PROSPECTUS
[american century logo]
American
Century(sm)
MAY 21, 1997
REVISED JUNE 16, 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Real Estate Fund
PROSPECTUS
MAY 21, 1997
REVISED JUNE 16, 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 American Century Real Estate
Fund 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: 816-444-3485
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 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 and 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.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund.............................................2
Transaction and Operating Expense Table......................................4
Financial Highlights.........................................................5
INFORMATION REGARDING THE FUND
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Investment Policies of the Fund..............................................6
Investment Objective....................................................6
Investment Strategy.....................................................6
Investments In Real Estate..............................................6
Investment Philosophy...................................................7
Other Investment Practices, Their Characteristics
and Risks.................................................................8
U.S. Fixed Income Securities............................................8
Diversification.........................................................8
Portfolio Lending.......................................................8
When-Issued Securities..................................................9
Rule 144A Securities....................................................9
Borrowing...............................................................9
Portfolio Turnover......................................................9
Repurchase Agreements...................................................9
Performance Advertising.....................................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
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American Century Investments................................................11
Investing in American Century...............................................11
How to Open an Account......................................................11
By Mail............................................................11
By Wire............................................................11
By Exchange........................................................12
In Person..........................................................12
Subsequent Investments.................................................12
By Mail............................................................12
By Telephone.......................................................12
By Online Access...................................................12
By Wire............................................................12
In Person..........................................................12
Automatic Investment Plan..............................................12
How to Exchange from One Account to Another.................................12
By Mail ...........................................................13
By Telephone.......................................................13
By Online Access...................................................13
How to Redeem Shares........................................................13
By Mail ...........................................................13
By Telephone.......................................................13
By Check-A-Month...................................................13
Other Automatic Redemptions........................................13
Redemption Proceeds....................................................13
By Check...........................................................13
By Wire and ACH....................................................13
Special Requirements for Large Redemptions.............................14
Redemption of Shares in Low-Balance Accounts...........................14
Signature Guarantee.........................................................14
Special Shareholder Services................................................14
Automated Information Line.........................................15
Online Account Access..............................................15
Open Order Service.................................................15
Tax-Qualified Retirement Plans.....................................15
Important Policies Regarding Your Investments...............................15
Reports to Shareholders.....................................................16
Employer-Sponsored Retirement Plans and
Institutional Accounts...................................................17
ADDITIONAL INFORMATION YOU SHOULD KNOW
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Share Price.................................................................18
When Share Price Is Determined.........................................18
How Share Price Is Determined..........................................18
Where to Find Information About Share Price............................18
Distributions...............................................................18
Taxes 19
Tax-Deferred Accounts..................................................19
Taxable Accounts.......................................................19
Management..................................................................20
Investment Management..................................................20
Performance History of the Subadvisor..................................21
Performance Highlights.................................................22
Code of Ethics.........................................................23
Transfer and Administrative Services...................................23
Distribution of Fund Shares.................................................23
Further Information About American Century..................................23
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Real Estate Fund
SHAREHOLDER TRANSACTION EXPENSES:
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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):
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Management Fees...........................................................1.20%
12b-1 Fees.................................................................none
Other Expenses(2).........................................................0.00%
Total Fund Operating Expenses.............................................1.20%
EXAMPLE:
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You would pay the following expenses on a 1 year $ 12
$1,000 investment, assuming a 5% annual return and 3 years 38
redemption at the end of each time period: 5 years 66
10 years 145
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) 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, are expected to be less than 0.01 of
1% of average net assets for the next 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 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.
Accordingly, the core investment advisory expenses do not vary by class. 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 23.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The fund had no assets prior to June 13, 1997, the date the RREEF Real Estate
Securities Fund merged into the fund. The financial information in this table
regarding selected per share data for the fund reflects the performance of the
RREEF fund, which had a total expense ratio that was voluntarily capped at
1.00%, which is 0.20% lower than the shares offered by this Prospectus.
The performance information for each of the periods presented has been audited
by Deloitte & Touche L.L.P., independent accountants, whose report thereon
appears in the fund's annual report. 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 October 31, except as noted.
<TABLE>
1996 1995(1)
PER-SHARE DATA
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<S> <C> <C>
Net Asset Value, Beginning of Period................................ $9.82 $10.00
Income From Investment Operations
Net Investment Income.......................................... 0.55 0.07
Net Realized and Unrealized Gain (Loss) on Investments......... 2.27 (0.25)
Total From Investment Operations............................... 2.82 (0.18)
Less Distributions to Shareholders
From Net Investment Income..................................... (0.35) --
Net Asset Value, End of Period...................................... $12.29 $9.82
Aggregate Total Return......................................... 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net Expenses as a Percentage of Average Net Assets(3)............... 1.00% 1.50%(2)
Net Expenses as a Percentage of Average Net Assets
(before waiver, offset and reimbursement)(3)................... 6.83% 14.83%(2)
Net Investment Income as a Percentage of Average Net Assets(3)...... 5.84% 6.66%(2)
Net Investment Income as a Percentage of Average Net Assets
(before waiver, offset and reimbursement)(3)................... 0.01% (6.67)%(2)
Portfolio Turnover Rate ............................................ 86% 0%
Average Broker Commission Rate...................................... $0.0545 --
Net Assets, End of Period (in thousands)............................ $7,209 $2,983
(1) September 21, 1995 (inception) through October 31, 1995.
(2) Annualized.
(3) During these two periods, RREEF Real Estate Securities Advisers L.P.
voluntarily agreed to waive its management fee and reimburse certain expenses
incurred by the fund. The Custodian offset part of its fees for balance credits
given to the fund.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
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The fund has adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund 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 fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. 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 and 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.
INVESTMENT STRATEGY
Under normal conditions, the fund will invest not less than 80% 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," this page.
The fund may also invest up to 20% 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 8.)
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
6 Information Regarding the Fund American Century Investments
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 with
strong cash flow growth potential and, therefore, the capacity for sustained
dividend increases.
