SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
File No. 33-64872
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
File No. 811-7820
Amendment No. 17 [X]
(Check appropriate box or boxes.)
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
_________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
4500 Main Street, Kansas City, MO 64111
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 531-5575
David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111
_________________________________________________________________
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: August 1, 2000
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
[front cover]
Your
AMERICAN CENTURY
prospectus
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
AUGUST 1, 2000
INVESTOR CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors
[american century logo(reg.sm)]
American
Century
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more impor-tantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.
An Overview of the Funds - Learn about fund goals, strategies and risks, and who
may or may not want to invest.
Fund Performance History - See how the funds performed from year to year.
Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.
As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, an Investor Relations Representative will be
happy to help weekdays, 7 a.m. to 7 p.m. and Saturdays, 9 a.m. to 2 p.m. Central
time. Give us a call at 1-800-345-2021.
Sincerely,
[signature of Mark Killen]
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[left margin]
[american century logo(reg.sm)]
American
Century
American Century
Investments
P.O. Box 419200
Kansas City, MO
64141-6200
TABLE OF CONTENTS
An Overview of the Funds .................................................. 4
Fund Performance History .................................................. 5
Fees and Expenses ......................................................... 7
Objectives, Strategies and Risks .......................................... 8
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
Management ................................................................ 12
Investing with American Century ........................................... 15
Share Price and Distributions ............................................. 20
Taxes ..................................................................... 21
Multiple Class Information ................................................ 22
Financial Highlights ...................................................... 23
[left margin]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[graphic of finger pointing]
This symbol highlights special information and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
Large Cap Value, Value and Small Cap Value seek long-term capital growth. Income
is a secondary objective.
Equity Income seeks current income. Capital appreciation is a secondary
objective.
WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
In selecting stocks for Large Cap Value, Value and Small Cap Value, the fund
managers look for companies whose stock price is less than they believe the
company is worth. The managers attempt to purchase the stocks of these
undervalued companies and hold them until their stock price has increased to ,
or is higher than, a level the managers believe more accurately reflects the
fair value of the company. For Equity Income, the fund managers look for stocks
of companies with a favorable dividend-paying history and secondarily, for
potential increase in share price.
The chart below shows the primary differences among the funds. A more detailed
description of the funds' investment strategies and risks begins on page 8 .
Fund Primary Investments
----------------------------------------------------------------------------------------
Large Cap Value Equity securities of larger companies
----------------------------------------------------------------------------------------
Value Equity securities of small, medium and large companies
----------------------------------------------------------------------------------------
Small Cap Value Equity securities of smaller companies
----------------------------------------------------------------------------------------
Equity Income Equity securities of companies with a favorable dividend-paying history
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
If the market does not consider the individual stocks purchased by the funds to
be undervalued, if their stock prices decline, or if the stocks purchased by
Equity Income do not continue or increase dividend payments, the value of the
funds' shares may decline, even if stock prices generally are rising.
The smaller companies in which Small Cap Value invests may present greater
opportunities for capital appreciation than larger companies, but also may
present greater risks.
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you are
* seeking long-term capital growth and income from your investment
* comfortable with the risks associated with the funds' investment strategies
* comfortable with the funds' short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
* investing for a short period of time
* not seeking income from an equity investment
* uncomfortable with short-term volatility in the value of your investment
[left margin]
[graphic of finger pointing]
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
4 American Century Investments 1-800-345-2021
FUND PERFORMANCE HISTORY
VALUE FUND
SMALL CAP VALUE FUND
EQUITY INCOME FUND
Annual Total Returns(1)
The following bar chart shows the performance of the funds' Investor Class
shares for each full calendar year in the life of the funds. It indicates the
volatility of the funds' historical returns from year to year. Large Cap Value
is not included because it does not yet have a full calendar year of
performance.
[bar chart data below]
Value
1999 -0.80%
1998 4.99%
1997 26.01%
1996 24.25%
1995 32.80%
Small Cap Value
1999 -0.86%
Equity Income
1999 -0.18%
1998 12.97%
1997 28.26%
1996 23.31%
1995 29.63%
1994 3.99%
(1) As of June 30, 2000, the end of the most recent calendar quarter, the funds'
year-to-date returns were: Value, -3.72%; Small Cap Value, 11.05%; and
Equity Income, 0.20% .
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
--------------------------------------------------------------------------------
Value 18.45% (2Q 1999) -11.00% (3Q 1999)
--------------------------------------------------------------------------------
Small Cap Value 15.80% (2Q 1999) -7.88% (3Q 1999)
--------------------------------------------------------------------------------
Equity Income 14.19% (4Q 1998) -6.23% (3Q 1998)
[left margin]
[graphic of finger pointing]
The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.
www.americancentury.com American Century Investments 5
Average Annual Returns
The following table shows the average annual total returns of the funds'
Investor Class shares for the periods indicated. The S&P 500 is viewed as a
broad measure of U.S. stock performance, while the S&P 500/BARRA Value Index
consists of S&P 500 stocks that have lower price/book ratios and, in
general, share other characteristics associated with value stocks. The Lipper
Multicap Value Index is an index of multicap value funds that have management
styles similar to Value.
Value's benchmark was changed from the S&P 500/BARRA Value Index to the
Lipper Multicap Value Index beginning January 1, 2000. The fund's advisor
believes the latter index better represents the types of value stocks in which
the fund invests.
The S&P SmallCap 600/BARRA Value Index consists of S&P 600 stocks that
have lower price/book ratios. The S&P SmallCap 600 Index consists of 600
domestic stocks chosen for market size, liquidity and industry group
representation.
The Lipper Equity Income Fund Index is a non-weighted index of the 30 largest
equity income mutual funds. Large Cap Value is not included because it does not
yet have a full calendar year of performance.
For the calendar year ended December 31, 1999 1 year 5 years Life of Fund (1)
----------------------------------------------------------------------------------------------
Value -0.80% 16.70% 14.22%
Lipper Multicap Value Index 5.94% 17.82% 12.70%
S&P 500 Index 21.04% 28.56% 22.49%
S&P 500/BARRA Value Index 12.72% 22.94% 17.67%
----------------------------------------------------------------------------------------------
Small Cap Value -0.86% N/A 1.70%
S&P SmallCap 600/BARRA Value Index 3.03% N/A 0.41%
----------------------------------------------------------------------------------------------
Equity Income -0.18% 18.24% 16.85%
Lipper Equity Income Index 4.19% 17.80% 16.07%
S&P 500 Index 21.04% 28.56% 26.43%
(1) The inception dates for the funds are Value, September 1, 1993; Small Cap
Value, July 31, 1998; and Equity Income, August 1, 1994.
[left margin]
[graphic of finger pointing]
For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.
6 American Century Investments 1-800-345-2021
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Investor Class shares of other American Century funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses(2) Operating Expenses
---------------------------------------------------------------------------------------------------
Large Cap Value 0.90%(1) None 0.00% 0.90%
---------------------------------------------------------------------------------------------------
Value 1.00% None 0.00% 1.00%
---------------------------------------------------------------------------------------------------
Small Cap Value 1.25% None 0.00% 1.25%
---------------------------------------------------------------------------------------------------
Equity Income 1.00% None 0.00% 1.00%
1 Based on expenses incurred during the fund's most recent fiscal year. The fund
has a stepped fee schedule. As a result, the fund's management fee rate
generally decreases as fund assets increase.
2 Other expenses, which include the fees and expenses of the funds' independent
directors and their legal counsel, as well as interest, were less than 0.005%
for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
----------------------------------------------------------------------------------
Large Cap Value $92 $286 $497 $1,104
----------------------------------------------------------------------------------
Value $102 $318 $551 $1,219
----------------------------------------------------------------------------------
Small Cap Value $127 $395 $683 $1,503
----------------------------------------------------------------------------------
Equity Income $102 $318 $551 $1,219
[left margin]
[graphic of finger pointing]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
www.americancentury.com American Century Investments 7
OBJECTIVES, STRATEGIES AND RISKS
LARGE CAP VALUE FUND
VALUE FUND
SMALL CAP VALUE FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek long-term capital growth. Income is a secondary objective.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
The fund managers look for stocks of companies that they believe are undervalued
at the time of purchase. The managers use a value investment strategy that looks
for companies that are temporarily out of favor in the market. The managers
attempt to purchase the stocks of these undervalued companies and hold them
until they have returned to favor in the market and their stock prices have gone
up. Large Cap Value's managers also consider the diversification of the fund in
determining when to sell securities.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 65% of the funds' assets
invested in U.S. equity securities at all times. When the managers believe it is
prudent, the funds may invest a portion of their assets in convertible debt
securities, equity-equivalent securities, foreign securities, debt securities of
companies, debt obligations of governments and their agencies, NONLEVERAGED
stock index futures contracts and other similar securities. Stock index futures
contracts, a type of derivative security, can help the funds' cash assets remain
liquid while performing more like stocks. The funds have a policy governing
stock index futures and similar derivative securities to help manage the risk of
these types of investments. For example, the fund managers cannot invest in a
derivative security if it would be possible for a fund to lose more money than
it invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
In the event of exceptional market or economic conditions, a fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or short-term debt securities. To the extent a fund assumes a defensive
position, it will not be pursuing its objective of capital growth. A fund
generally limits its purchase of debt securities to investment-grade
obligations, except for convertible debt securities which may be rated below
investment grade.
Additional information about the funds' investments is available in their annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
8 American Century Investments 1-800-345-2021
WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?
* Large Cap Value invests primarily in larger companies. Under normal market
conditions, the fund will have at least 65% of its assets invested in U.S.
equity securities of issuers ranking generally among the 1,000 largest companies
in the United States as measured by their MARKET CAPITALIZATION.
* Value invests in companies of all sizes. Under normal market conditions, the
fund will have at least 65% of its assets invested in U.S. equity securities.
Although the fund managers invest in companies of all sizes, the fund's overall
characteristics are most similar to those in the mid-cap arena.
* Small Cap Value invests primarily in smaller companies. Under normal market
conditions, the fund will have at least 65% of its assets invested in U.S.
equity securities of issuers that the fund managers believe to be smaller
companies as measured by their market capitalization. The fund managers consider
smaller companies to include those with a market capitalization no bigger than
that of the largest company in the S&P SMALLCAP 600/BARRA VALUE INDEX.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the funds.
If the market does not consider the individual stocks purchased by a fund to be
undervalued, the value of a fund's shares may not rise as high as other funds
and may in fact decline, even if stock prices generally are increasing.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the fund's style, the fund's gains may not be as big as, or its losses may be
bigger than, other equity funds using different investment styles.
Because Small Cap Value generally invests in smaller companies than American
Century's similarly managed value funds (such as Value, Large Cap Value and
Equity Income), it may be more volatile, and subject to greater short-term risk,
than those funds. Smaller companies may have limited financial resources,
product lines and markets, and their securities may trade less frequently and in
more limited volumes than the securities of larger companies. In addition,
smaller companies may have less publicly available information and, when
available, it may be inaccurate or incomplete.
Although the fund managers intend to invest the funds' assets primarily in U.S.
stocks, the funds may invest in securities of foreign companies. Foreign
investment involves additional risks, including fluctuations in currency
exchange rates, less stable political and economic structures, reduced
availability of public information, and lack of uniform financial reporting and
regulatory practices similar to those that apply in the United States. These
factors make investing in foreign securities generally riskier than investing in
U.S. stocks.
[left margin]
MARKET CAPITALIZATION is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share
The S&P SMALLCAP 600/BARRA VALUE INDEX is an unmanaged stock index that
tracks the performance of small companies that may be attractive to investors
using the value style of investing. As of June 30, 2000, the largest company
contained in the index had a market capitalization of $3.4 billion, while the
median company in the index had a market capitalization of $363 million.
www.americancentury.com American Century Investments 9
EQUITY INCOME FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVES?
Equity Income seeks to provide current income. Capital appreciation is a
secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund managers look for stocks with a favorable dividend-paying history that
have prospects for dividend payments to continue or increase. Secondarily, the
fund managers look for the possibility that the stock price may increase. The
fund seeks to receive dividend payments that provide a yield that exceeds the
yield of the stocks comprising the S&P 500 Index.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges. The fund managers also look for companies whose
dividend payments appear high when compared to the stock price.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 85% of the fund's assets
invested in income-paying securities and at least 65% of its assets in U.S.
equity securities. When the managers believe it is prudent, the fund may invest
a portion of its assets in convertible debt securities, equity-equivalent
securities, foreign securities, debt securities of companies, debt obligations
of governments and their agencies, NONLEVERAGED stock index futures contracts
and other similar securities. Stock index futures contracts, a type of
derivative security, can help the fund's cash assets remain liquid while
performing more like stocks. The fund has a policy governing stock index futures
and similar derivative securities to help manage the risk of these types of
investments. For example, the fund managers cannot invest in a derivative
security if it would be possible for the fund to lose more money than it
invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
In the event of exceptional market or economic conditions, the fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or short-term debt securities. To the extent the fund assumes a
defensive position, it will not be pursuing its objective of capital growth. The
fund generally limits its purchase of debt securities to investment-grade
obligations, except for convertible debt securities which may be rated below
investment grade.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
10 American Century Investments 1-800-345-2021
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
If the individual stocks purchased by the fund do not continue or increase
dividend payments, or if their stock price does not increase, the value of the
fund's shares may not increase as quickly as other funds and may decline, even
if stock prices generally are rising.
The value of the fund's assets invested in bonds and other fixed-income
securities will go up and down as prevailing interest rates change. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline.
Although the fund managers intend to invest the fund's assets primarily in U.S.
stocks, the fund may invest in securities of foreign companies. Foreign
investment involves additional risks, including fluctuations in currency
exchange rates, less stable political and economic structures, reduced
availability of public information, and lack of uniform financial reporting and
regulatory practices similar to those that apply in the United States. These
factors make investing in foreign securities generally riskier than investing in
U.S. stocks.
www.americancentury.com American Century Investments 11
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Investor Class shares of each fund. The amount of the
management fee for a fund is calculated on a class-by-class basis daily and paid
monthly.
Out of that fee, the advisor paid all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended March 31, 2000
--------------------------------------------------------------------------------
Large Cap Value 0.90%
--------------------------------------------------------------------------------
Value 1.00%
--------------------------------------------------------------------------------
Small Cap Value 1.25%
--------------------------------------------------------------------------------
Equity Income 1.00%
12 American Century Investments 1-800-345-2021
THE FUND MANAGEMENT TEAMS
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. The teams meet regularly to review portfolio
holdings, and discuss purchase and sale activity. Team members buy and sell
securities for a fund as they see fit, guided by the fund's investment objective
and strategy.
The portfolio managers on the investment teams are identified below.
Large Cap Value
MARK MALLON
Mr. Mallon, Chief Investment Officer--Value and Quantitative Equities and Senior
Vice President, has been a member of the team that manages Large Cap Value since
its inception in July 1999. He joined American Century in April 1997. From
August 1978 until he joined American Century, he was employed in several
positions by Federated Investors and served as President and Chief Executive
Officer of Federated Investment Counseling and Executive Vice President of
Federated Research Corporation since January 1990. He has a bachelor of arts
from Westminster College and an MBA from Cornell University. He is a Chartered
Financial Analyst.
CHARLES RITTER
Mr. Ritter, Vice President and Portfolio Manager, has been a member of the team
that manages Large Cap Value since its inception in July 1999. He joined
American Century in December 1998. Before joining American Century, he spent 15
years with Federated Investors, most recently serving as a Vice President and
Portfolio Manager. He has a bachelor's degree in mathematics and a master's
degree in economics from Carnegie Mellon University. He also has an MBA from the
University of Chicago. He is a Chartered Financial Analyst.
Value and Equity Income
PHILLIP N. DAVIDSON
Mr. Davidson, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages Value and Equity Income since joining American
Century in September 1993. Prior to joining American Century, he spent 11 years
at Boatmen's Trust Company in St. Louis and served as Vice President and
Portfolio Manager responsible for institutional value equity clients. He has a
bachelor's degree in finance and an MBA from Illinois State University.
SCOTT A. MOORE
Mr. Moore, Vice President and Portfolio Manager, has been a member of the team
that manages Value and Equity Income since October 1996 and Portfolio Manager
since February 1999. He joined American Century in August 1993 as an Investment
Analyst. He has a bachelor's degree in finance from Southern Illinois University
and an MBA in finance from the University of Missouri-Columbia. He is a
Chartered Financial Analyst.
[left margin]
[graphic of finger pointing]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the funds to obtain approval before executing permitted personal trades.
www.americancentury.com American Century Investments 13
Small Cap Value
R. TODD VINGERS
Mr. Vingers, Portfolio Manager, has been a member of the team that manages Small
Cap Value since its inception in July 1998. He joined American Century in August
1994 as an Investment Analyst. He has a bachelor's degree in business
administration from the University of St. Thomas and an MBA in finance and
accounting from the University of Chicago. He is a Chartered Financial Analyst.
BENJAMIN Z. GIELE
Mr. Giele, Portfolio Manager, has been a member of the team that manages Small
Cap Value since its inception in July 1998 and Portfolio Manager since February
1999. He joined American Century in May 1998 as an Investment Analyst. Before
joining American Century, he served as an Investment Analyst at USAA Investment
Management Company from June 1995 to May 1998 and as an Investment Analyst at
Texas Commerce Investment Management from July 1992 to June 1995. He has a
bachelor of arts from Rice University and an MBA in finance and accounting from
the University of Texas-Austin. He is a Chartered Financial Analyst.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Directors may change any other policies
and investment strategies.
14 American Century Investments 1-800-345-2021
INVESTING WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE
Investor Relations
1-800-345-2021
Business, Not-For-Profit
and Employer-Sponsored
Retirement Plans
1-800-345-3533
Automated Information Line
1-800-345-8765
[graphic of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call or use our Automated Information Line if you have authorized us to invest
from your bank account.
SELL SHARES Call a Service Representative.
--------------------------------------------------------------------------------
ONLINE
www.americancentury.com
[graphic of computer]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Exchange shares from another American Century account.
MAKE ADDITIONAL INVESTMENTS
Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.
SELL SHARES Not available.
--------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419200
Kansas City, MO 64141-6200
Fax
816-340-7962
[graphic of envelope]
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.
SELL SHARES
Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
www.americancentury.com American Century Investments 15
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce expenses and demonstrate respect for our environment, we will deliver
a single copy of most financial reports and prospectuses to investors who share
an address, even if the accounts are registered under different names. If you
would like to receive separate mailings, please call us and we will begin
individual delivery within 30 days. If you'd like to reduce mailbox clutter even
more, visit www.americancentury.com and sign up to receive these documents by
email. In most cases, we also will deliver account statements for all the
investors in a household in a single envelope.
YOUR GUIDE TO SERVICES AND POLICIES
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the funds and the transfer agent.
--------------------------------------------------------------------------------
AUTOMATICALLY
[graphic of arrows in circle]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
--------------------------------------------------------------------------------
BY WIRE
Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.
[graphic of wire machine]
OPEN AN ACCOUNT
Call to set up your account or mail a completed application to the address
provided in the "By mail" section. Give your bank the following information to
wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number*
* Your name
* The contribution year (for IRAs only)
*For additional investments only
MAKE ADDITIONAL INVESTMENTS Follow the wire instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES Not available.
--------------------------------------------------------------------------------
IN PERSON
[graphic of person]
If you prefer to handle your transactions in person, visit one of our Investor
Centers and a representative can help you open an account, make additional
investments, and sell or exchange shares.
4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
1665 Charleston Road 9445 East County Line Road, Suite A
Mountain View, California Englewood, Colorado
8 a.m. to 5 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
16 American Century Investments 1-800-345-2021
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account, the minimum investments are:
--------------------------------------------------------------------------------
Individual or Joint $2,500
--------------------------------------------------------------------------------
Traditional IRA $1,000
--------------------------------------------------------------------------------
Roth IRA $1,000
--------------------------------------------------------------------------------
Education IRA $500
--------------------------------------------------------------------------------
UGMA/UTMA $2,500
--------------------------------------------------------------------------------
403(b) $1,000(1)
--------------------------------------------------------------------------------
Qualified Retirement Plans $2,500(2)
(1) American Century will waive the minimum if: (a) you contribute at least $50
a month in each fund you select or, (b) your plan contribution is less than $50
a month and is invested in one fund.
(2) The minimum investment requirements may be different for some types of
retirement accounts.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. Each fund reserves the right to suspend the offering of shares for a period
of time, and each fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
www.americancentury.com American Century Investments 17
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
[left margin]
[graphic of finger pointing]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
18 American Century Investments 1-800-345-2021
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
these intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.
[left margin]
[graphic of finger pointing]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
www.americancentury.com American Century Investments 19
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of each fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that the funds will not be subject to state or federal
income tax on amounts distributed. The distributions generally consist of
dividends and interest received by a fund, as well as CAPITAL GAINS realized on
the sale of investment securities.
The funds pay distributions of substantially all of their income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. They may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day a distribution is declared, you will not receive that distribution. If you
redeem shares, you will receive any distribution declared on the day you redeem.
If you redeem all shares, we will include any distributions received with your
redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For investors investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information about distributions and your options
for receiving them.
[left margin]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
20 American Century Investments 1-800-345-2021
TAXES
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
--------------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
--------------------------------------------------------------------------------------
Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
[left margin]
[graphic of finger pointing]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The funds distribute those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
www.americancentury.com American Century Investments 21
MULTIPLE CLASS INFORMATION
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Investor Class shares and have no up-front or deferred charges, commissions, or
12b-1 fees.
American Century offers the other classes of shares primarily through
employer-sponsored retirement plans, or through institutions like banks,
broker-dealers and insurance companies. The other classes have different fees,
expenses and/or minimum investment requirements from the Investor Class. The
difference in the fee structures between 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 advisor 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 for Advisor or Institutional Class
shares. You also can 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 between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
22 American Century Investments 1-800-345-2021
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next few pages itemize what contributed to the changes in
share price during the most recently ended fiscal year. They also show the
changes in share price for this period in comparison to changes over the last
five fiscal years.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* TOTAL RETURN -- the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO -- the operating expenses as a percentage of average net asset
* NET INCOME RATIO -- the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER -- the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
funds' annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 23
LARGE CAP VALUE FUND
Investor Class
For a Share Outstanding Throughout the Period Indicated
Per-Share Data
2000(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.00
---------
Income From Investment Operations
Net Investment Income(2) 0.05
Net Realized and Unrealized Loss on Investment Transactions (0.41)
---------
Total From Investment Operations (0.36)
---------
Distributions
From Net Investment Income (0.05)
---------
Net Asset Value, End of Period $4.59
=========
Total Return(3) (7.22)%
Ratios/Supplemental Data
2000(1)
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.90% (4)
Ratio of Net Investment Income to Average Net Assets 1.72% (4)
Portfolio Turnover Rate 51%
Net Assets, End of Period (in thousands) $12,67
(1) July 30, 1999 (inception) through March 31, 2000.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
24 American Century Investments 1-800-345-2021
VALUE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.77 $7.73 $6.58 $6.32 $5.46
-------------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 0.09 0.08 0.10 0.12 0.13
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.01) (0.80) 2.35 0.87 1.34
------------------------------------------------------
Total From Investment Operations 0.08 (0.72) 2.45 0.99 1.47
-----------------------------------------------------
Distributions
From Net Investment Income. (0.09) (0.09) (0.10) (0.12) (0.12)
In Excess of Net Investment Income -- -- -- --(2) (0.01)
From Net Realized Gains on Investment Transactions .-- (1.15) (1.20) (0.61) (0.48)
In Excess of Net Realized Gains on
Investment Transactions (0.41) -- -- -- --
-------------------------------------------------------
Total Distributions (0.50) (1.24) (1.30) (0.73) (0.61)
------------------------------------------------------
Net Asset Value, End of Period $5.35 $5.77 $7.73 $6.58 $6.32
=======================================================
Total Return(3) 1.42% (9.88)% 39.94% 15.92% 28.06%
Ratios/Supplemental Data
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.97%
Ratio of Net Investment Income to Average Net Assets 1.48% 1.19% 1.38% 1.86% 2.17%
Portfolio Turnover Rate 115% 130% 130% 111% 145%
Net Assets, End of Period (in thousands) $1,388,646 $1,719,367 $2,713,562 $1,743,582 $881,885
(1) Computed using average shares outstanding throughout the period.
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 25
SMALL CAP VALUE FUND
Investor Class
For a Share Outstanding Throughout the Period Indicated
Per-Share Data
2000 1999(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.73 $5.00
-----------------------------
Income From Investment Operations
Net Investment Income(2) 0.05 0.03
Net Realized and Unrealized Gain (Loss)
on Investment Transactions 0.60 (0.24)
-----------------------------
Total From Investment Operations 0.65 (0.21)
-----------------------------
Distributions
From Net Investment Income (0.06) (0.02)
From Net Realized Gains on Investment Transactions (0.17) (0.02)
In Excess of Net Realized Gains on
Investment Transactions (0.11) (0.02)
-----------------------------
Total Distributions (0.34) (0.06)
-----------------------------
Net Asset Value, End of Period $5.04 $4.73
=============================
Total Return(3) 14.37% (4.24)%
Ratios/Supplemental Data
2000 1999(1)
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25%(4)
Ratio of Net Investment Income to Average Net Assets 1.04% 1.02%(4)
Portfolio Turnover Rate 178% 153%
Net Assets, End of Period (in thousands) $17,690 $11,410
(1) July 31, 1998 (inception) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
26 American Century Investments 1-800-345-2021
EQUITY INCOME FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.95 $7.15 $6.31 $6.10 $5.42
--------------------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 0.21 0.22 0.25 0.22 0.20
Net Realized and Unrealized Gain (Loss) on
Investment Transactions 0.03 (0.23) 1.99 0.75 1.13
--------------------------------------------------------------
Total From Investment Operations 0.24 (0.01) 2.24 0.97 1.33
--------------------------------------------------------------
Distributions
From Net Investment Income. (0.21) (0.23) (0.24) (0.21) (0.19)
In Excess of Net Investment Income -- -- -- --(2) (0.01)
From Net Realized Gains on Investment Transactions (0.02) (0.96) (1.16) (0.55) (0.45)
In Excess of Net Realized Gains on
Investment Transactions (0.46) -- -- -- --
---------------------------------------------------------------
Total Distributions (0.69) (1.19) (1.40) (0.76) (0.65)
---------------------------------------------------------------
Net Asset Value, End of Period $5.50 $5.95 $7.15 $6.31 $6.10
===============================================================
Total Return(3) 3.88% (0.44)% 37.78% 16.24% 25.67%
Ratios/Supplemental Data
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.98%
Ratio of Net Investment Income to Average Net Assets 3.41% 3.31% 3.52% 3.46% 3.51%
Portfolio Turnover Rate 141% 180% 158% 159% 170%
Net Assets, End of Period (in thousands) $282,692 $296,585 $355,962 $199,388 $116,692
(1) Computed using average shares outstanding throughout the period.
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 27
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]
By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo (reg.sm)]
American
Century
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
0008
SH-PRS-20873
Your
AMERICAN CENTURY
prospectus
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
AUGUST 1, 2000
ADVISOR CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.
An Overview of the Funds - Learn about fund goals, strategies and risks, and who
may or may not want to invest.
Fund Performance History - See how the funds performed from year to year.
Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.
As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.
Sincerely,
[signature of Mark Killen}
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[left margin]
[american century logo (reg.sm)]
American
Century
American Century
Investments
P.O. Box 419385
Kansas City, MO
64141-6385
TABLE OF CONTENTS
An Overview of the Funds .................................................. 4
Fund Performance History .................................................. 5
Fees and Expenses ......................................................... 6
Objectives, Strategies and Risks .......................................... 7
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
Management ................................................................ 11
Investing with American Century ........................................... 14
Share Price and Distributions ............................................. 16
Taxes ..................................................................... 17
Multiple Class Information ................................................ 18
Financial Highlights ...................................................... 19
Performance Information of Other Class .................................... 23
[left margin]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[graphic of finger pointing]
This symbol highlights special information and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
Large Cap Value, Value and Small Cap Value seek long-term capital growth. Income
is a secondary objective.
Equity Income seeks current income. Capital appreciation is a secondary
objective.
WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
In selecting stocks for Large Cap Value, Value and Small Cap Value, the fund
managers look for companies whose stock price is less than they believe the
company is worth. The managers attempt to purchase the stocks of these
undervalued companies and hold them until their stock price has increased to, or
is higher than, a level the managers believe more accurately reflects the fair
value of the company. For Equity Income, the fund managers look for stocks of
companies with a favorable dividend-paying history and secondarily, for
potential increase in share price.
The chart below shows the primary differences among the funds. A more detailed
description of the funds' investment strategies and risks begins on page 7.
Fund Primary Investments
--------------------------------------------------------------------------------------------
Large Cap Value Equity securities of larger companies
--------------------------------------------------------------------------------------------
Value Equity securities of small, medium and large companies
--------------------------------------------------------------------------------------------
Small Cap Value Equity securities of smaller companies
--------------------------------------------------------------------------------------------
Equity Income Equity securities of companies with a favorable dividend-paying
history
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
If the market does not consider the individual stocks purchased by the funds to
be undervalued, if their stock prices decline, or if the stocks purchased by
Equity Income do not continue or increase dividend payments, the value of the
funds' shares may decline, even if stock prices generally are rising.
The smaller companies in which Small Cap Value invests may present greater
opportunities for capital appreciation than larger companies, but also may
present greater risks.
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you are
* seeking long-term capital growth and income from your investment
* comfortable with the risks associated with the funds' investment strategies
* comfortable with the funds' short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
* investing for a short period of time
* not seeking income from an equity investment
* uncomfortable with short-term volatility in the value of your investment
[left margin]
[graphic of finger pointing]
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
4 American Century Investments 1-800-345-3533
FUND PERFORMANCE HISTORY
VALUE FUND
EQUITY INCOME FUND
Annual Total Returns(1)
The following bar chart shows the performance of the funds' Advisor Class shares
for each full calendar year in the life of the funds. It indicates the
volatility of the funds' historical returns from year to year. Large Cap Value
and Small Cap Value are not included because the Advisor Class of those funds
does not yet have a full calendar year of performance.
[bar chart data below]
Value
1999 -0.87%
1998 4.55%
1997 25.73%
Equity Income
1999 -0.28%
1998 12.29%
(1) As of June 30, 2000, the end of the most recent calendar quarter, the funds'
year-to-date returns were: Value, -3.85% and Equity Income, 0.06%.
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
--------------------------------------------------------------------------------
Value 18.20% (2Q 1999) -10.93% (3Q 1999)
--------------------------------------------------------------------------------
Equity Income 13.95% (4Q 1998) -6.25% (3Q 1998)
Average Annual Returns
The following table shows the average annual total returns of the funds' Advisor
Class shares for the periods indicated. The S&P 500 is viewed as a broad
measure of U.S. stock performance, while the S&P 500/BARRA Value Index
consists of S&P 500 stocks that have lower price/book ratios and, in
general, share other characteristics associated with value stocks. The Lipper
Multicap Value Index is an index of multicap value funds that have management
styles similar to Value.
Value's benchmark was changed from the S&P 500/BARRA Value Index to the
Lipper Multicap Value Index beginning January 1, 2000. The fund's advisor
believes the latter index better represents the types of value stocks in which
the fund invests.
The Lipper Equity Income Fund Index is a non-weighted index of the 30 largest
equity income mutual funds. Large Cap Value and Small Cap Value are not included
because the Advisor Class of those funds does not yet have a full calendar year
of performance.
For the calendar year ended December 31, 1999 1 year Life of Fund (1)
--------------------------------------------------------------------------------
Value -0.87% 11.02%
Lipper Multicap Value Index 5.94% 14.48%
S&P 500 Index 21.04% 28.31%
S&P 500/BARRA Value Index 12.72% 20.63%
--------------------------------------------------------------------------------
Equity Income -0.28% 12.34%
Lipper Equity Income Index 4.19% 12.58%
S&P 500 Index 21.04% 25.99%
(1) The inception dates for the funds are Value, October 2, 1996 and Equity
Income, March 7, 1997.
Performance Information of Other Class
The original class of shares of the funds was the Investor Class. For
information about the historical performance of the original class of shares,
see page 23.
[left margin]
[graphic of finger pointing]
The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.
[graphic of finger pointing]
For current performance information, including yields, please call us at
1-800-345-3533 or visit us at www.americancentury.com.
www.americancentury.com American Century Investments 5
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Advisor Class shares of other American Century funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees(2) Expenses Operating Expenses
--------------------------------------------------------------------------------------------------------------
Large Cap Value 0.65%(1) 0.50% 0.00%(3) 1.15%
--------------------------------------------------------------------------------------------------------------
Value 0.75% 0.50% 0.00%(4) 1.25%
--------------------------------------------------------------------------------------------------------------
Small Cap Value 1.00% 0.50% 0.00%(4) 1.50%
--------------------------------------------------------------------------------------------------------------
Equity Income 0.75% 0.50% 0.00%(4) 1.25%
(1) Based on expenses incurred during the fund's most recent fiscal year. The
fund has a stepped fee schedule. As a result, the fund's management fee rate
generally decreases as fund assets increase.
(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other financial
intermediaries. A portion of the fee is used to compensate them for ongoing
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor, and a portion is used to compensate them for
distribution and other shareholder services. For more information, see Service
and Distribution Fees, page 18.
(3) Other expenses, which include the fees and expenses of the funds'
independent directors and their legal counsel, as well as interest, are expected
to be less than 0.005% for the current fiscal year.
