As filed with the Securities and Exchange Commission on February 17, 1998
1933 Act File No. 33-64872; 1940 Act File No. 811-7820
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 __X__
Pre-Effective Amendment No. _____
Post-Effective Amendment No. __9__ __X__
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__
Amendment No. __9__
(Check appropriate box or boxes.)
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
American Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (816) 531-5575
Patrick A. Looby
American Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Name and address of Agent for Service)
Approximate Date of Proposed Public Offering February 17, 1998
It is proposed that this filing will become effective (check appropriate box)
__X__ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on (date) pursuant to paragraph (a) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the
fiscal year ended October 31, 1997, was filed on January 7, 1998.
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<PAGE>
================================================================================
CROSS REFERENCE SHEET
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N-1A Item No. Location
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PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Operating
Expense Table
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Investment Policies of
Registrant the Fund; Other Investment
Practices, Their Characteristics
and Risks; Performance
Advertising; Distributions;
Further Information About
American Century
Item 5. Management of the Management
Fund
Item 6. Capital Stock and Further Information About
Other Securities American Century
Item 7. Purchase of Securities How to Open An Account;
Being Offered How to Exchange From One
Account to Another;
Share Price; Distributions
Item 8. Redemption How to Redeem Shares;
Signature Guarantee
Item 9. Pending Legal N/A
Proceedings
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PART B
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information N/A
Item 13. Investment Objectives Investment Objectives of
and Policies the Funds; Fundamental
Policies of the Funds;
Investment Restrictions;
Forward Currency Exchange
Contracts; An Explanation of
Fixed Income Securities Ratings;
Short Sales; Portfolio Turnover;
Index Futures Contracts;
Municipal Leases
Item 14. Management of the Officers and Directors;
Registrant Management;
Custodians
Item 15. Control Persons Capital Stock
and Principal
Holders of Securities
Item 16. Investment Advisory Management;
and Other Services Custodians
Item 17. Brokerage Allocation Brokerage;
Performance Advertising
Item 18. Capital Stock and Capital Stock;
Other Securities Multiple Class Structure
Item 19. Purchase, Redemption N/A
and Pricing of
Securities Being
Offered
Item 20. Tax Status N/A
Item 21. Underwriters N/A
Item 22. Calculation of Yield Performance Advertising
Quotations of Money
Market Funds
Item 23. Financial Statements Financial Statements
<PAGE>
PROSPECTUS
[american century logo]
American
Century(reg.sm)
FEBRUARY 17, 1998
AMERICAN
CENTURY
GROUP
Real Estate Fund
INVESTOR CLASS
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(reg.tm) AMERICAN CENTURY TWENTIETH CENTURY GROUP
GROUP
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MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- --------------------------------------------------------------------------------
Real Estate Fund
PROSPECTUS
FEBRUARY 17, 1998
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 February 17, 1998, 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 * P.O. Box 419200
Kansas City, Missouri 64141-6200 * 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 * 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. Current 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 .............................................................. 8
U.S. Fixed Income Securities ........................................... 8
Diversification ........................................................ 8
When-Issued Securities ................................................. 8
Rule 144A Securities ................................................... 9
Borrowing .............................................................. 9
Portfolio Turnover ..................................................... 9
Repurchase Agreements .................................................. 9
Futures and Options ....................................................... 10
Investments in Companies with Limited
Operating History ...................................................... 10
Performance Advertising ................................................... 10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments .............................................. 12
Investing in American Century ............................................. 12
How to Open an Account .................................................... 12
By Mail ........................................................ 12
By Wire ........................................................ 12
By Exchange .................................................... 13
In Person ...................................................... 13
Subsequent Investments .............................................. 13
By Mail ........................................................ 13
By Telephone ................................................... 13
By Online Access ............................................... 13
By Wire ........................................................ 13
In Person ...................................................... 13
Automatic Investment Plan ........................................... 13
How to Exchange from One Account to Another ............................... 13
By Mail ......................................................... 14
By Telephone ................................................... 14
By Online Access ............................................... 14
How to Redeem Shares ..................................................... 14
By Mail ........................................................ 14
By Telephone ................................................... 14
By Check-A-Month ............................................... 14
Other Automatic Redemptions .................................... 14
Redemption Proceeds ................................................. 14
By Check ....................................................... 14
By Wire and ACH ................................................ 15
Special Requirements for Large Redemptions .......................... 15
Redemption of Shares in Low-Balance Accounts ........................ 15
Signature Guarantee ....................................................... 15
Special Shareholder Services .............................................. 15
Automated Information Line ..................................... 16
Online Account Access .......................................... 16
Open Order Service ............................................. 16
Tax-Qualified Retirement Plans ................................. 16
Important Policies Regarding Your Investments ............................. 16
Reports to Shareholders ................................................... 17
Employer-Sponsored Retirement Plans and
Institutional Accounts ................................................. 18
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ............................................................... 19
When Share Price Is Determined ......................................... 19
How Share Price Is Determined .......................................... 19
Where to Find Information About Share Price ............................ 20
Distributions ............................................................. 20
Taxes ..................................................................... 20
Tax-Deferred Accounts .................................................. 20
Taxable Accounts ....................................................... 20
Management ................................................................ 22
Investment Management .................................................. 22
Performance History of the Subadvisor .................................. 23
Performance Highlights ................................................. 24
Code of Ethics ......................................................... 25
Transfer and Administrative Services ................................... 25
Distribution of Fund Shares ............................................... 25
Further Information About American Century ................................ 26
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ............................... none
Maximum Sales Load Imposed on Reinvested Dividends .................... none
Deferred Sales Load ................................................... none
Redemption Fee(1) ..................................................... none
Exchange Fee .......................................................... none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees(2) .................................................... 1.20%
12b-1 Fees ............................................................ none
Other Expenses(3) ..................................................... 0.00%
Total Fund Operating Expenses ......................................... 1.20%
EXAMPLE:
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
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) A portion of the management fee may be paid by the fund's manager to
unaffiliated third parties who provide recordkeeping and administrative
services that would otherwise be performed by an affiliate of the manager.
See "Management - Transfer and Administrative Services," page 25.
(3) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, 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 26.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The Financial Highlights for each of the periods presented has been audited by
Deloitte & Touche LLP, independent auditors, whose report thereon appears in the
fund's annual report, which is incorporated by reference into the Statement of
Additional Information. The annual report contains additional performance
information and will be made available upon request and without charge. The
information presented is for a share outstanding throughout the years ended
October 31, except as noted.
1997 1996 1995(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................. $12.29 $9.82 $10.00
------- ------- -------
Income From Investment Operations
Net Investment Income ......................................... 0.67(2) 0.55 0.07
Net Realized and Unrealized Gain (Loss) on Investments ........ 4.13 2.27 (0.25)
------- ------- -------
Total From Investment Operations .............................. 4.80 2.82 (0.18)
------- ------- -------
Distributions to Shareholders
From Net Investment Income .................................... (0.48) (0.35) --
From Net Realized Gains on Investment Transactions ............ (0.55) -- --
------- ------- -------
Total Distributions ........................................... (1.03) (0.35) --
------- ------- -------
Net Asset Value, End of Period ................................... $16.06 $12.29 $9.82
======= ======= =======
Total Return(3) ............................................... 40.69% 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ................ 1.17% 1.00% 1.50%(4)
Ratio of Operating Expenses to Average Net Assets
(before expense waivers and reimbursements) ................... 1.82%(5) 6.83%(5) 14.83%(4)(5)
Ratio of Net Investment Income to Average Net Assets ............. 4.48% 5.84% 6.66%(4)
Ratio of Net Investment Income to Average Net Assets
(before expense waivers and reimbursements) ................... 3.84%(5) 0.01%(5) (6.67)%(4)(5)
Portfolio Turnover Rate .......................................... 69% 86% --
Average Commission Paid per Share of Equity Security Traded ...... $0.0528 $0.0545 --
Net Assets, End of Period (in thousands) ......................... $76,932 $7,209 $2,983
- ----------
(1) September 21, 1995 (inception) through October 31, 1995.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gain
distributions, if any. Total return for periods less than one year are not
annualized.
(4) Annualized.
(5) During the periods ended October 31, 1996 and October 31, 1995 and for a
portion of the period ended October 31, 1997, 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, 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 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 can be 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 real estate investment trusts
(REITs) or 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 investor 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 REITs and 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 addi-
6 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
tion, the fund may incur losses due to environmental problems. If there is
historic contamination at a site, the current owner is one of the parties that
may be responsible for clean up costs.
Equity REITs may be affected by changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by default or
payment problems relating to underlying mortgages, the quality of credit
extended and self-liquidation provisions by which mortgages held may be paid in
full and distributions of capital returns may be made at any time. Equity and
mortgage REITs are dependent upon the skill of their individual management
personnel and generally are not diversified. In addition, equity and mortgage
REITs could be adversely affected by failure to qualify for tax-free
pass-through of income under the Internal Revenue Code, or to maintain their
exemptions from registration under the Investment Company Act. By investing in
REITs indirectly through the fund, a shareholder will bear not only a
proportionate share of the expenses of the fund, but also indirectly, similar
expenses of the REITs, including compensation of management.
To the extent the fund is invested in debt securities (including
asset-backed securities) or mortgage REITs, it will be subject to credit risk
and interest rate risk. Credit risk relates to the ability of the issuer to meet
interest and principal payments when due. Interest rate risk refers to the
fluctuations in the net asset value of any portfolio of fixed income securities
resulting solely from the inverse relationship between the price and yield of
fixed income securities; that is, when interest rates rise, bond prices
generally fall and, conversely, when interest rates fall, bond prices generally
rise. In general, bonds with longer maturities are more sensitive to interest
rate changes than bonds with shorter maturities.
The fund, as a non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment company. Therefore,
an investment in the fund may present greater risk and volatility to an investor
than an investment in a diversified investment company.
INVESTMENT PHILOSOPHY
The investment philosophy of the fund is premised upon the belief that
successful investing in real estate securities requires in-depth knowledge of
the securities market and a complete understanding of the factors influencing
the performance of real estate assets. The fund strives to provide superior
performance via investment in a select group of real estate securities 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 22.)
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 20, and "Taxes," page 20.) 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.
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
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
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 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.
PROSPECTUS INFORMATION REGARDING THE FUND 9
FUTURES AND OPTIONS
The fund may invest in financial futures contracts and options thereon. A
financial futures contract is an agreement to take or make delivery of a
financial asset or an amount of cash, as specified in the applicable contract,
at some time in the future. The value of the asset or cash to be delivered at
the end of the contract period is calculated based upon the difference in value
between the making of the contract and the end of the contract period of a
financial index, indicator, or security underlying the futures contract.
Rather than actually purchasing a financial asset (e.g., a long- or
short-term treasury security) or all of the securities contained in a specific
index (e.g., the S&P 500), the manager may choose to purchase a futures contract
which reflects the value of such securities or index. For example, an S&P 500
futures contract reflects the value of the underlying companies that comprise
the S&P 500 Composite Stock Price Index. If the aggregate market value of the
index securities increases or decreases during the contract period of an S&P 500
futures contract, the amount of cash to be paid to the contract holder at the
end of the period would correspondingly increase or decrease. As a result, the
manager is able to expose to the market cash that is held by the funds to meet
anticipated redemptions or for future investment opportunities. Because futures
contracts generally settle more quickly than their underlying securities, the
manager believes that the use of futures and options thereon allows the funds to
be fully invested while maintaining the needed liquidity.
The fund will not purchase leveraged futures. When a fund enters into a
futures contract, it must make a deposit of cash or high-quality debt
securities, known as "initial margin," as partial security for its performance
under the contract. As the value of the contract fluctuates, a party to the
contract may be required to make additional margin payments, known as "variation
margin," to cover a portion of such fluctuation. A fund will also deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fund's payment obligation under the futures contract,
less any initial or variation margin. For options sold, a fund will segregate
cash or high-quality debt securities equal to the value of the securities
underlying the option unless the option is otherwise covered.
INVESTMENTS IN COMPANIES WITH LIMITED
OPERATING HISTORY
The fund may invest in the securities of issuers with limited operating
history. The manager considers an issuer to have a limited operating history if
that issuer has a record of less than three years of continuous operation.
Investments in securities of issuers with limited operating history may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating history and financial
information upon which the manager may base its investment decision on behalf of
the fund. In addition, financial and other information regarding such issuers,
when available, may be incomplete or inaccurate.
The fund will not invest more than 5% of its total assets in the securities
of issuers with less than a three-year operating history. The manager will
consider periods of capital formation, incubation, consolidation, and research
and development in determining whether a particular issuer has a record of three
years of continuous operation.
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.
10 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
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.
PROSPECTUS INFORMATION REGARDING THE FUND 11
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.
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 18.
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 13). 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 on the following page.
12 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
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):
*Taxpayer identification or Social Security
number.
*If more than one account, account numbers and amount to be invested in each
account.
*Current tax year, previous tax year or rollover designation if an IRA.
Specify whether Traditional IRA, Roth IRA, Education 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 12 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
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 13
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 19.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
If, in any 90-day period, the total of your exchanges and your redemptions
from any one account exceeds the lesser of $250,000 or 1% of the fund's assets,
further exchanges will be subject to special requirements to comply with our
policy on large redemptions (see "Special Requirements for Large Redemptions,"
page 15).
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 16) 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 15).
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.
14 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company
Act, which obligates 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:
*redeeming more than $25,000; or
*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
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 15
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:
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:
*Individual Retirement Accounts (IRAs);
*403(b) plans for employees of public school
systems and non-profit organizations; or
*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
16 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
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 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.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 17
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.
18 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 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 or designees before the time as of
which the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
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.
We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they have systems to track the time at
which investment orders are received and to segregate orders received at
different times. Based on these representations, the fund has authorized such
intermediaries and their designees to accept purchase and redemption orders on
the fund's behalf up to the applicable cut-off time. The fund will be deemed to
have received such orders upon acceptance by the duly authorized intermediary,
and such orders will be priced at the fund's net asset value next determined
after acceptance on the fund's behalf by such intermediary.
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
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 19
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 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 certain IRAs 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. The dividends from net income may qualify for the 70% dividends
received deduction for corporations to the extent that the fund held shares
receiving the dividend for more than 45 days. Distributions from gains on assets
held greater than 12 months but no more than 18 months (28% rate gain) and/or
assets held greater than 18 months (20% rate gain) are taxable as long-term
gains regardless of the length of time you have held the shares. Additionally,
the fund may receive distributions of "unrecaptured Section 1250" gains from
REIT. To the extent the fund receives such distributions, "unrecaptured Section
1250" gains will be distributed to shareholders of the fund. 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 (28% or 20% rate gain) to you with
respect to such shares.
Distributions are taxable to you regardless of
20 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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 (28%
and/or 20% rate gain).
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. The fund may
pay a "return of capital" distribution to the shareholders by distributing more
cash than its taxable income. 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 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 considered long-term subject to tax
at a maximum rate of 28% (28% rate gain/loss) if shareholders have held such
shares for a period of more than 12 months but no more than 18 months and
long-term subject to tax at a maximum rate of 20%, minimum of 10% (20% rate
gain/loss) if shareholders have held such shares for a period of more than 18
months. 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
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 21
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 America, L.L.C., 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.
On January 27, 1998, the subadvisor was acquired by RoProperty Services,
B.V., a Dutch investment advisor. The subadvisor will continue to operate as
RREEF America, L.L.C., a wholly-owned subsidiary of RoProperty. As a result of
the acquisition, the existing subadvisory agreement between the fund, the
subadvisor and American Century Investment Management, Inc., automatically
terminated. In anticipation of the receipt of an Exemptive Order from the SEC
allowing them to do so, the parties entered into a new subadvisory agreement
which is substantially identical to the old agreement. The new subadvisory
agreement will be submitted to a special meeting of fund shareholders to be held
prior to May 27, 1998. The subadvisor will receive no fees other than
reimbursement for actual out of pocket expenses for the period from January 27,
1998 until the date the SEC grants the Exemptive Order, which is expected to be
in mid-February. Between the date of the Exemptive Order and the date the
shareholders vote on the agreement, any subadvisory fees that the subadvisor
would otherwise receive will be placed in an escrow account, and will be paid to
the subadvisor only if shareholders approve the new subadvisory agreement. If
shareholders do not approve the new subadvisory agreement, the subadvisor will
only receive reimbursement of out of pocket expenses. The directors at that time
will consider the appropriate action to take in that event, which may include a
resubmission of the new subadvisory agreement to shareholders.
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 is a Senior Vice President of RREEF America, L.L.C. 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 Senior Vice President of RREEF America, L.L.C. 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 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
22 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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 24 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 24, 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 23
PERFORMANCE HIGHLIGHTS
(See Notes Below)
ANNUALIZED RETURNS FROM OCTOBER 1987 THROUGH DECEMBER 1997
RREEF Real Estate Securities Advisers
Before Fees ....................................... 19.7%
After Fees ........................................ 19.0%
NAREIT Equity Less Healthcare .......................... 16.0%
Wilshire REIT Index .................................... 15.0%
<TABLE>
<CAPTION>
For the Years Ended December 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
ANNUAL TIME-WEIGHTED RETURNS
RREEF Real Estate Securities Advisers
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Before Fees ............................ 8.2% 7.7% (4.8)% 32.9% 29.4% 19.0% 4.8% 13.9% 41.1% 25.8%
After Fees ............................. 6.8% 6.1% (6.4)% 30.9% 28.1% 18.0% 4.3% 13.0% 40.3% 25.1%
NAREIT Equity Less Healthcare ............ 15.8% 4.6% (23.6)% 29.4% 20.7% 18.7% 3.0% 14.2% 36.4% 20.5%
Wilshire REIT Index ...................... 17.5% 2.7% (23.4)% 23.8% 15.3% 15.2% 2.7% 12.2% 37.0% 19.7%
</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 REIT Index is a market capitalization weighted index comprised
of 110 equity REITS as of December 1997. It does not include special purpose or
healthcare REITS. The NAREIT Equity without Healthcare Index is a market
capitalization weighted index comprised of 169 REITS, as of December 1997, with
75% or greater of their gross assets invested in equity ownership of real estate
and excludes healthcare REITS.
24 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 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. 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.
Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor, Inc. (FDI) serves as the Co-Administrator for the fund. FDI is
responsible for (i) providing certain officers of the fund and (ii) reviewing
and filing marketing and sales literature on behalf of the fund. The fees and
expenses of FDI are paid by the manager.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by FDI, a registered broker-dealer. FDI is
a wholly-owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. The Investor Class of shares does not pay any commissions or sales loads
to the distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
Investors may open accounts with American Century only through the
distributor. All purchase transactions in the fund offered by this Prospectus
are processed by the transfer agent, which is authorized to accept any
instructions relating to fund accounts. All purchases orders must be accepted by
the distributor. All fees and expenses of FDI in acting as distributor for the
funds are paid by the manager.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 25
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 telephone 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.
26 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
NOTES
PROSPECTUS NOTES 27
NOTES
28 NOTES AMERICAN CENTURY INVESTMENTS
NOTES
PROSPECTUS NOTES 29
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
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(reg.sm)
9802 [recycled logo]
SH-BKT-10828 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(reg.sm)
FEBRUARY 17, 1998
AMERICAN
CENTURY
GROUP
Real Estate Fund
ADVISOR CLASS
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(reg.tm) AMERICAN CENTURY TWENTIETH CENTURY GROUP
GROUP
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- --------------------------------------------------------------------------------
Real Estate Fund
PROSPECTUS
FEBRUARY 17, 1998
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 February 17, 1998, 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 * P.O. Box 419385
Kansas City, Missouri 64141-6385 * 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 * 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. Current 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
Performance Information of Other Class .................................... 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 ........................................... 7
Diversification ........................................................ 8
When-Issued Securities ................................................. 8
Rule 144A Securities ................................................... 8
Borrowing .............................................................. 9
Portfolio Turnover ..................................................... 9
Repurchase Agreements .................................................. 9
Futures and Options ....................................................... 9
Investments in Companies with Limited
Operating History ...................................................... 10
Performance Advertising ................................................... 10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American
Century Funds .......................................................... 12
How to Exchange from One American Century
Fund to Another ........................................................ 12
How to Redeem Shares ...................................................... 12
Special Requirements for Large Redemptions ............................. 12
Telephone Services ........................................................ 13
Investors Line ......................................................... 13
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ............................................................... 14
When Share Price Is Determined ......................................... 14
How Share Price Is Determined .......................................... 14
Where to Find Information About Share Price ............................ 14
Distributions ............................................................. 15
Taxes ..................................................................... 15
Tax-Deferred Accounts .................................................. 15
Taxable Accounts ....................................................... 15
Management ................................................................ 17
Investment Management .................................................. 17
Performance History of the Subadvisor .................................. 18
Performance Highlights ................................................. 19
Code of Ethics ......................................................... 20
Transfer and Administrative Services ................................... 20
Distribution of Fund Shares ............................................... 20
Service and Distribution Fees .......................................... 20
Further Information About American Century ................................ 21
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ............................... none
Maximum Sales Load Imposed on Reinvested Dividends .................... none
Deferred Sales Load ................................................... none
Redemption Fee ........................................................ none
Exchange Fee .......................................................... none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees ....................................................... 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 20.
(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 21.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
REAL ESTATE FUND
The Advisor Class of the fund was established June 16, 1997, however no shares
had been issued prior to the fund's fiscal year end. The financial information
in this table regarding selected per share data for the fund reflects the
performance of the fund's Investor Class shares. The Investor Class shares have
a total expense ratio that is 0.25% lower than the Advisor Class. Had the
Advisor Class been in existence for the fund for the time periods presented, the
fund's performance information would be lower as a result of the additional
expense.
The Financial Highlights for each of the periods presented has been audited by
Deloitte & Touche LLP, independent auditors, whose report thereon appears in the
fund's annual report, which is incorporated by reference into the Statement of
Additional Information. The annual report contains additional performance
information and will be made available upon request without charge. The
information presented is for a share outstanding throughout the years ended
October 31, except as noted.
1997 1996 1995(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................. $12.29 $9.82 $10.00
------ ----- ------
Income From Investment Operations
Net Investment Income ......................................... 0.67(2) 0.55 0.07
Net Realized and Unrealized Gain (Loss) on Investments ........ 4.13 2.27 (0.25)
------ ----- ------
Total From Investment Operations .............................. 4.80 2.82 (0.18)
------ ----- ------
Distributions to Shareholders
From Net Investment Income .................................... (0.48) (0.35) --
From Net Realized Gains on Investment Transactions ............ (0.55) -- --
------ ----- ------
Total Distributions ........................................... (1.03) (0.35) --
------ ------ ------
Net Asset Value, End of Period ................................... $16.06 $12.29 $9.82
====== ====== ======
Total Return(3) ............................................... 40.69% 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ................ 1.17% 1.00% 1.50%(4)
Ratio of Operating Expenses to Average Net Assets
(before expense waivers and reimbursements) ................... 1.82%(5) 6.83%(5) 14.83%(4)(5)
Ratio of Net Investment Income to Average Net Assets ............. 4.48% 5.84% 6.66%(4)
Ratio of Net Investment Income to Average Net Assets
(before expense waivers and reimbursements) ................... 3.84%(5) 0.01%(5) (6.67)%(4)(5)
Portfolio Turnover Rate .......................................... 69% 86% --
Average Commission Paid per Share of Equity Security Traded ...... $0.0528 $0.0545 --
Net Assets, End of Period (in thousands) ......................... $76,932 $7,209 $2,983
- ----------
(1) September 21, 1995 (inception) through October 31, 1995.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gain
distributions, if any. Total return for periods less than one year are not
annualized.
