As filed with the Securities and Exchange Commission on February 5, 1996
1933 Act File No. 33-79482; 1940 Act File No. 811-8532
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 ____
Pre-Effective Amendment No._4__ _X__
Post-Effective Amendment No.___ ____
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X__
Amendment No._4_
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
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(Exact Name of Registrant as Specified in Charter)
Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 816-531-5575
James E. Stowers III
Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Name and address of Agent for service)
Approximate Date of Proposed Public Offering: 2/15/96
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number or amount of securities is being registered under the
Securities Act of 1933 by this registration statement.
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Cross Reference Sheet Rule 481(a)
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Item No. Page No.
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<S> <C> <C> <C>
Retail Institutional
Part A. Prospectus Prospectus
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1. Cover Page Cover Page Cover Page
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2. Synopsis N/A N/A
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3. Condensed Financial Information N/A N/A
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4. General Description of Registrant Cover Page, 4-14, Cover Page, 4-13
25-31 17-23
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5. Management of the Fund 28-30 20-22
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6. Capital Stock and Other Securities 26-28, 30-31 18-20, 22-23
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7. Purchase of Securities Being Offered Cover Page, 15-24 Cover Page,
15-16
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8. Redemption or Repurchase 18-22 15-16
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9. Pending Legal Proceedings N/A N/A
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Part B. - Statement of Additional Information
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10. Cover Page Cover Page
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11. Table of Contents Cover Page
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12. General Information and History N/A
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13. Investment Objectives and Policies 2-8
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14. Management of the Fund 8-11
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15. Control Persons and Principal Holders of Securities
N/A
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16. Investment Advisory and Other Services 10-11
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17. Brokerage Allocation 12-13
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18. Capital Stock and Other Securities 11-12
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19. Purchase, Redemption and Pricing of Securities Being
Offered 14
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20. Tax Status 12
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21. Underwriters N/A
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22. Calculation of Performance Data N/A
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23. Financial Statements 14-16
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<PAGE>
TWENTIETH CENTURY
Strategic Asset
Allocations, Inc.
Prospectus
February 15,
1996
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TWENTIETH CENTURY
Twentieth Century Strategic Asset Allocations, Inc., a member of the
Twentieth Century family of funds, is an open-end diversified management
investment company. Three series of shares, or "funds," are described in this
prospectus, Strategic Allocation: Conservative, Strategic Allocation: Moderate
and Strategic Allocation: Aggressive.
The investment objective of each fund is to provide as high a level of
total return (capital appreciation plus dividend and interest income) as is
consistent with its risk profile. Each fund seeks to achieve its investment
objective by diversifying investments among three asset classes -- equity
securities, bonds and cash equivalent instruments, the mix of which will depend
on the risk profile of the particular fund. The funds are designed for investors
with investment time horizons of at least five years who want to diversify their
investments among these various asset classes through a single investment
vehicle. There is no assurance that the funds will achieve their investment
objectives. See "Investment Policies of the Funds," page 4.
NO-LOAD MUTUAL FUNDS
Twentieth Century's funds are "no-load" investments, which means there is
no sales charge or commission. There are no minimum initial investment
requirements. However, if the value of the shares held in any one fund account
is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish a $50 or
greater automatic monthly investment to purchase additional shares in each such
account. See "Automatic Monthly Investments," page 16, and "Automatic Redemption
of Shares," page 22.
This prospectus gives you information about Twentieth Century that you
should know before investing. You should read this prospectus carefully and
retain it for future reference. Additional information is included in the
statement of additional information dated February 15, 1996, and filed with the
Securities and Exchange Commission. It is incorporated in this prospectus by
reference. To obtain a copy without charge, call or write:
Twentieth Century Strategic Asset Allocations, Inc.
4500 Main Street o P.O. Box 419200
Kansas City, MO 64141-6200 o 1-800-345-2021
Local and international calls: 816-531-5575
Telecommunications device for the hearing impaired:
1-800-634-4113 o In Missouri: 816-753-1865
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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TRANSACTION AND
OPERATING EXPENSE TABLE ........................ 3
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS ............... 4
OTHER INVESTMENT PRACTICES, THEIR
CHARACTERISTICS AND RISKS ................. 7
Equity Securities ......................... 7
Foreign Securities ........................ 8
Mortgage-Related and Other
Asset-Backed Securities ............... 9
Forward Currency Exchange Contracts
and Options Thereon ................... 9
Portfolio Turnover ........................ 10
Repurchase Agreements ..................... 11
Futures Contracts ......................... 11
Derivative Securities ..................... 12
When-Issued Securities .................... 12
Short Sales ............................... 13
Rule 144A Securities ...................... 13
PERFORMANCE ADVERTISING ........................ 13
HOW TO INVEST WITH TWENTIETH CENTURY
TWENTIETH CENTURY FAMILY OF FUNDS .............. 15
INVESTING IN TWENTIETH CENTURY ................. 15
By Mail ................................... 15
By Telephone .............................. 15
By Wire ................................... 15
Automatic Monthly Investments ............. 16
Additional Information About Investments .. 16
Tax Identification Number ................. 16
Certificates .............................. 17
SPECIAL SHAREHOLDER SERVICES ................... 17
HOW TO EXCHANGE YOUR INVESTMENT FROM ONE
TWENTIETH CENTURY FUND TO ANOTHER ......... 17
By Telephone .............................. 17
By Mail ................................... 18
Additional Information About Exchanges .... 18
HOW TO REDEEM SHARES ........................... 18
By Telephone .............................. 19
By Mail ................................... 19
By Check-A-Month .......................... 19
Signature Guarantee ....................... 20
REDEMPTION PROCEEDS ............................ 20
By Mail ................................... 20
By Wire and Electronic Funds Transfer ..... 21
Special Requirements for Large Redemptions 21
Automatic Redemption of Shares ............ 22
Additional Information About Redemptions .. 22
TELEPHONE SERVICES ............................. 22
Investors Line ............................ 22
Automated Information Line ................ 23
HOW TO CHANGE YOUR ADDRESS OF RECORD ........... 23
TAX-QUALIFIED RETIREMENT PLANS ................. 23
HOW TO TRANSFER AN INVESTMENT TO A
TWENTIETH CENTURY RETIREMENT PLAN .............. 23
HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON .. 23
REPORTS TO SHAREHOLDERS ........................ 23
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE .................................... 25
When Share Price Is Determined ............ 25
How Share Price Is Determined ............. 25
Where to Find Information About Share Price 26
DISTRIBUTIONS .................................. 26
General Information About Distributions ... 26
TAXES .......................................... 27
MANAGEMENT ..................................... 28
Investment Management ..................... 28
Code of Ethics ............................ 30
Transfer and Administrative Services ...... 30
FURTHER INFORMATION ABOUT TWENTIETH CENTURY .... 30
2
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TRANSACTION AND OPERATING EXPENSE TABLE
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Strategic Strategic Strategic
Allocation: Allocation: Allocation:
Conservative Moderate Aggressive
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed
on Purchases none none none
Maximum Sales Load Imposed on
Reinvested Dividends none none none
Deferred Sales Load none none none
Redemption Fee(1) none none none
Exchange Fee none none none
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS):
Management Fees 1.00%(2) 1.10%(3) 1.20%(4)
12b-1 Fees none none none
Other Expenses(5) 0.00% 0.00% 0.00%
Total Fund Operating Expenses 1.00% 1.10% 1.20%
Example
You would pay the following expenses
on a $1,000 investment, 1 year $10 $11 $12
assuming (1) a 5% annual 3 years 32 35 38
return and (2) redemption at
the end of each time period:(6)
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Twentieth Century funds offered
by this prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(1) Redemption proceeds sent by wire transfer are subject to a $10 processing
fee.
(2) The fund pays an annual management fee equal to 1.00% of its first $1
billion of average net assets and .90% of average net assets over $1
billion.
(3) The fund pays an annual management fee equal to 1.10% of its first $1
billion of average net assets and 1.00% of average net assets over $1
billion.
(4) The fund pays an annual management fee equal to 1.20% of its first $1
billion of average net assets and 1.10% of average net assets over $1
billion.
(5) Other expenses, the fees and expenses of those directors who are not
"interested persons" as defined in the Investment Company Act, are expected
to be approximately .00035 of 1% of average net assets for the fund's first
fiscal year.
(6) Assumes that the average net assets of the funds remain constant at less
than $1 billion.
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NO PERSON IS AUTHORIZED BY TWENTIETH CENTURY TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN
OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY TWENTIETH CENTURY, AND YOU SHOULD
NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION.
3
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INFORMATION REGARDING THE FUNDS
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INVESTMENT POLICIES OF THE FUNDS
INVESTMENT OBJECTIVES
Twentieth Century offers three asset allocation funds: Strategic
Allocation: Conservative, Strategic Allocation: Moderate and Strategic
Allocation: Aggressive.
Each fund's investment objective is to obtain as high a level of total
return (capital appreciation plus dividend and interest income) as is consistent
with such fund's risk profile. As with all mutual funds, there can be no
assurance that the funds will achieve their investment objectives.
You should be aware that the names of the funds are intended to reflect the
relative short-term price volatility risk among the three asset allocation funds
offered in this prospectus and not as an indication of the manager's assessment
of the riskiness of the funds as compared to other mutual funds, including other
mutual funds within the Twentieth Century family of funds.
The Funds
The funds pursue a flexible approach that diversifies the funds' assets
among various classes and categories of assets. Each fund has its own mix, which
gives it a distinct risk profile and return potential. The three funds enable
investors to select the level of risk that is appropriate for their particular
situations and investment goals. See "Investment Strategy and Asset
Diversification" on this page.
STRATEGIC ALLOCATION: CONSERVATIVE. The asset mix of Strategic Allocation:
Conservative seeks to provide shareholders with regular income through its
emphasis on bonds and money market securities, combined with the potential for
moderate long-term total return as a result of its stake in equity securities.
The fund's emphasis on bonds and money market securities should help to provide
a measure of principal protection while the stock market is in a decline.
STRATEGIC ALLOCATION: MODERATE. The asset mix of Strategic Allocation:
Moderate emphasizes investments in equity securities, but maintains a sizable
stake in bonds and money market securities. This asset mix seeks to provide
long-term growth and some regular income, while helping to moderate losses
when the stock market declines.
STRATEGIC ALLOCATION: AGGRESSIVE. The asset mix of Strategic Allocation:
Aggressive emphasizes investments in equity securities, but maintains a
portion of its assets in bonds and money market securities. This asset mix
seeks to provide long-term growth, together with a small amount of income to
help cushion the volatility of the equity portfolio.
INVESTMENT STRATEGY AND ASSET DIVERSIFICATION
The funds seek to achieve their investment objectives by pursuing a
strategic asset allocation strategy. Each fund will diversify its investments
among three major asset classes -- equity securities, bonds and cash equivalent
instruments.
Each fund has its own neutral mix that represents a benchmark as to how
that fund's investments will be generally allocated among the major asset
classes over the long term. Each fund's neutral mix is set forth below:
NEUTRAL MIXES
Equity Cash
Fund Securities Bonds Equivalents
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Strategic Allocation:
Conservative 40% 45% 15%
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Strategic Allocation:
Moderate 60% 30% 10%
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Strategic Allocation:
Aggressive 75% 20% 5%
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<PAGE>
The mix of a fund will vary over short-term periods depending on the
relative performance of the various asset classes (for example, when one class
of assets increases or decreases in value at a different rate than the other
classes). In addition, the manager may temporarily emphasize or de-emphasize a
class of assets based on market conditions regarding the relative value of the
asset class in the near term. However, each fund has operating ranges that
restrict the amount by which the assets of each class may fluctuate. Those
operating ranges are set forth below:
OPERATING RANGES
Equity Cash
Fund Securities Bonds Equivalents
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Strategic Allocation:
Conservative 34-46% 38-52% 10-25%
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Strategic Allocation:
Moderate 50-70% 20-40% 5-20%
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Strategic Allocation:
Aggressive 60-90% 5-20% 0-15%
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In addition to diversifying among asset classes, the assets in the equity
and bond classes are further diversified among investment categories (or
sectors) and styles within those classes. See "Investment Approach and
Practices," below. The allocation of assets within a fund's operating range and
among the different investment categories within each class is designed to
provide a diversified portfolio emphasizing total return.
INVESTMENT APPROACH AND PRACTICES
As described above, each fund's assets are allocated among major asset
classes according to their respective asset mix and subject to the applicable
operating ranges. Each fund's assets are further diversified among various
investment categories and disciplines within the major asset classes, as
described below.
EQUITY SECURITIES. The equity portion of a fund's portfolio may be invested
in any type of domestic or foreign equity security, primarily common stocks,
that meets certain fundamental and technical standards of selection. The manager
will utilize two distinct investment disciplines in managing the equity portion
of each fund's portfolio: (1) growth; and (2) value.
The growth discipline seeks long-term capital appreciation by investing in
companies whose earnings and revenue trends meet the manager's standards of
selection, which generally means that the companies have demonstrated, or, in
the manager's opinion, have the prospects for demonstrating, accelerating
earnings and revenues as compared to prior periods and/or industry competitors.
The value investment discipline seeks capital growth by investing in equity
securities of well-established companies that are believed by the manager to be
temporarily undervalued.
Management believes that both value investing and growth investing provide
the potential for appreciation over time. Value investing tends to provide less
volatile results. This lower volatility means that the price of value stocks
tends not to fall as significantly as growth stocks do in down markets. However,
value stocks do not usually appreciate as significantly as growth stocks do in
up markets. In keeping with the diversification theme of these funds, and as a
result of management's belief that these styles are complementary, both
disciplines will be represented to some degree in each portfolio at all times.
As noted, the value investment discipline tends to be less volatile than
the growth style. As a result, Strategic Allocation: Conservative, will
generally have a higher proportion of its equity investments in value stocks
than the other two funds. Likewise, Strategic Allocation: Aggressive, will
generally have a greater proportion of growth stocks than either Strategic
Allocation: Moderate or Strategic Allocation: Conservative.
In addition, the equity portion of each fund's portfolio will be further
diversified among small, medium and large companies. This approach provides
investors with an additional level of
5
<PAGE>
diversification and enables investors to achieve a broader exposure to the
various capitalization ranges without having to invest in multiple funds.
Although the funds will remain exposed to each of the investment
disciplines and categories described above, a particular discipline or
investment category may be emphasized when, in the manager's opinion, such
discipline or investment category is undervalued relative to the other
disciplines or categories. See "Other Investment Practices, Their
Characteristics and Risks," page 8.
BONDS. The fixed income portion of a fund's portfolio will include U.S.
Treasury securities, securities issued or guaranteed by the U.S. government or a
foreign government, or an agency or instrumentality of the U.S. or a foreign
government, and non-convertible debt obligations issued by U.S. or foreign
corporations. The funds may also invest in mortgage-related and other
asset-backed securities as described under "Mortgage-Related and Other Asset
Backed Securities," page 7. As with the equity portion of a fund's portfolio,
the bond portion of a fund's portfolio will be diversified among the various
types of fixed income investment categories described above. The manager's
strategy is to actively manage the portfolio by investing the fund's assets in
sectors it believes are undervalued (relative to the other sectors) and which
represent better relative long-term investment opportunities.
The value of fixed income securities fluctuates based on changes in
interest rates and in the credit quality of the issuer. Debt securities that
comprise part of a fund's fixed income portfolio will primarily be limited to
"investment grade" obligations. However, Strategic Allocation: Moderate may
invest up to 5% of its assets, and Strategic Allocation: Aggressive may invest
up to 10% 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. ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P")], or, if not rated, are of equivalent
investment quality as determined by the investment manager. According to
Moody's, bonds rated Baa are medium-grade and possess some speculative
characteristics. A BBB rating by S&P indicates S&P's belief that a security
exhibits a satisfactory degree of safety and capacity for repayment, but is more
vulnerable to adverse economic conditions and changing circumstances.
"High yield" securities, sometimes referred to as "junk bonds," are
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 investment objective of the fund. (See "An Explanation of Fixed
Income Securities Ratings" in the Statement of Additional Information.)
Under normal market conditions, the maturities of fixed-income securities
in which the funds invest will range from 2 to 30 years.
CASH EQUIVALENTS. The cash equivalent portion of a fund's portfolio may
be invested in high-quality money market instruments (denominated in U.S.
dollars or foreign currencies),
6
<PAGE>
including U.S. government obligations, obligations of domestic and foreign
banks, short-term corporate debt instruments and repurchase agreements.
GENERAL PORTFOLIO MANAGEMENT
Within each asset class, each fund's holdings will be invested across
industry groups and issuers that meet its investment criteria. This diversity of
investment is intended to help reduce the risk created by over-concentration in
a particular industry or issuer.
The funds are "strategic" rather than "tactical" allocation funds, which
means that the manager does not try to time the market to identify the exact
time when a major reallocation should be made. Instead, the manager utilizes a
longer-term approach in pursuing the funds' investment objectives, and thus
selects a blend of investments in the various asset classes.
The manager regularly reviews each fund's investments and allocations and
may make changes in the particular securities within each asset class or to a
fund's asset mix (within the defined operating ranges) to favor investments that
it believes will provide the most favorable outlook for achieving a fund's
objective. Recommended reallocations may be implemented promptly or may be
implemented gradually. In order to minimize the impact of reallocations on a
fund's performance, the manager will generally attempt to reallocate assets
gradually.
In determining the allocation of assets among U.S. and foreign capital
markets, the manager considers the condition and growth potential of the various
economies; the relative valuations of the markets; and social, political, and
economic factors that may affect the markets.
In selecting securities in foreign currencies, the manager considers, among
other factors, the impact of foreign exchange rates relative to the U.S. dollar
value of such securities. The manager may seek to hedge all or a part of a
fund's foreign currency exposure through the use of forward foreign currency
contracts or options thereon. See "Forward Currency Exchange Contracts," page 9.
The funds attempt to diversify across asset classes and investment
categories to a greater extent than mutual funds that invest primarily in equity
securities or primarily in fixed income securities. However, the funds are
designed to fit three general risk profiles and may not provide an appropriately
balanced investment plan for all investors.
The funds' investment objectives, as identified on the front cover of this
prospectus, and any other investment policies designated as "fundamental" in
this prospectus or in the statement of additional information, cannot be changed
without the approval of the shareholders entitled to cast a majority of the
outstanding votes of the corporation, as defined by the Investment Company Act.
Unless otherwise noted, all other investment policies and practices are
nonfundamental and may be changed without shareholder approval.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
EQUITY SECURITIES
In addition to investing in common stocks, the funds may invest in other
equity securities and equity equivalents. Other equity securities and equity
equivalents include securities that permit the fund to receive an equity
interest in an issuer, the opportunity to acquire an equity interest in an
issuer, or the opportunity to receive a return on its investment that permits
the fund to benefit from the growth over time in the equity of an issuer.
Examples of equity securities and equity equivalents include preferred stock,
convertible preferred stock and convertible debt securities.
Each fund will limit its purchase of convertible debt securities to those
that, at the time of purchase, are rated at least B- by S&P or B3 by
7
<PAGE>
Moody's, or if not rated by S&P or Moody's are of equivalent investment quality
as determined by the manager. No more than 35% of a fund's assets may be
invested in convertible debt securities and other high yield, non-convertible
debt securities rated below investment grade. Debt securities rated below the
four highest categories are not considered "investment grade" obligations. These
securities have speculative characteristics and present more credit risk than
investment grade obligations. For a description of the S&P and Moody's ratings
categories, see "An Explanation of Fixed Income Securities Ratings," page 5 of
the Statement of Additional Information. Equity equivalents may also include
securities whose value or return is derived from the value or return of a
different security. Depositary receipts are an example of the type of equity
equivalent security in which the funds might invest.
FOREIGN SECURITIES
Each fund may invest in the securities of foreign issuers, including debt
securities of foreign governments and their agencies, when these securities meet
its standards of selection. Strategic Allocation: Conservative will generally
invest between 7 and 17% of its assets in foreign securities; Strategic
Allocation: Moderate will generally invest between 10 and 30% of its assets in
foreign securities; and Strategic Allocation: Aggressive will generally invest
between 15 and 35% of its assets in foreign securities. With regard to foreign
investments by Strategic Allocation: Conservative, the principal activities of
such issuers will be located in developed countries. With regard to Strategic
Allocation: Aggressive and Strategic Allocation: Moderate, the principal
activities of such issuers may be located in either developed or developing
countries, but the majority of the activities will be in developed countries.
The funds may make such investments either directly in foreign securities
or indirectly by purchasing depositary receipts or depositary shares of similar
instruments ("depositary receipts") for foreign securities. Depositary receipts
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.
Subject to its investment objective and policies, each fund may invest in
common stocks, convertible securities, preferred stocks, bonds, notes and other
debt securities of foreign issuers and debt securities of foreign governments
and their agencies. The credit quality standards applicable to domestic
securities purchased by each fund are also applicable to its foreign securities
investments.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Strategic Allocation: Moderate and Strategic Allocation: Aggressive may
invest a portion of their international holdings in securities of issuers in
emerging market (developing) countries. Investing in emerging market countries
involves significantly higher risk than investing in countries with developed
markets as a result of uncertainty regarding the companies and the markets in
which they operate. Securities prices can be more volatile than in developed
countries as a result of investor concerns regarding the stability of the
government, internal economic pressures, and the impact of external economic
factors. In addition, securities markets in emerging market countries may trade
a small number of securities and may be unable to respond effectively to
increases in trading volume, potentially resulting in a lack of liquidity and in
volatility in the price of securities traded on those markets.
8
<PAGE>
Also, securities markets in emerging market countries typically offer less
regulatory protection for investors. See "Investing in Emerging Market
Countries" on page 7 of the Statement of Additional Information.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES
The funds may purchase mortgage-related and other asset-backed securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are generally made monthly, in effect "passing through" monthly
payments made by the individual borrowers on the residential mortgage loans that
underlie the securities (net of fees paid to the issuer or guarantor of the
securities).
Early repayment of principal on mortgage pass-through securities (arising
from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose the funds to a lower rate of return upon reinvestment of principal. Also,
if a security subject to prepayment were purchased at a premium, in the event of
prepayment, the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. government in the case of securities
guaranteed by the Government National Mortgage Association (GNMA), or guaranteed
by agencies or instrumentalities of the U.S. government in the case of
securities guaranteed by the Federal National Mortgage Association (FNMA) or the
Federal Home Loan Mortgage Corporation (FHLMC), which are supported only by the
discretionary authority of the U.S. government to purchase the agency's
obligations.
Mortgage pass-through securities created by nongovernmental issuers (such
as commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be supported
by various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance and letters of credit, which may be issued by
governmental entities, private insurers, or the mortgage poolers.
The funds may also invest in collateralized mortgage obligations (CMOs).
CMOs are mortgage-backed securities issued by government agencies;
single-purpose, stand-alone financial subsidiaries; trusts established by
financial institutions; or similar institutions. The funds may buy CMOs that
meet the following criteria:
o Are collateralized by pools of mortgages in which payment of principal
and interest of each mortgage is guaranteed by an agency or
instrumentality of the U.S. government;
o Are collateralized by pools of mortgages in which payment of principal
and interest are guaranteed by the issuer, and the guarantee is
collateralized by U.S. government securities;
o Are securities in which the proceeds of the issue are invested in
mortgage securities and payments of principal and interest are supported
by the credit of an agency or instrumentality of the U.S. government.
FORWARD CURRENCY EXCHANGE CONTRACTS AND OPTIONS THEREON
Some of the securities held by the funds may be denominated in foreign
currencies. Other securities, such as depositary receipts, may be denominated in
U.S. dollars but have a value that is dependent on the performance of a foreign
security, as valued in the currency of its home country. As a result, the value
of a fund's portfolio may be affected by changes in the
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exchange rate between foreign currencies and the U.S. dollar, as well as by
changes in the market value of the securities themselves. The performance of
foreign currencies relative to the dollar may be a factor in a fund's overall
performance.
To protect against adverse movements in exchange rates between currencies,
the funds may, for hedging purposes only, enter into forward currency exchange
contracts and buy put and call options relating to interest rate futures
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price. An option is a
contractual right to acquire a financial asset, such as a security, the
securities of a market index, a foreign currency or a foreign currency exchange
contract, at a specific price at the end of a specified term.
Each fund may elect to enter into a forward currency exchange contract or
an option thereon with respect to a specific purchase or sale of a security, or
with respect to the fund's portfolio positions generally.
By entering into a forward currency exchange contract or an option thereon
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the funds can "lock in" an exchange rate between the trade and
settlement dates for that purchase or sale. This practice is sometimes referred
to as "transaction hedging." Each fund may enter into transaction hedging
contracts with respect to all or a substantial portion of its foreign securities
trades.
When the manager believes that a particular currency may decline in value
compared to the dollar, the funds may enter into forward currency exchange
contracts or options thereon to sell an amount of foreign currency equal to the
value of some or all of a fund's portfolio securities either denominated in, or
whose value is tied to, that currency. This practice is sometimes referred to as
"portfolio hedging." A fund may not enter into a portfolio hedging transaction
where the fund would be obligated to deliver an amount of foreign currency in
excess of the aggregate value of the fund's portfolio securities or other assets
denominated in, or whose value is tied to, that currency.
The funds will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the funds will enter
into portfolio hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract or an option
thereon, the fund, when required, will instruct its custodian bank to segregate
cash or liquid high-grade securities in a separate account in an amount
sufficient to cover its obligation under the contract. For options sold, a fund
will segregate cash or liquid high-grade securities equal to the value of the
securities underlying the options unless the options are otherwise secured.
Those assets will be valued at market daily, and if the value of the segregated
securities declines, additional cash or securities will be added so that the
value of the account is not less than the amount of the fund's commitment. At
any given time, no more than 10% of a fund's assets will be committed to a
segregated account in connection with portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the funds against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S.
dollar.
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives.
Management believes that the rate of portfolio turnover is irrelevant when it
believes a
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change is in order to achieve those objectives and, accordingly, the annual
portfolio turnover rate cannot be accurately predicted.
The portfolio turnover of the funds may be higher than other investment
companies with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
The manager estimates, pursuant to SEC requirements, that the rate of
portfolio turnover will, generally, not exceed 150% per year.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the fund's investment policies.
A repurchase agreement occurs when a fund purchases an interest-bearing
obligation from a bank or broker-dealer registered under the Securities Exchange
Act of 1934 and simultaneously agrees to sell it back on a specified date in the
future (usually less than one week later) at a higher price. The repurchase
price reflects an agreed-upon interest rate during the time the fund's money is
invested in the security and is considered by the staff of the Securities and
Exchange Commission to be a loan by the fund.
A fund's risk in connection with repurchase agreements is the ability of
the seller to pay the repurchase price on the repurchase date. If the seller
defaults, the fund may incur costs, delays or losses. Management monitors the
creditworthiness of sellers.
The funds will enter into repurchase agreements only with those commercial
banks and broker-dealers whose creditworthiness has been reviewed and found
satisfactory by the funds' management pursuant to criteria adopted by the funds'
board of directors.
FUTURES CONTRACTS
Each fund may enter into domestic and foreign futures contracts. A futures
contract is an agreement to take or make delivery of a financial asset at a
specific price at the end of the contract period. Some futures contracts, such
as market index futures, require settlement in cash based on the difference
between the value of the underlying financial assets at the beginning and at the
end of the contract period. Rather than actually purchasing the specific
financial assets, or the securities of a market index, the manager may purchase
a futures contract, which reflects the value of such underlying securities. For
example, S&P 500 futures reflect the value of the underlying companies that
comprise the S&P 500 Composite Stock Price Index. If the aggregate market value
of the underlying index securities increases or decreases during the contract
period, the value of the S&P 500 futures can be expected to reflect such
increase or decrease. The manager may use index futures to efficiently expose to
the equity markets a portion of a fund's assets that is being held for future
investment opportunities.
When a fund enters into a futures contract, it must make a deposit of cash
or high-quality debt securities, known as "initial margin," as partial security
for its performance under the contract. As the value of the underlying financial
assets fluctuates, either party to the contract is required to make additional
margin payments, known as "variation margin," to cover any additional obligation
it may have under the contract. Assets set aside by a fund as initial or
variable margin may not be disposed of so long as the fund maintains the
contract.
The funds may not purchase leveraged futures. A fund will deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fluctuating market value of the index contracts it has
purchased, less any margin deposited on its position. The funds will only invest
in exchange-traded futures.
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DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts or S&P 500 futures), currencies, interest rates, indices
or other financial indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the S&P 500 Index would
be a permissible investment since each of the funds may invest in the securities
of companies comprising the S&P 500 Index (assuming they otherwise meet the
other requirements for the fund), while a security whose underlying value is
linked to the price of oil would not be a permissible investment since the funds
may not invest in oil and gas leases or futures.
The return of a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or
other financial asset will not move in the direction the portfolio
manager anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a
position when desired;
o the risk that adverse price movements in an instrument can result in a
loss substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The board of directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the board of directors as necessary. In addition, the
board will review the manager's policy for investments in derivative securities
annually.
WHEN-ISSUED SECURITIES
Each fund may purchase new issues of securities on a when-issued basis
without limit when, in the opinion of the manager, such purchases will further
the investment objectives of such fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur 15 to 45 days after the commitment
to purchase. Market rates of interest on debt securities at the time of delivery
may be higher or lower than those contracted for on the when-issued security.
Accordingly, the value of such security may decline prior to delivery, which
could result in
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a loss to the fund. A separate account consisting of cash or high-quality liquid
debt securities in an amount at least equal to the when-issued commitments will
be established and maintained with the custodian. No income will accrue to the
fund prior to delivery.