(4) Other expenses, which include the fees and expenses of the funds'
independent directors and their legal counsel, as well as interest, were less
than 0.005% for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
------------------------------------------------------------------------------------------
Large Cap Value $117 $364 $630 $1,390
------------------------------------------------------------------------------------------
Value $127 $395 $683 $1,503
------------------------------------------------------------------------------------------
Small Cap Value $152 $472 $814 $1,778
------------------------------------------------------------------------------------------
Equity Income $127 $395 $683 $1,503
[left margin]
[graphic of finger pointing]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
6 American Century Investments 1-800-345-3533
OBJECTIVES, STRATEGIES AND RISKS
LARGE CAP VALUE FUND
VALUE FUND
SMALL CAP VALUE FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek long-term capital growth. Income is a secondary objective.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
The fund managers look for stocks of companies that they believe are undervalued
at the time of purchase. The managers use a value investment strategy that looks
for companies that are temporarily out of favor in the market. The managers
attempt to purchase the stocks of these undervalued companies and hold them
until they have returned to favor in the market and their stock prices have gone
up. Large Cap Value's managers also consider the diversification of the fund in
determining when to sell securities.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 65% of the funds' assets
invested in U.S. equity securities at all times. When the managers believe it is
prudent, the funds may invest a portion of their assets in convertible debt
securities, equity-equivalent securities, foreign securities, debt securities of
companies, debt obligations of governments and their agencies, NONLEVERAGED
stock index futures contracts and other similar securities. Stock index futures
contracts, a type of derivative security, can help the funds' cash assets remain
liquid while performing more like stocks. The funds have a policy governing
stock index futures and similar derivative securities to help manage the risk of
these types of investments. For example, the fund managers cannot invest in a
derivative security if it would be possible for a fund to lose more money than
it invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
In the event of exceptional market or economic conditions, a fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or short-term debt securities. To the extent a fund assumes a defensive
position, it will not be pursuing its objective of capital growth. A fund
generally limits its purchase of debt securities to investment-grade
obligations, except for convertible debt securities which may be rated below
investment grade.
Additional information about the funds' investments is available in their annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
www.americancentury.com American Century Investments 7
WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?
* Large Cap Value invests primarily in larger companies. Under normal market
conditions, the fund will have at least 65% of its assets invested in U.S.
equity securities of issuers ranking generally among the 1,000 largest
companies in the United States as measured by their MARKET CAPITALIZATION.
* Value invests in companies of all sizes. Under normal market conditions, the
fund will have at least 65% of its assets invested in U.S. equity securities.
Although the fund managers invest in companies of all sizes, the fund's
overall characteristics are most similar to those in the mid-cap arena.
* Small Cap Value invests primarily in smaller companies. Under normal market
conditions, the fund will have at least 65% of its assets invested in U.S.
equity securities of issuers that the fund managers believe to be smaller
companies as measured by their market capitalization. The fund managers
consider smaller companies to include those with a market capitalization no
bigger than that of the largest company in the S&P SMALLCAP 600/BARRA
VALUE INDEX.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the funds.
If the market does not consider the individual stocks purchased by a fund to be
undervalued, the value of a fund's shares may not rise as high as other funds
and may in fact decline, even if stock prices generally are increasing.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the fund's style, the fund's gains may not be as big as, or its losses may be
bigger than, other equity funds using different investment styles.
Because Small Cap Value generally invests in smaller companies than American
Century's similarly managed value funds (such as Value, Large Cap Value and
Equity Income), it may be more volatile, and subject to greater short-term risk,
than those funds. Smaller companies may have limited financial resources,
product lines and markets, and their securities may trade less frequently and in
more limited volumes than the securities of larger companies. In addition,
smaller companies may have less publicly available information and, when
available, it may be inaccurate or incomplete.
Although the fund managers intend to invest the funds' assets primarily in U.S.
stocks, the funds may invest in securities of foreign companies. Foreign
investment involves additional risks, including fluctuations in currency
exchange rates, less stable political and economic structures, reduced
availability of public information, and lack of uniform financial reporting and
regulatory practices similar to those that apply in the United States. These
factors make investing in foreign securities generally riskier than investing in
U.S. stocks.
[left margin]
MARKET CAPITALIZATION is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share
The S&P SMALLCAP 600/BARRA VALUE INDEX is an unmanaged stock index that
tracks the performance of small companies that may be attractive to investors
using the value style of investing. As of June 30, 2000, the largest company
contained in the index had a market capitalization of $3.4 billion, while the
median company in the index had a market capitalization of $363 million.
8 American Century Investments 1-800-345-3533
EQUITY INCOME FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVES?
Equity Income seeks to provide current income. Capital appreciation is a
secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund managers look for stocks with a favorable dividend-paying history that
have prospects for dividend payments to continue or increase. Secondarily, the
fund managers look for the possibility that the stock price may increase. The
fund seeks to receive dividend payments that provide a yield that exceeds the
yield of the stocks comprising the S&P 500 Index.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges. The fund managers also look for companies whose
dividend payments appear high when compared to the stock price.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 85% of the fund's assets
invested in income-paying securities and at least 65% of its assets in U.S.
equity securities. When the managers believe it is prudent, the fund may invest
a portion of its assets in convertible debt securities, equity-equivalent
securities, foreign securities, debt securities of companies, debt obligations
of governments and their agencies, NONLEVERAGED stock index futures contracts
and other similar securities. Stock index futures contracts, a type of
derivative security, can help the fund's cash assets remain liquid while
performing more like stocks. The fund has a policy governing stock index futures
and similar derivative securities to help manage the risk of these types of
investments. For example, the fund managers cannot invest in a derivative
security if it would be possible for the fund to lose more money than it
invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
In the event of exceptional market or economic conditions, the fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or short-term debt securities. To the extent the fund assumes a
defensive position, it will not be pursuing its objective of capital growth. The
fund generally limits its purchase of debt securities to investment-grade
obligations, except for convertible debt securities which may be rated below
investment grade.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
www.americancentury.com American Century Investments 9
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
If the individual stocks purchased by the fund do not continue or increase
dividend payments, or if their stock price does not increase, the value of the
fund's shares may not increase as quickly as other funds and may decline, even
if stock prices generally are rising.
The value of the fund's assets invested in bonds and other fixed-income
securities will go up and down as prevailing interest rates change. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline.
Although the fund managers intend to invest the fund's assets primarily in U.S.
stocks, the fund may invest in securities of foreign companies. Foreign
investment involves additional risks, including fluctuations in currency
exchange rates, less stable political and economic structures, reduced
availability of public information, and lack of uniform financial reporting and
regulatory practices similar to those that apply in the United States. These
factors make investing in foreign securities generally riskier than investing in
U.S. stocks.
10 American Century Investments 1-800-345-3533
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Advisor Class shares of each fund. The amount of the
management fee for a fund is calculated on a class-by-class basis daily and paid
monthly.
Out of that fee, the advisor paid all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended March 31, 2000
--------------------------------------------------------------------------------
Large Cap Value N/A(1)
--------------------------------------------------------------------------------
Value 0.75%
--------------------------------------------------------------------------------
Small Cap Value 1.00%
--------------------------------------------------------------------------------
Equity Income 0.75%
(1) The Advisor Class of the fund had no assets during the fiscal year ended
March 31, 2000, and paid no fees to the advisor. The fund will pay the advisor a
unified management fee of 0.65% of the first $1 billion of average net assets,
0.55% of the next $4 billion of average net assets, and 0.45% of average net
assets over $5 billion of the Advisor Class of shares.
www.americancentury.com American Century Investments 11
THE FUND MANAGEMENT TEAMS
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. The teams meet regularly to review portfolio
holdings, and discuss purchase and sale activity. Team members buy and sell
securities for a fund as they see fit, guided by the fund's investment objective
and strategy.
The portfolio managers on the investment teams are identified below.
Large Cap Value
MARK MALLON
Mr. Mallon, Chief Investment Officer--Value and Quantitative Equities and Senior
Vice President, has been a member of the team that manages Large Cap Value since
its inception in July 1999. He joined American Century in April 1997. From
August 1978 until he joined American Century, he was employed in several
positions by Federated Investors and served as President and Chief Executive
Officer of Federated Investment Counseling and Executive Vice President of
Federated Research Corporation since January 1990. He has a bachelor of arts
from Westminster College and an MBA from Cornell University. He is a Chartered
Financial Analyst.
CHARLES RITTER
Mr. Ritter, Vice President and Portfolio Manager, has been a member of the team
that manages Large Cap Value since its inception in July 1999. He joined
American Century in December 1998. Before joining American Century, he spent 15
years with Federated Investors, most recently serving as a Vice President and
Portfolio Manager. He has a bachelor's degree in mathematics and a master's
degree in economics from Carnegie Mellon University. He also has an MBA from the
University of Chicago. He is a Chartered Financial Analyst.
Value and Equity Income
PHILLIP N. DAVIDSON
Mr. Davidson, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages Value and Equity Income since joining American
Century in September 1993. Prior to joining American Century, he spent 11 years
at Boatmen's Trust Company in St. Louis and served as Vice President and
Portfolio Manager responsible for institutional value equity clients. He has a
bachelor's degree in finance and an MBA from Illinois State University.
SCOTT A. MOORE
Mr. Moore, Vice President and Portfolio Manager, has been a member of the team
that manages Value and Equity Income since October 1996 and Portfolio Manager
since February 1999. He joined American Century in August 1993 as an Investment
Analyst. He has a bachelor's degree in finance from Southern Illinois University
and an MBA in finance from the University of Missouri - Columbia. He is a
Chartered Financial Analyst.
[left margin]
[graphic of finger pointing]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the funds to obtain approval before executing permitted personal trades.
12 American Century Investments 1-800-345-3533
Small Cap Value
R. TODD VINGERS
Mr. Vingers, Portfolio Manager, has been a member of the team that manages Small
Cap Value since its inception in July 1998. He joined American Century in August
1994 as an Investment Analyst. He has a bachelor's degree in business
administration from the University of St. Thomas and an MBA in finance and
accounting from the University of Chicago. He is a Chartered Financial Analyst.
BENJAMIN Z. GIELE
Mr. Giele, Portfolio Manager, has been a member of the team that manages Small
Cap Value since its inception in July 1998 and Portfolio Manager since February
1999. He joined American Century in May 1998 as an Investment Analyst. Before
joining American Century, he served as an Investment Analyst at USAA Investment
Management Company from June 1995 to May 1998 and as an Investment Analyst at
Texas Commerce Investment Management from July 1992 to June 1995. He has a
bachelor of arts from Rice University and an MBA in finance and accounting from
the University of Texas-Austin. He is a Chartered Financial Analyst.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Directors may change any other policies
and investment strategies.
www.americancentury.com American Century Investments 13
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR ADVISOR CLASS SHARES
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.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
these intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.
[left margin]
[graphic of finger pointing]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
14 American Century Investments 1-800-345-3533
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. Each fund reserves the right to suspend the offering of shares for a period
of time, and each fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
[left margin]
[grapic of finger pointing]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
www.americancentury.com American Century Investments 15
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of each fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that the funds will not be subject to state or federal
income tax on amounts distributed. The distributions generally consist of
dividends and interest received by a fund, as well as CAPITAL GAINS realized on
the sale of investment securities.
The funds pay distributions of substantially all of their income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. They may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day a distribution is declared, you will not receive that distribution. If you
redeem shares, you will receive any distribution declared on the day you redeem.
If you redeem all shares, we will include any distributions received with your
redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For investors investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information about distributions and your options
for receiving them.
[left margin]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
16 American Century Investments 1-800-345-3533
TAXES
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
--------------------------------------------------------------------------------
Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
[left margin]
[graphic of finger pointing]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The funds distribute those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
www.americancentury.com American Century Investments 17
MULTIPLE CLASS INFORMATION
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Advisor Class shares and are offered primarily through employer-sponsored
retirement plans, or through institutions like banks, broker-dealers and
insurance companies.
The other classes have different fees, expenses and/or minimum investment
requirements from the Advisor Class. The difference in the fee structures
between 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 advisor 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
* 1-800-345-2021 for Investor Class shares
* 1-800-345-3533 for Institutional Class shares
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
SERVICE AND DISTRIBUTION FEES
Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay certain expenses associated with the distribution of their shares out of
fund assets. The funds' Advisor Class shares have a 12b-1 Plan. Under the Plan,
the funds' Advisor Class pays an annual fee of 0.50% of Advisor Class average
net assets, half for certain shareholder and administrative services and half
for distribution services. The advisor, as paying agent for the funds, pays all
or a portion of such fees to the banks, broker-dealers and insurance companies
that make such shares available. Because these fees are paid out of the fund's
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. For
additional information about the Plan and its terms, see Multiple Class
Structure - Master Distribution and Shareholder Services Plan in the Statement
of Additional Information.
18 American Century Investments 1-800-345-3533
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next few pages itemize what contributed to the changes in
share price during the most recently ended fiscal year. They also show the
changes in share price for this period in comparison to changes over the last
five fiscal years or less, if the share class is not five years old.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* TOTAL RETURN -- the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO -- the operating expenses as a percentage of average net asset
* NET INCOME RATIO -- the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER -- the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
funds' annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 19
VALUE FUND
Advisor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998 1997(1)
------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.77 $7.73 $6.58 $6.71
-----------------------------------------------------
Income From Investment Operations
Net Investment Income(2) 0.07 0.06 0.08 0.05
Net Realized and Unrealized Gain (Loss)
on Investment Transactions 0.01 (0.80) 2.35 0.48
-----------------------------------------------------
Total From Investment Operations 0.08 (0.74) 2.43 0.53
-----------------------------------------------------
Distributions
From Net Investment Income (0.08) (0.07) (0.08) (0.05)
In Excess of Net Investment Income -- -- -- --(3)
From Net Realized Gains on Investment Transactions -- (1.15) (1.20) (0.61)
In Excess of Net Realized Gains on Investment Transactions (0.41) -- -- --
-----------------------------------------------------
Total Distributions (0.49) (1.22) (1.28) (0.66)
-----------------------------------------------------
Net Asset Value, End of Period $5.36 $5.77 $7.73 $6.58
=====================================================
Total Return(4) 1.36% (10.09)% 39.60% 8.07%
Ratios/Supplemental Data
2000 1999 1998 1997(1)
----------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Income to Average Net Assets 1.23% 0.94% 1.13% 1.50%(5)
Portfolio Turnover Rate 115% 130% 130% 111%
Net Assets, End of Period (in thousands) $61,323 $54,277 $56,118 $29,250
(1) October 2, 1996 (commencement of sale) through March 31, 1997.
(2) Computed using average shares outstanding throughout the period.
(3) Per share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
20 American Century Investments 1-800-345-3533
SMALL CAP VALUE FUND
Advisor Class
For a Share Outstanding Throughout the Period Indicated
Per-Share Data
2000(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.73
---------
Income From Investment Operations
Net Investment Income(2) 0.03
Net Realized and Unrealized Gain on Investment Transactions 0.29
---------
Total From Investment Operations 0.32
---------
Distributions
From Net Investment Income (0.01)
---------
Net Asset Value, End of Period $5.04
=========
Total Return(3) 6.86%
Ratios/Supplemental Data
2000(1)
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.50% (4)
Ratio of Net Investment Income to Average Net Assets 2.21% (4)
Portfolio Turnover Rate 178%
Net Assets, End of Period $91,12
(1) December 31, 1999 (commencement of sale) through March 31, 2000.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 21
EQUITY INCOME FUND
Advisor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998 1997(1)
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.95 $7.16 $6.31 $6.57
------------------------------------------------------
Income From Investment Operations
Net Investment Income(2) 0.20 0.21 0.23 0.02
Net Realized and Unrealized Gain (Loss)
on Investment Transactions 0.02 (0.24) 2.00 (0.21)
-----------------------------------------------------
Total From Investment Operations 0.22 (0.03) 2.23 (0.19)
-----------------------------------------------------
Distributions
From Net Investment Income (0.19) (0.22) (0.22) (0.07)
In Excess of Net Investment Income -- -- -- --(3)
From Net Realized Gains on Investment Transactions (0.02) (0.96) (1.16) --
In Excess of Net Realized Gains on Investment Transactions (0.46) -- -- --
------------------------------------------------------
Total Distributions (0.67) (1.18) (1.38) (0.07)
-----------------------------------------------------
Net Asset Value, End of Period $5.50 $5.95 $7.16 $6.31
=====================================================
Total Return(4) 3.61% (0.75)% 37.71% (2.89)%
Ratios/Supplemental Data
2000 1999 1998 1997(1)
--------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Income to Average Net Assets 3.16% 3.06% 3.27% 1.64%(5)
Portfolio Turnover Rate 141% 180% 158% 159%
Net Assets, End of Period (in thousands) $20,281 $12,251 $731 $18
(1) March 7, 1997 (commencement of sale) through March 31, 1997.
(2) Computed using average shares outstanding throughout the period.
(3) Per share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
22 American Century Investments 1-800-345-3533
PERFORMANCE INFORMATION OF OTHER CLASS
The following financial information is provided to show the performance of the
funds' original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.25% lower than the Advisor Class. If the Advisor Class
had existed during the periods presented, its performance would have been lower
because of the additional expense.
The tables on the next few pages itemize what contributed to the changes in
share price during the most recently ended fiscal year. They also show the
changes in share price for this period in comparison to changes over the last
five fiscal years.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* TOTAL RETURN -- the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO -- the operating expenses as a percentage of average net asset
* NET INCOME RATIO -- the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER -- the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
funds' annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 23
LARGE CAP VALUE FUND
Investor Class
For a Share Outstanding Throughout the Period Indicated
Per-Share Data
2000(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.00
---------
Income From Investment Operations
Net Investment Income(2) 0.05
Net Realized and Unrealized Loss on Investment Transactions (0.41)
---------------
Total From Investment Operations (0.36)
---------------
Distributions
From Net Investment Income (0.05)
---------------
Net Asset Value, End of Period $4.59
===============
Total Return(3) (7.22)%
Ratios/Supplemental Data
2000(1)
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.90% (4)
Ratio of Net Investment Income to Average Net Assets 1.72% (4)
Portfolio Turnover Rate 51%
Net Assets, End of Period (in thousands) $12,67
(1) July 30, 1999 (inception) through March 31, 2000.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
24 American Century Investments 1-800-345-3533
VALUE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.77 $7.73 $6.58 $6.32 $5.46
-----------------------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 0.09 0.08 0.10 0.12 0.13
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.01) (0.80) 2.35 0.87 1.34
-----------------------------------------------------------------
Total From Investment Operations 0.08 (0.72) 2.45 0.99 1.47
-----------------------------------------------------------------
Distributions
From Net Investment Income (0.09) (0.09) (0.10) (0.12) (0.12)
In Excess of Net Investment Income -- -- -- --(2) (0.01)
From Net Realized Gains on Investment Transactions -- (1.15) (1.20) (0.61) (0.48)
In Excess of Net Realized Gains on
Investment Transactions (0.41) -- -- -- .--
-----------------------------------------------------------------
Total Distributions (0.50) (1.24) (1.30) (0.73) (0.61)
-----------------------------------------------------------------
Net Asset Value, End of Period $5.35 $5.77 $7.73 $6.58 $6.32
=================================================================
Total Return(3) 1.42% (9.88)% 39.94% 15.92% 28.06%
Ratios/Supplemental Data
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.97%
Ratio of Net Investment Income to Average Net Assets 1.48% 1.19% 1.38% 1.86% 2.17%
Portfolio Turnover Rate 115% 130% 130% 111% 145%
Net Assets, End of Period (in thousands) $1,388,646 $1,719,367 $2,713,562 $1,743,582 $881,885
(1) Computed using average shares outstanding throughout the period.
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 25
SMALL CAP VALUE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
-----------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.73 $5.00
-----------------------
Income From Investment Operations
Net Investment Income(2) 0.05 0.03
Net Realized and Unrealized Gain (Loss) on Investment Transactions 0.60 (0.24)
-----------------------
Total From Investment Operations 0.65 (0.21)
-----------------------
Distributions
From Net Investment Income (0.06) (0.02)
From Net Realized Gains on Investment Transactions (0.17) (0.02)
In Excess of Net Realized Gains on Investment Transactions (0.11) (0.02)
-----------------------
Total Distributions (0.34) (0.06)
-----------------------
Net Asset Value, End of Period $5.04 $4.73
=======================
Total Return(3) 14.37% (4.24)%
Ratios/Supplemental Data
2000 1999(1)
-----------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25%(4)
Ratio of Net Investment Income to Average Net Assets 1.04% 1.02%(4)
Portfolio Turnover Rate 178% 153%
Net Assets, End of Period (in thousands) $17,690 $11,410
(1) July 31, 1998 (inception) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
26 American Century Investments 1-800-345-3533
EQUITY INCOME FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.95 $7.15 $6.31 $6.10 $5.42
-------------------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 0.21 0.22 0.25 0.22 0.20
Net Realized and Unrealized Gain (Loss) on
Investment Transactions 0.03 (0.23) 1.99 0.75 1.13
-------------------------------------------------------------
Total From Investment Operations 0.24 (0.01) 2.24 0.97 1.33
-------------------------------------------------------------
Distributions
From Net Investment Income (0.21) (0.23) (0.24) (0.21) (0.19)
In Excess of Net Investment Income -- -- -- --(2) (0.01)
From Net Realized Gains on Investment Transactions (0.02) (0.96) (1.16) (0.55) (0.45)
In Excess of Net Realized Gains
on Investment Transactions (0.46) -- -- -- --
-------------------------------------------------------------
Total Distributions (0.69) (1.19) (1.40) (0.76) (0.65)
-------------------------------------------------------------
Net Asset Value, End of Period $5.50 $5.95 $7.15 $6.31 $6.10
==============================================================
Total Return(3) 3.88% (0.44)% 37.78% 16.24% 25.67%
Ratios/Supplemental Data
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.98%
Ratio of Net Investment Income to Average Net Assets 3.41% 3.31% 3.52% 3.46% 3.51%
Portfolio Turnover Rate 141% 180% 158% 159% 170%
Net Assets, End of Period (in thousands) $282,692 $296,585 $355,962 $199,388 $116,692
(1) Computed using average shares outstanding throughout the period.
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 27
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]
By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo (reg. sm)]
American
Century
American Century Investments
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
0008
SH-PRS-20874
[front cover]
Your
AMERICAN CENTURY
prospectus
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
AUGUST 1, 2000
INSTITUTIONAL CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors
[american century logo (reg. sm)]
American
Century
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.
An Overview of the Funds - Learn about fund goals, strategies and risks, and who
may or may not want to invest.
Fund Performance History - See how the funds performed from year to year.
Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.
As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.
Sincerely,
[signature of Mark Killen]
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[left margin]
[american century logo (reg. sm)]
American
Century
American Century
Investments
P.O. Box 419385
Kansas City, MO
64141-6385
TABLE OF CONTENTS
An Overview of the Funds .................................................. 4
Fund Performance History .................................................. 5
Fees and Expenses ......................................................... 7
Objectives, Strategies and Risks .......................................... 8
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
Management ................................................................ 12
Investing with American Century ........................................... 15
Share Price and Distributions ............................................. 19
Taxes ..................................................................... 20
Multiple Class Information ................................................ 21
Financial Highlights ...................................................... 22
Performance Information of Other Class .................................... 26
[left margin]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[graphic of finger pointing]
This symbol highlights special information and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
Large Cap Value, Value and Small Cap Value seek long-term capital growth. Income
is a secondary objective.
Equity Income seeks current income. Capital appreciation is a secondary
objective.
WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
In selecting stocks for Large Cap Value, Value and Small Cap Value, the fund
managers look for companies whose stock price is less than they believe the
company is worth. The managers attempt to purchase the stocks of these
undervalued companies and hold them until their stock price has increased to, or
is higher than, a level the managers believe more accurately reflects the fair
value of the company. For Equity Income, the fund managers look for stocks of
companies with a favorable dividend-paying history and secondarily, for
potential increase in share price.
The chart below shows the primary differences among the funds. A more detailed
description of the funds' investment strategies and risks begins on page 8.
Fund Primary Investments
--------------------------------------------------------------------------------------------
Large Cap Value Equity securities of larger companies
--------------------------------------------------------------------------------------------
Value Equity securities of small, medium and large companies
--------------------------------------------------------------------------------------------
Small Cap Value Equity securities of smaller companies
--------------------------------------------------------------------------------------------
Equity Income Equity securities of companies with a favorable dividend-paying history
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
If the market does not consider the individual stocks purchased by the funds to
be undervalued, if their stock prices decline, or if the stocks purchased by
Equity Income do not continue or increase dividend payments, the value of the
funds' shares may decline, even if stock prices generally are rising.
The smaller companies in which Small Cap Value invests may present greater
opportunities for capital appreciation than larger companies, but also may
present greater risks.
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you are
* seeking long-term capital growth and income from your investment
* comfortable with the risks associated with the funds' investment strategies
* comfortable with the funds' short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUNDS?
The funds may not be a good investment if you are
* investing for a short period of time
* not seeking income from an equity investment
* uncomfortable with short-term volatility in the value of your investment
[left margin]
[graphic of finger pointing]
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
4 American Century Investments 1-800-345-3533
FUND PERFORMANCE HISTORY
VALUE FUND
SMALL CAP VALUE
EQUITY INCOME FUND
Annual Total Returns(1)
The following bar chart shows the performance of the funds' Institutional Class
shares for each full calendar year in the life of the funds. It indicates the
volatility of the funds' historical returns from year to year. Large Cap Value
is not included because it does not yet have a full calendar year of
performance.
[bar chart data below]
Value
1999 -0.40%
1998 5.18%
Small Cap Value
1999 -0.83%
Equity Income
1999 0.03%
(1) As of June 30, 2000, the end of the most recent calendar quarter, the funds'
year-to-date returns were: Value, -3.79%; Small Cap Value, 11.39%; and Equity
Income, 0.31%.
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
--------------------------------------------------------------------------------
Value 18.31% (2Q 1999) -10.95% (3Q 1999)
--------------------------------------------------------------------------------
Small Cap Value 15.67% (2Q 1999) -7.88% (3Q 1999)
--------------------------------------------------------------------------------
Equity Income 13.44% (2Q 1999) -5.92% (3Q 1999)
[left margin]
[graphic of finger pointing]
The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.
www.americancentury.com American Century Investments 5
Average Annual Returns
The following table shows the average annual total returns of the funds'
Institutional Class shares for the periods indicated. The S&P 500 is viewed
as a broad measure of U.S. stock performance, while the S&P 500/BARRA Value
Index consists of S&P 500 stocks that have lower price/book ratios and, in
general, share other characteristics associated with value stocks. The Lipper
Multicap Value Index is an index of multicap value funds that have management
styles similar to Value.
Value's benchmark was changed from the S&P 500/BARRA Value Index to the
Lipper Multicap Value Index beginning January 1, 2000. The fund's advisor
believes the latter index better represents the types of value stocks in which
the fund invests.
The S&P SmallCap 600/BARRA Value Index consists of S&P 600 stocks that
have lower price/book ratios. The S&P SmallCap 600 Index consists of 600
domestic stocks chosen for market size, liquidity and industry group
representation.
The Lipper Equity Income Fund Index is a non-weighted index of the 30 largest
equity income mutual funds. Large Cap Value is not included because it does not
yet have a full calendar year of performance.
For the calendar year ended December 31, 1999 1 year Life of Fund(1)
--------------------------------------------------------------------------------
Value -0.40% 4.05%
Lipper Multicap Value Index 5.94% 6.18%
S&P 500 Index 21.04% 21.25%
S&P 500/BARRA Value Index 12.72% 12.70%
--------------------------------------------------------------------------------
Small Cap Value -0.83% 5.28%
S&P SmallCap 600/BARRA Value Index 3.03% 9.91%
--------------------------------------------------------------------------------
Equity Income 0.03% 4.41%
Lipper Equity Income Index 4.19% 3.39%
S&P 500 Index 21.04% 18.98%
(1) The inception dates for the funds are Value, July 31, 1997; Small Cap Value,
October 26, 1998; and Equity Income, July 8, 1998.
Performance Information of Other Class
The original class of shares of the funds was the Investor Class. For
information about the historical performance of the original class of shares,
see page 26.
[left margin]
[graphic of finger pointing]
For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.
6 American Century Investments 1-800-345-3533
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Institutional Class shares of other American Century funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses Operating Expenses
-----------------------------------------------------------------------------------------------
Large Cap Value 0.70%(1) None 0.00%(2) 0.70%
-----------------------------------------------------------------------------------------------
Value 0.80% None 0.00%(3) 0.80%
-----------------------------------------------------------------------------------------------
Small Cap Value 1.05% None 0.00%(3) 1.05%
-----------------------------------------------------------------------------------------------
Equity Income 0.80% None 0.00%(3) 0.80%
(1) Based on expenses incurred during the fund's most recent fiscal year. The
fund has a stepped fee schedule. As a result, the fund's management fee rate
generally decreases as fund assets increase.
(2) Other expenses, which include the fees and expenses of the funds'
independent directors and their legal counsel, as well as interest, are expected
to be less than 0.005% for the current fiscal year.
(3) Other expenses, which include the fees and expenses of the funds'
independent directors and their legal counsel, as well as interest, were less
than 0.005% for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------------
Large Cap Value $71 $224 $389 $868
-----------------------------------------------------------------------------
Value $82 $255 $443 $987
-----------------------------------------------------------------------------
Small Cap Value $107 $333 $577 $1,277
-----------------------------------------------------------------------------
Equity Income $82 $255 $443 $987
[left margin]
[graphic of finger pointing]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
www.americancentury.com American Century Investments 7
OBJECTIVES, STRATEGIES AND RISKS
LARGE CAP VALUE FUND
VALUE FUND
SMALL CAP VALUE FUND
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
These funds seek long-term capital growth. Income is a secondary objective.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
The fund managers look for stocks of companies that they believe are undervalued
at the time of purchase. The managers use a value investment strategy that looks
for companies that are temporarily out of favor in the market. The managers
attempt to purchase the stocks of these undervalued companies and hold them
until they have returned to favor in the market and their stock prices have gone
up. Large Cap Value's managers also consider the diversification of the fund in
determining when to sell securities.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 65% of the funds' assets
invested in U.S. equity securities at all times. When the managers believe it is
prudent, the funds may invest a portion of their assets in convertible debt
securities, equity-equivalent securities, foreign securities, debt securities of
companies, debt obligations of governments and their agencies, NONLEVERAGED
stock index futures contracts and other similar securities. Stock index futures
contracts, a type of derivative security, can help the funds' cash assets remain
liquid while performing more like stocks. The funds have a policy governing
stock index futures and similar derivative securities to help manage the risk of
these types of investments. For example, the fund managers cannot invest in a
derivative security if it would be possible for a fund to lose more money than
it invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
In the event of exceptional market or economic conditions, a fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or short-term debt securities. To the extent a fund assumes a defensive
position, it will not be pursuing its objective of capital growth. A fund
generally limits its purchase of debt securities to investment-grade
obligations, except for convertible debt securities which may be rated below
investment grade.
Additional information about the funds' investments is available in their annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
8 American Century Investments 1-800-345-3533
WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?
* Large Cap Value invests primarily in larger companies. Under normal market
conditions, the fund will have at least 65% of its assets invested in U.S.
equity securities of issuers ranking generally among the 1,000 largest
companies in the United States as measured by their MARKET CAPITALIZATION.
* Value invests in companies of all sizes. Under normal market conditions, the
fund will have at least 65% of its assets invested in U.S. equity securities.
Although the fund managers invest in companies of all sizes, the fund's
overall characteristics are most similar to those in the mid-cap arena.
* Small Cap Value invests primarily in smaller companies. Under normal market
conditions, the fund will have at least 65% of its assets invested in U.S.
equity securities of issuers that the fund managers believe to be smaller
companies as measured by their market capitalization. The fund managers
consider smaller companies to include those with a market capitalization no
bigger than that of the largest company in the S&P SMALLCAP 600/BARRA
VALUE INDEX.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the funds.
If the market does not consider the individual stocks purchased by a fund to be
undervalued, the value of a fund's shares may not rise as high as other funds
and may in fact decline, even if stock prices generally are increasing.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the fund's style, the fund's gains may not be as big as, or its losses may be
bigger than, other equity funds using different investment styles.
Because Small Cap Value generally invests in smaller companies than American
Century's similarly managed value funds (such as Value, Large Cap Value and
Equity Income), it may be more volatile, and subject to greater short-term risk,
than those funds. Smaller companies may have limited financial resources,
product lines and markets, and their securities may trade less frequently and in
more limited volumes than the securities of larger companies. In addition,
smaller companies may have less publicly available information and, when
available, it may be inaccurate or incomplete.
Although the fund managers intend to invest the funds' assets primarily in U.S.
stocks, the funds may invest in securities of foreign companies. Foreign
investment involves additional risks, including fluctuations in currency
exchange rates, less stable political and economic structures, reduced
availability of public information, and lack of uniform financial reporting and
regulatory practices similar to those that apply in the United States. These
factors make investing in foreign securities generally riskier than investing in
U.S. stocks.
[left margin]
MARKET CAPITALIZATION is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share
The S&P SMALLCAP 600/BARRA VALUE INDEX is an unmanaged stock index that
tracks the performance of small companies that may be attractive to investors
using the value style of investing. As of June 30, 2000, the largest company
contained in the index had a market capitalization of $3.4 billion, while the
median company in the index had a market capitalization of $363 million.
www.americancentury.com American Century Investments 9
EQUITY INCOME FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVES?
Equity Income seeks to provide current income. Capital appreciation is a
secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund managers look for stocks with a favorable dividend-paying history that
have prospects for dividend payments to continue or increase. Secondarily, the
fund managers look for the possibility that the stock price may increase. The
fund seeks to receive dividend payments that provide a yield that exceeds the
yield of the stocks comprising the S&P 500 Index.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges. The fund managers also look for companies whose
dividend payments appear high when compared to the stock price.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 85% of the fund's assets
invested in income-paying securities and at least 65% of its assets in U.S.
equity securities. When the managers believe it is prudent, the fund may invest
a portion of its assets in convertible debt securities, equity-equivalent
securities, foreign securities, debt securities of companies, debt obligations
of governments and their agencies, NONLEVERAGED stock index futures contracts
and other similar securities. Stock index futures contracts, a type of
derivative security, can help the fund's cash assets remain liquid while
performing more like stocks. The fund has a policy governing stock index futures
and similar derivative securities to help manage the risk of these types of
investments. For example, the fund managers cannot invest in a derivative
security if it would be possible for the fund to lose more money than it
invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
In the event of exceptional market or economic conditions, the fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or short-term debt securities. To the extent the fund assumes a
defensive position, it will not be pursuing its objective of capital growth. The
fund generally limits its purchase of debt securities to investment-grade
obligations, except for convertible debt securities which may be rated below
investment grade.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
10 American Century Investments 1-800-345-3533
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
If the individual stocks purchased by the fund do not continue or increase
dividend payments, or if their stock price does not increase, the value of the
fund's shares may not increase as quickly as other funds and may decline, even
if stock prices generally are rising.