(4) Annualized.
(5) During the periods ended October 31, 1996 and October 31, 1995 and for a
portion of the period ended October 31, 1997, 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 PERFORMANCE INFORMATION OF OTHER CLASS 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 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 can be 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 real estate investment trusts
(REITs) or 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 7.)
REITs pool investor 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 REITs and 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 17.)
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
PROSPECTUS INFORMATION REGARDING THE FUND 7
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 15, and "Taxes," page 15.) 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.
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.
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
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 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.
FUTURES AND OPTIONS
The fund may invest in financial futures contracts and options thereon. A
financial futures contract is an agreement to take or make delivery of a
financial asset or an amount of cash, as specified in the applicable contract,
at some time in the future. The value of the asset or cash to be delivered at
the end of the contract period is calculated based upon the difference in value
between the making of the contract and the end of the contract period of a
financial index, indicator, or security underlying the futures contract.
Rather than actually purchasing a financial asset (e.g., a long- or
short-term treasury security) or all of the securities contained in a specific
index (e.g., the
PROSPECTUS INFORMATION REGARDING THE FUND 9
S&P 500), the manager may choose to purchase a futures contract which reflects
the value of such securities or index. For example, an S&P 500 futures contract
reflects the value of the underlying companies that comprise the S&P 500
Composite Stock Price Index. If the aggregate market value of the index
securities increases or decreases during the contract period of an S&P 500
futures contract, the amount of cash to be paid to the contract holder at the
end of the period would correspondingly increase or decrease. As a result, the
manager is able to expose to the market cash that is held by the funds to meet
anticipated redemptions or for future investment opportunities. Because futures
contracts generally settle more quickly than their underlying securities, the
manager believes that the use of futures and options thereon allows the funds to
be fully invested while maintaining the needed liquidity
The fund will not purchase leveraged futures. When a fund enters into a
futures contract, it must make a deposit of cash or high-quality debt
securities, known as "initial margin," as partial security for its performance
under the contract. As the value of the contract fluctuates, a party to the
contract may be required to make additional margin payments, known as "variation
margin," to cover a portion of such fluctuation. A fund will also deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fund's payment obligation under the futures contract,
less any initial or variation margin. For options sold, a fund will segregate
cash or high-quality debt securities equal to the value of the securities
underlying the option unless the option is otherwise covered.
INVESTMENTS IN COMPANIES WITH LIMITED
OPERATING HISTORY
The fund may invest in the securities of issuers with limited operating
history. The manager considers an issuer to have a limited operating history if
that issuer has a record of less than three years of continuous operation.
Investments in securities of issuers with limited operating history may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating history and financial
information upon which the manager may base its investment decision on behalf of
the fund. In addition, financial and other information regarding such issuers,
when available, may be incomplete or inaccurate.
The fund will not invest more than 5% of its total assets in the securities
of issuers with less than a three-year operating history. The manager will
consider periods of capital formation, incubation, consolidation, and research
and development in determining whether a particular issuer has a record of three
years of continuous operation.
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
10 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
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.
PROSPECTUS INFORMATION REGARDING THE FUND 11
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 an Institutional Service Representative at 1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See "
When Share Price is Determined," page 14.
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.
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 14. 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
12 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
one participant account during any 90-day period, up to the lesser of $250,000
or 1% of the assets of the fund. Although redemptions in excess of this
limitation will also normally be paid in cash, we reserve the right to honor
these redemptions by making payment in whole or in part in readily marketable
securities (a "redemption-in-kind"). If payment is made in securities, the
securities will be selected by the fund, will be valued in the same manner as
they are in computing the fund's net asset value and will be provided to the
redeeming plan participant or financial intermediary in lieu of cash without
prior notice.
If you expect to make a large redemption and would like to avoid any
possibility of being paid in securities, you may do so by providing us with an
unconditional instruction to redeem at least 15 days prior to the date on which
the redemption transaction is to occur. The instruction must specify the dollar
amount or number of shares to be redeemed and the date of the transaction.
Receipt of your instruction 15 days prior to the transaction provided the fund
with sufficient time to raise the cash in an orderly manner to pay the
redemption and thereby minimizes the effect of the redemption on the fund and
its remaining shareholders.
Despite the fund's right to redeem fund shares through a redemption in kind,
we do not expect to exercise this option unless a fund has an unusually low
level of cash to meet redemption's and/or is experiencing unusually strong
demands for its cash. Such a demand might be caused, for example, by extreme
market conditions that result in an abnormally high level of redemption requests
concentrated 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 an Institutional Service Representative at 1-800-345-3533.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 13
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 or designees before the time as of which the net
asset value of the fund is determined, are effective on, and will receive the
price determined, that day. Investment, redemption and exchange requests
received thereafter are effective on, and receive the price determined 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.
We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they have systems to track the time at
which investment orders are received and to segregate orders received at
different times. Based on these representations, the fund has authorized such
intermediaries and their designees to accept purchase and redemption orders in
the fund's behalf up to the applicable cut-off time. The fund will be deemed to
have received such orders upon acceptance by the duly authorized intermediary,
and such orders will be priced at the fund's net asset value next determined
after acceptance on the fund's behalf by such intermediary.
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.
ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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 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 held in certain IRAs 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. The dividends from net income may qualify for
the 70% dividends received deduction for corporations to the extent that the
fund held shares receiving the dividend for more than 45 days. Distributions
from gains on assets held greater than 12 months but no more than 18 months (28%
rate gain) and/or assets held greater than 18 months (20% rate gain) are taxable
as long-term gains regardless of the length of time you have held the shares.
Additionally, the fund may receive distributions of "unrecaptured Section 1250"
gains from REIT. To the extent the fund receives such distributions,
"unrecaptured Section 1250" gains will be distributed to shareholders of the
fund. 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 gains (28%
or 20% rate 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
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 15
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 (28% and/or 20% rate gain). See "Distributions," page
15.
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. The fund may
pay a "return of capital" distribution to the shareholder by distributing more
cash than its taxable income. 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 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 will generally be considered long-term subject to tax at
a maximum rate of 28% (28% rate gain/loss) if shareholders have held such shares
for a period of more than 12 months but no more than 18 months and long-term
subject to tax at a maximum rate of 20%, minimum of 10% (20% rate gain/loss) if
shareholders have held such shares for a period of more than 18 months. 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.)
16 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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 America, L.L.C., 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.
On January 27, 1998, the subadvisor was acquired by RoProperty Services,
B.V., a Dutch investment advisor. The subadvisor will continue to operate as
RREEF America, L.L.C., a wholly-owned subsidiary of RoProperty. As a result of
the acquisition, the existing subadvisory agreement between the fund, the
subadvisor and American Century Investment Management, Inc., automatically
terminated. In anticipation of the receipt of an Exemptive Order from the SEC
allowing them to do so, the parties entered into a new subadvisory agreement
which is substantially identical to the old agreement. The new subadvisory
agreement will be submitted to a special meeting of fund shareholders to be held
prior to May 27, 1998. The subadvisor will receive no fees other than
reimbursement for actual out of pocket expenses for the period from January 27,
1998 until the date the SEC grants the Exemptive Order, which is expected to be
in mid-February. Between the date of the Exemptive Order and the date the
shareholders vote on the agreement, any subadvisory fees that the subadvisor
would otherwise receive will be placed in an escrow account, and will be paid to
the subadvisor only if shareholders approve the new subadvisory agreement. If
shareholders do not approve the new subadvisory agreement, the subadvisor will
only receive reimbursement of out of pocket expenses. The directors at that time
will consider the appropriate action to take in that event, which may include a
resubmission of the new subadvisory agreement to shareholders.
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 is a Senior Vice President of RREEF America, L.L.C. 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 Senior Vice President of RREEF America, L.L.C. 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 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.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 17
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 19 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 19, 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.
18 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
PERFORMANCE HIGHLIGHTS
(See Notes Below)
ANNUALIZED RETURNS FROM OCTOBER 1987 THROUGH DECEMBER 1997
RREEF Real Estate Securities Advisers
Before Fees ...................................... 19.7%
After Fees ....................................... 19.0%
NAREIT Equity Less Healthcare ......................... 16.0%
Wilshire REIT Index ................................... 15.0%
<TABLE>
<CAPTION>
For the Years Ended December 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
ANNUAL TIME-WEIGHTED RETURNS
RREEF Real Estate Securities Advisers
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Before Fees ........................... 8.2% 7.7% (4.8)% 32.9% 29.4% 19.0% 4.8% 13.9% 41.1% 25.8%
After Fees ............................ 6.8% 6.1% (6.4)% 30.9% 28.1% 18.0% 4.3% 13.0% 40.3% 25.1%
NAREIT Equity Less Healthcare ........... 15.8% 4.6% (23.6)% 29.4% 20.7% 18.7% 3.0% 14.2% 36.4% 20.5%
Wilshire REIT Index ..................... 17.5% 2.7% (23.4)% 23.8% 15.3% 15.2% 2.7% 12.2% 37.0% 19.7%
</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 REIT Index is a market capitalization weighted index comprised
of 110 equity REITS as of December 1997. It does not include special purpose or
healthcare REITS. The NAREIT Equity without Healthcare Index is a market
capitalization weighted index comprised of 169 REITS, as of December 1997, 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 19
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.
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.
Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor, Inc. (FDI) serves as the Co-Administrator for the fund. FDI is
responsible for (i) providing certain officers of the fund and (ii) reviewing
and filing marketing and sales literature on behalf of the fund. The fees and
expenses of FDI are paid by the manager.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by FDI, a registered broker-dealer. FDI is a
wholly-owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. The Investor Class of shares does not pay any commissions or sales loads
to the distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
Investors may open accounts with American Century only through the
distributor. All purchase transactions in the fund offered by this Prospectus
are processed by the transfer agent, which is authorized to accept any
instructions relating to fund accounts. All purchase orders must be accepted by
the distributor. All fees and expenses of FDI in acting as distributor for the
funds are paid by the manager.
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 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, as paying agent for the funds, 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"
20 Additional Information You Should Know American Century Investments
in the Statement of Additional Information. Fees paid pursuant to the Plan may
be paid for shareholder services and the maintenance of accounts and therefore
may constitute "service fees" for purposes of applicable rules of the National
Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Capital Portfolios, Inc. the issuer of the fund, was
organized as a Maryland corporation on June 14, 1993.
American Century Capital Portfolios, Inc. is a diversified, open-end
management investment company whose shares were first offered for sale September
1, 1993. Its business and affairs are managed by its officers under the
direction of its Board of Directors.
The 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 telephone 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 an Institutional Service Representative 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 21
P.O. BOX 419385
KANSAS CITY, MISSOURI
64141-6385
INSTITUTIONAL 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(reg.sm)
9802 [recycled logo]
SH-BKT-10829 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(reg.sm)
FEBRUARY 17, 1998
AMERICAN
CENTURY
GROUP
Real Estate Fund
INSTITUTIONAL CLASS
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 American Century Twentieth Century
Group(reg. tm) Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Real Estate Fund
PROSPECTUS
FEBRUARY 17, 1998
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 February 17, 1998, 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 * P.O. Box 419385
Kansas City, Missouri 64141-6385 * 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 * 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. Current 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
Performance Information of Other Class .................................... 6
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ........................................... 7
Investment Objective .................................................. 7
Investment Strategy ................................................... 7
Investments in Real Estate ............................................ 7
Investment Philosophy ................................................. 8
Other Investment Practices, Their Characteristics
and Risks ............................................................... 8
U.S. Fixed Income Securities .......................................... 9
Diversification ....................................................... 9
When-Issued Securities ................................................ 9
Rule 144A Securities .................................................. 9
Borrowing ............................................................. 10
Portfolio Turnover .................................................... 10
Repurchase Agreements ................................................. 10
Futures and Options ....................................................... 10
Investments in Companies with Limited
Operating History ..................................................... 11
Performance Advertising ................................................... 11
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments .............................................. 13
Investing in American Century ............................................. 13
How to Open an Account .................................................... 13
By Mail ....................................................... 13
By Wire ....................................................... 13
By Exchange ................................................... 13
In Person ..................................................... 14
Subsequent Investments ............................................. 14
By Mail ....................................................... 14
By Telephone .................................................. 14
By Wire ....................................................... 14
In Person ..................................................... 14
Automatic Investment Plan .......................................... 14
Minimum Investment ................................................. 14
How to Exchange from One Account to Another ............................... 14
By Mail ....................................................... 15
By Telephone .................................................. 15
How to Redeem Shares ...................................................... 15
By Mail ....................................................... 15
By Telephone .................................................. 15
By Check-A-Month .............................................. 15
Other Automatic Redemptions ................................... 15
Redemption Proceeds ................................................ 15
By Check ...................................................... 15
By Wire and ACH ............................................... 15
Special Requirements for Large Redemptions ......................... 15
Signature Guarantee ....................................................... 16
Special Shareholder Services .............................................. 16
Open Order Service ............................................ 16
Tax-Qualified Retirement Plans ................................ 17
Important Policies Regarding Your Investments ............................. 17
Reports to Shareholders ................................................... 17
Customers of Banks, Broker-Dealers and Other
Financial Intermediaries ................................................ 18
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ............................................................... 19
When Share Price Is Determined ........................................ 19
How Share Price Is Determined ......................................... 19
Where to Find Information About Share Price ........................... 20
Distributions ............................................................. 20
Taxes ..................................................................... 20
Tax-Deferred Accounts ................................................. 20
Taxable Accounts ...................................................... 20
Management ................................................................ 22
Investment Management ................................................. 22
Performance History of the Subadvisor ................................. 23
Performance Highlights ................................................ 24
Code of Ethics ........................................................ 25
Transfer and Administrative Services .................................. 25
Distribution of Fund Shares ............................................... 25
Further Information About American Century ................................ 25
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ............................. none
Maximum Sales Load Imposed on Reinvested Dividends .................. none
Deferred Sales Load ................................................. none
Redemption Fee ...................................................... none
Exchange Fee ........................................................ none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees .....................................................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 25.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
The Financial Highlights for the period presented has been audited by Deloitte
& Touche LLP, independent auditors, whose report thereon appears in the fund's
annual report, which is incorporated by reference into the Statement of
Additional Information. The annual report contains additional performance
information and will be made available upon request and without charge. The
information presented is for a share outstanding for the period June 16, 1997
(commencement of sale) through October 31, 1997.
1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........................... $14.24
--------
Income From Investment Operations
Net Investment Income(2) ..................................... 0.28
Net Realized and Unrealized Gain (Loss) on Investments ....... 1.63
--------
Total From Investment Operations ............................. 1.91
--------
Distributions to Shareholders
From Net Investment Income ................................... (0.09)
--------
Net Asset Value, End of Period ................................. $16.06
========
Total Return(3) .............................................. 13.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets .............. 1.00%(4)
Ratio of Net Investment Income to Average Net Assets ........... 4.85%(4)
Portfolio Turnover Rate ........................................ 69%
Average Commission Paid per Share of Equity Security Traded .... $0.0528
Net Assets, End of Period (in thousands) ....................... $13,365
- ----------
(1) JUNE 16, 1997 (COMMENCEMENT OF SALE) THROUGH OCTOBER 31,1997.
(2) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(3) TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS, IF ANY. TOTAL RETURN IS NOT ANNUALIZED.
(4) ANNUALIZED.
PROSPECTUS FINANCIAL HIGHLIGHTS 5
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
REAL ESTATE FUND
The Institutional Class of the fund was established June 16, 1997. The
financial information in this table regarding selected per share data for the
fund reflects the performance of the fund's Investor Class of shares, which has
a total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
additional expense.
The Financial Highlights for the periods presented have been audited by
Deloitte & Touche LLP, independent auditors, whose report thereon appears in the
fund's annual report which is incorporated by reference into the Statement of
Additional Information. The annual report contains additional performance
information and will be made available upon request and without charge. The
information presented is for a share outstanding throughout the years ended
October 31, except as noted.
1997 1996 1995(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C>
Beginning of Period ................... $12.29 $9.82 $10.00
-------- -------- --------
Income From Investment Operations
Net Investment Income ............... 0.67(2) 0.55 0.07
Net Realized and Unrealized
Gain (Loss) on Investments .......... 4.13 2.27 (0.25)
-------- -------- --------
Total From Investment Operations .... 4.80 2.82 (0.18)
-------- -------- --------
Distributions to Shareholders
From Net Investment Income .......... (0.48) (0.35) --
From Net Realized Gains
on Investment Transactions .......... (0.55) -- --
-------- -------- --------
Total Distributions ................. (1.03) (0.35) --
-------- -------- --------
Net Asset Value, End of Period ........ $16.06 $12.29 $9.82
======== ======== ========
Total Return(3) ..................... 40.69% 29.28% (1.80)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.17% 1.00% 1.50%(4)
Ratio of Operating Expenses
to Average Net Assets
(before expense waivers
and reimbursements) ................. 1.82%(5) 6.83%(5) 14.83%(4)(5)
Ratio of Net Investment
Income to Average Net Assets .......... 4.48% 5.84% 6.66%(4)
Ratio of Net Investment
Income to Average Net Assets
(before expense waivers
and reimbursements) ................. 3.84%(5) 0.01%(5) (6.67)%(4)(5)
Portfolio Turnover Rate ............... 69% 86% --
Average Commission Paid per
Share of Equity Security Traded ....... $0.0528 $0.0545 --
Net Assets, End of Period
(in thousands) ........................ $76,932 $7,209 $2,983
- ----------
(1) SEPTEMBER 21, 1995 (INCEPTION) THROUGH OCTOBER 31, 1995.
(2) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(3) TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. TOTAL RETURN FOR PERIODS LESS THAN ONE
YEAR ARE NOT ANNUALIZED.
(4) ANNUALIZED.
(5) DURING THE PERIODS ENDED OCTOBER 31, 1996 AND OCTOBER 31, 1995 AND FOR A
PORTION OF THE PERIOD ENDED OCTOBER 31, 1997, 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>
6 PERFORMANCE INFORMATION OF OTHER CLASS AMERICAN CENTURY INVESTMENTS
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 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 can be 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 real estate investment trusts
(REITs) or 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 9.)
REITs pool investor 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 REITs and 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.
PROSPECTUS INFORMATION REGARDING THE FUND 7
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 22.)
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "INVESTMENT RESTRICTIONS" in the Statement
of Additional Information.
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
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 20, and "TAXES," page 20.) 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.
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
PROSPECTUS INFORMATION REGARDING THE FUND 9
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 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.
FUTURES AND OPTIONS
The fund may invest in financial contracts and options thereon. A financial
futures contract is an agreement to take or make delivery of a financial asset
or an amount of cash, as specified in the applicable contract, at some time in
the future. The value of the asset or cash to be delivered at the end of the
contract period is calculated based upon the difference in
10 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
value between the making of the contract and the end of the contract period of a
financial index, indicator, or security underlying the futures contract.
Rather than actually purchasing a financial asset (e.g., a long-or
short-term treasury security) or all of the securities contained in a specific
index (e.g., the S&P 500), the manager may choose to purchase a futures contract
which reflects the value of such securities or index. For example, an S&P 500
futures contract reflects the value of the underlying companies that comprise
the S&P 500 Composite Stock Price Index. If the aggregate market value of the
index securities increases or decreases during the contract period of an S&P 500
futures contract, the amount of cash to be paid to the contract holder at the
end of the period would correspondingly increase or decrease. As a result, the
manager is able to expose to the market cash that is held by the funds to meet
anticipated redemptions or for future investment opportunities. Because futures
contracts generally settle more quickly than their underlying securities, the
manager believes that the use of futures and options thereon allows the funds to
be fully invested while maintaining the needed liquidity.
The fund will not purchase leveraged futures. When a fund enters into a
futures contract, it must make a deposit of cash or high-quality debt
securities, known as "initial margin," as partial security for its performance
under the contract. As the value of the contract fluctuates, a party to the
contract may be required to make additional margin payments, known as "variation
margin," to cover a portion of such fluctuation. A fund will also deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fund's payment obligation under the futures contract,
less any initial or variation margin. For options sold, a fund will segregate
cash or high-quality debt securities equal to the value of the securities
underlying the option unless the option is otherwise covered.
INVESTMENTS IN COMPANIES WITH LIMITED
OPERATING HISTORY
The fund may invest in the securities of issuers with limited operating
history. The manager considers an issuer to have a limited operating history if
that issuer has a record of less than three years of continuous operation.
Investments in securities of issuers with limited operating history may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating history and financial
information upon which the manager may base its investment decision on behalf of
the fund. In addition, financial and other information regarding such issuers,
when available, may be incomplete or inaccurate.
The fund will not invest more than 5% of its total assets in the securities
of issuers with less than a three-year operating history. The manager will
consider periods of capital formation, incubation, consolidation, and research
and development in determining whether a particular issuer has a record of three
years of continuous operation.
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
PROSPECTUS INFORMATION REGARDING THE FUND 11
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.
12 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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.
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 14, and "CUSTOMERS OF BANKS,
BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES," page 18.
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:
* RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
* BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64141
* BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
* 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.
* ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
* BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
* Taxpayer identification or Social Security
number.
* If more than one account, account numbers and amount to be invested in
each account.
* Current tax year, previous tax year or rollover designation if an IRA.
Specify whether Traditional IRA, Roth IRA, Education 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
14 for more information on exchanges.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 13
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 Institutional Service Representative.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 13 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 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 19).
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
14 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
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,"
on 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 an Institutional Service
Representative 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," on 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 16).
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 an Institutional Service Representative.
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
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 15
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.
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:
* redeeming more than $25,000; or
* 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.
16 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:
* Individual Retirement Accounts (IRAs);
* 403(b) plans for employees of public school systems and non-profit
organizations; or
* 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 17
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 an Institutional Service Representative 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.
18 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 or designees before the time as of which the net
asset value of the fund is determined, are effective on, and will receive the
price determined, that day. Investment, redemption and exchange requests
received thereafter are effective on, and receive the price determined 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.
We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they systems to track the time at which
investment orders are received and to segregate orders received at different
times. Based on these representations, the fund has authorized such
intermediaries and their designees to accept purchase and redemption orders on
the fund's behalf up to the applicable cut-off time. The fund will be deemed to
have received such orders upon acceptance by the duly authorized intermediary,
and such orders will be priced at the fund's net asset value next determined
after acceptance on the fund's behalf by such intermediary.
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.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 19
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
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 held in certain IRAs and 403(b) plans paid in cash only if you are at
least 59(1)/(2) years old or permanently and totally disabled. Distribution
checks normally are mailed within seven days after the record date.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time, the value of your shares
includes the undistributed net gains, if any, realized by the fund on the sale
of portfolio securities and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed, the value of your
shares will be reduced by the amount of the distribution. If you buy your shares
through a taxable account just before the distribution, you will pay the full
price for your shares and then receive a portion of the purchase price back as a
taxable distribution. See "TAXES," this page.
TAXES
The fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code, which means that to the extent its
income is distributed to shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan (excluding
participant-directed employer-sponsored retirement plans, which are ineligible
to invest in Institutional Class shares), income and capital gains distributions
paid by the fund will generally not be subject to current taxation, but will
accumulate in your account on a tax-deferred basis.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. The dividends from net income may qualify for the 70% dividends
received deduction for corporations to the extent that the fund held shares
receiving the dividend for more than 45 days. Distributions from gains on assets
held greater than 12 months but no more than 18 months (28% rate gain) and/or
assets held greater than 18 months (20% rate gain) are taxable as long-term
gains regardless of the length of time you have held the shares. Additionally,
the fund may receive distributions of "unrecaptured Section 1250" gains from
REIT. To the extent the fund receives such distributions, "unrecaptured Section
1250" gains will be distributed to shareholders of the fund. 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 gains (28% or 20% rate 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
20 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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 (28%
and/or 20% rate gains). See "DISTRIBUTIONS," page 20.