The fund's approach is initially driven by an internally-generated systematic
assessment of changing real estate markets, an important input to sound
investment decisions. The subadvisor tracks economic conditions and real estate
market performance in major metropolitan areas and screens markets to identify
areas of risk and opportunity, and will focus investment activity in property
types and geographic areas it identifies as growth sectors.
This fundamental approach focuses on identifying changes in property level net
operating income and the impact on the ultimate stock performance of individual
REITs. It requires extensive local research on property markets across the
United States, direct inspection of individual property assets, and familiarity
with company management and operating strategies. Rigorous securities analyses
are performed to identify investments with unappreciated potential to produce
superior, long-term returns. Strategic sector allocations are directed by the
subadvisor's Strategic Investment Committee, which has become increasingly more
important as sectors have grown and as attractive companies have emerged in each
major sector.
This approach can be broken down into three areas. First, it involves a
macroeconomic review of supply-demand characteristics and the outlook for
economic growth within specific markets. Next, it involves a top-down analysis
of the relative pricing of real estate securities. Finally, a fundamental
analysis of each REIT portfolio on a property-by-property basis coupled with a
review of the company's management depth, financial structure, and business
strategy is performed.
In managing the fund, the subadvisor uses a nationwide network of real estate
professionals employed by RREEF America L.L.C. and its affiliates to assist in
evaluating and monitoring properties held by public REITs. (See "Investment
Management," page 20.)
Prospectus Information Regarding the Fund 7
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 18, and "Taxes," page 19.) 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.
8 Information Regarding the Fund American Century Investments
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. The staff also acknowledges that, while the Board
retains ultimate responsibility, it may delegate this function to the manager.
Accordingly, the Board has established guidelines and procedures for determining
the liquidity of Rule 144A securities and has delegated the day-to-day function
of determining the liquidity of Rule 144A securities to the manager. The Board
retains the responsibility to monitor the implementation of the guidelines and
procedures it has adopted.
Since the secondary market for such securities is limited to certain qualified
institutional buyers, the liquidity of such securities may be limited
accordingly and the 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 the subadvisor determines a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
predicted.
The portfolio turnover of the 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
Prospectus Information Regarding the Fund 9
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 the 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, the 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 Morgan Stanley
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.
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.
10 Information Regarding the Fund American Century Investments
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 17.
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 12). 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.
Prospectus How to Invest with American Century Investments 11
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA, SARSEP-IRA, SIMPLE Employer or SIMPLE
Employee.
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
Investor Centers, located at:
4500 Main Street
Kansas City, Missouri
4917 Town Center Drive
Leawood, Kansas
1665 Charleston Road
Mountain View, California
2000 S. Colorado Blvd.
Denver, Colorado
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 investment slip 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 investment slip
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 11 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor Centers.
The locations of our four Investor 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 as of 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 funds issued by
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 18.
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
12 How to Invest with American Century Investments American Century Investments
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 14).
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 (either with an Investor Services
Representative or using our Automated Information Line -- see page 15) 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 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
14).
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem your
shares by calling an Investor Services Representative.
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 or request a brochure, please call an Investor Services
Representative.
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 to 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.
Prospectus How to Invest with American Century Investments 13
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 the 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 the 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 to either 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 shareholder services include:
14 How to Invest with American Century Investments American Century Investments
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
The 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.
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.
Prospectus How to Invest with American Century Investments 15
(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 manager 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
Investor 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 better understand your fund.
16 How to Invest with American Century Investments American Century Investments
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.
Prospectus How to Invest with American Century Investments 17
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 the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
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 receipt by us of the 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 time as of which the net
asset value 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 as of, the close
of the Exchange on, the next day the Exchange is open.
Investments are considered received only when payment is received by us. Wired
funds are considered received on the day they are deposited in our bank account
if they are deposited before the time as of which the net asset value of the
fund 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 prior to the time as of which the net asset value of the fund 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 arrangements 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 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 quarterly.
Distributions from net
18 Additional Information You Should Know American Century Investments
realized securities gains, if any, are declared and paid once a year, but the
fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code and Regulations, 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 investing through 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 by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in 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 the 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 such gains and dividends are included in the value of your shares, when
they are distributed, the value of your shares is reduced by the amount of the
distribution. If you buy your share 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 under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a qualified
employer-sponsored retirement or savings plan, income and capital gains
distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan 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.
Because of the nature of REIT investments, REITs may generate significant non
cash deductions (i.e. depreciation on real estate holdings) while having a
greater cash flow to distribute to its shareholders. If a REIT distributes more
cash than it has taxable income, a "return of capital" results. A "return of
capital" represents a portion of a shareholder's original investment that is
generally non taxable when distributed (returned) to the investor. If you do not
reinvest distributions, the cost basis of your shares will be decreased
Prospectus Additional Information You Should Know 19
by the amount of return capital, which may result in a larger capital gain when
you sell your shares. Although a return of capital is generally non taxable to
you upon distribution, it would be taxable to you as a capital gain if your cost
basis in the shares is reduced to zero. This could occur if you do not reinvest
distributions and the returns of capital are significant.
Because the REITs invested in by the fund do not provide complete information
about the taxability of their distributions until after the calendar year end,
American Century may not be able to determine how much of the fund's
distribution is taxable to shareholders until after the January 31 deadline for
issuing Form 1099-DIV. As a result, the fund may request permission each year
from the Internal Revenue Service for an extension of time to issue Form
1099-DIV to February 28.
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.
RREEF Real Estate Securities Advisers L.P., acting pursuant to a subadvisory
agreement among it, American Century Investment Management, Inc. and the fund,
makes the day-to-day 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 subadvisor's team that manages the fund and
their work experience for the last five years are as follows:
20 Additional Information You Should Know American Century Investments
KIM G. REDDING, Portfolio Manager, is one of the fund's primary portfolio
managers. Mr. Redding has served as the President of the subadvisor's general
partner since its 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, is one of the fund's primary portfolio
managers. Ms. Knudson is a Vice President of the subadvisor, is currently a
member of RREEF America L.L.C. and is a Vice President of RREEF Management
Company. Prior to joining the subadvisor, 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.