The value of the fund's assets invested in bonds and other fixed-income
securities will go up and down as prevailing interest rates change. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline.
Although the fund managers intend to invest the fund's assets primarily in U.S.
stocks, the fund may invest in securities of foreign companies. Foreign
investment involves additional risks, including fluctuations in currency
exchange rates, less stable political and economic structures, reduced
availability of public information, and lack of uniform financial reporting and
regulatory practices similar to those that apply in the United States. These
factors make investing in foreign securities generally riskier than investing in
U.S. stocks.
www.americancentury.com American Century Investments 11
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Institutional Class shares of each fund. The amount of
the management fee for a fund is calculated on a class-by-class basis daily and
paid monthly.
Out of that fee, the advisor paid all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended March 31, 2000
--------------------------------------------------------------------------------
Large Cap Value N/A(1)
--------------------------------------------------------------------------------
Value 0.80%
--------------------------------------------------------------------------------
Small Cap Value 1.05%
--------------------------------------------------------------------------------
Equity Income 0.80%
(1) The Institutional Class of the fund had no assets during the fiscal year
ended March 31, 2000, and paid no fees to the advisor. The fund will pay the
advisor a unified management fee of 0.70% of the first $1 billion of average net
assets, 0.60% of the next $4 billion of average net assets, and 0.50% of average
net assets over $5 billion of the Institutional Class of shares.
12 American Century Investments 1-800-345-3533
THE FUND MANAGEMENT TEAMS
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. The teams meet regularly to review portfolio
holdings, and discuss purchase and sale activity. Team members buy and sell
securities for a fund as they see fit, guided by the fund's investment objective
and strategy.
The portfolio managers on the investment teams are identified below.
Large Cap Value
MARK MALLON
Mr. Mallon, Chief Investment Officer--Value and Quantitative Equities and Senior
Vice President, has been a member of the team that manages Large Cap Value since
its inception in July 1999. He joined American Century in April 1997. From
August 1978 until he joined American Century, he was employed in several
positions by Federated Investors and served as President and Chief Executive
Officer of Federated Investment Counseling and Executive Vice President of
Federated Research Corporation since January 1990. He has a bachelor of arts
from Westminster College and an MBA from Cornell University. He is a Chartered
Financial Analyst.
CHARLES RITTER
Mr. Ritter, Vice President and Portfolio Manager, has been a member of the team
that manages Large Cap Value since its inception in July 1999. He joined
American Century in December 1998. Before joining American Century, he spent 15
years with Federated Investors, most recently serving as a Vice President and
Portfolio Manager. He has a bachelor's degree in mathematics and a master's
degree in economics from Carnegie Mellon University. He also has an MBA from the
University of Chicago. He is a Chartered Financial Analyst.
Value and Equity Income
PHILLIP N. DAVIDSON
Mr. Davidson, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages Value and Equity Income since joining American
Century in September 1993. Prior to joining American Century, he spent 11 years
at Boatmen's Trust Company in St. Louis and served as Vice President and
Portfolio Manager responsible for institutional value equity clients. He has a
bachelor's degree in finance and an MBA from Illinois State University.
SCOTT A. MOORE
Mr. Moore, Vice President and Portfolio Manager, has been a member of the team
that manages Value and Equity Income since October 1996 and Portfolio Manager
since February 1999. He joined American Century in August 1993 as an Investment
Analyst. He has a bachelor's degree in finance from Southern Illinois University
and an MBA in finance from the University of Missouri - Columbia. He is a
Chartered Financial Analyst.
[left margin]
[graphic of finger pointing]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the funds to obtain approval before executing permitted personal trades.
www.americancentury.com American Century Investments 13
Small Cap Value
R. TODD VINGERS
Mr. Vingers, Portfolio Manager, has been a member of the team that manages Small
Cap Value since its inception in July 1998. He joined American Century in August
1994 as an Investment Analyst. He has a bachelor's degree in business
administration from the University of St. Thomas and an MBA in finance and
accounting from the University of Chicago. He is a Chartered Financial Analyst.
BENJAMIN Z. GIELE
Mr. Giele, Portfolio Manager, has been a member of the team that manages Small
Cap Value since its inception in July 1998 and Portfolio Manager since February
1999. He joined American Century in May 1998 as an Investment Analyst. Before
joining American Century, he served as an Investment Analyst at USAA Investment
Management Company from June 1995 to May 1998 and as an Investment Analyst at
Texas Commerce Investment Management from July 1992 to June 1995. He has a
bachelor of arts from Rice University and an MBA in finance and accounting from
the University of Texas-Austin. He is a Chartered Financial Analyst.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Directors may change any other policies
and investment strategies.
14 American Century Investments 1-800-345-3533
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR INSTITUTIONAL CLASS SHARES
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
retirement plans, endowments, foundations and financial advisors that meet the
funds' minimum investment requirements. Institutional Class shares are not
available for purchase by insurance companies for variable annuity and variable
life products.
MINIMUM INITIAL INVESTMENT AMOUNTS
The minimum investment is $5 million ($3 million for endowments and foundations)
per fund. If you invest with us through a 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). In addition, financial intermediaries or plan
recordkeepers may require retirement plans to meet certain additional
requirements, such as plan size or a minimum level of assets per participant, in
order to be eligible to purchase Institutional Class shares.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
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.
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
[left margin]
[graphic of finger pointing]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
www.americancentury.com American Century Investments 15
WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE
Service Representative
1-800-345-3533
[graphic of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call if you have authorized us to invest from your bank account.
SELL SHARES Call a Service Representative.
--------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419385
Kansas City, MO 64141-6385
Fax 816-340-4655
[graphic of envelope]
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.
SELL SHARES
Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
--------------------------------------------------------------------------------
AUTOMATICALLY
[graphic of arrows in circle]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
--------------------------------------------------------------------------------
BY WIRE
Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.
[graphic of wire machine]
OPEN AN ACCOUNT
Call to set up your account or mail a completed application to the address
provided in the "By mail" section. Give your bank the following
information to wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number*
* Your name
* The contribution year (for IRAs only)
*For additional investments only
MAKE ADDITIONAL INVESTMENTS Follow the wire instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES Not available.
16 American Century Investments 1-800-345-3533
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. Each fund reserves the right to suspend the offering of shares for a period
of time, and each fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
www.americancentury.com American Century Investments 17
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
these intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.
[left margin]
[graphic of finger pointing]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
18 American Century Investments 1-800-345-3533
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of each fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that the funds will not be subject to state or federal
income tax on amounts distributed. The distributions generally consist of
dividends and interest received by a fund, as well as CAPITAL GAINS realized on
the sale of investment securities.
The funds pay distributions of substantially all of their income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. They may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day a distribution is declared, you will not receive that distribution. If you
redeem shares, you will receive any distribution declared on the day you redeem.
If you redeem all shares, we will include any distributions received with your
redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For investors investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information about distributions and your options
for receiving them.
[left margin]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
www.americancentury.com American Century Investments 19
TAXES
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
------------------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
------------------------------------------------------------------------------------------
Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
[left margin]
[graphic of finger pointing]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The funds distribute those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
20 American Century Investments 1-800-345-3533
MULTIPLE CLASS INFORMATION
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Institutional Class shares and are offered primarily through employer-sponsored
retirement plans, or through institutions like banks, broker-dealers and
insurance companies.
The other classes have different fees, expenses and/or minimum investment
requirements from the Institutional Class. The difference in the fee structures
between 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 advisor 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
* 1-800-345-2021 for Investor Class shares
* 1-800-345-3533 for Advisor Class shares
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
www.americancentury.com American Century Investments 21
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next few pages itemize what contributed to the changes in
share price during the most recently ended fiscal year. They also show the
changes in share price for this period in comparison to changes over the last
five fiscal years or less, if the share class is not five years old.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* TOTAL RETURN -- the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO -- the operating expenses as a percentage of average net asset
* NET INCOME RATIO -- the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER -- the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
funds' annual report for the year ended March 31, 2000 , which is incorporated
by reference into the Statement of Additional Information, and is available upon
request.
22 American Century Investments 1-800-345-3533
VALUE FUND
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998(1)
--------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.78 $7.73 $7.84
-------------------------------------------
Income From Investment Operations
Net Investment Income(2) 0.10 0.10 0.15
Net Realized and Unrealized Gain (Loss) on Investment Transactions (0.01) (0.80) 1.02
-------------------------------------------
Total From Investment Operations 0.09 (0.70) 1.17
-------------------------------------------
Distributions
From Net Investment Income (0.10) (0.10) (0.08)
From Net Realized Gains on Investment Transactions -- (1.15) (1.20)
In Excess of Net Realized Gains on Investment Transactions (0.41) -- --
-------------------------------------------
Total Distributions (0.51) (1.25) (1.28)
-------------------------------------------
Net Asset Value, End of Period $5.36 $5.78 $7.73
===========================================
Total Return(3) 1.65% (9.52)% 17.14%
Ratios/Supplemental Data
2000 1999 1998(1)
-----------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.80% 0.80% 0.80%(4)
Ratio of Net Investment Income to Average Net Assets 1.68% 1.39% 2.97%(4)
Portfolio Turnover Rate 115% 130% 130%
Net Assets, End of Period (in thousands) $95,202 $36,318 $5,944
(1) July 31, 1997 (commencement of sale) through March 31, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 23
SMALL CAP VALUE FUND
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
---------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.74 $4.83
-----------------------------
Income From Investment Operations
Net Investment Income(2) 0.07 0.03
Net Realized and Unrealized Gain (Loss) on Investment Transactions 0.58 (0.06)
-----------------------------
Total From Investment Operations 0.65 (0.03)
-----------------------------
Distributions
From Net Investment Income (0.07) (0.02)
From Net Realized Gains on Investment Transactions (0.17) (0.04)
In Excess of Net Realized Gains on Investment Transactions (0.11) --
-----------------------------
Total Distributions (0.35) (0.06)
-----------------------------
Net Asset Value, End of Period $5.04 $4.74
=============================
Total Return(3) 14.39% (0.60)%
Ratios/Supplemental Data
2000 1999(1)
---------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.05% 1.05%(4)
Ratio of Net Investment Income to Average Net Assets 1.24% 1.22%(4)
Portfolio Turnover Rate 178% 153%
Net Assets, End of Period (in thousands) $2,359 $986
(1) October 26, 1998 (commencement of sale) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
24 American Century Investments 1-800-345-3533
EQUITY INCOME FUND
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
-------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.95 $6.96
-----------------------------
Income From Investment Operations
Net Investment Income(2) 0.22 0.07
Net Realized and Unrealized Gain on Investment Transactions 0.03 0.06
-----------------------------
Total From Investment Operations 0.25 0.13
-----------------------------
Distributions
From Net Investment Income (0.22) (0.18)
From Net Realized Gains on Investment Transactions (0.02) (0.96)
In Excess of Net Realized Gains on Investment Transactions (0.46) --
-----------------------------
Total Distributions (0.70) (1.14)
-----------------------------
Net Asset Value, End of Period $5.50 $5.95
=============================
Total Return(3) 4.09% 1.60%
Ratios/Supplemental Data
2000 1999(1)
-------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.80% 0.80%(4)
Ratio of Net Investment Income to Average Net Assets 3.61% 1.61%(4)
Portfolio Turnover Rate 141% 180%
Net Assets, End of Period (in thousands) $13,716 $2,654
(1) July 8, 1998 (commencement of sale) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 25
PERFORMANCE INFORMATION OF OTHER CLASS
The following financial information is provided to show the performance of the
fund's original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.20% higher than the Institutional Class. The
Institutional Class is made available to institutional shareholders or through
financial intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower unified management
fee. If the Institutional Class existed during the periods presented, its
performance would have been higher because of the lower expense.
The table on the next page itemizes what contributed to the changes in share
price during the period. It also shows the changes in share price for this
period in comparison to changes over the last five fiscal years or less, if the
share class is not five years old.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN -- the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO -- operating expenses as a percentage of average net assets
* NET INCOME RATIO -- net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER -- the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
funds' annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
26 American Century Investments 1-800-345-3533
LARGE CAP VALUE FUND
Investor Class
For a Share Outstanding Throughout the Period Indicated
Per-Share Data
2000(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.00
---------
Income From Investment Operations
Net Investment Income(2) 0.05
Net Realized and Unrealized Loss on Investment Transactions (0.41)
---------
Total From Investment Operations (0.36)
---------
Distributions
From Net Investment Income (0.05)
---------
Net Asset Value, End of Period $4.59
=========
Total Return(3) (7.22)%
Ratios/Supplemental Data
2000(1)
--------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.90% (4)
Ratio of Net Investment Income to Average Net Assets 1.72% (4)
Portfolio Turnover Rate 51%
Net Assets, End of Period (in thousands) $12,67
(1) July 30, 1999 (inception) through March 31, 2000.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 27
VALUE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.77 $7.73 $6.58 $6.32 $5.46
------------------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 0.09 0.08 0.10 0.12 0.13
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.01) (0.80) 2.35 0.87 1.34
------------------------------------------------------------
Total From Investment Operations 0.08 (0.72) 2.45 0.99 1.47
------------------------------------------------------------
Distributions
From Net Investment Income (0.09) (0.09) (0.10) (0.12) (0.12)
In Excess of Net Investment Income -- -- -- --(2) (0.01)
From Net Realized Gains on Investment Transactions -- (1.15) (1.20) (0.61) (0.48)
In Excess of Net Realized Gains on
Investment Transactions (0.41) -- -- -- --
------------------------------------------------------------
Total Distributions (0.50) (1.24) (1.30) (0.73) (0.61)
------------------------------------------------------------
Net Asset Value, End of Period $5.35 $5.77 $7.73 $6.58 $6.32
============================================================
Total Return(3) 1.42% (9.88)% 39.94% 15.92% 28.06%
Ratios/Supplemental Data
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.97%
Ratio of Net Investment Income to Average Net Assets 1.48% 1.19% 1.38% 1.86% 2.17%
Portfolio Turnover Rate 115% 130% 130% 111% 145%
Net Assets, End of Period (in thousands) $1,388,646 $1,719,367 $2,713,562 $1,743,582 $881,885
(1) Computed using average shares outstanding throughout the period.
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
28 American Century Investments 1-800-345-3533
SMALL CAP VALUE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
--------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $4.73 $5.00
-----------------------------
Income From Investment Operations
Net Investment Income(2) 0.05 0.03
Net Realized and Unrealized Gain (Loss) on Investment Transactions 0.60 (0.24)
-----------------------------
Total From Investment Operations 0.65 (0.21)
-----------------------------
Distributions
From Net Investment Income (0.06) (0.02)
From Net Realized Gains on Investment Transactions (0.17) (0.02)
In Excess of Net Realized Gains on Investment Transactions (0.11) (0.02)
-----------------------------
Total Distributions (0.34) (0.06)
-----------------------------
Net Asset Value, End of Period $5.04 $4.73
=============================
Total Return(3) 14.37% (4.24)%
Ratios/Supplemental Data
2000 1999(1)
-------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25% 1.25%(4)
Ratio of Net Investment Income to Average Net Assets 1.04% 1.02%(4)
Portfolio Turnover Rate 178% 153%
Net Assets, End of Period (in thousands) $17,690 $11,410
(1) July 31, 1998 (inception) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 29
EQUITY INCOME FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.95 $7.15 $6.31 $6.10 $5.42
---------------------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 0.21 0.22 0.25 0.22 0.20
Net Realized and Unrealized Gain (Loss) on
Investment Transactions 0.03 (0.23) 1.99 0.75 1.13
---------------------------------------------------------------
Total From Investment Operations 0.24 (0.01) 2.24 0.97 1.33
---------------------------------------------------------------
Distributions
From Net Investment Income (0.21) (0.23) (0.24) (0.21) (0.19)
In Excess of Net Investment Income -- -- -- --(2) (0.01)
From Net Realized Gains on Investment Transactions (0.02) (0.96) (1.16) (0.55) (0.45)
In Excess of Net Realized Gains on
Investment Transactions (0.46) -- -- -- --
----------------------------------------------------------------
Total Distributions (0.69) (1.19) (1.40) (0.76) (0.65)
----------------------------------------------------------------
Net Asset Value, End of Period $5.50 $5.95 $7.15 $6.31 $6.10
================================================================
Total Return(3) 3.88% (0.44)% 37.78% 16.24% 25.67%
Ratios/Supplemental Data
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.98%
Ratio of Net Investment Income to Average Net Assets 3.41% 3.31% 3.52% 3.46% 3.51%
Portfolio Turnover Rate 141% 180% 158% 159% 170%
Net Assets, End of Period (in thousands) $282,692 $296,585 $355,962 $199,388 $116,692
(1) Computed using average shares outstanding throughout the period.
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
30 American Century Investments 1-800-345-3533
NOTES
www.americancentury.com American Century Investments 31
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]
By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo (reg. sm)]
American
Century
American Century Investments
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
0008
SH-PRS-20875
Your
AMERICAN CENTURY
prospectus
Equity Index Fund
AUGUST 1, 2000
INVESTOR CLASS
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors
[american century logo(reg. sm)]
American
Century
[Sidebar]
[american century logo(reg. sm)]
American
Century
American Century
Investments
P.O. Box 419200
Kansas City, MO
64141-6200
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the fund.
An Overview of the Fund - Learn about fund goals, strategies and risks, and who
may or may not want to invest.
Fund Performance History - See how the fund performed from year to year.
Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Fund section.
As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, an Investor Relations Representative will be
happy to help weekdays, 7 a.m. to 7 p.m. and Saturdays, 9 a.m. to 2 p.m. Central
time. Give us a call at 1-800-345-2021.
Sincerely,
Mark Killen
/s/MARK KILLEN
Senior Vice President
American Century Investment Services, Inc.
TABLE OF CONTENTS
An Overview of the Fund ................................................... 4
Fees and Expenses ......................................................... 5
Objectives, Strategies and Risks .......................................... 6
Management ................................................................ 8
Investing with American Century ........................................... 9
Share Price and Distributions ............................................. 13
Taxes ..................................................................... 14
Multiple Class Information ................................................ 15
Financial Highlights ...................................................... 16
[Sidebar]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[Graphic of pointing finger]
This symbol highlights special information and helpful tips.
[End of Sidebar]
American Century Investments
AN OVERVIEW OF THE FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The fund seeks long-term capital growth.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
The fund seeks to match, as closely as possible, the investment characteristics
and results of the S&P 500 Composite Price Index (S&P 500 Index). The
fund managers buy and sell stocks and other securities in order to build an
investment portfolio that seeks to match the investment characteristics of the
S&P 500 Index. To build this portfolio, the fund managers will invest
primarily in the stocks contained in the S&P 500 Index in order of their
weightings in the index, beginning with the stocks that make up the largest
portion of the index. A more detailed description of the fund's investment
strategies and risks begins on page 6.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
The fund's ability to match the performance of the S&P 500 Index may be
affected by many factors. The fund managers will use cash flows from purchase
and redemption activity to maintain, to the extent feasible, the similarity of
the fund's portfolio to the investment characteristics of the S&P 500 Index.
Because of the composition of the S&P 500 Index, it is possible that a
relatively high percentage of the fund's assets may be invested in companies in
the same industry or economic sector. As a result, the fund may be subject to
greater risks and market fluctuations than funds investing in a broader range of
industries.
WHO MAY WANT TO INVEST IN THE FUND?
The fund may be a good investment if you are
* seeking long-term capital growth from your investment
* comfortable with the risks associated with the fund's investment strategy
* comfortable with the fund's short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund may not be a good investment if you are
* investing for a short period of time
* uncomfortable with the risks associated with the fund's investment strategy
* uncomfortable with short-term volatility in the value of your investment
Fund Performance History
As a new fund, the fund's performance history is not available as of the date of
this Prospectus. When this class of the fund has investment results for a full
calendar year, this section will feature charts that show annual total returns,
highest and lowest quarterly returns and average annual returns.
[Sidebar]
[Graphic of pointing finger]
An investment in the fund is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
[Graphic of pointing finger]
For current performance information, please call us at 1-800-345-2021 or visit
us at www.americancentury.com.
4 American Century Investments 1-800-345-2021
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Investor Class shares of other American Century funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the fund.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses Operating Expenses
--------------------------------------------------------------------------------
Equity Index 0.49% None 0.00%(1) 0.49%
(1) Other expenses, which include the fees and expenses of the fund's
independent directors and their legal counsel, as well as interest, were
less than 0.005% for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in the fund with the costs of investing in other mutual funds.
Assuming you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
----------------------------------------------------------------------------
Equity Index $50 $157 $274 $615
[Sidebar]
[Graphic of pointing finger]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
www.americancentury.com American Century Investments 5
OBJECTIVES, STRATEGIES AND RISKS
EQUITY INDEX FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The fund seeks long-term capital growth.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
Equity Index seeks to match, as closely as possible, the investment
characteristics and results of the S&P 500 Index. The fund managers buy and
sell stocks and other securities in order to build an investment portfolio that
seeks to match the investment characteristics of the S&P 500 Index.
To build this investment portfolio, the fund managers will invest primarily in
the stocks contained in the S&P 500 Index in order of their weightings in
the index, beginning with the stocks that make up the largest portion of the
index. The fund attempts to be fully invested at all times in the stocks that
comprise the S&P 500 Index and, in any event, will keep at least 80% of the
fund's total assets invested this way.
The S&P 500 Index is an unmanaged index composed of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. Standard &
Poor's, a division of The McGraw-Hill Companies, Inc., chooses the stocks to be
included in the S&P 500 Index. The weightings of stocks in the S&P 500
Index are based on each stock's total MARKET CAPITALIZATION relative to the
other stocks contained in the index. Because of this weighting, the fund expects
that the 50 largest companies will comprise a large proportion of the S&P
500 Index.
The fund managers do not attempt to time the market. When the managers believe
it is prudent, the fund may invest a portion of its assets in convertible debt
securities, equity-equivalent securities, debt securities of companies, debt
obligations of governments and their agencies, NONLEVERAGED stock index futures
contracts and other similar securities. Stock index futures contracts, a type of
derivative security, can help the fund's cash assets remain liquid while
performing more like stocks. The fund has a policy governing stock index futures
and similar derivative securities to help manage the risk of these types of
investments. For example, the fund managers cannot invest in a derivative
security if it would be possible for the fund to lose more money than it
invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
"Standard & Poor's(reg.tm)," "S&P 500(reg.tm)" and
"S&P(reg.tm)" are trademarks of The McGraw-Hill Companies, Inc.,
and have been licensed for use by American Century. The fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's
makes no representation regarding the advisability of investing in the fund.
Inclusion of a security in the S&P 500 Index in no way implies an opinion by
Standard & Poor's as to its attractiveness as an investment.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[Sidebar]
MARKET CAPITALIZATION is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share.
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
6 American Century Investments 1-800-345-2021
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
The fund managers' ability to match the performance of the S&P 500 Index may
be affected by many factors, such as changes in securities markets, the manner
in which the return of the S&P 500 Index is calculated, the size of the
fund's portfolio, the amount of cash held in the fund's portfolio, and the
amount and timing of shareholder purchases and redemptions. The fund managers
will use cash flows from shareholder purchase and redemption activity to
maintain, to the extent feasible, the similarity of its portfolio to the
securities comprising the S&P 500 Index.
It is intended that Equity Index will be diversified to the extent that the
S&P 500 Index is diversified. Because of the composition of the S&P 500
Index, it is possible that a relatively high percentage of the fund's assets may
be invested in the securities of a limited number of issuers, some of which may
be in the same industry or economic sector. As a result, the fund's portfolio
may be more sensitive to changes in the market value of a single issuer or
industry than other equity funds using different investment styles.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the stocks contained in the S&P 500 Index, the fund's gains may not be as
big as, or its losses may be bigger than, other equity funds using different
investment styles.
www.americancentury.com American Century Investments 7
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the fund.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the fund, it has hired an investment advisor to do so.
More than two-thirds of the directors are independent of the fund's advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The fund's investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the fund
and directing the purchase and sale of its investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the fund to operate.
The advisor has, in turn, hired Barclays Global Fund Advisors to make the
day-to-day investment decisions for the fund. Barclays Global Fund Advisors
performs this function under the supervision of American Century Investment
Management, Inc. and the fund's Board of Directors.
For the services it provided to the fund during the most recent fiscal year, the
advisor received a unified management fee of 0.49% of the average net assets of
the Investor Class shares of the fund. The amount of the management fee is
calculated on a class-by-class basis daily and paid monthly.
Out of that fee, the advisor paid all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objective of the fund may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.
[Sidebar]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the fund to obtain approval before executing permitted personal trades.
8 American Century Investments 1-800-345-2021
INVESTING WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE
Investor Relations
1-800-345-2021
Business, Not-For-Profit
and Employer-Sponsored
Retirement Plans
1-800-345-3533
Automated Information Line
1-800-345-8765
[Graphic of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call or use our Automated Information Line if you have authorized us to invest
from your bank account.
SELL SHARES
Call a Service Representative.
--------------------------------------------------------------------------------
ONLINE
www.americancentury.com
[Graphic of computer]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Exchange shares from another American Century account.
MAKE ADDITIONAL INVESTMENTS
Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.
SELL SHARES
Not available.
--------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419200
Kansas City, MO 64141-6200
Fax
816-340-7962
[Graphic of envelope]
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.
SELL SHARES
Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
www.americancentury.com American Century Investments 9
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce expenses and demonstrate respect for our environment, we will deliver
a single copy of most financial reports and prospectuses to investors who share
an address, even if the accounts are registered under different names. If you
would like to receive separate mailings, please call us and we will begin
individual delivery within 30 days. If you'd like to reduce mailbox clutter even
more, visit www.americancentury.com and sign up to receive these documents by
email. In most cases, we also will deliver account statements for all the
investors in a household in a single envelope.
YOUR GUIDE TO SERVICES AND POLICIES
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the fund and the transfer agent.
--------------------------------------------------------------------------------
AUTOMATICALLY
[Graphic of there revolving arrows]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
--------------------------------------------------------------------------------
BY WIRE
[Graphic of pointing finger]
Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.
[Graphic of wire machine]
OPEN AN ACCOUNT
Call to set up your account or mail a completed application to the address
provided in the "By mail" section. Give your bank the following
information to wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number*
* Your name
* The contribution year (for IRAs only)
*For additional investments only
MAKE ADDITIONAL INVESTMENTS
Follow the wire instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES
Not available.
--------------------------------------------------------------------------------
IN PERSON
[Graphic of person]
If you prefer to handle your transactions in person, visit one of our Investor
Centers and a representative can help you open an account, make additional
investments, and sell or exchange shares.
4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
1665 Charleston Road 9445 East County Line Road, Suite A
Mountain View, California Englewood, Colorado
8 a.m. to 5 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
10 American Century Investments 1-800-345-2021
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account the minimum investment is:
--------------------------------------------------------------------------------
Individual or Joint $10,000
--------------------------------------------------------------------------------
Traditional IRA(1) $10,000
--------------------------------------------------------------------------------
Roth IRA(1) $10,000
--------------------------------------------------------------------------------
Education IRA N/A
--------------------------------------------------------------------------------
UGMA/UTMA $10,000
--------------------------------------------------------------------------------
403(b) $10,000
--------------------------------------------------------------------------------
Qualified Retirement Plans $10,000(2)
(1) To establish a traditional or Roth IRA in the fund, you will need to
exchange from another American Century IRA, transfer from another custodian
or roll over a minimum of $10,000 in order to meet the fund's minimum.
(2) The minimum investment requirements may be different for some types of
retirement accounts.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. The fund reserves the right to suspend the offering of shares for a period
of time, and the fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the fund and its shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
[Sidebar]
[Graphic of pointing finger]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
www.americancentury.com American Century Investments 11
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the fund's annual report, semiannual
report and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the fund.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The fund has authorized these
intermediaries to accept orders on the fund's behalf up to the time at which the
net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on the fund's behalf.
[Sidebar]
[Graphic of pointing finger]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
12 American Century Investments 1-800-345-2021
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of the fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that the fund will not be subject to state or federal
income tax on amounts distributed. The distributions generally consist of
dividends and interest received by a fund, as well as CAPITAL GAINS realized on
the sale of investment securities.
The fund pays distributions of substantially all of its income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. It may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day a distribution is declared, you will not receive that distribution. If you
redeem shares, you will receive any distribution declared on the day you redeem.
If you redeem all shares, we will include any distributions received with your
redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For investors investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information about distributions and your options
for receiving them.
[Sidebar]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
www.americancentury.com American Century Investments 13
TAXES
The tax consequences of owning shares of the fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the fund of dividend and interest income it has received
or capital gains it has generated through its investment activities. Tax
consequences also result from sales of fund shares by investors after the net
asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
---------------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
---------------------------------------------------------------------------------------
Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. American Century will inform you of the
tax status of fund distributions for each calendar year in an annual tax mailing
(Form 1099-DIV).
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
[Sidebar]
[Graphic of pointing finger]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
14 American Century Investments 1-800-345-2021
MULTIPLE CLASS INFORMATION
American Century offers two classes of the fund: Investor Class and
Institutional Class. The shares offered by this Prospectus are Investor Class
shares and have no up-front or deferred charges, commissions or 12b-1 fees.
American Century offers the other class of shares primarily to institutional
investors through institutional distribution channels, such as
employer-sponsored retirement plans, or through banks, broker-dealers and
insurance companies. The other class has different fees, expenses and/or minimum
investment requirements from the Investor Class. The difference in the fee
structures between 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 advisor 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 class of shares not offered by this Prospectus, call us at
1-800-345-3533. You also can contact a sales representative or financial
intermediary who offers that class of shares.
Except as described below, all classes of shares of the fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
www.americancentury.com American Century Investments 15
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The table on the next page itemizes what contributed to the changes in share
price during the most recently ended fiscal year. It also shows the changes in
share price for this period in comparison to changes over the last five fiscal
years or less, if the fund is not five years old.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN - the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO - the operating expenses as a percentage of average net assets
* NET INCOME RATIO - the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
16 American Century Investments 1-800-345-2021
EQUITY INDEX FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.20 $5.00
------------ ---------
Income From Investment Operations
Net Investment Income(2) 0.05 0.01
Net Realized and Unrealized Gain on Investments 0.83 0.19
------------ ---------
Total From Investment Operations 0.88 0.20
------------ ---------
Distributions
From Net Investment Income (0.05) --
In Excess of Net Realized Gains (0.04) --
------------ ---------
Total Distributions (0.09) --
------------ ---------
Net Asset Value, End of Period $5.99 $5.20
============ =========
Total Return(3) 17.17% 4.00%
Ratios/Supplemental Data
2000 1999(1)
------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.49% 0.49%(4)
Ratio of Net Investment Income to Average Net Assets 0.94% 1.13%(4)
Portfolio Turnover Rate 13% 0%
Net Assets, End of Period (in thousands) $68,905 $17,010
(1) February 26, 1999 (inception) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 17
NOTES
18 American Century Investments 1-800-345-2021
NOTES
www.americancentury.com American Century Investments 19
MORE INFORMATION ABOUT THE FUND IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the fund's
investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the fund's operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the fund or your accounts, by contacting American Century at the
address or telephone numbers listed below.
You also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]
By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo(reg. sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
0008
SH-PRS-20894
Your
AMERICAN CENTURY
prospectus
Equity Index Fund
AUGUST 1, 2000
INSTITUTIONAL CLASS
THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors
[american century logo(reg. sm)]
American
Century
[Sidebar]
[american century logo(reg. sm)]
American
Century
American Century
Investments
P.O. Box 419385
Kansas City, MO
64141-6385
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the fund.
An Overview of the Fund - Learn about fund goals, strategies and risks, and who
may or may not want to invest.
Fund Performance History - See how the fund performed from year to year.
Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Fund section.
As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.
Sincerely,
/s/MARK KILLEN
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
TABLE OF CONTENTS
An Overview of the Fund ................................................... 2
Fees and Expenses ......................................................... 3
Objectives, Strategies and Risks .......................................... 4
Management ................................................................ 6
Investing with American Century ........................................... 7
Share Price and Distributions ............................................. 11
Taxes ..................................................................... 12
Multiple Class Information ................................................ 13
Financial Highlights ...................................................... 14
Performance Information of Other Class .................................... 16
[Sidebar]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[Graphic of pointing finger]
This symbol highlights special information and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The fund seeks long-term capital growth.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
The fund seeks to match, as closely as possible, the investment characteristics
and results of the S&P 500 Composite Price Index (S&P 500 Index). The
fund managers buy and sell stocks and other securities in order to build an
investment portfolio that seeks to match the investment characteristics of the
S&P 500 Index. To build this portfolio, the fund managers will invest
primarily in the stocks contained in the S&P 500 Index in order of their
weightings in the index, beginning with the stocks that make up the largest
portion of the index. A more detailed description of the fund's investment
strategies and risks begins on page 4.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
The fund's ability to match the performance of the S&P 500 Index may be
affected by many factors. The fund managers will use cash flows from purchase
and redemption activity to maintain, to the extent feasible, the similarity of
the fund's portfolio to the investment characteristics of the S&P 500 Index.
Because of the composition of the S&P 500 Index, it is possible that a
relatively high percentage of the fund's assets may be invested in companies in
the same industry or economic sector. As a result, the fund may be subject to
greater risks and market fluctuations than funds investing in a broader range of
industries.
WHO MAY WANT TO INVEST IN THE FUND?
The fund may be a good investment if you are
* seeking long-term capital growth from your investment
* comfortable with the risks associated with the fund's investment strategy
* comfortable with the fund's short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund may not be a good investment if you are
* investing for a short period of time
* uncomfortable with the risks associated with the fund's investment strategy
* uncomfortable with short-term volatility in the value of your investment
Fund Performance History
As a new fund, the fund's performance history is not available as of the date of
this Prospectus. When this class of the fund has investment results for a full
calendar year, this section will feature charts that show annual total returns,
highest and lowest quarterly returns and average annual returns.
[Sidebar]
[Graphic of pointing finger]
An investment in the fund is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
[Graphic of pointing finger]
For current performance information, please call us at 1-800-345-3533 or visit
us at www.americancentury.com.
2 American Century Investments 1-800-345-3533
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Institutional Class shares of other American Century
funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the fund.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses(1) Operating Expenses
------------------------------------------------------------------------------------------------
Equity Index 0.29% None 0.00% 0.29%
(1) Other expenses, which include the fees and expenses of the fund's
independent directors and their legal counsel, as well as interest, were
less than 0.005% for the most recent fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in the fund with the costs of investing in other mutual funds.