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. The fund may
pay a "return of capital" distribution to the shareholders by distributing more
cash than its taxable income. 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 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 will generally be considered long-term subject to tax at
a maximum rate of 28% (28% rate gain/loss) if shareholders have held such shares
for a period of more than 12 months but no more than 18 months and long-term
subject to tax at a maximum rate of 20%, minimum of 10% (20% rate gain/loss) if
shareholders have held such shares for a period of more than 18 months. 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.)
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 21
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 America, L.L.C., 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.
On January 27, 1998, the subadvisor was acquired by RoProperty Services,
B.V., a Dutch investment advisor. The subadvisor will continue to operate as
RREEF America, L.L.C., a wholly-owned subsidiary of RoProperty. As a result of
the acquisition, the existing subadvisory agreement between the fund, the
subadvisor and American Century Investment Management, Inc., automatically
terminated. In anticipation of the receipt of an Exemptive Order from the SEC
allowing them to do so, the parties entered into a new subadvisory agreement
which is substantially identical to the old agreement. The new subadvisory
agreement will be submitted to a special meeting of fund shareholders to be held
prior to May 27, 1998. The subadvisor will receive no fees other than
reimbursement for actual out of pocket expenses for the period from January 27,
1998 until the date the SEC grants the Exemptive Order, which is expected to be
in mid-February. Between the date of the Exemptive Order and the date the
shareholders vote on the agreement, any subadvisory fees that the subadvisor
would otherwise receive will be placed in an escrow account, and will be paid to
the subadvisor only if shareholders approve the new subadvisory agreement. If
shareholders do not approve the new subadvisory agreement, the subadvisor will
only receive reimbursement of out of pocket expenses. The directors at that time
will consider the appropriate action to take in that event, which may include a
resubmission of the new subadvisory agreement to shareholders.
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 is a Senior Vice President of RREEF America, L.L.C. 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 Senior Vice President of RREEF America, L.L.C. 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 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
22 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
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 24 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 24, 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 23
PERFORMANCE HIGHLIGHTS
(See Notes Below)
ANNUALIZED RETURNS FROM OCTOBER 1987 THROUGH DECEMBER 1997
RREEF Real Estate Securities Advisers
Before Fees .................................................... 19.7%
After Fees ..................................................... 19.0%
NAREIT Equity Less Healthcare .................................... 16.0%
Wilshire REIT Index .............................................. 15.0%
<TABLE>
<CAPTION>
For the Years Ended December 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
ANNUAL TIME-WEIGHTED RETURNS
RREEF Real Estate Securities Advisers
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Before Fees ........................ 8.2% 7.7% (4.8)% 32.9% 29.4% 19.0% 4.8% 13.9% 41.1% 25.8%
After Fees ......................... 6.8% 6.1% (6.4)% 30.9% 28.1% 18.0% 4.3% 13.0% 40.3% 25.1%
NAREIT Equity Less Healthcare ........ 15.8% 4.6% (23.6)% 29.4% 20.7% 18.7% 3.0% 14.2% 36.4% 20.5%
Wilshire REIT Index .................. 17.5% 2.7% (23.4)% 23.8% 15.3% 15.2% 2.7% 12.2% 37.0% 19.7%
</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 REIT Index is a market capitalization weighted index comprised
of 110 equity REITS as of December 1997. It does not include special purpose or
healthcare REITS. The NAREIT Equity without Healthcare Index is a market
capitalization weighted index comprised of 169 REITS, as of December 1997, with
75% or greater of their gross assets invested in equity ownership of real estate
and excludes healthcare REITS.
24 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 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.
Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor, Inc. (FDI) serves as the Co-Administrator for the fund. FDI is
responsible for (i) providing certain officers of the fund and (ii) reviewing
and filing marketing and sales literature on behalf of the fund. The fees and
expenses of FDI are paid by the manager.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by FDI, a registered broker-dealer. FDI is
a wholly-owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. The Institutional Class of shares does not pay any commissions or sales
loads to the distributor or to any other broker-dealers or financial
intermediaries in connection with the distribution of fund shares.
Investors may open account with American Century only through the
distributor. All purchase transactions in the fund offered by this Prospectus
are processed by the transfer agent, which is authorized to accept any
instructions relating to fund accounts. All purchase orders must be accepted by
the distributor. All fees and expenses of FDI in acting as distributor for the
funds are paid by the manager.
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
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 25
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 telephone 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 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 an Institutional Service
Representative 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.
26 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
NOTES
NOTES 27
NOTES
28 NOTES AMERICAN CENTURY INVESTMENTS
NOTES
NOTES 29
P.O. BOX 419385
KANSAS CITY, MISSOURI
64141-6385
INSTITUTIONAL 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(reg.sm)
9802 [recycled logo]
SH-BKT-10827 Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(reg.sm)
FEBRUARY 17, 1998
AMERICAN
CENTURY
GROUP
Real Estate Fund
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1998
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
This Statement is not a prospectus but should be read in conjunction with the
current Prospectus of the American Century Real Estate Fund, a series of
American Century Capital Portfolios, Inc. dated February 17, 1998. Please retain
this document for future reference. To obtain a prospectus, call American
Century at 1-800-345-2021 (international calls: 816-531-5575), or write to P.O.
Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Investment Objective of the Fund .......................................... 2
Investment Restrictions ................................................... 2
Forward Currency Exchange Contracts ....................................... 3
Index Futures Contracts ................................................... 4
An Explanation of Fixed Income Securities Ratings ......................... 5
Portfolio Lending ......................................................... 7
Portfolio Turnover ........................................................ 7
Officers and Directors .................................................... 7
Management ................................................................ 9
Custodians ................................................................ 10
Independent Auditors ...................................................... 10
Capital Stock ............................................................. 10
Multiple Class Structure .................................................. 11
Taxes ..................................................................... 12
Brokerage ................................................................. 14
Performance Advertising ................................................... 15
Redemptions in Kind ....................................................... 16
Holidays .................................................................. 16
Financial Statements ...................................................... 16
STATEMENT OF ADDITIONAL INFORMATION 1
INVESTMENT OBJECTIVE OF THE FUND
The investment objective of the fund is described on page 2 of the
Prospectus. In achieving its objective, the fund must conform to certain
policies, some of which are designated in its prospectus or in this Statement of
Additional Information as "fundamental" and cannot be changed without
shareholder approval.
Neither the Securities and Exchange Commission nor any other federal or
state agency participates in or supervises the management of the funds or their
investment practices or policies.
INVESTMENT RESTRICTIONS
Additional fundamental policies that may be changed only with shareholder
approval provide as follows:
(1) The fund shall not issue senior securities, except as permitted under
the Investment Company Act of 1940.
(2) The fund shall not borrow money, except that the funds may borrow money
for temporary or emergency purposes (not for leveraging or investment)
in an amount not exceeding 33-1/3% of a fund's total assets (including
the amount borrowed) less liabilities (other than borrowings).
(3) The fund shall not lend any security or make any other loan if, as a
result, more than 33-1/3% of a fund's total assets would be lent to
other parties, except, (i) through the purchase of debt securities in
accordance with its investment objective, policies and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities.
(4) The fund shall not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments. This policy
shall not prevent the funds from investment in securities or other
instruments backed by real estate or securities of companies that deal
in real estate or are engaged in the real estate business.
(5) The fund shall not act as an underwriter of securities issued by
others, except to the extent that a fund may be considered an
underwriter within the meaning of the Securities Act of 1933 in the
disposition of restricted securities.
(6) The fund shall not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other instruments;
provided that this limitation shall not prohibit the funds from
purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities.
(7) The fund shall not invest for purposes of exercising control over
management.
In addition, the fund has adopted the following non-fundamental investment
restrictions:
(1) As an operating policy, the fund shall not purchase additional
investment securities at any time during which outstanding borrowings
exceed 5% of the total assets of the fund.
(2) As an operating policy, the fund may not purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of its net
assets (10% for money market funds) would be invested in repurchase
agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by
virtue of legal or contractual restrictions on resale or the absence of
a readily available market.
(3) As an operating policy, the fund shall not sell securities short,
unless it owns or has the right to obtain securities equivalent in kind
and amount to the securities sold short, and provided that transaction
in futures contracts and options are not deemed to constitute selling
securities short.
(4) As an operating policy, the fund shall not purchase securities on
margin, except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the fund
2 AMERICAN CENTURY INVESTMENTS
of securities issued by insurance companies, brokers, dealers, underwriters or
investment advisors, and upon transactions with affiliated persons as therein
defined. It also defines and forbids the creation of cross and circular
ownership.
FORWARD CURRENCY EXCHANGE CONTRACTS
The fund conducts its foreign currency exchange transactions either on a
spot (ie., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into forward currency exchange contracts to
purchase or sell foreign currencies.
The fund expects to use forward contracts under two circumstances:
(1) When the manager wishes to "lock in" the U.S. dollar price of a
security when a fund is purchasing or selling a security denominated in
a foreign currency, the fund would be able to enter into a forward
contract to do so; or
(2) When the manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, the
fund would be able to enter into a forward contract to sell foreign
currency for a fixed U.S. dollar amount approximating the value of some
or all of its portfolio securities either denominated in, or whose
value is tied to, such foreign currency.
As to the first circumstance, when the fund enters into a trade for the
purchase or sale of a security denominated in a foreign currency, it may be
desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering
into forward contracts in U.S. dollars for the purchase or sale of a foreign
currency involved in an underlying security transaction, the fund will be able
to protect itself against a possible loss between trade and settlement dates
resulting from the adverse change in the relationship between the U.S. dollar
and the subject foreign currency.
Under the second circumstance, when the manager believes that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, the fund could enter into a forward contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will place cash or high-grade liquid securities
in a separate account with its custodian in an amount equal to the value of the
forward contracts entered into under the second circumstance. If the value of
the securities placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account equals the amount of the fund's commitments with respect to such
contracts.
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible since the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The manager does not intend to enter into such
contracts on a regular basis. Normally, consideration of the prospect for
currency parities will be incorporated into the long-term investment decisions
made with respect to overall diversification strategies. However, the manager
believes that it is important to have flexibility to enter into such forward
contracts when it determines that a fund's best interests may be served.
Generally, the fund will not enter into a forward contract with a term of
greater than one year. At the maturity of the forward contract, the fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate the obligation to deliver the foreign
currency by purchasing an "offsetting" forward contract with the same currency
trader obligating the fund to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for the fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency the fund is obligated to deliver.
STATEMENT OF ADDITIONAL INFORMATION 3
INDEX FUTURES CONTRACTS
As described in the Prospectus, the fund may enter into domestic stock index
futures contracts. Unlike when a fund purchases securities, no purchase price
for the underlying securities is paid by the fund at the time it purchases a
futures contract. When an index futures contract is entered into, both the buyer
and seller of the contract are required to deposit with a futures commission
merchant ("FCM") cash or high-grade debt securities in an amount equal to a
percentage of the contract's value, as set by the exchange on which the contract
is traded. This amount is known as "initial margin" and is held by the fund's
custodian for the benefit of the FCM in the event of any default by the fund in
the payment of any future obligations.
The value of the index futures contract is adjusted daily to reflect the
fluctuation of the value of the underlying securities that comprise the index.
This is a process known as marking the contract to market. If the value of a
party's position declines, that party is required to make additional "variation
margin" payments to the FCM to settle the change in value. The party that has a
gain may be entitled to receive all or a portion of this amount. The FCM may
have access to a fund's margin account only under specified conditions of
default.
The fund maintains from time to time a percentage of its assets in cash or
high-grade liquid securities to provide for redemptions or to hold for future
investment in securities consistent with the fund's investment objectives. The
fund may enter into index futures contracts as an efficient means to expose the
funds' cash position to the domestic equity market. The manager believes that
the purchase of futures contracts is an efficient means to effectively be fully
invested in equity securities.
The fund intends to comply with guidelines of eligibility for exclusion from
the definition of the term "commodity pool operator" adopted by the Commodity
Futures Trading Commission and the National Futures Association, which regulate
trading in the futures markets. To do so, the aggregate initial margin required
to establish such positions may not exceed 5% of the fair market value of the
fund's net assets, after taking into account unrealized profits and unrealized
losses on any contracts it has entered into.
The principal risks generally associated with the use of futures include:
* the possible absence of a liquid secondary market for any particular
instrument may make it difficult or impossible to close out a position
when desired (liquidity risk);
* the risk that the counter party to the contract may fail to perform its
obligations or the risk of bankruptcy of the FCM holding margin deposits
(counter party risk);
* the risk that the index of securities to which the futures contract
relates may go down in value (market risk); and
* adverse price movements in the underlying index can result in losses
substantially greater than the value of a fund's investment in that
instrument because only a fraction of a contract's value is required to
be deposited as initial margin (leverage risk); provided, however, that
the fund may not purchase leveraged futures, so there is no leverage
risk involved in the fund's use of futures.
A liquid secondary market is necessary to close out a contract. The fund may
seek to manage liquidity risk by investing only in exchange-traded futures.
Exchange-traded index futures pose less risk that there will not be a liquid
secondary market than privately negotiated instruments. Through their clearing
corporations, the futures exchanges guarantee the performance of the contracts.
Futures contracts are generally settled within a day from the date they are
closed out, as compared to three days for most types of equity securities. As a
result, futures contracts can provide more liquidity than an investment in the
actual underlying securities. Nevertheless, there is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Liquidity may also be influenced by an exchange-imposed daily
price fluctuation limit, which halts trading if a contract's price moves up or
down more than the established limit on any given day. On volatile trading days
when the price fluctuation limit is reached, it may be impossible for the fund
to enter into new positions or close out existing positions. If the secondary
market for a futures contract is not liquid because of price fluctua-
AMERICAN CENTURY INVESTMENTS 4
tion limits or otherwise, the fund may not be able to promptly liquidate
unfavorable futures positions and potentially could be required to continue to
hold a futures position until liquidity in the market is re-established. As a
result, the fund's access to other assets held to cover its futures positions
also could be impaired until liquidity in the market is re-established.
The fund manages counter-party risk by investing in exchange-traded index
futures. In the event of the bankruptcy of the FCM that holds margin on behalf
of the fund, the fund may be entitled to the return of margin owed to the fund
only in proportion to the amount received by the FCM's other customers. The
manager will attempt to minimize the risk by monitoring the creditworthiness of
the FCMs with which the fund does business.
The prices of futures contracts depend primarily on the value of their
underlying instruments. As a result, the movement in market price of index
futures contracts will reflect the movement in the aggregate market price of the
entire portfolio of securities comprising the index. Since the fund is not an
index fund, the fund's investment in futures contracts will not correlate
precisely with the performance of the fund's other equity investments. However,
the manager believes that an investment in index futures will more closely
reflect the investment performance of the funds than an investment in U.S.
government or other highly liquid, short-term debt securities, which is where
the cash position of the fund would otherwise be invested.
The policy of the manager is to remain fully invested in equity securities.
There may be times when the manager deems it advantageous to the fund not to
invest excess cash in index futures, but such decision will generally not be the
result of an active effort to use futures to time or anticipate market movements
in general.
AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS
As described in the Prospectus, the fund may invest in fixed income
securities. The fund is not restricted to investment grade fixed income
obligations, but may invest in such fixed income securities as the investment
manager deems appropriate.
Fixed income securities ratings provide the investment manager with current
assessment of the credit rating of an issuer with respect to a specific fixed
income security. The following is a description of the rating categories
utilized by the rating services referenced in the prospectus disclosure:
The following summarizes the ratings used by Standard & Poor's Corporation
for bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only to a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions, which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions
to meet timely payment of interest and repay-
STATEMENT OF ADDITIONAL INFORMATION 5
ment of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied B or B- rating.
CC - The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C - The rating C typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
To provide more detailed indications of credit quality, the ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the ratings used by Moody's Investors Service, Inc.
for bonds:
AAA - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other
elements present that make the long-term risk appear somewhat larger than the
Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment some time in the
future.
BAA - Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
BA - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA - Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds that are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa through B. The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
6 AMERICAN CENTURY INVESTMENTS
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities. Such loans may not exceed one-third of the fund's net assets valued
at market except (i) through the purchase of debt securities in accordance with
its investment objective, policies and limitations, or (ii) by engaging in
repurchase agreements with respect to portfolio securities.
PORTFOLIO TURNOVER
In order to achieve the fund's investment objective, the manager will
purchase and sell securities without regard to the length of time the security
has been held. Accordingly, the fund's rate of portfolio turnover may be
substantial.
The fund intends to purchase a given security whenever the manager believes
it will contribute to the stated objective of the fund, even if the same
security has only recently been sold. In selling a given security, the manager
keeps in mind that (1) profits from sales of securities held less than three
months must be limited in order to meet the requirements of Subchapter M of the
Internal Revenue Code, and (2) profits from sales of securities are taxed to
shareholders. Subject to those considerations, the corporation will sell a given
security, no matter for how long or how short a period it has been held in the
portfolio and no matter whether the sale is at a gain or at a loss, if
management believes that the security is not fulfilling its purpose, either
because, among other things, it did not live up to the manager's expectations,
or because it may be replaced with another security holding greater promise, or
because it has reached its optimum potential, or because of a change in the
circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
When a general decline in security prices is anticipated, the fund may
decrease or eliminate entirely its equity position and increase its cash
position, and when a rise in price levels is anticipated, the fund may increase
its equity position and decrease its cash position. It should be expected,
however, that the fund will, under most circumstances, be essentially fully
invested in equity securities and equity equivalents.
Since investment decisions are based on the anticipated contribution of the
security in question to the fund's objectives, management believes that the rate
of portfolio turnover is irrelevant when management believes a change is in
order to achieve those objectives.
OFFICERS AND DIRECTORS
The principal officers and directors of the corporation, their principal
business experience during the past five years, and their affiliations with the
fund's investment manager, American Century Investment Management, Inc. and its
transfer agent, American Century Services Corporation, are listed below. The
address at which each director and officer below may be contacted is American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111. All persons named
as officers of the Corporation also serve in similar capacities for other funds
advised by the manager. Those directors that are "interested persons" as defined
in the Investment Company Act of 1940 are indicated by an asterisk(*).
JAMES E. STOWERS JR.,* Chairman of the Board and Director; Chairman of the
Board, Director and controlling shareholder of American Century Companies, Inc.,
parent corporation of American Century Investment Management, Inc. and American
Century Services Corporation; Chairman of the Board and Director of American
Century Investment Management, Inc. and American Century Services Corporation;
father of James E. Stowers III.
JAMES E. STOWERS III,* Director; Chief Executive Officer and Director,
American Century Companies, Inc.
THOMAS A. BROWN, Director; Director of Plains States Development, Applied
Industrial Technologies, Inc., a corporation engaged in the sale of bearings and
power transmission products.
ROBERT W. DOERING, M.D., Director; retired, formerly general surgeon.
ANDREA C. HALL, Ph.D., Director; Senior Vice President and Associate
Director, Midwest Research Institute.
D. D. (DEL) HOCK, Director; retired, formerly Chairman, Public Service of
Colorado; Director, Service Tech, Inc., Hathaway Corporation, and J.D. Edwards &
Company.
STATEMENT OF ADDITIONAL INFORMATION 7
DONALD H. PRATT, Vice Chairman of the Board and Director; President and
Director, Butler Manufacturing Company.
LLOYD T. SILVER JR., Director; President, LSC, Inc., a manufacturer's
representative.
M. JEANNINE STRANDJORD, Director; Senior Vice President and Treasurer,
Sprint Corporation; Director, DST Systems, Inc.
RICHARD W. INGRAM, President; Executive Vice President and Director of
Client Services and Treasury Administration of Funds Distributor, Inc.. (FDI).
Mr. Ingram joined FDI in 1995. Prior to joining FDI, Mr. Ingram served as Vice
President and Division Manager for First Data Investor Services Group, Inc.
(from March 1994 to November 1995) and before that as Vice President, Assistant
Treasurer and Tax Director-Mutual Funds of the Boston Company, Inc. (from 1989
to 1994).
MARYANNE ROEPKE, CPA, Vice President, Treasurer and Principal Accounting
Officer; Vice President, American Century Services Corporation.
PATRICK A. LOOBY, Vice President; Vice President, American Century Services
Corporation.
CHRISTOPHER J. KELLEY, Vice President; Vice President and Associate General
Counsel of FDI. Prior to joining FDI, Mr. Kelly served as Assistant Counsel at
Forum Financial Group (from April 1994 to July 1996) and before that as a
compliance officer for Putnam Investments (from 1992 to 1994).
MARY A. NELSON, Vice President; Vice President and Manager of Treasury
Services and Administration of FDI. Prior to joining FDI, Ms. Nelson served as
Assistant Vice President and Client Manager for the Boston Company, Inc. (from
1989 to 1994).
MERELE A. MAY, Controller.
The Board of Directors has established four standing committees, the
Executive Committee, the Audit Committee, the Compliance Committee and the
Nominating Committee.
Messrs. Stowers Jr. (chairman), Stowers III, and Pratt constitute the
Executive Committee of the Board of Directors. The committee performs the
functions of the Board of Directors between meetings of the Board, subject to
the limitations on its power set out in the Maryland General Corporation Law,
and except for matters required by the Investment Company Act to be acted upon
by the whole Board.
Ms. Strandjord (chairman), and Dr. Doering and Mr. Hock constitute the Audit
Committee. The functions of the Audit Committee include recommending the
engagement of the funds' independent accountants, reviewing the arrangements for
and scope of the annual audit, reviewing comments made by the independent
accountants with respect to internal controls and the considerations given or
the corrective action taken by management, and reviewing nonaudit services
provided by the independent accountants.
Messrs. Brown (chairman), Pratt, Silver and Dr. Hall constitute the
Compliance Committee. The functions of the Compliance Committee include
reviewing the results of the fund's compliance testing program, reviewing
quarterly reports from the manager to the Board regarding various compliance
matters and monitoring the implementation of the fund's Code of Ethics,
including violations thereof.
The Nominating Committee has as its principal role the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the Board, management and shareholders. This
committee also reviews and makes recommendations to the Board with respect to
the composition of Board committees and other Board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Pratt
(chairman), Hock and Stowers III.
The Directors of the corporation also serve as Directors for other funds
advised by the manager. Each Director who is not an "interested person" as
defined in the Investment Company Act receives for service as a member of the
Board of six of such companies an annual director's fee of $44,000, a fee of
$1,000 per regular Board meeting attended and $500 per special Board meeting and
committee meeting attended. In addition, those Directors who are not "interested
persons" who serve as chairman of a committee of the Board of Directors receive
an additional $2,000 for such services. These fees and expenses are divided
among the six investment companies based upon their relative net assets. Under
the terms of the management agreement with the manager, the funds are
responsible for paying such fees and expenses.
8 AMERICAN CENTURY INVESTMENTS
Set forth below is the aggregate compensation paid for the periods indicated
by the fund and by the American Century family of funds as a whole to each
director of the corporation who is not an "interested person" as defined in the
Investment Company Act.