The representative of the investment manager that will oversee the subadvisor's
operation of the fund is as follows:
MARK L. MALLON, Senior Vice President and Managing Director, American Century
Investment Management, Inc. Mr. Mallon joined American Century in April 1997.
From August 1978 until he joined American Century, Mr. Mallon was employed in
several positions by Federated Investors, and had served as President and Chief
Executive Officer of Federated Investment Counseling and Executive Vice
President of Federated Research Corporation since January 1990.
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 1.20% 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 1.20% 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 the subadvisor an annual fee of
0.425% of the average net assets of the fund.
PERFORMANCE HISTORY OF THE SUBADVISOR
While the subadvisor has limited operational history with the fund, set forth on
page 22 are certain performance data, provided by the subadvisor, relating to
the performance of all private accounts managed by the subadvisor using
investment strategies and techniques similar to those that are used for the
fund. Also set forth on page 22, for comparison, are the performances of widely
recognized indices of market activity based upon the aggregate performance of
selected unmanaged portfolios of publicly traded common stocks.
The results presented may not necessarily equate with the returns experienced by
the fund, owing to the differences in brokerage commissions, investment and
management fees, the size of positions taken in relation to account size and
diversification of securities, as well as other costs, such as registration fees
borne by the fund but not incurred by the private accounts. Investors should not
rely on the following data as an indication of future performance of the
subadvisor or of the fund. Investors should be aware that the use of methods for
computing performance numbers different than that used by the subadvisor with
respect to its accounts could result in performance data different than that
shown.
Prospectus Additional Information You Should Know 21
<TABLE>
<CAPTION>
PERFORMANCE HIGHLIGHTS
(See Notes Below)
ANNULIZED RETURNS FROM OCTOBER 1987 THROUGH DECEMBER 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RREEF Real Estate Securities Advisers
Before Fees..............................................................................................15.5%
After Fees...............................................................................................14.3%
NAREIT Equity Less Healthcare.................................................................................10.0%
Wilshire REIT Index............................................................................................8.6%
For the Years Ended December 31,
---------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996
ANNUAL TIME-WEIGHTED RETURNS
- -------------------------------------------------------------------------------------------------------------------
RREEF Real Estate Securities Advisers
Before Fees ...................... 8.2% 7.7% (4.8)% 32.9% 29.4% 19.0% 4.8% 13.9% 41.1%
After Fees ....................... 6.8% 6.1% (6.4)% 30.9% 28.1% 18.0% 4.3% 13.0% 40.3%
NAREIT Equity Less Healthcare ......... 15.8% 4.6% (23.6)% 29.4% 20.7% 18.7% 3.0% 14.2% 36.4%
Wilshire REIT Index ................... 17.5% 2.7% (23.4)% 23.8% 15.3% 15.2% 2.7% 12.2% 37.0%
</TABLE>
Notes: The subadvisor's "After Fees" performance includes reinvested dividends,
capital gains and losses, and deducts advisory fees (generally between 0.65% and
0.75%) and other account expenses. The subadvisor's "Before Fees" performance is
presented before applicable advisory fees and reflects growth investment
results. Other indices noted do not deduct advisory fees. Past performance
indicated for the subadvisor relates to all discretionary accounts managed using
investment strategies and techniques similar to those used by the fund, and
includes, for the period prior to July 1993, performance under a predecessor
advisor (K.G. Redding & Associates) using the same investment approach and under
the same primary portfolio manager. Past performance is not necessarily
indicative of future results nor can it be assumed that any recommendations will
be profitable.
The Wilshire Real Estate Securities Index (REIT component) is a market
capitalization weighted index comprised of 98 equity REITS as of December 1996.
It does not include special purpose or healthcare REITS. The NAREIT Equity
without Healthcare Index is a market capitalization weighted index comprised of
198 REITS, as of December 1996, with 75% or greater of their gross assets
invested in equity ownership of real estate and excludes healthcare REITS.
22 Additional Information You Should Know American Century Investments
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 and
the subadvisor's Code of Ethics require 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, both Codes of Ethics prohibit
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.
The subadvisor's Code of Ethics provides that upon approval of the compliance
officer, certain acquisitions of securities in an initial public offering may be
permitted, but that such approval will be granted only in extraordinary
circumstances. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
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
fund, 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 American Century Real Estate Fund commenced operations June 16, 1997, after
the RREEF Real Estate Securities Fund merged into the fund. As a successor to
the RREEF fund, the prior performance history of the RREEF fund will continue in
the fund.
The principal office of the fund is American Century Tower, 4500 Main Street,
P.O. Box 419200, Kansas City,
Prospectus Additional Information You Should Know 23
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. currently issues three series of $0.01
par value shares. Each series is commonly referred to as a fund. The assets
belonging to each series of shares are held separately by the custodian.
American Century offers 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. 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. Accordingly, the core investment advisory expenses do not vary by
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 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.