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at
a current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet Twentieth
Century's criteria for selection. Rule 144A securities are securities that are
privately placed with and traded among qualified institutional buyers rather
than the general public. Although Rule 144A securities are considered
"restricted securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the board of directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. Accordingly, the board
of directors is responsible for developing and establishing the guidelines and
procedures for determining the liquidity of Rule 144A securities. As allowed by
Rule 144A, the board of directors of Twentieth Century has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A security
that is illiquid. In such an event, Twentieth Century will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
PERFORMANCE ADVERTISING
From time to time, Twentieth Century may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time,
expressed as a percentage of the fund's share price.
Yield is calculated by adding over a 30-day (or one month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding
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during the period, and expressing the result as a percentage of the fund's share
price on the last day of the 30-day (or one month) period. The percentage is
then annualized. Capital gains and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in the fund's financial statements.
Each fund also may include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services) and publications that monitor the performance of
mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to the performance of other mutual funds or mutual fund
portfolios with comparable investment objectives and policies through various
mutual fund or market indices (such as those prepared by Dow Jones & Co., Inc.
Standard & Poor's Corporation, Shearson Lehman Brothers, Inc., J. P. Morgan &
Company, Inc., Salomon Brothers, Inc., Morgan Stanley Capital International,
Donoghue's Money Fund Average, the Bank Rate Monitor National Index of 2
1/2-year CD rates, IFC Global Composite Index), and to composite indices
consisting of two or more of the above to more accurately reflect fund holdings,
and to data prepared by Lipper Analytical Services, Inc. or Morningstar, Inc.,
and to the Consumer Price Index. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, Pensions and Investments, U.S.A. Today, and other
similar publications or services. In addition to performance information,
general information about the funds that appears in a publication such as those
mentioned above may be included in advertisements and in reports to
shareholders. It may also be combined or blended with other funds in the
Twentieth Century family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
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HOW TO INVEST WITH TWENTIETH CENTURY
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TWENTIETH CENTURY FAMILY OF FUNDS
In addition to the funds offered by this prospectus, the Twentieth Century
family of funds also includes funds offered by Twentieth Century Investors,
Inc., Twentieth Century World Investors, Inc., Twentieth Century Capital
Portfolios, Inc. and Twentieth Century Premium Reserves, Inc. Please call the
Investors Line for a prospectus and additional information about the
other funds in the Twentieth Century family of funds.
The Twentieth Century family of mutual funds also now includes the funds
offered by The Benham Group as a result of the acquisition of Benham Management
Corporation, the investment manager of The Benham Group, by Twentieth Century
Companies, Inc. The Benham Group offers several funds with investment objectives
similar to funds within the Twentieth Century family, but with different fee
structures. You also may wish to consider the funds of The Benham Group for your
investment needs. For a prospectus and more information about those funds,
please call 1-800-331-8331.
INVESTING IN TWENTIETH CENTURY
You may make an initial investment in a fund in any amount you choose.
SUBSEQUENT INVESTMENTS TO PURCHASE ADDITIONAL SHARES IN ANY ONE FUND ACCOUNT
MUST BE IN AN AMOUNT OF NOT LESS THAN $50.*
While there is no minimum investment requirement, if you have one or more
accounts with a share value of less than $2,500 ($1,000 for Uniform
Gifts/Transfers to Minors Acts ["UGMA/UTMA"] accounts), you must establish an
automatic monthly investment to purchase additional shares in each such fund
account in an amount of $50 or more.** See "Automatic Monthly Investments," page
16, and "Automatic Redemption of Shares," page 22.
*THIS REQUIREMENT DOES NOT APPLY TO 403(B) ACCOUNTS AND OTHER TYPES OF
TAX-DEFERRED RETIREMENT PLAN ACCOUNTS.
**THIS REQUIREMENT DOES NOT APPLY TO INDIVIDUAL RETIREMENT ACCOUNTS, 403(B)
ACCOUNTS AND OTHER TYPES OF TAX-DEFERRED RETIREMENT PLAN ACCOUNTS.
You may invest in the following ways:
BY MAIL
Send your application and check or money order to Twentieth Century.
Checks must be payable in U.S. dollars.
WHEN MAKING SUBSEQUENT INVESTMENTS, ENCLOSE YOUR CHECK WITH THE RETURN
REMITTANCE PORTION OF THE CONFIRMATION OF YOUR PREVIOUS INVESTMENT. If the
remittance slip is not available, indicate your name, address and account number
on your check or a separate piece of paper.
Orders to purchase shares are effective on the day Twentieth Century
receives your check or money order. See "When Share Price is Determined," page
25.
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have elected the service authorizing Twentieth Century to draw on your bank
account by electronic draft when you call with instructions. Investments made by
phone are effective at the time of your call. See "When Share Price Is
Determined," page 25.
BY WIRE
You may make your initial or subsequent investments in Twentieth Century by
wiring funds. To do so:
(1) Instruct your bank to wire funds to the Boatmen's First National Bank
of Kansas City, Missouri (ABA routing number 101000035).
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(2) BE SURE TO SPECIFY ON THE WIRE:
(A) TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC.
(B) THE FUND YOU ARE BUYING AND ACCOUNT NUMBER.
(C) YOUR NAME.
(D) YOUR CITY AND STATE.
(E) YOUR TAXPAYER IDENTIFICATION NUMBER.
Wired funds are considered received on the day they are deposited in
Twentieth Century's account if they are deposited before the close of business
on the New York Stock Exchange, usually 3 p.m. Central time. See "When Share
Price Is Determined," page 25.
AUTOMATIC MONTHLY INVESTMENTS
Once your account is open, you may make investments automatically by
electing the service authorizing Twentieth Century to draw on your bank account
regularly by a preauthorized electronic draft. SUCH INVESTMENTS MUST BE IN
AMOUNTS OF NOT LESS THAN $50. You should inquire at your bank whether it will
honor a pre-authorized check or electronic debit. Contact Twentieth Century if
your bank requires additional documentation.
You may change the date or amount of your monthly investment at any time by
calling or writing to Twentieth Century at least five business days before the
change is to become effective.
ADDITIONAL INFORMATION ABOUT INVESTMENTS
TWENTIETH CENTURY CANNOT ACCEPT INVESTMENTS SPECIFYING A CERTAIN PRICE,
DATE OR NUMBER OF SHARES AND WILL RETURN THESE INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to Twentieth Century, it may not be modified or canceled.
The funds reserve the right to suspend the offering of shares for a period
of time, and they reserve the right to reject any specific purchase order,
including purchases by exchange. Additionally, purchases may be refused if, in
the opinion of the manager, they are of a size that would disrupt the management
of the fund.
Twentieth Century intends, upon 60 days' prior notice, to involuntarily
redeem shares in any account that does not meet any required minimum share value
or automatic monthly investment applicable to such account. Twentieth Century
reserves the right to change such requirements from time to time or waive it in
whole or in part for certain classes of investors. See "Automatic Monthly
Investments," on this page, and "Automatic Redemption of Shares," page 22.
Transactions in shares of the fund may be executed by brokers or investment
advisers who charge a fee for their services. You should be aware of the fact
that these transactions may be made directly with Twentieth Century without
incurring such fees.
TAX IDENTIFICATION NUMBER
You must furnish Twentieth Century with your tax identification number and
state whether or not you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Internal Revenue Code
and Regulations. Unless previously furnished, an investment received without
such certification will be returned. Instructions to exchange or transfer shares
held in an established account will be refused unless the certification has been
provided, and redemption of such shares will be subject to federal tax
withholding at the rate of 31%. In addition, redemption proceeds will be reduced
by $50 to reimburse Twentieth Century for the penalty that the IRS will impose
on the company for failure to report your tax identification number on
information reports. Please avoid these penalties by correctly furnishing your
tax identification number.
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CERTIFICATES
At your written request, Twentieth Century will issue negotiable stock
certificates. Unless your shares are purchased with wired funds, a certificate
will not be issued until 15 days have elapsed from the time of purchase, or
Twentieth Century has satisfactory proof of payment, such as a copy of your
canceled check.
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services, which are designed to
provide an easy way to do business with Twentieth Century. By electing these
services on your application or by completing the appropriate forms, you may
authorize:
o Investments by phone.
o Automatic Monthly Investments.
o Exchanges and redemptions by phone.
o Exchanges and redemptions in writing signed by only one registered
owner.
o Redemptions without a signature guarantee.
o Transmission of redemption proceeds by wire or electronic funds
transfer.
An election to establish any of the above services, except Automatic
Monthly Investments, also will apply to all existing or future accounts in the
Twentieth Century family of funds, listed under the same Social Security number
or employer identification number.
With regard to the service that enables you to exchange and redeem by phone
or in writing signed by only one registered owner and with respect to
redemptions without a signature guarantee, Twentieth Century, its transfer agent
and investment adviser will not be responsible for any loss for instructions
that they reasonably believe are genuine. Twentieth Century intends to employ
reasonable procedures to confirm that instructions received by Twentieth Century
for your account in fact are genuine. Such procedures will include requiring
personal information to verify the identity of callers, providing written
confirmations of transactions, and recording telephone calls. If Twentieth
Century does not employ reasonable procedures to confirm the genuineness of
instructions, then Twentieth Century may be liable for losses due to
unauthorized or fraudulent instructions.
HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER
Subject to any applicable minimum initial investment requirements, you may
exchange your fund shares to shares of any of the other funds (except Giftrust
Investors) in the Twentieth Century family of funds. Please call the Investors
Line for a prospectus and additional information about the other funds in the
Twentieth Century family of funds.
Except as noted below, exchanges from any one fund account are limited to
four times in any one calendar year. In addition, the shares being exchanged and
the shares of each fund being acquired must have a current value of at least
$500 and otherwise meet the minimum investment requirement, if any, of the fund
being acquired. If you would like to exchange your shares, please call the
Investors Line for a prospectus and additional information about the other funds
in the Twentieth Century family of funds. See "Additional Information About
Exchanges," page 18.
Shares of the funds may be received in exchange for shares of any series
issued by the other members of the Twentieth Century family of mutual funds.
THE EXCHANGE PRIVILEGE IS NOT DESIGNED TO AFFORD SHAREHOLDERS A WAY TO PLAY
SHORT-TERM SWINGS IN THE MARKET. TWENTIETH CENTURY IS NOT SUITABLE FOR THAT
PURPOSE.
BY TELEPHONE
You may exchange your shares by phone if you have authorized Twentieth
Century to accept telephone instructions. Before calling,
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read "Additional Information About Exchanges," below.
BY MAIL
You may direct Twentieth Century in writing to exchange your shares.
If you have authorized Twentieth Century to accept written instructions
from any one registered owner, and if the shares are owned by two or more
persons, only one signature is required on your written exchange request.
Otherwise, the request should be signed by each person in whose name the shares
are registered. All signatures should be exactly as the name appears in the
registration; for example, if an owner's name is registered as John Robert
Jones, he should sign that way and not as John R. Jones.
Before writing, read "Additional Information About Exchanges," below.
ADDITIONAL INFORMATION ABOUT EXCHANGES
(1) IN AN EXCHANGE OF SHARES FROM ONE FUND ACCOUNT TO SHARES OF ANOTHER
FUND ACCOUNT, THE SHARES BEING SOLD AND THE NEW SHARES BEING PURCHASED
MUST HAVE A CURRENT VALUE OF AT LEAST $500, AND YOU MUST MEET ANY
INVESTMENT MINIMUM IMPOSED BY THE FUND BEING ACQUIRED.
(2) CONVERSIONS FROM ANY ONE FUND ACCOUNT ARE LIMITED TO FOUR TIMES IN ANY
ONE CALENDAR YEAR except for the exchange of shares pursuant to an
automatic monthly exchange. [This limitation does not apply to shares
held in 403(b) accounts, certain pooled accounts owned by institutional
investors, and time-phased redemptions of shares with a value in excess
of $250,000.]
(3) The shares being acquired must be qualified for sale in your state of
residence.
(4) If the shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) ONCE YOU HAVE TELEPHONED OR MAILED YOUR EXCHANGE REQUEST, IT IS
IRREVOCABLE AND MAY NOT BE MODIFIED OR CANCELED.
(6) If, in any 90-day period, the total of your exchanges and your
redemptions from any one account exceeds the lesser of $250,000 or 1%
of the fund's assets, further exchanges will be subject to special
requirements to comply with Twentieth Century's policy on large
redemptions. See "Special Requirements for Large Redemptions," page 21.
(7) For purposes of processing exchanges, the value of the shares
surrendered and the value of the shares acquired are the net asset
values of such shares next computed after receipt of your exchange
order.
(8) Shares MAY NOT be exchanged unless you have furnished Twentieth Century
with your tax identification number, certified as prescribed by the
Internal Revenue Code and Regulations. See "Tax Identification
Number," page 16.
(9) Exchange of shares is, for federal income tax purposes, a sale of the
shares on which you may realize a taxable gain or loss.
(10)If the request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, Twentieth Century will
require evidence satisfactory to it of the authority of the individual
signing the request.
HOW TO REDEEM SHARES
Twentieth Century will redeem or "buy back" your shares at any time at the
net asset value next determined after receipt of a redemption request in good
order. Before redeeming, please read "Special Requirements for Large
Redemptions," page 21, "Additional Information About Redemptions," page 22 and
"When Share Price Is Determined," page 25.
Your redemption proceeds may be delayed if you have owned your shares less
than 15 days. See "Redemption Proceeds," page 20.
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ALL REQUESTS TO REDEEM SHARES MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN
ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE),
WHICH ARE TO BE PAID BY CHECK, MUST BE IN WRITING. ADDITIONALLY, THE REQUEST
MUST BE SIGNED BY EACH PERSON IN WHOSE NAME THE SHARES ARE OWNED, AND ALL
SIGNATURES MUST BE GUARANTEED. See "Signature Guarantee," page 20 and "How to
Change Your Address of Record," page 23.
BY TELEPHONE
If you have authorized Twentieth Century to accept telephone instructions,
you may redeem your shares by telephone. ONCE MADE, YOUR TELEPHONE REQUEST MAY
NOT BE MODIFIED OR CANCELED.
If you call before the close of the New York Stock Exchange ("NYSE" or the
"Exchange"), usually 3 p.m. Central time, you will receive that day's closing
price.
Before calling, read "Additional Information About Redemptions," page 22.
BY MAIL
Your written instructions to redeem shares may be in any one of the
following forms:
o A redemption form, available from Twentieth Century.
o A letter to Twentieth Century.
o An assignment form or stock power.
o An endorsement on the back of your negotiable stock certificate, if you
have one.
ONCE MAILED TO TWENTIETH CENTURY, THE REDEMPTION REQUEST IS IRREVOCABLE AND
MAY NOT BE MODIFIED OR CANCELED.
If you have authorized Twentieth Century to accept written instructions
from any one registered owner without a signature guarantee, only one signature
is required on your written redemption request and it need not be guaranteed.
If you have not elected this special service, all signatures must be
guaranteed. See "Signature Guarantee," page 20. The request must be signed by
each person in whose name the shares are registered; for example, in the case of
joint ownership, each owner must sign.
All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones, she
should sign that way and not as Mary E. Jones.
Before writing, see "Additional Information About Redemptions," page 22.
BY CHECK-A-MONTH
Twentieth Century's Check-A-Month plan automatically redeems enough shares
each month to provide you with a check for a minimum of $25. To set up a
Check-A-Month plan, call Twentieth Century for instructions.
Shares will be redeemed on the 20th day of each month or the next business
day, and your check will be mailed the next day. If your monthly checks exceed
the dividends, interest and capital appreciation on your shares, the payments
will deplete your investment.
Amounts paid to you by Check-A-Month are not a return on your investment.
They are derived from the redemption of shares in your account, and you must
report on your income tax return gains or losses that you realize.
You may specify a Check-A-Month when you make your first investment. If you
order a Check-A-Month thereafter, then, as in any redemption, the request for a
Check-A-Month or any increase in amount must be signed by all owners with their
signatures guaranteed unless Twentieth Century has been authorized to accept
instructions from any one owner, by telephone or in writing, without a signature
guarantee.
You may request that the Check-A-Month be sent to an address other than the
address of record at the time of your first investment. Thereafter, a request to
send a Check-A-Month to an address other than the address of record must be
signed by all owners, with their signatures guaranteed.
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Twentieth Century may terminate the Check-A-Month at any time, upon notice
to you, and you likewise may terminate it or change the amount of the
Check-A-Month by notice to Twentieth Century in writing or by telephone.
Termination or change will become effective within five business days following
receipt of your instruction.
Your Check-A-Month plan may begin anytime after you have owned your shares
for 15 days.
SIGNATURE GUARANTEE
When a signature guarantee is required, each signature MUST be guaranteed
by a domestic bank or trust company, credit union, broker, dealer, national
securities exchange registered securities association, clearing agency or
savings association as defined by federal law. The institution providing the
guarantee must use a signature guarantee ink stamp or medallion that states
"Signature(s) Guaranteed" and be signed in the name of the guarantor by an
authorized person with that person's title and the date. Twentieth Century may
reject a signature guarantee if the guarantor is not a member of or participant
in a signature guarantee program.
Shareholders living abroad may acknowledge their signatures before a U.S.
consular officer. Military personnel in foreign countries may acknowledge their
signatures before officers authorized to take acknowledgments; e.g., legal
officers and adjutants.
Twentieth Century may waive the signature guarantee on a redemption of
$5,000 or less if it is able to verify the signatures of all registered owners
from its account records. Twentieth Century reserves the right to amend or
discontinue this waiver policy at any time and, with regard to a particular
redemption transaction, to require a signature guarantee at its discretion.
REDEMPTION PROCEEDS
Redemption proceeds may be sent to you:
BY MAIL
If your redemption check is mailed, it is usually mailed on the second
business day after receipt of your redemption request, but not later than seven
days afterwards. If a redemption is requested shortly after a recent purchase
made by check or electronic draft, Twentieth Century will process the
redemption, but may hold the redemption proceeds beyond seven days until your
purchase funds have cleared, which may take up to 15 days or more.
No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption check is mailed. IF YOU ANTICIPATE
REDEMPTIONS SOON AFTER YOU PURCHASE YOUR SHARES, YOU ARE ADVISED TO WIRE FUNDS
TO AVOID DELAY.
Except for a direct transfer of proceeds from an IRA or 403(b) to a
custodian of another IRA or 403(b), and as noted below, all checks will be made
payable to the registered owner of the shares and will be mailed only to the
ADDRESS OF RECORD.
If you would like a redemption check made payable to someone other than the
registered owner of the shares and/or mailed to an address other than the
address of record, your request to redeem must (1) be made in writing; (2)
include an instruction to make the check payable to someone other than the
registered owner of the shares and/or mail it to an address other than the
address of record; and (3) be signed by all registered owners with their
signatures guaranteed. See "Signature Guarantee," on this page. Redemptions from
UGMA/UTMA accounts and from certain types of retirement accounts, such as IRA,
403(b) and qualified retirement plan accounts, will not be eligible for this
special service. If you would like to use this special service but are not
certain that a redemption from your account is eligible, please call Twentieth
Century prior to submitting your request. See "Telephone Services," page 22.
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BY WIRE AND ELECTRONIC FUNDS TRANSFER
You may authorize Twentieth Century to transmit redemption proceeds by wire
or electronic funds transfer. These services will be effective 30 days after
Twentieth Century receives the authorization.
Proceeds from the redemption of shares will normally be transmitted on the
first business day, but not later than the seventh day, following the
redemption.
Your bank usually will receive wired funds the day they are transmitted or
the next day. Electronically transferred funds will ordinarily be received
within one to seven days after transmission. Once the funds are transmitted, the
time of receipt and the availability of the funds are not within Twentieth
Century's control. Wired funds are subject to a charge of $10 to cover bank wire
charges, which is deducted from redemption proceeds.
If your bank account changes, you must send a new "voided" check,
preprinted with your bank registration, with written instructions, including tax
identification number. The change will be effective 30 days after receipt by
Twentieth Century.
Redemption proceeds will be transmitted by wire or electronic funds
transfer only after Twentieth Century is satisfied that checks or electronic
drafts that paid for the shares have cleared, i.e., after 15 days have elapsed
from the time of purchase, or you have furnished Twentieth Century with
satisfactory proof that the purchase funds have cleared. If a purchase were made
by check, for example, a copy of the canceled check would be satisfactory proof.
No interest is paid on the redemption proceeds after the redemption is processed
but before your redemption proceeds are transmitted. IF YOU ANTICIPATE
REDEMPTIONS WITHIN 15 DAYS AFTER YOU PURCHASE SHARES, YOU ARE ADVISED TO WIRE
FUNDS TO PAY FOR YOUR PURCHASES TO AVOID DELAY.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
Twentieth Century has elected to be governed by Rule 18f-1 under the
Investment Company Act, which obligates each fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to the lesser of
$250,000 or 1% of the assets of the fund. Although redemptions in excess of this
limitation will also normally be paid in cash, Twentieth Century reserves the
right to honor these redemptions by making payment in whole or in part in
readily marketable securities (a "redemption-in-kind"). If payment is made in
securities, the securities will be selected by the fund, will be valued in the
same manner as they are in computing the fund's net asset value and will be
provided to you in lieu of cash without prior notice.
If you expect to make a large redemption and would like to avoid any
possibility of being paid in securities, you may do so by providing Twentieth
Century with an unconditional instruction to redeem at least 15 days prior to
the date on which the redemption transaction is to occur. The instruction must
specify the dollar amount or number of shares to be redeemed and the date of the
transaction. Receipt of your instruction 15 days prior to the transaction
provides a fund with sufficient time to raise the cash in an orderly manner to
pay the redemption and thereby minimizes the effect of the redemption on the
fund and its remaining shareholders.
Despite its right to redeem fund shares through a redemption-in-kind,
Twentieth Century does not expect to exercise this option unless a fund has an
unusually low level of cash to meet redemptions and/or is experiencing unusually
strong demands for its cash. Such a demand might be caused, for example, by
extreme market conditions that result in an abnormally high level of redemption
requests concentrated in a short period of time. Absent these or similar
circumstances, Twentieth Century expects redemptions in excess of $250,000 to be
paid in cash in any fund with assets of more than $50 million if
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total redemptions from any one account in any 90-day period do not exceed
one-half of 1% of the total assets of the fund.
AUTOMATIC REDEMPTION OF SHARES
Whenever the shares held in an account have a value of less than $2,500
($1,000 for UGMA/UTMA accounts), a notification will be sent advising you of the
need to either make an investment to bring the value of the shares held in the
account up to $2,500 ($1,000) or to establish a $50 or more automatic monthly
investment to purchase additional shares. If the investment is not made or the
automatic monthly investment is not established within 60 days from the date of
notification, the shares held in the account will be redeemed and the proceeds
from the redemption will be sent by check to your address of record.
The automatic redemption of shares will not apply to Individual Retirement
Accounts, 403(b) accounts and other types of tax-deferred retirement plan
accounts. In addition, Twentieth Century reserves the right to modify its policy
regarding the automatic redemption of shares, or to waive such policy in whole
or in part for certain classes of investors.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
If you experience difficulty in making a telephone redemption during
periods of drastic economic or market changes, your redemption request may be
made by regular or express mail. It will be implemented at the net asset value
next determined after your request has been received by Twentieth Century in
good order. Twentieth Century reserves the right to revise or terminate the
telephone redemption privilege at any time.
REDEMPTIONS SPECIFYING A CERTAIN DATE OR PRICE CANNOT BE ACCEPTED AND WILL
BE RETURNED.
If the shares are represented by a negotiable stock certificate, the
certificate must be returned before the redemption can be effected.
ALL REDEMPTIONS ARE MADE AND THE PRICE IS DETERMINED ON THE DAY WHEN ALL
DOCUMENTATION, PROPERLY COMPLETED, IS RECEIVED BY TWENTIETH CENTURY. See "When
Share Price Is Determined," page 25.
If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, Twentieth Century will require
evidence satisfactory to it of the authority of the individual signing the
request. Please call or write Twentieth Century for further information.
A request to redeem shares in an IRA or 403(b) plan must be accompanied by
an IRS Form W4-P and a reason for withdrawal as specified by the IRS.
TELEPHONE SERVICES
INVESTORS LINE
You may reach a Twentieth Century Customer Service Representative by
calling our Investors Line at 1-800-345-2021. On our Investors Line, you may
request information about our funds and a current prospectus, speak with a
Customer Service Representative about your account, or get answers to any
questions that you may have about the funds and the services we offer. In
addition, if you have authorized telephone transactions in your account, you may
have a Customer Service Representative help you with investment, exchange and
redemption transactions.
UNUSUAL STOCK MARKET CONDITIONS HAVE IN THE PAST RESULTED IN AN INCREASE IN
THE NUMBER OF SHAREHOLDER TELEPHONE CALLS. IF YOU EXPERIENCE DIFFICULTY IN
REACHING TWENTIETH CENTURY ON THE INVESTORS LINE DURING SUCH PERIODS, YOU SHOULD
CONSIDER SENDING YOUR TRANSACTION INSTRUCTIONS BY MAIL, EXPRESS MAIL OR COURIER
SERVICE OR USING OUR AUTOMATED INFORMATION LINE, IF YOU HAVE REQUESTED AND
RECEIVED AN ACCESS CODE AND ARE NOT ATTEMPTING TO REDEEM SHARES.
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AUTOMATED INFORMATION LINE
In addition to reaching us on our Investors Line, you may also reach us by
telephone on our Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also obtain an access code
that will allow you to use the Automated Information Line to make investment and
exchange transactions in your accounts and obtain your share balance, value and
most recent transaction. Redemption transactions cannot be made on the Automated
Information Line. Please call our Investors Line at 1-800-345-2021 for more
information on how to obtain an access code for our Automated Information Line.
HOW TO CHANGE YOUR ADDRESS OF RECORD
You may notify Twentieth Century of changes in your address of record
either by writing us or calling our Investors Line. Because your address of
record impacts every piece of information we send to you, you are urged to
notify us promptly of any change of address. TO PROTECT YOU AND TWENTIETH
CENTURY, ALL REQUESTS TO REDEEM SHARES MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN
ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE),
WHICH ARE TO BE PAID BY CHECK, MUST BE MADE IN WRITING, SIGNED BY EACH PERSON IN
WHOSE NAME THE SHARES ARE OWNED, AND ALL SIGNATURES MUST BE GUARANTEED. See
"Signature Guarantee," page 20.
TAX-QUALIFIED RETIREMENT PLANS
Each fund is available for your tax-deferred retirement plan. Call or write
Twentieth Century and request the appropriate forms for:
o Individual Retirement Accounts (IRAs).
o 403(b) plans for employees of public school systems and non-profit
organizations.
o Profit sharing plans and pension plans for corporations and other
employers.
HOW TO TRANSFER AN INVESTMENT TO A TWENTIETH CENTURY RETIREMENT PLAN
It's easy to transfer your tax-deferred plan to Twentieth Century from
another company or custodian. Call or write Twentieth Century for a request to
transfer form.
If you direct Twentieth Century to transfer funds from an existing
non-retirement Twentieth Century account into a retirement account, the shares
in your non-retirement account will be redeemed. The redemption proceeds will be
invested in your Twentieth Century IRA or other tax-qualified retirement plan.
The redemption is a taxable event resulting in a taxable gain or loss.
HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON
You may transfer ownership of your shares to another person or organization
by sending written instructions to Twentieth Century, SIGNED BY ALL OWNERS AND
WITH SIGNATURES GUARANTEED AS DESCRIBED UNDER "SIGNATURE GUARANTEE," PAGE 20. IF
THE SHARES ARE REPRESENTED BY A NEGOTIABLE STOCK CERTIFICATE, THE CERTIFICATE
MUST BE RETURNED WITH YOUR TRANSFER INSTRUCTIONS.
REPORTS TO SHAREHOLDERS
At the end of each quarter, Twentieth Century will send you a consolidated
statement that summarizes all of your Twentieth Century holdings. At the same
time, you will also receive an individual statement for each Twentieth Century
fund you own with complete year-to-
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date information on activity in your account. You may at any time also request a
statement of your account activity be sent to you.
With the exception of the automatic transactions noted below, each time you
invest, redeem, transfer or exchange shares, Twentieth Century will send you a
confirmation of the transaction. Automatic monthly investment purchases and
403(b) purchases (other than transfers), exchanges made in a Exchange-A-Month
program, purchases made by direct deposit and transfers made in a
Transfer-A-Month program, will be confirmed on your next consolidated quarterly
statement. Please carefully review all information in your confirmation or
consolidated statement relating to transactions to ensure that your instructions
have been acted on properly. If you believe we have processed a transaction you
requested incorrectly, please notify us as soon as possible. If you fail to
notify us of an error with reasonable promptness, i.e., within 30 days of the
date of your nonautomatic transactions (or within 30 days of the date of your
consolidated quarterly statement in the case of the automatic transactions noted
above) we will deem you to have ratified the transaction.
No later than January 31 of each year, Twentieth Century will send you the
following reports, which you may use in completing your U.S. income tax return:
Form 1099-DIV Reports taxable distributions during the preceding year. (If
you did not receive taxable distributions in the previous
year, you will not receive a 1099-DIV.)
Form 1099-B Reports proceeds paid on redemptions during the preceding
year.
Form 1099-R Reports distributions from IRAs and 403(b) plans during the
preceding year.
At such time as prescribed by law, Twentieth Century will send you a Form
5498, which reports contributions to your IRA for the previous calendar year.
In January of each year, Twentieth Century will send you an annual report
that includes audited financial statements for the fiscal year ending the
preceding November 30 and a list of securities in its portfolio on that date. In
July of each year, Twentieth Century will send you a semiannual report that
includes unaudited financial statements for the six months ending the preceding
May 31, as well as a list of securities in its portfolio on that date. Twentieth
Century does not publish interim lists of portfolio securities.