Aggregate Total Compensation from
Compensation the American Century
Director from the fund(1) Family of Funds(2)
- --------------------------------------------------------------------------------
Thomas A. Brown $41 $60,000
Robert W. Doering, M.D. 40 49,500
Andrea C. Hall, Ph.D. 0 8,833
Linsley L. Lundgaard(3) 41 42,333
Donald H. Pratt 41 60,000
Lloyd T. Silver Jr. 40 49,000
M. Jeannine Strandjord 40 48,833
D.D. (Del) Hock 40 49,500
- --------------------------------------------------------------------------------
(1)Includes compensation actually paid by the fund during the fiscal year ended
October 31, 1997.
(2)Includes compensation paid by the fifteen investment company members of the
American Century family of funds for the calendar year ended December 31, 1997.
(3)Dr. Hall replaced Mr. Lundgaard as a director effective November 1, 1997.
Those Directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a Director. The salaries of
such individuals, who also are officers of the funds, are paid by the manager.
MANAGEMENT
A description of the responsibilities and method of compensation of the
fund's manager, American Century Investment Management, Inc., appears in the
Prospectus under the caption "Management."
During the most recent fiscal year, the management fees paid by the Real
Estate Fund were as follows:
REAL ESTATE FUND Year Ended October 31,
- --------------------------------------------------------
1997
- --------------------------------------------------------
Management fees $ 295,909
Average net assets 26,058,700
- --------------------------------------------------------
The Institutional Class of the Real Estate Fund commenced June 16, 1997. The
management fees shown above include $48,843 paid on Institutional Class shares
of the Real Estate Fund for the period ended October 31, 1997.
The management agreement between the Real Estate Fund and the manager shall
continue in effect until the earlier of the expiration of two years from the
date of its execution or until the first meeting of shareholders following such
execution and for as long thereafter as its continuance is specifically approved
at least annually by (i) the fund's Board of Directors or by the vote of a
majority of outstanding votes (as defined in the Investment Company Act) and
(ii) by the vote of a majority of the Directors who are not parties to the
agreement or interested persons of the manager, cast in person at a meeting
called for the purpose of voting on such approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the fund's Board of Directors, or by a vote of
the fund's shareholders, on 60 days' written notice to the manager and that it
shall be automatically terminated if it is assigned.
The management agreement provides that the manager shall not be liable to
the fund or the shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
The management agreement between the Real Estate Fund and the manager
contemplates the retention of a subadvisor by the manager.
Certain investments may be appropriate for the fund and also for other
clients advised by the manager. Investment decisions for the fund and other
clients are made with a view to achieving their respective investment objectives
after consideration of such factors as their current holdings, availability of
cash for investment, and the size of their investment generally. A particular
security may be bought or sold for only one client, or in different amounts and
at different times for more than one but less than all clients. In addition,
purchases or sales of the same
STATEMENT OF ADDITIONAL INFORMATION 9
security may be made for two or more clients on the same date. Such transactions
will be allocated among clients in a manner believed by the manager to be
equitable to each. In some cases this procedure could have an adverse effect on
the price or amount of the securities purchased or sold by the fund.
The manager may aggregate purchase and sale orders of the fund with purchase
and sale orders of its other clients when the manager believes that such
aggregation provides the best execution for the fund. The fund's Board of
Directors has approved the policy of the manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the fund participates at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
manager will not aggregate portfolio transactions of the fund unless it believes
such aggregation is consistent with its duty to seek best execution on behalf of
the fund and the terms of the management agreement. The manager receives no
additional compensation or remuneration as a result of such aggregation.
In addition to managing the fund the manager is also acting as an investment
adviser to eight institutional accounts and to twelve registered investment
companies: American Century Mutual Funds, Inc., American Century Premium
Reserves, Inc., American Century World Mutual Funds, Inc., American Century
Strategic Asset Allocations, Inc., American Century Variable Portfolios, Inc.,
American Century Municipal Trust, American Century Quantitative Equity Funds,
American Century International Bond Funds, American Century Investment Trust,
American Century Government Income Trust, American Century Target Maturities
Trust, and American Century California Tax-Free and Municipal Funds.
American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the fund and the manager pays American Century Services
Corporation for such services.
As stated in the Prospectus, all of the stock of American Century Investment
Management, Inc. and American Century Services Corporation is owned by American
Century Companies, Inc.
CUSTODIANS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York
10003-9598, and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105,
each serves as custodian of the assets of the fund. The custodians take no part
in determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund, however, may invest in
certain obligations of the custodians and may purchase or sell certain
securities from or to the custodians.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 1010 Grand Avenue, Suite 400, Kansas City, Missouri
64106 served as independent auditors for the fund for the fiscal year ended
October 31, 1997.
CAPITAL STOCK
The fund's capital stock is described in the Prospectus under the heading
"Further Information About American Century."
The corporation currently has three series of shares outstanding, Value and
Equity Income are further divided into four classes, and the Real Estate Fund is
further divided into three classes. The funds may in the future issue one or
more additional series or class of shares without a vote of the shareholders.
The assets belonging to each series or class of shares are held separately by
the custodian and the shares of each series or class represent a beneficial
interest in the principal, earnings and profits (or losses) of investment and
other assets held for that series or class. Your rights as a shareholder are the
same for all series or classes of securities unless otherwise stated. Within
their respective series or class, all shares will have equal redemption rights.
Each share, when issued, is fully paid and non-assessable. Each share,
irrespective of series or class, is entitled to one vote for each dollar of net
asset value represented by such share on all questions.
In the event of complete liquidation or dissolution of the fund,
shareholders of each series or class of shares will be entitled to receive, pro
rata, all of the assets less the liabilities of that series or class.
As of January 2, 1998, in excess of 5% of the
10 AMERICAN CENTURY INVESTMENTS
outstanding shares of the Real Estate Fund were owned of record as follows:
Charles Schwab & Co., San Francisco, California, owned 5.17%, and Merrill Lynch
Trust Company, Somerset, New Jersey, owned 5.64%.
MULTIPLE CLASS STRUCTURE
The fund's Board of Directors has adopted a multiple class plan (the
"Multiclass Plan") pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the fund may issue up to three classes of shares: an Investor Class, an
Institutional Class, and an Advisor Class.
The Investor Class is made available to investors directly by the investment
manager through its affiliated broker-dealer, American Century Investment
Services, Inc., for a single unified management fee, without any load or
commission. The Institutional and Advisor Classes are made available to
institutional shareholders or through financial intermediaries that do not
require the same level of shareholder and administrative services from the
manager as Investor Class shareholders. As a result, the manager is able to
charge these classes a lower management fee. In addition to the management fee,
however, the Advisor Class shares are subject to a Master Distribution and
Shareholder Services Plan (described below). That plan has been adopted by the
fund's Board of Directors and initial shareholder in accordance with Rule 12b-1
adopted by the SEC under the Investment Company Act.
RULE 12B-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Directors and approved by its shareholders. Pursuant to such
rule, the Board of Directors and initial shareholder of the fund's Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan, with respect to the Advisor Class (the "Plan"). The Plan is described
below.
In adopting the Plan, the Board of Directors (including a majority of
directors who are not "interested persons" of the fund (as defined in the
Investment Company Act), hereafter referred to as the "independent directors")
determined that there was a reasonable likelihood that the Plan would benefit
the fund and the shareholders of the affected classes. Pursuant to Rule 12b-1,
information with respect to revenues and expenses under the Plan is presented to
the Board of Directors quarterly for its consideration in connection with its
deliberations as to the continuance of the Plan. Continuance of the Plan must be
approved by the Board of Directors (including a majority of the independent
directors) annually. The Plan may be amended by a vote of the Board of Directors
(including a majority of the independent directors), except that the Plan may
not be amended to materially increase the amount to be spent for distribution
without majority approval of the shareholders of the affected class. The Plan
terminates automatically in the event of an assignment and may be terminated
upon a vote of a majority of the independent directors or by vote of a majority
of the outstanding voting securities of the affected class.
All fees paid under the Plan will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers.
MASTER DISTRIBUTION AND SHAREHOLDER
SERVICES PLAN
As described in the Prospectus, the fund's Advisor Class of shares is made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. 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 investment products or in connection with various
financial services.
As with the Service Class, certain record keeping and administrative
services that are provided by the fund's transfer agent of the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for shareholders in the Advisor Class.
Payments may be made for a variety of shareholder services, including, but
are not limited to, (1) receiving, aggregating and processing purchase, exchange
and redemption request from beneficial owners
STATEMENT OF ADDITIONAL INFORMATION 11
(including contract owners of insurance products that utilize the fund as
underlying investment medium) of shares and placing purchase, exchange and
redemption orders with the Distributor; (2) providing shareholders with a
service that invests the assets of their accounts in shares pursuant to specific
or pre-authorized instructions; (3) processing dividend payments from the fund
on behalf of shareholders and assisting shareholders in changing dividend
options, account designations and addresses; (4) providing and maintaining
elective services such as check writing and wire transfer services; (5) acting
as shareholder of record and nominee for beneficial owners; (6) maintaining
account records for shareholders and/or other beneficial owners; (7) issuing
confirmations of transactions; (8) providing subaccounting with respect to
shares beneficially owned by customers of third parties or providing the
information to a fund as necessary for such subaccounting; (9) preparing and
forwarding shareholder communications from the funds (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to shareholders and/or other beneficial owners;
and (10) providing other similar administrative and sub-transfer agency services
(collectively referred to as "Shareholder Services"). Shareholder Services do
not include those activities and expenses that are primarily intended to result
in the sale of additional shares of the funds. In addition to such services, the
financial intermediaries provide various distribution services.
To enable the fund's shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the fund's
investment manager has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares and the fund's Board of Directors has
adopted a Master Distribution and Shareholder Services Plan (the "Distribution
Plan"). Pursuant to such Plan, the Advisor Class shares pay a fee of 0.50%
annually of the aggregate average daily net assets of the fund's Advisor Class
shares, 0.25% of which is paid for Shareholder Services (as described above) and
0.25% of which is paid for distribution services.
Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (1) the payment of sales
commissions, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant to
Selling Agreements; (2) compensation to registered representatives or other
employees of Distributor who engage in or support distribution of the funds'
Advisor Class shares; (3) compensation to, and expenses (including overhead and
telephone expenses) of, Distributor; (4) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (5) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' shareholders and prospective
shareholders; (6) receiving and answering correspondence from prospective
shareholders including distributing prospectuses, statements of additional
information, and shareholder reports; (7) the providing of facilities to answer
questions from prospective investors about fund shares; (8) complying with
federal and state securities laws pertaining to the sale of fund shares; (9)
assisting investors in completing application forms and selecting dividend and
other account options: (10) the providing of other reasonable assistance in
connection with the distribution of fund shares; (11) the organizing and
conducting of sales seminars and payments in the form of transactional
compensation or promotional incentives; (12) profit on the foregoing; (13) the
payment of "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD and (14)
such other distribution and services activities as the manager determines may be
paid for by the funds pursuant to the terms of this Agreement and in accordance
with Rule 12b-1 of the 1940 Act.
TAXES
TAXATION OF CERTAIN MORTGAGE REITS
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 (referred to in
the Code as an "excess inclusion") will be subject to
12 AMERICAN CENTURY INVESTMENTS
Federal income tax in all events. These regulations are also expected to provide
that excess inclusion income of a regulated investment company, such as a fund,
will be allocated to shareholders of the regulated investment company in
proportion to the dividends received by them with the same consequences as if
the shareholders held the related REMIC residual interest directly. In general,
excess inclusion income allocated to shareholders (i) cannot be offset by net
operating losses (subject to a limited exception for certain thrift
institutions) and (ii) will constitute unrelated business taxable income to
entities (including a qualified pension plan, an individual retirement account,
a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on
unrelated business income, thereby potentially requiring such an entity that is
allocated excess inclusion income, and otherwise might be required to file a tax
return, to file a tax return and pay tax on some income. In addition, if at any
time during any taxable year a "disqualified organization" (as defined in the
Code) is a record holder of a share in a regulated investment company, then the
regulated investment company will be subject to a tax equal to that portion of
its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest Federal income tax rate
imposed on corporations.
TAXATION OF DEBT INSTRUMENTS
For Federal income tax purposes, debt securities purchased by the fund may
be treated as having original issue discount. Original issue discount can
generally be defined as the excess of the stated redemption price at maturity of
a debt obligation over the issue price. Original issue discount is treated as
interest earned by the fund for Federal income tax purposes, whether or not any
income is actually received, and therefore is subject to the distribution
requirements of the Code. However, original issue discount with respect to
tax-exempt obligations generally will be excluded from a fund's taxable income.
Original issue discount with respect to tax-exempt securities is accrued and
added to the adjusted tax basis of such securities for purposes of determining
gain or loss upon sale or at maturity. Generally, the amount of original issue
discount for any period is determined on the basis of a constant yield to
maturity which takes into account the compounding of accrued interest. Under
section 1286 of the Code, an investment in a stripped bond or stripped coupon
will result in original issue discount.
The fund may purchase debt securities at a discount which exceeds the
original issue price plus previously accrued original issue discount remaining
on the securities, at the time of purchase. This additional discount represents
market discount for income tax purposes. Generally, market discount is accrued
on a daily basis.
The fund may purchase debt securities at a premium, i.e., at a purchase
price in excess of face amount. With respect to tax-exempt securities, the
premium must be amortized to the maturity date but no deduction is allowed for
the premium amortization. Instead, the amortized bond premium will reduce the
fund's adjusted tax basis in the securities. For taxable securities, the premium
may be amortized if the fund so elects. The amortized premium on taxable
securities is allowed as a deduction, and, generally for securities issued after
September 27, 1985, must be amortized under a constant yield method.
FOREIGN HOLDERS
A foreign holder is a person or entity that, for U.S. Federal income tax
purposes, is a nonresident alien individual, a foreign corporation, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust. If a
distribution of the fund's taxable income (without regard to its net capital
gain) to a foreign holder is not effectively connected with a U.S. trade of
business carried on by the investor, such distribution will be subject to
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. In addition, distributions from the fund will
generally be subject to information reporting.
If at least 50% of the value of the Real Estate Fund is represented by
shares of REITs that are "domestically controlled" within the meaning of Section
897(h) of the Code, or is represented by shares of classes of REIT stock that
(i) represent not more than 5% of such classes and (ii) are "regularly traded on
an established securities market" within the meaning of Section 897(c)(3) of the
Code, a for-
STATEMENT OF ADDITIONAL INFORMATION 13
eign holder should not be subject to withholding tax under the Foreign
Investment in Real Property Tax Act with respect to gain arising from the sale
or redemption of units. In addition, based upon advice of counsel as to existing
law, the fund does not intend to withhold under FIRPTA on distributions of the
fund's net capital gain (designated as capital gain by the fund). Such income
generally will not be subject to federal income tax unless the income is
effectively connected with a trade or business of such foreign holder in the
United States. In the case of a foreign holder who is a non-resident alien
individual, however, gain arising from the sale or redemption of shares or
distributions of the fund's net capital gain ordinarily will be subject to
federal income tax at a rate of 30% if such individual is physically present in
the U.S. for 183 days or more during the taxable year and, in the case of the
gain arising from the sale or redemption of units, either the gain is
attributable to an office or other fixed place of business maintained by the
holder in the United States or the holder has a "tax home" in the United States.
In addition, shares held by individual who is not a citizen or resident of the
United States at the time of his death will generally be subject to United
States federal estate tax.
The tax consequences to a foreign holder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
holders should consult their own tax advisers to determine whether investment in
the fund is appropriate.
BROKERAGE
Under the terms of the management agreements between the fund and the
manager, the manager has the responsibility of selecting brokers to execute
portfolio transactions. The manager has delegated responsibility for selecting
brokers to execute portfolio transactions to the subadvisor under the terms of
the Investment Subadvisory Agreement. The fund's policy is to secure the most
favorable prices and execution of orders on its portfolio transactions. So long
as that policy is met, the manager may take into consideration the factors
discussed below when selecting brokers.
The manager or the subadvisor, as the case may be, receives statistical and
other information and services without cost from brokers and dealers. The
manager or the subadvisor evaluates such information and services, together with
all other information that it may have, in supervising and managing the
investments of the funds. Because such information and services may vary in
amount, quality and reliability, their influence in selecting brokers varies
from none to very substantial. The manager and the subadvisor propose to
continue to place some of the funds' brokerage business with one or more brokers
who provide information and services. Such information and services provided to
the manager and the subadvisor will be in addition to and not in lieu of the
services required to be performed for the funds by the manager and subadvisor.
Neither the manager nor the subadvisor utilizes brokers who provide such
information and services for the purpose of reducing the expense of providing
required services to the funds.
In the fiscal year ended October 31, 1997, the brokerage commissions of the
Real Estate Fund were as follows:
FUND Year Ended October 31,
- ----------------------------------------------
1997
- ----------------------------------------------
REAL ESTATE FUND $140,226(1)
- ----------------------------------------------
(1)Since commencement of sale (June 16, 1997).
The brokerage commissions paid by the fund may exceed those that another
broker might have charged for effecting the same transactions because of the
value of the brokerage and/or research services provided by the broker. Research
services furnished by brokers through whom the fund effects securities
transactions may be used by the manager in servicing all of its accounts, and
not all such services may be used by the manager in managing the portfolios of
the fund.
The staff of the SEC has expressed the view that the best price and
execution of over-the-counter transactions in portfolio securities may be
secured by dealing directly with principal market makers, thereby avoiding the
payment of compensation to another broker. In certain situations, the officers
of the fund and the manager believe that the facilities, expert personnel and
technological systems of a broker enable
14 AMERICAN CENTURY INVESTMENTS
the funds to secure as good a net price by dealing with a broker instead of a
principal market maker, even after payment of the compensation to the broker.
The fund normally places its over-the-counter transactions with principal market
makers but also may deal on a brokerage basis when utilizing electronic trading
networks or as circumstances warrant.
On occasions when the manager deems the purchase or sale of a security to be
in the best interests of the fund as well as other fiduciary accounts, the
manager may aggregate the security to be sold or purchased for the fund with
those to be sold or purchased for other accounts in order to obtain the best net
price and most favorable execution. In such event, the allocation will be made
by the manager in the manner considered to be most equitable and consistent with
its fiduciary obligations to all such fiduciary accounts, including the fund.
PERFORMANCE ADVERTISING
FUND PERFORMANCE
Individual fund performance may be compared to various indices, including
the Standard & Poor's 500 Index, the Consumer Price Index, the Dow Jones
Industrial Average and the Morgan Stanley REIT Index, NAREIT Equity-Less Health
Care Index , and Wilshire REIT Only Index. Fund performance also may be compared
to the rankings prepared by Lipper Analytical Services, Inc.
The following table sets forth the average annual total return of the
Investor class of the fund for the period indicated. Average annual total return
is calculated by determining the fund's cumulative total return for the stated
period and then computing the annual compound return that would produce the
cumulative total return if the fund's performance had been constant over that
period. Cumulative total return includes all elements of return, including
reinvestment of dividends and capital gains distributions. Annualization of the
fund's return assumes that the partial year performance will be constant
throughout the period. Actual return through the period may be greater or less
than the annualized data.
Average Annual
Real Estate Fund Total Return
- --------------------------------------------------------------------------------
Year ended October 31, 1997 40.69%
September 21, 1995 (Inception)
through October 31, 1997 31.46%
- --------------------------------------------------------------------------------
The fund also may elect to advertise cumulative total return and average
annual total return, computed as described above, over periods of time other
than one, five and 10 years and cumulative total return over various time
periods. The following table shows the cumulative total returns and the average
annual returns for the Investor Class of the fund since its date of inception.
Cumulative Total Average Annual
Return Since Inception Compound Rate
- --------------------------------------------------------------------------------
Real Estate Fund 78.08% 31.46%
- --------------------------------------------------------------------------------
ADDITIONAL PERFORMANCE COMPARISONS
Investors may judge the performance of the fund by comparing its performance
to the performance of other mutual funds or mutual fund portfolios with
comparable investment objectives and policies through various mutual fund or
market indices such as the EAFE(reg.tm) Index, NAREIT Equity-Less Health Care
Index and Wilshire REIT Only Index, and those prepared by Dow Jones & Co., Inc.,
Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and The Russell
2000 Index, and to data prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc. and the Consumer Price Index. Comparisons may also be made to
indices or data published in Money, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, Pensions and Investments, USA Today, Realty
Stock Review, Changing Times, Institutional Investor, and other similar
publications or services. In addition to performance information, general
information about the fund that appears in a publication such as those mentioned
above or in the Prospectus under the heading "Performance Advertising" may be
included in advertisements and in reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION 15
PERMISSIBLE ADVERTISING INFORMATION
From time to time, the fund may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for the funds; (5)
descriptions of investment strategies for the funds; (6) descriptions or
comparisons of various savings and investment products (including, but not
limited to, qualified retirement plans and individual stocks and bonds), which
may or may not include the fund; (7) comparisons of investment products
(including the fund) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in the funds. The funds may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of the funds.
MULTIPLE CLASS PERFORMANCE ADVERTISING
Pursuant to the Multiple Class Plan, the funds may issue additional classes
of existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the manager
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class. For periods after the first full quarter after inception, actual
performance of the new class will be used.
REDEMPTIONS IN KIND
In order to protect the investments of the remaining shareholders, the fund
has adopted a policy regarding large redemptions. That policy is described in
detail in the fund Prospectus under the heading "Special Requirements for Large
Redemptions."
The fund has elected to be governed by Rule 18f-1 under the Investment
Company Act, pursuant to which the fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the fund
during any 90-day period for any one shareholder. Should redemptions by any
shareholder exceed such limitation, the fund will have the option of redeeming
the excess in cash or in kind. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets to cash. The
securities delivered will be selected at the sole discretion of the manager.
Such securities will not necessarily be representative of the entire portfolio
and may be securities that the manager regards as least desirable. The method of
valuing securities used to make redemptions in kind will be the same as the
method of valuing portfolio securities described in the Prospectus under the
heading "How Share Price is Determined," and such valuation will be made as of
the same time the redemption price is determined.
HOLIDAYS
The fund does not determine the net asset value of its shares on days when
the New York Stock Exchange is closed. Currently, the Exchange is closed on
Saturdays and Sundays and on holidays, namely New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
FINANCIAL STATEMENTS
The financial statements of the fund for the fiscal year ended October 31,
1997, are included in the Annual Report to shareholders, which is incorporated
herein by reference. You may receive copies of the Annual Report without charge
upon request to the fund at the address and telephone numbers shown on the cover
of this Statement.
16 AMERICAN CENTURY INVESTMENTS
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
WWW.AMERICANCENTURY.COM
[american century logo]
American
Century(reg.sm)
9802 [recycled logo]
SH-BKT-10830 Recycled
<PAGE>
PART C OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
(i) Financial Statements filed in Part A of Registration Statement:
1. Financial Highlights
(ii) Financial Statements filed in Part B of the Registration
Statement (each of the following financial statements is
contained in the Registrant's Annual Report dated October 31,
1997, and which are incorporated by reference in Part B of this
Registration Statement):
1. Statements of Assets and Liabilities at October 31, 1997.
2. Statements of Operations for the year ended October 31,
1997.
3. Statements of Changes in Net Assets for the year ended
October 31, 1997.
4. Notes to Financial Statements as of October 31, 1997.
5. Schedule of Investments at October 31, 1997.
6. Independent Auditors' Report dated November 26, 1997.
(b) Exhibits (all exhibits not filed herein are being incorporated
herein by reference).
1. (a) Articles of Incorporation of Twentieth Century Capital
Portfolios, Inc., dated June 11, 1993 (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(b) Articles Supplementary of Twentieth Century Capital
Portfolios, Inc., dated March 11, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(c) Articles of Amendment of Twentieth Century Capital
Portfolios, Inc., dated December 2, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 7 on Form N-1A on March 3, 1997, File No.