24 Additional Information You Should Know American Century Investments
NOTES
Prospectus Notes 25
P.O. Box 419200
Kansas City, Missouri
64141-6200
Investor Services:
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 816-444-3485
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9706 [recycled logo]
SH-BKT-8460 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 21, 1997
REVISED JUNE 16, 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Real Estate Fund
PROSPECTUS
MAY 21, 1997
REVISED JUNE 16, 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 American Century Real Estate
Fund 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 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 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-444-3038
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 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 and 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 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.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund.............................................2
Transaction and Operating Expense Table......................................4
Financial Highlights.........................................................5
INFORMATION REGARDING THE FUND
- --------------------------------------------------------------------------------
Investment Policies of the Fund..............................................6
Investment Objective....................................................6
Investment Strategy.....................................................6
Investments In Real Estate..............................................6
Investment Philosophy...................................................7
Other Investment Practices, Their Characteristics
and Risks.................................................................7
U.S. Fixed Income Securities............................................8
Diversification.........................................................8
Portfolio Lending.......................................................8
When-Issued Securities..................................................8
Rule 144A Securities....................................................9
Borrowing...............................................................9
Portfolio Turnover......................................................9
Repurchase Agreements...................................................9
Performance Advertising.....................................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
- --------------------------------------------------------------------------------
American Century Investments................................................11
Investing in American Century...............................................11
How to Open an Account......................................................11
By Mail............................................................11
By Wire............................................................11
By Exchange........................................................11
In Person..........................................................11
Subsequent Investments.................................................12
By Mail............................................................12
By Telephone.......................................................12
By Wire............................................................12
In Person..........................................................12
Automatic Investment Plan..............................................12
Minimum Investment.....................................................12
How to Exchange from One Account to Another.................................12
By Mail ...........................................................13
By Telephone.......................................................13
How to Redeem Shares........................................................13
By Mail ...........................................................13
By Telephone.......................................................13
By Check-A-Month...................................................13
Other Automatic Redemptions........................................13
Redemption Proceeds....................................................13
By Check...........................................................13
By Wire and ACH....................................................13
Special Requirements for Large Redemptions.............................13
Signature Guarantee.........................................................14
Special Shareholder Services................................................14
Open Order Service.................................................14
Tax-Qualified Retirement Plans.....................................15
Important Policies Regarding Your Investments...............................15
Reports to Shareholders.....................................................15
Customers of Banks, Broker-Dealers and Other
Financial Intermediaries.................................................16
ADDITIONAL INFORMATION YOU SHOULD KNOW
- --------------------------------------------------------------------------------
Share Price.................................................................17
When Share Price Is Determined.........................................17
How Share Price Is Determined..........................................17
Where to Find Information About Share Price............................17
Distributions...............................................................17
Taxes 18
Tax-Deferred Accounts..................................................18
Taxable Accounts.......................................................18
Management..................................................................19
Investment Management..................................................19
Performance History of the Subadvisor..................................20
Performance Highlights.................................................21
Code of Ethics.........................................................22
Transfer and Administrative Services...................................22
Distribution of Fund Shares.................................................22
Further Information About American Century..................................22
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Real Estate Fund
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............................................................1.00%
12b-1 Fees..................................................................none
Other Expenses(1)..........................................................0.00%
Total Fund Operating Expenses..............................................1.00%
EXAMPLE:
- --------------------------------------------------------------------------------
You would pay the following expenses on a 1 year $ 10
$1,000 investment, assuming a 5% annual return and 3 years 32
redemption at the end of each time period: 5 years 55
10 years 122
(1) 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, are expected to be less than
0.01 of 1% of average net assets for the next 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 other classes have different fee structures than the
Institutional 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. Accordingly, the core investment advisory
expenses do not vary by class. 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 22.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The fund had no assets prior to June 13, 1997, the date the RREEF Real Estate
Securities Fund merged into the fund. The financial information in this table
regarding selected per share data for the fund reflects the performance of the
RREEF fund, which had a total expense ratio that was voluntarily capped at
1.00%, which is the same expense ratio as the shares offered by this Prospectus.
The performance information for each of the periods presented has been audited
by Deloitte & Touche L.L.P., independent accountants, whose report thereon
appears in the fund's annual report. 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 October 31, except as noted.
<TABLE>
1996 1995(1)
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period................................. $9.82 $10.00
Income From Investment Operations
Net Investment Income........................................... 0.55 0.07
Net Realized and Unrealized Gain (Loss) on Investments.......... 2.27 (0.25)
Total From Investment Operations................................ 2.82 (0.18)
Less Distributions to Shareholders
From Net Investment Income...................................... (0.35) .--
Net Asset Value, End of Period....................................... $12.29 $9.82
Aggregate Total Return.......................................... 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net Expenses as a Percentage of Average Net Assets(3)................ 1.00% 1.50%(2)
Net Expenses as a Percentage of Average Net Assets
(before waiver, offset and reimbursement)(3).................... 6.83% 14.83%(2)
Net Investment Income as a Percentage of Average Net Assets(3)....... 5.84% 6.66%(2)
Net Investment Income as a Percentage of Average Net Assets
(before waiver, offset and reimbursement)(3).................... 0.01% (6.67)%(2)
Portfolio Turnover Rate ............................................. 86% 0%
Average Broker Commission Rate....................................... $0.0545 --
Net Assets, End of Period (in thousands)............................. $7,209 $2,983
(1) September 21, 1995 (inception) through October 31, 1995.
(2) Annualized.
(3) During these two periods, RREEF Real Estate Securities Advisers L.P.
voluntarily agreed to waive its management fee and reimburse certain
expenses incurred by the Fund. The Custodian offset part of its fees for
balance credits given to the Fund.
</TABLE>
Prospectus Financial Highlights 5
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 and 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.
INVESTMENT STRATEGY
Under normal conditions, the fund will invest not less than 80% 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," this page.
The fund may also invest up to 20% 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 8.)
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.
6 Information Regarding the Fund American Century Investments
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 with
strong cash flow growth potential and, therefore, the capacity for sustained
dividend increases.
The fund's approach is initially driven by an internally-generated systematic
assessment of changing real estate markets, an important input to sound
investment decisions. The subadvisor tracks economic conditions and real estate
market performance in major metropolitan areas and screens markets to identify
areas of risk and opportunity, and will focus investment activity in property
types and geographic areas it identifies as growth sectors.
This fundamental approach focuses on identifying changes in property level net
operating income and the impact on the ultimate stock performance of individual
REITs. It requires extensive local research on property markets across the
United States, direct inspection of individual property assets, and familiarity
with company management and operating strategies. Rigorous securities analyses
are performed to identify investments with unappreciated potential to produce
superior, long-term returns. Strategic sector allocations are directed by the
subadvisor's Strategic Investment Committee, which has become increasingly more
important as sectors have grown and as attractive companies have emerged in each
major sector.
This approach can be broken down into three areas. First, it involves a
macroeconomic review of supply-demand characteristics and the outlook for
economic growth within specific markets. Next, it involves a top-down analysis
of the relative pricing of real estate securities. Finally, a fundamental
analysis of each REIT portfolio on a property-by-property basis coupled with a
review of the company's management depth, financial structure, and business
strategy is performed.
In managing the fund, the subadvisor uses a nationwide network of real estate
professionals employed by RREEF America L.L.C. and its affiliates to assist in
evaluating and monitoring properties held by public REITs. (See "Investment
Management," page 19.)