Twentieth Century usually will prepare a new prospectus on April 1 of each
year. If not sent before, you will receive a current prospectus with the
confirmation of your first investment after that date.
IT IS IMPORTANT THAT YOU NOTIFY TWENTIETH CENTURY PROMPTLY OF ANY CHANGE OF
ADDRESS. See "How to Change Your Address of Record," page 23.
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ADDITIONAL INFORMATION YOU SHOULD KNOW
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SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is their net asset value next determined after
receipt of your instruction to purchase, exchange or redeem. Net asset value is
determined by calculating the total value of a fund's assets, deducting total
liabilities and dividing the result by the number of shares outstanding. Net
asset value is determined on each day that the NYSE is open.
Investments and requests to redeem shares will receive the share price next
determined after receipt by Twentieth Century of the investment or redemption
request. For example, investments and requests to redeem shares received by
Twentieth Century before the close of business on the NYSE are effective on, and
will receive the price determined, that day as of the close of the Exchange.
Redemption requests received thereafter are effective on, and receive the price
determined, as of the close of the Exchange on the next day the Exchange is
open.
Investments are considered received only when your check or wired funds are
received by Twentieth Century. Wired funds are considered received on the day
they are deposited in Twentieth Century's bank account if they are deposited
before the close of business on the Exchange, usually 3 p.m. Central time.
Investments by telephone pursuant to your prior authorization to Twentieth
Century to draw on your bank account are considered received at the time of your
telephone call.
Investment and transaction instructions received by Twentieth Century on
any business day by mail at its office prior to the close of business on the
Exchange, usually 3 p.m. Central time, will receive that day's price.
Investments and instructions received after that time will receive the price
determined on the next business day.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
Portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
price is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices or at
the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good faith
by the board of directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the board of directors.
Pursuant to a determination by Twentieth Century's board of directors that
such value represents fair value, debt securities with maturities of 60 days or
less are valued at amortized cost. When a security is valued at amortized cost,
it is valued at its cost when purchased and thereafter by assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.
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 NYSE, usually 3 p.m. Central
time, if that is earlier. That value is then converted to dollars at the
prevailing foreign exchange rate.
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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 NYSE 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, which was likely to materially change the net asset value, then
that security would be valued at fair value as determined by the board of
directors. Trading of these securities in foreign markets may not take place on
every NYSE business day. In addition, trading may take place in various foreign
markets on Saturdays or on other days when the Exchange is not open and on which
a fund's net asset value is not calculated. Therefore, such calculation does not
take place contemporaneously with the determination of the prices of many of the
portfolio securities used in such calculation and the value of a fund's
portfolio may be affected on days when shares of the fund may not be purchased
or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the funds will be published in leading newspapers
daily upon meeting the minimum fund size and number of shareholders for each
listing. The net asset value of each fund may also be obtained by calling
Twentieth Century at 1-800-345-2021. See "Telephone Services," page 22.
DISTRIBUTIONS
Distributions from net investment income and net realized securities gains,
if any, generally are declared and paid once a year, but the funds may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act.
GENERAL INFORMATION ABOUT DISTRIBUTIONS
Distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 and distributions on shares purchased within the
last 15 days, however, will not be paid in cash and will be reinvested. You may
elect to have distributions on shares of Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 59 1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
The board of directors may elect not to distribute capital gains in whole
or in part to take advantage of loss carryovers.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time, the value of your shares
includes the undistributed net gains, if any, realized by the fund on the sale
of portfolio securities and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed, the value of your
shares will be reduced by the amount of the distribution. If you buy your shares
just before the distribution, you will pay the full price for your shares and
then receive a portion of the purchase price back as a taxable distribution. See
"Taxes," page 27.
If your distribution is reinvested in additional shares, the distribution
has no effect on the total value of your investment; while you own more shares,
the price of each share has been reduced by the amount of the distribution.
Likewise, if you take your distribution in cash, the value of your shares after
the record date plus the cash received is equal to the value of the shares
before the record date. For example, if your shares immediately before the
distribution have a value of $10, including $2 in dividends and capital
gains realized by the fund during the year, and if the $2 is distributed, the
value will decline to $8. If the $2
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is reinvested at $8 per share, you will receive .250 shares, so that, after the
distribution, you will have 1.250 shares at $8 per share, or $10, the same as
before.
TAXES
Twentieth Century has elected to be taxed as a regulated investment company
under Sub-chapter M of the Internal Revenue Code, which means that to the extent
its income is distributed to shareholders, it pays no income taxes.
Distributions of net investment income and net short-term capital gains are
taxable to you as ordinary income. Distributions from net long-term capital
gains are taxable as long-term capital gains regardless of the length of time
you have held the shares on which such distributions are paid. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any distribution of long-term capital gain to you with respect to such
shares.
Dividends and interest received by the funds on foreign securities, and, in
limited circumstances capital gains realized by the funds upon the sale of such
securities, may give rise to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Foreign countries generally do not impose taxes
on capital gains in respect of investments by non-resident investors. The
foreign taxes paid by a fund will reduce its dividends.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains. See "General Information About
Distributions," page 26.
In January of the year following the distribution, Twentieth Century will
send you a Form 1099-DIV notifying you of the status of your distributions for
federal income tax purposes.
Distributions also may be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations, which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax adviser about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, Twentieth Century is required by federal law to withhold
and remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you to
certify that the Social Security number or tax identification number you provide
is correct and that you are not subject to 31% withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application. PAYMENTS REPORTED BY TWENTIETH CENTURY THAT
OMIT YOUR SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER WILL SUBJECT
TWENTIETH CENTURY TO A PENALTY OF $50, WHICH WILL BE CHARGED AGAINST YOUR
ACCOUNT IF YOU FAIL TO PROVIDE THE CERTIFICATION BY THE TIME THE REPORT IS
FILED. THIS CHARGE IS NOT REFUNDABLE. See "Tax Identification Number," page 16.
Redemption of shares of a fund will be a taxable transaction for federal
income tax purposes and shareholders will generally recognize gain
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or loss in an amount equal to the difference between the basis of the shares and
the amount received. Assuming that shareholders hold such shares as a capital
asset, the gain or loss will be a capital gain or loss and generally will be
long term if shareholders have held such shares for a period of more than one
year. If a loss is realized on the redemption of fund shares, the reinvestment
in additional fund shares within 30 days before or after the redemption may be
subject to the "wash sale" rules of the Code, resulting in a postponement of the
recognition of such loss for federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of Twentieth Century. Acting
pursuant to an investment management agreement entered into with Twentieth
Century, Investors Research Corporation ("Investors Research") serves as the
investment manager of Twentieth Century. Its principal place of business is
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri, 64111.
Investors Research has been providing investment advisory services to investment
companies and institutional clients since 1958.
Investors Research supervises and manages the investment portfolio of
Twentieth Century and directs the purchase and sale of its investment
securities. Investors Research utilizes a team of portfolio managers, assistant
portfolio managers and analysts acting together to manage the assets of the
funds. The team meets regularly to review portfolio holdings and to discuss
purchase and sale activity. The team adjusts holdings in the funds' portfolios
and the funds' asset mix as it deems appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds or of sectors of the funds as necessary
between team meetings.
In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of
Investors Research, acquired Benham Management International, Inc. In the
acquisition, Benham Management Corporation ("BMC"), the investment adviser to
the Benham Group of Mutual Funds, became a wholly owned subsidiary of TCC.
Certain employees of BMC will be providing investment management services to
Twentieth Century funds, while certain Twentieth Century employees will be
providing investment management services to Benham funds.
The portfolio manager members of the teams managing the funds described in
this prospectus and their work experience for the last five years are as
follows:
ROBERT C. PUFF JR., Executive Vice President and Chief Investment Officer,
joined Twentieth Century in 1983. In his position as Chief Investment Officer,
Mr. Puff oversees the investment activities of all of the teams that manage
Twentieth Century funds.
CHRISTOPHER K. BOYD, Vice President and Portfolio Manager, joined Twentieth
Century in March 1988 as an Investment Analyst, a position he held until
December 1990. At that time he was promoted to Assistant Portfolio Manager, and
then was promoted to Portfolio Manager in December 1992. He is a member of the
team that manages Growth Investors and Ultra Investors.
C. CASEY COLTON, a Portfolio Manager for BMC, joined BMC in 1990 as a
Municipal Analyst. Mr. Colton was promoted to Portfolio Manager in 1995 and
co-manages the Benham GNMA Income Fund.
PHILLIP N. DAVIDSON, Vice President and Portfolio Manager, joined
Twentieth Century in September 1993 as a Portfolio Manager. Prior to joining
Twentieth Century, Mr. Davidson served as an investment manager for Boatmen's
Trust Company in St. Louis, Missouri.
DEREK FELSKE, Vice President and Portfolio Manager, joined Twentieth
Century in
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September 1993 as a Portfolio Manager. He is a member of the team that manages
Growth Investors and Ultra Investors. Prior to joining Twentieth Century, Mr.
Felske served as a member of the portfolio management team of RCM Capital
Management, a San Francisco, California-based investment management firm, a
position he held from May 1991 to September 1993. From September 1989 to May
1991, Mr. Felske attended the University of Pennsylvania-Wharton School of
Business, where he obtained an MBA in finance.
GLENN A. FOGLE, Vice President and Portfolio Manager, joined Twentieth
Century in September 1990 as an Investment Analyst, a position he held until
March 1993. At that time he was promoted to Portfolio Manager. He is a member of
the team that manages Vista Investors and Giftrust Investors.
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager,
joined Twentieth Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He is a member of the team
that manages Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond and the
fixed income portion of Balanced Investors.
DAVID SCHROEDER, Vice President and Portfolio Manager for BMC, joined BMC
in July 1990. Mr. Schroeder has primary responsibility for the day-to-day
operations of the Benham Treasury Note, Benham Short-Term, and Benham
Long-Term Funds. He also manages Benham Target Maturities Trust.
JEFFREY R. TYLER, Senior Vice President and Portfolio Manager for BMC,
joined BMC in January 1988 as a Portfolio Manager. Mr. Tyler supervises the team
of other Portfolio Managers who assist in the management of the various
investment categories of the funds. Mr. Tyler also co-manages the Benham GNMA
Income Fund. He also has primary responsibility for the day-to-day operations of
the Benham Capital Manager Fund and oversees the portfolio manager's operation
of the Benham European Government Bond Fund.
THEODORE J. TYSON, Vice President and Portfolio Manager, joined Investors
Research in 1988 and has been a member of the International Equity and
International Emerging Growth team since its inception in 1991.
PETER A. ZUGER, Vice President and Portfolio Manager, joined Twentieth
Century in June 1993 as a Portfolio Manager. Prior to joining Twentieth Century,
Mr. Zuger served as an investment manager in the Trust Department of NBD Bancorp
in Detroit, Michigan.
The activities of Investors Research are subject only to directions of
Twentieth Century's board of directors. Investors Research pays all the expenses
of Twentieth Century except brokerage, taxes, interest, fees and expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the services provided to Twentieth Century, Investors Research receives
an annual fee of 1.00% of average net assets up to $1 billion and .90% of
average net assets in excess of $1 billion for Strategic Allocation:
Conservative, 1.10% of average net assets up to $1 billion and 1.00% of average
net assets in excess of $1 billion for Strategic Allocation: Moderate, and 1.20%
of average net assets up to $1 billion and 1.10% of average net assets in excess
of $1 billion for Strategic Allocation: Aggressive. On the first business day of
each month, each fund pays a management fee to the manager for the previous
month at the specified rate. The fee for the previous month is calculated by
multiplying the applicable fee for such fund by the aggregate average daily
closing value of each fund's net assets during the previous month by a fraction,
the numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
The management fees paid by the funds to Investors Research may be higher
than those paid by many investment companies. However, most if not all of such
companies also pay, in addi-
29
<PAGE>
tion, certain of their own expenses, while virtually all of the funds' expenses,
except as specified above, are paid by Investors Research.
CODE OF ETHICS
Twentieth Century and Investors Research have adopted a Code of Ethics,
which restricts personal investing practices by employees of Investors Research
and its affiliates. Among other provisions, the Code of Ethics requires that
employees with access to information about the purchase or sale of securities in
the funds' portfolios obtain preclearance before executing personal trades. With
respect to portfolio managers and other investment personnel, the Code of Ethics
prohibits acquisition of securities in an initial public offering, as well as
profits derived from the purchase and sale of the same security within 60
calendar days. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage those
funds.
TRANSFER AND ADMINISTRATIVE SERVICES
Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri,
64111, acts as transfer, administrative services and dividend paying agent for
Twentieth Century. It provides facilities, equipment and personnel to Twentieth
Century and is paid for such services by Investors Research. Certain
recordkeeping services that would otherwise be performed by Twentieth Century
Services, Inc., may be performed by an insurance company or other entity
providing similar services for various retirement plans using shares of
Twentieth Century as a funding medium or by broker-dealers for their customers
investing in shares of Twentieth Century. Investors Research may elect to enter
into a contract to pay them for such services.
From time to time, special services may be offered to shareholders who
maintain higher share balances in the 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 Investors Research.
Investors Research and Twentieth Century Services, Inc., are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman of the
board of Twentieth Century Strategic Portfolios, controls Twentieth Century
Companies by virtue of his ownership of a majority of its common stock.
FURTHER INFORMATION ABOUT TWENTIETH CENTURY
Twentieth Century Strategic Asset Allocations, Inc. was organized as a
Maryland corporation on April 4, 1994.
Twentieth Century is a diversified, open-end management investment company
whose shares were first offered for sale February 15, 1996. Its business and
affairs are managed by its officers under the direction of its board of
directors.
The principal office of Twentieth Century is Twentieth Century Tower,
4500 Main Street, P.O. Box 419200, Kansas City, Missouri, 64141-6200. All
inquiries may be made by mail to that address, or by phone to 1-800-345-2021.
(For local Kansas City area or international callers: 816-531-5575.)
Twentieth Century Strategic Asset Allocations, Inc. issues three series
of $0.01 par value shares, Strategic Allocation: Conservative, Strategic
Allocation: Moderate and Strategic Allocation: Aggressive. The assets
belonging to each series of shares are held separately by the custodian, and,
in effect, each series is a separate fund. Each share, when issued, is fully
paid and non-assessable.
Each share, irrespective of series, is entitled to one vote for each dollar
of net asset value applicable to such share on all questions, except for those
matters that must be voted on sepa-
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<PAGE>
rately by the series of shares affected. Matters affecting only one series are
voted upon only by that series.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of directors can elect all
of the directors if they choose to do so, and in such event the holders of the
remaining shares will not be able to elect any person or persons to the board of
directors.
Unless required by the Investment Company Act, it will not be necessary for
Twentieth Century to hold annual meetings of shareholders. As a result,
shareholders may not vote each year on the election of directors or the
appointment of auditors. However, pursuant to Twentieth Century's bylaws, the
holders of at least 10% of the votes entitled to be cast may request Twentieth
Century to hold a special meeting of shareholders. Twentieth Century will assist
in the communication with other shareholders.
TWENTIETH CENTURY RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT
OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE
INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
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<PAGE>
TWENTIETH CENTURY
Strategic Asset
Allocations, Inc.
Prospectus
February 15, 1996
[company logo]
Investments That Work(TM)
- ---------------------------------------
P.O. Box 419200
- ---------------------------------------
Kansas City, Missouri
- ---------------------------------------
64141-6200
- ---------------------------------------
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
- ---------------------------------------
Automated information line:
1-800-345-8765
- ---------------------------------------
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
- ---------------------------------------
Fax: 816-340-7962
- ---------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
SH-BKT-3927
9602
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
TWENTIETH CENTURY
Strategic Asset
Allocations, Inc.
Statement of Additional Information
February 15,
1996
- --------------------------------------------------------------------------------
This statement is not a prospectus but should be read in conjunction with
the current prospectus of Twentieth Century Strategic Asset Allocations, Inc.,
dated February 15, 1996. Please retain this document for future reference.
To obtain the prospectus, call Twentieth Century toll-free at
1-800-345-2021 (816-531-5575 for local and international calls), or write P.O.
Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Institutional
Page Prospectus Prospectus
Herein Page Page
Investment Objectives of the Funds 2 4 4
Investment Restrictions 2 -- --
Forward Currency Exchange Contracts 2 10 10
Futures Contracts 3 11 11
An Explanation of Fixed Income
Securities Ratings 5 -- --
Short Sales 7 13 13
Portfolio Turnover 8 11 11
Officers and Directors 8 -- --
Management 10 28 20
Custodians 11 -- --
Independent Auditors 11 -- --
Capital Stock 11 -- --
Taxes 12 27 19
Brokerage 12 -- --
Performance Advertising 13 13 13
Redemptions in Kind 14 -- --
Holidays 14 -- --
Financial Statements 14 -- --
- --------------------------------------------------------------------------------
<PAGE>
INVESTMENT OBJECTIVE OF THE FUNDS
The investment objective of each series of shares of Twentieth Century
Strategic Asset Allocations, Inc. is described on the front cover page of the
prospectus. In seeking to achieve its objective, a fund must conform to certain
policies, some of which are designated in the prospectus or in this statement of
additional information as "fundamental" and cannot be changed except with the
approval of the shareholders entitled to cast a majority of the outstanding
votes of the fund as defined in the Investment Company Act.
The following paragraph is also a statement of fundamental policy with
respect to selection of investments:
In general, within the restrictions outlined herein, each series has broad
powers with respect to investing funds or holding them uninvested. Investments
are varied according to what is judged advantageous under changing economic
conditions. It is the policy of Twentieth Century to retain maximum flexibility
in management without restrictive provisions as to the proportion of one or
another class of securities that may be held, subject to the investment
restrictions described below.
Neither the Securities and Exchange Commission nor any other federal or
state agency participates in or supervises the management of the funds or their
investment practices or policies.
INVESTMENT RESTRICTIONS
Fundamental policies that may be changed only with shareholder approval
provide that no series of shares:
(1) Shall, with regard to 75% of its portfolio, purchase the security of
any one issuer if such purchase would cause more than 5% of the fund's
assets at market to be invested in the securities of such issuer,
except U.S. government securities, or if the purchase would cause more
than 10% of the outstanding voting securities of any one issuer to be
held in a fund's portfolio.
(2) Shall invest for control or for management or concentrate its
investment in a particular company or a particular industry. No more
than 25% of the assets of a fund, exclusive of cash and U.S. government
securities, will be invested in securities of any one industry.
(3) Shall buy securities on margin or sell short (unless it owns or by
virtue of its ownership of other securities has the right to obtain
securities equivalent in kind and amount to the securities sold without
additional cost); however, a fund may make margin deposits in
connection with the use of any financial instrument or any transaction
in securities permitted by its fundamental policies.
(4) Shall issue any senior security.
(5) Shall underwrite any securities.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the fund of securities issued by insurance companies, brokers,
dealers, underwriters or investment advisers, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership.
To comply with the requirements of state security administrators, Twentieth
Century may, from time to time, agree to additional investment restrictions. For
example, the fund has agreed not to invest in oil, gas or other mineral leases,
or in warrants, except that a fund may purchase securities with warrants
attached. In addition, the fund will not invest in puts, calls, straddles,
spreads or any combination thereof (other than hedging positions or positions
covered by cash or securities). These types of restrictions are not fundamental
policies and may be adopted, revised or withdrawn as required or permitted by
the various state securities administrators.
FORWARD CURRENCY EXCHANGE CONTRACTS
Each fund conducts its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into
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<PAGE>
forward currency exchange contracts ("forward contracts") to purchase or sell
foreign currencies.
Each fund expects to use forward contracts under two circumstances:
(1) When the manager wishes to "lock in" the U.S. dollar price of a
security when a fund is purchasing or selling a security denominated in
a foreign currency, the fund would be able to enter into a forward
contract to do so; or
(2) When the manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, a
fund would be able to enter into a forward contract to sell foreign
currency for a fixed U.S. dollar amount approximating the value of some
or all of its portfolio securities either denominated in, or whose
value is tied to, such foreign currency.
As to the first circumstance, when a fund enters into a trade for the
purchase or sale of a security denominated in a foreign currency, it may be
desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering
into forward contracts in U.S. dollars for the purchase or sale of a foreign
currency involved in an underlying security transaction, the fund will be able
to protect itself against a possible loss between trade and settlement dates
resulting from the adverse change in the relationship between the U.S. dollar
and the subject foreign currency.
Under the second circumstance, when the manager believes that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will place cash or high-grade liquid securities
in a separate account with its custodian in an amount equal to the value of the
forward contracts entered into under the second circumstance. If the value of
the securities placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account equals the amount of the fund's commitments with respect to such
contracts.
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible since the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The manager does not intend to enter into such
contracts on a regular basis. Normally, consideration of the prospect for
currency parities will be incorporated into the long-term investment decisions
made with respect to overall diversification strategies. However, the manager
believes that it is important to have flexibility to enter into such forward
contracts when it determines that a fund's best interests may be served.
Generally, a fund will not enter into a forward contract with a term of
greater than one year. At the maturity of the forward contract, the fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate the obligation to deliver the foreign
currency by purchasing an "offsetting" forward contract with the same currency
trader obligating the fund to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for a fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency the fund is obligated to deliver.
FUTURES CONTRACTS
As described in the prospectus, each fund may enter into futures contracts.
Unlike when a fund purchases securities, no purchase price for the underlying
securities is paid by the fund at the
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<PAGE>
time it purchases a futures contract. When a futures contract is entered into,
both the buyer and seller of the contract are required to deposit with a futures
commission merchant ("FCM") cash or high-grade debt securities in an amount
equal to a percentage of the contract's value, as set by the exchange on which
the contract is traded. This amount is known as "initial margin" and is held by
the fund's custodian for the benefit of the FCM in the event of any default by
the fund in the payment of any future obligations.
The value of a futures contract is adjusted daily to reflect the
fluctuation of the value of the underlying securities. This is a process known
as marking the contract to market. If the value of a party's position declines,
that party is required to make additional "variation margin" payments to the FCM
to settle the change in value. The party that has a gain is generally entitled
to receive all or a portion of this amount.
The funds maintain from time to time a percentage of their assets in cash
or high-grade liquid securities to provide for redemptions or to hold for future
investment in securities consistent with the funds' investment objectives. The
funds may enter into index futures contracts as an efficient means to expose the
funds' cash position to the domestic equity market. The manager believes that
the purchase of futures contracts is an efficient means to effectively be fully
invested in equity securities.
The funds intend to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the
Commodity Futures Trading Commission ("CFTC") and the National Futures
Association, which regulate trading in the futures markets. To do so, the
aggregate initial margin required to establish such positions may not exceed 5%
of the fair market value of a fund's net assets, after taking into account
unrealized profits and unrealized losses on any contracts it has entered into.
The principal risks generally associated with the use of futures include:
o the possible absence of a liquid secondary market for any particular
instrument may make it difficult or impossible to close out a position
when desired (liquidity risk);
o the risk that the counter party to the contract may fail to perform its
obligations or the risk of bankruptcy of the FCM holding margin
deposits (counter-party risk);
o the risk that the securities to which the futures contract relates may
go down in value (market risk); and
o adverse price movements in the underlying securities can result in
losses substantially greater than the value of a fund's investment in
that instrument because only a fraction of a contract's value is
required to be deposited as initial margin (leverage risk); provided,
however, that the funds may not purchase leveraged futures, so there is
no leverage risk involved in the funds' use of futures.
A liquid secondary market is necessary to close out a contract. The funds
may seek to manage liquidity risk by investing in exchange-traded futures.
Exchange-traded futures pose less risk that there will not be a liquid secondary
market than privately negotiated instruments. Through their clearing
corporations, the futures exchanges guarantee the performance of the contracts.
Futures contracts are generally settled within a day from the date they are
closed out, as compared to three days for most types of equity securities. As a
result, futures contracts can provide more liquidity than an investment in the
actual underlying securities. Nevertheless, there is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Liquidity may also be influenced by an exchange-imposed daily
price fluctuation limit, which halts trading if a contract's price moves up or
down more than the established limit on any given day. On volatile trading days
when the price fluctuation limit is reached, it may be impossible for a fund to
enter into new positions or close out existing positions. If
4
<PAGE>
the secondary market for a futures contract is not liquid because of price
fluctuation limits or otherwise, a fund may not be able to promptly liquidate
unfavorable futures positions and potentially could be required to continue to
hold a futures position until liquidity in the market is re-established. As a
result, such fund's access to other assets held to cover its futures positions
also could be impaired until liquidity in the market is re-established.
The funds manage counter-party risk by investing in exchange-traded index
futures. In the event of the bankruptcy of the FCM that holds margin on behalf
of a fund, that fund may be entitled to the return of margin owed to such fund
only in proportion to the amount received by the FCM's other customers. The
manager will attempt to minimize the risk by monitoring the creditworthiness of
the FCMs with which the funds do business.
AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS
As described in the prospectus, each fund will invest a portion of its
assets in fixed income securities. The fixed income securities that comprise
part of a fund's bond portfolio will primarily be limited to investment grade
obligations, provided, that Strategic Allocation: Moderate may invest up to 5%
of its assets, and Strategic Allocation: Aggressive may invest up to 10% of its
assets, in high yield securities. In addition, each fund may invest a portion of
its equity portfolio in convertible securities, which may be rated below
investment grade (but not below B- by S&P or B3 by Moody's).
Fixed income securities ratings provide the investment manager with current
assessment of the credit rating of an issuer with respect to a specific fixed
income security. The following is a description of the rating categories
utilized by the rating services referenced in the prospectus disclosure:
The following summarizes the ratings used by Standard & Poor's Corporation
("S&P") for bonds:
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA--Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only to a small
degree.
A--Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the
5
<PAGE>
capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C--The rating C typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
To provide more detailed indications of credit quality, the ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the ratings used by Moody's Investors Service,
Inc. ("Moody's") for bonds:
Aaa--Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present that make the long-term risk appear somewhat
larger than the Aaa securities.
A--Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment some time in the
future.
Baa--Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
Ba--Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa--Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds that are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor
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<PAGE>
prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa through B. The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
In the event any of a fund's fixed income securities are downgraded from
one category to another by a securities ratings agency, the manager intends to
evaluate the reasons for such downgrade and other available information
regarding the issuer and will take action it deems appropriate regarding whether
or not to continue holding such securities.
INVESTING IN EMERGING MARKETS
Strategic Allocations: Moderate and Strategic Allocation: Aggressive may
invest a portion of their international holdings in securities of issuers in
emerging market countries. Investing in securities of issuers in emerging market
countries involves exposure to significantly higher risk than investing in
countries with developed markets. Emerging market countries may have economic
structures that are generally less diverse and mature, and political systems
that can be expected to be less stable than those of developed countries.
Securities prices in emerging market countries can be significantly more
volatile than in developed countries, reflecting the greater uncertainties of
investing in lesser developed markets and economies. In particular, emerging
market countries may have relatively unstable governments, and may present the
risk of nationalization of businesses, expropriation confiscatory taxation or in
certain instances, reversion to closed-market, centrally planned economics. Such
countries may also have less protection of property rights than developed
countries.
The economies of emerging market countries may be predominantly based on
only a few industries or may be dependent on revenues from particular
commodities or on international aid of developmental assistance, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. In addition, securities
markets in emerging market countries may trade a small number of securities and
may be unable to respond effectively to increases in trading volume, potentially
resulting in a lack of liquidity and in volatility in the price of securities
traded on those markets. Also, securities markets in emerging market countries
typically offer less regulatory protection for investors.
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 an equal amount of the security being sold
short at no additional cost.
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. There will be certain additional transaction
costs associated with short sales, but the fund will endeavor to offset these
costs with income from the investment of the cash proceeds of short sales.
A fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price but also wishes to defer
recognition of gain or loss for federal income tax purposes and for purposes of
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code. In such a case, all or some part of any future losses in
the fund's long position in substantially identical securities may
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<PAGE>
not become deductible for tax purposes until all or some part of the short
position has been closed.
PORTFOLIO TURNOVER
With respect to each series of shares, the manager will purchase and sell
securities without regard to the length of time the security has been held.
Accordingly, the rate of portfolio turnover may be greater than other investment
companies with similar investment objectives.
The corporation intends to purchase a given security whenever the manager
believes it will contribute to the stated objective of a fund, even if the same
security has only recently been sold. In selling a given security, management
keeps in mind that (1) profits from sales of securities held less than three
months must be limited in order to meet the requirements of Subchapter M of the
Internal Revenue Code, and (2) profits from sales of securities are taxed to
shareholders. Subject to those considerations, the corporation will sell a given
security, no matter for how long or how short a period it has been held in the
portfolio and no matter whether the sale is at a gain or at a loss, if
management believes that the security is not fulfilling its purpose, either
because, among other things, it did not live up to management's expectations, or
because it may be replaced with another security holding greater promise, or
because it has reached its optimum potential, or because of a change in the
circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
When a general decline in securities prices is anticipated for a particular
asset category, a fund may decrease its position in such category and increase
its position in one or both of the other asset categories, and when a rise in
price levels is anticipated, a fund may increase its position in such category
and decrease its position in the other categories. However, the funds will,
under most circumstances, be essentially fully invested within the operating
ranges set forth in the prospectus.
Since investment decisions are based on the anticipated contribution of the
security in question to a fund's objectives, the manager believes that the rate
of portfolio turnover is irrelevant when management believes a change is in
order to achieve those objectives.
OFFICERS AND DIRECTORS
The principal officers and directors of the corporation, their positions
held with Twentieth Century, their principal business experience during the past
five years, and their affiliation with Investors Research Corporation and its
affiliated companies are listed below. Unless otherwise noted, the business
address of each director and officer is 4500 Main Street, Kansas City, Missouri
64111. Those directors who are "interested persons" as defined in the Investment
Company Act are indicated by an asterisk (*).
