulnerable to adverse economic conditions and changing circumstances.
"High yield" securities, sometimes referred to as "junk bonds," are higher
risk, non-convertible debt obligations that are rated below investment grade
securities, or are unrated, but with similar credit quality.
There are no credit or maturity restrictions on the fixed income securities
in which the high yield portion of fund's portfolio may be invested. Debt
securities rated lower than Baa by Moody's or BBB by S&P or their equivalent are
considered by many to be predominantly speculative. Changes in economic
conditions or other circumstances are more likely to lead a weakened capacity to
make principal and interest payments on such securities that is the case with
higher quality debt securities. Regardless of rating levels, all debt securities
considered for purchase by the fund are analyzed by the manager to determine, to
the extent reasonably possible, that the planned investment is sound, given the
investment objective of the fund. See "An Explanation of Fixed Income Securities
Ratings" in the Statement of Additional Information.
The funds will not necessarily dispose of high yield securities if the
aggregate value of such securities exceeds 5% of a fund's assets if such level
is exceeded as a result of market appreciation of the value of such securities
or market depreciation of the value of the other assets of the fund. Rather, the
manager will cease purchasing any additional high yield securities until the
value of such securities is less than 5% of the fund's assets and will monitor
such investments to determine whether continuing to hold such investments is
likely to assist the fund in meeting its investment objectives.
In addition, the value of a fund's investments in fixed income securities
will change as prevailing interest rates change. In general, the prices of such
securities vary inversely with interest rates. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis rise.
When prevailing interest rates rise, bond prices fall. These changes in value
may, depending upon the particular amount and type of fixed income securities
holdings of a fund, impact the net asset value of that fund's shares.
Notwithstanding the fact the funds will primarily invest in equity
securities, under exceptional market or economic conditions, the funds may
temporarily invest all or a substantial portion of their assets in cash or
investment grade short-term securities (denominated in U.S. dollars or foreign
currencies).
To the extent that a fund assumes a defensive position, it will not be
investing for capital growth.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
FOREIGN SECURITIES
Each fund may invest up to 25% of its assets in the securities of foreign
issuers, including debt securities of foreign governments and their agencies,
when these securities meet its standards of selection. The manager defines
"foreign issuer" as an issuer of securities that is domiciled outside the United
States, derives at least 50% of its total revenue from production or sales
outside of the United States, and/or whose principal trading market is outside
the United States. The principal business activities of such issuers will be
located in developed countries.
The funds may make such investments either directly in foreign securities
or indirectly by purchasing depositary receipts or depositary shares of similar
instruments ("DRs") for foreign securities. DRs are securities that are listed
on exchanges or quoted in the domestic over-the-counter markets in one country
but represent shares of issuers domiciled in other countries. DRs may be
sponsored or unsponsored. Direct investments in foreign securities may be made
8 Information Regarding the Funds American Century Investments
either on foreign securities exchanges or in the over-the-counter markets.
Subject to its investment objective and policies, each fund may invest in
common stocks, convertible securities, preferred stocks, bonds, notes and other
debt securities of foreign issuers and debt securities of foreign governments
and their agencies. The funds will limit their purchases of debt securities to
investment grade obligations.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
EQUITY SECURITIES
In addition to investing in common stocks, the funds may invest in other
equity securities and equity equivalents. Other equity securities and equity
equivalents include securities that permit the fund to receive an equity
interest in an issuer, the opportunity to acquire an equity interest in an
issuer, or the opportunity to receive a return on its investment that permits
the fund to benefit from the growth over time in the equity of an issuer.
Examples of equity securities and equity equivalents include preferred stock,
convertible preferred stock and convertible debt securities.
Each fund will limit its purchase of convertible debt securities to those
that, at the time of purchase, are rated at least B- by S&P or B3 by Moody's, or
if not rated by S&P or Moody's are of equivalent investment quality as
determined by the manager. Debt securities rated below the four highest
categories are not considered "investment grade" obligations. These securities
have speculative characteristics and present more credit risk than investment
grade obligations. For a description of the S&P and Moody's ratings categories,
see "An Explanation of Fixed Income Securities Ratings," in the Statement of
Additional Information. Equity equivalents may also include securities whose
value or return is derived from the value or return of a different security.