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
- -----------------------------------------------------------
For additional information, see "Investment Restrictions" in the Statement of
Additional Information.
Prospectus Information Regarding the Fund 7
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 17, and "Taxes," page 18.) 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
8 Information Regarding the Fund American Century Investments
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. The staff also acknowledges that, while the Board
retains ultimate responsibility, it may delegate this function to the manager.
Accordingly, the Board has established guidelines and procedures for determining
the liquidity of Rule 144A securities and has delegated the day-to-day function
of determining the liquidity of Rule 144A securities to the manager. The Board
retains the responsibility to monitor the implementation of the guidelines and
procedures it has adopted.
Since the secondary market for such securities is limited to certain qualified
institutional buyers, the liquidity of such securities may be limited
accordingly and the 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 331/3% 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 the subadvisor determines a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
predicted.
The portfolio turnover of the 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
Prospectus Information Regarding the Fund 9
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 the 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, the 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 Morgan Stanley
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.
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.
10 Information Regarding the Fund American Century Investments
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 12, and "Customers of Banks,
Broker-Dealers and Other Financial Intermediaries," page 16.
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 64141
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, SARSEP-IRA, SIMPLE Employer or SIMPLE
Employee.
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
12 for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of our
Investor Centers, located at:
4500 Main Street
Kansas City, Missouri
Prospectus How to Invest with American Century Investments 11
4917 Town Center Drive
Leawood, Kansas
1665 Charleston Road
Mountain View, California
2000 S. Colorado Blvd.
Denver, Colorado
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 investment slip 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 investment slip
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 11 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor Centers.
The locations of our four Investor Centers are listed on pages 11-12.
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 as of 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 17).
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.
12 How to Invest with American Century Investments American Century Investments
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,"
this 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 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," this 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
14).
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 to 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 the 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
Prospectus How to Invest with American Century Investments 13
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 the 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.
14 How to Invest with American Century Investments American Century Investments
TAX-QUALIFIED RETIREMENT PLANS
This 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.
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 manager 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
Investor 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
Prospectus How to Invest with American Century Investments 15
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 better 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.
16 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
- -----------
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of a fund's assets, deducting
total liabilities and dividing the result by the number of shares outstanding.
For all American Century funds, except funds issued by the American Century
Target Maturities Trust, net asset value is determined as of 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 our agents before the time as of which the net asset value 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 as of, 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 time as of which 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 prior to the time as of which the net asset value of the fund 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 quarterly.
Distributions from net realized securities gains, if any, are declared and paid
once a year, but the fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code and
Prospectus Additional Information You Should Know 17
Regulations, in all events in a manner consistent with the provisions of the
Investment Company Act.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders in taxable accounts, distributions will be
reinvested unless you elect to receive them in cash. Distributions of less than
$10 generally will be reinvested. Distributions made shortly after purchase by
check or ACH may be held up to 15 days. You may elect to have distributions on
shares of Individual Retirement Accounts and 403(b) plans paid in cash only if
you are at least 591/2 years old or permanently and totally disabled.
Distribution checks normally are mailed within seven days after the record date.
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 17.
Because of the nature of REIT investments, REITs may generate significant non
cash deductions (i.e. depreciation on real estate holdings) while having a
greater cash flow to distribute to its shareholders. If a REIT distributes more
cash than it has taxable income, a "return of capital" results. A "return of
capital" represents a portion of a shareholder's original investment that is
generally non taxable when distributed (returned) to the investor. If you do not
reinvest distributions, the cost basis of your shares will be decreased by the
amount of return capital, which may result in a larger capital gain when you
sell your shares. Although a return of capital is generally non taxable to you
upon distribution, it would be taxable to you as a capital gain if your cost
basis in the shares is reduced to zero.
18 Additional Information You Should Know American Century Investments
This could occur if you do not reinvest distributions and the returns of capital
are significant.
Because the REITs invested in by the fund do not provide complete information
about the taxability of their distributions until after the calendar year end,
American Century may not be able to determine how much of the fund's
distribution is taxable to shareholders until after the January 31 deadline for
issuing Form 1099-DIV. As a result, the fund may request permission each year
from the Internal Revenue Service for an extension of time to issue Form
1099-DIV to February 28.
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.
RREEF Real Estate Securities Advisers L.P., acting pursuant to a subadvisory
agreement among it, American Century Investment Management, Inc. and the fund,
makes the day-to-day 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 subadvisor's team that manages the fund and
their work experience for the last five years are as follows:
KIM G. REDDING, Portfolio Manager, is one of the fund's primary portfolio
managers. Mr. Redding has
Prospectus Additional Information You Should Know 19
served as the President of the subadvisor's general partner since its 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, is one of the fund's primary portfolio
managers. Ms. Knudson is a Vice President of the subadvisor, is currently a
member of RREEF America L.L.C. and is a Vice President of RREEF Management
Company. Prior to joining the subadvisor, 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.
The representative of the investment manager that will oversee the subadvisor's
operation of the fund is as follows:
MARK L. MALLON, Senior Vice President and Managing Director, American Century
Investment Management, Inc. Mr. Mallon joined American Century in April 1997.
From August 1978 until he joined American Century, Mr. Mallon was employed in
several positions by Federated Investors, and had served as President and Chief
Executive Officer of Federated Investment Counseling and Executive Vice
President of Federated Research Corporation since January 1990.
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 1.00% 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 1.00% 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 the subadvisor an annual fee of
0.425% of the average net assets of the fund.
PERFORMANCE HISTORY OF THE SUBADVISOR
While the subadvisor has limited operational history with the fund, set forth on
page 21 are certain performance data, provided by the subadvisor, relating to
the performance of all private accounts managed by the subadvisor using
investment strategies and techniques similar to those that are used for the
fund. Also set forth on page 21, for comparison, are the performances of widely
recognized indices of market activity based upon the aggregate performance of
selected unmanaged portfolios of publicly traded common stocks.