JAMES E. STOWERS, JR.,* chairman, principal executive officer and director;
chairman, director and controlling shareholder of Twentieth Century Companies,
Inc., parent corporation of Investors Research Corporation and Twentieth Century
Services, Inc.; chairman and director of Investors Research Corporation,
Twentieth Century Services, Inc., Twentieth Century Investors, Inc., Twentieth
Century World Investors, Inc., Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Premium Reserves, Inc. and TCI Portfolios, Inc.
JAMES E. STOWERS III,* president and director; president and director,
Investors Research Corporation, Twentieth Century Services, Inc., Twentieth
Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Premium Reserves, Inc., TCI
Portfolios, Inc. and Twentieth Century Companies, Inc.
THOMAS A. BROWN, director; 2029 Wyandotte, Kansas City, Missouri; chief
executive officer, Associated Bearing Company, a corporation engaged in the sale
of bearings and power transmission products; director, Twentieth Century
Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century
Capital Portfolios, Inc., Twentieth Century Premium Reserves, Inc. and TCI
Portfolios, Inc.
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ROBERT W. DOERING, M.D., director; 6406 Prospect, Kansas City, Missouri;
general surgeon; director, Twentieth Century Investors, Inc., Twentieth Century
World Investors, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth
Century Premium Reserves, Inc., and TCI Portfolios, Inc.
LINSLEY L. LUNDGAARD, director; 18648 White Wing Drive, Rio Verde, Arizona;
retired; formerly vice president and national sales manager, Flour Milling
Division, Cargill, Inc.; director, Twentieth Century Investors, Inc., Twentieth
Century World Investors, Inc., Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Premium Reserves, Inc. and TCI Portfolios, Inc.
DONALD H. PRATT, director; P.O. Box 419917, Kansas City, Missouri;
president, Butler Manufacturing Company; director, Twentieth Century Investors,
Inc., Twentieth Century World Investors, Inc., Twentieth Century Capital
Portfolios, Inc., Twentieth Century Premium Reserves, Inc., and TCI Portfolios,
Inc.
LLOYD T. SILVER JR., director; 2300 West 70th Terrace, Mission Hills,
Kansas; president, LSC, Inc., manufacturer representative; director, Twentieth
Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Premium Reserves, Inc. and
TCI Portfolios, Inc.
M. JEANNINE STRANDJORD, director; 2330 Shawnee Mission Parkway, Westwood,
Kansas; senior vice president and treasurer, Sprint Corporation; director,
Twentieth Century Investors, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Capital Portfolios, Inc., Twentieth Century Premium Reserves,
Inc. and TCI Portfolios, Inc.
JOHN M. URIE, director; 5511 N.W. Flint Ridge Road, Kansas City, Missouri;
consultant; formerly director of finance, City of Kansas City, Missouri;
director, Twentieth Century Investors, Inc., Twentieth Century World Investors,
Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century
Premium Reserves, Inc. and TCI Portfolios, Inc.
WILLIAM M. LYONS, executive vice president and general counsel; executive
vice president, secretary and general counsel, Twentieth Century Investors, Inc.
and Twentieth Century World Investors, Inc.; executive vice president and
general counsel, Twentieth Century Capital Portfolios, Inc., Twentieth Century
Premium Reserves, Inc., TCI Portfolios, Inc., Twentieth Century Companies, Inc.,
Investors Research Corporation and Twentieth Century Services, Inc.
ROBERT T. JACKSON, executive vice president- finance and principal
financial officer; treasurer, Twentieth Century Companies, Inc. and Investors
Research Corporation; executive vice president and treasurer, Twentieth Century
Services, Inc.; executive vice president-finance, Twentieth Century Investors,
Inc., TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Capital Portfolios, Inc. and Twentieth Century Premium Reserves, Inc.;
formerly executive vice president, Kemper Corporation.
PATRICK A. LOOBY, vice president and secretary; vice president and
secretary, Twentieth Century Capital Portfolios, Inc., Twentieth Century
Premium Reserves, Inc. and TCI Portfolios; vice president, Twentieth Century
Investors, Inc., Twentieth Century World Investors, Inc. and Twentieth Century
Services, Inc.; formerly associated with the law firm of Stinson, Mag &
Fizzell, Kansas City, Missouri.
MARYANNE ROEPKE, CPA, vice president, treasurer and principal accounting
officer; vice president and treasurer, Twentieth Century Investors, Inc.,
Twentieth Century World Investors, Inc., Twentieth Century Capital Portfolios,
Inc., Twentieth Century Premium Reserves, Inc. and TCI Portfolios, Inc.; vice
president, Twentieth Century Services, Inc.
MERELE A. MAY, controller; controller, Twentieth Century Investors, Inc.,
Twentieth Century Capital Portfolios, Inc. and TCI Portfolios, Inc.
The board of directors has established three standing committees: the
executive committee, the audit committee and the nominating committee.
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Messrs. Stowers Jr., Stowers III and Urie constitute the executive
committee of the board of directors. The committee performs the functions of the
board of directors between meetings of the board, subject to the limitations on
its power set out in the Maryland General Corporation Law and except for matters
required by the Investment Company Act to be acted upon by the whole board.
Those directors who are not "interested persons" constitute the audit
committee. The functions of the audit committee include recommending the
engagement of the corporation's independent auditors, reviewing the arrangements
for and scope of the annual audit, reviewing comments made by the independent
auditors with respect to internal controls and the considerations given or the
corrective action taken by management and reviewing nonaudit services provided
by the independent auditors.
The nominating committee has, as its principal role, the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the board, management and shareholders. This
committee also reviews and makes recommendations to the board with respect to
the composition of board committees and other board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Urie
(chairman), Lundgaard and Stowers III.
The directors of the corporation also serve as directors of Twentieth
Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Premium Reserves, Inc., and
TCI Portfolios, Inc., registered investment companies. Each director who is not
an "interested person" as defined in the Investment Company Act receives for
service as a member of the board of all six of such companies an annual
director's fee of $36,000, a fee of $1,000 per regular board meeting attended
and $500 per special board meeting and committee meeting attended. In addition,
those directors who are not "interested persons" who serve as chairman of a
committee of the board of directors receive an additional $2,000 for such
services. These fees and expenses are divided among the six investment companies
based upon their relative net assets. Under the terms of the management
agreement with Investors Research Corporation, the corporation is responsible
for paying such fees and expenses.
Those directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a director. The salaries of
such individuals, who also are officers of the corporation, are paid by
Investors Research Corporation.
MANAGEMENT
A description of the responsibilities and method of compensation of
Twentieth Century's investment manager, Investors Research Corporation
("Investors Research"), appears in the prospectus under the caption
"Management."
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 such execution and for as long thereafter as
its continuance is specifically approved at least annually by (i) the board of
directors of Twentieth Century or by the vote of a majority of outstanding votes
(as defined in the Investment Company Act) and (ii) by the vote of a majority of
the directors of Twentieth Century who are not parties to the agreement or
interested persons of Investors Research, cast in person at a meeting called for
the purpose of voting on such approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the board of directors of Twentieth Century,
or by a vote of Twentieth Century's shareholders, on 60 days' written notice to
Investors Research and that it shall be automatically terminated if it is
assigned.
The management agreement provides that Investors Research shall not be
liable to Twentieth Century or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
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The management agreement also provides that Investors Research 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 Investors Research. Investment decisions for the funds and
other clients are made with a view to achieving their respective investment
objectives after consideration of such factors as their current holdings,
availability of cash for investment, and the size of their investment generally.
A particular security may be bought or sold for only one client, or in different
amounts and at different times for more than one but less than all clients. In
addition, purchases or sales of the same security may be made for two or more
clients on the same date. Such transactions will be allocated among clients in a
manner believed by Investors Research 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.
In addition to managing the funds, on February 1, 1996, Investors Research
was also acting as an investment adviser to 13 institutional accounts and to
five other registered investment companies within the Twentieth Century mutual
fund complex: Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc., Twentieth Century Premium Reserves, Inc., TCI Portfolios, Inc.
and Twentieth Century Capital Portfolios, Inc.
Twentieth Century Services, Inc. provides physical facilities, including
computer hardware and software and personnel, for the day-to-day
administration of Twentieth Century and Investors Research. Investors Research
pays Twentieth Century Services, Inc., for such services.
As stated in the prospectus, all of the stock of Twentieth Century
Services, Inc., and Investors Research is owned by Twentieth Century Companies,
Inc.
CUSTODIANS
The Chase Manhattan Bank, N.A., 770 Broadway, New York, New York 10003,
Boatmen's First National Bank of Kansas City, 10th and Baltimore, Kansas City,
Missouri 64105 and United Missouri Bank of Kansas City, N.A., 10th and Grand,
Kansas City, Missouri 64105, each serves as custodian of 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
Ernst & Young LLP, One Kansas City Place, 1200 Main Street, Kansas City,
Missouri 64105, serves as Twentieth Century's independent auditors, providing
services including (1) audit of the annual financial statements, (2) assistance
and consultation in connection with SEC filings and (3) review of the annual
federal income tax return filed for each fund by Twentieth Century.
CAPITAL STOCK
Twentieth Century's capital stock is described in the prospectus under the
caption "Further Information About Twentieth Century."
Twentieth Century currently has three series of shares outstanding:
Strategic Allocation: Conservative, Strategic Allocation: Moderate and
Strategic Allocation: Aggressive. Twentieth Century may in the future issue
one or more additional series of shares without a vote of the shareholders.
The assets belonging to each series of shares are held separately by the
custodian and the shares of each series represent a beneficial interest in the
principal, earnings and profits (or losses) of investment and other assets
held for that series. Your rights as a shareholder are the same for all series
of securities unless otherwise stated. Within their respective series, all
shares will have
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equal redemption rights. Each share, when issued, is fully paid and
non-assessable. Each share, irrespective of series, is entitled to one vote for
each dollar of net asset value represented by such share on all questions.
In the event of complete liquidation or dissolution of Twentieth Century,
shareholders of each series of shares will be entitled to receive, pro rata, all
of the assets less the liabilities of that series.
Prior to February 15, 1996, no shares of the funds had been offered to the
public. As a result, there were no 5% shareholders and no shares were owned by
officers or directors of the corporation.
TAXES
Each fund intends to qualify under the Internal Revenue Code (the "Code")
as a regulated investment company. If they qualify, they will not be subject to
U.S. federal income tax on net investment income and net capital gains, which
are distributed to its shareholders within certain time periods specified in the
Code. Amounts not distributed on a timely basis would be subject to federal and
state corporate income tax and to a nondeductible 4% excise tax.
Each fund intends to distribute annually all of its net ordinary income and
net capital gains.
Distributions from net investment income and net short-term capital gains
are taxable to shareholders as ordinary income. The dividends received
deduction available to corporate shareholders for dividends received from a
fund will apply to ordinary income distributions only to the extent that they
are attributable to the fund's dividend income from U.S. corporations. In
addition, the dividends received deduction will be limited if the shares with
respect to which the dividends are received are treated as debt-financed or are
deemed to have been held less than 46 days by a fund.
Distributions from net long-term capital gains are taxable to a shareholder
as long-term capital gains regardless of the length of time the shares on which
such distributions are paid have been held by the shareholder. However,
shareholders should note that any loss realized upon the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any distribution of long-term capital gain to the shareholder
with respect to such shares.
Redemption of shares of a fund will be a taxable transaction for federal
income tax purposes and shareholders will generally recognize gain or loss in an
amount equal to the difference between the basis of the shares and the amount
received. Assuming that shareholders hold such shares as a capital asset, the
gain or loss will be a capital gain or loss and will generally be long term if
shareholders have held such shares for a period of more than one year. If a loss
is realized on the redemption of fund shares, the reinvestment in additional
fund shares within 30 days before or after the redemption may be subject to the
"wash sale" rules of the Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes.
In addition to the federal income tax consequences described above relating
to an investment in shares of the funds, there may be other federal, state or
local tax considerations that depend upon the circumstances of each particular
investor. Prospective shareholders are therefore urged to consult their tax
advisers with respect to the effect of this investment on their own situations.
BROKERAGE
Under the terms of the Management Agreement between Twentieth Century and
Investors Research, Investors Research has the responsibility of selecting
brokers to execute portfolio transactions. Twentieth Century's policy is to
secure the most favorable prices and execution of orders on its portfolio
transactions. So long as that policy is met, Investors Research may take into
consideration the factors discussed below when selecting brokers.
Investors Research receives statistical and other information and services
without cost from brokers and dealers. Investors Research evaluates such
information and services, together with all other information that it may have,
in supervising and managing the investment portfolios of Twentieth Century.
Because such information and
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services may vary in amount, quality and reliability, their influence in
selecting brokers varies from none to very substantial. Investors Research
proposes to continue to place some of Twentieth Century's brokerage business
with one or more brokers who provide information and services.
Such information and services will be in addition to and not in lieu of the
services required to be performed by Investors Research. Investors Research does
not utilize brokers who provide such information and services for the purpose of
reducing the expense of providing required services to Twentieth Century.
The brokerage commissions paid by the funds may exceed those that another
broker might have charged for effecting the same transactions because of the
value of the brokerage and/or research services provided by the broker. Research
services furnished by brokers through whom Twentieth Century effects securities
transactions may be used by Investors Research in servicing all of its accounts,
and not all such services may be used by Investors Research in managing the
portfolios of Twentieth Century.
The staff of the Securities and Exchange Commission 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 Twentieth Century and the manager believe that the
facilities, expert personnel and technological systems of a broker enable the
corporation 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.
Twentieth Century normally places its over-the-counter transactions with
principal market makers but also may deal on a brokerage basis when utilizing
electronic trading networks or as circumstances warrant.
PERFORMANCE ADVERTISING
Individual fund performance may be compared to the performance of other
mutual funds of mutual fund portfolios with comparable investment objectives and
policies through various mutual fund or market indices (such as those prepared
by Dow Jones & Co., Inc. Standard & Poor's Corporation, Shearson Lehman
Brothers, Inc., J. P. Morgan & Company, Salomon Brothers, Inc., the Morgan
Stanley Capital International EAFE (Europe, Australia and Far East) Index,
Donoghue's Money Fund Average, the Bank Rate Monitor National Index of 2
1/2-year CD rates, IFC Global Composite Index), and to composite indices
consisting of two or more of the above to more accurately reflect fund holdings,
and to data prepared by Lipper Analytical Services, Inc. or Morningstar, Inc.,
and to the Consumer Price Index. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, Pensions and Investments, U.S.A. Today, and other
similar publications or services. In addition to performance information,
general information about the funds that appears in a publication such as those
mentioned above or in the prospectus under the heading "Performance Advertising"
may be included in advertisements and in reports to shareholders. It may also be
combined or blended with other funds in the Twentieth Century family of funds,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders:
(1) discussions of general economic or financial principles (such as the
effects of compounding and the benefits of dollar-cost averaging);
(2) discussions of general economic trends;
(3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or
more of the funds;
(5) descriptions of investment strategies for one or more of the funds;
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(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 ratings
organizations; and
(9) testimonials describing the experience of persons that have invested in
one or more of the funds.
The funds may also include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of assumptions and are
not indicative of the performance of any of the funds.
The funds also may advertise average annual total return over periods of
time other than one, five and 10 years and cumulative total return over various
time periods.
The funds also may elect to advertise cumulative total return and average
annual total return, computed as described above.
REDEMPTIONS IN KIND
In order to protect the investments of the remaining shareholders,
Twentieth Century has adopted a policy regarding large redemptions. That policy
is described in detail in the prospectuses under the heading "Redemption
Proceeds--Special Requirements for Large Redemptions."
In addition to the policy just mentioned, Twentieth Century has elected to
be governed by Rule 18f-1 under the Investment Company Act of 1940, pursuant to
which it is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of a fund during any 90-day period for any
one shareholder. Should redemptions by any shareholder exceed such limitation,
Twentieth Century will have the option of redeeming the excess in cash or in
kind. If shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The securities delivered will
be selected at the sole discretion of Twentieth Century and will not necessarily
be representative of the entire portfolio and will be securities that Twentieth
Century regards as least desirable. The method of valuing securities used to
make redemptions in kind will be the same as the method of valuing portfolio
securities described in the prospectus under the heading "How Share Price is
Determined," and such valuation will be made as of the same time the redemption
price is determined.
HOLIDAYS
Twentieth Century does not determine the net asset value of its shares on
days when the New York Stock Exchange is closed. Currently, the Exchange is
closed on Saturdays and Sundays and on holidays, namely New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
FINANCIAL STATEMENTS
The Statement of Net Assets at February 1, 1996, appearing in this
Statement of Additional Information has been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon their report, given upon the authority
of such firm as experts in accounting and auditing.
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REPORT OF INDEPENDENT AUDITORS
The Shareholder and Board of Directors
Twentieth Century Strategic Asset Allocations, Inc.
We have audited the accompanying statement of net assets of Twentieth
Century Strategic Asset Allocations, Inc. (comprised of the Strategic
Allocation: Conservative, Strategic Allocation: Moderate and Strategic
Allocation: Aggressive portfolios)(the Company) as of February 1, 1996. This
statement of net assets is the responsibility of the Company's management. Our
responsibility is to express an opinion on this statement of net assets based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of net assets is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of net assets. Our
procedures included confirmation of securities owned as of February 1, 1996, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall statement of net assets presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of each of the
portfolios comprising Twentieth Century Strategic Asset Allocations, Inc. at
February 1, 1996, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Kansas City, Missouri
February 1, 1996
15
<PAGE>
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
Statement of Net Assets
February 1, 1996
Strategic Strategic Strategic
Allocation: Allocation: Allocation:
Conservative Moderate Aggressive
Assets
Federal Home Loan Bank
Discount Note, 2/27/96,
at market value ............ $ 99,628 $ -- $ --
Federal National Mortgage
Association Discount Note,
2/28/96, at market value ... $ -- $ 99,613 $ 99,613
Cash ......................... 372 387 387
------------- ------------- -------------
Net assets applicable to
outstanding shares ........... $ 100,000 $ 100,000 $ 100,000
------------- ------------- -------------
Capital Shares, $.01 par value
Authorized ................... 1,000,000,000 1,000,000,000 1,000,000,000
============= ============= =============
Outstanding .................. 20,000 20,000 20,000
============= ============= =============
Net asset value per share .... $ 5.00 $ 5.00 $ 5.00
============= ============= =============
Note: Twentieth Century Strategic Asset Allocations, Inc. (the Company) was
organized as a Maryland corporation on April 4, 1994 and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company of the series type with each series, in effect,
representing a separate fund. Three series of shares are currently issued:
Strategic Allocation: Conservative, Strategic Allocation: Moderate and Strategic
Allocation: Aggressive. Shares outstanding on February 1, 1996 for each series
were issued to Twentieth Century Companies, Inc. (TCC), the parent corporation
of the Company's investment manager. The costs of organization will be paid by
TCC.
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TWENTIETH CENTURY
Strategic Asset
Allocations, Inc.
Statement of
Additional Information
February 15, 1996
[company logo]
Investments That Work(TM)
- ---------------------------------------
P.O. Box 419200
- ---------------------------------------
Kansas City, Missouri
- ---------------------------------------
64141-6200
- ---------------------------------------
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
- ---------------------------------------
Automated information line:
1-800-345-8765
- ---------------------------------------
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
- ---------------------------------------
Fax: 816-340-7962
- ---------------------------------------
- --------------------------------------------------------------------------------
SH-BKT-3929
9602
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
TWENTIETH CENTURY
Strategic Asset Allocations, Inc.
Institutional Prospectus
February 15, 1996
- --------------------------------------------------------------------------------
TWENTIETH CENTURY
Twentieth Century Strategic Asset Allocations, Inc., a member of the
Twentieth Century family of funds, is an open-end diversified management
investment company. Three series of shares, or "funds," are described in this
prospectus, Strategic Allocation: Conservative, Strategic Allocation: Moderate
and Strategic Allocation: Aggressive.
The investment objective of each fund is to provide as high a level of
total return (capital appreciation plus dividend and interest income) as is
consistent with its risk profile. Each fund seeks to achieve its investment
objective by diversifying investments among three asset classes -- equity
securities, bonds and cash equivalent instruments, the mix of which will depend
on the risk profile of the particular fund. The funds are designed for investors
with investment time horizons of at least five years who want to diversify their
investments among these various asset classes through a single investment
vehicle. There is no assurance that the funds will achieve their investment
objectives. See "Investment Policies of the Funds," page 4.
NO-LOAD MUTUAL FUNDS
Twentieth Century's funds are "no-load" investments, which means there is
no sales charge or commission. There are no minimum initial investment
requirements. However, if the value of the shares held in any one fund account
is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish a $50 or
greater automatic monthly investment to purchase additional shares in each such
account.
This prospectus gives you information about Twentieth Century that you
should know before investing. You should read this prospectus carefully and
retain it for future reference. Additional information is included in the
statement of additional information dated February 15, 1996, and filed with the
Securities and Exchange Commission. It is incorporated in this prospectus by
reference. To obtain a copy without charge, call or write:
Twentieth Century Strategic Asset Allocations, Inc.
4500 Main Street o P.O. Box 419385
Kansas City, MO 64141-6385 o 1-800-345-3533
Local and international calls: 816-531-5575
Telecommunications device for the deaf:
1-800-345-1833 o In Missouri: 816-753-0700
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TRANSACTION AND
OPERATING EXPENSE TABLE ........................ 4
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS ............... 5
OTHER INVESTMENT PRACTICES, THEIR
CHARACTERISTICS AND RISKS ................. 8
Equity Securities ......................... 8
Foreign Securities ........................ 8
Mortgage-Related and Other
Asset-Backed Securities ................... 9
Forward Currency Exchange Contracts ....... 9
Portfolio Turnover ........................ 10
Repurchase Agreements ..................... 11
Futures and Options Contracts ............. 11
Derivative Securities ..................... 11
Portfolio Lending ......................... 12
When-Issued Securities .................... 12
Short Sales ............................... 13
Rule 144A Securities ...................... 13
PERFORMANCE ADVERTISING ........................ 13
HOW TO INVEST WITH TWENTIETH CENTURY
TWENTIETH CENTURY FAMILY OF FUNDS .............. 15
INVESTING IN TWENTIETH CENTURY ................. 15
HOW TO EXCHANGE YOUR INVESTMENT FROM ONE
TWENTIETH CENTURY FUND TO ANOTHER ......... 15
HOW TO REDEEM SHARES ........................... 15
Special Requirements for Large Redemptions. 16
TELEPHONE SERVICES ............................. 16
Institutional Sales and Service Line ...... 16
Automated Information Line ................ 16
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE .................................... 17
When Share Price Is Determined ............ 17
How Share Price Is Determined ............. 17
Where to Find Information About Share Price 18
DISTRIBUTIONS .................................. 18
General Information About Distributions ... 18
TAXES .......................................... 19
MANAGEMENT ..................................... 20
Investment Management ..................... 20
Code of Ethics ............................ 22
Transfer and Administrative Services ...... 22
FURTHER INFORMATION ABOUT TWENTIETH CENTURY .... 22
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TRANSACTION AND OPERATING EXPENSE TABLE
- --------------------------------------------------------------------------------
Strategic Strategic Strategic
Allocation: Allocation: Allocation:
Conservative Moderate Aggressive
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed
on Purchases none none none
Maximum Sales Load Imposed on
Reinvested Dividends none none none
Deferred Sales Load none none none
Redemption Fee(1) none none none
Exchange Fee none none none
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS):
Management Fees 1.00%(2) 1.10%(3) 1.20%(4)
12b-1 Fees none none none
Other Expenses(5) 0.00% 0.00% 0.00%
Total Fund Operating Expenses 1.00% 1.10% 1.20%
Example
You would pay the following expenses
on a $1,000 investment, 1 year $10 $11 $12
assuming (1) a 5% annual 3 years 32 35 38
return and (2) redemption at
the end of each time period:(6)
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Twentieth Century funds offered
by this prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(1) Redemption proceeds sent by wire transfer are subject to a $10 processing
fee.
(2) The fund pays an annual management fee equal to 1.00% of its first $1
billion of average net assets and .90% of average net assets over $1
billion.
(3) The fund pays an annual management fee equal to 1.10% of its first $1
billion of average net assets and 1.00% of average net assets over $1
billion.
(4) The fund pays an annual management fee equal to 1.20% of its first $1
billion of average net assets and 1.10% of average net assets over $1
billion.
(5) Other expenses, the fees and expenses of those directors who are not
"interested persons" as defined in the Investment Company Act, are expected
to be approximately .00035 of 1% of average net assets for the fund's first
fiscal year.
(6) Assumes that the average net assets of the funds remain
constant at less than $1 billion.
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED BY TWENTIETH CENTURY TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN
OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY TWENTIETH CENTURY, AND YOU SHOULD
NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION.
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INFORMATION REGARDING THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT POLICIES OF THE FUNDS
INVESTMENT OBJECTIVES
Twentieth Century offers three asset allocation funds: Strategic
Allocation: Conservative, Strategic Allocation: Moderate and Strategic
Allocation: Aggressive.
Each fund's investment objective is to obtain as high a level of total
return (capital appreciation plus dividend and interest income)as is consistent
with such fund's risk profile. As with all mutual funds, there can be no
assurance that the funds will achieve their investment objectives.
You should be aware that the names of the funds are intended to reflect the
relative short-term price volatility risk among the three asset allocation funds
offered in this prospectus and not as an indication of the manager's assessment
of the riskiness of the funds as compared to other mutual funds, including other
mutual funds within the Twentieth Century family of funds.
THE FUNDS
The funds pursue a flexible approach that diversifies the funds' assets
among various classes and categories of assets. Each fund has its own mix, which
gives it a distinct risk profile and return potential. The three funds enable
investors to select the level of risk that is appropriate for their particular
situations and investment goals. See "Investment Strategy and Asset
Diversification" on this page.
STRATEGIC ALLOCATION: CONSERVATIVE. The asset mix of Strategic Allocation:
Conservative seeks to provide shareholders with regular income through its
emphasis on bonds and money market securities, combined with the potential for
moderate long-term total return as a result of its stake in equity securities.
The fund's emphasis on bonds and money market securities should help to provide
a measure of principal protection while the stock market is in a decline.
STRATEGIC ALLOCATION: MODERATE. The asset mix of Strategic Allocation:
Moderate emphasizes investments in equity securities, but maintains a sizable
stake in bonds and money market securities. This asset mix seeks to provide
long-term growth and some regular income, while helping to moderate losses
when the stock market declines.
STRATEGIC ALLOCATION: AGGRESSIVE. The asset mix of Strategic Allocation:
Aggressive emphasizes investments in equity securities, but maintains a
portion of its assets in bonds and money market securities. This asset mix
seeks to provide long-term growth, together with a small amount of income to
help cushion the volatility of the equity portfolio.
INVESTMENT STRATEGY AND ASSET DIVERSIFICATION
The funds seek to achieve their investment objectives by pursuing a
strategic asset allocation strategy. Each fund will diversify its investments
among three major asset classes -- equity securities, bonds and cash equivalent
instruments.
Each fund has its own neutral mix that represents a benchmark as to how
that fund's investments will be generally allocated among the major asset
classes over the long term. Each fund's neutral mix is set forth below:
NEUTRAL MIXES
Equity Cash
Fund Securities Bonds Equivalents
-------------------------------------------------------------
Strategic Allocation:
Conservative 40% 45% 15%
-------------------------------------------------------------
Strategic Allocation:
Moderate 60% 30% 10%
-------------------------------------------------------------
Strategic Allocation:
Aggressive 75% 20% 5%
-------------------------------------------------------------
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The mix of a fund will vary over short-term periods depending on the
relative performance of the various asset classes (for example, when one class
of assets increases or decreases in value at a different rate than the other
classes). In addition, the manager may temporarily emphasize or de-emphasize a
class of assets based on market conditions regarding the relative value of the
asset class in the near term. However, each fund has operating ranges that
restrict the amount by which the assets of each class may fluctuate. Those
operating ranges are set forth below:
OPERATING RANGES
Equity Cash
Fund Securities Bonds Equivalents
-------------------------------------------------------------
Strategic Allocation:
Conservative 34-46% 38-52% 10-25%
-------------------------------------------------------------
Strategic Allocation:
Moderate 50-70% 20-40% 5-20%
-------------------------------------------------------------
Strategic Allocation:
Aggressive 60-90% 5-20% 0-15%
-------------------------------------------------------------
In addition to diversifying among asset classes, the assets in the equity
and bond classes are further diversified among investment categories (or
sectors) and styles within those classes. See "Investment Approach and
Practices," below. The allocation of assets within a fund's operating range and
among the different investment categories within each class is designed to
provide a diversified portfolio emphasizing total return.
INVESTMENT APPROACH AND PRACTICES
As described above, each fund's assets are allocated among major asset
classes according to their respective asset mix and subject to the applicable
operating ranges. Each fund's assets are further diversified among various
investment categories and disciplines within the major asset classes, as
described below.
EQUITY SECURITIES. The equity portion of a fund's portfolio may be invested
in any type of domestic or foreign equity security, primarily common stocks,
that meets certain fundamental and technical standards of selection. The manager
will utilize two distinct investment disciplines in managing the equity portion
of each fund's portfolio: (1) growth; and (2) value.
The growth discipline seeks long-term capital appreciation by investing in
companies whose earnings and revenue trends meet the manager's standards of
selection, which generally means that the companies have demonstrated, or, in
the manager's opinion, have the prospects for demonstrating, accelerating
earnings and revenues as compared to prior periods and/or industry competitors.
The value investment discipline seeks capital growth by investing in equity
securities of well-established companies that are believed by the manager to be
temporarily undervalued.