Assuming you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------------
Equity Index $30 $93 $163 $368
[Sidebar]
[Graphic of pointing finger]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
www.americancentury.com American Century Investments 3
OBJECTIVES, STRATEGIES AND RISKS
EQUITY INDEX FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The fund seeks long-term capital growth.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?
Equity Index seeks to match, as closely as possible, the investment
characteristics and results of the S&P 500 Index. The fund managers buy and
sell stocks and other securities in order to build an investment portfolio that
seeks to match the investment characteristics of the S&P 500 Index.
To build this investment portfolio, the fund managers will invest primarily in
the stocks contained in the S&P 500 Index in order of their weightings in
the index, beginning with the stocks that make up the largest portion of the
index. The fund attempts to be fully invested at all times in the stocks that
comprise the S&P 500 Index and, in any event, will keep at least 80% of the
fund's total assets invested this way.
The S&P 500 Index is an unmanaged index composed of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. Standard &
Poor's, a division of The McGraw-Hill Companies, Inc., chooses the stocks to be
included in the S&P 500 Index. The weightings of stocks in the S&P 500
Index are based on each stock's total MARKET CAPITALIZATION relative to the
other stocks contained in the index. Because of this weighting, the fund expects
that the 50 largest companies will comprise a large proportion of the S&P
500 Index.
The fund managers do not attempt to time the market. When the managers believe
it is prudent, the fund may invest a portion of its assets in convertible debt
securities, equity-equivalent securities, debt securities of companies, debt
obligations of governments and their agencies, NONLEVERAGED stock index futures
contracts and other similar securities. Stock index futures contracts, a type of
derivative security, can help the fund's cash assets remain liquid while
performing more like stocks. The fund has a policy governing stock index futures
and similar derivative securities to help manage the risk of these types of
investments. For example, the fund managers cannot invest in a derivative
security if it would be possible for the fund to lose more money than it
invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
&Standard & Poor's(reg.tm),& &S&P 500(reg.tm)& and
&S&P(reg.tm)& are trademarks of The McGraw-Hill Companies, Inc., and
have been licensed for use by American Century. The fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's
makes no representation regarding the advisability of investing in the fund.
Inclusion of a security in the S&P 500 Index in no way implies an opinion by
Standard & Poor's as to its attractiveness as an investment.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[Sidebar]
MARKET CAPITALIZATION is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share.
NONLEVERAGED means that the fund may not invest in futures contracts when it
would be possible to lose more than the fund invested.
4 American Century Investments 1-800-345-3533
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
The fund managers' ability to match the performance of the S&P 500 Index may
be affected by many factors, such as changes in securities markets, the manner
in which the return of the S&P 500 Index is calculated, the size of the
fund's portfolio, the amount of cash held in the fund's portfolio, and the
amount and timing of shareholder purchases and redemptions. The fund managers
will use cash flows from shareholder purchase and redemption activity to
maintain, to the extent feasible, the similarity of its portfolio to the
securities comprising the S&P 500 Index.
It is intended that Equity Index will be diversified to the extent that the
S&P 500 Index is diversified. Because of the composition of the S&P 500
Index, it is possible that a relatively high percentage of the fund's assets may
be invested in the securities of a limited number of issuers, some of which may
be in the same industry or economic sector. As a result, the fund's portfolio
may be more sensitive to changes in the market value of a single issuer or
industry than other equity funds using different investment styles.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the stocks contained in the S&P 500 Index, the fund's gains may not be as
big as, or its losses may be bigger than, other equity funds using different
investment styles.
www.americancentury.com American Century Investments 5
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the fund.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the fund, it has hired an investment advisor to do so.
More than two-thirds of the directors are independent of the fund's advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The fund's investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the fund
and directing the purchase and sale of its investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the fund to operate.
The advisor has, in turn, hired Barclays Global Fund Advisors to make the
day-to-day investment decisions for the fund. Barclays Global Fund Advisors
performs this function under the supervision of American Century Investment
Management, Inc. and the fund's Board of Directors.
For the services it provided to the fund during the most recent fiscal year, the
advisor received a unified management fee of 0.29% of the average net assets of
the Institutional Class shares of the fund. The amount of the management fee is
calculated on a class-by-class basis daily and paid monthly.
Out of that fee, the advisor paid all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objective of the fund may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.
[Sidebar]
[Graphic of pointing finger]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the fund to obtain approval before executing permitted personal trades.
6 American Century Investments 1-800-345-3533
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR INSTITUTIONAL CLASS SHARES
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
retirement plans, endowments, foundations and financial advisors that meet the
fund's minimum investment requirements. Institutional Class shares are not
available for purchase by insurance companies for variable annuity and variable
life products.
MINIMUM INITIAL INVESTMENT AMOUNTS
The minimum investment is $5 million ($3 million for endowments and foundations)
per fund. If you invest with us through a 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). In addition, financial intermediaries or plan
recordkeepers may require retirement plans to meet certain additional
requirements, such as plan size or a minimum level of assets per participant, in
order to be eligible to purchase Institutional Class shares.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
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.
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
[Sidebar]
[Graphic of pointing finger]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
www.americancentury.com American Century Investments 7
WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE
Service Representative
1-800-345-3533
[Graphic of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call if you have authorized us to invest from your bank account.
SELL SHARES
Call a Service Representative.
--------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419385
Kansas City, MO 64141-6385
Fax
816-340-4655
[Graphic of envelope]
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.
SELL SHARES
Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
--------------------------------------------------------------------------------
AUTOMATICALLY
[Graphic of there revolving arrows]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
--------------------------------------------------------------------------------
BY WIRE
[Graphic of pointing finger]
Please remember that if you request redemptions by wire, $10 will be deducted
from the amount redeemed. Your bank also may charge a fee.
[Graphic of wire machine]
OPEN AN ACCOUNT
Call to set up your account or mail a completed application to the address
provided in the &By mail& section. Give your bank the following
information to wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number*
* Your name
* The contribution year (for IRAs only)
*For additional investments only
MAKE ADDITIONAL INVESTMENTS
Follow the wire instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES
Not available.
8 American Century Investments 1-800-345-3533
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. The fund reserves the right to suspend the offering of shares for a period
of time, and the fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the fund and its shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
www.americancentury.com American Century Investments 9
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the fund's annual report, semiannual
report and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the fund.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The fund has authorized these
intermediaries to accept orders on the fund's behalf up to the time at which the
net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on the fund's behalf.
[Sidebar]
[Graphic of pointing finger]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
10 American Century Investments 1-800-345-3533
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of the fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that the fund will not be subject to state or federal
income tax on amounts distributed. The distributions generally consist of
dividends and interest received by a fund, as well as CAPITAL GAINS realized on
the sale of investment securities.
The fund pays distributions of substantially all of its income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. It may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day a distribution is declared, you will not receive that distribution. If you
redeem shares, you will receive any distribution declared on the day you redeem.
If you redeem all shares, we will include any distributions received with your
redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For investors investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information about distributions and your options
for receiving them.
[Sidebar]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
www.americancentury.com American Century Investments 11
TAXES
The tax consequences of owning shares of the fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the fund of dividend and interest income it has received
or capital gains it has generated through its investment activities. Tax
consequences also result from sales of fund shares by investors after the net
asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
-----------------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
-----------------------------------------------------------------------------------------
Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
[Sidebar]
[Graphic of pointing finger]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
12 American Century Investments 1-800-345-3533
MULTIPLE CLASS INFORMATION
American Century offers two classes of the fund: Investor Class and
Institutional Class. The shares offered by this Prospectus are Institutional
Class shares and are offered primarily through employer-sponsored retirement
plans or through institutions like banks, broker-dealers and insurance
companies.
The Investor Class, which has no up-front or deferred charges, commissions or
12b-1 fees, is offered primarily to retail investors. The Investor Class has
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 advisor
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, call us
at 1-800-345-2021. You also can contact a sales representative or financial
intermediary who offers that class of shares.
Except as described below, all classes of shares of the fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
www.americancentury.com American Century Investments 13
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The table on the next page itemizes what contributed to the changes in share
price during the most recently ended fiscal year. It also shows the changes in
share price for this period in comparison to changes over the last five fiscal
years or less, if the share class is not five years old.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN - the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO - the operating expenses as a percentage of average net assets
* NET INCOME RATIO - the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling
activity.
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
14 American Century Investments 1-800-345-3533
EQUITY INDEX FUND
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.20 $5.00
--------- ----------
Income From Investment Operations
Net Investment Income(2) 0.06 0.01
Net Realized and Unrealized Gain on Investments 0.84 0.19
--------- ----------
Total From Investment Operations 0.90 0.20
--------- ----------
Distributions
From Net Investment Income (0.07) --
In Excess of Net Realized Gains (0.04) --
--------- ----------
Total Distributions (0.11) --
--------- ----------
Net Asset Value, End of Period $5.99 $5.20
========= ==========
Total Return(3) 17.43% 4.00%
Ratios/Supplemental Data
2000 1999(1)
------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.29% 0.29%(4)
Ratio of Net Investment Income to Average Net Assets 1.14% 1.33%(4)
Portfolio Turnover Rate 13% 0%
Net Assets, End of Period (in thousands) $398,560 $264,580
(1) February 26, 1999 (inception) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
www.americancentury.com American Century Investments 15
PERFORMANCE INFORMATION OF OTHER CLASS
The following financial information is provided to show the performance of the
fund's original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.20% higher than the Institutional Class. The
Institutional Class is made available to institutional shareholders or through
financial intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower unified management
fee. If the Institutional Class existed during the periods presented, its
performance would have been higher because of the lower expense.
The table on the next page itemizes what contributed to the changes in share
price during the period. It also shows the changes in share price for this
period in comparison to changes over the last five fiscal years or less, if the
share class is not five years old.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN - the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO - operating expenses as a percentage of average net assets
* NET INCOME RATIO - net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling
activity.
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
16 American Century Investments 1-800-345-3533
EQUITY INDEX FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
-----------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.20 $5.00
---------- ----------
Income From Investment Operations
Net Investment Income(2) 0.05 0.01
Net Realized and Unrealized Gain on Investments 0.83 0.19
---------- ----------
Total From Investment Operations 0.88 0.20
---------- ----------
Distributions
From Net Investment Income (0.05) --
In Excess of Net Realized Gains (0.04) --
---------- ----------
Total Distributions (0.09) --
---------- ----------
Net Asset Value, End of Period $5.99 $5.20
========== ==========
Total Return(3) 17.17% 4.00%
Ratios/Supplemental Data
2000 1999(1)
-----------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.49% 0.49%(4)
Ratio of Net Investment Income to Average Net Assets 0.94% 1.13%(4)
Portfolio Turnover Rate 13% 0%
Net Assets, End of Period (in thousands) $68,905 $17,010
(1) February 26, 1999 (inception) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
17 www.americancentury.com American Century Investments
MORE INFORMATION ABOUT THE FUND IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the fund's
investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the fund's operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the fund or your accounts, by contacting American Century at the
address or telephone numbers listed below.
You also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]
By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo(reg. sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P. O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
0008
SH-PRS-20895
[front cover]
Your
AMERICAN CENTURY
prospectus
Real Estate Fund
AUGUST 1, 2000
INVESTOR CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Funds Distributor, Inc. and
American Century
Investment Services, Inc.,
Distributors
[american century logo (reg. sm)]
American
Century
[end front cover]
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the fund.
An Overview of the Fund--Learn about fund goals, strategies and risks, and
who may or may not want to invest.
Fund Performance History--See how the fund performed from year to year.
Fees and Expenses--Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks--Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Fund section.
As you continue to read, the Management section will acquaint you with the
fund management team, and Investing with American Century gives an overview
about how to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, an Investor Relations Representative will be
happy to help weekdays, 7 a.m. to 7 p.m. and Saturdays, 9 a.m. to 2 p.m. Central
time. Give us a call at 1-800-345-2021.
Sincerely,
/s/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[left margin]
[american century logo (reg. sm)]
American
Century
American Century
Investments
P.O. Box 419200
Kansas City, MO
64141-6200
TABLE OF CONTENTS
An Overview of the Fund ................................................... 2
Fund Performance History .................................................. 3
Fees and Expenses ......................................................... 4
Objectives, Strategies and Risks .......................................... 5
Management ................................................................ 7
Investing with American Century ........................................... 9
Share Price and Distributions ............................................. 13
Taxes ..................................................................... 14
Multiple Class Information ................................................ 16
Financial Highlights ...................................................... 17
[left margin]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[graphic of pointing index finger] This symbol highlights special information
and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital appreciation. Income is a secondary objective.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
The fund invests primarily in real estate securities. These securities include
shares of real estate investment trusts (REITs) and companies engaged in the
real estate industry. The fund managers look for real estate securities they
believe will provide superior returns to the fund, focusing on companies with
the potential for stock price appreciation, plus strong growth of cash flow to
investors. A more detailed description of the fund's investment strategies and
risks begins on page 5.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
An investment in the fund may be subject to many of the same risks as a direct
investment in real estate. These risks include changes in economic conditions,
interest rates, property values, property tax increases, overbuilding and
increased competition, environmental contamination, zoning and natural
disasters. This is due to the fact that the value of the fund's investments may
be affected by the value of the real estate owned by the companies in which it
invests. To the extent the fund invests in companies that make loans to real
estate companies, the fund also may be subject to interest rate risk.
Because the fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than funds investing in a
broader range of industries.
WHO MAY WANT TO INVEST IN THE FUND?
The fund may be a good investment if you are
* seeking long-term capital growth and current income from your investment
* seeking diversification of your investment portfolio through an investment in
real estate securities
* comfortable with the risks associated with investing in real estate
securities
* comfortable with the fund's short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund may not be a good investment if you are
* investing for a short period of time
* uncomfortable with the risks associated with investments in real estate
* uncomfortable with short-term volatility in the value of your investment
[left margin]
[graphic of pointing index finger] An investment in the fund is not a bank
deposit, and it is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
2 American Century Investments 1-800-345-2021
FUND PERFORMANCE HISTORY
REAL ESTATE FUND
Annual Total Returns(1)
The following bar chart shows the performance of the fund's Investor Class
shares for each full calendar year in the life of the fund. It indicates the
volatility of the fund's historical returns from year to year.
[bar chart data shown below]
1999 1998 1997 1996
Real Estate -2.71% -18.10% 25.21% 40.81%
(1) As of June 30, 2000, the end of the most recent calendar quarter, the Real
Estate Fund's year-to-date return was 12.41%.
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
--------------------------------------------------------------------------------
Real Estate Fund 19.92% (4Q 1996) -13.35% (3Q 1998)
Average Annual Total Returns
The following table shows the average annual total returns of the fund's
Investor Class shares for the periods indicated. The benchmarks are unmanaged
indices that have no operating costs and are included in the table for
performance comparison. The fund's benchmark was changed to the Morgan Stanley
REIT Index beginning January 1, 2000. The fund's advisor believes this index
better represents the real estate industry.
For the calendar year ended December 31, 1999 1 year Life of Fund(1)
-----------------------------------------------------------------------------
Real Estate Fund -2.71% 9.51%
Morgan Stanley REIT Index -4.55% 7.03%(2)
Wilshire REIT Index -2.49% 7.89%(2)
(1) The inception date for the Real Estate Fund is September 21, 1995.
(2) Since September 30, 1995, the date closest to the fund's inception for which
data are available.
[left margin]
[graphic of pointing finger]
The performance information on this page is designed to help you see how the
fund's returns can vary. Keep in mind that past performance does not predict how
the fund will perform in the future.
[graphic of pointing finger]
For current performance information, please call us at 1-800-345-2021 or visit
us at www.americancentury.com.
www.americancentury.com American Century Investments 3
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Investor Class shares of other American Century funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the fund.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses Operating Expenses
------------------------------------------------------------------------------------------------------
Real Estate Fund 1.20%((1)) None 0.00%((2)) 1.20%
(1) Based on expenses incurred during the fund's most recent fiscal year. The
fund has a stepped fee schedule. As a result, the fund's management fee rate
generally decreases as fund assets increase.
(2) Other expenses, which include the fees and expenses of the fund's
independent directors and their legal counsel, as well as interest, were less
than 0.005% for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in the fund with the costs of investing in other mutual funds.
Assuming you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
-------------------------------------------------------------------------
Real Estate Fund $122 $380 $657 $1,447
[left margin]
[graphic of pointing finger]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
4 American Century Investments 1-800-345-2021
OBJECTIVES, STRATEGIES AND RISKS
REAL ESTATE FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital appreciation. Income is a secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund invests primarily in equity securities issued by real estate investment
trusts (REITs) and companies engaged in the real estate industry. The fund
managers look for real estate securities they believe will provide superior
returns to the fund. They attempt to focus the fund's investments on real estate
companies and REITs with the potential for stock price appreciation, plus strong
growth of cash flow to investors.
The fund managers' real estate securities investment philosophy is that
consistently excellent investment results can be achieved through superior stock
selection (based on both public equity and private real estate market factors)
and risk managed portfolio construction. The fund managers use a disciplined
investment process to manage the fund focusing on superior stock selection
rather than sector or theme bets. The portfolio management process relies on a
continuous screen of the target universe of investments to identify companies
exhibiting superior financial strength, operating returns and growth prospects
that are attractively priced at any given time.
The investment style of the fund is growth at a reasonable price. The fund
managers evaluate each company's ability to generate earnings over an earnings
cycle, not just for the next one or two years. The fund managers focus research
efforts on determining the normalized earnings and earnings growth of a company,
from which they determine if the company's current price fully reflects its
long-term value.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 80% of the fund's assets
invested in equity securities of REITs or real estate companies. A company is
considered to be a real estate company if, in the opinion of the fund managers,
at least 50% of its revenues or 50% of the market value of its assets at the
time its securities are purchased by the fund are attributed to the ownership,
construction, management or sale of real estate.
When the managers believe it is prudent, the fund may invest a portion of its
assets in other types of securities. These securities may include convertible
debt securities, equity-equivalent securities, foreign securities, short-term
securities, bonds, notes, securities of companies not principally engaged in the
real estate industry, non-leveraged stock index futures contracts and other
similar securities. Stock index futures contracts, a type of derivative
security, can help the fund's cash assets remain liquid while performing more
like stocks. The fund has a policy governing stock index futures and similar
derivative securities to help manage the risk of these types of investments. For
example, the fund managers cannot invest in a derivative security if it would be
possible for the fund to lose more money than it invested. A complete
description of the derivatives policy is included in the Statement of Additional
Information.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
[graphic of pointing finger]
Equity securities include common stock, preferred stock and securities
convertible into common stock.
www.americancentury.com American Century Investments 5
WHAT IS A REIT?
A real estate investment trust, or REIT, invests primarily in income-producing
real estate or makes loans to persons involved in the real estate industry.
Some REITs, called equity REITs, buy real estate, and investors receive income
from the rents received and from any profits on the sale of its properties.
Other REITs, called mortgage REITs, lend money to building developers and other
real estate companies, and receive income from interest paid on those loans.
There are also hybrid REITs which engage in both owning real estate and making
loans.
If a REIT meets certain requirements, it is not taxed on the income it
distributes to its investors.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
An investment in the fund may be subject to many of the same risks as a direct
investment in real estate. This is due to the fact that the value of the fund's
investments may be affected by the value of the real estate owned by the
companies in which it invests. These risks include changes in economic
conditions, interest rates, property values, property tax increases,
overbuilding and increased competition, environmental contamination, zoning and
natural disasters.
To the extent the fund invests in mortgage REITs, it will be subject to credit
risk and interest rate risk with respect to the loans made by the REITs in which
it invests. Credit risk is the risk that the borrower will not be able to make
interest and principal payments on the loan to the REIT when they are due.
Interest rate risk is the risk that a change in the prevailing interest rate
will cause the value of the loan portfolio held by the REIT to rise or fall.
Generally, when interest rates rise, the value of the loan portfolio will
decline. The opposite is true when interest rates decline. The degree to which
interest rate changes affect the fund's performance varies and is related to the
specific characteristics of the loan portfolios of the mortgage REITs in which
the fund invests.
Because the fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than a fund representing a
broader range of industries. In addition, market performance tends to be
cyclical and, in the various cycles, certain investment styles may fall in and
out of favor. If the market is not favoring the fund's style, the fund's gains
may not be as big as, or its losses may be bigger than, other equity funds using
different investment styles.
6 American Century Investments 1-800-345-2021
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the fund.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the fund, it has hired an investment advisor to do so.
More than two-thirds of the directors are independent of the fund's advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The fund's investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the fund
and directing the purchase and sale of its investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the fund to operate.
For the services it provides to the fund, the advisor receives a unified
management fee based on a percentage of the average net assets of the Investor
Class shares of the fund. The amount of the management fee is calculated on a
class-by-class basis daily and paid monthly. Effective January 1, 2000, the fund
will pay the advisor a unified management fee of 1.20% of the first $100 million
of average net assets and 1.15% of average net assets over $100 million of the
Investor class shares.
Out of that fee, the advisor pays all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
www.americancentury.com American Century Investments 7
THE FUND MANAGEMENT TEAM
American Century Investment Management, Inc. provides investment advisory and
management services for the fund. American Century Investment Management, Inc.
has, in turn, hired J.P. Morgan Investment Management Inc. to make the
day-to-day investment decisions for the fund. J.P. Morgan Investment Management
Inc. performs this function under the supervision of American Century Investment
Management, Inc. and the fund's Board of Directors.
The portfolio manager who leads the investment team is identified below:
DANIEL P. O'CONNOR
Mr. O'Connor, Portfolio Manager, has been a member of the team that manages the
Real Estate Fund since January 2000. He joined J.P. Morgan Investment Management
Inc. in February 1996 and is a portfolio manager of all real estate security
portfolios at J.P. Morgan Investment Management Inc. From July 1994 to January
1996, he was the director of Real Estate Securities at INVESCO. Prior to that
time, he was the supervisor of investments at the Delta Air Lines pension fund.
He has a bachelor of science from Indiana University, an MS from Clemson
University and an MBA in finance from the University of Chicago Graduate School
of Business. He is a Chartered Financial Analyst.
The representative of American Century Investment Management, Inc. who oversees
the management of the fund is identified as follows:
MARK MALLON
Mr. Mallon, Chief Investment Officer--Value and Quantitative Equities and Senior
Vice President, joined American Century in April 1997. From August 1978 until he
joined American Century, he was employed in several positions by Federated
Investors and served as President and Chief Executive Officer of Federated
Investment Counseling and Executive Vice President of Federated Research
Corporation since January 1990. He has a bachelor of arts from Westminster
College and an MBA from Cornell University. He is a Chartered Financial Analyst.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the fund may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.
[left margin]
[graphic of pointing finger]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the fund to obtain approval before executing permitted personal trades.
8 American Century Investments 1-800-345-2021
INVESTING WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE
Investor Relations
1-800-345-2021
Business, Not-For-Profit
and Employer-Sponsored
Retirement Plans
1-800-345-353
Automated Information Line
1-800-345-8765
[graphic of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call or use our Automated Information Line if you have authorized us to invest
from your bank account.
SELL SHARES
Call a Service Representative.
--------------------------------------------------------------------------------
ONLINE
www.americancentury.com
[graphic of computer]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Exchange shares from another American Century account.
MAKE ADDITIONAL INVESTMENTS
Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.
SELL SHARES
Not available.
--------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419200
Kansas City, MO 64141-6200
Fax
816-340-7962
[graphic of an envelope]
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.
SELL SHARES
Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
www.americancentury.com American Century Investments 9
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce expenses and demonstrate respect for our environment, we will deliver
a single copy of most financial reports and prospectuses to investors who share
an address, even if the accounts are registered under different names. If you
would like to receive separate mailings, please call us and we will begin
individual delivery within 30 days. If you'd like to reduce mailbox clutter even
more, visit www.americancentury.com and sign up to receive these documents by
email. In most cases, we also will deliver account statements for all the
investors in a household in a single envelope.
YOUR GUIDE TO SERVICES AND POLICIES
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the fund and the transfer agent.
--------------------------------------------------------------------------------
AUTOMATICALLY
[graphic of revolving arrows]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
--------------------------------------------------------------------------------
BY WIRE
[graphic of pointing finger]
Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.
[graphic of wire machine]
OPEN AN ACCOUNT
Call to set up your account or mail a completed application to the address
provided in the "By mail" section. Give your bank the following
information to wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number*
* Your name
* The contribution year (for IRAs only)
* For additional investments only
MAKE ADDITIONAL INVESTMENTS
Follow the wire instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES
Not available.
--------------------------------------------------------------------------------
IN PERSON
If you prefer to handle your transactions in person, visit one of our Investor
Centers and a representative can help you open an account, make additional
investments, and sell or exchange shares.
4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday -- Friday
8 a.m. to noon, Saturday
1665 Charleston Road 9445 East County Line Road, Suite A
Mountain View, California Englewood, Colorado
8 a.m. to 5 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
10 American Century Investments 1-800-345-2021
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account, the minimum investments are:
--------------------------------------------------------------------------------
Individual or Joint $2,500
--------------------------------------------------------------------------------
Traditional IRA $1,000
--------------------------------------------------------------------------------
Roth IRA $1,000
--------------------------------------------------------------------------------
Education IRA $500
--------------------------------------------------------------------------------
UGMA/UTMA $2,500
--------------------------------------------------------------------------------
403(b) $1,000(1)
--------------------------------------------------------------------------------
Qualified Retirement Plans $2,500(2)
(1) American Century will waive the minimum if: (A) you contribute at least $50
a month in each fund you select or, (B) your plan contribution is less than $50
a month and is invested in one fund.
(2) The minimum investment requirements may be different for some types of
retirement accounts.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. The fund reserves the right to suspend the offering of shares for a period
of time, and the fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the fund and its shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
[left margin]
[graphic of pointing finger]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
www.americancentury.com American Century Investments 11
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
* minimum investment requirements * exchange policies * fund choices * cutoff
time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the fund's annual report, semiannual
report and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the fund.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The fund has authorized these
intermediaries to accept orders on the fund's behalf up to the time at which the
net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on the fund's behalf.
[left margin]
[graphic of pointing finger]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
12 American Century Investments 1-800-345-2021
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of the fund as of one hour
before the close of regular trading on the New York Stock Exchange (usually 4
p.m. Eastern time) on each day the Exchange is open. On days when the Exchange
is closed (including certain U.S. holidays), we do not calculate the NAV. A fund
share's NAV is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification
as a regulated investment company means that the fund will not be subject to
state or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as CAPITAL GAINS realized on
the sale of investment securities.
The fund pays distributions of substantially all of its income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. It may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distribution received with
your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
[left margin]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
www.americancentury.com American Century Investments 13
TAXES
The tax consequences of owning shares of the fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the fund of dividend and interest income it has received
or capital gains it has generated through its investment activities. Tax
consequences also result from sales of fund shares by investors after the net
asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term, long term or UNRECAPTURED
SECTION 1250 CAPITAL GAINS, and are taxed as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket
or Above
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
--------------------------------------------------------------------------------
Long-term capital gains 10% 20%
--------------------------------------------------------------------------------
Unrecaptured Section Ordinary income rate 25%
1250 capital gains
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Additionally, the fund may receive distributions of unrecaptured Section 1250
capital gains from REITs. To the extent the fund receives such distributions,
unrecaptured Section 1250 capital gains will be distributed to shareholders of
the fund.
Because of the nature of REIT investments, REITs may generate significant
non-cash deductions, such as depreciation on real estate holdings, while having
a greater cash flow to distribute to its shareholders. If a REIT distributes
more cash flow than it has taxable income, a RETURN OF CAPITAL results. The fund
may pay a return of capital distribution to its 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 returned capital,
which may result in a larger capital gain when you sell your shares. Although a
return of capital generally is not 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.
[left margin]
[graphic of pointing finger]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
UNRECAPTURED SECTION 1250 CAPITAL GAINS, named for the Internal Revenue Code
section that describes them, are frequently realized upon the sale of real
estate and are subject to a maximum tax rate of 25%. These gains are received by
the fund from its REIT securities and are then subsequently passed through to
shareholders.
A RETURN OF CAPITAL represents the return of a portion of a shareholder's
original investment that is generally non-taxable when distributed, or returned,
to the investor.
14 American Century Investments 1-800-345-2021
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
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 from the
Internal Revenue Service each year for an extension of time to issue Form
1099-DIV until February 28.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
www.americancentury.com American Century Investments 15
MULTIPLE CLASS INFORMATION
American Century offers three classes of the fund: Investor Class, Institutional
Class and Advisor Class. The shares offered by this Prospectus are Investor
Class shares and have no up-front or deferred charges, commissions, or 12b-1
fees.
American Century offers the other classes of shares primarily through
employer-sponsored retirement plans, or through institutions like banks,
broker-dealers and insurance companies. The other classes have different fees,
expenses and/or minimum investment requirements from the Investor Class. The
difference in the fee structures between 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 advisor 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 for Advisor or Institutional Class
shares. You also can 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 between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
16 American Century Investments 1-800-345-2021
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The table on the next page itemizes what contributed to the changes in share
price during the most recently ended fiscal year. It also shows the changes in
share price for this period in comparison to changes over the last five fiscal
years.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO--the operating expenses as a percentage of average net assets
* NET INCOME RATIO--the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER--the percentage of the fund's buying and selling activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 17
REAL ESTATE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998(1) 1997 1996 1995(2)
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.10 $16.12 $16.06 $12.29 $9.82 $10.00
---------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.74(3) 0.73(3) 0.25(3) 0.67(3) 0.55 0.07
Net Realized and Unrealized Gain
(Loss) on Investment Transactions (0.41) (4.09) 0.26 4.13 2.27 (0.25)
---------------------------------------------------------------------------
Total From Investment Operations 0.33 (3.36) 0.51 4.80 2.82 (0.18)
---------------------------------------------------------------------------
Distributions
From Net Investment Income (0.69) (0.54) (0.18) (0.48) (0.35) --
From Net Realized Gains on
Investment Transactions -- (0.12) (0.27) (0.55) -- --
---------------------------------------------------------------------------
Total Distributions (0.69) (0.66) (0.45) (1.03) (0.35) --
---------------------------------------------------------------------------
Net Asset Value, End of Period $11.74 $12.10 $16.12 $16.06 $12.29 $9.82
===========================================================================
Total Return(4) 2.87% (21.04)% 3.26% 40.69% 29.28% (1.80)%
Ratios/Supplemental Data
2000 1999 1998(1) 1997 1996 1995(2)
--------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets 1.20% 1.20% 1.15%(5) 1.17% 1.00% 1.50%(5)
Ratio of Operating Expenses
to Average Net Assets (before expense
waivers and reimbursements)(6) 1.20% 1.20% 1.20%(5) 1.82% 6.83% 14.83%(5)
Ratio of Net Investment Income to
Average Net Assets 5.95% 5.41% 3.75%(5) 4.48% 5.84% 6.66%(5)
Ratio of Net Investment Income to
Average Net Assets (before expense
waivers and reimbursements)(6) 5.95% 5.41% 3.70%(5) 3.84% 0.01% (6.67)%(5)
Portfolio Turnover Rate 102% 66% 28% 69% 86% --
Net Assets, End of Period (in thousands) $73,812 $110,285 $135,922 $76,932 $7,209 $2,983
(1) The period ended March 31, 1998 represents a five month reporting period.
The fund's fiscal year end was changed from October 31 to March 31 during the
period. Periods prior to 1998 are based on a fiscal year ended October 31.
(2) September 21, 1995 (inception) through October 31, 1995.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
(6) During the periods ended October 31, 1996 and October 31, 1995 and for a
portion of the period ended October 31, 1997, the manager voluntarily agreed to
waive its management fee and reimburse certain expenses incurred by the fund.
Also, prior to the unified management fee structure, effective June 13, 1997,
the custodian offset part of its fees for balance credits given to the fund.
During the period ended March 31, 1998, a portion of the subadvisory fee, which
is paid for subadvisory services, was waived.
18 American Century Investments 1-800-345-2021
NOTES
www.americancentury.com American Century Investments 19
NOTES
20 American Century Investments 1-800-345-2021
NOTES
www.americancentury.com American Century Investments 21
MORE INFORMATION ABOUT THE FUND IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the fund's
investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the fund's operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the fund or your accounts, by contacting American Century at the
address or telephone numbers listed below.
You also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
* In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for
location and hours.
* On the Internet EDGAR database at www.sec.gov
By email request at [email protected]
* By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo(reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
0008
SH-PRS-20920
[front cover]
Your
AMERICAN CENTURY
prospectus
Real Estate Fund
AUGUST 1, 2000
ADVISOR CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Funds Distributor, Inc. and
American Century
Investment Services, Inc.,
Distributors
[american century logo (reg. sm)]
American
Century
[end front cover]
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the fund.
An Overview of the Fund--Learn about fund goals, strategies and risks, and
who may or may not want to invest.
Fund Performance History--See how the fund performed from year to year.
Fees and Expenses--Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks--Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Fund section.
As you continue to read, the Management section will acquaint you with the
fund management team, and Investing with American Century gives an overview
about how to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.
Sincerely,
/s/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[left margin]
[american century logo (reg. sm)]
American
Century
American Century
Investments
P.O. Box 419385
Kansas City, MO
64141-6385
TABLE OF CONTENTS
An Overview of the Fund ................................................... 2
Fund Performance History .................................................. 3
Fees and Expenses ......................................................... 4
Objectives, Strategies and Risks .......................................... 5
Management ................................................................ 7
Investing with American Century ........................................... 9
Share Price and Distributions ............................................. 11
Taxes ..................................................................... 12
Multiple Class Information ................................................ 14
Financial Highlights ...................................................... 15
Performance Information of Other Class .................................... 17
[left margin]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[graphic of pointing index finger] This symbol highlights special information
and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital appreciation. Income is a secondary objective.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
The fund invests primarily in real estate securities. These securities include
shares of real estate investment trusts (REITs) and companies engaged in the
real estate industry. The fund managers look for real estate securities they
believe will provide superior returns to the fund, focusing on companies with
the potential for stock price appreciation, plus strong growth of cash flow to
investors. A more detailed description of the fund's investment strategies and
risks begins on page 5.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
An investment in the fund may be subject to many of the same risks as a direct
investment in real estate. These risks include changes in economic conditions,
interest rates, property values, property tax increases, overbuilding and
increased competition, environmental contamination, zoning and natural
disasters. This is due to the fact that the value of the fund's investments may
be affected by the value of the real estate owned by the companies in which it
invests. To the extent the fund invests in companies that make loans to real
estate companies, the fund also may be subject to interest rate risk.