Depositary receipts are an example of the type of derivative security in which
the fund might invest.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the securities held by the funds may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars,
but have a value that is dependent on the performance of a foreign security, as
valued in the currency of its home country. As a result, the value of a fund's
portfolio may be affected by changes in the exchange rate between foreign
currencies and the U.S. dollar, as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
U.S. dollar may be a factor in the overall performance of a fund.
To protect against adverse movements in exchange rates between currencies,
the funds may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
Each fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
funds can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." Each fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the funds may enter into forward currency exchange
contracts to sell an amount of foreign currency equal to the value of some or
all of a fund's portfolio securities either denominated in, or whose value is
tied to, that currency. This practice is sometimes referred to as "portfolio
hedging." A fund may not enter into a portfolio hedging transaction where the
fund would be obligated to deliver an amount of foreign currency in excess of
the aggregate value of its portfolio securities or other assets denominated in,
or whose value is tied to, that currency.
Prospectus Information Regarding the Funds 9
Each fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the funds will enter
into portfolio hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of a fund's
assets will be committed to a segregated account in connection with portfolio
hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the funds against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial
Highlights table on pages 5 and 6 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and, accordingly,
the annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest up to 20% of its assets in repurchase agreements when
such transactions present an attractive short-term return on cash that is not
otherwise committed to the purchase of securities pursuant to the fund's
investment policies.
A repurchase agreement occurs when, at the time a fund purchases an
interest-bearing obligation, the seller (a bank or broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it back on a
specified date in the future at an agreed upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchased
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the funds' Board of Directors.
The funds will not invest more than 15% of their respective assets in
repurchase agreements maturing in more than seven days.
INDEX FUTURES CONTRACTS
Each fund may enter into domestic stock index futures contracts. An index
futures contract is an agreement to take or make delivery of an amount of cash
based on the difference between the value of the index at the beginning and at
the end of the contract period. Rather than actually purchasing the securities
of an index, the manager may purchase a futures contract, which reflects the
value of such underlying securities. For example, S&P 500 futures reflect the
value of the underlying companies that comprise the
10 Information Regarding the Funds American Century Investments
S&P 500 Composite Stock Price Index. If the aggregate market value of the
underlying index securities increases or decreases during the contract period,
the value of the S&P 500 futures can be expected to reflect such increase or
decrease. As a result, the manager is able to expose to the equity markets cash
that is maintained by the funds to meet anticipated redemptions or held for
future investment opportunities. Because futures generally settle within a day
from the date they are closed out (compared with three days for the types of
equity securities primarily invested in by the funds) the manager believes that
this use of futures allows the funds to effectively be fully invested in equity
securities while maintaining the liquidity needed by the funds.
When a fund enters into a futures contract, it must make deposit of cash or
high-quality debt securities, known as "initial margin," as partial security for
its performance under the contract. As the value of the index fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. Assets set aside by a fund as initial or variable margin may not be
disposed of so long as the fund maintains the contract.
The funds may not purchase leveraged futures. A fund will deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fluctuating market value of the index contracts it has
purchased, less any margin deposited on its position. The funds will only invest
in exchange-traded futures. In addition, the value of index futures contracts
purchased by a fund may not exceed 5% of the fund's total assets.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts or S&P 500 futures), currencies, interest rates, indices
or other financial indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the S&P 500 Index would
be a permissible investment since each of the funds may invest in the securities
of companies comprising the S&P 500 Index (assuming they otherwise meet the
other requirements for the fund), while a security whose underlying value is
linked to the price of oil would not be a permissible investment since the funds
may not invest in oil and gas leases or futures.
The return of a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
Prospectus Information Regarding the Funds 11
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
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, 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 funds must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of either fund's net assets taken at market. The portfolio
lending policy described in this paragraph is fundamental policy that may be
changed only by a vote of a majority of the fund's shareholders.