Management believes that both value investing and growth investing provide
the potential for appreciation over time. Value investing tends to provide less
volatile results. This lower volatility means that the price of value stocks
tends not to fall as significantly as growth stocks do in down markets. However,
value stocks do not usually appreciate as significantly as growth stocks do in
up markets. In keeping with the diversification theme of these funds, and as a
result of management's belief that these styles are complementary, both
disciplines will be represented to some degree in each portfolio at all times.
As noted, the value investment discipline tends to be less volatile than
the growth style. As a result, Strategic Allocation: Conservative, will
generally have a higher proportion of its equity investments in value stocks
than the other two funds. Likewise, Strategic Allocation: Aggressive, will
generally have a greater proportion of growth stocks than either Strategic
Allocation: Moderate or Strategic Allocation: Conservative.
In addition, the equity portion of each fund's portfolio will be further
diversified among small, medium and large companies. This approach provides
investors with an additional level of
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diversification and enables investors to achieve a broader exposure to the
various capitalization ranges without having to invest in multiple funds.
Although the funds will remain exposed to each of the investment
disciplines and categories described above, a particular discipline or
investment category may be emphasized when, in the manager's opinion, such
discipline or investment category is undervalued relative to the other
disciplines or categories. See "Other Investment Practices, Their
Characteristics and Risks," page 8.
BONDS. The fixed income portion of a fund's portfolio will include U.S.
Treasury securities, securities issued or guaranteed by the U.S. government or a
foreign government, or an agency or instrumentality of the U.S. or a foreign
government, and non-convertible debt obligations issued by U.S. or foreign
corporations. The funds may also invest in mortgage-related and other
asset-backed securities as described under "Mortgage-Related and Other Asset
Backed Securities," page 7. As with the equity portion of a fund's portfolio,
the bond portion of a fund's portfolio will be diversified among the various
types of fixed income investment categories described above. The manager's
strategy is to actively manage the portfolio by investing the fund's assets in
sectors it believes are undervalued (relative to the other sectors) and which
represent better relative long-term investment opportunities.
The value of fixed income securities fluctuates based on changes in
interest rates and in the credit quality of the issuer. Debt securities that
comprise part of a fund's fixed income portfolio will primarily be limited to
"investment grade" obligations. However, Strategic Allocation: Moderate may
invest up to 5% of its assets, and Strategic Allocation: Aggressive may invest
up to 10% 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. ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P")], or, if not rated, are of equivalent
investment quality as determined by the investment manager. According to
Moody's, bonds rated Baa are medium-grade and possess some speculative
characteristics. A BBB rating by S&P indicates S&P's belief that a security
exhibits a satisfactory degree of safety and capacity for repayment, but is more
vulnerable to adverse economic conditions and changing circumstances.
"High yield" securities, sometimes referred to as "junk bonds," are
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 investment objective of the fund. (See "An Explanation of Fixed
Income Securities Ratings" in the Statement of Additional Information.)
Under normal market conditions, the maturities of fixed-income securities
in which the funds invest will range from 2 to 30 years.
CASH EQUIVALENTS. The cash equivalent portion of a fund's portfolio may
be invested in high-quality money market instruments (denominated in U.S.
dollars or foreign currencies),
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including U.S. government obligations, obligations of domestic and foreign
banks, short-term corporate debt instruments and repurchase agreements.
GENERAL PORTFOLIO MANAGEMENT
Within each asset class, each fund's holdings will be invested across
industry groups and issuers that meet its investment criteria. This diversity of
investment is intended to help reduce the risk created by over-concentration in
a particular industry or issuer.
The funds are "strategic" rather than "tactical" allocation funds, which
means that the manager does not try to time the market to identify the exact
time when a major reallocation should be made. Instead, the manager utilizes a
longer-term approach in pursuing the funds' investment objectives, and thus
selects a blend of investments in the various asset classes.
The manager regularly reviews each fund's investments and allocations and
may make changes in the particular securities within each asset class or to a
fund's asset mix (within the defined operating ranges) to favor investments that
it believes will provide the most favorable outlook for achieving a fund's
objective. Recommended reallocations may be implemented promptly or may be
implemented gradually. In order to minimize the impact of reallocations on a
fund's performance, the manager will generally attempt to reallocate assets
gradually.
In determining the allocation of assets among U.S. and foreign capital
markets, the manager considers the condition and growth potential of the various
economies; the relative valuations of the markets; and social, political, and
economic factors that may affect the markets.
In selecting securities in foreign currencies, the manager considers, among
other factors, the impact of foreign exchange rates relative to the U.S. dollar
value of such securities. The manager may seek to hedge all or a part of a
fund's foreign currency exposure through the use of forward foreign currency
contracts or options thereon. See "Forward Currency Exchange
Contracts," page 9.
The funds attempt to diversify across asset classes and investment
categories to a greater extent than mutual funds that invest primarily in equity
securities or primarily in fixed income securities. However, the funds are
designed to fit three general risk profiles and may not provide an appropriately
balanced investment plan for all investors.
The funds' investment objectives, as identified on the front cover of this
prospectus, and any other investment policies designated as "fundamental" in
this prospectus or in the statement of additional information, cannot be changed
without the approval of the shareholders entitled to cast a majority of the
outstanding votes of the corporation, as defined by the Investment Company Act.
Unless otherwise noted, all other investment policies and practices are
nonfundamental and may be changed without shareholder approval.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
EQUITY SECURITIES
In addition to investing in common stocks, the funds may invest in other
equity securities and equity equivalents. Other equity securities and equity
equivalents include securities that permit the fund to receive an equity
interest in an issuer, the opportunity to acquire an equity interest in an
issuer, or the opportunity to receive a return on its investment that permits
the fund to benefit from the growth over time in the equity of an issuer.
Examples of equity securities and equity equivalents include preferred stock,
convertible preferred stock and convertible debt securities.
Each fund will limit its purchase of convertible debt securities to those
that, at the time of purchase, are rated at least B- by S&P or B3 by
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<PAGE>
Moody's, or if not rated by S&P or Moody's are of equivalent investment quality
as determined by the manager. No more than 35% of a fund's assets may be
invested in convertible debt securities and other high yield, non-convertible
debt securities rated below investment grade. Debt securities rated below the
four highest categories are not considered "investment grade" obligations. These
securities have speculative characteristics and present more credit risk than
investment grade obligations. For a description of the S&P and Moody's ratings
categories, see "An Explanation of Fixed Income Securities Ratings," page 5 of
the Statement of Additional Information. Equity equivalents may also include
securities whose value or return is derived from the value or return of a
different security. Depositary receipts are an example of the type of equity
equivalent security in which the funds might invest.
FOREIGN SECURITIES
Each fund may invest in the securities of foreign issuers, including debt
securities of foreign governments and their agencies, when these securities meet
its standards of selection. Strategic Allocation: Conservative will generally
invest between 7 and 17% of its assets in foreign securities; Strategic
Allocation: Moderate will generally invest between 10 and 30% of its assets in
foreign securities; and Strategic Allocation: Aggressive will generally invest
between 15 and 35% of its assets in foreign securities. With regard to foreign
investments by Strategic Allocation: Conservative, the principal activities of
such issuers will be located in developed countries. With regard to Strategic
Allocation: Aggressive and Strategic Allocation: Moderate, the principal
activities of such issuers may be located in either developed or developing
countries, but the majority of the activities will be in developed countries.
The funds may make such investments either directly in foreign securities
or indirectly by purchasing depositary receipts or depositary shares of similar
instruments ("depositary receipts") for foreign securities. Depositary receipts
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.
Subject to its investment objective and policies, each fund may invest in
common stocks, convertible securities, preferred stocks, bonds, notes and other
debt securities of foreign issuers and debt securities of foreign governments
and their agencies. The credit quality standards applicable to domestic
securities purchased by each fund are also applicable to its foreign securities
investments.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Strategic Allocation: Moderate and Strategic Allocation: Aggressive may
invest a portion of their international holdings in securities of issuers in
emerging market (developing) countries. Investing in emerging market countries
involves significantly higher risk than investing in countries with developed
markets as a result of uncertainty regarding the companies and the markets in
which they operate. Securities prices can be more volatile than in developed
countries as a result of investor concerns regarding the stability of the
government, internal economic pressures, and the impact of external economic
factors. In addition, securities markets in emerging market countries may trade
a small number of securities and may be unable to respond effectively to
increases in trading volume, potentially resulting in a lack of liquidity and in
volatility in
8
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the price of securities traded on those markets. Also, securities markets in
emerging market countries typically offer less regulatory protection for
investors. See "Investing in Emerging Market Countries" on page 7 of the
Statement of Additional Information.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES
The funds may purchase mortgage-related and other asset-backed securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are generally made monthly, in effect "passing through" monthly
payments made by the individual borrowers on the residential mortgage loans that
underlie the securities (net of fees paid to the issuer or guarantor of the
securities).
Early repayment of principal on mortgage pass-through securities (arising
from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose the funds to a lower rate of return upon reinvestment of principal. Also,
if a security subject to prepayment were purchased at a premium, in the event of
prepayment, the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. government in the case of securities
guaranteed by the Government National Mortgage Association (GNMA), or guaranteed
by agencies or instrumentalities of the U.S. government in the case of
securities guaranteed by the Federal National Mortgage Association (FNMA) or the
Federal Home Loan Mortgage Corporation (FHLMC), which are supported only by the
discretionary authority of the U.S. government to purchase the agency's
obligations.
Mortgage pass-through securities created by nongovernmental issuers (such
as commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be supported
by various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance and letters of credit, which may be issued by
governmental entities, private insurers, or the mortgage poolers.
The funds may also invest in collateralized mortgage obligations (CMOs).
CMOs are mortgage-backed securities issued by government agencies;
single-purpose, stand-alone financial subsidiaries; trusts established by
financial institutions; or similar institutions. The funds may buy CMOs that
meet the following criteria:
o Are collateralized by pools of mortgages in which payment of principal
and interest of each mortgage is guaranteed by an agency or
instrumentality of the U.S. government;
o Are collateralized by pools of mortgages in which payment of principal
and interest are guaranteed by the issuer, and the guarantee is
collateralized by U.S. government securities;
o Are securities in which the proceeds of the issue are invested in
mortgage securities and payments of principal and interest are
supported by the credit of an agency or instrumentality of the U.S.
government.
FORWARD CURRENCY EXCHANGE CONTRACTS AND OPTIONS THEREON
Some of the securities held by the funds may be denominated in foreign
currencies. Other securities, such as depositary receipts, may be denominated in
U.S. dollars but have a value that is dependent on the performance of a foreign
security, as valued in the currency of its home country. As a result, the value
of a fund's
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portfolio may be affected by changes in the exchange rate between foreign
currencies and the U.S. dollar, as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
dollar may be a factor in a fund's overall performance.
To protect against adverse movements in exchange rates between currencies,
the funds may, for hedging purposes only, enter into forward currency exchange
contracts and buy put and call options relating to interest rate futures
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price. An option is a
contractual right to acquire a financial asset, such as a security, the
securities of a market index, a foreign currency or a foreign currency exchange
contract, at a specific price at the end of a specified term.
Each fund may elect to enter into a forward currency exchange contract or
an option thereon with respect to a specific purchase or sale of a security, or
with respect to the fund's portfolio positions generally.
By entering into a forward currency exchange contract or an option thereon
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the funds can "lock in" an exchange rate between the trade and
settlement dates for that purchase or sale. This practice is sometimes referred
to as "transaction hedging." Each fund may enter into transaction hedging
contracts with respect to all or a substantial portion of its foreign securities
trades.
When the manager believes that a particular currency may decline in value
compared to the dollar, the funds may enter into forward currency exchange
contracts or options thereon to sell an amount of foreign currency equal to the
value of some or all of a fund's portfolio securities either denominated in, or
whose value is tied to, that currency. This practice is sometimes referred to as
"portfolio hedging." A fund may not enter into a portfolio hedging transaction
where the fund would be obligated to deliver an amount of foreign currency in
excess of the aggregate value of the fund's portfolio securities or other assets
denominated in, or whose value is tied to, that currency.
The funds will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the funds will enter
into portfolio hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract or an option
thereon, the fund, when required, will instruct its custodian bank to segregate
cash or liquid high-grade securities in a separate account in an amount
sufficient to cover its obligation under the contract. For options sold, a fund
will segregate cash or liquid high-grade securities equal to the value of the
securities underlying the options unless the options are otherwise secured.
Those assets will be valued at market daily, and if the value of the segregated
securities declines, additional cash or securities will be added so that the
value of the account is not less than the amount of the fund's commitment. At
any given time, no more than 10% of a fund's assets will be committed to a
segregated account in connection with portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the funds against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S.
dollar.
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's
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objectives. Management believes that the rate of portfolio turnover is
irrelevant when it believes a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
predicted.
The portfolio turnover of the funds may be higher than other investment
companies with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
The manager estimates, pursuant to SEC requirements, that the rate of
portfolio turnover will, generally, not exceed 150% per year.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the fund's investment policies.
A repurchase agreement occurs when a fund purchases an interest-bearing
obligation from a bank or broker-dealer registered under the Securities Exchange
Act of 1934 and simultaneously agrees to sell it back on a specified date in the
future (usually less than one week later) at a higher price. The repurchase
price reflects an agreed-upon interest rate during the time the fund's money is
invested in the security and is considered by the staff of the Securities and
Exchange Commission to be a loan by the fund.
A fund's risk in connection with repurchase agreements is the ability of
the seller to pay the repurchase price on the repurchase date. If the seller
defaults, the fund may incur costs, delays or losses. Management monitors the
creditworthiness of sellers.
The funds will enter into repurchase agreements only with those commercial
banks and broker-dealers whose creditworthiness has been reviewed and found
satisfactory by the funds' management pursuant to criteria adopted by the funds'
board of directors.
FUTURES CONTRACTS
Each fund may enter into domestic and foreign futures contracts. A futures
contract is an agreement to take or make delivery of a financial asset at a
specific price at the end of the contract period. Some futures contracts, such
as market index futures, require settlement in cash based on the difference
between the value of the underlying financial assets at the beginning and at the
end of the contract period. Rather than actually purchasing the specific
financial assets, or the securities of a market index, the manager may purchase
a futures contract, which reflects the value of such underlying securities. For
example, S&P 500 futures reflect the value of the underlying companies that
comprise the S&P 500 Composite Stock Price Index. If the aggregate market value
of the underlying index securities increases or decreases during the contract
period, the value of the S&P 500 futures can be expected to reflect such
increase or decrease. The manager may use index futures to efficiently expose to
the equity markets a portion of a fund's assets that is being held for future
investment opportunities.
When a fund enters into a futures contract, it must make a deposit of cash
or high-quality debt securities, known as "initial margin," as partial security
for its performance under the contract. As the value of the underlying financial
assets fluctuates, either party to the contract is required to make additional
margin payments, known as "variation margin," to cover any additional obligation
it may have under the contract. Assets set aside by a fund as initial or
variable margin may not be disposed of so long as the fund maintains the
contract.
The funds may not purchase leveraged futures. A fund will deposit in a
segregated account with its custodian bank cash or high-quality debt securities
in an amount equal to the fluctuating market value of the index contracts it
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has purchased, less any margin deposited on its position. The funds will only
invest in exchange-traded futures.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts or S&P 500 futures), currencies, interest rates, indices
or other financial indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the S&P 500 Index would
be a permissible investment since each of the funds may invest in the securities
of companies comprising the S&P 500 Index (assuming they otherwise meet the
other requirements for the fund), while a security whose underlying value is
linked to the price of oil would not be a permissible investment since the funds
may not invest in oil and gas leases or futures.
The return of a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or
other financial asset will not move in the direction the portfolio
manager anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a
position when desired;
o the risk that adverse price movements in an instrument can result in a
loss substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The board of directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the board of directors as necessary. In addition, the
board will review the manager's policy for investments in derivative securities
annually.
WHEN-ISSUED SECURITIES
Each fund may purchase new issues of securities on a when-issued basis
without limit when, in the opinion of the manager, such purchases will further
the investment objectives of such fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur 15 to 45 days after the commitment
to purchase. Market rates of interest on debt securities at the time of deliv-
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ery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of such security may decline prior to delivery,
which could result in a loss to the fund. A separate account consisting of cash
or high-quality liquid debt securities in an amount at least equal to the
when-issued commitments will be established and maintained with the custodian.
No income will accrue to the fund prior to delivery.
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at
a current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet Twentieth
Century's criteria for selection. Rule 144A securities are securities that are
privately placed with and traded among qualified institutional buyers rather
than the general public. Although Rule 144A securities are considered
"restricted securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the board of directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. Accordingly, the board
of directors is responsible for developing and establishing the guidelines and
procedures for determining the liquidity of Rule 144A securities. As allowed by
Rule 144A, the board of directors of Twentieth Century has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A security
that is illiquid. In such an event, Twentieth Century will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
PERFORMANCE ADVERTISING
From time to time, Twentieth Century may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
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A quotation of yield reflects a fund's income over a stated period of time,
expressed as a percentage of the fund's share price.
Yield is calculated by adding over a 30-day (or one month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding during the period, and expressing the result as a percentage of the
fund's share price on the last day of the 30-day (or one month) period. The
percentage is then annualized. Capital gains and losses are not included in the
calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in the fund's financial statements.
Each fund also may include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services) and publications that monitor the performance of
mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to the performance of other mutual funds or mutual fund
portfolios with comparable investment objectives and policies through various
mutual fund or market indices (such as those prepared by Dow Jones & Co., Inc.
Standard & Poor's Corporation, Shearson Lehman Brothers, Inc., J. P. Morgan &
Company, Inc., Salomon Brothers, Inc., Morgan Stanley Capital International,
Donoghue's Money Fund Average, the Bank Rate Monitor National Index of 2
1/2-year CD rates, IFC Global Composite Index), and to composite indices
consisting of two or more of the above to more accurately reflect fund holdings,
and to data prepared by Lipper Analytical Services, Inc. or Morningstar, Inc.,
and to the Consumer Price Index. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, Pensions and Investments, U.S.A. Today, and other
similar publications or services. In addition to performance information,
general information about the funds that appears in a publication such as those
mentioned above may be included in advertisements and in reports to
shareholders. It may also be combined or blended with other funds in the
Twentieth Century family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
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HOW TO INVEST WITH TWENTIETH CENTURY
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TWENTIETH CENTURY FAMILY OF FUNDS
In addition to the funds offered by this prospectus, the Twentieth Century
family of funds also includes funds offered by Twentieth Century Investors,
Inc., Twentieth Century World Investors, Inc., Twentieth Century Capital
Portfolios, Inc. and Twentieth Century Premium Reserves, Inc. Please call the
Investors Line for a prospectus and additional information about the
other funds in the Twentieth Century family of funds.
The Twentieth Century family of mutual funds also now includes the funds
offered by The Benham Group as a result of the acquisition of Benham Management
Corporation, the investment manager of The Benham Group, by Twentieth Century
Companies, Inc. The Benham Group offers several funds with investment objectives
similar to funds within the Twentieth Century family, but with different fee
structures. You also may wish to consider the funds of The Benham Group for your
investment needs. For a prospectus and more information about those funds,
please call 1-800-331-8331.
INVESTING IN TWENTIETH CENTURY
The funds offered by this prospectus, Strategic Allocation: Conservative,
Strategic Allocation: Moderate and Stratetic Allocation: Aggressive, are
available as investment options in your employer-sponsored retirement or savings
plan. All orders to purchase shares must be made through your employer. The
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select a Twentieth
Century investment option.
If you have questions about the funds, see, "Investment Policies of the
Funds," page 4, or call Twentieth Century at 1-800-345-3533.
Orders to purchase shares are effective on the day Twentieth Century
receives payment. See "When Share Price is Determined," page 17.
Twentieth Century may discontinue offering shares generally in either fund
or in any particular state without notice to shareholders.
HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER
Your plan may permit you to exchange your investment from the shares of the
funds to shares of another fund in the Twentieth Century family of funds. See
your plan administrator or employee benefits office for details on the rules in
your plan governing exchanges, or call Twentieth Century's Institutional Sales
and Service Line at 1-800-345-3533. Exchange will be accepted by Twentieth
Century only as permitted by your plan.
Exchanges are made at the respective net asset values, next computed after
receipt of the exchange instruction by Twentieth Century. If in any 90-day
period, the total of the exchanges and redemptions from any one plan
participant's account exceeds the lesser of $250,000 or 1% of a fund's assets,
further exchanges will be subject to special requirements to comply with
Twentieth Century's policy on large redemptions. See "Special Requirements for
Large Redemptions," page 16.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan, you can sell
("redeem") your shares through the plan at their net asset value. Your plan
administrator, trustee or other designated person must provide Twentieth Century
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order.
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See "When Share Price Is Determined," page 17. If you have any questions about
how to redeem, contact your plan administrator or your employee benefits office.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
Twentieth Century has elected to be governed by Rule 18f-1 under the
Investment Company Act, which obligates each fund to redeem shares in cash, with
respect to any one participant account during any 90-day period, up to the
lesser of $250,000 or 1% of the assets of the fund. Although redemptions in
excess of this limitation will also normally be paid in cash, Twentieth Century
reserves the right to honor these redemptions by making payment in whole or in
part in readily marketable securities (a "redemption-in-kind"). If payment is
made in securities, the securities will be selected by the fund, will be valued
in the same manner as they are in computing the fund's net asset value and will
be provided to the redeeming plan participant in lieu of cash without prior
notice.
If you expect to make a large redemption and would like to avoid any
possibility of being paid in securities, you may do so by providing Twentieth
Century 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
transaction. Receipt of your instruction 15 days prior to the transaction
provides a fund with sufficient time to raise the cash in an orderly manner to
pay the redemption and thereby minimizes the effect of the redemption on the
fund and its remaining shareholders.
Despite its right to redeem fund shares through a redemption-in-kind,
Twentieth Century does not expect to exercise this option unless a fund has an
unusually low level of cash to meet redemptions and/or is experiencing unusually
strong demands for its cash. Such a demand might be caused, for example, by
extreme market conditions that result in an abnormally high level of redemption
requests concentrated in a short period of time. Absent these or similar
circumstances, Twentieth Century expects redemptions in excess of $250,000 to be
paid in cash in any fund with assets of more than $50 million if total
redemptions from any one account in any 90-day period do not exceed one-half of
1% of the total assets of the fund.
TELEPHONE SERVICES
INSTITUTIONAL SALES AND SERVICE LINE
You may reach a Twentieth Century Institutional Service Representative by
calling 1-800-345-3533. You may request information about our funds and a
current prospectus or get answers to any questions that you may have about the
funds and the services we offer.
AUTOMATED INFORMATION LINE
In addition to reaching us on our Institutional Sales and Service Line, you
may also reach us by telephone on our Automated Information Line, 24 hours a
day, seven days a week, at 1-800-345-8765. By calling the Automated Information
Line you may listen to fund prices, yields and total return figures.
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ADDITIONAL INFORMATION YOU SHOULD KNOW
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SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is their net asset value next determined after
receipt of your instruction to purchase, exchange or redeem. Net asset value is
determined by calculating the total value of a fund's assets, deducting total
liabilities and dividing the result by the number of shares outstanding. Net
asset value is determined on each day that the NYSE is open.
Investments and requests to redeem shares will receive the share price next
determined after receipt by Twentieth Century of the investment or redemption
request. For example, investments and requests to redeem shares received by
Twentieth Century before the close of business on the NYSE are effective on, and
will receive the price determined, that day as of the close of the Exchange.
Redemption requests received thereafter are effective on, and receive the price
determined, as of the close of the Exchange on the next day the Exchange is
open.
Investments are considered received only when your check or wired funds are
received by Twentieth Century. Wired funds are considered received on the day
they are deposited in Twentieth Century's bank account if they are deposited
before the close of business on the Exchange, usually 3 p.m. Central time.
Investments by telephone pursuant to your prior authorization to Twentieth
Century to draw on your bank account are considered received at the time of your
telephone call.
Investment and transaction instructions received by Twentieth Century on
any business day by mail at its office prior to the close of business on the
Exchange, usually 3 p.m. Central time, will receive that day's price.
Investments and instructions received after that time will receive the price
determined on the next business day.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
Portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
price is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices or at
the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good faith
by the board of directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the board of directors.
Pursuant to a determination by Twentieth Century's board of directors that
such value represents fair value, debt securities with maturities of 60 days or
less are valued at amortized cost. When a security is valued at amortized cost,
it is valued at its cost when purchased and thereafter by assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.
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 NYSE, usually 3 p.m. Central
time, if that is earlier. That value is then converted to dollars at the
prevailing foreign exchange rate.
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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 NYSE 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, which was likely to materially change the net asset value, then
that security would be valued at fair value as determined by the board of
directors. Trading of these securities in foreign markets may not take place on
every NYSE business day. In addition, trading may take place in various foreign
markets on Saturdays or on other days when the Exchange is not open and on which
a fund's net asset value is not calculated. Therefore, such calculation does not
take place contemporaneously with the determination of the prices of many of the
portfolio securities used in such calculation and the value of a fund's
portfolio may be affected on days when shares of the fund may not be purchased
or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the funds will be published in leading newspapers
daily upon meeting the minimum fund size and number of shareholders for each
listing. The net asset value of each fund may also be obtained by calling
Twentieth Century at 1-800-345-2021. See "Telephone Services," page 16.
DISTRIBUTIONS
Distributions from net investment income and net realized securities gains,
if any, generally are declared and paid once a year, but the funds may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act.
GENERAL INFORMATION ABOUT DISTRIBUTIONS
Distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 and distributions on shares purchased within the
last 15 days, however, will not be paid in cash and will be reinvested. You may
elect to have distributions on shares of Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 59 1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
The board of directors may elect not to distribute capital gains in whole
or in part to take advantage of loss carryovers.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time, the value of your shares
includes the undistributed net gains, if any, realized by the fund on the sale
of portfolio securities and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed, the value of your
shares will be reduced by the amount of the distribution. If you buy your shares
just before the distribution, you will pay the full price for your shares and
then receive a portion of the purchase price back as a taxable distribution. See
"Taxes," page 19.
If your distribution is reinvested in additional shares, the distribution
has no effect on the total value of your investment; while you own more shares,
the price of each share has been reduced by the amount of the distribution.
Likewise, if you take your distribution in cash, the value of your shares after
the record date plus the cash received is equal to the value of the shares
before the record date. For example, if your shares immediately before the
distribution have a value of $10, including $2 in dividends and capital
gainsrealized by the fund during the year, and if the $2 is distributed, the
value will decline to $8. If the $2
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is reinvested at $8 per share, you will receive .250 shares, so that, after the
distribution, you will have 1.250 shares at $8 per share, or $10, the same as
before.
TAXES
Twentieth Century has elected to be taxed as a regulated investment company
under Sub-chapter M of the Internal Revenue Code, which means that to the extent
its income is distributed to shareholders, it pays no income taxes.
Distributions of net investment income and net short-term capital gains are
taxable to you as ordinary income. Distributions from net long-term capital
gains are taxable as long-term capital gains regardless of the length of time
you have held the shares on which such distributions are paid. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any distribution of long-term capital gain to you with respect to such
shares.
Dividends and interest received by the funds on foreign securities, and, in
limited circumstances capital gains realized by the funds upon the sale of such
securities, may give rise to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Foreign countries generally do not impose taxes
on capital gains in respect of investments by non-resident investors. The
foreign taxes paid by a fund will reduce its dividends.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains. See "General Information About
Distributions," page 18.
In January of the year following the distribution, Twentieth Century will
send you a Form 1099-DIV notifying you of the status of your distributions for
federal income tax purposes.
Distributions also may be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations, which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax adviser about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, Twentieth Century is required by federal law to withhold
and remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you to
certify that the Social Security number or tax identification number you provide
is correct and that you are not subject to 31% withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application. PAYMENTS REPORTED BY TWENTIETH CENTURY THAT
OMIT YOUR SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER WILL SUBJECT
TWENTIETH CENTURY TO A PENALTY OF $50, WHICH WILL BE CHARGED AGAINST YOUR
ACCOUNT IF YOU FAIL TO PROVIDE THE CERTIFICATION BY THE TIME THE REPORT IS
FILED. THIS CHARGE IS NOT REFUNDABLE. See "Tax Identification Number," page 16.
Redemption of shares of a fund will be a taxable transaction for federal
income tax purposes
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and shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of Twentieth Century. Acting
pursuant to an investment management agreement entered into with Twentieth
Century, Investors Research Corporation ("Investors Research") serves as the
investment manager of Twentieth Century. Its principal place of business is
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri, 64111.
Investors Research has been providing investment advisory services to investment
companies and institutional clients since 1958.
Investors Research supervises and manages the investment portfolio of
Twentieth Century and directs the purchase and sale of its investment
securities. Investors Research utilizes a team of portfolio managers, assistant
portfolio managers and analysts acting together to manage the assets of the
funds. The team meets regularly to review portfolio holdings and to discuss
purchase and sale activity. The team adjusts holdings in the funds' portfolios
and the funds' asset mix as it deems appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds or of sectors of the funds as necessary
between team meetings.
In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of
Investors Research, acquired Benham Management International, Inc. In the
acquisition, Benham Management Corporation ("BMC"), the investment adviser to
the Benham Group of Mutual Funds, became a wholly owned subsidiary of TCC.
Certain employees of BMC will be providing investment management services to
Twentieth Century funds, while certain Twentieth Century employees will be
providing investment management services to Benham funds.
The portfolio manager members of the teams managing the funds described in
this prospectus and their work experience for the last five years are as
follows:
ROBERT C. PUFF JR., Executive Vice President and Chief Investment Officer,
joined Twentieth Century in 1983. In his position as Chief Investment Officer,
Mr. Puff oversees the investment activities of all of the teams that manage
Twentieth Century funds.