The results presented may not necessarily equate with the returns experienced by
the fund, owing to the differences in brokerage commissions, investment and
management fees, the size of positions taken in relation to account size and
diversification of securities, as well as other costs, such as registration fees
borne by the fund but not incurred by the private accounts. Investors should not
rely on the following data as an indication of future performance of the
subadvisor or of the fund. Investors should be aware that the use of methods for
computing performance numbers different than that used by the subadvisor with
respect to its accounts could result in performance data different than that
shown.
20 Additional Information You Should Know American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE HIGHLIGHTS
(See Notes Below)
ANNULIZED RETURNS FROM OCTOBER 1987 THROUGH DECEMBER 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RREEF Real Estate Securities Advisers
Before Fees..............................................................................................15.5%
After Fees...............................................................................................14.3%
NAREIT Equity Less Healthcare.................................................................................10.0%
Wilshire REIT Index............................................................................................8.6%
For the Years Ended December 31,
------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996
ANNUAL TIME-WEIGHTED RETURNS
- ------------------------------------------------------------------------------------------------------------------------------
RREEF Real Estate Securities Advisers
Before Fees .............................. 8.2% 7.7% (4.8)% 32.9% 29.4% 19.0% 4.8% 13.9% 41.1%
After Fees ............................... 6.8% 6.1% (6.4)% 30.9% 28.1% 18.0% 4.3% 13.0% 40.3%
NAREIT Equity Less Healthcare ................. 15.8% 4.6% (23.6)% 29.4% 20.7% 18.7% 3.0% 14.2% 36.4%
Wilshire REIT Index ........................... 17.5% 2.7% (23.4)% 23.8% 15.3% 15.2% 2.7% 12.2% 37.0%
</TABLE>
Notes: The subadvisor's "After Fees" performance includes reinvested dividends,
capital gains and losses, and deducts advisory fees (generally between 0.65% and
0.75%) and other account expenses. The subadvisor's "Before Fees" performance is
presented before applicable advisory fees and reflects growth investment
results. Other indices noted do not deduct advisory fees. Past performance
indicated for the subadvisor relates to all discretionary accounts managed using
investment strategies and techniques similar to those used by the fund, and
includes, for the period prior to July 1993, performance under a predecessor
advisor (K.G. Redding & Associates) using the same investment approach and under
the same primary portfolio manager. Past performance is not necessarily
indicative of future results nor can it be assumed that any recommendations will
be profitable.
The Wilshire Real Estate Securities Index (REIT component) is a market
capitalization weighted index comprised of 98 equity REITS as of December 1996.
It does not include special purpose or healthcare REITS. The NAREIT Equity
without Healthcare Index is a market capitalization weighted index comprised of
198 REITS, as of December 1996, with 75% or greater of their gross assets
invested in equity ownership of real estate and excludes healthcare REITS.
Prospectus Additional Information You Should Know 21
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 and
the subadvisor's Code of Ethics require 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, both Codes of Ethics prohibit
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.
The subadvisor's Code of Ethics provides that upon approval of the compliance
officer, certain acquisitions of securities in an initial public offering may be
permitted, but that such approval will be granted only in extraordinary
circumstances. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
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
fund, 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 American Century Real Estate Fund commenced operations June 16, 1997, after
the RREEF Real Estate Securities Fund merged into the fund. As a successor to
the RREEF fund, the prior performance history of the RREEF fund will continue in
the fund.
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.)
22 Additional Information You Should Know American Century Investments
American Century Capital Portfolios, Inc. currently issues three series of $0.01
par value shares. Each series is commonly referred to as a fund. The assets
belonging to each series of shares are held separately by the custodian.
American Century offers 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. 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. Accordingly, the
core investment advisory expenses do not vary by 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 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.
Prospectus Additional Information You Should Know 23
NOTES
24 Notes American Century Investments
NOTES
Prospectus Notes 25
P.O. Box 419385
Kansas City, Missouri
64141-6385
Investor Services:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-444-3038
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9706 [recycled logo]
SH-BKT-8461 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 21, 1997
Revised JUNE 16, 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 GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Real Estate Fund
PROSPECTUS
MAY 21, 1997
REVISED JUNE 16, 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 American Century Real Estate
Fund 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: 816-444-3038
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 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 and 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.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund...............................................2
Transaction and Operating Expense Table........................................4
Financial Highlights...........................................................5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund................................................6
Investment Objective......................................................6
Investment Strategy.......................................................6
Investments in Real Estate................................................6
Investment Philosophy.....................................................7
Other Investment Practices, Their Characteristics
and Risks...................................................................7
U.S. Fixed Income Securities..............................................8
Diversification...........................................................8
Portfolio Lending.........................................................8
When-Issued Securities....................................................9
Rule 144A Securities......................................................9
Borrowing.................................................................9
Portfolio Turnover........................................................9
Repurchase Agreements.....................................................9
Performance Advertising.......................................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American
Century Funds..............................................................11
How to Exchange from One American Century
Fund to Another............................................................11
How to Redeem Shares..........................................................11
Special Requirements for Large Redemptions...............................11
Telephone Services............................................................12
Investors Line...........................................................12
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................................13
When Share Price Is Determined...........................................13
How Share Price Is Determined............................................13
Where to Find Information About Share Price..............................13
Distributions.................................................................13
Taxes.........................................................................14
Tax-Deferred Accounts....................................................14
Taxable Accounts.........................................................14
Management....................................................................15
Investment Management....................................................15
Performance History of the Subadvisor....................................16
Performance Highlights...................................................17
Code of Ethics...........................................................18
Transfer and Administrative Services.....................................18
Distribution of Fund Shares...................................................18
Service and Distribution Fees............................................18
Further Information About American Century....................................19
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Real Estate Fund
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............................................... 0.95%
12b-1 Fees(1)................................................. 0.50%
Other Expenses(2)............................................. 0.00%
Total Fund Operating Expenses................................. 1.45%
EXAMPLE:
You would pay the following expenses on a 1 year $ 15
$1,000 investment, assuming a 5% annual return and 3 years 46
redemption at the end of each time period: 5 years 79
10 years 172
(1) 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 18.