WHEN-ISSUED SECURITIES
Each fund may purchase new issues of securities on a when-issued basis
without limit when, in the opinion of management, such purchases will further
the investment objectives of such fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur 15 to 45 days after the commitment
to purchase. Market rates of interest on debt securities at the time of delivery
may be higher or lower than those contracted for on the when-issued security.
Accordingly, the value of such security may decline prior to delivery, which
could result in a loss to the fund. A separate account consisting of cash or
high-quality liquid debt securities in an amount at least equal to the
when-issued commitments will be established and maintained with the custodian.
No income will accrue to the fund prior to delivery.
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at
a current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the SEC has taken the position that the liquidity of such securities in the
portfolio of a fund offering redeemable securities is a question of fact for the
Board of Directors to determine, such determination to be based upon a
consideration of the readily available trading markets and the review of any
contractual restrictions. Accordingly, the Board of Directors is responsible for
developing and establishing the guidelines and procedures for determining the
liquidity of Rule 144A securities. As allowed by Rule 144A, the Board of
Directors of the funds has delegated the day-to-day function of determining the
liquidity of Rule 144A securities to the manager. The Board retains the
responsibility to monitor the implementation of the guidelines and procedures it
has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the
12 Information Regarding the Funds American Century Investments
liquidity of such securities may be limited accordingly and a fund may, from
time to time, hold a Rule 144A security that is illiquid. In such an event, the
fund's manager will consider appropriate remedies to minimize the effect on such
fund's liquidity. Neither fund may invest more than 15% of its assets in
illiquid securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of fund shares).
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return. Performance
data may be quoted separately for the Institutional Class and the other classes
offered by the funds.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if a
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on its shares or the income reported
in the fund's financial statements.
Each fund also may include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services) and publications that monitor the performance of
mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to well-known indices of market performance, such as the
Standard & Poor's 500 Index, the Dow Jones Industrial Average, the S&P/Barra
Value Index (with regard to Value) and the Lipper Equity Income Fund Index (with
regard to Equity Income). Fund performance may also be compared, on a relative
basis, to other funds in our fund family. This relative comparison, which may be
based upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 13
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-3533 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 15 and "Customers of Banks,
Broker-Dealers and Other Financial Intermediaries," page 19.
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 FORMTEXT):
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
page 15 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
14 How To Invest With American Century Investments American Century Investments
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," on page 15) 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 14 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on page 14.
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 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 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 20.
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 16.
Prospectus How To Invest With American Century Investments 15
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 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 16.
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. Please see "Signature
Guarantee," page 17.
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 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 to 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,
16 How To Invest With American Century Investments American Century Investments
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 funds' 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; or
o Profit sharing plans and pension plans for corporations and other
employers.
Prospectus How To Invest With American Century Investments 17
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
18 How To Invest With American Century Investments American Century Investments
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.
Prospectus How To Invest With American Century Investments 19
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 the 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 of a fund 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 funds'
transfer agent prior to the applicable cut-off time for receiving orders and to
make payment for any purchase transactions in accordance with the funds'
procedures or any contractual arrangement with the funds or the funds'
distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
Portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
price is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices or at
the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange
20 Additional Information You Should Know American Century Investments
is open. If an event were to occur after the value of a security was
established, but before the net asset value per share was determined that was
likely to materially change the net asset value, then that security would be
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in
leading newspapers daily. 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 quarterly.
Distributions from net realized securities gains, if any, generally are declared
and paid annually, usually in December, but the funds may make distributions on
a more frequent basis to comply with the distribution requirements of the Code,
in all events in a manner consistent with the provisions of the Investment
Company Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders in taxable accounts, distributions
will be reinvested unless you elect to receive them in cash. Distributions of
less than $10 generally will be reinvested. Distributions made shortly after a
purchase made by check or ACH may be held up to 15 days. You may elect to have
distributions on shares of Individual Retirement Accounts and 403(b) plans paid
in cash only if you are at least 591/2 years old or permanently and totally
disabled. Distribution checks normally are mailed within seven days after the
record date.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time, the value of your shares
includes the undistributed net gains, if any, realized by the fund on the sale
of portfolio securities and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed, the value of your
shares will be reduced by the amount of the distribution. If you buy your shares
through a taxable account just before the distribution, you will pay the full
price for your shares and then receive a portion of the purchase price back as a
taxable distribution. See "Taxes," this page.