33-64872).
(d) Articles Supplementary of American Century Capital
Portfolios, Inc., dated December 2, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 7 on Form N-1A on March 3, 1997, File No.
33-64872).
(e) Articles Supplementary of American Century Capital
Portfolios, Inc. dated April 30, 1997 (filed
electronically as an exhibit to Post-Effective
Amendment No. 8 on Form N-1A on May 21, 1997, File No.
33-64872).
(f) Certificate of Correction of Articles Supplementary of
American Century Capital Portfolios, Inc. dated May 15,
1997 (filed electronically as an exhibit to
Post-Effective Amendment No. 8 on Form N-1A on May 21,
1997, File No. 33-64872).
(g) Articles Supplementary of American Century Capital
Portfolios, Inc. dated December 19,1997 (filed herein
as Ex-99.B1g).
2. (a) By-Laws of Twentieth Century Capital Portfolios, Inc.
(filed electronically as an exhibit to Post-Effective
Amendment No. 5 on Form N-1A on July 31, 1996, File No.
33-64872).
(b) Amendment to By-Laws of American Century Capital
Portfolios, Inc. (filed herein as EX-99.B2b)
3. Voting Trust Agreements - None.
4. Specimen securities (filed electronically as an exhibit to
Post-Effective Amendment No. 8 on Form N-1A on May 21, 1997,
File No. 33-64872).
5. (a) Management Agreement dated as of August 1, 1997,
between American Century Capital Portfolios, Inc. and
American Century Investment Management, Inc. (filed
herein as EX-99.B5a).
(b) Subadvisory Agreement by and between American Century
Capital Portfolios, Inc., American Century Investment
Management, Inc. and RREEF America, L.L.C., dated
January 27, 1998 (filed herein as EX-99.B5b).
6. Distribution Agreement between American Century Capital
Portfolios, Inc. and Funds Distributor, Inc., dated January
15, 1998 (filed electronically as Exhibit B6 to
Post-Effective Amendment No. 28 on form N-1A of American
Century Target Maturities Trust, File No. 2-94608).
7. Bonus and Profit Sharing Plan, Etc. - None.
8. (a) Master Agreement by and between Twentieth Century
Service, Inc. and Commerce Bank, N.A. dated January 22,
1997 (filed as a part of Post-Effective Amendment No.
76 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213,
filed February 28, 1997 and incorporated herein by
reference).
(b) Global Custody Agreement between The Chase Manhattan
Bank and the Twentieth Century and Benham Funds, dated
August 9, 1996 (filed as a part of Post-Effective
Amendment No. 31 to the Registration Statement on Form
N-1A of American Century Government Income Trust, File
No. 2-99222, filed February 7, 1997, and incorporated
herein by reference).
9. Transfer Agency Agreement, dated as of August 1, 1993, by
and between Twentieth Century Capital Portfolios, Inc. and
Twentieth Century Services, Inc. (filed electronically as an
exhibit to Post-Effective Amendment No. 5 on Form N-1A on
July 31, 1996, File No. 33-64872).
10. Opinion and consent of Counsel (filed herein as EX-99.B10).
11. Consent of Deloitte & Touche LLP (filed herein as
EX-99.B11).
12. Annual Report of the Registrant dated October 31, 1997
(filed electronically on December 19, 1997).
13. Agreements for Initial Capital, Etc. - None.
14. Model Retirement Plans (filed as Exhibits 14(a)-(d) to
Pre-Effective Amendment No. 2 to the Registration Statement
on Form N-1A of Twentieth Century World Investors, Inc.,
File No. 33-39242, filed on May 6, 1991).
15. (a) Master Distribution and Shareholder Services Plan of
Twentieth Century Capital Portfolios, Inc., Twentieth
Century Investors, Inc., Twentieth Century Strategic
Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. (Advisor Class) dated September 3, 1996
(filed herein as EX-99.B15a).
(b) Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc.,
Twentieth Century Strategic Asset Allocations, Inc.,
and Twentieth Century World Investors, Inc. (Service
Class) dated September 3, 1996 (filed herein as
EX-99.B15b).
16. Schedule of Computation for Performance Advertising
Quotations (filed herein as EX-99.B16).
17. Power of Attorney (filed herein as EX-99.B17).
18. Multiple Class Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century
World Investors, Inc. dated September 3, 1996, (filed
herein as EX-99.B18).
27. (a) Financial Data Schedule for American Century Value,
(EX-27.1.1).
(b) Financial Data Schedule for American Century Equity
Income (EX-27.1.2).
(b) Financial Data Schedule for American Century Real
Estate (EX-27.1.3).
ITEM 25. Persons Controlled by or Under Common Control with Registrant - None.
ITEM 26. Number of Holders of Securities.
Number of Record Holders
As of April 30, 1997
Investor Advisor Institutional Service
Title of Series Class Class Class Class
- --------------- ----- ----- ----- -----
American Century Value 91,645 17 0 0
American Century Equity Income 18,448 3 0 0
American Century Real Estate 8,165 0 8 0
ITEM 27. Indemnification.
The Registrant is a Maryland corporation. Section 2-418 of the
Maryland General Corporation Law allows a Maryland corporation to
indemnify its officers, directors, employees and agents to the extent
provided in such statute.
Article XIII of the Registrant's Articles of Incorporation, Exibit 1,
requires the indemnification of the Registrant's directors and
officers to the extent permitted by Section 2-418 of the Maryland
General Corporation Law, the Investment Company Act of 1940 and all
other applicable laws.
The Registrant has purchased an insurance policy insuring its officers
and directors against certain liabilities which such officers and
directors may incur while acting in such capacities and providing
reimbursement to the Registrant for sums which it may be permitted or
required to pay to its officers and directors by way of
indemnification against such liabilities, subject in either case to
clauses respecting deductibility and participation.
ITEM 28. Business and Other Connections of Investment Advisor.
American Century Investment Management, Inc. (formerly known as
Investors Research Corporation), the investment advisor, is engaged in
the business of managing investments for registered investment
companies, deferred compensation plans and other institutional
investors.
ITEM 29. Principal Underwriters
None.
ITEM 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder,
are in the possession of Registrant, American Century Services
Corporation and American Century Investment Management, Inc., all
located at 4500 Main Street, Kansas City, Missouri 64111.
ITEM 31. Management Services - None.
ITEM 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) The Registrant hereby undertakes that it will, if requested to do
so by the holders of at least 10% of the Registrant's outstanding
votes, call a meeting of shareholders for the purpose of voting
upon the question of the removal of a director and to assist in
communication with other shareholders as required by Section
16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 9 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Kansas City, State of Missouri on the 17th day of February, 1998.
American Century Capital Portfolios, Inc.
(Registrant)
By: /s/Patrick A. Looby
Patrick A. Looby, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 9 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
*Richard W. Ingram President, Principal Executive February 17, 1998
- ------------------------- and Principal Financial Officer
Richard W. Ingram
*Maryanne Roepke Vice President and Treasurer February 17, 1998
- -------------------------
Maryanne Roepke
*James E. Stowers, Jr. Director February 17, 1998
- -------------------------
James E. Stowers, Jr.
*James E. Stowers III Director February 17, 1998
- -------------------------
James E. Stowers, III
*Thomas A. Brown Director February 17, 1998
- -------------------------
Thomas A. Brown
*Robert W. Doering, M.D. Director February 17, 1998
- -------------------------
Robert W. Doering, M.D.
*Andrea C. Hall, Ph.D. Director February 17, 1998
- -------------------------
Andrea C. Hall, Ph.D.
*D. D. (Del) Hock Director February 17, 1998
- -------------------------
D. D. (Del) Hock
*Donald H. Pratt Director February 17, 1998
- -------------------------
Donald H. Pratt
*Lloyd T. Silver, Jr. Director February 17, 1998
- -------------------------
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director February 17, 1998
- -------------------------
M. Jeannine Strandjord
*By /s/Patrick A. Looby
Patrick A. Looby
Attorney-in-Fact
</TABLE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER
EX-99.B1a Articles of Incorporation of Twentieth Century Capital
Portfolios, Inc. (filed electronically as Exhibit 1a to
Post-Effective Amendment No. 5 on Form N-1A, filed on July 31,
1996, and incorporated herein by reference).
EX-99.B1b Articles Supplementary of Twentieth Century Capital Portfolios,
Inc. (filed electronically as Exhibit 1b to Post-Effective
Amendment No. 5 on Form N-1A, filed on July 31, 1996, and
incorporated herein by reference).
EX-99.B1c Articles of Amendment of Twentieth Century Capital Portfolios,
Inc., dated December 2, 1996 (filed electronically as Exhibit B1c
to Post-Effective Amendment No. 7 on Form N-1A, filed on March 3,
1997, and incorporated herein by reference).
EX-99.B1d Articles Supplementary of American Century Capital Portfolios,
Inc., dated December 2, 1996 (filed electronically as Exhibit B1d
to Post-Effective Amendment No. 7 on Form N-1A, filed on March 3,
1997, and incorporated herein by reference).
EX-99.B1e Articles Supplementary of American Century Captial Portfolios,
Inc. dated April 30, 1997 (filed electronically as Exhibit B1e to
Post-Effective Amendment No. 8 on Form N-1A, filed on May 21,
1997, and incorporated herein by reference).
EX-99.B1f Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc. dated May 15, 1997 (filed
electronically as Exhibit B1f to Post-Effective Amendment No. 8
on Form N-1A, filed on May 21, 1997, and incorporated herein by
reference).
EX-99.B1g Articles Supplementary of American Century Capital Portfolios,
Inc. dated December 19, 1997 is included herewith.
EX-99.B2a By-Laws of Twentieth Century Capital Portfolios, Inc. (filed
electronically as Exhibit 2 to Post-Effective Amendment No. 5 on
Form N-1A, filed on July 31, 1996, and incorporated herein by
reference).
EX-99.B2b Amendment to By-Laws of American Century Capital Portfolios, Inc.
is included herewith.
EX-99.B4 Specimen securities representing shares of common stock of
American Century Capital Portfolios, Inc. (filed electronically
as Exhibit B4 to Post-Effective Amendment No. 8 on Form N-1A,
filed on May 21, 1997, and incorporated herein by reference).
EX-99.B5a Management Agreement, dated as of August 1, 1997, between
American Century Capital Portfolios, Inc. and American Century
Investment Management, Inc. is included herewith.
EX-99.B5b Investment Subadvisory Agreement by and among American Century
Capital Portfolios, Inc., American Century Investment Management,
Inc. and RREEF America L.L.C., dated January 27, 1998 is included
herewith.
EX-99.B6 Distribution Agreement between American Century Capital
Portfolios, Inc. and Funds Distributor, Inc. dated January 15,
1998 (filed electronically as Exhibit 6 to Post-Effective
Amendment No. 28 on Form N-1A of American Century Target
Maturities Trust, filed on January 30, 1998, and incorporated
herein by reference).
EX-99.B8a Master Agreement by and between Twentieth Century Services, Inc.
and Commerce Bank, N.A. dated January 22, 1997 (filed
electronically as Exhibit 8(b) to Post-Effective Amendment No. 76
to the Registration Statement on Form N-1A of American Century
Mutual Funds, Inc., File No. 2-14213, filed February 28, 1997 and
incorporated herein by reference).
EX-99.B8b Global Custody Agreement between The Chase Manhattan Bank and the
Twentieth Century and Benham Funds, dated August 9, 1996 (filed
electronically as Exhibit B8 to Post-Effective Amendment No. 31
to the Registration Statement on Form N-1A of American Century
Government Income Trust, File No. 2-99222, filed February 7,
1997, and incorporated herein by reference).
EX-99.B9 Transfer Agency Agreement dated as of August 1, 1993, by and
between Twentieth Century Capital Portfolios, Inc. and Twentieth
Century Services, Inc. (filed electronically as Exhibit 9 to
Post-Effective Amendment No. 5 on Form N-1A, filed July 31, 1996,
and incorporated herein by reference).
EX-99.B10 Opinion and Consent of Counsel.
EX-99.B11 Consent of Deloitte & Touche LLP.
EX-99.B12 Annual Report of the Registrant dated October 31, 1997 (filed
electronically on December 19, 1997, and incorporated herein by
reference).
EX-99.B14 Model Retirement Plans (filed as Exhibits 14(a),14(b),14(c) and
14(d) to Pre-Effective Amendment No. 2 to the Registration
Statement and incorporated herein by reference).
EX-99.B15a Master Distribution and Shareholder Services Plan of Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century World Investors, Inc. (Advisor Class) dated
September 3, 1996 is included herewith.
EX-99.B15b Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth
Century Strategic Asset Allocations, Inc. and Twentieth Century
World Investors, Inc. (Service Class) dated September 3, 1996 is
included herewith.
EX-99.B16 Schedule for Computation of Advertising Performance Quotations.
EX-99.B17 Power of Attorney dated January 23, 1998 is included herein.
EX-99.B18 Multiple Class Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. dated September 3, 1996 is included herewith.
EX-27.1.1 Financial Data Schedule for American Century Value.
EX-27.1.2 Financial Data Schedule for American Century Equity Income.
EX-27.1.3 Financial Data Schedule for American Century Real Estate.
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
ARTICLES SUPPLEMENTARY
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC., a Maryland corporation whose
principal Maryland office is located in Baltimore, Maryland (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SECOND: The total number of shares of stock which the Corporation is
authorized to issue is One Billion One Hundred Million (1,100,000,00) shares of
capital sotck of the Corporation, with a par value of One Cent ($0.01) per
share, for the aggregate par value of Eleven Million Dollars ($11,000,000) and
allocated among three (3) Series as follows:
Aggregate
Series No. of Shares Par Value
- ------ ------------- ----------
American Century Value Fund 700,000,000 $7,000,000
American Century Equity Income Fund 300,000,000 $3,000,000
American Century Real Estate Fund 100,000,000 $1,000,000
THIRD: Pursuant to authority expressly vested in the Board of Directors
by the Maryland General Corporation Law and by Article FIFTH and Article SEVENTH
of the Articles of Incorporation, the Board of Directors of the Corporation (a)
has duly established classes of shares (each hereinafter referred to as a
"Class") for the Series of the capital stock of the Corporation and (b) has
allocated the shares designated to the Series in Article SECOND above among the
Classes of shares. As a result of the action taken by the Board of Directors,
the Classes of shares of the three (3) Series of stock of the Corporation and
the number of shares and aggregate par value of each is as follows:
<TABLE>
<CAPTION>
No. of Shares Aggregate
Series Name Class Name Par Value
<S> <C> <C> <C>
American Century Equity Income Fund Investor 150,000,000 $1,500,000
Institutional 25,000,000 250,000
Service 62,500,000 625,000
Advisor 62,500,000 625,000
American Century Value Fund Investor 490,000,000 $4,900,000
Institutional 60,000,000 600,000
Service 5,000,000 50,000
Advisor 145,000,000 1,450,000
American Century Real Estate Fund Investor 50,000,000 $ 500,000
Institutional 25,000,000 250,000
Advisor 25,000,000 250,000
</TABLE>
FOURTH: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or Class or any unissued
shares that have not been allocated to a Series or Class, and to fix or alter
all terms thereof, to the full extent provided by the Articles of Incorporation
of the Corporation.
FIFTH: A description of the series and classes of shares, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions for
redemption is set forth in the Articles of Incorporation of the Corporation and
is not changed by these Articles Supplementary, except with respect to the
creation and/or designation of the various Series.
SIXTH: The Board of Directors of the Corporation duly adopted
resolutions dividing into Series the authorized capital stock of the Corporation
and allocating shares to each Series as set forth in these Articles
Supplementary.
SEVENTH: The Board of Directors of the Corporation duly adopted
resolutions allocating shares to the Series, as set forth in Article SECOND, and
dividing the Series of capital stock of the Corporation into Classes as set
forth in Article THIRD.
IN WITNESS WHEREOF, AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. has
caused these Articles Supplementary to be signed and acknowledged in its name
and on its behalf by its Vice President and its corporate seal to be hereunto
affixed and attested to by its Assistant Secretary on this 18th day of December,
1997.
AMERICAN CENTURY CAPITAL
ATTEST: PORTFOLIOS, INC.
/s/Charles A. Etherington By: /s/Patrick A. Looby
Name: Charles A. Etherington Name: Patrick A. Looby
Title: Assistant Secretary Title: Vice President
THE UNDERSIGNED Vice President of AMERICAN CENTURY CAPITAL PORTFOLIOS,
INC., who executed on behalf of said Corporation the foregoing Articles
Supplementary to the Charter, of which this certificate is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, the foregoing
Articles Supplementary to the Charter to be the corporate act of said
Corporation, and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects under the penalties of
perjury.
Dated: December 18, 1997 /s/ Patrick A. Looby
Patrick A. Looby, Vice President
AMERICAN CENTURY MUTUAL FUNDS, INC.
AMERICAN CENTURY WORLD MUTUAL FUNDS, INC.
AMERICAN CENTURY PREMIUM RESERVES, INC.
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
AMERICAN CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
RESOLVED, that the By-laws of this Corporation are hereby amended by
deleting Section 25 in its entirety and replacing it with the following:
OFFICERS
Section 25. The officers of the Corporation shall be chosen by the
Board of Directors and shall include a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also choose a
Chairman of the Board, a Vice Chairman of the Board, additional Vice
Presidents, one or more Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers. If chosen, the Chairman and Vice
Chairman of the Board shall be selected from among the Directors but
shall not be considered officers of the Corporation. Officers of the
Corporation shall be elected by the Board of Directors at its first
meeting after each annual meeting of stockholders. If no annual meeting
of stockholders shall be held in any year, such election of officers
may be held at any regular or special meeting of the Board of Directors
as shall be determined by the Board of Directors.
RESOLVED, that the By-laws of this Corporation are hereby amended by
deleting Section 30 in its entirety and replacing it with the following, adding
Section 31 and renumbering the Sections following thereafter:
CHAIRMAN AND VICE CHAIRMAN OF THE BOARD
Section 30. If a Chairman of the Board be elected, he shall preside at
all meetings of the stockholders and Directors at which he may be
present and shall have such other duties, powers and authority as may
be prescribed elsewhere in these By-laws. The Board of Directors may
delegate such other authority and assign such additional duties to the
Chairman of the Board, other than those conferred by law exclusively
upon the President.
Section 31. If a Vice Chairman of the Board be elected, he shall
preside at all meetings of the stockholders and Directors at which the
Chairman is absent and shall have such other duties, powers and
authority as may be prescribed elsewhere in these By-laws. The Board of
Directors may delegate such other authority and assign such additional
duties to the Vice Chairman of the Board, other than those conferred by
law exclusively upon the President.
RESOLVED, that the By-laws of this Corporation are hereby amended by
deleting Section 32 in its entirety and replacing it with the following, adding
Section 34 and renumbering the Sections following thereafter:
VICE PRESIDENTS AND ASSISTANT VICE PRESIDENTS
Section 33. The Vice President, or if there shall be more than one, the
Vice Presidents in the order determined by the Board of Directors,
shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President, and shall perform such
other duties and have such other powers as the Board of Directors may
from time to time prescribe.
Section 34. The Assistant Vice President, if any, or if there be more
than one, the Assistant Vice Presidents in the order determined by the
Board of Directors, shall, in the absence or disability of the Vice
President, perform the duties and exercise the powers of the Vice
President and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
* * * * * *
I, the undersigned, being the Secretary of the Corporation, do hereby
certify that the foregoing amendments to the By-laws were adopted by the Board
of Directors of the Corporation on November 22, 1997, to be effective January
15, 1998.
/s/ Patrick A. Looby
Patrick A. Looby, Secretary
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is made as of the 1st day of
August, 1997, by and between AMERICAN CENTURY CAPITAL PORTFOLIOS, INC., a
Maryland corporation (hereinafter called the "Corporation"), and AMERICAN
CENTURY INVESTMENT MANAGEMENT, INC., a Delaware corporation (hereinafter called
the "Investment Manager").
WHEREAS, the Corporation has adopted a Multiple Class Plan dated as of
September 3, 1996 (as the same may be amended from time to time, the "Multiple
Class Plan"), pursuant to Rule 18f-3 of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and
WHEREAS, the Multiple Class Plan establishes four classes of shares for
certain series of shares of the Corporation: the Investor Class, the
Institutional Class, the Service Class, and the Advisor Class; and
WHEREAS, the parties hereto desire to enter into this Agreement to
arrange for investment management services to be provided by Investment Manager
for all classes of shares issued by the Corporation.
NOW, THEREFORE, IN CONSIDERATION of the mutual promises and agreements
herein contained, the parties agree as follows:
1. Investment Management Services. The Investment Manager shall
supervise the investments of each class of each series of shares of the
Corporation contemplated as of the date hereof, and each class of each
subsequent series of shares as the Corporation shall select the Investment
Manager to manage. In such capacity, the Investment Manager shall either
directly, or through the utilization of others as contemplated by Section 7
below, maintain a continuous investment program for each series, determine what
securities shall be purchased or sold by each series, secure and evaluate such
information as it deems proper and take whatever action is necessary or
convenient to perform its functions, including the placing of purchase and sale
orders. In performing its duties hereunder, the Investment Manager will manage
the portfolio of all classes of shares of a particular series as a single
portfolio.
2. Compliance with Laws. All functions undertaken by the Investment
Manager hereunder shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and any rules and regulations promulgated thereunder;
(2) any other applicable provisions of law; (3) the Articles of Incorporation of
the Corporation as amended from time to time; (4) the Bylaws of the Corporation
as amended from time to time; (5) the Multiple Class Plan; and (6) the
registration statement(s) of the Corporation, as amended from time to time,
filed under the Securities Act of 1933 and the Investment Company Act.
3. Board Supervision. All of the functions undertaken by the Investment
Manager hereunder shall at all times be subject to the direction of the Board of
Directors of the Corporation, its executive committee, or any committee or
officers of the Corporation acting under the authority of the Board of
Directors.
4. Payment of Expenses. The Investment Manager will pay all of the
expenses of each class of each series of the Corporation's shares that it shall
manage other than interest, taxes, brokerage commissions, extraordinary
expenses, the fees and expenses of those directors who are not "interested
persons" as defined in the Investment Company Act (hereinafter referred to as
the "Independent Directors") (including counsel fees), and expenses incurred in
connection with the provision of shareholder services and distribution services
under the Master Distribution and Shareholder Services Plan adopted by the
Corporation and dated September 3, 1996. The Investment Manager will provide the
Corporation with all physical facilities and personnel required to carry on the
business of each class of each series of the Corporation's shares that it shall
manage, including but not limited to office space, office furniture, fixtures
and equipment, office supplies, computer hardware and software and salaried and
hourly paid personnel. The Investment Manager may at its expense employ others
to provide all or any part of such facilities and personnel.
5. Account Fees. The Corporation, by resolution of the Board of
Directors, including a majority of the Independent Directors, may from time to
time authorize the imposition of a fee as a direct charge against shareholder
accounts of any class of one or more of the series, such fee to be retained by
the Corporation or to be paid to the Investment Manager to defray expenses which
would otherwise be paid by the Investment Manager in accordance with the
provisions of paragraph 4 of this Agreement. At least sixty days prior written
notice of the intent to impose such fee must be given to the shareholders of the
affected class and series.