CHRISTOPHER K. BOYD, Vice President and Portfolio Manager, joined Twentieth
Century in March 1988 as an Investment Analyst, a position he held until
December 1990. At that time he was promoted to Assistant Portfolio Manager, and
then was promoted to Portfolio Manager in December 1992. He is a member of the
team that manages Growth Investors and Ultra Investors.
C. CASEY COLTON, a Portfolio Manager for BMC, joined BMC in 1990 as a
Municipal Analyst. Mr. Colton was promoted to Portfolio Manager in 1995 and
co-manages the Benham GNMA Income Fund.
PHILLIP N. DAVIDSON, Vice President and Portfolio Manager, joined
Twentieth Century in September 1993 as a Portfolio Manager. Prior to joining
Twentieth Century, Mr. Davidson served as an investment manager for Boatmen's
Trust Company in St. Louis, Missouri.
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DEREK FELSKE, Vice President and Portfolio Manager, joined Twentieth
Century in September 1993 as a Portfolio Manager. He is a member of the team
that manages Growth Investors and Ultra Investors. Prior to joining Twentieth
Century, Mr. Felske served as a member of the portfolio management team of RCM
Capital Management, a San Francisco, California-based investment management
firm, a position he held from May 1991 to September 1993. From September 1989 to
May 1991, Mr. Felske attended the University of Pennsylvania-Wharton School of
Business, where he obtained an MBA in finance.
GLENN A. FOGLE, Vice President and Portfolio Manager, joined Twentieth
Century in September 1990 as an Investment Analyst, a position he held until
March 1993. At that time he was promoted to Portfolio Manager. He is a member of
the team that manages Vista Investors and Giftrust Investors.
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager,
joined Twentieth Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He is a member of the team
that manages Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond and the
fixed income portion of Balanced Investors.
DAVID SCHROEDER, Vice President and Portfolio Manager for BMC, joined BMC
in July 1990. Mr. Schroeder has primary responsibility for the day-to-day
operations of the Benham Treasury Note, Benham Short-Term, and Benham
Long-Term Funds. He also manages Benham Target Maturities Trust.
JEFFREY R. TYLER, Senior Vice President and Portfolio Manager for BMC,
joined BMC in January 1988 as a Portfolio Manager. Mr. Tyler supervises the team
of other Portfolio Managers who assist in the management of the various
investment categories of the funds. Mr. Tyler also co-manages the Benham GNMA
Income Fund. He also has primary responsibility for the day-to-day operations of
the Benham Capital Manager Fund and oversees the portfolio manager's operation
of the Benham European Government Bond Fund.
THEODORE J. TYSON, Vice President and Portfolio Manager, joined Investors
Research in 1988 and has been a member of the International Equity and
International Emerging Growth team since its inception in 1991.
PETER A. ZUGER, Vice President and Portfolio Manager, joined Twentieth
Century in June 1993 as a Portfolio Manager. Prior to joining Twentieth Century,
Mr. Zuger served as an investment manager in the Trust Department of NBD Bancorp
in Detroit, Michigan.
The activities of Investors Research are subject only to directions of
Twentieth Century's board of directors. Investors Research pays all the expenses
of Twentieth Century except brokerage, taxes, interest, fees and expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the services provided to Twentieth Century, Investors Research receives
an annual fee of 1.00% of average net assets up to $1 billion and .90% of
average net assets in excess of $1 billion for Strategic Allocation:
Conservative, 1.10% of average net assets up to $1 billion and 1.00% of average
net assets in excess of $1 billion for Strategic Allocation: Moderate, and 1.20%
of average net assets up to $1 billion and 1.10% of average net assets in excess
of $1 billion for Strategic Allocation: Aggressive. On the first business day of
each month, each fund pays a management fee to the manager for the previous
month at the specified rate. The fee for the previous month is calculated by
multiplying the applicable fee for such fund by the aggregate average daily
closing value of each fund's net assets during the previous month by a fraction,
the numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
The management fees paid by the funds to Investors Research may be higher
than those
21
<PAGE>
paid by many investment companies. However, most if not all of such companies
also pay, in addition, certain of their own expenses, while virtually all of the
funds' expenses, except as specified above, are paid by Investors Research.
CODE OF ETHICS
Twentieth Century and Investors Research have adopted a Code of Ethics,
which restricts personal investing practices by employees of Investors Research
and its affiliates. Among other provisions, the Code of Ethics requires that
employees with access to information about the purchase or sale of securities in
the funds' portfolios obtain preclearance before executing personal trades. With
respect to portfolio managers and other investment personnel, the Code of Ethics
prohibits acquisition of securities in an initial public offering, as well as
profits derived from the purchase and sale of the same security within 60
calendar days. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage those
funds.
TRANSFER AND ADMINISTRATIVE SERVICES
Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri,
64111, acts as transfer, administrative services and dividend paying agent for
Twentieth Century. It provides facilities, equipment and personnel to Twentieth
Century and is paid for such services by Investors Research. Certain
recordkeeping services that would otherwise be performed by Twentieth Century
Services, Inc., may be performed by an insurance company or other entity
providing similar services for various retirement plans using shares of
Twentieth Century as a funding medium or by broker-dealers for their customers
investing in shares of Twentieth Century. Investors Research may elect to enter
into a contract to pay them for such services.
From time to time, special services may be offered to shareholders who
maintain higher share balances in the 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 Investors Research.
Investors Research and Twentieth Century Services, Inc., are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman of the
board of Twentieth Century Strategic Portfolios, controls Twentieth Century
Companies by virtue of his ownership of a majority of its common stock.
FURTHER INFORMATION ABOUT TWENTIETH CENTURY
Twentieth Century Strategic Asset Allocations, Inc. was organized as a
Maryland corporation on April 4, 1994.
Twentieth Century is a diversified, open-end management investment company
whose shares were first offered for sale February 15, 1996. Its business and
affairs are managed by its officers under the direction of its board of
directors.
The principal office of Twentieth Century is Twentieth Century Tower,
4500 Main Street, P.O. Box 419200, Kansas City, Missouri, 64141-6200. All
inquiries may be made by mail to that address, or by phone to 1-800-345-2021.
(For local Kansas City area or international callers: 816-531-5575.)
Twentieth Century Strategic Asset Allocations, Inc. issues three series
of $0.01 par value shares, Strategic Allocation: Conservative, Strategic
Allocation: Moderate and Strategic Allocation: Aggressive. The assets
belonging to each series of shares are held separately by the custodian, and,
in effect, each series is a separate fund. Each share, when issued, is fully
paid and non-assessable.
22
<PAGE>
Each share, irrespective of series, is entitled to one vote for each dollar of
net asset value applicable to such share on all questions, except for those
matters that must be voted on separately by the series of shares affected.
Matters affecting only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of directors can elect all
of the directors if they choose to do so, and in such event the holders of the
remaining shares will not be able to elect any person or persons to the board of
directors.
Unless required by the Investment Company Act, it will not be necessary for
Twentieth Century to hold annual meetings of shareholders. As a result,
shareholders may not vote each year on the election of directors or the
appointment of auditors. However, pursuant to Twentieth Century's bylaws, the
holders of at least 10% of the votes entitled to be cast may request Twentieth
Century to hold a special meeting of shareholders. Twentieth Century will assist
in the communication with other shareholders.
TWENTIETH CENTURY RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT
OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE
INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
23
<PAGE>
TWENTIETH CENTURY
Strategic Asset
Allocations, Inc.
Institutional Prospectus
February 15, 1996
[company logo]
Investments That Work(TM)
- ---------------------------------------
P.O. Box 419200
- ---------------------------------------
Kansas City, Missouri
- ---------------------------------------
64141-6200
- ---------------------------------------
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
- ---------------------------------------
Automated information line:
1-800-345-8765
- ---------------------------------------
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
- ---------------------------------------
Fax: 816-340-7962
- ---------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
IN-BKT 3992
9602
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
PART C. OTHER INFORMATION.
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
1. Financial Statements filed in Part A of the Registration
Statement:
NONE
2. Financial Statements filed in Part B of the Registration
Statement:
(i) Report of Independent Auditors, dated February 1,
1996.1
(ii) Statement of Net Assets, dated February 1, 1996.1
(b) Exhibits.
1. (a) Articles of Incorporation of Twentieth
Century Strategic Asset Allocations, Inc.2
(b) Articles of Amendment of Twentieth Century
Strategic Asset Allocations, Inc., dated November
28, 1995.2
(c) Articles Supplementary of Twentieth Century
Strategic Asset Allocations, Inc., dated December
28, 1995.1 (EX-99.B1c)
(d) Articles of Amendment of Twentieth Century
Strategic Asset Allocations, Inc., dated January
30, 1996.1 (EX-99.B1d)
(e) Articles Supplementary of Twentieth
Century Strategic Asset Allocations, Inc., dated
January 30, 1996.1 (EX-99.B1e)
2. By-Laws of Twentieth Century Strategic Asset
Allocations Allocations, Inc.2
3. Voting Trust Agreements:
NONE
4. Instruments Defining Rights of Shareholders:
NONE
5. Management Agreement, dated as of February 1, 1996, by
and between Twentieth Century Strategic Asset
Allocations, Inc. and Investors Research Corporation.1
(EX-99.B5)
6. Underwriting Agreements:
NONE
- ---------------------------------
1 Filed herewith
2 Previously filed
<PAGE>
7. Bonus and Profit Sharing Plan, Etc.:
NONE
8. (a) Custodian Agreement, dated as of February 1, 1996, by
and between Twentieth Century Strategic Asset
Allocations, Inc. and The Chase Manhattan Bank, N.A.1
(EX-99.B8a)
(b) Custodian Agreement, dated as of February 1, 1996, by
and between Twentieth Century Strategic Asset
Allocations, Inc. and Boatmen's First National Bank
of Kansas City.1 (EX-99.B8b)
(c) Custody Agreement, dated September 12, 1995, by and
among United Missouri Bank of Kansas City, N.A.,
Investors Research Corporation, Twentieth Century
Investors, Inc., Twentieth Century World Investors,
Inc., Twentieth Century Premium Reserves, Inc., and
Twentieth Century Capital Portfolios, Inc.1
(EX-99.B8c)
(d) Custodian Agreement for ACH transactions, dated as of
February 1, 1996, by and between Twentieth Century
Strategic Asset Allocations, Inc. and United Missouri
Bank of Kansas City, N.A.1 (EX-99.B8d)
(e) Amendment No. 1 to Custody Agreement, dated January
25, 1996, by and among the United Missouri Bank of
Kansas City, N.A., Investors Research Corporation,
Twentieth Century Investors, Inc., Twentieth Century
World Investors, Inc., Twentieth Century Premium
Reserves, Inc., Twentieth Century Capital Portfolios,
Inc., and Twentieth Century Strategic Asset
Allocations, Inc.1 (EX-99.B8e)
9. Transfer Agency Agreement, dated as of February 1, 1996,
by and between Twentieth Century Strategic Asset
Allocations, Inc. and Twentieth Century Services, Inc.1
(EX-99.B9)
10. Opinion and consent of Charles A . Etherington, Esq.1
(EX-99.B10)
11. Consent of Ernst & Young LLP.1 (EX-99.B11)
12. Annual Report:
NONE
13. Agreements of Initial Capital, Etc.:
NONE
14. Model Retirement Plans (filed as Exhibits 14a, 14b, 14c
and 14d to Pre-Effective Amendment No.2 to the
Registration Statement on Form N-1A of Twentieth Century
World Investors, Inc., Commission File No. 33-39242,
filed May 6, 1991, and incorporated herein by reference).
2
- ---------------------------
1 Filed herewith
2 Previously filed
<PAGE>
15. 12b-1 Plans:
NONE
16. Schedule of Computation for Performance Advertising
Quotations:
NONE
17. Financial Data Schedule:
NONE
18. 18f-3 Plans:
NONE
19. Power of Attorney.2
ITEM 25. Persons Controlled by or Under Common Control with Registrant:
NONE
ITEM 26. Number of Holders of Securities:
NONE
ITEM 27. Indemnification.
The Registrant is a Maryland corporation. Section 2-418 of the
Maryland General Corporation Law allows a Maryland corporation
to indemnity its officers, directors, employees and agents to
the extent provided in such statute.
Article Ninth of the Registrant's Articles of Incorporation,
Exhibit 1, requires the indemnification of the Registrant's
directors and officers to the extent permitted by Section
2-418 of the Maryland General Corporation Law, the Investment
Company Act of 1940 and all other applicable laws.
The Registrant intends to purchase an insurance policy
insuring its officers and directors against certain
liabilities that 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.
3
- -------------------------
2 Previously filed
<PAGE>
ITEM 28. Business and Other Connections of Investment Advisor.
Investors Research Corporation, the investment advisor, is
engaged in the business of managing investments for registered
investment companies, deferred compensation plans and other
institutional investors.
ITEM 29. Principal Underwriters:
NONE
ITEM 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act, and the rules
promulgated thereunder, are in the possession of Registrant,
Twentieth Century Services, Inc. and Investors Research
Corporation, all located at 4500 Main Street, Kansas City,
Missouri 64111.
ITEM 31. Management Services:
NONE
ITEM 32. Undertakings.
(a) None.
(b) The Registrant hereby undertakes to file a
Post-Effective Amendment to this Registration Statement,
using reasonably current financial statements which need
not be certified, within four to six months from the
effective date of the Registrant's 1933 Act Registration
Statement.
(c) The Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders,
upon request and without charge.
(d) The Registrant hereby undertakes that it will, if
requested to do so by the holders of at least 10% of the
Registrant's outstanding votes, call a meeting of
shareholders for the purpose of voting upon the question
of the removal of a director and to assist in
communication with other shareholders as required by
Section 16(c).
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 4 to 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 5th day of February, 1996.
Twentieth Century Strategic Asset Allocations, Inc.
(Registrant)
By: /s/ James E. Stowers III
-------------------------------
James E. Stowers III, President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 4 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James E. Stowers, Jr. Chairman of the Board, Director and February 5, 1996
- ------------------------------------
James E. Stowers, Jr. Principal Executive Officer
/s/ James E. Stowers III President and Director February 5, 1996
- ------------------------------------
James E. Stowers III
/s/ Robert T. Jackson Executive Vice President and February 5, 1996
- ------------------------------------
Robert T. Jackson Principal Financial Officer
* Vice President, Treasurer and February 5, 1996
- ---------------------------------------
Maryanne Roepke Principal Accounting Officer
* Director February 5, 1996
- ---------------------------------------
Thomas A. Brown
* Director February 5, 1996
- ---------------------------------------
Robert W. Doering, M.D.
* Director February 5, 1996
- ---------------------------------------
Linsley L. Lundgaard
* Director February 5, 1996
- ---------------------------------------
Donald H. Pratt
* Director February 5, 1996
- ---------------------------------------
Lloyd T. Silver, Jr.
* Director February 5, 1996
- ---------------------------------------
M. Jeannine Strandjord
* Director February 5, 1996
- ---------------------------------------
John M. Urie
*By /s/ James E. Stowers III
------------------------
James E. Stowers III
Attorney-in-Fact
</TABLE>
EXHIBIT INDEX
Exhibit Description of Document
Number
EX-99.B1c Articles Supplementary of Twentieth Century Strategic Asset
Allocations, Inc., dated December 26, 1995.
EX-99.B1d Articles of Amendment of Twentieth Century Strategic Asset
Allocations, Inc., dated January 29, 1996.
EX-99.B1e Articles Supplementary of Twentieth Century Strategic Asset
Allocations, Inc., dated January 29, 1996.
EX-99.B5 Management Agreement, dated as of February 1, 1996, by and between
Twentieth Century Strategic Asset Allocations, Inc. and Investors
Research Corporation.
EX-99.B8a Custodian Agreement, dated as of February 1, 1996, by and between
Twentieth Century Strategic Asset Allocations, Inc. and The Chase
Manhattan Bank, N.A.
EX-99.B8b Custodian Agreement, dated as of February 1, 1996, by and between
Twentieth Century Strategic Asset Allocations, Inc. and Boatmen's
First National Bank of Kansas City.
EX-99.B8c Custody Agreement, dated September 12, 1995, by and among United
Missouri Bank of Kansas City, N.A., Investors Research Corporation,
Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc., Twentieth Century Premium Reserves, Inc., and
Twentieth Century Capital Portfolios, Inc.
EX-99.B8d Custodian Agreement for ACH transactions, dated as of February 1,
1996, by and between Twentieth Century Strategic Asset Allocations,
Inc. and United Missouri Bank of Kansas City, N.A.
EX-99.B8e Amendment No. 1 to Custody Agreement, dated January 25, 1996, by
and among the United Missouri Bank of Kansas City, N.A., Investors
Research Corporation, Twentieth Century Investors, Inc., Twentieth
Century World Investors, Inc., Twentieth Century Premium Reserves,
Inc., Twentieth Century Capital Portfolios, Inc., and Twentieth
Century Strategic Asset Allocations, Inc.
EX-99.B9 Transfer Agency Agreement, dated as of February 1, 1996, by and
between Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century Services, Inc.
EX-99.B10 Opinion and consent of Charles A . Etherington, Esq.
EX-99.B11 Consent of Ernst & Young LLP.
TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC.
ARTICLES SUPPLEMENTARY
TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC., a Maryland corporation
whose principal Maryland office is located in Baltimore, Maryland (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article FIFTH of the Articles of Incorporation of the
Corporation, the Board of Directors of the Corporation has duly established
three (3) different series for the Corporation's stock (each hereinafter
referred to as a "Series") and allocated Three Hundred Million (300,000,000)
shares of the One Billion (1,000,000,000) shares of authorized capital stock of
the Corporation, par value One Cent ($.01) per share for an aggregate par value
of Three Million Dollars ($3,000,000), among such Series as follows:
Series Number of Shares Aggregate Par Value
- ------ ---------------- -------------------
Twentieth Century Strategic Guardian 100,000,000 $ 1,000,000
Twentieth Century Strategic Advantage 100,000,000 1,000,000
Twentieth Century Strategic Horizons 100,000,000 1,000,000
The par value of each share of stock in each Series is One Cent ($0.01) per
share.
SECOND: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or any unissued shares
that have not been allocated to a Series, and to fix or alter all terms thereof,
to the full extent provided by the Articles of Incorporation of the Corporation.
THIRD: A description of the Series, including the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions for redemption is set forth
in the Articles of Incorporation of the Corporation and is not changed by these
Articles Supplementary, except with respect to the creation of the various
Series.
FOURTH: The Board of Directors of the Corporation duly adopted
resolutions dividing into Series the authorized capital stock of the Corporation
and allocating shares to each Series as set forth in these Articles
Supplementary.
<PAGE>
IN WITNESS WHEREOF, TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC., has
caused these Articles Supplementary to be signed and acknowledged in its name
and on its behalf by its Executive Vice President and its corporate seal to be
hereunto affixed and attested to by its Secretary on this 26th day of December,
1995.
ATTEST: TWENTIETH CENTURY STRATEGIC
PORTFOLIOS, INC.
/s/Patrick A. Looby By: /s/William M. Lyons
- ------------------- -------------------
Patrick A. Looby William M. Lyons
Secretary Executive Vice President
THE UNDERSIGNED Executive Vice President of TWENTIETH CENTURY STRATEGIC
PORTFOLIOS, INC., who executed on behalf of said Corporation the foregoing
Articles Supplementary to the Articles of Incorporation, of which this
certificate is made a part, hereby acknowledges, in the name of and on behalf of
said Corporation, the foregoing Articles Supplementary to the Articles of
Incorporation to be the corporate act of said Corporation, and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects under the penalties of perjury.
Dated: December 26, 1995 /s/William M. Lyons
-------------------
William M. Lyons
Executive Vice President
ARTICLES OF AMENDMENT
OF
TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC.
The undersigned, William M. Lyons, in accordance with the Maryland
General Corporation Law, does hereby certify that:
1. He is duly appointed Executive Vice President of Twentieth Century
Strategic Portfolios, Inc., a Maryland corporation (the "Corporation").
2. The amendment to the Articles of Incorporation of the Corporation,
which was approved as of January 18, 1996 by the Board of Directors of the
Corporation by a unanimous written consent in lieu of a meeting pursuant to
ss.2-408(c) of the Maryland General Corporation Law, is as follows:
The Articles of Incorporation of the Corporation are hereby amended
by deleting all of the present Article SECOND and inserting in lieu therefor the
following Article SECOND:
"SECOND: The name of the Corporation is
------
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC."
3. No stock entitled to be voted on the amendment was outstanding or
subscribed for at the time of the approval of such amendment by the Board of
Directors.
IN WITNESS WHEREOF, the undersigned hereby acknowledges that these
Articles of Amendment are the act of the Corporation and states, that to the
best of his knowledge, information and belief, the matters and facts stated
herein are true in all material respects, and that this statement is made under
penalties of perjury.
Dated this 29th day of January, 1996.
/s/ William M. Lyons
------------------------
William M. Lyons
Executive Vice President
Witness:
/s/ Charles A. Etherington
- --------------------------
Charles A. Etherington
Assistant Secretary
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
ARTICLES SUPPLEMENTARY
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC., a Maryland
corporation whose principal Maryland office is located in Baltimore, Maryland
(the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Section 2-605(a)(4) of the Maryland General Corporation
Law, the Board of Directors of the Corporation has renamed the duly established
and allocated series of the Corporation's stock as follows:
New Name Prior Name
- -------- ----------
Strategic Allocation: Conservative Twentieth Century Strategic Guardian
Strategic Allocation: Moderate Twentieth Century Strategic Advantage
Strategic Allocation: Aggressive Twentieth Century Strategic Horizons
SECOND: By virtue of action previously taken by the Board of Directors
of the Corporation pursuant to authority expressly vested in the Board by
Article FIFTH of the Articles of Incorporation of the Corporation, the
Corporation has duly established three different series for the Corporation's
stock (each hereinafter referred to as a "Series") and allocated Three Hundred
Million (300,000,000) shares of the One Billion (1,000,000,000) shares of
authorized capital stock of the Corporation, par value One Cent ($.01) per share
for an aggregate par value of Three Million Dollars ($3,000,000). As a result of
the action taken by the Board of Directors referenced in Article FIRST of these
Articles Supplementary, the three series of stock of the Corporation and the
number of shares and aggregate par value of each is as follows:
Series Number of Shares Aggregate Par Value
- ------ ---------------- -------------------
Strategic Allocation: Conservative 100,000,000 $ 1,000,000
Strategic Allocation: Moderate 100,000,000 1,000,000
Strategic Allocation: Aggressive 100,000,000 1,000,000
The par value of each share of stock in each Series is One Cent ($0.01) per
share.
THIRD: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or any unissued shares
that have not been allocated to a Series, and to fix or alter all terms thereof,
to the full extent provided by the Articles of Incorporation of the Corporation.
FOURTH: A description of the Series, including the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and
<PAGE>
conditions for redemption is set forth in the Articles of Incorporation of the
Corporation and is not changed by these Articles Supplementary, except with
respect to the creation and/or designation of the various Series.
FIFTH: The Board of Directors of the Corporation duly adopted
resolutions dividing into Series the authorized capital stock of the Corporation
and allocating shares to each Series as set forth in these Articles
Supplementary.
IN WITNESS WHEREOF, TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS,
INC., has caused these Articles Supplementary to be signed and acknowledged in
its name and on its behalf by its Executive Vice President and its corporate
seal to be hereunto affixed and attested to by its Secretary on this 29th day of
January, 1996.
ATTEST: TWENTIETH CENTURY STRATEGIC
ASSET ALLOCATIONS, INC.
/s/ Patrick A. Looby By: /s/ William M. Lyons
- -------------------- ------------------------
Patrick A. Looby William M. Lyons
Secretary Executive Vice President
THE UNDERSIGNED Executive Vice President of TWENTIETH CENTURY STRATEGIC
ASSET ALLOCATIONS, INC., who executed on behalf of said Corporation the
foregoing Articles Supplementary to the Articles of Incorporation, of which this
certificate is made a part, hereby acknowledges, in the name of and on behalf of
said Corporation, the foregoing Articles Supplementary to the Articles of
Incorporation to be the corporate act of said Corporation, and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects under the penalties of perjury.
Dated: January 29, 1996 /s/ William M. Lyons
--------------------
William M. Lyons
Executive Vice President
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of February, 1996, is by and
between Twentieth Century Strategic Asset Allocations, Inc., a Maryland
corporation (hereinafter called the "Corporation") and Investors Research
Corporation, a Delaware corporation (hereinafter called the "Investment
Manager").
IN CONSIDERATION of the mutual promises and agreements herein
contained, the parties agree as follows:
1. INVESTMENT MANAGEMENT SERVICES. The Investment Manager shall
supervise the investments of each series of shares of the Corporation
contemplated as of the date hereof, and such subsequent series of shares as the
Corporation shall select the Investment Manager to manage. In such capacity, the
Investment Manager shall maintain a continuous investment program for each such
series, determine what securities shall be purchased or sold by each series,
secure and evaluate such information as it deems proper and take whatever action
is necessary or convenient to perform its functions, including the placing of
purchase and sale orders.
2. COMPLIANCE WITH LAWS. All functions undertaken by the Investment
Manager hereunder shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and any rules and regulations promulgated thereunder;
(2) any other applicable provisions of law; (3) the Articles of Incorporation of
the Corporation as amended from time to time; (4) the By-laws of the Corporation
as amended from time to time; and (5) the registration statements of the
Corporation, as amended from time to time, filed under the Securities Act of
1933 and the Investment Company Act.
3. BOARD SUPERVISION. All of the functions undertaken by the
Investment Manager hereunder shall at all times be subject to the direction of
the Board of Directors of the Corporation, its executive committee, or any
committee or officers of the Corporation acting under the authority of the Board
of Directors.
4. PAYMENT OF EXPENSES. The Investment Manager will pay all of the
expenses of each series of the Corporation's shares that it shall manage, other
than interest, taxes, brokerage commissions, extraordinary expenses and the fees
and expenses of those directors who are not "interested persons" as defined in
Investment Company Act (hereinafter referred to as the "Independent Directors")
(including counsel fees). The Investment Manager will provide the Corporation
with all physical facilities and personnel required to carry on the business of
each series that the Investment Manager shall manage, including but not limited
to office space, office furniture, fixtures and equipment, office supplies,
computer hardware and software and salaried and hourly paid personnel. The
Investment Manager may at its expense employ others to provide all or any part
of such facilities and personnel.
5. ACCOUNT FEES. The Corporation, by resolution of the Board of
Directors, including a majority of the Independent Directors, may from time to
time authorize the imposition of a fee as a direct charge against shareholder
accounts of one or more of the series, such fee to be
<PAGE>
retained by the Corporation or to be paid to the Investment Manager to defray
expenses which would otherwise be paid by the Investment Manager in accordance
with the provisions of paragraph 4 of this Agreement. At least sixty (60) days
prior written notice of the intent to impose such fee must be given to the
shareholders of the affected series.
6. MANAGEMENT FEES.
(a) In consideration of the services provided by the Investment
Manager, each series of shares of the Corporation managed by the Investment
Manager shall pay to the Investment Manager a per annum management fee
(hereinafter, the "Applicable Fee"), as follows:
Name of Series Applicable Fee
-------------- --------------
Strategic Allocation: Conservative (i) 1.00% on assets up to $1
billion
(ii) 0.90% on assets in excess of $1
billion
Strategic Allocation: Moderate (i) 1.10% on assets up to $1
billion
(ii) 1.00% on assets in excess of $1
billion
Strategic Allocation: Aggressive (i) 1.20% on assets up to $1
billion
(ii) 1.10% on assets in excess of $1
billion
(b) On the first business day of each month, each series of shares
shall pay the management fee at the rate specified by subparagraph (a) of this
paragraph 6 to the Investment Manager for the previous month. The fee for the
previous month shall be calculated by multiplying the Applicable Fee for such
series by the aggregate average daily closing value of the series' net assets
during the previous month, and further multiplying that product by a fraction,
the numerator of which shall be the number of days in the previous month, and
the denominator of which shall be 365 (366 in leap years).
(c) In the event that the Board of Directors of the Corporation shall
determine to issue any additional series of shares for which it is proposed that
the Investment Manager serve as investment manager, the Corporation and the
Investment Manager shall enter into an Addendum to this Agreement setting forth
the name of the series, the Applicable Fee and such other terms and conditions
as are applicable to the management of such series of shares.
7. CONTINUATION OF AGREEMENT. This Agreement shall continue in effect,
unless sooner terminated as hereinafter provided, for a period of two years from
the execution hereof, and for as long thereafter as its continuance is
specifically approved at least annually (i) by the Board of Directors of the
Corporation or by the vote of a majority of the outstanding voting securities of
the Corporation, and (ii) by the vote of a majority of the directors of the
Corporation, who are not parties to the agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval.
8. TERMINATION. This Agreement may be terminated by the Investment
Manager at any time without penalty upon giving the Corporation 60 days' written
notice, and may be
2
<PAGE>
terminated at any time without penalty by the Board of Directors of the
Corporation or by vote of a majority of the outstanding voting securities of the
Corporation on 60 days' written notice to the Investment Manager.
9. EFFECT OF ASSIGNMENT. This Agreement shall automatically terminate
in the event of assignment by the Investment Manager, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the Investment
Company Act.