Because the fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than funds investing in a
broader range of industries.
WHO MAY WANT TO INVEST IN THE FUND?
The fund may be a good investment if you are
* seeking long-term capital growth and current income from your investment
* seeking diversification of your investment portfolio through an investment in
real estate securities
* comfortable with the risks associated with investing in real estate
securities
* comfortable with the fund's short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund may not be a good investment if you are
* investing for a short period of time
* uncomfortable with the risks associated with investments in real estate
* uncomfortable with short-term volatility in the value of your investment
[left margin]
[graphic of pointing index finger] An investment in the fund is not a bank
deposit, and it is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
2 American Century Investments 1-800-345-3533
FUND PERFORMANCE HISTORY
REAL ESTATE FUND
Annual Total Returns(1)
The following bar chart shows the performance of the fund's Advisor Class shares
for each full calendar year in the life of the fund. It indicates the volatility
of the fund's historical returns from year to year.
[bar chart data shown below]
1999
Real Estate -3.03%
(1) As of June 30, 2000, the end of the most recent calendar quarter, the Real
Estate Fund's year-to-date return was 12.35%.
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
--------------------------------------------------------------------------------
Real Estate Fund 12.04% (2Q 1999) -4.30% (1Q 1999)
Average Annual Total Returns
The following table shows the average annual total returns of the fund's Advisor
Class shares for the periods indicated. The benchmarks are unmanaged indices
that have no operating costs and are included in the table for performance
comparison. The fund's benchmark was changed to the Morgan Stanley REIT Index
beginning January 1, 2000. The fund's advisor believes this index better
represents the real estate industry.
For the calendar year ended December 31, 1999 1 year Life of Fund(1)
-----------------------------------------------------------------------------
Real Estate Fund -3.03% 2.91%
Morgan Stanley REIT Index -4.55% -5.30%(2)
Wilshire REIT Index -2.49% -3.65%(2)
(1) The inception date for the Real Estate Fund is October 6, 1998.
(2) Since September 30, 1998, the date closest to the fund's inception for which
data are available.
PERFORMANCE INFORMATION OF OTHER CLASS
The original class of shares of the fund was the Investor Class. For information
about the historical performance of the original class of shares, see page 17.
[left margin]
[graphic of pointing finger]
The performance information on this page is designed to help you see how the
fund's returns can vary. Keep in mind that past performance does not predict how
the fund will perform in the future.
[graphic of pointing finger]
For current performance information, please call us at 1-800-345-3533 or visit
us at www.americancentury.com.
www.americancentury.com American Century Investments 3
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Advisor Class shares of other American Century funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the fund.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees(2) Expenses Operating Expenses
------------------------------------------------------------------------------------------------------
Real Estate Fund 0.95% 0.50% 0.00% 1.45%
(1) Based on expenses incurred during the fund's most recent fiscal year. The
fund has a stepped fee schedule. As a result, the fund's management fee rate
generally decreases as fund assets increase.
(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other financial
intermediaries. A portion of the fee is used to compensate them for ongoing
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor, and a portion is used to compensate them for
distribution and other shareholder services. For more information, see Service
and Distribution Fees, page 14.
(3) Other expenses, which include the fees and expenses of the fund's
independent directors and their legal counsel, as well as interest, were less
than 0.005% for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in the fund with the costs of investing in other mutual funds.
Assuming you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
--------------------------------------------------------------------------
Real Estate Fund $147 $456 $788 $1,724
--------------------------------------------------------------------------
[left margin]
[graphic of pointing finger]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
4 American Century Investments 1-800-345-3533
OBJECTIVES, STRATEGIES AND RISKS
REAL ESTATE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital appreciation. Income is a secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund invests primarily in equity securities issued by real estate investment
trusts (REITs) and companies engaged in the real estate industry. The fund
managers look for real estate securities they believe will provide superior
returns to the fund. They attempt to focus the fund's investments on real estate
companies and REITs with the potential for stock price appreciation, plus strong
growth of cash flow to investors.
The fund managers' real estate securities investment philosophy is that
consistently excellent investment results can be achieved through superior stock
selection (based on both public equity and private real estate market factors)
and risk managed portfolio construction. The fund managers use a disciplined
investment process to manage the fund focusing on superior stock selection
rather than sector or theme bets. The portfolio management process relies on a
continuous screen of the target universe of investments to identify companies
exhibiting superior financial strength, operating returns and growth prospects
that are attractively priced at any given time.
The investment style of the fund is growth at a reasonable price. The fund
managers evaluate each company's ability to generate earnings over an earnings
cycle, not just for the next one or two years. The fund managers focus research
efforts on determining the normalized earnings and earnings growth of a company,
from which they determine if the company's current price fully reflects its
long-term value.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 80% of the fund's assets
invested in equity securities of REITs or real estate companies. A company is
considered to be a real estate company if, in the opinion of the fund managers,
at least 50% of its revenues or 50% of the market value of its assets at the
time its securities are purchased by the fund are attributed to the ownership,
construction, management or sale of real estate.
When the managers believe it is prudent, the fund may invest a portion of its
assets in other types of securities. These securities may include convertible
debt securities, equity-equivalent securities, foreign securities, short-term
securities, bonds, notes, securities of companies not principally engaged in the
real estate industry, non-leveraged stock index futures contracts and other
similar securities. Stock index futures contracts, a type of derivative
security, can help the fund's cash assets remain liquid while performing more
like stocks. The fund has a policy governing stock index futures and similar
derivative securities to help manage the risk of these types of investments. For
example, the fund managers cannot invest in a derivative security if it would be
possible for the fund to lose more money than it invested. A complete
description of the derivatives policy is included in the Statement of Additional
Information.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
[graphic of pointing finger]
Equity securities include common stock, preferred stock and securities
convertible into common stock.
www.americancentury.com American Century Investments 5
WHAT IS A REIT?
A real estate investment trust, or REIT, invests primarily in income-producing
real estate or makes loans to persons involved in the real estate industry.
Some REITs, called equity REITs, buy real estate, and investors receive income
from the rents received and from any profits on the sale of its properties.
Other REITs, called mortgage REITs, lend money to building developers and other
real estate companies, and receive income from interest paid on those loans.
There are also hybrid REITs which engage in both owning real estate and making
loans.
If a REIT meets certain requirements, it is not taxed on the income it
distributes to its investors.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
An investment in the fund may be subject to many of the same risks as a direct
investment in real estate. This is due to the fact that the value of the fund's
investments may be affected by the value of the real estate owned by the
companies in which it invests. These risks include changes in economic
conditions, interest rates, property values, property tax increases,
overbuilding and increased competition, environmental contamination, zoning and
natural disasters.
To the extent the fund invests in mortgage REITs, it will be subject to credit
risk and interest rate risk with respect to the loans made by the REITs in which
it invests. Credit risk is the risk that the borrower will not be able to make
interest and principal payments on the loan to the REIT when they are due.
Interest rate risk is the risk that a change in the prevailing interest rate
will cause the value of the loan portfolio held by the REIT to rise or fall.
Generally, when interest rates rise, the value of the loan portfolio will
decline. The opposite is true when interest rates decline. The degree to which
interest rate changes affect the fund's performance varies and is related to the
specific characteristics of the loan portfolios of the mortgage REITs in which
the fund invests.
Because the fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than a fund representing a
broader range of industries. In addition, market performance tends to be
cyclical and, in the various cycles, certain investment styles may fall in and
out of favor. If the market is not favoring the fund's style, the fund's gains
may not be as big as, or its losses may be bigger than, other equity funds using
different investment styles.
6 American Century Investments 1-800-345-3533
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the fund.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the fund, it has hired an investment advisor to do so.
More than two-thirds of the directors are independent of the fund's advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The fund's investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the fund
and directing the purchase and sale of its investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the fund to operate.
For the services it provides to the fund, the advisor receives a unified
management fee based on a percentage of the average net assets of the Advisor
Class shares of the fund. The amount of the management fee is calculated on a
class-by-class basis daily and paid monthly. Effective January 1, 2000, the fund
will pay the advisor a unified management fee of 0.95% of the first $100 million
of average net assets and 0.90% of average net assets over $100 million of the
Advisor class shares.
Out of that fee, the advisor pays all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
www.americancentury.com American Century Investments 7
THE FUND MANAGEMENT TEAM
American Century Investment Management, Inc. provides investment advisory and
management services for the fund. American Century Investment Management, Inc.
has, in turn, hired J.P. Morgan Investment Management Inc. to make the
day-to-day investment decisions for the fund. J.P. Morgan Investment Management
Inc. performs this function under the supervision of American Century Investment
Management, Inc. and the fund's Board of Directors.
The portfolio manager who leads the investment team is identified below:
DANIEL P. O'CONNOR
Mr. O'Connor, Portfolio Manager, has been a member of the team that manages the
Real Estate Fund since January 2000. He joined J.P. Morgan Investment Management
Inc. in February 1996 and is a portfolio manager of all real estate security
portfolios at J.P. Morgan Investment Management Inc. From July 1994 to January
1996, he was the director of Real Estate Securities at INVESCO. Prior to that
time, he was the supervisor of investments at the Delta Air Lines pension fund.
He has a bachelor of science from Indiana University, an MS from Clemson
University and an MBA in finance from the University of Chicago Graduate School
of Business. He is a Chartered Financial Analyst.
The representative of American Century Investment Management, Inc. who oversees
the management of the fund is identified as follows:
MARK MALLON
Mr. Mallon, Chief Investment Officer--Value and Quantitative Equities and Senior
Vice President, joined American Century in April 1997. From August 1978 until he
joined American Century, he was employed in several positions by Federated
Investors and served as President and Chief Executive Officer of Federated
Investment Counseling and Executive Vice President of Federated Research
Corporation since January 1990. He has a bachelor of arts from Westminster
College and an MBA from Cornell University. He is a Chartered Financial Analyst.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the fund may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.
[left margin]
[graphic of pointing finger]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the fund to obtain approval before executing permitted personal trades.
8 American Century Investments 1-800-345-3533
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR ADVISOR CLASS SHARES
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.
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the fund's annual report, semiannual
report and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the fund.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The fund has authorized these
intermediaries to accept orders on the fund's behalf up to the time at which the
net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on the fund's behalf.
[left margin]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
www.americancentury.com American Century Investments 9
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. The fund reserves the right to suspend the offering of shares for a period
of time, and the fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the fund and its shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
10 American Century Investments 1-800-345-3533
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of the fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification
as a regulated investment company means that the fund will not be subject to
state or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as CAPITAL GAINS realized on
the sale of investment securities.
The fund pays distributions of substantially all of its income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. It may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distribution received with
your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
[left margin]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
www.americancentury.com American Century Investments 11
TAXES
The tax consequences of owning shares of the fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the fund of dividend and interest income it has received
or capital gains it has generated through its investment activities. Tax
consequences also result from sales of fund shares by investors after the net
asset value has increased or decreased.
TAX-DEFERRED ACCOUNTS
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
TAXABLE ACCOUNTS
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term, long term or UNRECAPTURED
SECTION 1250 CAPITAL GAINS, and are taxed as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket
or
Above
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
--------------------------------------------------------------------------------
Long-term capital gains 10% 20%
--------------------------------------------------------------------------------
Unrecaptured Section Ordinary income rate 25%
1250 capital gains
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Additionally, the fund may receive distributions of unrecaptured Section 1250
capital gains from REITs. To the extent the fund receives such distributions,
unrecaptured Section 1250 capital gains will be distributed to shareholders of
the fund.
Because of the nature of REIT investments, REITs may generate significant
non-cash deductions, such as depreciation on real estate holdings, while having
a greater cash flow to distribute to its shareholders. If a REIT distributes
more cash flow than it has taxable income, a RETURN OF CAPITAL results. The fund
may pay a return of capital distribution to its 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 returned capital,
which may result in a larger capital gain when you sell your shares. Although a
return of capital generally is not 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.
[left margin]
[graphic of pointing finger]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
UNRECAPTURED SECTION 1250 CAPITAL GAINS, named for the Internal Revenue Code
section that describes them, are frequently realized upon the sale of real
estate and are subject to a maximum tax rate of 25%. These gains are received by
the fund from its REIT securities and are then subsequently passed through to
shareholders.
A RETURN OF CAPITAL represents the return of a portion of a shareholder's
original investment that is generally non-taxable when distributed, or returned,
to the investor.
12 American Century Investments 1-800-345-3533
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
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 from the
Internal Revenue Service each year for an extension of time to issue Form
1099-DIV until February 28.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
13 www.americancentury.com American Century Investments
MULTIPLE CLASS INFORMATION
American Century offers three classes of the fund: Investor Class, Institutional
Class and Advisor Class. The shares offered by this Prospectus are Advisor Class
shares and are offered primarily through employer-sponsored retirement plans, or
through institutions like banks, broker-dealers and insurance companies.
The other classes have different fees, expenses and/or minimum investment
requirements from the Advisor Class. The difference in the fee structures
between 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 advisor 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
* 1-800-345-2021 for Investor Class shares
* 1-800-345-3533 for Institutional Class shares
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
SERVICE AND DISTRIBUTION FEES
Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay certain expenses associated with the distribution of their shares out of
fund assets. The fund's Advisor Class shares have a 12b-1 Plan. Under the Plan,
the fund's Advisor Class pays an annual fee of 0.50% of Advisor Class average
net assets, half for certain shareholder and administrative services and half
for distribution services. The advisor, as paying agent for the fund, pays all
or a portion of such fees to the banks, broker-dealers and insurance companies
that make such shares available. Because these fees are paid out of the fund's
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. For
additional information about the Plan and its terms, see Multiple Class
Structure--Master Distribution and Shareholder Services Plan in the Statement of
Additional Information.
14 American Century Investments 1-800-345-3533
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The table on the next page itemizes what contributed to the changes in share
price during the most recently ended fiscal year. It also shows the changes in
share price for this period in comparison to changes over the last five fiscal
years.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO--the operating expenses as a percentage of average net assets
* NET INCOME RATIO--the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER--the percentage of the fund's buying and selling activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 15
REAL ESTATE FUND
Advisor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999(1)
--------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.10 $12.22
------------------------
Income From Investment Operations
Net Investment Income(2) 0.75 0.43
Net Realized and Unrealized Loss on Investment Transactions (0.45) (0.15)
------------------------
Total From Investment Operations 0.30 0.28
------------------------
Distributions
From Net Investment Income (0.66) (0.28)
From Net Realized Gains on Investment Transactions -- (0.12)
------------------------
Total Distributions (0.66) (0.40)
------------------------
Net Asset Value, End of Period $11.74 $12.10
========================
Total Return(3) 2.62% 2.25%
Ratios/Supplemental Data
2000 1999(1)
--------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.45% 1.45%(4)
Ratio of Net Investment Income to Average Net Assets 5.70% 5.16%(4)
Portfolio Turnover Rate 102% 66%
Net Assets, End of Period (in thousands) $5,353 $449
(1) October 6, 1998 (commencement of sale) through March 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
16 American Century Investments 1-800-345-3533
PERFORMANCE INFORMATION OF OTHER CLASS
The following financial information is provided to show the performance of the
fund's original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.25% lower than the Advisor Class. If the Advisor Class
had existed during the periods presented, its performance would have been lower
because of the additional expense.
The table on the next page itemizes what contributed to the changes in share
price during the most recently ended fiscal year. It also shows the changes in
share price for this period in comparison to changes over the last five fiscal
years.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO--the operating expenses as a percentage of average net assets
* NET INCOME RATIO--the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER--the percentage of the fund's buying and selling activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 17
REAL ESTATE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998(1) 1997 1996 1995(2)
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.10 $16.12 $16.06 $12.29 $9.82 $10.00
---------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.74(3) 0.73(3) 0.25(3) 0.67(3) 0.55 0.07
Net Realized and Unrealized Gain
(Loss) on Investment Transactions (0.41) (4.09) 0.26 4.13 2.27 (0.25)
---------------------------------------------------------------------------
Total From Investment Operations 0.33 (3.36) 0.51 4.80 2.82 (0.18)
---------------------------------------------------------------------------
Distributions
From Net Investment Income (0.69) (0.54) (0.18) (0.48) (0.35) --
From Net Realized Gains on
Investment Transactions -- (0.12) (0.27) (0.55) -- --
---------------------------------------------------------------------------
Total Distributions (0.69) (0.66) (0.45) (1.03) (0.35) --
---------------------------------------------------------------------------
Net Asset Value, End of Period $11.74 $12.10 $16.12 $16.06 $12.29 $9.82
===========================================================================
Total Return(4) 2.87% (21.04)% 3.26% 40.69% 29.28% (1.80)%
Ratios/Supplemental Data
2000 1999 1998(1) 1997 1996 1995(2)
--------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets 1.20% 1.20% 1.15%(5) 1.17% 1.00% 1.50%(5)
Ratio of Operating Expenses
to Average Net Assets (before expense
waivers and reimbursements)(6) 1.20% 1.20% 1.20%(5) 1.82% 6.83% 14.83%(5)
Ratio of Net Investment Income to
Average Net Assets 5.95% 5.41% 3.75%(5) 4.48% 5.84% 6.66%(5)
Ratio of Net Investment Income to
Average Net Assets (before expense
waivers and reimbursements)(6) 5.95% 5.41% 3.70%(5) 3.84% 0.01% (6.67)%(5)
Portfolio Turnover Rate 102% 66% 28% 69% 86% --
Net Assets, End of Period (in thousands) $73,812 $110,285 $135,922 $76,932 $7,209 $2,983
(1) The period ended March 31, 1998 represents a five month reporting period.
The fund's fiscal year end was changed from October 31 to March 31 during
the period. Periods prior to 1998 are based on a fiscal year ended October
31.
(2) September 21, 1995 (inception) through October 31, 1995.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
(6) During the periods ended October 31, 1996 and October 31, 1995 and for a
portion of the period ended October 31, 1997, the manager voluntarily
agreed to waive its management fee and reimburse certain expenses incurred
by the fund. Also, prior to the unified management fee structure, effective
June 13, 1997, the custodian offset part of its fees for balance credits
given to the fund. During the period ended March 31, 1998, a portion of the
subadvisory fee, which is paid for subadvisory services, was waived.(
18 American Century Investments 1-800-345-3533
NOTES
www.americancentury.com American Century Investments 19
NOTES
20 American Century Investments 1-800-345-3533
NOTES
www.americancentury.com American Century Investments 21
MORE INFORMATION ABOUT THE FUND IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the fund's
investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the fund's operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the fund or your accounts, by contacting American Century at the
address or telephone numbers listed below.
You also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
* In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for
location and hours.
* On the Internet EDGAR database at www.sec.gov
By email request at [email protected]
* By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo(reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
0008
SH-PRS-20921
[front cover]
Your
AMERICAN CENTURY
prospectus
Real Estate Fund
AUGUST 1, 2000
INSTITUTIONAL CLASS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
Funds Distributor, Inc. and
American Century
Investment Services, Inc.,
Distributors
[american century logo (reg. sm)]
American
Century
[end front cover]
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the fund.
An Overview of the Fund--Learn about fund goals, strategies and risks, and
who may or may not want to invest.
Fund Performance History--See how the fund performed from year to year.
Fees and Expenses--Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks--Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Fund section.
As you continue to read, the Management section will acquaint you with the
fund management team, and Investing with American Century gives an overview
about how to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.
Sincerely,
/s/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
[left margin]
[american century logo (reg. sm)]
American
Century
American Century
Investments
P.O. Box 419385
Kansas City, MO
64141-6385
TABLE OF CONTENTS
An Overview of the Fund ................................................... 2
Fund Performance History .................................................. 3
Fees and Expenses ......................................................... 4
Objectives, Strategies and Risks .......................................... 5
Management ................................................................ 7
Investing with American Century ........................................... 9
Share Price and Distributions ............................................. 13
Taxes ..................................................................... 14
Multiple Class Information ................................................ 16
Financial Highlights ...................................................... 17
Performance Information of Other Class .................................... 19
[left margin]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.
[graphic of pointing index finger] This symbol highlights special information
and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital appreciation. Income is a secondary objective.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
The fund invests primarily in real estate securities. These securities include
shares of real estate investment trusts (REITs) and companies engaged in the
real estate industry. The fund managers look for real estate securities they
believe will provide superior returns to the fund, focusing on companies with
the potential for stock price appreciation, plus strong growth of cash flow to
investors. A more detailed description of the fund's investment strategies and
risks begins on page 5.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. As with all funds, if
you sell your shares when the value is less than the price you paid, you will
lose money.
An investment in the fund may be subject to many of the same risks as a direct
investment in real estate. These risks include changes in economic conditions,
interest rates, property values, property tax increases, overbuilding and
increased competition, environmental contamination, zoning and natural
disasters. This is due to the fact that the value of the fund's investments may
be affected by the value of the real estate owned by the companies in which it
invests. To the extent the fund invests in companies that make loans to real
estate companies, the fund also may be subject to interest rate risk.
Because the fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than funds investing in a
broader range of industries.
WHO MAY WANT TO INVEST IN THE FUND?
The fund may be a good investment if you are
* seeking long-term capital growth and current income from your investment
* seeking diversification of your investment portfolio through an investment in
real estate securities
* comfortable with the risks associated with investing in real estate
securities
* comfortable with the fund's short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund may not be a good investment if you are
* investing for a short period of time
* uncomfortable with the risks associated with investments in real estate
* uncomfortable with short-term volatility in the value of your investment
[left margin]
[graphic of pointing index finger]
An investment in the fund is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
2 American Century Investments 1-800-345-3533
FUND PERFORMANCE HISTORY
REAL ESTATE FUND
Annual Total Returns(1)
The following bar chart shows the performance of the fund's Institutional Class
shares for each full calendar year in the life of the fund. It indicates the
volatility of the fund's historical returns from year to year.
[bar chart data shown below]
1999 1998
Real Estate -2.47% -17.86%
(1) As of June 30, 2000, the end of the most recent calendar quarter, the Real
Estate Fund's year-to-date return was 12.53%.
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
--------------------------------------------------------------------------------
Real Estate Fund 12.15% (4Q 1998) -13.23% (3Q 1998)
Average Annual Total Returns
The following table shows the average annual total returns of the fund's
Institutional Class shares for the periods indicated. The benchmarks are
unmanaged indices that have no operating costs and are included in the table for
performance comparison. The fund's benchmark was changed to the Morgan Stanley
REIT Index beginning January 1, 2000. The fund's advisor believes this index
better represents the real estate industry.
For the calendar year ended December 31, 1999 1 year Life of Fund(1)
------------------------------------------------------------------------------
Real Estate Fund -2.47% -2.22%
Morgan Stanley REIT Index -4.55% -4.37%(2)
Wilshire REIT Index -2.49% -3.45%(2)
(1) The inception date for the Real Estate Fund is June 16, 1997.
(2) Since June 30, 1997, the date closest to the fund's inception for which
data are available.
PERFORMANCE INFORMATION OF OTHER CLASS
The original class of shares of the fund was the Investor Class. For information
about the historical performance of the original class of shares, see page 19.
[left margin]
[graphic of pointing finger]
The performance information on this page is designed to help you see how the
fund's returns can vary. Keep in mind that past performance does not predict how
the fund will perform in the future.
[graphic of pointing finger]
For current performance information, please call us at 1-800-345-3533 or visit
us at www.americancentury.com.
www.americancentury.com American Century Investments 3
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Institutional Class shares of other American Century
funds
* to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the fund.
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees Expenses(2) Operating Expenses
-------------------------------------------------------------------------------------------------------------
Real Estate Fund 1.00% None 0.00% 1.00%
(1) Based on expenses incurred during the fund's most recent fiscal year. The
fund has a stepped fee schedule. As a result, the fund's management fee rate
generally decreases as fund assets increase.
(2) Other expenses, which include the fees and expenses of the fund's
independent directors and their legal counsel, as well as interest, were less
than 0.005% for the most recent fiscal year.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in the fund with the costs of investing in other mutual funds.
Assuming you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Real Estate Fund $102 $318 $551 $1,219
[left margin]
[graphic of pointing finger]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
4 American Century Investments 1-800-345-3533
OBJECTIVES, STRATEGIES AND RISKS
REAL ESTATE FUND
WHAT IS THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital appreciation. Income is a secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund invests primarily in equity securities issued by real estate investment
trusts (REITs) and companies engaged in the real estate industry. The fund
managers look for real estate securities they believe will provide superior
returns to the fund. They attempt to focus the fund's investments on real estate
companies and REITs with the potential for stock price appreciation, plus strong
growth of cash flow to investors.
The fund managers' real estate securities investment philosophy is that
consistently excellent investment results can be achieved through superior stock
selection (based on both public equity and private real estate market factors)
and risk managed portfolio construction. The fund managers use a disciplined
investment process to manage the fund focusing on superior stock selection
rather than sector or theme bets. The portfolio management process relies on a
continuous screen of the target universe of investments to identify companies
exhibiting superior financial strength, operating returns and growth prospects
that are attractively priced at any given time.
The investment style of the fund is growth at a reasonable price. The fund
managers evaluate each company's ability to generate earnings over an earnings
cycle, not just for the next one or two years. The fund managers focus research
efforts on determining the normalized earnings and earnings growth of a company,
from which they determine if the company's current price fully reflects its
long-term value.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 80% of the fund's assets
invested in equity securities of REITs or real estate companies. A company is
considered to be a real estate company if, in the opinion of the fund managers,
at least 50% of its revenues or 50% of the market value of its assets at the
time its securities are purchased by the fund are attributed to the ownership,
construction, management or sale of real estate.
When the managers believe it is prudent, the fund may invest a portion of its
assets in other types of securities. These securities may include convertible
debt securities, equity-equivalent securities, foreign securities, short-term
securities, bonds, notes, securities of companies not principally engaged in the
real estate industry, non-leveraged stock index futures contracts and other
similar securities. Stock index futures contracts, a type of derivative
security, can help the fund's cash assets remain liquid while performing more
like stocks. The fund has a policy governing stock index futures and similar
derivative securities to help manage the risk of these types of investments. For
example, the fund managers cannot invest in a derivative security if it would be
possible for the fund to lose more money than it invested. A complete
description of the derivatives policy is included in the Statement of Additional
Information.
Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
[left margin]
[graphic of pointing finger]
Equity securities include common stock, preferred stock and securities
convertible into common stock.
www.americancentury.com American Century Investments 5
WHAT IS A REIT?
A real estate investment trust, or REIT, invests primarily in income-producing
real estate or makes loans to persons involved in the real estate industry.
Some REITs, called equity REITs, buy real estate, and investors receive income
from the rents received and from any profits on the sale of its properties.
Other REITs, called mortgage REITs, lend money to building developers and other
real estate companies, and receive income from interest paid on those loans.
There are also hybrid REITs which engage in both owning real estate and making
loans.
If a REIT meets certain requirements, it is not taxed on the income it
distributes to its investors.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the fund.
An investment in the fund may be subject to many of the same risks as a direct
investment in real estate. This is due to the fact that the value of the fund's
investments may be affected by the value of the real estate owned by the
companies in which it invests. These risks include changes in economic
conditions, interest rates, property values, property tax increases,
overbuilding and increased competition, environmental contamination, zoning and
natural disasters.
To the extent the fund invests in mortgage REITs, it will be subject to credit
risk and interest rate risk with respect to the loans made by the REITs in which
it invests. Credit risk is the risk that the borrower will not be able to make
interest and principal payments on the loan to the REIT when they are due.
Interest rate risk is the risk that a change in the prevailing interest rate
will cause the value of the loan portfolio held by the REIT to rise or fall.
Generally, when interest rates rise, the value of the loan portfolio will
decline. The opposite is true when interest rates decline. The degree to which
interest rate changes affect the fund's performance varies and is related to the
specific characteristics of the loan portfolios of the mortgage REITs in which
the fund invests.
Because the fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than a fund representing a
broader range of industries. In addition, market performance tends to be
cyclical and, in the various cycles, certain investment styles may fall in and
out of favor. If the market is not favoring the fund's style, the fund's gains
may not be as big as, or its losses may be bigger than, other equity funds using
different investment styles.
6 American Century Investments 1-800-345-3533
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the fund.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the fund, it has hired an investment advisor to do so.
More than two-thirds of the directors are independent of the fund's advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The fund's investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the fund
and directing the purchase and sale of its investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the fund to operate.
For the services it provides to the fund, the advisor receives a unified
management fee based on a percentage of the average net assets of the
Institutional Class shares of the fund. The amount of the management fee is
calculated on a class-by-class basis daily and paid monthly. Effective January
1, 2000, the fund will pay the advisor a unified management fee of 1.00% of the
first $100 million of average net assets and 0.95% of average net assets over
$100 million of the Institutional class shares.
Out of that fee, the advisor pays all expenses of managing and operating the
fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the funds' advisor to
unaffiliated third parties who provide recordkeeping and administrative services
that would otherwise be performed by an affiliate of the advisor.
www.americancentury.com American Century Investments 7
THE FUND MANAGEMENT TEAM
American Century Investment Management, Inc. provides investment advisory and
management services for the fund. American Century Investment Management, Inc.
has, in turn, hired J.P. Morgan Investment Management Inc. to make the
day-to-day investment decisions for the fund. J.P. Morgan Investment Management
Inc. performs this function under the supervision of American Century Investment
Management, Inc. and the fund's Board of Directors.
The portfolio manager who leads the investment team is identified below:
DANIEL P. O'CONNOR
Mr. O'Connor, Portfolio Manager, has been a member of the team that manages the
Real Estate Fund since January 2000. He joined J.P. Morgan Investment Management
Inc. in February 1996 and is a portfolio manager of all real estate security
portfolios at J.P. Morgan Investment Management Inc. From July 1994 to January
1996, he was the director of Real Estate Securities at INVESCO. Prior to that
time, he was the supervisor of investments at the Delta Air Lines pension fund.
He has a bachelor of science from Indiana University, an MS from Clemson
University and an MBA in finance from the University of Chicago Graduate School
of Business. He is a Chartered Financial Analyst.
The representative of American Century Investment Management, Inc. who oversees
the management of the fund is identified as follows:
MARK MALLON
Mr. Mallon, Chief Investment Officer--Value and Quantitative Equities and Senior
Vice President, joined American Century in April 1997. From August 1978 until he
joined American Century, he was employed in several positions by Federated
Investors and served as President and Chief Executive Officer of Federated
Investment Counseling and Executive Vice President of Federated Research
Corporation since January 1990. He has a bachelor of arts from Westminster
College and an MBA from Cornell University. He is a Chartered Financial Analyst.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the fund may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.
[left margin]
[graphic of pointing finger]
CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the fund to obtain approval before executing permitted personal trades.
8 American Century Investments 1-800-345-3533
INVESTING WITH AMERICAN CENTURY
ELIGIBILITY FOR INSTITUTIONAL CLASS SHARES
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
retirement plans, endowments, foundations and financial advisors that meet the
fund's minimum investment requirements. Institutional Class shares are not
available for purchase by insurance companies for variable annuity and variable
life products.
MINIMUM INITIAL INVESTMENT AMOUNTS
The minimum investment is $5 million ($3 million for endowments and foundations)
per fund. If you invest with us through a 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). In addition, financial intermediaries or plan
recordkeepers may require retirement plans to meet certain additional
requirements, such as plan size or a minimum level of assets per participant, in
order to be eligible to purchase Institutional Class shares.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
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.
SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
[left margin]
[graphic of pointing finger]
A redemption is the sale of all or a portion of the shares in an account,
including as part of an exchange to another American Century account.
www.americancentury.com American Century Investments 9
WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE
Service Representative
1-800-345-3533
[graphic of telephone]
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call if you have authorized us to invest from your bank account.
SELL SHARES Call a Service Representative.
--------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419385
Kansas City, MO 64141-6385
Fax
816-340-4655
[graphic of an envelope]
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.
SELL SHARES
Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
--------------------------------------------------------------------------------
AUTOMATICALLY
[graphic of revolving arrows]
OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
--------------------------------------------------------------------------------
BY WIRE
[graphic of pointing finger]
Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.
OPEN AN ACCOUNT
Call us to set up your account or mail a completed application to the address
provided in the "By mail" section. Give your bank the following
information to wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number*
* Your name
* The contribution year (for IRAs only)
* For additional investments only
MAKE ADDITIONAL INVESTMENTS
Follow the wire instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES Not available.
10 American Century Investments 1-800-345-3533
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. The fund reserves the right to suspend the offering of shares for a period
of time, and the fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the fund and its shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
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.
www.americancentury.com American Century Investments 11
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the fund's annual report, semiannual
report and Statement of Additional Information are available from your
intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the fund.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The fund has authorized these
intermediaries to accept orders on the fund's behalf up to the time at which the
net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on the fund's behalf.
[left margin]
[graphic of pointing finger]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
12 American Century Investments 1-800-345-3533
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the NET ASSET VALUE (NAV) of the fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification
as a regulated investment company means that the fund will not be subject to
state or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as CAPITAL GAINS realized on
the sale of investment securities.
The fund pays distributions of substantially all of its income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. It may make more frequent distributions if necessary to comply with
Internal Revenue Code provisions. Distributions are reinvested automatically in
additional shares unless you choose another option.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distribution received with
your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
[left margin]
[graphic of pointing finger]
A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.
CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
www.americancentury.com American Century Investments 13
TAXES
The tax consequences of owning shares of the fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the fund of dividend and interest income it has received
or capital gains it has generated through its investment activities. Tax
consequences also result from sales of fund shares by investors after the net
asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term, long term or UNRECAPTURED
SECTION 1250 CAPITAL GAINS, and are taxed as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket
or
Above
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
--------------------------------------------------------------------------------
Long-term capital gains 10% 20%
--------------------------------------------------------------------------------
Unrecaptured Section Ordinary income rate 25%
1250 capital gains
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).
Additionally, the fund may receive distributions of unrecaptured Section 1250
capital gains from REITs. To the extent the fund receives such distributions,
unrecaptured Section 1250 capital gains will be distributed to shareholders of
the fund.