6. Management Fees.
(a) In consideration of the services provided by the Investment
Manager, each class of each series of shares of the Corporation managed by the
Investment Manager shall pay to the Investment Manager a per annum management
fee (hereinafter, the "Applicable Fee") as follows:
Name of Series Name of Class Applicable Fee Rate
-------------- ------------- -------------------
American Century Equity Income Fund Investor Class 1.00%
Institutional Class .80%
Service Class .75%
Advisor Class .75%
American Century Value Fund Investor Class 1.00%
Institutional Class .80%
Service Class .75%
Advisor Class .75%
American Century Real Estate Fund Investor Class 1.20%
Institutional Class 1.00%
Advisor Class .95%
(b) On the first business day of each month, each class of each series
of shares set forth above shall pay the management fee at the rate specified by
subparagraph (a) of this paragraph 6 to the Investment Manager for the previous
month. The fee for the previous month shall be calculated by multiplying the
Applicable Fee set forth above for each class and series by the aggregate
average daily closing value of the net assets of each class and series during
the previous month, and further multiplying that product by a fraction, the
numerator of which shall be the number of days in the previous month, and the
denominator of which shall be 365 (366 in leap years).
(c) In the event that the Board of Directors of the Corporation shall
determine to issue any additional series or classes of shares for which it is
proposed that the Investment Manager serve as investment manager, the
Corporation and the Investment Manager may enter into an Addendum to this
Agreement setting forth the name of the series, the Applicable Fee and such
other terms and conditions as are applicable to the management of such series of
shares.
7. Subcontracts. In rendering the services to be provided pursuant to
this Agreement, the Investment Manager may, from time to time, engage or
associate itself with such persons or entities as it determines is necessary or
convenient in its sole discretion and may contract with such persons or entities
to obtain information, investment advisory and management services, or such
other services as the Investment Manager deems appropriate. Any fees,
compensation or expenses to be paid to any such person or entity shall be paid
by the Investment Manager, and no obligation to such person or entity shall be
incurred on behalf of the Corporation. Any arrangement entered into pursuant to
this paragraph shall, to the extent required by law, be subject to the approval
of the Board of Directors of the Corporation, including a majority of the
Independent Directors, and the shareholders of the Corporation.
8. Continuation of Agreement. This Agreement shall continue in effect,
unless sooner terminated as hereinafter provided, for a period of two years from
the execution hereof, and for as long thereafter as its continuance is
specifically approved at least annually (a) by the Board of Directors of the
Corporation or by the vote of a majority of the outstanding class of voting
securities of each series and (b) by the vote of a majority of the Directors of
the Corporation, who are not parties to the Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval.
9. Termination. This Agreement may be terminated by the Investment
Manager at any time without penalty upon giving the Corporation 60 days' written
notice, and may be terminated at any time without penalty by the Board of
Directors of the Corporation or by vote of a majority of the outstanding voting
securities of each class of each series on 60 days' written notice to the
Investment Manager.
10. Effect of Assignment. This Agreement shall automatically terminate
in the event of assignment by the Investment Manager, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the Investment
Company Act.
11. Other Activities. Nothing herein shall be deemed to limit or
restrict the right of the Investment Manager, or the right of any of its
officers, directors or employees (who may also be a director, officer or
employee of the Corporation), to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
12. Standard of Care. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties hereunder
on the part of the Investment Manager, it, as an inducement to it to enter into
this Agreement, shall not be subject to liability to the Corporation or to any
shareholder of the Corporation for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
13. Separate Agreement. The parties hereto acknowledge that certain
provisions of the Investment Company Act, in effect, treat each series of shares
of an investment company as a separate investment company. Accordingly, the
parties hereto hereby acknowledge and agree that, to the extent deemed
appropriate and consistent with the Investment Company Act, this Agreement shall
be deemed to constitute a separate agreement between the Investment Manager and
each series of shares of the Corporation managed by the Investment Manager.
14. Use of the Names "American Century", "Twentieth Century", and
"Benham". The names "American Century", "Twentieth Century", and "Benham" and
all rights to the use of the names "American Century", "Twentieth Century", and
"Benham" are the exclusive property of American Century Services Corporation
and/or its affiliate, Benham Management Corporation (collectively, "ACSC"). ACSC
has consented to, and granted a non-exclusive license for, the use by the
Corporation of the names "American Century", "Twentieth Century", and "Benham"
in the name of the Corporation and any series of shares thereof. Such consent
and non-exclusive license may be revoked by ACSC in its discretion if ACSC, the
Investment Manager, or a subsidiary or affiliate of either of them is not
employed as the investment adviser of each series of shares of the Corporation.
In the event of such revocation, the Corporation and each series of shares
thereof using the names "American Century", "Twentieth Century", or "Benham"
shall cease using the names "American Century", "Twentieth Century", or
"Benham", unless otherwise consented to by ACSC or any successor to its interest
in such names.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
AMERICAN CENTURY CAPITAL AMERICAN CENTURY INVESTMENT
PORTFOLIOS, INC. MANAGEMENT, INC.
By: /s/James E. Stowers III By: /s/James E. Stowers III
Name: James E. Stowers III Name: James E. Stowers III
Title: President Title: President
Attest: /s/ Patrick A. Looby Attest: /s/ William M. Lyons
Name: Patrick A. Looby Name: William M. Lyons
Title: Secretary Title: Secretary
INVESTMENT SUBADVISORY AGREEMENT
THIS INVESTMENT SUBADVISORY AGREEMENT ("Agreement") is made as of the
27th day of January, 1998, by and among AMERICAN CENTURY CAPITAL PORTFOLIOS,
INC. ("ACCP"), a Maryland corporation acting on behalf of American Century Real
Estate Fund (the "ACRE Fund"), a series of shares of ACCP, AMERICAN CENTURY
INVESTMENT MANAGEMENT, INC. ("ACIM"), a Delaware corporation, and RREEF AMERICA
L.L.C., f/k/a ROMEO AMERICA L.L.C. (the "Subadvisor"), a Delaware limited
liability company.
WITNESSETH:
WHEREAS, ACCP is an open-end management investment company registered
with the Securities and Exchange Commission under the Investment Company Act of
1940, as amended; and
WHEREAS, ACIM and the Subadvisor are both investment advisors
registered with the Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended; and
WHEREAS, ACCP has engaged ACIM to serve as the investment manager for
the ACRE Fund pursuant to a Management Agreement dated May 8, 1997; and
WHEREAS, ACCP and ACIM desire to engage the Subadvisor as a subadvisor
for the ACRE Fund, and the Subadvisor desires to accept such engagement; and
WHEREAS, the Boards of Directors of ACCP, ACIM and the Subadvisor have
determined that it is advisable to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, and intending to be legally bound hereby,
the parties hereto covenant and agree as follows:
1. INVESTMENT DESCRIPTION - APPOINTMENT. ACCP desires to appoint the
Subadvisor to provide certain advisory services to the ACRE Fund in accordance
with the ACRE Fund's Prospectus and Statement of Additional Information as in
effect and as amended from time to time, in such manner and to such extent as
may be approved by the Board of Directors of ACCP. ACCP agrees to provide the
Subadvisor copies of all amendments to the ACRE Fund's Prospectus and Statement
of Additional Information on an ongoing basis. In consideration for the
compensation set forth below, the Subadvisor accepts the appointment and agrees
to furnish the services described herein.
2. SERVICES AS INVESTMENT SUBADVISOR.
(a) Subject to the general supervision of the Board of Directors of
ACCP, and of ACIM, the Subadvisor will (i) act in conformity with the ACRE
Fund's Prospectus and Statement of Additional Information, the Investment
Company Act of 1940, the Investment Advisers Act of 1940, the nternal Revenue
Code and all other applicable federal and state laws and regulations, as the
same may from time to time be amended; (ii) make investment decisions for the
ACRE Fund in accordance with the ACRE Fund's investment objective and policies
as stated in the ACRE Fund's Prospectus and Statement of Additional Information
and with such written guidelines as ACIM may from time to time provide to the
Subadvisor; (iii) place purchase and sale orders on behalf of the ACRE Fund;
(iv) maintain books and records with respect to the securities transactions of
the ACRE Fund and furnish ACCP's Board of Directors such periodic, regular and
special reports as the Board may request; and (v) treat confidentially and as
proprietary information of ACCP all records and other information related to
ACCP and its prior, present or potential shareholders. The Subadvisor will not
use such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by ACCP, which approval shall not be unreasonably withheld.
Such records may not be withheld when the Subadvisor may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by ACCP,
but in any case the Subadvisor will provide reasonable notice to ACCP prior to
disclosing any such records or information.
(b) In providing those services, the Subadvisor will supervise the ACRE
Fund's investments and conduct a continual program of investment, evaluation
and, if appropriate, sale and reinvestment of the ACRE Fund's assets. In
addition, the Subadvisor will furnish ACCP or ACIM whatever information,
including statistical data, ACCP or ACIM may reasonably request with respect to
the instruments that the ACRE Fund may hold or contemplate purchasing.
(c) The Subadvisor will at all times comply with the policies adopted
by ACCP's Board of Directors of which it has received written notice. If the
Subadvisor shall believe that a change in any of such policies shall be
advisable, it shall recommend such change to ACIM and the Board of Directors of
ACCP. Any change to any such policies shall be approved by ACCP's Board of
Directors prior to the implementation of such change.
3. BROKERAGE.
(a) In executing transactions for the ACRE Fund and selecting brokers
or dealers, the Subadvisor will use its best efforts to obtain the best net
price and execution available and shall execute or direct the execution of all
such transactions as permitted by law and in a manner that best suits the
interest of the ACRE Fund and its shareholders. In assessing the best net price
and execution available for any ACRE Fund transaction, the Subadvisor will
consider all factors it deems relevant including, but not limited to, breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and on a continuing basis. Consistent
with this obligation, when the execution and price offered by two or more
brokers or dealers are comparable, the Subadvisor may, at its discretion,
execute transactions with brokers and dealers who provide the ACRE Fund with
research advice and other services, but in all instances best net price and
execution shall control. The Subadvisor is authorized to place purchase and sale
orders for the ACRE Fund with brokers and/or dealers subject to the supervision
of ACIM and the Board of Directors of ACCP and in accordance with the
limitations set forth in the registration statement for the ACRE Fund shares
then in effect.
(b) On occasions when the Subadvisor deems the purchase or sale of a
security to be in the best interest of the ACRE Fund as well as one or more of
its other clients, the Subadvisor may to the extent permitted by applicable law,
but shall not be obligated to, aggregate the securities to be sold or purchased
with those of its other clients. In such event, allocation of the securities so
purchased or sold will be made by the Subadvisor in a manner it considers to be
equitable and consistent with its fiduciary obligations to ACCP and to such
other clients. Securities so allocated will be delivered in proportion to the
consideration paid. The expenses incurred in the transaction shall be allocated
pro-rata.
4. INFORMATION PROVIDED TO ACCP.
(a) The Subadvisor will keep ACCP and ACIM informed of developments
materially affecting the ACRE Fund and will take initiative to furnish ACCP and
ACIM on at least quarterly basis with whatever information the Subadvisor and
ACIM believe is appropriate for this purpose. Such regular quarterly reports
shall include (i) a discussion of the ACRE Fund's performance relative to its
benchmark; (ii) an assessment of investment decisions and analysis of the
components of the ACRE Fund's performance; (iii) the decisions it has made with
respect to the ACRE Fund's assets and the purchase and sale of its portfolio
securities; (iv) the reasons for such decisions and related actions; and (v) the
extent to which those decisions have been implemented.
(b) The Subadvisor will provide ACCP and ACIM with such investment
records, ledgers, accounting and statistical data, and other information as ACCP
and ACIM require for the preparation of registration statements, periodic and
other reports and other documents required by federal and state laws and
regulations, and particularly as may be required for the periodic review,
renewal, amendment or termination of this Agreement, and such additional
documents and information as ACCP and ACIM may reasonably request for the
management of their affairs. At least twice annually a representative of the
Subadvisor shall attend a meeting of the Board of Directors to make a
presentation on the ACRE Fund's performance during the preceding six and twelve
months periods, as well as such other time periods as the Subadvisor and ACIM
believe is appropriate.
(c) The Subadvisor shall furnish to regulatory authorities any
information or reports in connection with such services as may be lawfully
requested. The Subadvisor shall also, at ACCP's request, certify to ACCP's
independent auditors that sales or purchases aggregated with those of other
clients of the Subadvisor, as described in Section 3 above, were equitably
allocated.
(d) In compliance with the requirements of the Investment Company Act,
the Subadvisor hereby agrees that all records that it maintains for the ACRE
Fund are the property of ACCP and further agrees to surrender to ACCP promptly
upon ACCP's request any of such records. In addition, the Subadvisor agrees to
cooperate with ACCP and ACIM when either of them is being examined by any
regulatory authorities, and specifically agrees to promptly comply with any
request by such authorities to provide information or records. The Subadvisor
further agrees to preserve for the periods of time prescribed by the Investment
Company Act and the Investment Advisers Act the records required to be
maintained thereunder.
5. LIABILITY AND INDEMNIFICATION.
(a) The Subadvisor shall be responsible for the exercise of reasonable
care in carrying out its responsibilities hereunder; provided, however, that no
provision of this Agreement be construed to protect any trustee, director,
officer, agent or employee of the Subadvisor or an affiliate from liability by
reason of gross negligence, willful malfeasance, bad faith in the performance of
such person's duties or by reason of reckless disregard of obligations and
duties hereunder. No party shall be liable for any actions or omissions taken or
made pursuant to this Agreement unless such actions or omissions result from
gross negligence, willful malfeasance, or bad faith in the performance of such
party's duties or by reason of reckless disregard of obligations and duties
hereunder.
(b) ACIM agrees to indemnify and hold harmless the Subadvisor and its
officers, directors, employees, agents, affiliates and each person, if any, who
controls the Subadvisor within the meaning of the Securities Act of 1933
(collectively, the "Indemnified Parties" for purposes of this Section 5(b))
against any losses, claims, expenses, damages or liabilities (including amounts
paid in settlement thereof) or litigation expenses (including legal and other
expenses) (collectively, "Losses"), to which the Indemnified Parties may become
subject, insofar as such Losses result from (a) a breach by ACCP or ACIM of a
material provision of this Agreement, (b) gross negligence, willful malfeasance
or bad faith in the performance by ACCP or ACIM of its respective duties or
reckless disregard by ACCP or ACIM of its respective duties hereunder, or (c)
any violation by ACCP or ACIM of any applicable law or regulation where the
Subadvisor was not contributing to or a part of the violation. ACIM will
reimburse any legal or other expenses reasonably incurred by the Indemnified
Parties in connection with investigating or defending any such Losses. ACIM
shall not be liable for indemnification hereunder if such Losses are
attributable to the gross negligence or misconduct of the Subadvisor in
performing its obligations under this Agreement.
(c) The Subadvisor agrees to indemnify and hold harmless ACIM and ACCP,
and their respective officers, directors, employees, agents, affiliates and each
person, if any, who controls ACIM or ACCP within the meaning of the Securities
Act of 1933 (collectively, the "Indemnified Parties" for purposes of this
Section 5(c)) against any Losses to which the Indemnified Parties may become
subject, insofar as such Losses result from (a) a breach by the Subadvisor of a
material provision of this Agreement, (b) gross negligence, willful malfeasance,
or bad faith in performance by the Subadvisor or its affiliates of their duties
or reckless disregard by the Subadvisor or its affiliates of their duties
hereunder, or (c) any violation by the Subadvisor of any applicable law or
regulation where neither ACCP or ACIM was contributing to or was a part of the
violation. The Subadvisor will reimburse any legal or other expenses reasonably
incurred by the Indemnified Parties in connection with investigating or
defending any such Losses. The Subadvisor shall not be liable for
indemnification hereunder if such Losses are attributable to the gross
negligence or misconduct of ACIM or ACCP in performing their obligations under
this Agreement.
(d) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 5. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 5 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(e) If the indemnifying party assumes the defense of any such action,
the indemnifying party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of the
indemnified parties in such action, or permit a default or consent to the entry
of any judgment in respect thereof, unless in connection with such settlement,
compromise or consent, each indemnified party receives from such claimant an
unconditional release from all liability in respect of such claim.
6. COMPENSATION.
(a) In consideration of the services rendered pursuant to this
Agreement, ACIM will pay the Subadvisor a per annum management fee (the
"Applicable Fee"), as follows:
Name of Series Applicable Fee
-------------- --------------
American Century Real Estate Fund 0.425%
(b) On the first business day of each month, ACIM shall pay the
Subadvisor the Applicable Fee for the previous month. The fee for the previous
month shall be calculated by multiplying the Applicable Fee for such series by
the aggregate average daily closing value of all classes of the series' net
assets during the previous month, and further multiplying that product by a
fraction, the numerator of which shall be the number of days in the previous
month, and the denominator of which shall be 365 (366 in leap years).
(c) In the event that the Board of Directors of ACCP shall determine to
issue any additional series of shares for which it is proposed that the
Subadvisor serve as investment manager, ACCP, ACIM and the Subadvisor shall
enter into an Addendum to this Agreement setting forth the name of the series,
the Applicable Fee and such other terms and conditions as are applicable to the
management of such series of shares.
(d) The Subadvisor shall have no right to obtain compensation directly
from the ACRE Fund or ACCP for services provided hereunder and agrees to look
solely to ACIM for payment of fees due. Upon termination of this Agreement
before the end of a month, or in the event the Agreement begins after the
beginning of the month, the fee for that month shall be prorated according to
the proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
(e) Notwithstanding anything else set forth herein, ACIM shall deposit
into an interest bearing escrow account maintained by an unaffiliated financial
institution the Applicable Fee earned by the Subadvisor from and after the later
of (i) the day on which the acquisition of the Subadvisor by ROMEO U.S. Group,
Inc., a Delaware corporation, is closed (the "Closing") and (ii) the date on
which relief from Section 15(a) of the Investment Company Act of 1940 is granted
(the "Order Date") (Investment Company Act of 1940, File No. 812-10932, filed
with the Securities Exchange Commission, December 29, 1997, as amended February
___, 1998) to but not including the date on which the shareholders of the ACRE
Fund have approved this Agreement; provided, however, that any fees (other than
expenses) earned by the Subadvisor during the time period between the Closing
and the Order Date shall not be paid into the escrow account by ACIM and shall
be refunded to the ACRE Fund. As soon as practicable after the date on which
this Agreement is approved by the shareholders of the ACRE Fund in accordance
with Section 15(a) of 1940, as amended, ACIM agrees to deliver to the escrow
agent a certificate from an officer of ACIM who is not affiliated with the
Subadvisor stating that this Agreement has been approved by the shareholders of
the ACRE Fund and that moneys held in escrow are to be delivered to the
Subadvisor.
7. EXPENSES. The Subadvisor will bear all of its expenses in connection
with the performance of its services under this Agreement, which expenses shall
not include brokerage fees or commissions in connection with the execution of
securities transactions.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS. ACCP understands that the
Subadvisor or its affiliates now acts and will continue to act as investment
advisor to other clients. ACCP has no objection to the Subadvisor so acting,
provided that, as described in Section 3 above, whenever the ACRE Fund and one
or more other client of the Subadvisor have funds available for investment,
investments suitable and appropriate for each will be allocated equitably to
each entity in accordance with procedures, with no preference given to other
clients. Similarly, opportunities to sell securities will be allocated in an
equitable manner, with no preference given to other clients. In addition, ACCP
understands that the persons employed by the Subadvisor to assist in the
performance of the Subadvisor's duties hereunder will not devote their full time
to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Subadvisor of any affiliate of the Subadvisor to
engage in and devote time and attention to other business or to render services
of whatever kind or nature. Further, from time to time, the Subadvisor may refer
or introduce certain institutional investors and existing clients of the
Subadvisor and its affiliates to ACCP. ACCP understands that nothing herein
shall be deemed to limit or restrict the right of the Subadvisor, in the event
the Subadvisor's clients purchase shares of ACCP, to subsequently suggest or
induce such clients to redeem such shares and open a separate advisory account
with the Subadvisor.
9. TERMS OF AGREEMENT. This Agreement shall become effective as of the
date first written above and shall continue until May 8, 1999 and thereafter so
long as such continuance is specifically approved at least annually by (i) the
Board of Directors of ACCP or (ii) a vote of a majority of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors who are not interested
persons (as defined in the Investment Company Act) of any party to this
Agreement, by a vote cast at a meeting called for the purpose of voting on such
approval. This Agreement is terminable without penalty on 60 days' written
notice by the Board of Directors of ACCP, or by vote of holders of a majority of
the ACRE Fund's shares, or upon six months' written notice by the Subadvisor,
and will terminate automatically upon any termination of the investment
management agreement between ACCP and ACIM. This Agreement will terminate
automatically in the event of its assignment. The Subadvisor agrees to notify
ACCP of any circumstances that might result in this Agreement being deemed to be
assigned.
10. REPRESENTATIONS OF ACIM, THE SUBADVISOR AND ACCP.
(a) ACIM and the Subadvisor each hereby represents that it is
registered as an investment advisor under the Investment Advisers Act, that it
will use its reasonable best efforts to maintain such registration, and that it
will promptly notify the other if it ceases to be so registered, if its
registration is suspended for any reason, or if it is notified by any regulatory
organization or court of competent jurisdiction that it should show cause why
its registration should not be suspended or terminated. ACIM and the Subadvisor
each further represents that it is registered under the laws of all
jurisdictions in which the conduct of its business hereunder requires such
registration.
(b) ACCP and ACIM represent and warrant that (i) the appointment of the
Subadvisor has been duly authorized; and (ii) each of them has full power and
authority to execute and deliver this Agreement and to perform the services
contemplated hereunder, and such execution, delivery and performance will not
cause either to be in violation of its Articles of Incorporation, Bylaws, or any
material laws.
(c) The Subadvisor represents and warrants that (i) its service as
subadvisor hereunder has been duly authorized; and (ii) it has full power and
authority to execute and deliver this Agreement and to perform the services
contemplated hereunder, and such execution, delivery and performance will not
cause it to be in violation of its organizational documents, its Bylaws or
material laws.
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. LIMITATION OF LIABILITY. This Agreement has been executed on behalf
of ACCP by the undersigned officer of ACCP solely in his capacity as an officer
of ACCP.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter described herein.
14. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder,
the Subadvisor is and shall be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent ACCP or ACIM in any way, or otherwise be deemed to be an agent of ACCP
or ACIM.
15. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statue, rule or similar authority, the
remainder of this Agreement shall not be affected thereby.
16. NOTICES. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent by telex,
telecopy, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
To the Subadvisor:
RREEF America, L.L.C.
875 North Michigan Avenue, 41st Floor
Chicago, Illinois 60611
Attention: Kim G. Redding
Copy to: Barry H. Braitman, Esq.
(312) 266-9300 (office number)
(312) 266-9346 (telecopy number)
To ACCP or ACIM:
American Century Investments
4500 Main Street
Kansas City, Missouri 64111
Attention: Patrick A. Looby, Esq.
(816) 340-4349 (office number)
(816) 340-4964 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
Section shall be deemed to have been delivered on receipt.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below on the day and year first written
above.
RREEF AMERICA L.L.C. AMERICAN CENTURY CAPITAL
PORTFOLIOS, INC.
By:/s/Kim G. Redding By:/s/Patrick A. Looby
Name: Kim G. Redding Name: Patrick A. Looby
Title: Senior Vice President Title: Vice President
AMERICAN CENTURY
INVESTMENT MANAGEMENT, INC.
By:/s/Robert C. Puff Jr.
Name: Robert C. Puff Jr.