10.OTHER ACTIVITIES. Nothing herein shall be deemed to limit or
restrict the right of the Investment Manager, or the right of any of its
officers, directors or employees (who may also be a director, officer or
employee of the Corporation), to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
11. STANDARD OF CARE. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties hereunder
on the part of the Investment Manager, it, as an inducement to it to enter into
this Agreement, shall not be subject to liability to the Corporation or to any
shareholder of the Corporation for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
12. SEPARATE AGREEMENT. The parties hereto acknowledge that certain
provisions of the Investment Company Act, in effect, treat each series of shares
of an investment company as a separate investment company. Accordingly, the
parties hereto hereby acknowledge and agree that, to the extent deemed
appropriate and consistent with the Investment Company Act, this Agreement shall
be deemed to constitute a separate agreement between the Investment Manager and
each series of shares of the Corporation managed by the Investment Manager.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
Attest: TWENTIETH CENTURY STRATEGIC
ASSET ALLOCATIONS, INC.
/s/ Patrick A. Looby By: /s/ James E. Stowers III
- -------------------- ----------------------------
Patrick A. Looby James E. Stowers III
Secretary President
Attest: INVESTORS RESEARCH CORPORATION
/s/ Patrick A. Looby By: /s/ James E. Stowers III
- -------------------- ----------------------------
Patrick A. Looby James E. Stowers III
Secretary President
3
CUSTODIAN AGREEMENT
THIS AGREEMENT, made as of the 1st day of February, 1996, is by and between
TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC., a Maryland corporation
("Corporation") and THE CHASE MANHATTAN BANK, N.A., a trust corporation
organized under the laws of the state of New York ("Custodian").
1. During the life of this Agreement, the Corporation shall place and
maintain its securities and cash with the Custodian. All securities delivered to
the Custodian (other than bearer securities) shall be properly endorsed prior to
such delivery and in negotiable form for transfer or in the name of the
Custodian or its nominee.
2. The Custodian shall keep safely such securities owned by the
Corporation as are delivered to it and, on behalf of the Corporation, shall from
time to time receive securities for safekeeping. The Custodian shall hold all
registered securities owned by the Corporation registered in the name of the
Corporation or of the Custodian, or of any nominee of the Corporation or of the
Custodian, or in the so-called street certificate form, in any case with or
without any indication of fiduciary capacity. The Custodian shall deliver
securities owned by the Corporation only:
(a) upon sales of such securities for the account of the
Corporation; such delivery to be made only upon payment of readily available
funds therefor;
(b) when such securities are called, redeemed, retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for or upon conversion into other securities alone
or other securities and cash;
(e) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(f) upon conversion of such securities pursuant to their terms into
other securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of the capital stock
of the Corporation;
(i) for the purpose of pledge or hypothecation to secure any loan
incurred by the Corporation, but only upon payment to the Custodian of the money
borrowed, except that in cases where additional collateral is required to secure
a borrowing already made, further securities may be released for that purpose;
<PAGE>
(j) for other proper corporate purposes. The Custodian will act,
under this subparagraph only upon receipt of a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an officer of the
Corporation and certified by its Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the purposes for which such
delivery is to be made, declaring such purposes to be proper corporate purposes,
and naming the person or persons to whom delivery of such securities shall be
made; or
(k) except in the case of delivery pursuant to the terms of
subsection (c) or (g) above, upon receipt of proper instructions from the
Corporation. Any securities or cash or other property receivable by virtue of
delivery pursuant to subsections (b), (d), (f) and (g) of this paragraph shall
be deliverable to the Custodian.
3. The Custodian shall retain all funds received by it from or for the
account of the Corporation in an account or accounts, whether with the Custodian
or other bank or banks in the name of the Custodian as custodian for the
Corporation, subject only to draft or order in accordance with the terms of this
Agreement. The Custodian shall make payments from funds received by it from or
for the account of the Corporation only:
(a) for the purchase of securities for the portfolio of the
Corporation and upon the delivery of such securities to the Custodian either in
bearer form or registered as provided in paragraph 2 and negotiable form;
(b) for the repurchase or redemption of shares of the capital stock
of the Corporation;
(c) for the payment of distributions to shareholders, taxes,
brokerage, interest, management fees, custodian fees and extraordinary expenses
of the Corporation;
(d) for payments in connection with the conversion, exchange or
surrender of securities owned by the Corporation;
(e) to pay any loan made to the Corporation and upon redelivery to
it of any securities pledged or hypothecated therefore and upon surrender of the
note or notes evidencing the loan or evidence of the cancellation of the same;
and
(f) for other proper corporate purposes. The Custodian will act
under this subparagraph (f) only upon receipt of a certified copy of a
resolution of the Board of Directors or of the Executive Committee of the
Corporation signed by an officer of the Corporation and certified by its
Secretary or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose, and naming the person or persons to whom such payment
is to be made.
Such payment shall be made only insofar as funds are available for such
purposes and only upon receipt of proper instructions from the Corporation.
2
<PAGE>
4. The Custodian shall collect, receive and deposit in said account or
accounts all income and other payments with respect to the securities held
hereunder, and execute ownership or other certificates and affidavits for all
federal and state tax purposes, and do all things necessary or proper in
connection with the collection of such income and shall without limiting the
generality of the foregoing:
(a) present for payment all coupons or other income items requiring
presentation;
(b) present for payment, unless otherwise instructed, all securities
which may mature or be called, redeemed, retired or otherwise become payable;
and
(c) endorse for collection all checks, drafts or other negotiable
instruments.
5. Anything in this Agreement to the contrary notwithstanding, the
Custodian may deposit all or any part of the Corporation's securities in a
clearing agency, securities depository or book entry system in conformance with
applicable law and the regulations from time to time promulgated by appropriate
regulatory agencies.
6. The Custodian shall promptly deliver to the Corporation all
financial reports, notices of meetings, proxies, proxy material and any other
notices or announcements affecting or relating to the securities held by the
Custodian. Proxies issued in the name of the Custodian or its nominee shall be
delivered to the Corporation executed in blank.
7. The Custodian is authorized to accept and rely upon all written
instructions given by one or more officers, employees or agents of the
Corporation authorized by or in accordance with the resolution delivered to the
Custodian which authorizes the opening of the Account (each such officer,
employee or agent or combination of officers, employees and agents is
hereinafter referred to as an "Authorized Officer"), including, without
limitation, instructions to sell, assign, transfer or deliver, or purchase for
the Account, any and all Property or to transfer funds in the Account in
connection with a securities transaction.
The Custodian may also rely on any instructions bearing or purporting
to bear the facsimile signature of any of the individuals designated as an
Authorized Officer pursuant to the resolution described above, regardless of or
by whom or by what means the actual or purported facsimile signature or
signatures thereon may have been affixed thereto if such facsimile signature or
signature resemble the facsimile specimens from time to time furnished to the
Custodian by any of such officers. In addition, the Custodian may rely on
instructions received by telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess acceptable to it which the Custodian believes in good
faith to have been given by an Authorized Officer or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Custodian may specify.
The Custodian may also rely on instructions transmitted electronically
through its Asset Management System or any similar electronic instruction system
acceptable to the Custodian. The Custodian shall incur no liability to the
Corporation or otherwise as a result of any act or
3
<PAGE>
omission by the Custodian in accordance with instructions on which the Custodian
is authorized to rely pursuant to the provisions of this Paragraph. Any
instructions delivered to the Custodian by telephone shall promptly thereafter
be confirmed in writing by an Authorized Officer, but the Custodian will incur
no liability for the Corporation's failure to send such confirmation in writing,
or the failure of any such written confirmation to conform to the telephone
instructions which the Custodian received. Unless otherwise expressly provided,
all authorizations and instructions shall continue in full force and effect
until cancelled or superseded by subsequent instructions received by the
Custodian.
The Corporation agrees that test arrangements, authentication methods
or other security devices to be used with respect to instructions which the
Corporation may give by telephone, telex, TWX, facsimile transmission, bank wire
or other teleprocess, or through an electronic instructions system, shall be
processed in accordance with terms and conditions for the use of such
arrangements, methods or devices as the Custodian may put into effect and modify
from time to time. The Corporation shall safeguard any test keys, identification
codes or other security devices which the Custodian makes available to the
Corporation and agrees that the Corporation shall be responsible for any loss,
liability or damage incurred by the Custodian or by the Corporation as a result
of the Custodian's acting in accordance with instructions from any unauthorized
person using the proper security device, provided that such person did not
obtain such security device solely as a result of the Custodian's gross
negligence or willful misconduct. The Custodian may electronically record, but
shall not be obligated to so record, any instructions given by telephone and
other telephone discussions with respect to the Account. In the event that the
Corporation uses the Custodian's Asset Management System or any successor
electronic communications or information system, the Corporation agrees that the
Custodian is not responsible for the consequences of the failure of that System
to perform for any reason or for the failure to perform for any reason of any
communications carrier, utility, communications network or the failure to
perform for any reason of communications or computer equipment. In the event
that System is inoperable, the Corporation agrees to notify the Custodian
immediately, and the Custodian agrees that it will accept the communication
transaction instructions by telephone, facsimile transmission on equipment
compatible to the Custodian's facsimile receiving equipment or by
letter, at no additional charge to the Custodian.
8. If the Corporation instructs the Custodian in any capacity to take
any action with respect to any securities or funds held by it hereunder, which
action might subject the Custodian or its nominee in the opinion of the
Custodian to liability for any cost, loss, damage, and expense in any way, as a
prerequisite to taking such action the Custodian shall be and be kept
indemnified in an amount and form satisfactory to it.
9. The Custodian shall be entitled to receive and act upon advice of
counsel (who may be counsel for the Corporation) and shall be without liability
for any action taken or thing done pursuant to such advice; and whether or not
it seeks advice of counsel, the Custodian shall be without liability for any
action taken or thing done by it hereunder in good faith and without negligence
and the Corporation agrees to indemnify and hold the Custodian harmless against
any and all loss, cost, liability, damage and expense resulting with respect
thereto.
4
<PAGE>
10. The Corporation, as sole owner of all securities delivered or to be
delivered to the Custodian hereunder, will indemnify and hold harmless the
Custodian and its nominee from any and all cost, liability, loss, damage and
expense resulting directly or indirectly from the fact that securities are
registered in the name of the Custodian or its nominee.
11. The Custodian shall be entitled to receive from the Corporation, on
demand, reimbursement for its cash disbursements, expenses and charges,
including counsel fees, in connection with its duties as Custodian as aforesaid,
but excluding salaries and usual overhead expenses. All payments which the
Custodian is authorized or required to make hereunder shall be made only from
and to the extent of the funds of the Corporation in its hands and nothing
herein contained shall be construed to impose any obligation upon the Custodian
to make any payments for which such funds are not available.
12. The Custodian shall be protected in acting upon any instruction,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained by it hereunder a certificate signed
by any officer of the Corporation or any other person authorized by the Board of
Directors.
13. The Custodian may, at its sole risk, appoint any other bank or
trust company as its agent to carry out any one or more of its functions
hereunder.
14. The Corporation shall pay to the Custodian for its services
hereunder such compensation and at such times as may from time to time be agreed
upon in writing by the Corporation and the Custodian.
15. This Agreement may be terminated by the Corporation in whole or in
part upon ten (10) days written notice delivered to the Custodian at 114 West
47th Street, New York, New York 10036 or by the Custodian upon sixty (60) days
written notice delivered to the Corporation at 4500 Main Street, Kansas City,
Missouri 64111, or such other address as the corporation may from time to time
designate. Such notices shall be sent by registered mail. In the event of the
inability of the Custodian to serve or other termination of this Agreement by
either party, the Corporation shall forthwith appoint a Custodian which
qualifies as such under the Investment Company Act of 1940 or any other
applicable law and the Custodian shall deliver all funds (less unpaid expenses,
including any unpaid compensation to the Custodian) and all securities of the
Corporation duly endorsed and in form for transfer to such succeeding Custodian
and such delivery shall constitute a full and complete discharge of the
Custodian's obligations hereunder. If no such successor shall be found, the
Corporation shall submit to the holders of shares of its capital stock, before
permitting delivery of such cash and securities to anyone other than its
successor custodian, the question whether the Corporation shall be dissolved or
shall function without a Custodian; and pending such decision the Custodian
shall:
(a) continue to hold said cash and securities hereunder, or
5
<PAGE>
(b) deliver the same to a bank or trust company in the City of New
York, selected by it, such assets to be held subject to the terms of custody
hereunder and any such delivery shall be a full and complete discharge of its
obligation hereunder.
16. If the Corporation shall be liquidated while this Agreement is in
force, the Custodian shall distribute the property of the Corporation to
creditors and shareholders in such a manner as the Corporation may direct.
17. This Agreement shall be governed by the laws of the state of New
York and shall be binding on and shall inure to the benefit of the Corporation
and the Custodian and their respective successors and assigns and cannot be
changed orally.
18. This Agreement may be executed in two counterparts, each of which
shall be deemed an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its officer or
officers duly authorized, as of the day and year first above written.
TWENTIETH CENTURY STRATEGIC
PORTFOLIOS, INC.
By /s/ James E. Stowers III
---------------------------
James E. Stowers III
President
THE CHASE MANHATTAN BANK, N.A.
By /s/ Peter C. Arrighetti
--------------------------
Name: Peter C. Arrighetti
Title: Vice President
6
CUSTODIAN AGREEMENT
THIS AGREEMENT, made as of the 1st day of February, 1996, is by and
between TWENTIETH CENTURY STRATEGIC PORTFOLIOS, INC., a Maryland Corporation
("Corporation") and BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY, a
nationally-chartered banking association ("Custodian").
1. During the term of this Agreement the Corporation shall maintain one
or more custody accounts (the "Accounts") with the Custodian and shall deposit
in the Accounts all currency, checks, drafts, wired funds and other funds
delivered to the Corporation in Kansas City, Missouri in payment for its shares.
All checks, drafts and similar items shall be endorsed in proper form for
deposit to the Accounts.
2. The Custodian shall provide a courier for delivery of deposits from
the Corporation's office to the Custodian, and the courier shall pick up the
deposits at such times as the Corporation and Custodian may from time to time
agree upon.
3. The Custodian promptly and in a business-like manner shall process
the items so deposited in the Accounts and remit the funds deposited to United
States Trust Company of New York, the Corporation's custodian, for deposit in
Corporation's accounts there. Any funds not remitted by the close of each day
shall be invested for the Corporation's benefit in such manner as the
Corporation and Custodian may from time to time agree upon. All income from such
investments shall be deposited in the Accounts. No funds shall be invested or
otherwise utilized for the benefit of the Custodian.
4. (a) The Custodian shall, no later than 9 a.m. on every day
(Saturdays, Sundays and Holidays excluded), report to the Corporation the
balance in the Accounts and the amounts available for transfer to The Chase
Manhattan Bank, N.A.
(b) The Custodian shall furnish monthly bank statements of the
Accounts in the usual form.
(c) At least monthly the Custodian shall provide the Corporation
with an account analysis showing average ledger and collected balance for the
month, total items processed and other bank services used during the period,
together with the Custodian's statement for its services. The Corporation shall
compensate the Custodian for its services in accordance with the schedule of
compensation attached to this Agreement and marked Schedule 1.
5. If the Corporation instructs the Custodian in any capacity to take
any action with respect to any funds held by it hereunder, which action might
subject the Custodian in the opinion of the Custodian to liability for any cost,
loss, damage or expense, as a prerequisite to taking such action the Custodian
shall be and be kept indemnified in an amount and form satisfactory to it.
6. This Agreement may be terminated by the Corporation in whole or in
part upon ten (10) days written notice delivered to the Custodian at 10th &
Baltimore, Kansas City, Missouri 64105 (mailing address P.O. Box 38, Kansas
City, Missouri 64183-0300) or by the Custodian upon sixty (60) days written
notice delivered to the Corporation at 4500 Main Street, Kansas City, Missouri
64111 (mailing address P.O. Box 419200, Kansas City, Missouri 64141),
<PAGE>
and each party may from time to time designate another address to which such
notice shall be delivered. Such notices shall be sent by registered mail and
shall be deemed delivered when deposited in the United States Mail, postage
prepaid. In the event of the inability of the Custodian to serve or other
termination of this Agreement by either party, the Corporation shall forthwith
appoint a custodian which qualifies as such under the Investment Company Act of
1940 or any other applicable law and the Custodian shall deliver all funds to
such successor custodian (or to any other custodian of the Corporation's assets)
and such delivery shall constitute a full and complete discharge of the
Custodian's obligations hereunder. If no such successor shall be found and there
should be no other custodian, the Corporation shall submit to the holders of
shares of its capital stock, before permitting delivery of such cash to anyone
other than a qualified custodian, the question whether the Corporation shall be
dissolved or shall function without a custodian; and pending such decision the
Custodian shall:
(a) continue to hold the Accounts, or
(b) deliver the funds in the Accounts, and all other assets,if
any, to a bank or trust company selected by it, such funds and assets to be held
subject to the terms of custody hereunder and any such delivery shall be a full
and complete discharge of its obligation hereunder.
7. If the Corporation shall be liquidated while this Agreement is in
force, the Custodian shall distribute the property of the Corporation to
creditors and shareholders in such manner as the Corporation may direct.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its officer or
officers duly authorized, as of the day and year first above written.
TWENTIETH CENTURY STRATEGIC
PORTFOLIOS, INC.
By: /s/ James E. Stowers, Jr.
-----------------------------
James E. Stowers, Jr.
Chairman of the Board
BOATMEN'S FIRST NATIONAL BANK OF
KANSAS CITY
By: /s/ Rebecca L. Dehart
-------------------------
Rebecca L. Dehart
Vice President
2
CUSTODY AGREEMENT
Dated September 12, 1995
Between
UMB BANK, N.A.
and
INVESTORS RESEARCH CORPORATION
and
THE TWENTIETH CENTURY MUTUAL FUNDS
<PAGE>
Table of Contents
SECTION PAGE
1. APPOINTMENT OF CUSTODIAN 1
2. DEFINITIONS 2
(a) Securities 2
(b) Assets 2
(c) Instructions and Special Instructions 2
3. DELIVERY OF CORPORATE DOCUMENTS 2
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC
SUBCUSTODIAN 3
(a) Safekeeping 4
(b) Manner of Holding Securities 4
(c) Free Delivery of Assets 6
(d) Exchange of Securities 6
(e) Purchases of Assets 6
(f) Sales of Assets 7
(g) Options 7
(h) Futures Contracts 8
(i) Segregated Accounts 9
(j) Depositary Receipts 9
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 9
(l) Interest Bearing Deposits 10
(m) Foreign Exchange Transactions 10
(n) Pledges or Loans of Securities 11
(o) Stock Dividends, Rights, Etc. 12
(p) Routine Dealings 12
(q) Collections 12
(r) Bank Accounts 12
(s) Dividends, Distributions and Redemptions 13
(t) Proceeds from Shares Sold 13
(u) Proxies and Notices; Compliance with the
Shareholders Communication Act of 1985 13
(v) Books and Records 14
(w) Opinion of Fund's Independent Certified
Public Accountants 14
(x) Reports by Independent Certified Public
Accountants 14
(y) Bills and Other Disbursements 14
5. SUBCUSTODIANS 14
(a) Domestic Subcustodians 15
(b) Foreign Subcustodians 15
(c) Interim Subcustodians 16
(d) Special Subcustodians 16
(e) Termination of a Subcustodian 17
(f) Certification Regarding Foreign Subcustodians 17
6. STANDARD OF CARE 17
(a) General Standard of Care 17
<PAGE>
SECTION PAGE
(b) Actions Prohibited by Applicable Law, Events
Beyond Custodian's Control, Armed Conflict,
Sovereign Risk, Etc. 17
(c) Liability for Past Records 18
(d) Advice of Counsel 18
(e) Advice of the Funds and Others 18
(f) Instructions Appearing to be Genuine 18
(g) Exceptions from Liability 19
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS 19
(a) Domestic Subcustodians 19
(b) Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities
Depositories and Clearing Agencies 19
(c) Defaults or Insolvencies of Brokers, Banks
Etc. 20
(d) Reimbursement of Expenses 20
8. INDEMNIFICATION 20
(a) Indemnification by Fund 20
(b) Indemnification by Custodian 20
9. ADVANCES 21
10. COMPENSATION 21
11. POWERS OF ATTORNEY 21
12. TERMINATION AND ASSIGNMENT 22
13. ADDITIONAL FUNDS 22
14. NOTICES 22
15. MISCELLANEOUS 23
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this 12th day of September 1995, between UMB
Bank, n.a., a national banking association with its principal place of business
located at Kansas City, Missouri (hereinafter "Custodian"), and Investors
Research Corporation (hereinafter "IRC"), and each of the registered investment
companies that have executed the signature page hereof, together with such
additional registered investment companies that shall be made parties to this
Agreement by the execution of a separate signature page hereto (individually, a
"Fund Company" and collectively, the "Fund Companies").
WITNESSETH:
WHEREAS, each Fund Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, IRC is a registered investment adviser and provides, either
directly or through one o more of its affiliates, investment management and
administrative services to the Fund Companies; and
WHEREAS, each Fund Company desires to appoint Custodian as its
custodian for the custody of Assets (as hereinafter defined) owned by the
various series of shares of each such Fund Company which Assets are to be held
in such accounts as such Fund Company may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Each Fund Company hereby constitutes and appoints the Custodian as
custodian of Assets belonging to the various series of shares of each such Fund
Company which have been or may be from time to time deposited with the Custodian
or any Subcustodian (as defined in Section 5 below) duly appointed as set forth
herein. Custodian accepts such appointment as a custodian and agrees to perform
the duties and responsibilities of Custodian as set forth herein on the
conditions set forth herein. It is understood and agreed to the parties hereto
that wherever in this agreement it is stated or implied that an action is to be
taken or performed by the Fund Companies, that such action shall be taken or
performed by IRC or its affiliates.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings so indicated:
(a) "Security" or "Securities" shall have the same meaning
ascribed to such term under Section 2(36) of the 1940 Act.
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(b) "Assets" shall mean Securities, monies and other property
held by the Custodian for the benefit of a Fund Company.
(c) (1) "Instructions," as used herein, shall mean: (i) a
tested telex, a written (including, without limitation, facsimile transmission)
request, direction, instruction or certification signed or initialed by or on
behalf of a Fund Company by an Authorized Person (defined in Section 3 below);
(ii) a telephonic or other oral communication from a person the Custodian
reasonably believes to be an Authorized Person; or (iii) a communication
effected directly between an electro-mechanical or electronic device or system
(including, without limitation, computers) on behalf of a Fund Company.
Instructions in the form of oral communications shall be confirmed by the
appropriate Fund Company by tested telex or in writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral Instructions prior
to the Custodian's receipt of such confirmation. Each Fund Company authorizes
the Custodian to record any and all telephonic or other oral Instructions
communicated to the Custodian.
(2) "Special Instructions," as used herein, shall mean
Instructions countersigned or confirmed in writing by the Treasurer or any
Controller of a Fund Company or any other person designated by the Treasurer of
such Fund Company in writing, which countersignature or confirmation shall be
included on the same instrument containing the Instructions or on a separate
instrument relating thereto.
(3) Instructions and Special Instructions shall be
delivered to the Custodian at the address and/or telephone, facsimile
transmission or telex number agreed upon from time to time by the Custodian and
each Fund Company.
(4) Where appropriate, Instructions and Special
Instructions shall be continuing instructions.
(d) "Domestic Subcustodian" shall mean those entities
specifically identified as such on Appendix A attached hereto and such other
entities as may be appointed "Domestic Subcustodians" pursuant to Section 5(a)
below.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution
does not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund Company has furnished the Custodian with copies, properly
certified or authenticated, with all amendments or supplements thereto, of the
following documents:
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(a) Resolutions of the Board of Directors of the Fund Companies
appointing the Custodian and approving the form of this
Agreement; and
(b) Each Fund Company's current prospectus and statements of
additional information.
IRC will furnish the Custodian with copies of any updates, amendments or
supplements to each Fund Company's prospectus and SAI upon request of the
foregoing documents.
In addition, each Fund Company has delivered or will promptly deliver
to the Custodian, copies of the Resolution(s) of its Board of Directors or
Trustees and all amendments or supplements thereto, properly certified or
authenticated, designating certain officers or employees of IRC or its
affiliates who will have continuing authority to certify to the Custodian: (a)
the names, titles, signatures and scope of authority of all persons authorized
to give Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of each Fund Company, and (b) the names,
titles and signatures of those persons authorized to countersign or confirm
Special Instructions on behalf of each Fund Company (in both cases collectively,
the "Authorized Persons" and individually, an "Authorized Person"). Such
Resolutions and certificates may be accepted and relied upon by the Custodian as
conclusive evidence of the facts set forth therein and shall be considered to be
in full force and effect until revoked by telephone by any such officer or
employee or by any Authorized Person, or until delivery to the Custodian of a
similar Resolution or certificate to the contrary, whichever first occurs. Upon
delivery of a certificate which deletes or does not include the name(s) of a
person previously authorized to give Instructions or to countersign or confirm
Special Instructions, such persons shall no longer be considered an Authorized
Person authorized to give Instructions or to countersign or confirm Special
Instructions. Unless the certificate specifically requires that the approval of
anyone else will first have been obtained, the Custodian will be under no
obligation to inquire into the right of the person giving such Instructions or
Special Instructions to do so. Notwithstanding any of the foregoing, no
Instructions or Special Instructions received by the Custodian from a Fund
Company will be deemed to authorize or permit any director, trustee, officer,
employee, or agent of such Fund Company or of IRC to withdraw any of the Assets
of such Fund Company for his or her own personal use or receipt or to be an
account not registered in the name of the Fund Companies upon the mere receipt
of such authorization, Special Instructions or Instructions from such director,
trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
The Custodian shall have and perform the powers and duties hereinafter
set forth in this Section 4. For purposes of this Section 4 all references to
powers and duties of the "Custodian" shall also refer to any Domestic
Subcustodian, whichever first occurs.
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(a) Safekeeping.
The Custodian will keep safely the Assets of each Fund Company
which are delivered to it from time to time. The Custodian shall not be
responsible for any property of a Fund held or received by such Fund and not
delivered to the Custodian or Subcustodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times in accordance with
Instructions received from IRC hold Securities of each Fund Company either: (i)
by physical possession of the share certificates or other instruments
representing such Securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities
which have been delivered to it in physical form, by registering the same in the
name of the Custodian or its nominee, for whose actions Custodian shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the contrary,
the Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the appropriate Fund Company or only
assets held by the Custodian as a fiduciary, provided that the records of the
Custodian shall accurately reflect at all times the Fund Company or other
customer for which such Securities are held in such accounts and the respective
interests therein.
(3) Upon receipt of Instructions, the Custodian will deposit
and/or maintain domestic Securities owned by a Fund Company in, and each Fund
Company hereby approves use of: (a) The Depository Trust Company; (b) The
Participants Trust Company; and (c) any book-entry system as provided in (i)
Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii) Subpart B of
Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the
book-entry regulations of federal agencies substantially in the form of 31 CRT
306.115. Upon the receipt of Special Instructions, the Custodian will deposit
and/or maintain domestic Securities owned by a Fund Company in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System," and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
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(i) The Custodian may deposit the Securities directly or
through one or more agents or Subcustodians which are
also qualified to act as custodians for investment
companies.
(ii) The Custodian shall deposit and/or maintain the
Securities in a Securities System, provided that such
Securities are represented in an account ("Account")
of the Custodian in the Securities System that
includes only assets held by the Custodian as a
fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all
times identify those Securities belonging to any one
or more of the Fund Companies that are maintained in
a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of a Fund Company only upon (a) receipt of advice
from the Securities System that such Securities have been
transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making
of an entry on the records of the Custodian to reflect such
payment and transfer for the account of such Fund Company.
The Custodian shall transfer Securities sold for the account
of a Fund Company only upon (a) receipt of advice from the
Securities System that payment for such Securities has been
transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making
of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Fund Company.
Copies of all advices from the Securities System relating to
transfers of Securities for the account of a Fund Company
shall be maintained for such Fund Company by the Custodian.
The Custodian shall deliver to a Fund Company on the next
succeeding business day daily transaction reports which
shall include each day's transactions in the Securities
System for the account of such Fund Company. Such
transaction reports shall be delivered to such Fund Company
or any agent designated by such Fund Company pursuant to
Instructions, by computer or in such other manner as such
Fund Company and Custodian may agree.
(v) The Custodian shall provide such Fund Company with
reports obtained by the Custodian or any Subcustodian
with respect to a Securities System's accounting
system, internal accounting control and procedures
for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian
shall terminate the use of any Securities System on
behalf of a Fund Company as promptly as practicable
and shall take all actions reasonably practicable to
safeguard the Securities of such Fund Company
maintained with such Securities System.
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(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement and
except as provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund Company's
transactions and to transfer such Assets to such broker, dealer, Subcustodian,
bank agent, Securities System or otherwise as specified in such Special
Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange
portfolio Securities held by it for a Fund for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will tender any such portfolio
Securities in accordance with the terms of any reorganization or protective
plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund Company's account for which the
purchase was made, but only insofar as monies are available therein for such
purpose, and receive the portfolio Securities so purchased. Unless the Custodian
has received Special Instructions to the contrary, such payment will be made
only upon receipt of Securities by the Custodian, a clearing corporation of a
national Securities exchange of which the Custodian is a member, or a Securities
System in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, upon receipt of Instructions: (i) in connection
with a repurchase agreement, the Custodian may release funds to a Securities
System prior to the receipt of advice from the Securities System that the
Securities underlying such repurchase agreement have been transferred by
book-entry into the Account maintained with such Securities System by the
Custodian, provided that the Custodian's instructions to the Securities System
require that the Securities System may make payment of such funds to the other
party to the repurchase agreement only upon transfer by book-entry of the
Securities underlying the repurchase agreement into such Account; (ii) in the
case of Interest Bearing Deposits (defined in Section 4(e) below), currency
deposits, and other deposits, foreign exchange transactions, futures contracts
or options, pursuant to Sections 4(g), 4(h), 4(l), and 4(m) hereof, the
Custodian may make payment therefor before receipt of an advice of transaction;
and (iii) in the case of Securities as to which payment for the Security and
receipt of the instrument evidencing the Security
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are under generally accepted trade practice or the terms of the instrument
representing the Security expected to take place in different locations or
through separate parties, such as commercial paper which is indexed to foreign
currency exchange rates, derivatives and similar Securities, the Custodian may
make payment for such Securities prior to delivery thereof in accordance with
such generally accepted trade practice or the terms of the instrument
representing such Security.