Because of the nature of REIT investments, REITs may generate significant
non-cash deductions, such as depreciation on real estate holdings, while having
a greater cash flow to distribute to its shareholders. If a REIT distributes
more cash flow than it has taxable income, a RETURN OF CAPITAL results. The fund
may pay a return of capital distribution to its 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 returned capital,
which may result in a larger capital gain when you sell your shares. Although a
return of capital generally is not 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.
[left margin]
[graphic of pointing finger]
BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
UNRECAPTURED SECTION 1250 CAPITAL GAINS, named for the Internal Revenue Code
section that describes them, are frequently realized upon the sale of real
estate and are subject to a maximum tax rate of 25%. These gains are received by
the fund from its REIT securities and are then subsequently passed through to
shareholders.
A RETURN OF CAPITAL represents the return of a portion of a shareholder's
original investment that is generally non-taxable when distributed, or returned,
to the investor.
14 American Century Investments 1-800-345-3533
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
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 from the
Internal Revenue Service each year for an extension of time to issue Form
1099-DIV until February 28.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.
www.americancentury.com American Century Investments 15
MULTIPLE CLASS INFORMATION
American Century offers three classes of the fund: Investor Class, Institutional
Class and Advisor Class. The shares offered by this Prospectus are Institutional
Class shares and are offered primarily through employer-sponsored retirement
plans, or through institutions like banks, broker-dealers and insurance
companies.
The other classes have different fees, expenses and/or minimum investment
requirements from the Institutional Class. The difference in the fee structures
between 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 advisor 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
* 1-800-345-2021 for Investor Class shares
* 1-800-345-3533 for Advisor Class shares
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
16 American Century Investments 1-800-345-3533
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The table on the next page itemizes what contributed to the changes in share
price during the most recently ended fiscal year. It also shows the changes in
share price for this period in comparison to changes over the last five fiscal
years or less, if the share class is not five years old.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN--the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO--the operating expenses as a percentage of average net assets
* NET INCOME RATIO--the net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER--the percentage of the fund's buying and selling activity
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 17
REAL ESTATE FUND
Institutional Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998(1) 1997(2)
------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.11 $16.12 $16.06 $14.24
---------------------------------------------------
Income From Investment Operations
Net Investment Income(3) 0.75 0.78 0.26 0.28
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.38) (4.09) 0.26 1.63
---------------------------------------------------
Total From Investment Operations 0.37 (3.31) 0.52 1.91
---------------------------------------------------
Distributions
From Net Investment Income (0.73) (0.58) (0.19) (0.09)
From Net Realized Gains on Investment Transactions -- (0.12) (0.27) --
---------------------------------------------------
Total Distributions (0.73) (0.70) (0.46) (0.09)
---------------------------------------------------
Net Asset Value, End of Period $11.75 $12.11 $16.12 $16.06
===================================================
Total Return(4) 3.18% (20.77)% 3.32% 13.40%
Ratios/Supplemental Data
2000 1999 1998(1) 1997(2)
------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.00% 1.00% 0.95%(5) 1.00%(5)
Ratio of Operating Expenses to Average Net Assets
(before expense waivers and reimbursements)(6) 1.00% 1.00% 1.00%(5) 1.00%(5)
Ratio of Net Investment Income to Average Net Assets 6.15% 5.61% 4.00%(5) 4.85%(5)
Ratio of Net Investment Income to Average Net Assets
(before expense waivers and reimbursements)(6) 6.15% 5.61% 3.95%(5) 4.85%(5)
Portfolio Turnover Rate 102% 66% 28% 69%
Net Assets, End of Period (in thousands) $15,457 $26,315 $14,795 $13,365
(1) The period ended March 31, 1998 represents a five month reporting period.
The fund's fiscal year end was changed from October 31 to March 31 during the
period. Periods prior to 1998 are based on a fiscal year ended October 31.
(2) June 16, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
(6) During the period ended March 31, 1998, a portion of the subadvisory fee,
which is paid for subadvisory services, was waived.
18 American Century Investments 1-800-345-3533
PERFORMANCE INFORMATION OF OTHER CLASS
The following financial information is provided to show the performance of the
fund's original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.20% higher than the Institutional Class. The
Institutional Class is made available to institutional shareholders or through
financial intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower unified management
fee. If the Institutional Class existed during the periods presented, its
performance would have been higher because of the lower expense.
The table on the next page itemizes what contributed to the changes in share
price during the period. It also shows the changes in share price for this
period in comparison to changes over the last five fiscal years or less, if the
share class is not five years old.
On a per-share basis, the table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period
The table also includes some key statistics for the period as appropriate
* TOTAL RETURN - the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO - operating expenses as a percentage of average net assets
* NET INCOME RATIO - net investment income as a percentage of average net
assets
* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling activit
The Financial Highlights have been audited by Deloitte & Touche LLP,
independent auditors. Their Independent Auditors' Report is included in the
fund's annual report for the year ended March 31, 2000, which is incorporated by
reference into the Statement of Additional Information, and is available upon
request.
www.americancentury.com American Century Investments 19
REAL ESTATE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31 (except as noted)
Per-Share Data
2000 1999 1998(1) 1997 1996 1995(2)
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.10 $16.12 $16.06 $12.29 $9.82 $10.00
---------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.74(3) 0.73(3) 0.25(3) 0.67(3) 0.55 0.07
Net Realized and Unrealized Gain
(Loss) on Investment Transactions (0.41) (4.09) 0.26 4.13 2.27 (0.25)
---------------------------------------------------------------------------
Total From Investment Operations 0.33 (3.36) 0.51 4.80 2.82 (0.18)
---------------------------------------------------------------------------
Distributions
From Net Investment Income (0.69) (0.54) (0.18) (0.48) (0.35) --
From Net Realized Gains on
Investment Transactions -- (0.12) (0.27) (0.55) -- --
---------------------------------------------------------------------------
Total Distributions (0.69) (0.66) (0.45) (1.03) (0.35) --
---------------------------------------------------------------------------
Net Asset Value, End of Period $11.74 $12.10 $16.12 $16.06 $12.29 $9.82
===========================================================================
Total Return(4) 2.87% (21.04)% 3.26% 40.69% 29.28% (1.80)%
Ratios/Supplemental Data
2000 1999 1998(1) 1997 1996 1995(2)
--------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets 1.20% 1.20% 1.15%(5) 1.17% 1.00% 1.50%(5)
Ratio of Operating Expenses
to Average Net Assets (before expense
waivers and reimbursements)(6) 1.20% 1.20% 1.20%(5) 1.82% 6.83% 14.83%(5)
Ratio of Net Investment Income to
Average Net Assets 5.95% 5.41% 3.75%(5) 4.48% 5.84% 6.66%(5)
Ratio of Net Investment Income to
Average Net Assets (before expense
waivers and reimbursements)(6) 5.95% 5.41% 3.70%(5) 3.84% 0.01% (6.67)%(5)
Portfolio Turnover Rate 102% 66% 28% 69% 86% --
Net Assets, End of Period (in thousands) $73,812 $110,285 $135,922 $76,932 $7,209 $2,983
(1) The period ended March 31, 1998 represents a five month reporting period.
The fund's fiscal year end was changed from October 31 to March 31 during the
period. Periods prior to 1998 are based on a fiscal year ended October 31.
(2) September 21, 1995 (inception) through October 31, 1995.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
(6) During the periods ended October 31, 1996 and October 31, 1995 and for a
portion of the period ended October 31, 1997, the manager voluntarily agreed to
waive its management fee and reimburse certain expenses incurred by the fund.
Also, prior to the unified management fee structure, effective June 13, 1997,
the custodian offset part of its fees for balance credits given to the fund.
During the period ended March 31, 1998, a portion of the subadvisory fee, which
is paid for subadvisory services, was waived.
20 American Century Investments 1-800-345-3533
NOTES
www.americancentury.com American Century Investments 21
MORE INFORMATION ABOUT THE FUND IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the fund's
investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the fund's operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the fund or your accounts, by contacting American Century at the
address or telephone numbers listed below.
You also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
* In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for
location and hours.
* On the Internet EDGAR database at www.sec.gov
By email request at [email protected]
* By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
[american century logo(reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
0008
SH-PRS-20922
[front cover]
AMERICAN CENTURY
statement of
additional information
Large Cap Value Fund
Value Fund
Small Cap Value Fund
Equity Income Fund
Equity Index Fund
Real Estate Fund
[left margin]
AUGUST 1, 2000
American Century
Capital Portfolios, Inc.
THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUSES, DATED AUGUST 1, 2000, BUT IS NOT A PROSPECTUS. THE STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUNDS' CURRENTP
ROSPECTUSES. IF YOU WOULD LIKE A COPY OF A PROSPECTUS, PLEASE CONTACT US AT THE
ADDRESS OR TELEPHONE NUMBERS LISTED ON THE BACK COVER OR VISIT
WWW.AMERICANCENTURY.COM.
This Statement of Additional Information incorporates by reference certain
information that appears in the funds' annual and semiannual reports, which are
delivered to all shareholders. You may obtain a free copy of the funds' annual
or semiannual reports by calling 1-800-345-2021.
Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors
[american century logo (reg. sm)]
American
Century
TABLE OF CONTENTS
The Funds' History ........................................................ 2
Fund Investment Guidelines ................................................ 2
Fund Investments and Risks ................................................ 4
Investment Strategies and Risks ....................................... 4
Investment Policies ................................................... 14
Portfolio Turnover .................................................... 16
S&P 500 Index ..................................................... 17
Management ................................................................ 17
The Board of Directors ................................................ 17
Officers .............................................................. 21
Code of Ethics ........................................................ 22
The Funds' Principal Shareholders ......................................... 22
Service Providers ......................................................... 24
Investment Advisor .................................................... 24
Transfer Agent and Administrator ...................................... 26
Distributors .......................................................... 26
Other Service Providers ................................................... 27
Custodian Banks ....................................................... 27
Independent Auditors .................................................. 27
Brokerage Allocation ...................................................... 27
Information about Fund Shares ............................................. 28
Multiple Class Structure .............................................. 28
Buying and Selling Fund Shares ........................................ 31
Valuation of a Fund's Securities ...................................... 31
Taxes ..................................................................... 32
Federal Income Taxes .................................................. 32
State and Local Taxes ................................................. 33
Taxation of Certain Mortgage REITs .................................... 33
How Fund Performance Information Is Calculated ............................ 34
Additional Performance Comparisons .................................... 35
Permissible Advertising Information ................................... 36
Multiple Class Performance Advertising ................................ 36
Financial Statements ...................................................... 36
Explanation of Fixed-Income Securities Ratings ............................ 36
www.americancentury.com American Century Investments 1
THE FUNDS' HISTORY
American Century Capital Portfolios, Inc. is a registered open-end management
investment company that was organized as a Maryland corporation on June 14,
1993. The corporation was known as Twentieth Century Capital Portfolios, Inc.
until January 1997. Throughout this Statement of Additional Information we refer
to American Century Capital Portfolios, Inc. as the corporation.
Each fund described in this Statement of Additional Information is a separate
series of the corporation and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, tax identification and stock registration numbers.
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
-------------- ------------- -------------------
Ticker Inception Ticker Inception Ticker Inception
Fund Symbol Date Symbol Date Symbol Date
---- ------ ---- ------ ---- ------ ----
Large Cap Value N/A 07/30/99 N/A 07/30/99 N/A 07/30/99
Value TWVLX 09/01/93 TWADX 10/02/96 AVLIX 07/31/97
Small Cap Value ASVIX 07/31/98 N/A 12/31/99 N/A 10/26/98
Equity Income TWEIX 08/01/94 TWEAX 03/07/97 N/A 07/08/98
Equity Index ACIVX 02/26/99 N/A N/A ACQIX 02/26/99
Real Estate REACX 09/21/95 N/A 10/06/98 REAIX 06/16/97
FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc., can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, Investment Strategies and Risks,
which begins on page 4. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussions contained in the
Prospectuses.
Large Cap Value, Value, Small Cap Value and Equity Income are each a
diversified, open-end investment company as defined in the Investment Company
Act of 1940 (the Investment Company Act). Diversified means that, with respect
to 75% of its total assets, each fund will not invest more than 5% of its total
assets in the securities of a single issuer or own more than 10% of the
outstanding voting securities of a single issuer.
Equity Index and Real Estate are non-diversified, open-end investment companies
as defined in the Investment Company Act. Non-diversified means that the
proportion of the funds' assets that may be invested in the securities of a
single issuer is not limited by the Investment Company Act.
It is intended that Equity Index will be diversified to the extent that the
S&P 500 Index is diversified. Because of the composition of the S&P 500
Index, it is possible that a relatively high percentage of the fund's assets may
be invested in the securities of a limited number of issuers, some of which may
be in the same industry or economic sector. As a result, the fund's portfolio
may be more sensitive to changes in the market value of a single issuer or
industry than other equity funds using different investment styles.
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer
2 American Century Investments 1-800-345-2021
(other than the U.S. government or a regulated investment company), and (2) with
respect to at least 50% of its total assets, no more than 5% of its total assets
are invested in the securities of a single issuer.
In general, within the restrictions outlined here and in the funds'
Prospectuses, the funds' managers have broad powers to decide how to invest fund
assets, including the power to hold them uninvested.
Investments vary according to what is judged advantageous under changing
economic conditions. It is the advisor's policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described on the following pages. It is the advisor's intention that each fund
generally will consist of common stocks and equity-equivalent securities.
However, subject to the specific limitations applicable to a fund, the funds'
management teams may invest the assets of each fund in varying amounts using
other investment techniques, such as those reflected in the table below, when
such a course is deemed appropriate in order to attempt to attain a fund's
investment objective. Senior securities that are high-grade issues, in the
opinion of the managers, also may be purchased for defensive purposes.
Income is a primary or secondary objective of the Large Cap Value, Value, Small
Cap Value, Equity Income and Real Estate funds. As a result, a portion of the
portfolio of each of these funds may consist of debt securities.
So long as a sufficient number of acceptable securities are available, the
managers intend to keep the funds fully invested. However, under exceptional
conditions, the funds may assume a defensive position, temporarily investing all
or a substantial portion of their assets in cash or short-term securities.
The managers may use stock index futures and options as a way to expose the
funds' cash assets to the market while maintaining liquidity. As mentioned in
the Prospectuses, the managers may not leverage the funds' portfolios, so there
is no greater market risk to the funds than if they purchase stocks. See
Derivative Securities, page 8, and Short-Term Securities and Futures and
Options, page 11.
www.americancentury.com American Century Investments 3
FUND INVESTMENTS AND RISKS
INVESTMENT STRATEGIES AND RISKS
This section describes investment vehicles and techniques the fund managers can
use in managing a fund's assets. It also details the risks associated with each,
because each investment vehicle and technique contributes to a fund's overall
risk profile. To determine whether a fund may invest in a particular investment
vehicle, consult the table below.
Large Cap Small Cap Equity Equity Real Estate
Value Value Value Income Index Fund
Equity Equivalents x x x x x x
Debt Securities x x x x x x
Foreign Securities 35% 35% 35% 35% x x
Convertible Debt Securities x x x x x x
Short Sales x x x x x x
Portfolio Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Derivative Securities x x x x x x
Investments in Companies with
Limited Operating Histories 5% 5% 5% 5% 5% 5%
Other Investment Companies 10% 10% 10% 10% 10% 10%
Repurchase Agreements x x x x x x
When-Issued and Forward
Commitment Agreements x x x x x x
Illiquid Securities 15% 15% 15% 15% 15% 15%
Restricted Securities x x x x x x
Short-Term Securities x x x x x x
Futures and Options x x x x x x
Forward Currency
Exchange Contracts x x x x x x
Equity Equivalent Securities
In addition to investing in common stocks, the funds may invest in other equity
securities and equity equivalents, including securities that permit a fund to
receive an equity interest in an issuer, the opportunity to acquire an equity
interest in an issuer, or the opportunity to receive a return on its investment
that permits the fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity equivalents include preferred
stock, convertible preferred stock and convertible debt securities.
Each fund will limit its holdings of convertible debt securities to those that,
at the time of purchase, are rated at least B- by S&P or B3 by Moody's, or,
if not rated by S&P or Moody's, are of equivalent investment quality as
determined by the advisor. A fund's investments in convertible debt securities
and other high-yield, non-convertible debt securities rated below
investment-grade will comprise less than 35% of the fund's net assets. Debt
securities rated below the four highest categories are not considered
"investment-grade" obligations. These securities have speculative
characteristics and present more credit risk than investment-grade obligations.
For a description of the S&P and Moody's ratings categories, see Explanation
of Fixed-Income Securities Ratings, page 36. Equity equivalents also may include
securities whose value or return is derived from the value or return of a
different security. Depositary receipts, which are described in the Foreign
Securities, page 6, are an example of the type of derivative security in which a
fund might invest.
4 American Century Investments 1-800-345-2021
Debt Securities
Each of the funds may invest in debt securities. The primary or secondary
investment objective of Large Cap Value, Value, Small Cap Value, Equity Income
and Real Estate is income creation. As a result, these funds may invest in debt
securities where the fund managers believe such securities represent an
attractive investment for the funds. These funds may invest in debt securities
for income or as a defensive strategy when the managers believe adverse economic
or market conditions exist.
Equity Index invests in debt securities primarily for cash management. The debt
securities that Equity Index invests in are generally short-term.
The value of the debt securities in which the funds may invest will fluctuate
based upon changes in interest rates and the credit quality of the issuer. Debt
securities that are part of a fund's fixed-income portfolio will be limited
primarily to "investment-grade" obligations. However, each fund may
invest up to 5% of its assets in "high-yield" securities.
"Investment grade" means that at the time of purchase, such
obligations are rated within the four highest categories by a nationally
recognized statistical rating organization (for example, at least Baa by Moody's
Investors Service, Inc. or BBB by Standard & Poor's Corporation), or, if not
rated, are of equivalent investment quality as determined by the fund's advisor.
According to Moody's, bonds rated Baa are medium-grade and possess some
speculative characteristics. A BBB rating by S&P indicates S&P's belief
that a security exhibits a satisfactory degree of safety and capacity for
repayment, but is more vulnerable to adverse economic conditions and changing
circumstances.
"High-yield" securities, sometimes referred to as "junk
bonds," are higher risk, non-convertible debt obligations that are rated
below investment-grade securities, or are unrated, but with similar credit
quality.
There are no credit or maturity restrictions on the fixed-income securities in
which the high-yield portion of a fund's portfolio may be invested. Debt
securities rated lower than Baa by Moody's or BBB by S&P, or their
equivalent, are considered by many to be predominantly speculative. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments on such securities than is the
case with higher quality debt securities. Regardless of rating levels, all debt
securities considered for purchase by the fund are analyzed by the investment
manager to determine, to the extent reasonably possible, that the planned
investment is sound, given the fund's investment objective. See Explanation of
Fixed-Income Securities Ratings, page 36.
If the aggregate value of high-yield securities exceeds 5% because of their
market appreciation or other assets' depreciation, the funds will not
necessarily sell them. Instead, the fund managers will not purchase additional
high-yield securities until their value is less than 5% of the fund's assets.
Fund managers will monitor these investments to determine whether holding them
will likely help the fund meet its investment objectives.
In addition, the value of a fund's investments in fixed-income securities will
change as prevailing interest rates change. In general, the prices of such
securities vary inversely with interest rates. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis
generally rise. When prevailing interest rates rise, bond prices generally fall.
Depending upon the particular amount and type of fixed-income securities
holdings of a fund, these changes may impact the net asset value of that fund's
shares.
Even though the funds will invest primarily in equity securities, under
exceptional market or economic conditions, the funds may temporarily invest all
or a substantial portion of their assets in cash or investment-grade short-term
securities (denominated in U.S. dollars or foreign currencies).
To the extent that a fund assumes a defensive position, it will not be investing
for capital growth.
www.americancentury.com American Century Investments 5
Foreign Securities
Each fund may invest in the securities of foreign issuers, including foreign
governments and their agencies, when these securities meet their standards of
selection. In determining whether a company is foreign, the fund managers will
consider various factors, including where the company is headquartered, where
the company's principal operations are located, where the company's revenues are
derived, where the principal trading market is located and the country in which
the company was legally organized. The weighting given to each of these factors
will vary depending on the circumstances in a given case.
The funds may make such investments either directly in foreign securities or
indirectly by purchasing depositary receipts for foreign securities. Depositary
receipts, depositary shares or similar instruments are securities that are
listed on exchanges or quoted in the domestic over-the-counter markets in one
country, but represent shares of issuers domiciled in another country. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
The funds may invest in common stocks, convertible securities, preferred stocks,
bonds, notes and other debt securities of foreign issuers, foreign governments
and their agencies. The funds will limit their purchase of foreign securities to
those of issuers whose principal business activities are located in developed
countries. The funds consider developed countries to include Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom and the United States.
Investments in foreign securities may present certain risks, including:
CURRENCY RISK - The value of the foreign investments held by the funds may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign currency in which the security is denominated and tends to
increase when the value of the dollar falls against that currency. In addition,
the value of fund assets may be affected by losses and other expenses incurred
in converting between various currencies in order to purchase and sell foreign
securities, and by currency restrictions, exchange control regulation, currency
devaluations and political developments.
POLITICAL AND ECONOMIC RISK - The economies of many of the countries in which
the funds invest are not as developed as the economy of the United States and
may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, confiscatory taxation and
limitations on the removal of funds or other assets also could adversely affect
the value of investments. Further, the funds may encounter difficulties or be
unable to enforce ownership rights, pursue legal remedies or obtain judgments in
foreign courts.
REGULATORY RISK - Foreign companies generally are not subject to the regulatory
controls imposed on U.S. issuers and, in general, there is less publicly
available information about foreign securities than is available about domestic
securities. Many foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the funds may be reduced by a withholding tax at the source,
which would reduce dividend income payable to shareholders.
MARKET AND TRADING RISK - Brokerage commission rates in foreign countries, which
generally are fixed rather than subject to negotiation as in the United States,
are likely to be higher. The securities markets in many of the countries in
which the funds invest have substantially less trading volume than the principal
U.S. markets. As a result, the securities of some companies in these countries
may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There
generally
6 American Century Investments 1-800-345-2021
is less government regulation and supervision of foreign stock exchanges,
brokers and issuers, which may make it difficult to enforce contractual
obligations.
CLEARANCE AND SETTLEMENT RISK - Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the funds are uninvested and no return is earned. The funds' inability to
make intended security purchases due to clearance and settlement problems could
cause them to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to clearance and settlement problems could result
either in losses to the funds due to subsequent declines in the value of the
portfolio security or, if the fund has entered into a contract to sell the
security, liability to the purchaser.
OWNERSHIP RISK - Evidence of securities ownership may be uncertain in many
foreign countries. As a result, there may be a risk that a fund's trade details
could be incorrectly or fraudulently entered at the time of the transaction,
resulting in a loss to the fund.
Convertible Debt Securities
A convertible debt security is a fixed-income security that offers the potential
for capital appreciation through a conversion feature that enables the holder to
convert the fixed-income security into a stated number of shares of common
stock. As fixed-income securities, convertible debt securities provide a stable
stream of income, with generally higher yields than common stocks. Convertible
debt securities offer the potential to benefit from increases in the market
price of the underlying common stock, however, they generally offer lower yields
than nonconvertible securities of similar quality. Of course, as with all
fixed-income securities, there can be no assurance of current income because the
issuers of the convertible debt securities may default on their obligations. In
addition, there can be no assurance of capital appreciation because the value of
the underlying common stock will fluctuate.
Convertible debt securities generally are subordinate to other similar but
nonconvertible debt securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar nonconvertible securities.
Short Sales
A fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire securities equivalent in kind and amount to the
securities being sold short.
In a short sale, the seller does not immediately deliver the securities sold and
is said to have a short position in those securities until delivery occurs. To
make delivery to the purchaser, the executing broker borrows the securities
being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. While the short sale is open, the fund will
maintain in a segregated custodial account an amount of securities convertible
into, or exchangeable for, equivalent securities at no additional cost. These
securities would constitute the fund's long position.
A fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. There will be
additional transaction costs associated with short sales, but the fund will
endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
www.americancentury.com American Century Investments 7
Portfolio Lending
In order to realize additional income, a fund may lend its portfolio securities.
Such loans may not exceed one-third of the fund's total assets valued at market
except (i) through the purchase of debt securities in accordance with its
investment objectives, policies and limitations, or (ii) by engaging in
repurchase agreements with respect to portfolio securities.
Derivative Securities
To the extent permitted by its investment objectives and policies, each fund may
invest in derivative securities. Generally, a derivative is a financial
arrangement, having a value based on, or derived from, a traditional security,
asset or market index. Certain derivative securities are described more
accurately as index/structured securities. Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as depositary receipts), currencies, interest rates, indices or
other financial indicators (reference indices).
Some derivatives, such as mortgage-related and other asset-backed securities,
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices or currency exchange rates, and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are risks associated with derivative investments, including:
* the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the fund managers anticipate;
* the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange, either
of which may make it difficult or impossible to close out a position when
desired;
* the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
* the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the advisor's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The advisor will report on fund activity in derivative
securities to the Board of Directors as necessary.
8 American Century Investments 1-800-345-2021
Investment in Companies with Limited Operating Histories
The funds may invest a portion of their assets in the securities of issuers with
limited operating histories. The fund managers consider an issuer to have a
limited operating history if that issuer has a record of less than three years
of continuous operation. The managers will consider periods of capital
formation, incubation, consolidations, and research and development in
determining whether a particular issuer has a record of three years of
continuous operation.
Investments in securities of issuers with limited operating histories may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating histories and financial
information upon which the managers may base their investment decision on behalf
of the funds. In addition, financial and other information regarding these
issuers, when available, may be incomplete or inaccurate.
Other Investment Companies
Each of the funds may invest up to 10% of its total assets in other mutual funds
provided that the investment is consistent with the fund's investment policies
and restrictions. Under the Investment Company Act, a fund's investment in these
securities, subject to certain exceptions, currently is limited to (a) 3% of the
total voting stock of any one investment company; (b) 5% of the fund's total
assets of any investment company; and (c) 10% of a fund's total assets in the
aggregate. Such purchases will be made in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the customary
brokers' commissions. As a shareholder of another investment company, a fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the management fee that each fund bears directly in connection
with its own operations.
Repurchase Agreements
Each fund may invest in repurchase agreements when they present an attractive
short-term return on cash that is not otherwise committed to the purchase of
securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time a fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to purchase it on a specified
date in the future at an agreed-upon price. The repurchase price reflects an
agreed-upon interest rate during the time the fund's money is invested in the
security.
Because the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. If the value of the
security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued by
the U.S. government and its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy by the funds' advisor.
Repurchase agreements maturing in more than seven days would count towards a
fund's 15% limit on illiquid securities.
www.americancentury.com American Century Investments 9
When-Issued and Forward Commitment Agreements
The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. 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 the security may decline prior to delivery,
which could result in a loss to the fund. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.
In purchasing securities on a when-issued or forward commitment basis, a fund
will establish and maintain a segregated account consisting of cash, cash
equivalents or other appropriate liquid securities until the settlement date in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, a fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.
Restricted and Illiquid Securities
The funds may purchase restricted or illiquid securities, including Rule 144A
securities, when they present attractive investment opportunities that otherwise
meet the funds' criteria for selection. Rule 144A securities are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered restricted
securities, they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission (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, based
upon a consideration of the readily available trading markets and the review of
any contractual restrictions. Accordingly, the Board of Directors is responsible
for developing and establishing the guidelines and procedures for determining
the liquidity of Rule 144A securities. As allowed by Rule 144A, the Board of
Directors of the funds has delegated the day-to-day function of determining the
liquidity of Rule 144A securities to the advisor. The Board retains the
responsibility to monitor the implementation of the guidelines and procedures it
has adopted.
Because the secondary market for these securities is limited to certain
qualified institutional investors, their liquidity may be limited accordingly
and a fund may, from time to time, hold a Rule 144A or other security that is
illiquid. In such an event, the fund managers will consider appropriate remedies
to minimize the effect on that fund's liquidity.
10 American Century Investments 1-800-345-2021
Short-Term Securities
In order to meet anticipated redemptions, to hold pending the purchase of
additional securities for a fund's portfolio, or, in some cases, for temporary
defensive purposes, these funds may invest a portion of their assets in money
market and other short-term securities.
Examples of those securities include:
* Securities issued or guaranteed by the U.S. government and its agencies
and instrumentalities;
* Commercial Paper;
* Certificates of Deposit and Euro Dollar Certificates of Deposit;
* Bankers' Acceptances;
* Short-term notes, bonds, debentures or other debt instruments; and
* Repurchase agreements.
Under the Investment Company Act, a fund's investment in other investment
companies (including money market funds) currently is limited to (a) 3% of the
total voting stock of any one investment company; (b) 5% of the fund's total
assets with respect to any one investment company; and (c) 10% of a fund's total
assets in the aggregate. These investments may include investments in money
market funds managed by the advisor. Any investments in money market funds must
be consistent with the investment policies and restrictions of the fund making
the investment.
Futures and Options
Each fund may enter into futures contracts, options or options on futures
contracts. Generally, futures transactions will be used to:
* protect against a decline in market value of the funds' securities (taking a
short futures position), or
* protect against the risk of an increase in market value for securities in
which the fund generally invests at a time when the fund is not fully invested
(taking a long futures position), or
* provide a temporary substitute for the purchase of an individual security that
may not be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and
writing calls, hedge a fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure. Although other techniques may be used to control a
fund's exposure to market fluctuations, the use of futures contracts may be a
more effective means of hedging this exposure. While a fund pays brokerage
commissions in connection with opening and closing out futures positions, these
costs are lower than the transaction costs incurred in the purchase and sale of
the underlying securities.
For example, the sale of a future by a fund means the fund becomes obligated to
deliver the security (or securities, in the case of an index future) at a
specified price on a specified date. The purchase of a future means the fund
becomes obligated to buy the security (or securities) at a specified price on a
specified date. Futures contracts provide for the sale by one party and purchase
by another party of a specific security at a specified future time and price.
The fund managers may engage in futures and options transactions based on
securities indices that are consistent with the fund's investment objectives.
Examples of indices that may be used include the Bond Buyer Index of Municipal
Bonds for fixed-income funds, or the S&P 500 Index for equity funds. The
managers may engage in futures and options transactions based on specific
securities, such as U.S. Treasury
www.americancentury.com American Century Investments 11
bonds or notes. Futures contracts are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission (CFTC), a U.S. government agency.
Index futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).
Unlike when the fund purchases or sells a bond, no price is paid or received by
the fund upon the purchase or sale of the future. Initially, the fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute a margin
transaction for purposes of the fund's investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin accounts generally are not
income-producing. Coupon-bearing securites, such as Treasury bills and bonds,
held in margin accounts generally will earn income. Subsequent payments to and
from the broker, called variation margin, will be made on a daily basis as the
price of the underlying debt securities or index fluctuates, making the future
more or less valuable, a process known as marking the contract to market.
Changes in variation margin are recorded by the fund as unrealized gains or
losses. At any time prior to expiration of the future, the fund may close the
position by taking an opposite position that will operate to terminate its
position in the future. A final determination of variation margin is then made;
additional cash is required to be paid by or released to the fund, and the fund
realizes a loss or gain.
RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the fund managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower a fund's return.
A fund could suffer losses if it is unable to close out its position because of
an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the fund managers consider it appropriate or desirable to
do so. In the event of adverse price movements, a fund would be required to
continue making daily cash payments to maintain its required margin. If the fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the fund managers would not otherwise do so.
In addition, a fund may be required to deliver or take delivery of instruments
underlying futures contracts it holds. The fund managers will seek to minimize
these risks by limiting the contracts entered into on behalf of the funds to
those traded on national futures exchanges and for which there appears to be a
liquid secondary market.
A fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.
12 American Century Investments 1-800-345-2021
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
OPTIONS ON FUTURES
By purchasing an option on a futures contract, a fund obtains the right, but not
the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the funds may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the funds would give up some
ability to participate in a price increase on the underlying security. If a fund
were to engage in options transactions, it would own the futures contract at the
time a call was written and would keep the contract open until the obligation to
deliver it expired.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS
Under the Commodity Exchange Act, a fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the fund's total assets. To the extent required by law, each
fund will segregate enough cash or securities on its records to cover its
obligations under the futures contracts and options.
Forward Currency Exchange Contracts
Each fund may purchase and sell foreign currency on a spot (cash) basis and may
engage in forward currency contracts, currency options and futures transactions
for hedging or any other lawful purpose. See Derivative Securities, page 8.
The funds expect to use forward contracts under two circumstances:
(1) When the fund managers wish 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 fund managers believe the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar, a fund would be
able to enter into a forward contract to sell foreign currency for a fixed
U.S. dollar amount approximating the value of some or all of its portfolio
securities either denominated in, or whose value is tied to, such foreign
currency.
In the first circumstance, when a fund enters into a trade for the purchase or
sale of a security denominated in a foreign currency, it may be desirable to
establish (lock in) the U.S. dollar cost or proceeds. By entering into forward
contracts in U.S. dollars for the purchase or sale of a foreign currency
involved in an underlying security transaction, the
www.americancentury.com American Century Investments 13
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 fund managers believe that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will segregate enough cash or securities on its
records to cover its obligations under the contract.
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible because the future values of
foreign currencies will change due to 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 short-term hedging strategy is highly uncertain.
The fund managers do 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 fund managers believe that it
is important to have flexibility to enter into such forward contracts when they
determine that a fund's best interests may be served.
At the maturity of the forward contract, the fund may either sell the portfolio
security and deliver 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 precisely forecast the market value of portfolio securities
at the expiration of the forward contract. Accordingly, it may be necessary for
a fund to purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency that the
fund is obligated to deliver.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the following restrictions apply at the time a fund enters into a
transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a fund's net assets will not be considered
in determining whether it has complied with its investment restrictions.
Fundamental Investment Policies
The funds' fundamental investment restrictions are set forth below. These
investment restrictions may not be changed without approval of a majority of the
outstanding votes of shareholders of a fund, as determined in accordance with
the Investment Company Act.
Subject Policy
--------------------------------------------------------------------------------
Senior Securities A fund may not issue senior securities, except as
permitted under the Investment Company Act.
--------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except for temporary or
emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the fund's total assets.