Title: President
DAVID H. REINMILLER
Attorney At Law
4500 Main Street, P.O. Box 418210
Kansas City, Missouri 64141-9210
Telephone (816)340-4046
Telecopier (816)340-4964
February 17, 1998
American Century Capital Portfolios, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to American Century Capital Portfolios, Inc., I am generally
familiar with its affairs. Based upon this familiarity, and upon the examination
of such documents as I have deemed relevant, it is my opinion that the shares of
the Corporation described in Post-Effective Amendment No. 9 to its Registration
Statement on Form N-1A to be filed with the Securities and Exchange Commission
on February 17, 1998, will, when issued, be validly issued, fully paid and
nonassessable.
For the record, it should be stated that I am an officer and employee of
American Century Services Corporation, an affiliated corporation of American
Century Investment Management, Inc., the investment adviser of American Century
Capital Portfolios, Inc.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 9.
Very truly yours,
/s/David H. Reinmiller
David H. Reinmiller
Independent Auditors' Consent
American Century Capital Portfolios, Inc.:
We consent to the use in Post-Effective Amendment No. 9 to Registration
Statement No. 33-64872 of our report dated November 26, 1997 for American
Century Real Estate Fund (the "Fund), one of the funds comprising American
Century Capital Portfolios, Inc., included in the Annual Report to Shareholders
of the Fund for the year ended October 31, 1997, and incorporated by reference
in the Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectuses, which also are a part of such Registration
Statement.
/*/Deloitte & Touche LLP
Deloitte & Touche LLP
Kansas City, Missouri
February 13, 1998
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
of
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
TWENTIETH CENTURY INVESTORS, INC.
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
TWENTIETH CENTURY WORLD INVESTORS, INC.
Advisor Class
WHEREAS, each of the above named corporations (the "Issuers") is an
open-ended, management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the common stock of the Issuers are currently divided into a
number of separate series of shares, or funds, each corresponding to a distinct
portfolio of securities; and
WHEREAS, pursuant to Rule 18f-3 of the 1940 Act, the Issuers' Boards of
Directors (the "Board") have established multiple classes of shares of the
various funds of the Issuers, including an Advisor Class of shares; and
WHEREAS, the Board desires to authorize the funds identified in
SCHEDULE A (the "Funds") to bear expenses of shareholder services and
distribution of certain of their shares by adopting this Master Distribution and
Shareholder Services Plan pursuant to Rule 12b-1 under the 1940 Act with respect
to the Advisor Class shares of each of the Funds; and
WHEREAS, INVESTORS RESEARCH CORPORATION ("IRC") is the registered
investment adviser to the Issuers; and
WHEREAS, the Issuers have entered into a Distribution Agreement (the
"Distribution Agreement") with TWENTIETH CENTURY SECURITIES, INC. (the
"Distributor") pursuant to which Distributor serves as distributor of the
various classes of the Funds, including the Advisor Class.
NOW, THEREFORE, the Issuers hereby adopt, on behalf of the Funds, this
Plan, in accordance with Rule 12b-1 under the 1940 Act on the following terms
and conditions:
Section 1. Distribution Fees
a. Distribution Fee. For purposes of paying costs and expenses incurred in
providing the services set forth in Section 2 below, the Funds shall
pay IRC, as paying agent for the Funds, a fee equal to 25 basis points
(0.25%) per annum of the average daily net assets of the shares of the
Funds' Advisor Class of shares (the "Distribution Fee").
b. Shareholder Services Fee. For purposes of paying costs and expenses
incurred in providing the services set forth in Section 3 below, the
Funds shall pay IRC, as paying agent for the Funds, a fee equal to 25
basis points (0.25%) per annum of the average daily net assets of the
shares of the Funds' Advisor Class of shares (the "Shareholder Services
Fee").
c. Applicability to Additional and Future Funds. If any of the Issuers
desire to add additional, currently-existing funds to the Plan or
establish additional funds in the future, and the applicability of the
Plan with respect to such existing or new funds is approved in the
manner set forth in Section 4 of this Plan, as well as by the then-sole
shareholder of the Advisor Class shares of such new funds (to the
extent shareholder approval of new funds is required by then-current
1940 Act Rules), this Plan may be amended to provide that such new
funds will become subject to this Plan and will pay the Distribution
Fee and the Shareholder Services Fee set forth in Sections 1(a) and
1(b) above, unless the Board specifies otherwise. After the adoption of
this Plan by the Board with respect to the Advisor Class of shares of
the existing or new funds, the term "Funds" under this Plan shall
thereafter be deemed to include the existing or new funds.
d. Calculation and Assessment. Distribution Fees and the Shareholder
Services Fees under this Plan will be calculated and accrued daily by
each Fund and paid monthly to IRC or at such other intervals as the
Issuers and IRC may agree.
Section 2. Distribution Services
a. The amount set forth in Section 1(a) of this Plan shall be paid for
services in connection with any activities undertaken or expenses
incurred by the Distributor or its affiliates primarily intended to
result in the sale of Advisor Class shares of the Funds, which services
may include but are not limited to, (A) the payment of sales
commission, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant
to Selling Agreements; (B) compensation to registered representatives
or other employees of Distributor who engage in or support distribution
of the Funds' Advisor Class shares; (C) compensation to, and expenses
(including overhead and telephone expenses) of, Distributor; (D) the
printing of prospectuses, statements of additional information and
reports for other than existing shareholders; (E) the preparation,
printing and distribution of sales literature and advertising materials
provided to the Funds' shareholders and prospective shareholders; (F)
receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional
information, and shareholder reports; (G) the providing of facilities
to answer questions from prospective investors about Fund shares; (H)
complying with federal and state securities laws pertaining to the sale
of Fund shares; (I) assisting investors in completing application forms
and selecting dividend and other account options; (J) the providing of
other reasonable assistance in connection with the distribution of Fund
shares; (K) the organizing and conducting of sales seminars and
payments in the form of transactional compensation or promotional
incentives; (L) profit on the foregoing; (M) the payment of "service
fees", as contemplated by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") and (N) such other
distribution and services activities as the Issuers determine may be
paid for by the Issuers pursuant to the terms of this Plan and in
accordance with Rule 12b-1 of the 1940 Act.
b. For purposes of the Plan, "service fees" shall mean payments in
connection with the provision of personal, continuing services to
investors in each Fund and/or the maintenance of shareholder accounts,
excluding (i) transfer agent and subtransfer agent services for
beneficial owners of a Fund's Advisor Class shares, (ii) aggregating
and processing purchase and redemption orders, (iii) providing
beneficial owners with account statements, processing dividend
payments, (iv) providing subaccounting services for Advisor Class
shares held beneficially, (v) forwarding shareholder communications to
beneficial owners, and (vi) receiving, tabulating and transmitting
proxies executed by beneficial owners; provided, however, that if the
NASD adopts a definition of "service fees" for purposes of Section
26(d) of the Rules of Fair Practice of the NASD (or any successor to
such rule) that differs from the definition of "service activities"
hereunder, or if the NASD adopts a related definition intended to
define the same concept, the definition of "service fees" in this
Section shall be automatically amended, without further action of the
parties, to conform to such NASD definition. Overhead and other
expenses of Distributor related to its service activities, including
telephone and other communications expenses, may be included in the
information regarding amounts expended for such activities.
Section 3. Shareholder Services Defined
As manager of the Funds' Advisor Class of shares, IRC may cause one of its
affiliates to provide shareholder and administrative services to the
shareholders of the Advisor Class shares of the Funds ("Shareholder Services")
or it may engage third parties to do so. The payments authorized by this Plan
are intended to reimburse IRC for expenses incurred by it or its affiliates as a
result of these arrangements. Such Shareholder Services and related expenses may
include, but are not limited to, (A) receiving, aggregating and processing
purchase, exchange and redemption requests from beneficial owners (including
contract owners of insurance products that utilize the Funds as underlying
investment media) of Advisor Class shares and placing purchase, exchange and
redemption orders with the Funds' transfer agent; (B) providing shareholders
with a service that invests the assets of their accounts in shares pursuant to
specific or pre-authorized instructions; (C) processing dividend payments from a
Fund on behalf of shareholders and assisting shareholders in changing dividend
options, account designations and addresses; (D) providing and maintaining
elective services such as check writing and wire transfer services; (E) acting
as sole shareholder of record and nominee for beneficial owners; (F) maintaining
account records for shareholders and/or other beneficial owners; (G) issuing
confirmations of transactions; (H) providing subaccounting with respect to
shares beneficially owned by customers of third parties or providing the
information to a Fund as necessary for such subaccounting; (I) creating and
forwarding shareholder communications from the Funds (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to shareholders and/or other beneficial owners;
and (J) providing other similar administrative and sub-transfer agency services.
Shareholder Services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the Advisor
Class of the Funds.
Section 4. Effectiveness
Upon receipt of approval by vote of both (a) the Board of Directors of the
Issuers, and (b) the Independent Directors, this Plan shall become effective as
of September 3, 1996.
Section 5. Term
This Plan will continue in effect until September 3, 1997, and will continue
thereafter in full force and effect for successive periods of up to one year,
provided that each such continuance is approved in the manner provided in
Section 4.
Section 6. Reporting Requirements
IRC shall administer this Plan in accordance with Rule 12b-1 of the 1940 Act.
IRC will provide to each Issuer's Board, and the Independent Directors will
review and approve, in exercise of their fiduciary duties, at least quarterly, a
written report of the amounts expended with respect to the Advisor Class shares
of each Fund by IRC under this Plan and such other information as may be
required by the 1940 Act and Rule 12b-1 thereunder.
Section 7. Termination
This Plan may be terminated without penalty at any time with respect to the
Advisor Class shares of any Fund by vote of the Board of the Issuer of which the
Fund is a series, by votes of a majority of the Independent Directors, or by
vote of a majority of the outstanding voting Advisor Class shares of that Fund.
Termination of the Plan with respect to the Advisor Class shares of one Fund
will not affect the continued effectiveness of this Plan with respect to the
Advisor Class shares of any other Fund.
Section 8. Amendments to this Plan
This Plan may not be amended to increase materially the amount of compensation a
Fund is authorized to pay under Section 1 hereof unless such amendment is
approved in the manner provided for initial approval in Section 4 hereof, and
such amendment is further approved by a majority of the outstanding voting
securities of the Advisor Class shares of the Fund, and no other material
amendment to the Plan will be made unless approved in the manner provided for
approval and annual renewal in Section 5 hereof.
Section 9. Recordkeeping
The Issuers will preserve copies of this Plan (including any amendments thereto)
and any related agreements and all reports made pursuant to Section 6 hereof for
a period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
IN WITNESS WHEREOF, the Issuers have executed this Plan as of September
3, 1996.
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
TWENTIETH CENTURY INVESTORS, INC.
TWENTIETH CENTURY STRATEGIC ASSET
ALLOCATIONS, INC.
Attest: TWENTIETH CENTURY WORLD INVESTORS, INC.
By:/s/Patrick A. Looby By:/s/William M. Lyons
Patrick A. Looby William M. Lyons
Assistant Secretary Executive Vice President
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
Series Offering Advisor Class Shares
Series Date Plan Adopted
- ------ -----------------
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
<S> <C>
0 Twentieth Century Equity Income September 3, 1996
0 Twentieth Century Value September 3, 1996
TWENTIETH CENTURY INVESTORS, INC.
0 Balanced Investors September 3, 1996
0 Cash Reserve September 3, 1996
0 Growth Investors September 3, 1996
0 Heritage Investors September 3, 1996
0 Intermediate-Term Bond September 3, 1996
0 Limited-Term Bond September 3, 1996
0 Long-Term Bond September 3, 1996
0 Select Investors September 3, 1996
0 U.S. Governments Intermediate-Term September 3, 1996
0 U.S. Governments Short-Term September 3, 1996
0 Ultra Investors September 3, 1996
0 Vista Investors September 3, 1996
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
0 Strategic Allocation: Aggressive September 3, 1996
0 Strategic Allocation: Conservative September 3, 1996
0 Strategic Allocation: Moderate September 3, 1996
TWENTIETH CENTURY WORLD INVESTORS, INC.
Twentieth Century International Discovery Fund September 3, 1996
Twentieth Century International Equity September 3, 1996
Twentieth Century Emerging Markets Fund September 3, 1996
</TABLE>
SHAREHOLDER SERVICES PLAN
of
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
TWENTIETH CENTURY INVESTORS, INC.
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
TWENTIETH CENTURY WORLD INVESTORS, INC.
Service Class
WHEREAS, each of the above named corporations (the "Issuers") is an
open-ended, management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the common stock of each Issuer is currently divided into a
number of separate series of shares, or funds, each corresponding to a distinct
portfolio of securities; and
WHEREAS, pursuant to Rule 18f-3 of the 1940 Act, the Boards of
Directors of the Issuers (the "Board of Directors") have established multiple
classes of shares of the various funds of the Issuers, including a Service Class
of shares; and
WHEREAS, the Board of Directors desires to authorize the funds
identified in SCHEDULE A (the "Funds") to authorize the Service Class of shares
of such Funds to bear the expenses for Shareholder Services (as defined herein)
provided to the Service Class shareholders by IRC or its affiliates, or by
independent third parties by adopting this Shareholder Services Plan pursuant to
Rule 12b-1 under the 1940 Act with respect to the Service Class shares of each
of the Funds; and
WHEREAS, INVESTORS RESEARCH CORPORATION ("IRC") is the registered
investment adviser to the Issuers; and
NOW, THEREFORE, the Issuers hereby adopt, on behalf of the Funds, this
Plan, in accordance with Rule 12b-1 under the 1940 Act on the following terms
and conditions:
Section 1. Shareholder Service Fees
a. Amount of Fee. For purposes of paying costs and expenses incurred in
providing shareholder and administrative services to each Fund's
Service Class of shares as set forth in Section 2 below, the Funds'
shall pay IRC, as paying agent for the Funds, a fee equal to 25 basis
points (0.25%) per annum of the average daily net assets of the Funds'
Service Class of shares (the "Shareholder Services Fee").
b. Calculation and Assessment. Shareholder Service Fees under this Plan
shall be calculated and accrued daily by each Fund and paid monthly or
at such other intervals as the Issuers and IRC shall agree.
Section 2. Shareholder Services Defined
As manager of the Funds' Service Class of shares, IRC may cause one of its
affiliates to provide shareholder and administrative services to the
shareholders of the Service Class shares of the Funds ("Shareholder Services")
or it may engage third parties to do so. The payments authorized by this Plan
are intended to reimburse IRC for expenses incurred as a result of these
arrangements. Such Shareholder Services and related expenses may include, but
are not limited to, (A) receiving, aggregating and processing purchase, exchange
and redemption request from beneficial owners of Service Class shares (including
contract owners of insurance products that utilize the Funds as underlying
investment media) and placing purchase, exchange and redemption orders with the
Distributor; (B) providing shareholders with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(C) processing dividend payments from a Fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations and
addresses; (D) providing and maintaining elective services such as check writing
and wire transfer services; (E) acting as shareholder of record and nominee for
beneficial owners; (F) maintaining account records for shareholders and/or other
beneficial owners; (G) issuing confirmations of transactions; (H) providing
subaccounting with respect to shares beneficially owned by customers of third
parties or providing the information to a Fund as necessary for such
subaccounting; (I) preparing and forwarding shareholder communications from the
Funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to shareholders and/or
other beneficial owners; (J) providing other similar administrative and
sub-transfer agency services; and (K) paying "service fees," as contemplated by
the Rules of Fair Practice of the NASD. Shareholder Services do not include
those activities and expenses that are primarily intended to result in the sale
of additional shares of the Service Class of the Funds.
Section 3. Effectiveness
This Plan shall become effective September 3, 1996.
Section 4. Term and Renewal
This Plan will continue in effect until September 3, 1997, and will continue
thereafter in full force and effect for successive periods of up to one year,
provided that each such continuance is approved by the Board to the extent and
in the manner required by the 1940 Act.
Section 5. Reporting Requirements
IRC shall administer this Plan in accordance with Rule 12b-1 of the 1940 Act.
Distributor will provide to each Issuer's Board and the Independent Directors
will review and approve, in exercise of their fiduciary duties, at least
quarterly, a written report of the amounts expended with respect to the Service
Class shares of each Fund by the Distributor under this Plan and such other
information as may be required by the 1940 Act and Rule 12b-1 thereunder.
Section 6. Termination
This Plan may be terminated at any time with respect to the Service Class shares
of any Fund by vote of the Board of Directors of the Issuer of which the Fund is
a series or by vote of a majority of the Independent Directors. Termination of
the Plan with respect to the Service Class shares of one Fund shall not affect
the continued effectiveness of this Plan with respect to the Service Class
shares of any other Fund.
Section 7. Amendments to this Plan
This Plan may not be amended to increase materially the amount of compensation a
Fund is authorized to pay under Section 1 hereof unless such amendment is
approved by the Board, as required by the 1940 Act, and such amendment is
further approved by a majority of the outstanding voting securities of the
Service Class shares of the Fund. No other material amendment to the Plan shall
be made unless approved by the Board in the manner provided for annual renewal
of the Plan in Section 4 hereof. This Agreement may be amended to include
additional series of shares of the Issuers, whether or not such series were in
existence at the time of original adoption of this Agreement or subsequently
established, and series of additional Issuers, by adoption of this Plan in the
manner required by the 1940 Act and the rules and regulations thereunder. Such
new funds will become subject to this Plan and will commence paying the
Shareholder Services Fee set forth in Section 1(a) on the date of the adoption
of this Plan by the Board, unless the Board specifies otherwise. After the
effective date of adoption of this Plan by the Board with respect to the Service
Class of shares of such new funds, the term "Funds" under this Plan shall
thereafter be deemed to include the existing or new funds.
Section 8. Recordkeeping
The Issuers shall preserve copies of this Plan (including any amendments
thereto) and any related agreements and all reports made pursuant to Section 5
hereof for a period of not less than six years from the date of this Plan, the
first two years in an easily accessible place.
IN WITNESS WHEREOF, the Issuers have executed this Shareholder Services
Plan as of September 3, 1996.
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
TWENTIETH CENTURY INVESTORS, INC.
TWENTIETH CENTURY STRATEGIC ASSET
ALLOCATIONS, INC.
Attest: TWENTIETH CENTURY WORLD INVESTORS, INC.
/s/Patrick A. Looby /s/William M. Lyons
Patrick A. Looby William M. Lyons
Assistant Secretary Executive Vice President
<TABLE>
<CAPTION>
SCHEDULE A
Series Offering Service Class Shares
Series Date Plan Adopted
- ------ -----------------
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
<S> <C>
0 Twentieth Century Equity Income September 3, 1996
0 Twentieth Century Value September 3, 1996
TWENTIETH CENTURY INVESTORS, INC.
0 Balanced Investors September 3, 1996
0 Cash Reserve September 3, 1996
0 Growth Investors September 3, 1996
0 Heritage Investors September 3, 1996
0 Intermediate-Term Bond September 3, 1996
0 Limited-Term Bond September 3, 1996
0 Long-Term Bond September 3, 1996
0 Select Investors September 3, 1996
0 U.S. Governments Intermediate-Term September 3, 1996
0 U.S. Governments Short-Term September 3, 1996
0 Ultra Investors September 3, 1996
0 Vista Investors September 3, 1996
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
0 Strategic Allocation: Aggressive September 3, 1996
0 Strategic Allocation: Conservative September 3, 1996
0 Strategic Allocation: Moderate September 3, 1996
TWENTIETH CENTURY WORLD INVESTORS, INC.
0 Twentieth Century International Emerging Growth September 3, 1996
0 Twentieth Century International Equity September 3, 1996
</TABLE>
SCHEDULE OF COMPUTATION OF PERFORMANCE ADVERTISING QUOTATIONS
Set forth below are representative calculations of each type of total
return performance quotation included in the Statement of Additional Information
of American Century Capital Portfolios, Inc.
1. AVERAGE ANNUAL TOTAL RETURN. The average one-year annual total
return of American Century Real Estate for the fiscal year ended October
31, 1997, as quoted in the Statement of Additional Information, was 40.69%.
This return was calculated as follows:
n
P(1+T) = ERV
where,
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 payment at the
end of the period.
Applying the actual return figures of the fund for the one year period
ended October 31, 1997:
1
1,000 (1 + 40.69%) = $1,406.90
1
T = (1,406.90)
------------ - 1
1,000
T = 40.69%
2. CUMULATIVE TOTAL RETURN. The cumulative total return of American
Century Real Estate from September 21, 1995 (inception) to October 31, 1997
as quoted in the Statement of Additional Information, was 78.08%
This return was calculated as follows:
(ERV - P)
C = ---------
P
where,
C = cumulative total return
P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of the hypothetical $1,000 payment at the end
of the period.
Applying the actual return figures of the fund for the period September 21,
1995 through October 31, 1997.
(1,780.80-1,000)
C = --------------
1,000
C = 78.08%
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, American Century
Capital Portfolios, Inc., hereinafter called the "Corporation", and certain
directors and officers of the Corporation, do hereby constitute and appoint
Richard W. Ingram, Patrick A. Looby, Charles A. Etherington, David H.
Reinmiller, and Charles C.S. Park, and each of them individually, their true and
lawful attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable the Corporation to comply with the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and any rules, regulations, orders,
or other requirements of the United States Securities and Exchange Commission
thereunder, in connection with the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940, as amended, including specifically,
but without limitation of the foregoing, power and authority to sign the name of
the Corporation in its behalf and to affix its corporate seal, and to sign the
names of each of such directors and officers in their capacities as indicated,
to any amendment or supplement to the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and to any instruments or documents
filed or to be filed as a part of or in connection with such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Corporation has caused this Power to be executed by
its duly authorized officers on this the 23rd day of January, 1998.
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
By: /s/Richard W. Ingram
Richard W. Ingram, President
SIGNATURE AND TITLE
/s/ Richard W. Ingram /s/ Robert W. Doering
Richard W. Ingram Robert W. Doering, M.d.
President, Principal Executive Director
and Principal Financial Officer
/s/ Maryanne Roepke /s/ Andrea C. Hall
Maryanne Roepke Andrea C. Hall, Ph.D.
Vice President and Treasurer Director
/s/ James E. Stowers, Jr. /s/ Donald H. Pratt
James E. Stowers, Jr. Donald H. Pratt
Director Director
/s/ James E. Stowers III /s/ Lloyd T. Silver
James E. Stowers III Lloyd T. Silver
Director Director
/s/ Thomas A. Brown /s/ M. Jeannine Strandjord
Thomas A. Brown M. Jeannine Strandjord
Director Director
Attest: /s/ D.D. (Del) Hock
By: /s/ Patrick A. Looby D.D. (Del) Hock
Patrick A. Looby, Secretary Director
Multiple Class Plan
of
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
TWENTIETH CENTURY INVESTORS, INC.
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
TWENTIETH CENTURY WORLD INVESTORS, INC.
WHEREAS, each of the above-named corporations (the "Issuers") is an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the common stock of the Issuers are currently divided into a
number of separate series of shares; and
WHEREAS, the Issuers desire to offer multiple classes of certain of
such series of shares pursuant to Rule 18f-3 under the 1940 Act; and
WHEREAS, Rule 18f-3 requires that the Board of Directors of the Issuers
adopt a written plan setting forth (1) the specific arrangement for shareholder
services and the distribution of securities for each class, (2) the allocation
of expenses for each class and (3) any related conversion features or exchange
privileges; and
WHEREAS, the Board of Directors of the Issuers, including a majority of
the Independent Directors, as defined in Section 3d below, have determined that
the following plan (the "Plan"), adopted pursuant to Rule 18f-3 under the 1940
Act, is in the best interests of each class individually and the Issuers as a
whole;
NOW, THEREFORE, the Issuers hereby adopt, on behalf of the Funds (as
defined in Section 2a below), this Plan, in accordance with Rule 18f-3 under the
1940 Act on the following terms and conditions:
Section 1. Establishment of Plan
As required by Rule 18f-3 under the 1940 Act, this Plan describes the multiple
class system for certain series of shares of the Issuers, including the separate
class arrangements for shareholder services and/or distribution of shares, the
method for allocating expenses to classes and any related conversion features or
exchange privileges applicable to the classes. Upon the effective date of this
Plan, the Issuers elect to offer multiple classes of their shares, as described
herein, pursuant to Rule 18f-3 and this Plan.