(2) 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, are expected to be less than 0.01 of
1% of average net assets for the next 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 other classes have different fee structures than the Advisor
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. Accordingly, the core investment advisory expenses
do not vary by class. 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 19.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The fund had no assets prior to June 13, 1997, the date the RREEF Real
Estate Securities Fund merged into the fund. The financial information in this
table regarding selected per share data for the fund reflects the performance of
the RREEF fund, which had a total expense ratio that was voluntarily capped at
1.00%, which is 0.45% lower than the shares offered by this Prospectus.
The performance information for each of the periods presented has been
audited by Deloitte & Touche L.L.P., independent accountants, whose report
thereon appears in the fund's annual report. 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 October 31, except as noted.
<TABLE>
1996 1995(1)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period................................... $9.82 $10.00
--------- ---------
Income From Investment Operations
Net Investment Income............................................. 0.55 0.07
Net Realized and Unrealized Gain (Loss) on Investments............ 2.27 (0.25)
--------- ---------
Total From Investment Operations.................................. 2.82 (0.18)
--------- ---------
Less Distributions to Shareholders
From Net Investment Income........................................ (0.35) --
--------- ---------
Net Asset Value, End of Period......................................... $12.29 $9.82
========= =========
AGGREGATE TOTAL RETURN............................................ 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
Net Expenses as a Percentage of Average Net Assets(3).................. 1.00% 1.50%(2)
Net Expenses as a Percentage of Average Net Assets
(before waiver, offset and reimbursement)(3)...................... 6.83% 14.83%(2)
Net Investment Income as a Percentage of Average Net Assets(3)......... 5.84% 6.66%(2)
Net Investment Income as a Percentage of Average Net Assets
(before waiver, offset and reimbursement)(3)...................... 0.01% (6.67)%(2)
Portfolio Turnover Rate ............................................... 86% 0%
Average Broker Commission Rate......................................... $0.0545 --
Net Assets, End of Period (in thousands)............................... $7,209 $2,983
(1) September 21, 1995 (inception) through October 31, 1995.
(2) Annualized.
(3) During these two periods, RREEF Real Estate Securities Advisers L.P.
voluntarily agreed to waive its management fee and reimburse certain
expenses incurred by the fund. The Custodian offset part of its fees
for balance credits given to the fund.
</TABLE>
Prospectus Financial Highlights 5
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 and 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.
INVESTMENT STRATEGY
Under normal conditions, the fund will invest not less than 80% 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," this page.
The fund may also invest up to 20% 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 8.)
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.
6 Information Regarding the Fund American Century Investments
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 with
strong cash flow growth potential and, therefore, the capacity for sustained
dividend increases.
The fund's approach is initially driven by an internally-generated
systematic assessment of changing real estate markets, an important input to
sound investment decisions. The subadvisor tracks economic conditions and real
estate market performance in major metropolitan areas and screens markets to
identify areas of risk and opportunity, and will focus investment activity in
property types and geographic areas it identifies as growth sectors.
This fundamental approach focuses on identifying changes in property level
net operating income and the impact on the ultimate stock performance of
individual REITs. It requires extensive local research on property markets
across the United States, direct inspection of individual property assets, and
familiarity with company management and operating strategies. Rigorous
securities analyses are performed to identify investments with unappreciated
potential to produce superior, long-term returns. Strategic sector allocations
are directed by the subadvisor's Strategic Investment Committee, which has
become increasingly more important as sectors have grown and as attractive
companies have emerged in each major sector.
This approach can be broken down into three areas. First, it involves a
macroeconomic review of supply-demand characteristics and the outlook for
economic growth within specific markets. Next, it involves a top-down analysis
of the relative pricing of real estate securities. Finally, a fundamental
analysis of each REIT portfolio on a property-by-property basis coupled with a
review of the company's management depth, financial structure, and business
strategy is performed.
In managing the fund, the subadvisor uses a nationwide network of real
estate professionals employed by RREEF America L.L.C. and its affiliates to
assist in evaluating and monitoring properties held by public REITs. (See
"Investment Management," page 15.)
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
Prospectus Information Regarding the Fund 7
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 13, and "Taxes," page 14.) 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.
8 Information Regarding the Fund American Century Investments
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. The staff also acknowledges that, while the Board
retains ultimate responsibility, it may delegate this function to the manager.
Accordingly, the Board has established guidelines and procedures for determining
the liquidity of Rule 144A securities and has delegated the day-to-day function
of determining the liquidity of Rule 144A securities to the manager. The Board
retains the responsibility to monitor the implementation of the guidelines and
procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional buyers, the liquidity of such securities may be limited
accordingly and the 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 the subadvisor determines a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
predicted.
The portfolio turnover of the 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
Prospectus Information Regarding the Fund 9
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 the 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,
the 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 Morgan Stanley
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.
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.
10 Information Regarding the Fund American Century Investments
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 6, 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 13.
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," this 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 or
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 13. 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
Prospectus How to Invest with American Century Investments 11
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 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.
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.
12 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of 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 our agents before the time as of which the net asset
value 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 as of, 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 time as of which the net asset value of
the fund 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 quarterly.
Distributions from net realized securities gains, if any, are declared and paid
once a year, but the fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code and
Regulations, 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
Prospectus Additional Information You Should Know 13
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 13.
Because of the nature of REIT investments, REITs may generate significant
non cash deductions (i.e. depreciation on real estate holdings) while having a
greater cash flow to distribute to its shareholders. If a REIT distributes more
cash than it has taxable income, a "return of capital" results. A "return of
capital" represents a portion of a shareholder's original investment that is
generally non taxable when distributed (returned) to the investor. If you do not
reinvest distributions, the cost basis of your shares will be decreased by the
amount of return capital, which may result in a larger capital gain when you
sell your shares. Although a return of capital is generally non taxable to you
upon distribution, it would be taxable to you as a capital gain if your cost
basis in the shares is reduced to zero. This could occur if you do not reinvest
distribution and the returns of capital are significant.