TAXES
Each fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code, which means that to the extent its
income is distributed to shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan (excluding
participant-directed employer-sponsored retirement plans, which are ineligible
to invest in Institutional Class shares) income and capital gains distributions
paid by the funds will generally not be subject to current taxation, but will
accumulate in your account on a tax-deferred basis.
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.
Dividends and interest received by the funds on
Prospectus Additional Information You Should Know 21
foreign securities, and, in limited circumstances capital gains realized by the
funds upon the sale of such securities, may give rise to withholding and other
taxes imposed by foreign countries. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. Foreign countries
generally do not impose taxes on capital gains in respect of investments by
non-resident investors. The foreign taxes paid by a fund will reduce its
dividends.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains. See "Distributions," page 21.
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, either we or your financial intermediary are required by
federal law to withhold and remit to the IRS 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions). Those
regulations require you to certify that the Social Security number or tax
identification number you provide is correct and that you are not subject to 31%
withholding for previous under-reporting to the IRS. You will be asked to make
the appropriate certification on your application. Payments reported by us that
omit your Social Security number or tax identification number will subject us to
a penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed. This charge is not
refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the manager of the funds. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment advisory
services to investment companies and institutional clients since it was founded
in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent
corporation of the manager, acquired Benham Management International, Inc. In
the acquisition, Benham Management Corporation ("BMC"), the investment advisor
to The Benham Group of mutual funds, became a wholly owned subsidiary of ACC.
Certain employees of BMC provide investment management services to the funds
while certain employees of the manager provide investment
22 Additional Information You Should Know American Century Investments
management services to funds managed by BMC.
The manager supervises and manages the investment portfolio of the funds
and directs the purchase and sale of their investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the funds' portfolios as it deems appropriate in pursuit of the
funds' investment objectives. Individual portfolio manager members of the team
may also adjust portfolio holdings of the funds as necessary between team
meetings.
The portfolio manager members of the team managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:
PETER A. ZUGER, Vice President and Portfolio Manager, joined American
Century in June 1993 as a Portfolio Manager. Prior to joining American
Century, Mr. Zuger served as an investment manager in the Trust Department of
NBD Bancorp in Detroit, Michigan.
PHILLIP N. DAVIDSON, Vice President and Portfolio Manager, joined
American Century in September 1993 as a Portfolio Manager. Prior to joining
American Century, Mr. Davidson served as an investment manager for Boatmen's
Trust Company in St. Louis, Missouri.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Institutional Class of the funds, the
manager receives an annual fee of 0.80% of the average net assets of each of the
funds. On the first business day of each month, each fund pays the management
fee to the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying 0.80% of the aggregate average daily
closing value of each fund's net assets during the previous month by a fraction,
the numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds and is paid for
such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs.
Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a 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
investment 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
Prospectus Additional Information You Should Know 23
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, controls American Century Companies by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the manager. The manager
pays all expenses for promoting sales of, and distributing the Institutional
Class of the 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 funds, was
organized as a Maryland corporation on June 14, 1993.
The principal office of the funds 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 $.01 par
value shares. Each series is commonly referred to as a fund. The assets
belonging to each series of shares are held separately by the custodian.
American Century offers four classes of each of the funds offered by this
Prospectus: an Investor Class, an Institutional Class, a Service Class, and an
Advisor Class. The shares offered by this Prospectus are 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
Service Class and Advisor Class 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 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 the 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 votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to
24 Additional Information You Should Know American Century Investments
the funds' bylaws, the holders of at least 10% of the votes entitled to be cast
may request the funds to hold a special meeting of shareholders. We will assist
in the communication with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 25
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: 816-340-4655
Internet: www.americancentury.com
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