Section 2. Features of the Classes
a. Division into Classes. Each series of shares of the Issuers identified
in SCHEDULE A attached hereto, and each series of shares of any Issuer
subsequently added to this Plan (collectively, the "Funds"), may offer
two or more classes of shares: the Retail Class, the Institutional
Class, the Service Class, and the Advisor Class. The classes that each
Fund is authorized to issue pursuant to this Plan are set forth in
SCHEDULE A. Shares of each class of a Fund shall represent an equal pro
rata interest in such Fund, and generally, shall have identical voting,
dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications, and terms and conditions,
except that: (A) each class shall have a different designation; (B)
each class of shares shall bear any Class Expenses, as defined in
Section 3d(3) below; (C) each class shall have exclusive voting rights
on any matter submitted to shareholders that relates solely to its
service arrangement; and (D) each class shall have separate voting
rights on any matter submitted to shareholders in which the interests
of one class differ from the interests of any other class.
b. Management Fees.
(1) Retail Class Unified Fee. The Issuers of the Funds listed on
SCHEDULE A are each party to a Management Agreement with Investors
Research Corporation ("IRC"), the Funds' investment adviser, for the
provision of investment advisory and management services in exchange
for a single, unified fee. Such Management Agreement and such unified
fee applies to each Fund's Retail Class of shares. Shares issued and
outstanding prior to the effective date of this Plan shall become
Retail Class shares following the effective date.
(2) Institutional Class Unified Fee. The Issuers of the Funds listed on
SCHEDULE A as being authorized to issue Institutional Class shares
shall enter into a Management Agreement with IRC providing for a
unified fee of 20 basis points less than the existing unified fee in
place for the corresponding Retail Class of such Funds, as described in
each Fund's current prospectus or prospectus supplement. Institutional
Class shares will be made available to large institutional
shareholders, such as corporations and retirement plans that are not
participant directed, and to other pooled accounts that meet certain
investment minimums established from time to time by IRC. Institutional
Class shares are not eligible for purchase by insurance companies,
except in connection with a product for defined benefit plans not
involving a group annuity contract.
(3) Service Class and Advisor Class Unified Fee. The Issuers of the
Funds listed on SCHEDULE A as being authorized to issue Service Class
or Advisor Class shares shall enter into a Management Agreement with
IRC providing for a unified fee of 25 basis points less than the
existing unified fee in place for the corresponding Retail Class of
such Funds, as described in each Fund's current prospectus or
prospectus supplement. The Service Class and Advisor Class are intended
to be sold to employer-sponsored retirement plans (including
participant directed plans), insurance companies, broker-dealers, banks
and other financial intermediaries.
c. Shareholder Services and Distribution Services.
(1) Shareholder Services Plan. Shares of the Service Class of each Fund
are offered subject to a Shareholder Services Plan (the "Service Class
Plan") adopted by the Issuers effective September 3, 1996. Shareholders
of the Service Class of each Fund typically receive most or all
shareholder services from independent third parties rather than from
Twentieth Century Services, Inc., the Funds' transfer agent. The cost
of some or all of such services is borne by the shareholders of the
Services Class through the payment of the Shareholder Services Fee
under the Service Class Plan.
Under the Service Class Plan, each Fund is authorized to pay to IRC, as
compensation for shareholder service activities rendered by IRC, its
affiliates, or independent third party service providers, to holders of
shares of the Service Class of a Fund, a shareholder service fee at the
rate of 0.25% on an annualized basis of the average net asset value of
each such class of shares of the Fund (the "Shareholder Services Fee").
Under the Service Class Plan, shareholder and administrative service
activities may include: (A) receiving, aggregating and processing purchase,
exchange and redemption request from beneficial owners of Service Class shares
(including contract owners of insurance products that utilize the Funds as
underlying investment media) and placing purchase, exchange and redemption
orders with the Funds' distributor and/or transfer agent; (B) providing
shareholders with a service that invests the assets of their accounts in shares
pursuant to specific or pre-authorized instructions; (C) processing dividend
payments from a Fund on behalf of shareholders and assisting shareholders in
changing dividend options, account designations and addresses; (D) providing and
maintaining elective services such as check writing and wire transfer services;
(E) acting as sole shareholder of record and nominee for beneficial owners; (F)
maintaining account records for shareholders; (G) issuing confirmations of
transactions; (H) providing subaccounting with respect to shares beneficially
owned by customers or providing the information to a Fund as necessary for such
subaccounting; (I) creating and forwarding shareholder communications from the
Funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to shareholders and/or
other beneficial owners; (J) providing other similar administrative and
sub-transfer agency services; and (K) paying "service fees," as contemplated by
the Rules of Fair Practice of the NASD. Shareholder Services do not include
those activities and expenses that are primarily intended to result in the sale
of additional shares of the Service Class or Advisor Class of the Funds.
(2) Distribution Plan. Shares of the Advisor Class of each Fund are
offered subject to a Master Distribution and Shareholder Services Plan
pursuant to Rule 12b-1 under the 1940 Act (the "Advisor Class Plan")
adopted by the Issuers effective September 3, 1996. Advisor Class
shares of each Fund shall pay IRC, as paying agent for the Funds, for
the expenses of shareholder and administrative services and
distribution expenses incurred in connection with providing such
services for shares of the Funds, as provided in the Advisor Class
Plan, at an aggregate annual rate of .50% of the average daily net
assets of such class.
Under the Advisor Class Plan, "distribution expenses" include, but are
not limited to, expenses incurred in connection with (A) payment of
sales commission, ongoing commissions and other payments to brokers,
dealers, financial institutions or others who sell Advisor Class shares
pursuant to Selling Agreements; (B) compensation to employees of
Distributor who engage in or support distribution of the Fund's Advisor
Class shares; (C) compensation to, and expenses (including overhead and
telephone expenses) of, Distributor; (D) the printing of prospectuses,
statements of additional information and reports for other than
existing shareholders; (E) the preparation, printing and distribution
of sales literature and advertising materials provided to the Funds'
shareholders and prospective shareholders; (F) receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder
reports; (G) the providing of facilities to answer questions from
prospective investors about Fund shares; (H) complying with federal and
state securities laws pertaining to the sale of Fund Shares; (I)
assisting investors in completing application forms and selecting
dividend and other account options; (J) the providing of other
reasonable assistance in connection with the distribution of Fund
shares; (K) the organizing and conducting of sales seminars and
payments in the form of transactional compensation or promotional
incentives; (L) profit on the foregoing; (M) the payment of "service
fees", as contemplated by the Rules of Fair Practice of the National
Association of Securities Dealers; and (N) such other distribution and
services activities as the Issuers determine may be paid for by the
Issuers pursuant to the terms of this Agreement and in accordance with
Rule 12b-1 of the 1940 Act.
Under the Advisor Class Plan, shareholder and administrative service
activities may include: (A) receiving, aggregating and processing purchase,
exchange and redemption request from beneficial owners of Advisor Class shares
(including contract owners of insurance products that utilize the Funds as
underlying investment media) and placing purchase, exchange and redemption
orders with the Funds' distributor and/or transfer agent; (B) providing
shareholders with a service that invests the assets of their accounts in shares
pursuant to specific or pre-authorized instructions; (C) processing dividend
payments from a Fund on behalf of shareholders and assisting shareholders in
changing dividend options, account designations and addresses; (D) providing and
maintaining elective services such as check writing and wire transfer services;
(E) acting as sole shareholder of record and nominee for beneficial owners; (F)
maintaining account records for shareholders; (G) issuing confirmations of
transactions; (H) providing subaccounting with respect to shares beneficially
owned by customers or providing the information to a Fund as necessary for such
subaccounting; (I) creating and forwarding shareholder communications from the
Funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to shareholders and/or
other beneficial owners; and (J) providing other similar administrative and
sub-transfer agency services.
Section 3. Allocation of Income and Expenses
a. Daily Dividend Funds. Funds that declare distributions of net
investment income daily to maintain the same net asset value per share
in each class ("Daily Dividend Funds") will allocate gross income and
expenses (other than Class Expenses, as defined below) to each class on
the basis of "relative net assets (settled shares)". Realized and
unrealized capital gains and losses will be allocated to each class on
the basis of relative net assets. "Relative net assets (settled
shares)," for this purpose, are net assets valued in accordance with
generally accepted accounting principles but excluding the value of
subscriptions receivable, in relation to the net assets of the
particular Daily Dividend Fund. Expenses to be so allocated include
Issuer Expenses and Fund Expenses, each as defined below.
b. Non-Daily Dividend Funds. The gross income, realized and unrealized
capital gains and losses and expenses (other than Class Expenses) of
each Fund, other than the Daily Dividend Funds, shall be allocated to
each class on the basis of its net asset value relative to the net
asset value of the Fund. Expenses to be so allocated also include
Issuer Expenses and Fund Expenses.
c. Apportionment of Certain Expenses. Expenses of a Fund shall be
apportioned to each class of shares depending on the nature of the
expense item. Issuer Expenses and Fund Expenses will be allocated among
the classes of shares pro rata based on their relative net asset values
in relation to the net asset value of all outstanding shares in the
Fund. Approved Class Expenses shall be allocated to the particular
class to which they are attributable. In addition, certain expenses may
be allocated differently if their method of imposition changes. Thus,
if a Class Expense can no longer be attributed to a class, it shall be
charged to a Fund for allocation among classes, as determined by IRC.
d. Definitions.
(1) Issuer Expenses. "Issuer Expenses" include expenses of an Issuer
that are not attributable to a particular Fund or class of a Fund.
Issuer Expenses include fees and expenses of those Directors who are
not "interested persons" as defined in the 1940 Act ("Independent
Directors"), including counsel fees for the Independent Directors, and
certain extraordinary expenses of the Issuer that are not attributable
to a particular Fund or class of a Fund.
(2) Fund Expenses. "Fund Expenses" include expenses of an Issuer that
are attributable to a particular fund but are not attributable to a
particular class of the Fund. Fund Expenses include (i) interest
expenses, (ii) taxes, (iii) brokerage expenses, and (iv) certain
extraordinary expenses of a Fund that are not attributable to a
particular class of a Fund.
(3) Class Expenses. "Class Expenses" are expenses that are attributable
to a particular class of a Fund and shall be limited to: (i) applicable
unified fee; (ii) payments made pursuant to the Advisor Class Plan;
(iii) payments made pursuant to the Service Class Plan; and (iv)
certain extraordinary expenses of an Issuer or Fund that are
attributable to a particular class of a Fund.
(4) Extraordinary Expenses. "Extraordinary expenses" shall be allocated
as an Issuer Expense, a Fund Expense or a Class Expense in such manner
and utilizing such methodology as IRC shall reasonably determine, which
determination shall be subject to ratification or approval of the Board
of Directors and shall be consistent with applicable legal principles
and requirements under the 1940 Act and the Internal Revenue Code, as
amended. IRC shall report to the Board of Directors quarterly regarding
those extraordinary expenses that have been allocated as Class
Expenses. Any such allocations shall be reviewed by, and subject to the
approval of, the Board of Directors.
Section 4. Exchange Privileges
Subject to the restrictions and conditions set forth in the Funds' prospectuses,
shareholders may (i) exchange shares of one class of a Fund for shares of the
same class of another Fund, (ii) exchange Retail Class shares for shares of any
fund within the Twentieth Century family of funds that only offers a single
class of shares (a "Single Class Fund"), and (iii) exchange shares of any Single
Class Fund for Retail Class shares of another Fund, provided that the amount to
be exchanged meets the applicable minimum investment requirements and the shares
to be acquired in the exchange are qualified for sale in the stockholder's state
of residence.
Section 5. Conversion Features
Conversions from one class of shares into another class of shares are not
permitted; provided, however, that if a shareholder of a particular class is no
longer eligible to own shares of that class, such shareholders' shares will be
converted to shares of the same Fund but of another class in which such
shareholder is eligible to invest. Similarly, if a shareholder becomes eligible
to invest in shares of another class that has lower expenses than the class in
which such shareholder is invested, such shareholder may be eligible to convert
into shares of the same Fund but of the class with the lower expenses.
Section 6. Quarterly and Annual Reports
The Board of Directors shall receive quarterly and annual reports concerning all
allocated Class Expenses and distribution and servicing expenditures complying
with paragraph (b)(3)(ii) of Rule 12b-1, as it may be amended from time to time.
In the reports, only expenditures properly attributable to the sale or servicing
of a particular class of shares will be used to justify any distribution or
servicing fee or other expenses charged to that class. Expenditures not related
to the sale or servicing of a particular class shall not be presented to the
Board of Directors to justify any fee attributable to that class. The reports,
including the allocations upon which they are based, shall be subject to the
review and approval of the Independent Directors of the Issuers who have no
direct or indirect financial interest in the operation of this Plan in the
exercise of their fiduciary duties.
Section 7. Waiver or Reimbursement of Expenses
Expenses may be waived or reimbursed by any adviser to the Issuers, by the
Issuers' underwriter or by any other provider of services to the Issuers without
the prior approval of the Issuers' Board of Directors, provided that the fee is
waived or reimbursed to all shares of a particular Fund in proportion to their
relative average daily net asset values.
Section 8. Effectiveness of Plan
Upon receipt of approval by votes of a majority of both (a) the Board of
Directors of the Issuers and (b) the Independent Directors, this Plan shall
become effective September 3, 1996.
Section 9. Material Modifications
This Plan may not be amended to modify materially its terms unless such
amendment is approved in the manner provided for initial approval in Section 8
herein.
IN WITNESS WHEREOF, the Issuers have adopted this Multiple Class Plan
as of the 31st day of May, 1996, to be effective September 3, 1996.
TWENTIETH CENTURY INVESTORS, TWENTIETH CENTURY WORLD
INC. INVESTORS, INC.
By:/s/William M. Lyons By:/s/William M. Lyons
William M. Lyons William M. Lyons
Executive Vice President Executive Vice President
TWENTIETH CENTURY CAPITAL TWENTIETH CENTURY STRATEGIC
PORTFOLIOS, INC. ASSET ALLOCATIONS, INC.
By:/s/William M. Lyons By:/s/William M. Lyons
William M. Lyons William M. Lyons
Executive Vice President Executive Vice President
<TABLE>
<CAPTION>
SCHEDULE A
Companies and Funds Covered by this Multiclass Plan
- ------------------------------------------------------------ ----------- -------------------- ------------- -------------------
Retail Institutional Service Advisor
Fund Class Class Class Class
- ------------------------------------------------------------ ----------- -------------------- ------------- -------------------
<S> <C> <C> <C> <C>
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
0 Twentieth Century Equity Income
0 Twentieth Century Value Yes Yes Yes Yes
Yes Yes Yes Yes
- ------------------------------------------------------------ ----------- -------------------- ------------- -------------------
TWENTIETH CENTURY INVESTORS, INC.
0 Balanced Investors Yes Yes Yes Yes
0 Cash Reserve Yes No Yes Yes
0 Growth Investors Yes Yes Yes Yes
0 Heritage Investors Yes Yes Yes Yes
0 Intermediate-Term Bond Yes No Yes Yes
0 Limited-Term Bond Yes No Yes Yes
0 Long-Term Bond Yes No Yes Yes
0 Select Investors Yes Yes Yes Yes
0 U.S. Governments Intermediate-Term Yes No Yes Yes
0 U.S. Governments Short-Term Yes No Yes Yes
0 Ultra Investors Yes Yes Yes Yes
0 Vista Investors Yes Yes Yes Yes
0 Giftrust Investors Yes No No No
0 Tax Exempt Short-Term Yes No No No
0 Tax Exempt Intermediate-Term Yes No No No
0 Tax Exempt Long-Term Yes No No No
- ------------------------------------------------------------ ----------- -------------------- ------------- -------------------
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
0 Strategic Allocation: Aggressive
0 Strategic Allocation: Conservative Yes No Yes Yes
0 Strategic Allocation: Moderate Yes No Yes Yes
Yes No Yes Yes
- ------------------------------------------------------------ ----------- -------------------- ------------- -------------------
TWENTIETH CENTURY WORLD INVESTORS, INC.
0 Twentieth Century International Emerging Markets
0 Twentieth Century International Equity Yes Yes Yes Yes
0 Twentieth Century International Discovery Yes Yes Yes Yes
Yes Yes Yes Yes
- ------------------------------------------------------------ ----------- -------------------- ------------- -------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000908186
<NAME> AMERICAN CENTURY VALUE FUND
<SERIES>
<NUMBER> 1
<NAME> AMERICAN CENTURY VALUE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997 <F1>
<INVESTMENTS-AT-COST> 2,108,271,374
<INVESTMENTS-AT-VALUE> 2,395,004,074
<RECEIVABLES> 34,808,473
<ASSETS-OTHER> 4,342,860
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,434,155,407
<PAYABLE-FOR-SECURITIES> 10,686,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,513,292
<TOTAL-LIABILITIES> 17,200,019
<SENIOR-EQUITY> 2,934,255
<PAID-IN-CAPITAL-COMMON> 1,807,902,832
<SHARES-COMMON-STOCK> 293,425,495
<SHARES-COMMON-PRIOR> 269,569,743
<ACCUMULATED-NII-CURRENT> 434,837
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 318,433,899
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 287,249,565
<NET-ASSETS> 2,416,955,388
<DIVIDEND-INCOME> 27,193,807
<INTEREST-INCOME> 1,789,784
<OTHER-INCOME> 0
<EXPENSES-NET> 10,556,723
<NET-INVESTMENT-INCOME> 18,426,868
<REALIZED-GAINS-CURRENT> 227,359,818
<APPREC-INCREASE-CURRENT> 241,116,270
<NET-CHANGE-FROM-OPS> 486,902,956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,635,977
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72,229,628
<NUMBER-OF-SHARES-REDEEMED> 50,592,232
<SHARES-REINVESTED> 2,218,356
<NET-CHANGE-IN-ASSETS> 644,123,272
<ACCUMULATED-NII-PRIOR> (356,054)
<ACCUMULATED-GAINS-PRIOR> 91,074,091
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,457,374
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,556,723
<AVERAGE-NET-ASSETS> 2,019,933,123
<PER-SHARE-NAV-BEGIN> 6.58<F2>
<PER-SHARE-NII> 0.06<F2>
<PER-SHARE-GAIN-APPREC> 1.66<F2>
<PER-SHARE-DIVIDEND> 0.06<F2>
<PER-SHARE-DISTRIBUTIONS> 0.00<F2>
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.24<F2>
<EXPENSE-RATIO> 1.00<F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1>SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2>INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000908186
<NAME> AMERICAN CENTURY EQUITY INCOME FUND
<SERIES>
<NUMBER> 2
<NAME> AMERICAN CENTURY EQUITY INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997 <F1>
<INVESTMENTS-AT-COST> 253,536,799
<INVESTMENTS-AT-VALUE> 277,406,888
<RECEIVABLES> 3,688,298
<ASSETS-OTHER> 833,802
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 281,928,988
<PAYABLE-FOR-SECURITIES> 1,164,923
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 868,546
<TOTAL-LIABILITIES> 2,033,469
<SENIOR-EQUITY> 363,800
<PAID-IN-CAPITAL-COMMON> 217,884,627
<SHARES-COMMON-STOCK> 36,379,958
<SHARES-COMMON-PRIOR> 31,588,347
<ACCUMULATED-NII-CURRENT> 275,529
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37,469,727
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,901,836
<NET-ASSETS> 279,895,519
<DIVIDEND-INCOME> 5,122,068
<INTEREST-INCOME> 1,074,024
<OTHER-INCOME> 0
<EXPENSES-NET> 1,214,152
<NET-INVESTMENT-INCOME> 4,981,940
<REALIZED-GAINS-CURRENT> 24,959,890
<APPREC-INCREASE-CURRENT> 21,418,210
<NET-CHANGE-FROM-OPS> 51,360,040
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,638,137
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,872,514
<NUMBER-OF-SHARES-REDEEMED> 6,676,540
<SHARES-REINVESTED> 595,637
<NET-CHANGE-IN-ASSETS> 80,488,826
<ACCUMULATED-NII-PRIOR> (356,054)
<ACCUMULATED-GAINS-PRIOR> 91,074,081
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,212,343
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,214,152
<AVERAGE-NET-ASSETS> 233,990,483
<PER-SHARE-NAV-BEGIN> 6.31<F2>
<PER-SHARE-NII> 0.14<F2>
<PER-SHARE-GAIN-APPREC> 1.37<F2>
<PER-SHARE-DIVIDEND> 0.13<F2>
<PER-SHARE-DISTRIBUTIONS> 0.00<F2>
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.69<F2>
<EXPENSE-RATIO> 1.00<F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1>SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2>INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY CAPITAL PORTFOLIOS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL
CLASSES, EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATA).
IN THOSE CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<CIK> 0000908186
<NAME> AMERICAN CENTURY REAL ESTATE FUND
<SERIES>
<NUMBER> 3
<NAME> AMERICAN CENTURY REAL ESTATE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997 <F1>
<INVESTMENTS-AT-COST> 84,065,142
<INVESTMENTS-AT-VALUE> 89,545,500
<RECEIVABLES> 508,975
<ASSETS-OTHER> 875,280
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90,929,755
<PAYABLE-FOR-SECURITIES> 469,095
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163,841
<TOTAL-LIABILITIES> 632,936
<SENIOR-EQUITY> 56,223
<PAID-IN-CAPITAL-COMMON> 82,515,762
<SHARES-COMMON-STOCK> 5,622,264
<SHARES-COMMON-PRIOR> 586,383
<ACCUMULATED-NII-CURRENT> 239,230
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,005,246
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,480,358
<NET-ASSETS> 90,296,819
<DIVIDEND-INCOME> 1,490,106
<INTEREST-INCOME> 92,427
<OTHER-INCOME> 0
<EXPENSES-NET> 318,216
<NET-INVESTMENT-INCOME> 1,264,317
<REALIZED-GAINS-CURRENT> 2,097,147
<APPREC-INCREASE-CURRENT> 4,737,101
<NET-CHANGE-FROM-OPS> 8,098,565
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 823,388
<DISTRIBUTIONS-OF-GAINS> 643,767
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,331,301
<NUMBER-OF-SHARES-REDEEMED> 2,381,513
<SHARES-REINVESTED> 86,093
<NET-CHANGE-IN-ASSETS> 83,087,463
<ACCUMULATED-NII-PRIOR> 87,808
<ACCUMULATED-GAINS-PRIOR> 200,443
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 295,909
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 318,216
<AVERAGE-NET-ASSETS> 29,106,097
<PER-SHARE-NAV-BEGIN> 12.29<F2>
<PER-SHARE-NII> 0.67<F2>
<PER-SHARE-GAIN-APPREC> 4.13<F2>
<PER-SHARE-DIVIDEND> 0.48<F2>
<PER-SHARE-DISTRIBUTIONS> 0.55<F2>
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.06<F2>
<EXPENSE-RATIO> 1.17<F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1>SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2>INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