--------------------------------------------------------------------------------
14 American Century Investments 1-800-345-2021
Subject Policy
--------------------------------------------------------------------------------
Lending A fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of the fund's total assets would be
lent to other parties except, (i) through the purchase of debt
securities in accordance with its investment objectives,
policies and limitations, or (ii) by engaging in repurchase
agreements with respect to portfolio securities.
--------------------------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate unless
acquired as a result of ownership of securities or other
instruments. This policy shall not prevent a fund from investing
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.
--------------------------------------------------------------------------------
Concentration Large Cap Value, Value, Small Cap Value and Equity Income may
not concentrate their investments in securities of issuers in a
particular industry (other than securities issued or guaranteed
by the U.S. government or any of its agencies or
instrumentalities).
--------------------------------------------------------------------------------
Underwriting A fund may not act as an underwriter of securities issued by
others, except to the extent that the fund may be considered an
underwriter within the meaning of the Securities Act of 1933 in
the disposition of restricted securities.
--------------------------------------------------------------------------------
Commodities A fund may 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 fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments
backed by physical commodities.
--------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising control over
management.
--------------------------------------------------------------------------------
For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding interfund
lending. Under the terms of the exemptive order, the funds may borrow money from
or lend money to other funds, advised by ACIM, that permit these transactions.
All such transactions will be subject to the limits set above for borrowing and
lending. The funds will borrow money through the program only when the costs are
equal to or lower than the cost of short-term bank loans. Interfund loans and
borrowings normally extend only overnight, but can have a maximum duration of
seven days. The funds will lend through the program only when the returns are
higher than those available from other short-term instruments (such as
repurchase agreements). The funds may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity or
additional borrowing costs.
For purposes of the investment restriction relating to concentration, Large Cap
Value, Value, Small Cap Value and Equity Income shall not purchase any
securities that would cause 25% or more of the value of the fund's total assets
at the time of purchase to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that (a) there is no limitation with respect to obligations issued or guaranteed
by the U.S. government; any state, territory or possession of the United States;
the District of Columbia; or any of their authorities, agencies,
instrumentalities or political subdivisions and repurchase agreements secured by
such instruments; (b) wholly owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of the parents; (c) utilities will be divided according
to their services, for example, gas, gas transmission, electric and gas,
electric and telephone will each be considered a separate industry; and (d)
personal credit and business credit businesses will be considered separate
industries.
www.americancentury.com American Century Investments 15
Nonfundamental Investment Policies
In addition, the funds are subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Directors.
Subject Policy
--------------------------------------------------------------------------------
Leveraging A fund may not purchase additional investment securities at any
time when outstanding borrowings exceed 5% of the total assets
of the fund.
--------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a repurchase
agreement if, as a result, more than 15% of its net assets
would be invested in illiquid securities. Illiquid securities
include repurchase agreements not entitling the holder to
payment of principal and interest within seven days and
securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available
market.
--------------------------------------------------------------------------------
Short Sales A fund may 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
transactions in futures contracts and options are not deemed to
constitute selling securities short.
--------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except to 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.
--------------------------------------------------------------------------------
Futures and Options A fund may enter into futures contracts and
write and buy put and call options relating to futures
contracts. A fund may not, however, enter into leveraged
futures transactions if it would be possible for the fund
to lose more money than it invested.
--------------------------------------------------------------------------------
Issuers with Limited A fund may invest up to 5% of its assets in the
Operating Histories securities of issuers with limited operating histories.
An issuer is considered to have a limited operating
history if it has a record of less than three years of
continuous operation. Periods of capital formation,
incubation, consolidations, and research and development
may be considered in determining whether a particular
issuer has a record of three years of continuous
operation.
--------------------------------------------------------------------------------
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial Highlights
tables in the Prospectuses.
The fund managers will purchase and sell securities regardless of the length of
time the security has been held. Accordingly, the funds' portfolio turnover
rates may be substantial.
The fund managers intend to purchase a given security whenever they believe it
will contribute to the stated objective of the fund. In order to achieve each
fund's investment objectives, the fund managers may sell a given security, no
matter how much time it has been held in the portfolio, and no matter whether
the sale is at a gain or at a loss, if the managers believe that the security is
not fulfilling its purpose, either because, among other things, it did not live
up to the managers' 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.
Because investment decisions are based on a security's anticipated contribution
to a fund's objectives, the managers believe that the rate of portfolio turnover
is irrelevant when they believe a change is in order to achieve the objectives.
As a result, a fund's annual portfolio turnover rate cannot be anticipated and
may be higher than that of other mutual funds with similar investment
objectives. Higher turnover would generate correspondingly greater brokerage
commissions, which is a cost the funds pay directly. Portfolio turnover also may
affect the character of capital gains realized and distributed by
16 American Century Investments 1-800-345-2021
the fund, if any, because short-term capital gains are taxable as ordinary
income. This disclosure regarding portfolio turnover is a statement of
fundamental policy and may be changed only by a vote of the shareholders.
Because the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of accomplishing any
particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.
S&P 500 INDEX
The Equity Index fund seeks to achieve a 95% or better correlation between its
total return and the total return of the S&P 500 Index. Correlation is
measured by comparing the fund's monthly total returns to those of the S&P
500 over the most recent 36-month period.
The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
(S&P) , a division of The McGraw-Hill Companies, Inc. S&P makes no
representation or warranty, express or implied, to the owners of the fund or any
member of the public regarding the advisability of investing in securities
generally or in the fund particularly or the ability of the S&P 500 Index to
track general stock market performance. S&P's only relationship to American
Century is the licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index which is determined, composed and calculated by S&P
without regard to the fund. S&P has no obligation to take the needs of
American Century or the owners of the fund into consideration in determining,
composing or calculating the S&P 500 the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of the prices and
amount of the fund or the timing of the issuance or sale of the fund or in the
determination or calculation of the equation by which the fund is to be
converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data it includes and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express
or implied, as to the results to be obtained by the fund, owners of the fund, or
any other person or entity from the use of the S&P 500 Index or any data
included therein. S&P makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the S&P 500 Index or any data included therein.
Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect or consequential damages
(including lost profits), even if notified of the possibility of such damages.
In the future, the fund may select a different index if such a standard of
comparison is deemed to be more representative of the performance of the
securities the fund seeks to match.
MANAGEMENT
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired the advisor to do so.
Two-thirds of the directors are independent of the funds' advisor; that is, they
are not employed by and have no financial interest in the advisor.
The individuals listed in the following table whose names are marked by an
asterisk (*) are interested persons of the funds (as defined in the Investment
Company Act) by virtue of, among other considerations, their affiliation with
either the funds; their advisor,
www.americancentury.com American Century Investments 17
American Century Investment Management, Inc. (ACIM); the funds' agent for
transfer and administrative services, American Century Services Corporation
(ACSC); the parent corporation, American Century Companies, Inc. (ACC); ACC's
subsidiaries (including ACIM and ACSC); the funds' distribution agent and
co-administrator, Funds Distributor, Inc. (FDI); the funds' other distribution
agent, American Century Investment Services, Inc. (ACIS); or other funds advised
by the advisor. Each director listed below (except James E. Stowers III) serves
as a director of five other registered investment companies in the American
Century family of funds, which are also advised by the advisor. James E. Stowers
III serves as a director of 12 other registered investment companies in the
American Century family of funds.
Name (Age) Position(s) Held
Address with Funds Principal Occupation(s) During Past Five Years
----------------------------------------------------------------------------------------------------
James E. Stowers, Jr.* (76) Director, Chairman, Director and controlling shareholder, ACC
4500 Main Street Chairman Chairman, ACIM, ACSC and seven other ACC
Kansas City, MO 64111 subsidiaries of the Board Director, ACIM,
ACSC and 11 other ACC subsidiaries(1)
----------------------------------------------------------------------------------------------------
James E. Stowers III* (41) Director Chief Executive Officer and Director, ACC
4500 Main Street Chief Executive Officer, ACIM, ASCS and seven
Kansas City, MO 64111 other ACC subsidiaries Director, ACIM, ASCS
and 12 other ACC subsidiaries(2)
----------------------------------------------------------------------------------------------------
Thomas A. Brown (60) Director Director of Plains States Development, Applied
4500 Main Street Industrial Technologies, Inc., a corporation
Kansas City, MO 64111 engaged in the sale of bearings and power
transmission products
----------------------------------------------------------------------------------------------------
Robert W. Doering, M.D. (67) Director Retired, formerly a general surgeon
4500 Main Street
Kansas City, MO 64111
----------------------------------------------------------------------------------------------------
Andrea C. Hall, Ph.D. (55) Director Senior Vice President and Associate
4500 Main Street Director, Midwest Research Institute
Kansas City, MO 64111
----------------------------------------------------------------------------------------------------
D.D. (Del) Hock (65) Director Retired, formerly Chairman, Public Service
4500 Main Street Company of Colorado
Kansas City, MO 64111 Director, Service Tech, Inc., Hathaway
Corporation, and J.D. Edwards & Company
----------------------------------------------------------------------------------------------------
Donald H. Pratt (63) Director, Chairman of the Board and Director,
4500 Main Street Vice Chairman Butler Manufacturing Company
Kansas City, MO 64111 of the Board Director, Atlas-Copco North America, Inc.
----------------------------------------------------------------------------------------------------
M. Jeannine Strandjord (54) Director Senior Vice President, Long Distance Finance,
4500 Main Street Sprint Corporation;
Kansas City, MO 64111 Director, DST Systems, Inc.
----------------------------------------------------------------------------------------------------
(1) Father of James E. Stowers III
(2) Son of James E. Stowers, Jr.
18 American Century Investments 1-800-345-2021
Committees
The Board has four standing committees to oversee specific functions of the
funds' operations. Information about these committees appears in the table
below. The director first named serves as chairman of the committee.
Committee Members Function of Committee
----------------------------------------------------------------------------------------------------
Executive James E. Stowers, Jr. The Executive Committee performs the functions of
James E. Stowers III the Board of Directors between Board meetings,
Donald H. Pratt 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.
----------------------------------------------------------------------------------------------------
Compliance and Thomas A. Brown The Compliance and Communications Committee
Communications Donald H. Pratt reviews the results of the funds' compliance testing
Andrea C. Hall, Ph.D. program, reviews
quarterly reports from the advisor to
the Board regarding various compliance
matters, and monitors the implementation
of the funds' Code of Ethics, including
any violations thereof.
----------------------------------------------------------------------------------------------------
Audit M. Jeannine Strandjord The Audit Committee recommends the engagement of the
Robert W. Doering, M.D. funds' independent auditors and oversees its activities.
D.D. (Del) Hock The Committee receives reports from the
advisor's Internal Audit Department,
which is accountable to the committee.
The Committee also receives reporting
about compliance matters affecting the
funds.
----------------------------------------------------------------------------------------------------
Nominating Donald H. Pratt The Nominating Committee primarily considers and
D.D. (Del) Hock recommends individuals for nomination as directors.
Andrea C. Hall, Ph.D. The names of potential director
candidates are drawn from a number of
sources, including recommendations from
Board members, 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.
----------------------------------------------------------------------------------------------------
www.americancentury.com American Century Investments 19
COMPENSATION OF DIRECTORS
The directors also serve as directors for five American Century investment
companies other than the corporation. Each director who is not an interested
person as defined in the Investment Company Act receives compensation for
service as a member of the Board of all six such companies based on a schedule
that takes into account the number of meetings attended and the assets of the
funds for which the meetings are held. These fees and expenses are divided among
the six investment companies based, in part, upon their relative net assets.
Under the terms of the management agreement with the advisor, the funds are
responsible for paying such fees and expenses.
The following table shows the aggregate compensation paid by the corporation for
the periods indicated and by the six investment companies served by the board to
each director who is not an interested person as defined in the Investment
Company Act.
AGGREGATE DIRECTOR COMPENSATION FOR FISCAL YEAR ENDED MARCH 31, 2000
Total Compensation Total Compensation from the
Name of Director from the Funds (1) American Century Family of Funds(2)
Thomas A. Brown $2,434 $57,497
Robert W. Doering, M.D. $2,365 $55,750
Andrea C. Hall, Ph.D. $2,389 $56,250
D.D. (Del) Hock $2,353 $55,500
Donald H. Pratt $2,497 $58,749
Lloyd T. Silver, Jr. (3) $2,377 $56,000
M. Jeannine Strandjord $2,464 $58,000
(1) Includes compensation paid to the directors during the fiscal year ended
March 31, 2000, and also includes amounts deferred at the election of the
directors under the American Century Mutual Funds Deferred Compensation Plan for
Non-Interested Directors and Trustees. The total amount of deferred compensation
included in the preceding table is as follows: Mr. Brown, $880; Dr. Hall,
$1,200; Mr. Hock, $1,300; Mr. Pratt, $701; Mr. Silver, $1,006; and Ms.
Strandjord, $1,911.
(2) Includes compensation paid by the six investment company members of the
American Century family of funds served by this Board.
(3) Mr. Silver retired from the Board on March 4, 2000.
The funds have adopted the Amended and Restated American Century Mutual Funds
Deferred Compensation Plan for Non-Interested Directors. Under the plan, the
independent directors may defer receipt of all or any part of the fees to be
paid to them for serving as directors of the funds.
All deferred fees are credited to an account established in the name of the
directors. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the director. The account balance continues
to fluctuate in accordance with the performance of the selected fund or funds
until final payment of all amounts is credited to the account. Directors are
allowed to change their designation of mutual funds from time to time.
No deferred fees are payable until such time as a director resigns, retires or
otherwise ceases to be a member of the Board of Directors. Directors may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a director, all remaining deferred fee account balances are paid to
the director's beneficiary or, if none, to the director's estate.
The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of directors to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.
No deferred fees were paid to any director under the plan during the fiscal year
ended March 31, 2000.
20 American Century Investments 1-800-345-2021
OFFICERS
Background information about the officers of the funds is provided in the
following table. All persons named as officers of the funds also serve in
similar capacities for the 12 other investment companies advised by ACIM. Not
all officers of the funds are listed; only those officers with policy-making
functions for the funds are listed. No officer is compensated for his or her
service as an officer of the funds. The individuals listed in the following
table are interested persons of the funds (as defined in the Investment Company
Act) because of their affiliation with either the funds, ACC, ACC's subsidiaries
(including ACIM, ACSC and ACIS), or the funds' distributors (ACIS and FDI).
Name (Age) Position(s) Held Principal Occupation(s)
Address with Funds During Past Five Years
----------------------------------------------------------------------------------------------------
George A. Rio (45) President Executive Vice President and Director of Client
60 State Street, Suite 1300 Services, FDI (March 1998 to present)
Boston, MA 02109 Senior Vice President and Senior Key
Account Manager, Putnam Mutual Funds
(June 1995 to March 1998)
----------------------------------------------------------------------------------------------------
Christopher J. Kelley (35) Vice President Vice President and Associate General Counsel, FDI
60 State Street, Suite 1300 (July 1996 to present)
Boston, MA 02109 Assistant Counsel, Forum Financial Group (April
1994 to July 1996)
----------------------------------------------------------------------------------------------------
Mary A. Nelson (36) Vice President Vice President and Manager of Treasury Services
60 State Street, Suite 1300 and Administration, FDI (1994 to present)
Boston, MA 02109
----------------------------------------------------------------------------------------------------
Maryanne Roepke, CPA (44) Vice President Senior Vice President and Assistant Treasurer, ACSC
4500 Main Street and
Kansas City, MO 64111 Treasurer
----------------------------------------------------------------------------------------------------
David C. Tucker (41) Vice President Senior Vice President, ACIM, ACSC, ACI and
4500 Main Street three other ACC subsidiaries
Kansas City, MO 64111 (June 1998 to present)
General Counsel, ACC and nine
ACC subsidiaries (June 1998 to
present) Consultant to mutual
fund industry (May 1997 to April
1998) Vice President and General
Counsel, Janus Companies (1990
to 1997)
----------------------------------------------------------------------------------------------------
Paul Carrigan Jr. (50) Secretary Secretary, ACC (February 1998 to present)
4500 Main Street Director of Legal Operations
Kansas City, MO 64111 (February 1996 to present)
Board Communications Manager, The Benham Company
(April 1994 to January 1996)
----------------------------------------------------------------------------------------------------
Robert J. Leach (34) Controller Vice President and Controller--Fund Accounting,
4500 Main Street ACSC
Kansas City, MO 64111
----------------------------------------------------------------------------------------------------
Jon Zindel (32) Tax Officer Vice President and Director of Taxation, ACSC
4500 Main Street (1996 to present)
Kansas City, MO 64111 Vice President, ACIM and 15 other ACC subsidiaries
(April 1999 to present)
Treasurer, American Century Ventures, Inc.
(December 1999 to present)
Tax Manager, Price Waterhouse LLP (1989 to 1996)
----------------------------------------------------------------------------------------------------
www.americancentury.com American Century Investments 21
CODE OF ETHICS
The funds, their investment advisor and principal underwriters have adopted
codes of ethics under Rule 17j-1 of the Investment Company Act and these codes
of ethics permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the funds, provided that
they first obtain approval from the appropriate compliance department before
making such investments.
THE FUNDS' PRINCIPAL SHAREHOLDERS
As of July 1, 2000, the following companies were the record owners of more than
5% of the outstanding shares of any class of a fund.
Investor Class
Fund Shareholder and Percentage of Shares Outstanding
----------------------------------------------------------------------------------------------------
Large Cap Value UMB Bank NA as Trustee for American Century Services Corporation
Kansas City, Mo -- 9.3%
----------------------------------------------------------------------------------------------------
Value Charles Schwab & Company
San Francisco, CA -- 5.3%
National Financial Services Corp
New York, NY -- 6.5%
----------------------------------------------------------------------------------------------------
Small Cap Value UMB Bank NA as Trustee for Utilicorp United Inc.
Retirement Investment Plan
Kansas City, MO - 14.4%
----------------------------------------------------------------------------------------------------
Equity Income Charles Schwab & Company
San Francisco, CA -- 10.9%
----------------------------------------------------------------------------------------------------
Equity Index None
----------------------------------------------------------------------------------------------------
Real Estate Charles Schwab & Company
San Francisco, CA -- 30.0%
American Century Investment Management Inc.
Kansas City, MO -- 6.1%
----------------------------------------------------------------------------------------------------
Institutional Class
Fund Shareholder and Percentage of Shares Outstanding
----------------------------------------------------------------------------------------------------
Large Cap Value None
----------------------------------------------------------------------------------------------------
Value Chase Manhattan Bank as Trustee for Robert Bosch Corporation
New York, NY -- 32.3%
Northern Trust Company as Trustee for Ericsson Retirement Plan
Richardson, TX -- 27.4%
Morgan Guaranty Trust Company Deferred Profit Sharing Plan
New York, NY -- 12.3%
Chase Manhattan Bank as Trustee for Winnebago Industries, Inc.
Deferred Compensation Plan
New York, NY -- 8.8%
Trustees of American Century Profit Sharing and 401(k)
Savings Plan and Trust
Kansas City, MO -- 8.3%
----------------------------------------------------------------------------------------------------
Small Cap Value UMB Bank NA as Trustee for American Century Services Corporation
Kansas City, MO -- 82.0%
North Carolina Engineering Foundation
Raleigh, NC -- 18.0%
----------------------------------------------------------------------------------------------------
22 American Century Investments 1-800-345-2021
Institutional Class
Fund Shareholder and Percentage of Shares Outstanding
----------------------------------------------------------------------------------------------------
Equity Income Richbak Company
Richfield, MN -- 33.8%
Kirchbak Company
Richfield, MN -- 25.7%
Trustees of American Century Profit Sharing and 401(k)
Savings Plan and Trust
Kansas City, MO -- 18.8%
Morgan Guaranty Trust Company Trustee for Champion
International Company
New York, NY -- 12.7%
----------------------------------------------------------------------------------------------------
Equity Index Chase Manhattan Bank as Trustee for Robert Bosch
Corporation New York, NY -- 8.3% Chase Manhattan Bank as
Trustee for Arch Coal, Inc.
New York, NY -- 5.5%
UMB Bank as Trustee for Andersen Corporation
Kansas City, MO -- 5.4%
----------------------------------------------------------------------------------------------------
Real Estate Charles Schwab & Company
San Francisco, CA -- 65.3%
Trustees of American Century Profit Sharing and 401(k)
Savings Plan and Trust
Kansas City, MO -- 12.5%
Strafe & Company FBO Reily Retirement
Westerville, OH -- 8.0%
North Carolina Engineering Foundation
Raleigh, NC -- 7.8%
----------------------------------------------------------------------------------------------------
Advisor Class
Fund Shareholder and Percentage of Shares Outstanding
----------------------------------------------------------------------------------------------------
Large Cap Value None
----------------------------------------------------------------------------------------------------
Value James B. Anderson Trustee for American Chamber of Commerce
Alexandria, VA -- 32.5%
Principal Life Insurance Company
Des Moines, IA -- 10.1%
American Express Trust Company
Minneapolis, MN -- 6.3%
----------------------------------------------------------------------------------------------------
Small Cap Value Principal Life Insurance Company
Des Moines, IA -- 97.5%
----------------------------------------------------------------------------------------------------
Equity Income Invesco Trust Company Trustee FBO Fisher and Phillips LLP
Concord, CA -- 16.0%
Penfirn Company
Omaha, NE -- 6.0% Charles Schwab & Company San
Francisco, -- CA 5.5%
----------------------------------------------------------------------------------------------------
Real Estate None
----------------------------------------------------------------------------------------------------
The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of a fund's outstanding shares. As of July 1, 2000, the
officers and directors of the funds, as a group, own less than 1% of any fund's
outstanding shares.
www.americancentury.com American Century Investments 23
SERVICE PROVIDERS
The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds and is described below.
ACIM and ACSC are both wholly owned by ACC. James E. Stowers, Jr., Chairman of
ACC, controls ACC by virtue of his ownership of a majority of its voting stock.
INVESTMENT ADVISOR
A description of the responsibilities of the advisor appears in each Prospectus
under the heading Management.
For the services provided to the funds, the advisor receives a monthly fee based
on a percentage of the average net assets of the funds as follows:
Fund Class Percentage of Net Assets
--------------------------------------------------------------------------------
Large Cap Value Investor 0.90% of first $1 billion
0.80% of the next $4 billion
0.70% over $5 billion
Institutional 0.70% of first $1 billion 0.60% of the next
$4 billion 0.50% over $5 billion
Advisor 0.65% of first $1 billion
0.55% of the next $4 billion
0.45% over $5 billion
--------------------------------------------------------------------------------
Value Investor 1.00%
Institutional 0.80%
Advisor 0.75%
--------------------------------------------------------------------------------
Small Cap Value Investor 1.25%
Institutional 1.05%
Advisor 1.00%
--------------------------------------------------------------------------------
Equity Income Investor 1.00%
Institutional 0.80%
Advisor 0.75%
--------------------------------------------------------------------------------
Equity Index Investor 0.49%
Institutional 0.29%
--------------------------------------------------------------------------------
Real Estate Investor 1.20% of first $100 million
1.15% over $100 million
Institutional 1.00% of first $100 million
0.95% over $100 million
Advisor 0.95% of first $100 million
0.90% over $100 million
--------------------------------------------------------------------------------
On the first business day of each month, the funds pay a management fee to the
advisor for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the fund by the
aggregate average daily closing value of a fund's net assets during the previous
month. This number is then multiplied by a fraction, the numerator being the
number of days in the previous month and the denominator being 365 (366 in leap
years).
The management agreement 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 its execution, whichever comes first. The
agreement will be in effect after that as long as it is specifically approved,
at least annually, by (1) the funds' Board of Directors, or by the vote of a
majority of outstanding votes (as defined in the Investment Company
24 American Century Investments 1-800-345-2021
Act) and (2) the vote of a majority of the directors of the funds who are not
parties to the agreement or interested persons of the advisor, cast in person at
a meeting called for the purpose of voting on this approval.
The management agreement provides that it may be terminated at any time without
payment of any penalty by the funds' Board of Directors, or by a vote of a
majority of outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.
The management agreement states that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties. The
management agreement also provides that the advisor 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.
Certain investments may be appropriate for the funds and also for other clients
advised by the advisor. Investment decisions for the funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or funds. In
addition, purchases or sales of the same security may be made for two or more
clients or funds on the same date. Such transactions will be allocated among
clients in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.
The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Directors
has approved the policy of the advisor with respect to the aggregation of
portfolio transactions. Where portfolio transactions have been aggregated, the
funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
Unified management fees incurred by each fund by class for the fiscal periods
ended March 31, 2000, 1999, and 1998, are indicated in the following table.
UNIFIED MANAGEMENT FEES
---------------------------------------------------------------------------------------------------
Fund 2000 1999 1998
---------------------------------------------------------------------------------------------------
Large Cap Value
Investor $ 72,002 N/A N/A
Institutional N/A N/A N/A
Advisor N/A N/A N/A
---------------------------------------------------------------------------------------------------
Value
Investor 17,395,789 21,943,111 22,462,663
Institutional 495,545 88,534 12,733(1)
Advisor 453,476 394,296 303,110
---------------------------------------------------------------------------------------------------
Small Cap Value
Investor 216,524 71,636 N/A
Institutional 12,964 4,618 N/A
Advisor 62 N/A N/A
---------------------------------------------------------------------------------------------------
www.americancentury.com American Century Investments 25
Fund 2000 1999 1998
---------------------------------------------------------------------------------------------------
Equity Income
Investor 3,284,147 3,171,000 2,719,021
Institutional 73,275 810 N/A
Advisor 139,749 34,006 3,083
---------------------------------------------------------------------------------------------------
Equity Index
Investor 227,932 4,659 N/A
Institutional 1,055,989 68,622 N/A
---------------------------------------------------------------------------------------------------
Real Estate
Investor 1,285,860(2) 1,475,686 527,319(3)
Institutional 236,619(4) 224,102 54,963(5)
Advisor 30,305(6) 673 N/A
---------------------------------------------------------------------------------------------------
(1) For the period July 31, 1997 (inception) through March 31, 1997.
(2) Includes $1,042,204 paid to RREEF America L.L.C. for the period April 1,
1999 through December 31, 1999.
(3) For the five months ended March 31, 1998. Does not include $25,548 of fees,
the payment of which was voluntarily waived by the advisor.
(4) Includes $191,691 paid to RREEF America L.L.C., for the period April 1, 1999
through December 31, 1999.
(5) For the five months ended March 31, 1998. Does not include $3,001 of fees,
the payment of which was voluntarily waived by the advisor.
(6) Includes $18,328 paid to RREEF America L.L.C. for the period April 1, 1999
through December 31, 1999.
TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, serves as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software, and personnel for
the day-to-day administration of the funds and the advisor. The advisor pays
ACSC for these services.
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 advisor.
Pursuant to a Sub-Administration Agreement with the advisor, Funds Distributor,
Inc. (FDI) serves as the co-administrator for the funds. FDI is responsible for
(i) providing certain officers of the funds and (ii) reviewing and filing
marketing and sales literature on behalf of the funds. The fees and expenses of
FDI are paid by the advisor out of its unified fee.
DISTRIBUTORS
The funds' shares are distributed by FDI and ACIS, both registered
broker-dealers. 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. ACIS is a wholly owned subsidiary of
ACC, and is located at 4500 Main Street, Kansas City, Missouri 64111.
The distributors are the principal underwriters of the funds' shares. The
distributors make a continuous, best-efforts underwriting of the funds' shares.
This means the distributors have no liability for unsold shares.
26 American Century Investments 1-800-345-2021
OTHER SERVICE PROVIDERS
CUSTODIAN BANKS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598,
and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves
as custodian of the assets of the funds. The custodians take no part in
determining the investment policies of the funds or in deciding which securities
are purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.
INDEPENDENT AUDITORS
Deloitte & Touche LLP are the independent auditors of the funds. The address
of Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri
64106. As the independent auditors of the funds, Deloitte & Touche provides
services including (1) audit of the annual financial statements for each fund,
(2) assistance and consultation in connection with SEC filings, and (3) review
of the annual federal income tax return filed for each fund.
BROKERAGE ALLOCATION
Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. The funds' policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. So long as that policy is
met, the advisor may take into consideration the factors discussed below when
selecting brokers. For Equity Index and the Real Estate Fund, the advisor has
delegated responsibility for selecting brokers to execute portfolio transactions
to the subadvisor under the terms of the applicable investment subadvisory
agreement.
The advisor, or the subadvisor, as the case may be, receives statistical and
other information and services, including research, without cost from brokers
and dealers. The advisor 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 this information and services
may vary in amount, quality and reliability, its influence in selecting brokers
varies from none to very substantial. The advisor or the subadvisor proposes to
continue to place some of the funds' brokerage business with one or more brokers
who provide information and services. This information and services will be in
addition to and not in lieu of services that must be to be performed by the
advisor. The advisor does not use brokers that provide such information and
services to reduce the expense of providing required services to the funds.
In the fiscal periods March 31, 2000, 1999, and 1998, the brokerage commissions
of each fund were as follows:
Fund 2000 1999 1998
------------------------------------------------------------------------------------
Large Cap Value $ 9,212(1) N/A N/A
Value 6,143,830 8,037,803 8,771,789
Small Cap Value 70,477 43,018 N/A
Equity Income 1,133,324 1,184,393 812,420
Equity Index 39,357 1,677 N/A
Real Estate 612,952 444,518 164,977(2)
(1) For the eight months ended March 31, 2000.
(2) For the five months ended March 31, 1998.
www.americancentury.com American Century Investments 27
The brokerage commissions paid by the funds may exceed those that another broker
might have charged for the same transactions because of the value of the
brokerage and research services provided. Research services furnished by brokers
through whom the funds make securities transactions may be used by the advisor
in servicing all of its accounts, and not all such services may be used by the
advisor in managing the funds' portfolios.
The staff of the SEC has expressed the view that the best price and execution of
over-the-counter transactions in portfolio securities may be secured by dealing
directly with principal market makers, thereby avoiding the payment of
compensation to another broker. In certain situations, the officers of the funds
and the advisor believe that the facilities, expert personnel and technological
systems of a broker often enable the funds to secure as good a net price by
dealing with a broker instead of a principal market maker, even after payment of
the compensation to the broker. The funds regularly place their over-the-counter
transactions with principal market makers, but also may deal on a brokerage
basis when utilizing electronic trading networks or as circumstances warrant.
INFORMATION ABOUT FUND SHARES
Each of the funds named on the front of this Statement of Additional Information
is a series of shares issued by the corporation, and shares of each fund have
equal voting rights. In addition, each series (or fund) may be divided into
separate classes. See Multiple Class Structure, which follows. Additional funds
and classes may be added without a shareholder vote.
Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
corporation's (that is, all funds') outstanding shares may be able to elect a
Board of Directors. The corporation undertakes dollar-based voting, meaning that
the number of votes a shareholder is entitled to is based upon the dollar amount
of the shareholder's investment. The election of directors is determined by the
votes received from all the corporation's shareholders without regard to whether
a majority of shares of any one fund voted in favor of a particular nominee or
all nominees as a group.
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 profit (or losses) of investments and
other assets held for each series or class. Within their respective series or
class, all shares have equal redemption rights. Each share, when issued, is
fully paid and non-assessable.
In the event of complete liquidation or dissolution of the funds, shareholders
of each series or class of shares will be entitled to receive, pro rata, all of
the assets less the liabilities of that series or class.
Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
MULTIPLE CLASS STRUCTURE
The corporation's Board of Directors has adopted a multiple class plan (the
Multiclass Plan) pursuant to Rule 18f-3 adopted by the SEC.Under this plan, the
funds may issue up to four classes of shares: an Investor Class, an
Institutional Class, a Service Class and an Advisor Class. Not all funds offer
all four classes.
The Investor Class is available directly to investors without any load or
commission, for a single unified management fee. The Institutional, Service and
Advisor Classes are available to institutional shareholders or through financial
intermediaries that do not require the
28 American Century Investments 1-800-345-2021
same level of shareholder and administrative services from the advisor as
Investor Class shareholders. As a result, the advisor is able to charge these
classes a lower total 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). The plan has been adopted by the
funds' Board of Directors and initial shareholder in accordance with Rule 12b-1
adopted by the SEC under the Investment Company Act.
Rule 12b-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Directors and approved by its shareholders. Pursuant to such
rule, the Board of Directors and initial shareholder of the funds' Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan.
In adopting the Plan, the Board of Directors [including a majority of directors
who are not interested persons of the funds (as defined in the Investment
Company Act), hereafter referred to as the independent directors] determined
that there was a reasonable likelihood that the Plan would benefit the funds and
the shareholders of the affected class. Pursuant to Rule 12b-1, information
about revenues and expenses under the Plan is presented to the Board of
Directors quarterly for its consideration in continuing 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 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 (NASD)
Master Distribution and Shareholder Services Plan
As described in the Prospectuses, the funds' Advisor Class shares also 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 funds' distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the funds' shares and/or
the use of the funds' shares in various investment products or in connection
with various financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for shareholders in
the Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.
To make the funds' shares available through such plans and financial
intermediaries, and to compensate them for these services, the funds' advisor
has reduced its management fee by 0.25% per annum for to the Advisor Class
shares and the funds' Board of Directors has adopted a Master Distribution and
Shareholder Services Plan. Following this Plan, the Advisor Class shares pay a
fee of 0.50% annually of the aggregate average daily net assets of the funds'
Advisor Class shares, 0.25% of which is paid for shareholder services (as
described below) and 0.25% of which is paid for distribution services. During
the fiscal year ended March 31, 2000, the aggregate amount of fees paid under
the Plan were:
www.americancentury.com American Century Investments 29
Large Cap Value $ N/A
Value 302,181
Small Cap Value 31
Equity Income 93,139
Real Estate 15,943
Payments may be made for a variety of shareholder services, including, but not
limited to, (a) receiving, aggregating and processing purchase, exchange and
redemption requests from beneficial owners (including contract owners of
insurance products that use the funds as underlying investment media) of shares
and placing purchase, exchange and redemption orders with the funds'
distributor; (b) providing shareholders with a service that invests the assets
of their accounts in shares according to specific or preauthorized 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 for 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 semiannual 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 funds.