Because the REITs invested in by the fund do not provide complete
information about the taxability of
14 Additional Information You Should Know American Century Investments
their distributions until after the calendar year end, American Century may not
be able to determine how much of the fund's distribution is taxable to
shareholders until after the January 31 deadline for issuing Form 1099-DIV. As a
result, the fund may request permission each year from the Internal Revenue
Service for an extension of time to issue Form 1099-DIV to February 28.
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.
RREEF Real Estate Securities Advisers L.P., acting pursuant to a
subadvisory agreement among it, American Century Investment Management, Inc. and
the fund, makes the day-to-day 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 subadvisor's team that manages the
fund and their work experience for the last five years are as follows:
KIM G. REDDING, Portfolio Manager, is one of the fund's primary portfolio
managers. Mr. Redding has served as the President of the subadvisor's general
partner since its 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,
Prospectus Additional Information You Should Know 15
Melchor & Company, an investment advisor. Mr. Redding has been professionally
managing portfolios of real estate securities since 1987.
KAREN J. KNUDSON, Portfolio Manager, is one of the fund's primary
portfolio managers. Ms. Knudson is a Vice President of the subadvisor, is
currently a member of RREEF America L.L.C. and is a Vice President of RREEF
Management Company. Prior to joining the subadvisor, 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.
The representative of the investment manager that will oversee the
subadvisor's operation of the fund is as follows:
MARK L. MALLON, Senior Vice President and Managing Director, American
Century Investment Management, Inc. Mr. Mallon joined American Century in
April 1997. From August 1978 until he joined American Century, Mr. Mallon was
employed in several positions by Federated Investors, and had served as
President and Chief Executive Officer of Federated Investment Counseling and
Executive Vice President of Federated Research Corporation since January 1990.
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 0.95% 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 0.95% 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 the subadvisor an annual fee of
0.425% of the average net assets of the fund.
PERFORMANCE HISTORY OF THE SUBADVISOR
While the subadvisor has limited operational history with the fund, set
forth on page 17 are certain performance data, provided by the subadvisor,
relating to the performance of all private accounts managed by the subadvisor
using investment strategies and techniques similar to those that are used for
the fund. Also set forth on page 17, for comparison, are the performances of
widely recognized indices of market activity based upon the aggregate
performance of selected unmanaged portfolios of publicly traded common stocks.
The results presented may not necessarily equate with the returns
experienced by the fund, owing to the differences in brokerage commissions,
investment and management fees, the size of positions taken in relation to
account size and diversification of securities, as well as other costs, such as
registration fees borne by the fund but not incurred by the private accounts.
Investors should not rely on the following data as an indication of future
performance of the subadvisor or of the fund. Investors should be aware that the
use of methods for computing performance numbers different than that used by the
subadvisor with respect to its accounts could result in performance data
different than that shown.
16 Additional Information You Should Know American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE HIGHLIGHTS
(See Notes Below)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNULIZED RETURNS FROM OCTOBER 1987 THROUGH DECEMBER 1996
RREEF Real Estate Securities Advisers
Before Fees................................................................................................... 15.5%
After Fees.................................................................................................... 14.3%
NAREIT Equity Less Healthcare...................................................................................... 10.0%
Wilshire REIT Index................................................................................................ 8.6%
For the Years Ended December 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996
ANNUAL TIME-WEIGHTED RETURNS
RREEF Real Estate Securities Advisers
Before Fees............................ 8.2% 7.7% (4.8)% 32.9% 29.4% 19.0% 4.8% 13.9% 41.1%
After Fees............................. 6.8% 6.1% (6.4)% 30.9% 28.1% 18.0% 4.3% 13.0% 40.3%
NAREIT Equity Less Healthcare............... 15.8% 4.6% (23.6)% 29.4% 20.7% 18.7% 3.0% 14.2% 36.4%
Wilshire REIT Index......................... 17.5% 2.7% (23.4)% 23.8% 15.3% 15.2% 2.7% 12.2% 37.0%
</TABLE>
Notes: The subadvisor's "After Fees" performance includes reinvested
dividends, capital gains and losses, and deducts advisory fees (generally
between 0.65% and 0.75%) and other account expenses. The subadvisor's "Before
Fees" performance is presented before applicable advisory fees and reflects
growth investment results. Other indices noted do not deduct advisory fees. Past
performance indicated for the subadvisor relates to all discretionary accounts
managed using investment strategies and techniques similar to those used by the
fund, and includes, for the period prior to July 1993, performance under a
predecessor advisor (K.G. Redding & Associates) using the same investment
approach and under the same primary portfolio manager. Past performance is not
necessarily indicative of future results nor can it be assumed that any
recommendations will be profitable.
The Wilshire Real Estate Securities Index (REIT component) is a market
capitalization weighted index comprised of 98 equity REITS as of December 1996.
It does not include special purpose or healthcare REITS. The NAREIT Equity
without Healthcare Index is a market capitalization weighted index comprised of
198 REITS, as of December 1996, with 75% or greater of their gross assets
invested in equity ownership of real estate and excludes healthcare REITS.
Prospectus Additional Information You Should Know 17
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 and the subadvisor's Code of Ethics require 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, both Codes of Ethics prohibit
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.
The subadvisor's Code of Ethics provides that upon approval of the compliance
officer, certain acquisitions of securities in an initial public offering may be
permitted, but that such approval will be granted only in extraordinary
circumstances. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
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 fund, 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.
18 Additional Information You Should Know American Century Investments
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 American Century Real Estate Fund commenced operations June 16, 1997,
after the RREEF Real Estate Securities Fund merged into the fund. As a successor
to the RREEF fund, the prior performance history of the RREEF fund will continue
in the fund.
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. currently issues three series
of $0.01 par value shares. Each series is commonly referred to as a fund. The
assets belonging to each series of shares are held separately by the custodian.
American Century offers 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 Advisor 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.
Accordingly, the core investment advisory expenses do not vary by 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 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 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 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.
Prospectus Additional Information You Should Know 19
NOTES
20 Notes American Century Investments
NOTES
Notes 21
P.O. Box 419385
Kansas City, Missouri
64141-6385
Investor Services:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-444-3038
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9706 [recycled logo]
SH-BKT-8462 Recycled