During the fiscal year ended March 31, 2000, the aggregate amount of fees paid
under the Plan by the funds for shareholder services were:
Large Cap Value $ N/A
Value 151,091
Small Cap Value 16
Equity Income 46,569
Real Estate 7,971
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, (a) 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; (b) compensation to registered representatives or other
employees of the distributor who engage in or support distribution of the funds'
Advisor Class shares; (c) compensation to, and expenses (including overhead and
telephone expenses) of the distributor; (d) the printing of prospectuses,
statements of additional information and reports for other-than-existing
investors; (e) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' investors and prospective
investors; (f) receiving and answering correspondence from prospective
investors, 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" for the provision of personal, continuing
services to investors, as contemplated by the Rules of Fair Practice of
30 American Century Investments 1-800-345-2021
the NASD; and (n) such other distribution and services activities as the advisor
determines may be paid for by the funds pursuant to the terms of this Agreement
and in accordance with Rule 12b-1 of the Investment Company Act.
During the fiscal year ended March 31, 2000, the aggregate amount of fees paid
under the Plan by the funds for distribution services were:
Large Cap Value $ N/A
Value 151,091
Small Cap Value 16
Equity Income 46,569
Real Estate 7,971
BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in the
funds' Prospectuses and in Your Guide to American Century Services. The
Prospectuses and guide are available to investors without charge and may be
obtained by calling us.
VALUATION OF A FUND'S SECURITIES
Each fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange), each day the Exchange is
open for business. The Exchange usually closes at 4 p.m. Eastern time. The
Exchange typically observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect
the same holidays to be observed in the future, the Exchange may modify its
holiday schedule at any time.
Each fund's NAV is calculated by adding the value of all portfolio securities
and other assets, deducting liabilities and dividing the result by the number of
shares outstanding. Expenses and interest earned on portfolio securities are
accrued daily.
The portfolio securities of the funds, except as otherwise noted, listed or
traded on a domestic securities exchange, are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges generally are valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices 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 according to
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 according to
procedures established by the Board of Directors.
Debt securities maturing within 60 days of the valuation date may be valued at
cost, plus or minus any amortized discount or premium, unless the directors
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith at their fair value using methods approved by the Board of
Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then translated to dollars at the prevailing foreign
exchange rate.
www.americancentury.com American Century Investments 31
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established, but before the net
asset value per share was determined, that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
according to procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets and on some electronic trading networks on Saturdays or on other
days when the exchange is not open and on which the funds' net asset values are
not calculated. Therefore, these calculations do not take place
contemporaneously with the determination of the prices of many of the portfolio
securities used in such calculation, and the value of the funds' portfolios may
be affected on days when shares of the funds may not be purchased or redeemed.
TAXES
FEDERAL INCOME TAXES
Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal income taxes to the extent that
it distributes substantially all of its net investment income and net realized
capital gains (if any) to shareholders. If a fund fails to qualify as a
regulated investment company, it will be liable for taxes, significantly
reducing its distributions to shareholders and eliminating shareholders' ability
to treat distributions of the funds in the manner they were realized by the
funds.
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. Dividends from domestic corporations 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 longer than 12 months are taxable as
long-term gains regardless of the length of time you have held the shares.
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 distributions of long-term capital gains to you with
respect to these shares.
Dividends and interest received by a fund on foreign securities may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate these
taxes. Foreign countries generally do not impose taxes on capital gains of
investments by non-resident investors. The foreign taxes paid by a fund will
reduce its dividends.
If more than 50% of the value of a fund's total assets at the end of its fiscal
year consists of securities of foreign corporations, the fund may qualify for
and make an election with the Internal Revenue Service for that fiscal year so
that fund shareholders may be able to claim a foreign tax credit in lieu of a
deduction for foreign income taxes paid by the fund. If this election is made,
the foreign taxes paid by the fund will be treated as income received by you. In
order for you to receive the foreign tax credit, you must have held your shares
for 16 days or more during the 30-day period, beginning 15 days prior to the
ex-dividend date for the shares. The mutual fund must meet a similar holding
period requirement for foreign securities to which a dividend is attributable.
Any portion of the foreign tax credit that is ineligible as a result of the fund
not meeting the holding period requirement will be deducted in computing net
investment income.
If a fund purchases the securities of certain foreign investment funds or trusts
called passive foreign investment companies (PFIC), capital gains on the sale of
those holdings
32 American Century Investments 1-800-345-2021
will be deemed to be ordinary income regardless of how long the fund holds its
investment. The fund also may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains are distributed to shareholders.
Alternatively, the fund may elect to recognize cumulative gains on such
investments and distribute them to shareholders. Any distribution attributable
to a PFIC is characterized as ordinary income.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, either American Century or your financial intermediary is
required by federal law to withhold and pay 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions) to the IRS.
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, and is not
refundable.
Redemption of shares of a fund (including a redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes, and
you generally will recognize a gain or loss equal to the difference between the
basis of the shares and the amount received. 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, postponing the recognition of such loss for federal income
tax purposes.
STATE AND LOCAL TAXES
Distributions also may be subject to state and local taxes, even if all or a
substantial part of those 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
these distributions in your own state.
TAXATION OF CERTAIN MORTGAGE REITS
The funds may invest in REITs that hold residual interests in real estate
mortgage investment conduits. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of a fund's income from a REIT
that is attributable to the REIT's residual interest in a REMIC (referred to in
the Code as an "excess inclusion") will be subject to federal income
tax in all events. These regulations are also expected to provide that excess
inclusion income of a regulated investment company, such as a fund, will be
allocated to shareholders of the regulated investment company in proportion to
the dividends received by them with the same consequences as if these
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.
www.americancentury.com American Century Investments 33
HOW FUND PERFORMANCE INFORMATION IS CALCULATED
The funds may quote performance in various ways. Fund performance may be shown
by presenting one or more performance measurements, including cumulative total
return, average annual total return or yield.
All performance information advertised by the funds is historical 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.
Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gain
distributions (if any) and any change in the fund's NAV during the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
The following tables set forth the average annual total return for the various
classes of the funds for the one-, five- and 10-year periods (or the period
since inception) ended March 31, 2000, the last day of the funds' most recent
fiscal year.
AVERAGE ANNUAL TOTAL RETURNS--INVESTOR CLASS
------------------------------------------------------------------------------------------
Fund 1 year 5 years 10 years From Inception
------------------------------------------------------------------------------------------
Large Cap Value N/A N/A N/A -7.22%
Value 1.42% 13.68% N/A 13.27%
Small Cap Value 14.37% N/A N/A 5.61%
Equity Income 3.88% 15.79% N/A 15.88%
Equity Index 17.17% N/A N/A 19.88%
Real Estate 2.87% N/A N/A 9.27%
AVERAGE ANNUAL TOTAL RETURNS--INSTITUTIONAL CLASS
------------------------------------------------------------------------------------------
Fund 1 year 5 years 10 years From Inception
------------------------------------------------------------------------------------------
Large Cap Value N/A N/A N/A N/A
Value 1.65% N/A N/A 2.83%
Small Cap Value 14.39% N/A N/A 9.42%
Equity Income 4.09% N/A N/A 3.29%
Equity Index 17.43% N/A N/A 20.12%
Real Estate 3.18% N/A N/A -1.53%
AVERAGE ANNUAL TOTAL RETURNS--ADVISOR CLASS
------------------------------------------------------------------------------------------
Fund 1 year 5 years 10 years From Inception
------------------------------------------------------------------------------------------
Large Cap Value N/A N/A N/A N/A
Value 1.36% N/A N/A 9.54%
Small Cap Value N/A N/A N/A 6.86%
Equity Income 3.61% N/A N/A 10.95%
Real Estate 2.62% N/A N/A 3.30%
34 American Century Investments 1-800-345-2021
The funds also may elect to advertise cumulative total return, computed as
described above. The following table shows the cumulative total return of the
funds by class since their respective inception dates (as noted) through March
31, 2000.
Cumulative
Total Return
Fund Class Since Inception Date of Inception
-----------------------------------------------------------------------------------------------
Large Cap Value Investor -7.22% 07/30/99
Institutional N/A N/A
Advisor N/A N/A
-----------------------------------------------------------------------------------------------
Value Investor 126.99% 09/01/93
Institutional 7.73% 07/31/97
Advisor 37.49% 10/02/96
-----------------------------------------------------------------------------------------------
Small Cap Value Investor 9.52% 07/31/98
Institutional 13.71% 10/26/98
-----------------------------------------------------------------------------------------------
Equity Income Investor 130.43% 08/01/94
Institutional 5.76% 07/08/98
Advisor 37.52% 03/07/97
-----------------------------------------------------------------------------------------------
Equity Index Investor 21.86% 02/26/99
Institutional 22.13% 02/26/99
-----------------------------------------------------------------------------------------------
Real Estate Investor 49.35% 09/21/95
Institutional -4.22% 06/16/97
Advisor 4.92% 10/06/98
ADDITIONAL PERFORMANCE COMPARISONS
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that, unlike the American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to: U.S. Treasury bill, note and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated, tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund
rankings published in major, nationally distributed periodicals; data provided
by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills,
and Inflation; major indices of stock market performance; and indices and
historical data supplied by major securities brokerage or investment advisory
firms. The funds also may use reprints from newspapers and magazines furnished
by third parties to illustrate historical performance or to provide general
information about the funds.
www.americancentury.com American Century Investments 35
PERMISSIBLE ADVERTISING INFORMATION
In addition to any other permissible information, the funds may 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 these discussions; (4) descriptions of past or
anticipated portfolio holdings for one or more of the funds; (5) descriptions of
investment strategies for one or more of the funds; (6) descriptions or
comparisons of various savings and investment products (including, but not
limited to, qualified retirement plans and individual stocks and bonds), which
may or may not include the funds; (7) comparisons of investment products
(including the funds) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons who have invested in one or more of the funds. The funds also may
include calculations, such as hypothetical compounding examples, which describe
hypothetical investment results. Such performance examples will be based on an
express set of assumptions and are not indicative of the performance of any 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 advisor
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, and for periods after the first full quarter after inception, actual
performance of the new class will be used.
FINANCIAL STATEMENTS
The financial statements of the funds are included in the Annual Reports to
shareholders for the fiscal year ended March 31, 2000. Each Annual Report is
incorporated herein by reference. You may receive copies of the reports without
charge upon request to American Century at the address and telephone numbers
shown on the back cover of this Statement of Additional Information.
EXPLANATION OF FIXED-INCOME SECURITIES RATINGS
As described in the Prospectuses, the funds may invest in fixed-income
securities. Those investments, however, are subject to certain credit quality
restrictions, as noted in the Prospectuses. The following is a summary of the
rating categories referenced in the prospectus disclosure.
BOND RATINGS
S& P Moody's Description
--------------------------------------------------------------------------------
AAA Aaa These are the highest ratings assigned by S& P
and Moody's to a debt obligation. They indicate an
extremely strong capacity to pay interest and repay
principal.
--------------------------------------------------------------------------------
AA Aa Debt rated in this category is considered to have a
very strong capacity to pay interest and repay
principal. It differs from AAA/Aaa issues only in a
small degree.
36 American Century Investments 1-800-345-2021
S& P Moody's Description
--------------------------------------------------------------------------------
A 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 Baa Debt rated BBB/Baa 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 Ba Debt rated BB/Ba 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 that could
lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category also is used
for debt subordinated to senior debt that is assigned an
actual or implied BBB- rating.
--------------------------------------------------------------------------------
B 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/Ba
or BB-/Ba3 rating.
--------------------------------------------------------------------------------
CCC Caa Debt rated CCC/Caa has a currently identifiable
vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet
timely payment of interest and repayment of principal.
In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC/Caa rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B-/B3
rating.
--------------------------------------------------------------------------------
CC Ca The rating CC/Ca typically is applied to debt
subordinated to senior debt that is assigned an actual
or implied CCC/Caa rating.
--------------------------------------------------------------------------------
C C The rating C typically is applied to debt subordinated
to senior debt, which is assigned an actual or implied
CCC-Caa3 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 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 Standard &
Poor's 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. Similarly,
Moody's adds numerical modifiers (1, 2, 3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.
www.americancentury.com American Century Investments 37
COMMERCIAL PAPER RATINGS
S&P Moody's Description
--------------------------------------------------------------------------------
A-1 Prime-1 This indicates that the degree of safety regarding timely
(P-1) payment is strong. Standard & Poor's rates those issues
determined to possess extremely strong safety characteristics
as A-1+.
--------------------------------------------------------------------------------
A-2 Prime-2 Capacity for timely payment on commercial paper is satisfactory,
(P-2) but the relative degree of safety is not as high as for issues
designated A-1. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity
is maintained.
--------------------------------------------------------------------------------
A-3 Prime-3 Satisfactory capacity for timely repayment. Issues that carry
(P-3) this rating are somewhat more vulnerable to the adverse changes in
circumstances than obligations carrying the higher designations.
--------------------------------------------------------------------------------
NOTE RATINGS
--------------------------------------------------------------------------------
S&P Moody's Description
--------------------------------------------------------------------------------
SP-1 MIG-1; VMIG-1 Notes are of the highest quality
enjoying strong protection from established cash flows
of funds for their servicing or from established and
broad-based access to the market for refinancing, or
both.
--------------------------------------------------------------------------------
SP-2 MIG-2; VMIG-2 Notes are of high quality with ample
margins of protection, although not so large as in the
preceding group.
--------------------------------------------------------------------------------
SP-3 MIG-3; VMIG-3 Notes are of favorable quality with all
security elements accounted for, but lacking the
undeniable strength of the preceding grades. Market
access for refinancing, in particular, is less likely
to be well-established.
--------------------------------------------------------------------------------
SP-4 MIG-4; VMIG-4 Notes are of adequate quality, carrying
specific risk but having protection and not distinctly
or predominantly speculative.
--------------------------------------------------------------------------------
38 American Century Investments 1-800-345-2021
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period. The annual and semiannual reports are incorporated by reference into
this SAI. This means that these are legally part of this SAI.
You can receive a free copy of the annual and semiannual reports, and ask any
questions about the funds and your accounts, by contacting American Century at
the address or telephone numbers listed below.
If you own or are considering purchasing fund shares through
* an employer-sponsored retirement plan
* a bank
* a broker-dealer
* an insurance company
* another financial intermediary
you can receive the annual and semiannual reports directly from them.
You also can get information about the funds from the Security and Exchange
Commission (SEC). The SEC charges a duplicating fee to provide copies of this
information.
* In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
* On the Internet EDGAR database at
www.sec.gov
By email request at
[email protected]
* By mail SEC Public Reference Section
Washington, D.C.
20549-010
Investment Company Act File No. 811-7820
[american century logo and text logo (reg. sm)]
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
INVESTOR RELATIONS
1-800-345-2021 or 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
WWW.AMERICANCENTURY.COM
FAX
816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 or 816-444-3485
BUSINESS; NOT-FOR-PROFIT AND
EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
SH-SAI-20911 0008
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
PART C OTHER INFORMATION
ITEM 23 Exhibits (all exhibits not filed herewith are being incorporated
herein by reference).
(a) (1) Articles of Incorporation of Twentieth Century Capital
Portfolios, Inc., dated June 11, 1993 (filed electronically as
Exhibit 1a to Post-Effective Amendment No. 5 to the Registration
Statement on July 31, 1996, File No. 33-64872).
(2) Articles Supplementary of Twentieth Century Capital
Portfolios, Inc., dated March 11, 1996 (filed electronically as
Exhibit 1b to Post-Effective Amendment No. 5 to the Registration
Statement on July 31, 1996, File No. 33-64872).
(3) Articles Supplementary of Twentieth Century Capital
Portfolios, Inc. dated September 9, 1996 (filed electronically as
Exhibit a3 to Post-Effective Amendment No. 15 to the Registration
Statement on May 14, 1999, File No. 33-64872).
(4) Articles of Amendment of Twentieth Century Capital
Portfolios, Inc., dated December 2, 1996 (filed electronically as
Exhibit b1c to Post-Effective Amendment No. 7 to the Registration
Statement on March 3, 1997, File No. 33-64872).
(5) Articles Supplementary of American Century Capital
Portfolios, Inc., dated December 2, 1996 (filed electronically as
Exhibit b1d to Post-Effective Amendment No. 7 to the Registration
Statement on March 3, 1997, File No. 33-64872).
(6) Articles Supplementary of American Century Capital
Portfolios, Inc. dated April 30, 1997 (filed electronically as
Exhibit b1e to Post-Effective Amendment No. 8 to the Registration
Statement on May 21, 1997, File No. 33-64872).
(7) Certificate of Correction of Articles Supplementary of
American Century Capital Portfolios, Inc. dated May 15, 1997
(filed electronically as Exhibit b1f to Post-Effective Amendment
No. 8 to the Registration Statement on May 21, 1997, File No.
33-64872).
(8) Articles of Merger merging RREEF Securities Fund, Inc. with
and into American Century Capital Portfolios, Inc. dated June 13,
1997 (filed electronically as Exhibit a8 to Post-Effective
Amendment No. 15 to the Registration Statement on May 14, 1999,
File No. 33-64872).
(9) Articles Supplementary of American Century Capital
Portfolios, Inc. dated December 18, 1997 (filed electronically as
Exhibit b1g to Post-Effective Amendment No. 9 to the Registration
Statement on February 17, 1998, File No. 33-64872).
(10) Articles Supplementary of American Century Capital
Portfolios, Inc. dated June 1, 1998 (filed electronically as
Exhibit b1h to Post-Effective Amendment No. 11 to the
Registration Statement on June 26, 1998, File No. 33-64872).
(11) Articles Supplementary of American Century Capital
Portfolios, Inc. dated January 29, 1999 (filed electronically as
Exhibit b1i to Post-Effective Amendment No. 14 to the
Registration Statement on December 29, 1998, File No. 33-64872).
(12) Articles Supplementary of American Century Capital
Portfolios, Inc. dated February 16, 1999 (filed electronically as
Exhibit a12 to Post-Effective Amendment No. 15 to the
Registration Statement on May 14, 1999, File No. 33-64872).
(13) Articles Supplementary of American Century Capital
Portfolios, Inc. dated June 2, 1999 (filed electronically as
Exhibit a13 to Post-Effective Amendment No. 16 to the
Registration Statement on July 29, 1999, File No. 33-64872).
(14) Articles Supplementary of American Century Capital
Portfolios, Inc. dated June 8, 2000 is included herein.
(b) (1) By-Laws of Twentieth Century Capital Portfolios, Inc. (filed
electronically as Exhibit 2 to Post-Effective Amendment No. 5 to
the Registration Statement on July 31, 1996, File No. 33-64872).
(2) Amendment to By-Laws of American Century Capital Portfolios,
Inc. (filed electronically as Exhibit b2b to Post-Effective
Amendment No. 9 to the Registration Statement on February 17,
1998, File No. 33-64872).
(c) Registrant hereby incorporates by reference, as though set forth
fully herein, Article Fifth, Article Seventh and Article Eighth
of Registrants Articles of Incorporation, appearing as Exhibit 1a
to Post-Effective Amendment No. 5 on Form N-1A of the Registrant;
and Sections 3, 4, 5, 6, 7, 8, 9, 10, 11, 22, 33, 39, 40, 45 and
46 of Registrants By-Laws appearing as Exhibit 2 to
Post-Effective Amendment No. 5 on Form N-1A of the Registrant,
and Sections 25, 30, and 31 of Registrants Amendment to By-Laws
appearing as Exhibit 2b to Post-Effective Amendment No. 9 on Form
N-1A of the Registrant.
(d) (1) Management Agreement between American Century Capital
Portfolios, Inc. and American Century Investment Management, Inc.
dated August 1, 1997 (filed electronically as Exhibit b5a to
Post-Effective Amendment No. 9 to the Registration Statement on
February 17, 1998, File No. 33-64872).
(2) Subadvisory Agreement by and between American Century Capital
Portfolios, Inc., American Century Investment Management, Inc.
and J.P. Morgan Investment Management Inc., dated January 1, 2000
is included herein.
(3) Addendum to Management Agreement between American Century
Capital Portfolios, Inc. and American Century Investment
Management, Inc. dated July 30, 1998 (filed electronically as
Exhibit b5c to Post-Effective Amendment No. 11 to the
Registration Statement on June 26, 1998, File No. 33-64872).
(4) Subadvisory Agreement between Barclays Global Fund Advisers
and American Century Investment Management, Inc. dated January
29, 1999 (filed electronically as Exhibit b5d to Post-Effective
Amendment No. 14 to the Registration Statement on December 29,
1998, File No. 33-64872).
(5) Addendum to Management Agreement between American Century
Capital Portfolios, Inc. and American Century Investment
Management, Inc. dated January 29, 1999 (filed electronically as
Exhibit b5e to Post-Effective Amendment No. 14 to the
Registration Statement on December 29, 1998, File No. 33-64872).
(6) Addendum to Management Agreement between American Century
Capital Portfolios, Inc. and American Century Investment
Management, Inc. dated July 30, 1999 (filed electronically as
Exhibit b6 to Post-Effective Amendment No. 16 to the Registration
Statement on July 29, 1999, File No. 33-64872).
(7) Amendment No. 1 to Management Agreement between American
Century Capital Portfolios, Inc. and American Century Investment
Management, Inc. dated January 1, 2000 is included herein.
(e) (1) 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 to the Registration Statement of American
Century Target Maturities Trust on January 30, 1998, File No.
2-94608).
(2) Amendment No. 1 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and Funds Distributor,
Inc. dated June 1, 1998 (filed electronically as Exhibit b6b to
Post-Effective Amendment No. 11 to the Registration Statement on
June 26, 1998, File No. 33-64872).
(3) Amendment No. 2 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and Funds Distributor,
Inc. dated December 1, 1998 (filed electronically as Exhibit b6c
to Post-Effective Amendment No. 12 to the Registration Statement
of American Century World Mutual Funds, Inc. on November 13,
1998, File No. 33-39242).
(4) Amendment No. 3 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and Funds Distributor,
Inc. dated January 29, 1999 (filed electronically as Exhibit e4
to Post-Effective Amendment No. 24 to the Registration Statement
of American Century Variable Portfolios, Inc. on January 15,
1999, File No. 33-14567).
(5) Amendment No. 4 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and Funds Distributor,
Inc. dated July 30, 1999 (filed electronically as Exhibit e5 to
Post-Effective Amendment No. 16 to the Registration Statement on
July 29, 1999, File No. 33-64872).
(6) Amendment No. 5 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and Funds Distributor,
Inc. dated November 19, 1999 (filed electronically as Exhibit e6
to Post-Effective Amendment No. 87 to the Registration Statement
of American Century Mutual Funds, Inc. on November 29, 1999, File
No. 2-14213).
(7) Amendment No. 6 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and Funds Distributor,
Inc. dated June 1, 2000 (filed electronically as Exhibit e7 to
Post-Effective Amendment No. 19 to the Registration Statement of
American Century World Mutual Funds, Inc. on May 25, 2000, File
No. 33-39242).
(8) Distribution Agreement between American Century Capital
Portfolios, Inc. and American Century Investment Services, Inc.
dated March 13, 2000 (filed electronically as Exhibit e7 to
Post-Effective Amendment No. 17 to the Registration Statement of
American Century World Mutual Funds, Inc. on March 30, 2000, File
No. 33-39242).
(9) Amendment No. 1 to the Distribution Agreement between
American Century Capital Portfolios, Inc. and American Century
Investment Services, Inc. dated June 1, 2000 (filed
electronically as Exhibit e9 to Post-Effective Amendment No. 19
to the Registration Statement of American Century World Mutual
Funds, Inc. on May 25, 2000, File No. 33-39242).
(f) Not applicable.
(g) (1) Master Agreement by and between Twentieth Century Services,
Inc. and Commerce Bank, N.A. dated January 22, 1997 (filed
electronically as Exhibit 8e to Post-Effective Amendment No. 76
to the Registration Statement of American Century Mutual Funds,
Inc. on February 28, 1997, File No. 2-14213).
(2) Global Custody Agreement between The Chase Manhattan Bank and
the Twentieth Century and Benham Funds, dated August 9, 1996
(filed electronically as Exhibit 8 to Post-Effective Amendment
No. 31 to the Registration Statement of American Century
Government Income Trust on February 7, 1997, File No. 2-99222).
(h) (1) 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 to the Registration Statement on
July 31, 1996, File No. 33-64872).
(2) Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as Administrative Agent dated as of December 21,
1999 (filed electronically as Exhibit h3 to Post-Effective
Amendment No. 29 to the Registration Statement of American
Century California Tax-Free and Municipal Funds on December 29,
1999, File No. 2-82734).
(i) Opinion and Consent of Counsel (filed electronically as Exhibit i
to Post-Effective Amendment No. 16 to the Registration Statement
on July 29, 1999, File No. 33-64872).
(j) (1) Consent of Deloitte & Touche LLP is included herein.
(2) Power of Attorney dated February 19, 1999 (filed
electronically as Exhibit j2 to Post-Effective Amendment No. 15
to the Registration Statement on May 14, 1999, File No.
33-64872).
(k) Not applicable.
(l) Not applicable.
(m) (1) Master Distribution and Shareholder Services Plan of
Twentieth Century Capital Portfolios, Inc., Twentieth Century
Investors, Inc., Twentieth Century Strategic Asset Allocations,
Inc. and Twentieth Century World Investors, Inc. (Advisor Class)
dated September 3, 1996 (filed electronically as Exhibit b15a to
Post-Effective Amendment No. 9 to the Registration Statement on
February 17, 1998, File No. 33-64872).
(2) Amendment No. 1 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated June 13, 1997 (filed electronically as
Exhibit b15d to Post-Effective Amendment No. 77 to the
Registration Statement of American Century Mutual Funds, Inc. on
July 17, 1997, File No. 2-14213).
(3) Amendment No. 2 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated September 30, 1997 (filed
electronically as Exhibit b15c to Post-Effective Amendment No. 78
to the Registration Statement of American Century Mutual Funds,
Inc. on February 26, 1998, File No. 2-14213).
(4) Amendment No. 3 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated June 30, 1998 (filed electronically as
Exhibit b15e to Post-Effective Amendment No. 11 to the
Registration Statement on June 26, 1998, File No. 33-64872).
(5) Amendment No. 4 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated November 13, 1998 (filed
electronically as Exhibit b15e to Post-Effective Amendment No. 12
to the Registration Statement of American Century World Mutual
Funds, Inc. on November 13, 1998, File No. 33-39242).
(6) Amendment No. 5 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated February 16, 1999 (filed
electronically as Exhibit m6 to Post-Effective Amendment No. 83
to the Registration Statement of American Century Mutual Funds,
Inc. on February 26, 1999, File No. 2-14213).
(7) Amendment No. 6 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated July 30, 1999 (filed electronically as
Exhibit m7 to Post-Effective Amendment No. 16 to the Registration
Statement on July 29, 1999, File No. 33-64872).
(8) Amendment No. 7 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated November 19, 1999 (filed
electronically as Exhibit m8 to Post-Effective Amendment No. 87
to the Registration Statement of American Century Mutual Funds,
Inc. on November 29, 1999, File No. 2-14213).
(9) Amendment No. 8 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic
Asset Allocations, Inc. and American Century World Mutual Funds,
Inc. (Advisor Class) dated June 1, 2000 (filed electronically as
Exhibit m9 to Post-Effective Amendment No. 19 to the Registration
Statement of American Century World Mutual Funds, Inc. on May 25,
2000, File No. 33-39242).
(10) Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth
Century Strategic Asset Allocations, Inc. and Twentieth Century
World Investors, Inc. (Service Class) dated September 3, 1996
(filed electronically as Exhibit b15b to Post-Effective Amendment
No. 9 to the Registration Statement on February 17, 1998, File
No. 33-64872).
(n) Not applicable.
(o) (1) Multiple Class Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. dated September 3, 1996 (filed electronically as
Exhibit b18 to Post-Effective Amendment No. 9 to the Registration
Statement on February 17, 1998, File No. 33-64872).
(2) Amendment No. 1 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated June 13, 1997 (filed
electronically as Exhibit b18b to Post-Effective Amendment No. 77
to the Registration Statement of American Century Mutual Funds,
Inc. on July 17, 1997, File No. 2-14213).
(3) Amendment No. 2 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated September 30, 1997 (filed
electronically as Exhibit b18c to Post-Effective Amendment No. 78
to the Registration Statement of American Century Mutual Funds,
Inc. on February 26, 1998, File No. 2-14213).
(4) Amendment No. 3 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated June 30, 1998 (filed
electronically as Exhibit b18d to Post-Effective Amendment No. 11
to the Registration Statement on June 26, 1998, 33-64872).
(5) Amendment No. 4 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated November 13, 1998 (filed
electronically as Exhibit b18e to Post-Effective Amendment No. 12
to the Registration Statement of American Century World Mutual
Funds, Inc. on November 13, 1998, File No. 33-39242).
(6) Amendment No. 5 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated January 29, 1999 (filed
electronically as Exhibit b18f to Post-Effective Amendment No. 14
to the Registration Statement on December 29, 1998, File No.
33-64872).
(7) Amendment No. 6 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated July 30, 1999 (filed
electronically as Exhibit o7 to Post-Effective Amendment No. 16
to the Registration Statement on July 29, 1999, File No.
33-64872).
(8) Amendment No. 7 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated November 19, 1999 (filed
electronically as Exhibit o8 to Post-Effective Amendment No. 87
to the Registration Statement of American Century Mutual Funds,
Inc. on November 29, 1999, File No. 2-14213).
(9) Amendment No. 8 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated June 1, 2000 (filed
electronically as Exhibit o9 to Post-Effective Amendment No. 19
to the Registration Statement of American Century World Mutual
Funds, Inc. on May 25, 2000, File No. 33-39242).
(p) (1) American Century Code of Ethics (filed electronically as
Exhibit p1 to Post-Effective Amendment No. 16 to the Registration
Statement of American Century World Mutual Funds, Inc. on March
10, 2000, File No. 33-39242).
(2) Funds Distributor, Inc. Code of Ethics (filed electronically
as Exhibit p2 to Post-Effective Amendment No. 16 to the
Registration Statement of American Century World Mutual Funds,
Inc. on March 10, 2000, File No. 33-39242).
ITEM 24. Persons Controlled by or Under Common Control with Registrant - None.
ITEM 25. 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 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 26. Business and Other Connections of Investment Advisor.
American Century Investment Management, Inc., the investment advisor,
is engaged in the business of managing investments for registered
investment companies, deferred compensation plans and other
institutional investors.
ITEM 27. Principal Underwriters
I. (a) Funds Distributor, Inc. (FDI) acts as principal underwriter for
the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
CDC MPT+ Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds Inc.
GMO Trust
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
The Saratoga Advantage Trust
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
The Skyline Funds
St. Clair Funds, Inc.
TD Waterhouse Family of Funds, Inc.
TD Waterhouse Trust
FDI is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
FDI is located at 60 State Street, Suite 1300, Boston, Massachusetts 02109. FDI
is an indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a
holding company all of whose outstanding shares are owned by key employees.
(b) The following is a list of the executive officers, directors and
partners of FDI:
Name and Principal Business Address* Positions and Offices with Positions and Offices with
Underwriter Registrant
Marie E. Connolly Director, President and Chief None
Executive Officer
George A. Rio Executive Vice President President, Principal Executive
and Principal Financial Officer
Gary S. MacDonald Executive Vice President and None
Chief Administrative Officers
Charles W. Carr Executive Vice President None
William S. Nichols Executive Vice President None
Margaret W. Chambers Senior Vice President, General None
Counsel, Chief Compliance
Officer, Secretary and Clerk
Joseph F. Tower, III Senior Vice President, and None
Treasurer
Judith K. Benson Senior Vice President None
William J. Nutt Chairman and Director None
William J. Stetter Senior Vice President and Chief None
Financial Officer
Christopher J. Kelley Senior Vice President and Deputy Vice President
General Counsel
John Lehning Senior Vice President None
John Prosperi Senior Vice President None
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
(c) Not applicable.
II. (a) American Century Investment Services, Inc. (ACIS) acts as
principal underwriter for the following investment companies:
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly-owned subsidiary of American Century Companies, Inc.
(b) The following is a list of the executive officers and partners of
ACIS:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
-----------------------------------------------------------------------------------------------------------
James E. Stowers, Jr. Chairman and Director Chairman
and Director
W. Gordon Snyder President none
James E. Stowers III Chief Executive Officer Director
and Director
William M. Lyons Chief Operating Officer, Executive none
Vice President, Secretary
and Director
Robert T. Jackson Executive Vice President none
and Chief Financial Officer
Kevin Cuccias Senior Vice President none
Brian Jeter Senior Vice President none
Mark Killen Senior Vice President none
Tom Kmak Senior Vice President none
David C. Tucker Senior Vice President Vice President
and General Counsel
* All addresses are 4500 Main Street, Kansas City, Missouri 64111
(c) Not applicable.
ITEM 28. 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 29. Management Services - Not applicable.
ITEM 30. Undertakings - Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 17 to its
Registration Statement pursuant to Rule 485(b) promulgated under the Securities
Act of 1933, as amended, and has duly caused this Post-Effective Amendment No.
17 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
28th day of July, 2000.
American Century Capital Portfolios, Inc.
(Registrant)
By: /*/George A. Rio
George A. Rio, President,
Principal Executive and
Principal Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 17 has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
*George A. Rio President, Principal Executive July 28, 2000
------------------------- and Principal Financial Officer
George A. Rio
*Maryanne Roepke Vice President and Treasurer July 28, 2000
-------------------------
Maryanne Roepke
*James E. Stowers, Jr. Director July 28, 2000
-------------------------
James E. Stowers, Jr.
*James E. Stowers III Director July 28, 2000
-------------------------
James E. Stowers, III
*Thomas A. Brown Director July 28, 2000
-------------------------
Thomas A. Brown
*Robert W. Doering, M.D. Director July 28, 2000
-------------------------
Robert W. Doering, M.D.
*Andrea C. Hall, Ph.D. Director July 28, 2000
-------------------------
Andrea C. Hall, Ph.D.
*D. D. (Del) Hock Director July 28, 2000
-------------------------
D. D. (Del) Hock
*Donald H. Pratt Director July 28, 2000
-------------------------
Donald H. Pratt
*Lloyd T. Silver, Jr. Director July 28, 2000
-------------------------
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director July 28, 2000
-------------------------
M. Jeannine Strandjord
*By /s/Janet A. Nash
Janet A. Nash
Attorney-in-Fact