(2) Other Assets Purchased. Upon receipt of Instructions and
except as otherwise provided herein, the Custodian shall pay for and receive
other Assets for the account of a Fund Company as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the
Custodian will, with respect to a sale, deliver or cause to be delivered the
Securities thus designated as sold to the broker or other person specified in
the Instructions relating to such sale. Unless the Custodian has received
Special Instructions to the contrary, such delivery shall be made only upon
receipt of payment therefor in the form of: (a) cash, certified check, bank
cashier's check, bank credit, or bank wire transfer; (b) credit to the account
of the Custodian with a clearing corporation of a national Securities exchange
of which the Custodian is a member; or (c) credit to the Account of the
Custodian with a Securities System, in accordance with the provisions of Section
4(b)(3) hereof. Notwithstanding the foregoing, Securities held in physical form
may be delivered and paid for in accordance with "street delivery custom" to a
broker or its clearing agent, against delivery to the Custodian of a receipt for
such Securities, provided that the Custodian shall have taken reasonable steps
to ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except
as otherwise provided herein, the Custodian shall receive payment for and
deliver other Assets for the account of a Fund Company as provided in
Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of
an option or sale of a covered call option, the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of the option by a Fund Company; (b) if the transaction involves the
sale of a covered call option, deposit and maintain in a segregated account the
Securities (either physically or by book-entry in a Securities System) subject
to the covered call option written on behalf of such Fund; and (c) pay, release
and/or transfer such Securities, cash or other Assets in accordance with any
notices or other communications evidencing the expiration,
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termination or exercise of such options which are furnished to the Custodian by
the Options Clearing Corporation (the "OCC"), the securities or options
exchanges on which such options were traded, or such other organization as may
be responsible for handling such option transactions.
(2) Upon receipt of Instructions relating to the sale of a
naked option (including stock index and commodity options), the Custodian, the
appropriate Fund Company and the broker-dealer shall enter into an agreement to
comply with the rules of the OCC or of any registered national securities
exchange or similar organization(s). Pursuant to that agreement and such Fund
Company's Instructions, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the writing of the option;
(b) deposit and maintain in a segregated account, Securities (either physically
or by book-entry in a Securities System), cash and/or other Assets in an amount
specified in the Instructions; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any such agreement and with
any notices or other communications evidencing the expiration, termination or
exercise of such option which are furnished to the Custodian by the OCC, the
securities or options exchanges on which such options were traded, or such other
organization as may be responsible for handling such option transactions. The
appropriate Fund Company and the broker-dealer shall be responsible for
determining the quality and quantity of assets held in any segregated account
established in compliance with applicable margin maintenance requirements and
the performance of other terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a
futures margin procedural agreement among the appropriate Fund Company, the
Custodian and the designated futures commission merchant (a "Procedural
Agreement"). Under the Procedural Agreement the Custodian shall: (a) receive and
retain confirmations, if any, evidencing the purchase or sale of a futures
contract or an option on a futures contract by such Fund Company; (b) deposit
and maintain in a segregated account cash, Securities and/or other Assets
designated as initial, maintenance or variation "margin" deposits intended to
secure such Fund Company's performance of its obligations under any futures
contracts purchased or sold, or any options on futures contracts written by such
Fund Company, in accordance with the provisions of any Procedural Agreement
designed to comply with the provisions of the Commodity Futures Trading
Commission and/or any commodity exchange or contract market (such as the Chicago
Board of Trade), the Securities Exchange Commission ("SEC"), or any similar
organization(s), regarding such margin deposits; and (c) release Assets from
and/or transfer Assets into such margin accounts only in accordance with any
such Procedural Agreements. The appropriate Fund Company and such futures
commission merchant shall be responsible for determining the type and amount of
Assets held in the segregated account or paid to the broker-dealer in compliance
with applicable margin maintenance requirements and the performance of any
futures contract or option on a futures contract in accordance with its terms.
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(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish
and maintain on its books a segregated account or accounts for and on behalf of
a Fund Company, into which account or accounts may be transferred Assets of such
Fund Company, including Securities maintained by the Custodian in a Securities
System pursuant to Paragraph (b)(3) of this Section 4, said account or accounts
to be maintained (i) for the purposes set forth in Sections 4(g), 4(h) and 4(n)
and (ii) for the purpose of compliance by such Fund Company with the procedures
required by the SEC Investment Company Act Release Number 10666 or any
subsequent release or releases relating to the maintenance of segregated
accounts by registered investment companies, or (iii) for such other purposes as
may be set forth, from time to time, in Special Instructions. The Custodian
shall not be responsible for the determination of the type or amount of Assets
to be held in any segregated account referred to in this paragraph, or for
compliance by the Fund Companies with required procedures noted in (ii) above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall exchange, or
cause to be exchanged, Securities held on behalf of a Fund Company for American
Depositary Receipts or International Depositary Receipts (hereinafter referred
to, collectively, as "ADRs") representing such Securities. To effect such
exchange, the Custodian or Subcustodian shall surrender the Securities to the
depository of the issuer of the applicable ADR, against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the Custodian or Subcustodian surrendering the same that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
Securities in the name of the Custodian or a nominee of the Custodian, for
delivery in accordance with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or
cause to be surrendered ADRs to the issuer thereof, against a written receipt
therefor adequately describing the ADRs surrendered and written evidence
satisfactory to the organization surrendering the same that the issuer of the
ADRs has acknowledged receipt of instructions to cause its depository to deliver
the Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar Securities to the issuer or trustee
thereof (or to the agent of such issuer or trustee) for the purpose of exercise
or sale, provided that the new Securities, cash or other Assets, if any,
acquired as a result of such actions are to be delivered to the Custodian; and
(b) deposit Securities upon invitations for tenders thereof, provided that the
consideration for such Securities is to be paid or delivered to the Custodian,
or the tendered Securities are to be returned to the Custodian.
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Notwithstanding any provision of this Agreement to the
contrary, the Custodian shall take all necessary action, unless otherwise
directed to the contrary in Instructions, to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and shall notify the appropriate Fund Company of
such action in writing by facsimile transmission or in such other manner as such
Fund Company and Custodian may agree in writing.
IRC agrees that if it gives an Instruction for the performance
of an act after the deadline prescribed by the Custodian for the performance of
such act, the Custodian shall use reasonable efforts to perform such act, but
the Fund Company shall hold the Custodian harmless from any adverse consequences
in connection with any failure to effect such Instructions. The Custodian agrees
to establish reasonable deadlines by which Instructions must be given.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to
purchase interest bearing fixed term and call deposits (hereinafter referred to,
collectively, as "Interest Bearing Deposits") for the account of a Fund Company,
the Custodian shall purchase such Interest Bearing Deposits in the name of such
Fund Company with such banks or trust companies, including the Custodian, any
Subcustodian or any subsidiary or affiliate of the Custodian (hereinafter
referred to as "Banking Institutions"), and in such amounts as such Fund Company
may direct pursuant to Instructions. Such Interest Bearing Deposits may be
denominated in U.S. dollars or other currencies, as such Fund Company may
determine and direct pursuant to Instructions. The responsibilities of the
Custodian to a Fund Company for Interest Bearing Deposits issued by the
Custodian shall be that of a U.S. bank for a similar deposit. With respect to
Interest Bearing Deposits other than those issued by the Custodian, (a) the
Custodian shall be responsible for the collection of income and the transmission
of cash to and from such accounts; and (b) the Custodian shall have no duty with
respect to the selection of the Banking Institution or for the failure of such
Banking Institution to pay upon demand.
(m) Foreign Exchange Transactions.
(1) Each Fund hereby appoints the Custodian
as its agent in the execution of certain currency exchange transactions. The
Custodian agrees to provide exchange rate and U.S. Dollar information, in
writing, to the Funds. Such information shall be supplied by the Custodian at
least by the business day prior to the value date of the foreign exchange
transaction, provided that the Custodian receives the request for such
information at least two business days prior to the value date of the
transaction.
(2) Upon receipt of Instructions, the Custodian
shall settle foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf of and for the account of a
Fund with such currency brokers or Banking Institutions as such Fund may
determine and direct pursuant to Instructions.
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(3) Each Fund Company accepts full
responsibility for its use of third party foreign exchange brokers and for
execution of said foreign exchange contracts and understands that the Fund
Company shall be responsible for any and all costs and interest charges which
may be incurred as a result of the failure or delay of its third party broker to
deliver foreign exchange. The Custodian shall have no responsibility or
liability with respect to the selection of the currency brokers or Banking
Institutions with which a Fund Company deals or the performance of such brokers
or Banking Institutions.
(4) Notwithstanding anything to the contrary
contained herein, upon receipt of Instructions the Custodian may, in connection
with a foreign exchange contract, make free outgoing payments of cash in the
form of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue currency
completing such contract has been delivered or received.
(5) The Custodian shall not be obligated to
enter into foreign exchange transactions as principal. However, if the Custodian
has made available to a Fund Company its services as a principal in foreign
exchange transactions and subject to any separate agreement between the parties
relating to such transactions, the Custodian shall enter into foreign exchange
contracts or options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of the Fund Company, with the
Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a Fund
Company, the Custodian will release or cause to be released Securities held in
custody to the pledgees designated in such Instructions by way of pledge or
hypothecation to secure loans incurred by such Fund Company with various lenders
including but not limited to the Custodian; provided, however, that the
Securities shall be released only upon payment to the Custodian of the monies
borrowed, except that in cases where additional collateral is required to secure
existing borrowings, further Securities may be released or delivered, or caused
to be released or delivered for that purpose upon receipt of Instructions. Upon
receipt of Instructions, the Custodian will pay, but only from funds available
for such purpose, any such loan upon re-delivery to it of the Securities pledged
or hypothecated therefor and upon surrender of the note or notes evidencing such
loan. In lieu of delivering collateral to a pledgee, the Custodian, on the
receipt of Instructions, shall transfer the pledged Securities to a segregated
account for the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a
separate Securities Lending Agreement, the Custodian will release Securities
held in custody to the borrower designated in such Instructions and may, except
as otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate
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Fund to the borrower thereof only upon receipt of the collateral for such
borrowing. The Custodian shall have no responsibility or liability for any loss
arising from the delivery of Securities prior to the receipt of collateral. Upon
receipt of Instructions and the loaned Securities, the Custodian will release
the collateral to the borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends,
rights, and other items of like nature and, upon receipt of Instructions, take
action with respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and
mechanical matters in accordance with industry standards in connection with the
sale, exchange, substitution, purchase, transfer, or other dealings with
Securities or other property of each Fund Company except as may be otherwise
provided in this Agreement or directed from time to time by Instructions from
any particular Fund Company.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to
each Fund Company with respect to portfolio Securities and other Assets; (b)
promptly credit to the account of each Fund Company all income and other
payments relating to portfolio Securities and other Assets held by the Custodian
hereunder upon Custodian's receipt of such income or payments or as otherwise
agreed in writing by the Custodian and any particular Fund Company; (c) promptly
endorse and deliver any instruments required to effect such collection; and (d)
promptly execute ownership and other certificates and affidavits for all
federal, state, local and foreign tax purposes in connection with receipt of
income or other payments with respect to portfolio Securities and other Assets,
or in connection with the transfer of such Securities or other Assets; provided,
however, that with respect to portfolio Securities registered in so-called
street name, or physical Securities with variable interest rates, the Custodian
shall use its best efforts to collect amounts due and payable to any such Fund
Company. The Custodian shall notify a Fund Company in writing by facsimile
transmission or in such other manner as such Fund Company and Custodian may
agree in writing if any amount payable with respect to portfolio Securities or
other Assets is not received by the Custodian when due. The Custodian shall not
be responsible for the collection of amounts due and payable with respect to
portfolio Securities or other Assets that are in default.
(f) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank
account or accounts on the books of the Custodian; provided that such bank
account(s) shall be in the name of the Custodian or a nominee thereof, for the
account of one or more of the Fund Companies, and shall be subject only to
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draft or order of the Custodian; and provided further, that the records of the
Custodian shall identify the amount of Assets of each Fund Company on deposit in
such bank account(s) and the responsibility of the Custodian with respect to the
portion of such bank account(s) attributable to each Fund Company shall be that
of a U.S. bank for a similar amount deposited in a similar account.
(s) Dividends, Distributions and Redemptions.
To enable each Fund Company to pay dividends or other
distributions to shareholders of each such Fund Company and to make payment to
shareholders who have requested repurchase or redemption of their shares of each
such Fund Company (collectively, the "Shares"), the Custodian shall release cash
or Securities insofar as available. In the case of cash, the Custodian shall,
upon the receipt of Instructions, transfer such funds by check or wire transfer
to any account at any bank or trust company designated by each such Fund Company
in such Instructions. In the case of Securities, the Custodian shall, upon the
receipt of Special Instructions, make such transfer to any entity or account
designated by each such Fund Company in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments
received for shares issued or sold from time to time by each Fund Company, and
shall credit such funds to the account of the appropriate Fund Company. The
Custodian shall notify the appropriate Fund Company of Custodian's receipt of
cash in payment for shares issued by such Fund Company by facsimile transmission
or in such other manner as such Fund Company and the Custodian shall agree. Upon
receipt of Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for shares as may be set forth in such
Instructions and at a time agreed upon between the Custodian and such Fund
Company; and (b) make federal funds available to a Fund Company as of specified
times agreed upon from time to time by such Fund Company and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund Company.
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985.
The Custodian shall deliver or cause to be delivered to the
appropriate Fund Company all forms of proxies, all notices of meetings, and any
other notices or announcements affecting or relating to Securities owned by such
Fund Company that are received by the Custodian, any Subcustodian, or any
nominee of either of them, and, upon receipt of Instructions, the Custodian
shall execute and deliver, or cause such Subcustodian or nominee to execute and
deliver, such proxies or other authorizations as may be required. Except as
directed pursuant to Instructions, neither the Custodian nor any Subcustodian or
nominee shall vote upon any such Securities, or execute any proxy to vote
thereon, or give any consent or take any other action with respect thereto.
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The Custodian will not release the identity of any Fund
Company to an issuer which requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct communications
between such issuer and any such Fund Company unless IRC directs the Custodian
otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its
activities under this Agreement as are required to be maintained by Rule 31a-1
under the Investment Company Act of 1940 ("the 1940 Act") and to preserve them
for the periods prescribed in Rule 31a-2 under the 1940 Act. These records shall
be open for inspection by duly authorized officers, employees or agents
(including independent public accountants) of the appropriate Fund during normal
business hours of the Custodian.
The Custodian shall provide accountings relating to its
activities under this Agreement as shall be agreed upon by each Fund Company and
the Custodian.
(w) Opinion of Fund Companies' Independent Certified
Public Accountants.
The Custodian shall take all reasonable action as each Fund
Company may request to obtain from year to year favorable opinions from each
such Fund Companies' independent certified public accountants with respect to
the Custodian's activities hereunder and in connection with the preparation of
each such Fund Companies' periodic reports to the SEC and with respect to any
other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of a Fund Company, the Custodian shall deliver
to such Fund Company a written report prepared by the Custodian's independent
certified public accountants with respect to the services provided by the
Custodian under this Agreement, including, without limitation, the Custodian's
accounting system, internal accounting control and procedures for safeguarding
cash, Securities and other Assets, including cash, Securities and other Assets
deposited and/or maintained in a Securities System or with a Subcustodian. Such
report shall be of sufficient scope and in sufficient detail as may reasonably
be required by such Fund Company and as may reasonably be obtained by the
Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or
cause to be paid, all bills, statements, or other obligations of a Fund Company.
5. SUBCUSTODIANS.
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From time to time, in accordance with the relevant provisions
of this Agreement, the Custodian may appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Special Subcustodians, or Interim Subcustodians (as each
are hereinafter defined) to act on behalf of any one or more of the Fund
Companies. A Domestic Subcustodian, in accordance with the provisions of this
Agreement, may also appoint a Foreign Subcustodian, Special Subcustodian, or
Interim Subcustodian to act on behalf of any one or more of the Fund Companies.
For purposes of this Agreement, all Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians and Interim Subcustodians shall be referred
to collectively as "Subcustodians."
(a) Domestic Subcustodians.
Subject to the prior written approval of IRC and the Funds,
the Custodian may appoint any bank as defined in Section 2(a)(5) of the 1940 Act
or any trust company or other entity, any of which meet the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act for the Custodian on behalf of any one or more Funds as a
subcustodian for purposes of holding Assets of such Fund(s) and performing other
functions of the Custodian within the United States (a "Domestic Subcustodian").
The Custodian's appointment of any such Domestic Subcustodian shall not be
effective without such prior written approval of IRC and the Fund Companies. In
connection with the appointment of any Domestic Subcustodian, the Custodian
shall enter into a subcustodian agreement with the proposed Domestic
Subcustodian in form and substance approved by IRC and each Fund Company. The
Custodian shall not consent to the amendment of any subcustodian agreement
entered into with a Domestic Subcustodian that materially affects IRC and Fund
Company's rights under such agreement, except upon prior written approval of IRC
and each Fund Company pursuant to Special Instructions. Each such duly approved
Domestic Subcustodian shall be listed on Appendix A attached hereto, as it may
be amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic
Subcustodian to appoint, any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the 1940
Act and the rules and regulations thereunder to act for the Custodian on behalf
of any one or more Funds as a subcustodian or sub-subcustodian (if appointed by
a Domestic Subcustodian) for purposes of holding Assets of the Fund(s) and
performing other functions of the Custodian in countries other than the United
States of America (hereinafter referred to as a "Foreign Subcustodian" in the
context of either a subcustodian or a sub-subcustodian); provided that the
Custodian shall have obtained written confirmation from each Fund Company of the
approval of the Board of Directors or other governing body of each such Fund
(which approval may be withheld in the sole discretion of such Board of
Directors or other governing body or entity) with respect to (i) the identity of
any proposed Foreign Subcustodian (including branch designation), (ii) the
country or countries in which, and the securities depositories or clearing
agencies (hereinafter "Securities Depositories and Clearing Agencies"), if any,
through which, the Custodian or any proposed
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Foreign Subcustodian is authorized to hold Securities and other Assets of each
such Fund Company, and (iii) the form and terms of the subcustodian agreement to
be entered into with such proposed Foreign Subcustodian. Each such duly approved
Foreign Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold Securities and other Assets of the
Fund Companies shall be listed on Appendix A attached hereto, as it may be
amended, from time to time. Each Fund Company shall be responsible for informing
the Custodian sufficiently in advance of a proposed investment which is to be
held in a country in which no Foreign Subcustodian is authorized to act, in
order that there shall be sufficient time for the Custodian, or any Domestic
Subcustodian, to effect the appropriate arrangements with a proposed Foreign
Subcustodian, including obtaining approval as provided in this Section 5(b). In
connection with the appointment of any Foreign Subcustodian, the Custodian
shall, or shall cause the Domestic Subcustodian to, enter into a subcustodian
agreement with the Foreign Subcustodian in form and substance approved by IRC
and each such Fund Company. The Custodian shall not consent to the amendment of,
and shall cause any Domestic Subcustodian not to consent to the amendment of,
any agreement entered into with a Foreign Subcustodian, which materially affects
any Fund Company's rights under such agreement, except upon prior written
approval of such Fund Company pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Fund
Company shall invest in an Asset to be held in a country in which no Foreign
Subcustodian is authorized to act, the Custodian shall notify such Fund Company
in writing by facsimile transmission or in such other manner as such Fund
Company and the Custodian shall agree in writing of the unavailability of an
approved Foreign Subcustodian in such country; and upon the receipt of Special
Instructions from such Fund Company, the Custodian shall, or shall cause its
Domestic Subcustodian to, appoint or approve an entity (referred to herein as an
"Interim Subcustodian") designated in such Special Instructions to hold such
Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on
behalf of a Fund Company, appoint one or more banks, trust companies or other
entities designated in such Special Instructions to act for the Custodian on
behalf of such Fund Company as a subcustodian for purposes of: (i) effecting
third-party repurchase transactions with banks, brokers, dealers or other
entities through the use of a common custodian or subcustodian; (ii) providing
depository and clearing agency services with respect to certain variable rate
demand note Securities, (iii) providing depository and clearing agency services
with respect to dollar denominated Securities, and (iv) effecting any other
transactions designated by such Fund Company in such Special Instructions. Each
such designated subcustodian (hereinafter referred to as a "Special
Subcustodian") shall be listed on Appendix A attached hereto, as it may be
amended from time to time. In connection with the appointment of any Special
Subcustodian, the Custodian shall enter into a subcustodian agreement
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with the Special Subcustodian in form and substance approved by the appropriate
Fund Company in Special Instructions. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or waive any
rights under such agreement, except upon prior approval pursuant to Special
Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon
notification to the appropriate Fund Companies, terminate any Subcustodian of
such Fund(s) in accordance with the termination provisions under the applicable
subcustodian agreement, and upon the receipt of Special Instructions, the
Custodian will terminate any Subcustodian in accordance with the termination
provisions under the applicable subcustodian agreement. Notwithstanding the
above, the Custodian may not terminate Morgan Stanley Trust Company as a
Domestic Subcustodian under this Agreement unless 60 days prior written notice
is provided to IRC and the Fund Companies.
(f) Certification Regarding Foreign Subcustodians.
Upon request of a Fund Company, the Custodian shall deliver to
such Fund Company a certificate stating: (i) the identity of each Foreign
Subcustodian then acting on behalf of the Custodian; (ii) the countries in which
and the Securities Depositories and Clearing Agencies through which each such
Foreign Subcustodian is then holding cash, Securities and other Assets of such
Fund Company; and (iii) such other information as may be requested by such Fund
Company, and as the Custodian shall be reasonably able to obtain, to evidence
compliance with rules and regulations under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to IRC and each Fund Company for
all losses, damages and reasonable costs and expenses (including reasonable
attorneys fees) suffered or incurred by IRC and each Fund Company in connection
with this Agreement resulting from the negligence or willful misconduct of the
Custodian.
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Sovereign Risk, Etc.
In no event shall the Custodian incur liability hereunder (i)
if the Custodian or any Subcustodian or Securities System, or any subcustodian,
Securities System, Securities Depository or Clearing Agency utilized by the
Custodian or any such Subcustodian, or any nominee of the Custodian or any
Subcustodian (individually, a "Person") is prevented, forbidden or delayed from
performing, or omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (a) any provision
of any present or future law or regulation or order of the United States of
America, or any state thereof, or of any foreign country, or
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political subdivision thereof or of any court of competent jurisdiction (other
than a federal bankruptcy court) (and neither the Custodian nor any other Person
shall be obligated to take any action contrary thereto); or (b) any event beyond
the control of the Custodian or other Person such as armed conflict, riots,
labor disputes of third-party vendors, Fund Company equipment or transmission
failures, natural disasters, or failure of the mails, transportation,
communications or power supply; or (ii) for any loss, damage, cost or expense
resulting from "Sovereign Risk." A "Sovereign Risk" shall mean nationalization,
expropriation, currency devaluation, revaluation or fluctuation, confiscation,
seizure, cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency restrictions,
exchange controls, taxes, levies or other charges affecting a Fund's Assets; or
acts of armed conflict, terrorism, insurrection or revolution.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have
any liability in respect of any loss, damage or expense suffered by a Fund
Company, insofar as such loss, damage or expense arises from the performance of
the Custodian or any Domestic Subcustodian as a result of reasonable reliance
upon records that were maintained for such Fund Company by entities other than
the Custodian or any Domestic Subcustodian prior to the Custodian's employment
hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled
to receive and act upon the written advice of counsel of its own choosing on all
matters (which may include counsel for the Fund Companies). The Custodian and
all Domestic Subcustodians shall be without liability for any actions taken or
omitted in good faith pursuant to the written advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the
advice of any Fund and upon statements of such Fund's accountants and other
persons affiliated with the Fund Companies reasonably believed by it in good
faith to be expert in matters upon which they are consulted, and neither the
Custodian nor any Domestic Subcustodian shall be liable for any actions taken or
omitted, reasonably and in good faith, pursuant to such written advice or
statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully
protected and indemnified in acting as a custodian hereunder upon any
Resolutions of the Board of Directors or Trustees, Instructions, Special
Instructions, advice, notice, request, consent, certificate, instrument or paper
appearing to it to be genuine and to have been properly executed and
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shall, unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained from any Fund
Company hereunder a certificate signed by any officer of such Fund authorized to
countersign or confirm Special Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions
hereof, neither the Custodian nor any Domestic Subcustodian shall be under any
duty or obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased
by or for any Fund Company, the legality of the
purchase thereof or evidence of ownership required to
be received by any such Fund Company, or the
propriety of the decision to purchase or amount paid
therefor;
(ii) the legality of the sale of any Securities by or for any
Fund Company, or the propriety of the amount for which the
same were sold; or
(iii) any other expenditures, encumbrances of Securities,
borrowings or similar actions with respect to any Fund
Company's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund Company's Declaration of Trust,
Partnership Agreement, Articles of Incorporation or By-Laws or votes or
proceedings of the shareholders, trustees, partners or directors of any such
Fund Company, or any such Fund Company's currently effective Registration
Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians and Foreign Subcustodian
The Custodian shall be liable for the acts or omissions of any
Domestic Subcustodian and Foreign Subcustodian to the same extent as if such
actions or omissions were performed by the Custodian itself.
(b) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and Clearing Agencies.
The Custodian shall not be liable to any Fund Company for any
loss, damage or expense suffered or incurred by such Fund resulting from or
occasioned by the actions or omissions of a Securities System, Interim
Subcustodian, Special Subcustodian, or Securities Depository and Clearing Agency
unless such loss, damage or expense is caused by, or results from, the
negligence or willful misconduct of the Custodian.
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(c) Defaults or Insolvencies of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or
expense suffered or incurred by any Fund Company resulting from or occasioned by
the actions, omissions, neglects, defaults or insolvency of any broker, bank,
trust company or any other person with whom the Custodian may deal (other than
any of such entities acting as a Subcustodian, Securities System or Securities
Depository and Clearing Agency, for whose actions the liability of the Custodian
is set out elsewhere in this Agreement) unless such loss, damage or expense is
caused by, or results from, the gross negligence or willful misconduct of the
Custodian.
(d) Reimbursement of Expenses.
IRC agrees to reimburse the Custodian for all reasonable
out-of-pocket expenses incurred by the Custodian in connection with this
Agreement, but excluding salaries and overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by IRC.
Subject to the limitations set forth in this Agreement, IRC
agrees to indemnify and hold harmless the Custodian and its nominees from all
losses, damages and expenses (including reasonable attorneys' fees) suffered or
incurred by the Custodian or its nominee caused by or arising from actions taken
by the Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement, the form of which has been approved by IRC; provided,
however, that such indemnity shall not apply to the extent the Custodian is
liable under Sections 6 or 7 hereof.
If any Fund Company requires the Custodian to take any action
with respect to Securities, which action involves the payment of money or which
may, in the opinion of the Custodian, result in the Custodian or its nominee
assigned to such Fund Company being liable for the payment of money or incurring
liability of some other form, such Fund Company, as a prerequisite to requiring
the Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in
addition to the obligations provided in Sections 6 and 7, the Custodian agrees
to indemnify and hold harmless by IRC and each Fund Company from all losses,
damages and expenses suffered or incurred that is caused by the negligence or
willful misconduct of the Custodian or any Subcustodian.
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9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or
any Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of any Fund Company as to which there
would be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Fund Company, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Fund Company in an amount sufficient to allow
the completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Fund
Company as to which it is subsequently determined that such Fund Company has
overdrawn its cash account with the Custodian as of the close of business on the
date of such payment or transfer, said overdraft shall constitute an Advance.
Any Advance shall be payable by the Fund Company on behalf of which the Advance
was made on demand by Custodian, unless otherwise agreed by such Fund Company
and the Custodian, and, as an overdraft charge, shall accrue interest from the
date of the Advance to the date of payment by such Fund Company to the Custodian
at a rate agreed upon in writing from time to time by the Custodian and such
Fund Company. It is understood that any transaction in respect of which the
Custodian shall have made an Advance, including but not limited to a foreign
exchange contract or transaction in respect of which the Custodian is not acting
as a principal, is for the account of and at the risk of the Fund Company on
behalf of which the Advance was made, and not, by reason of such Advance, deemed
to be a transaction undertaken by the Custodian for its own account and risk.
The Custodian and each of the Fund Companies that are parties to this Agreement
acknowledge that the purpose of Advances is to provide for the prompt delivery
in accordance with the settlement terms of such transactions or to meet
emergency expenses not reasonably foreseeable by a Fund Company. The Custodian
shall promptly notify the appropriate Fund Company of any Advance. Such
notification shall be sent by facsimile transmission or in such other manner as
such Fund Company and the Custodian may agree. The Custodian shall have a lien
on the property in the custody accounts, in an amount not greater than 110% of
the amount of an advance to secure payment of any such advance.
10. COMPENSATION.
IRC will pay to the Custodian such compensation as is agreed
to in writing by the Custodian and IRC from time to time. Such compensation,
together with all amounts for which the Custodian is to be reimbursed in
accordance with Section 7(e), shall be billed to IRC and paid in cash to the
Custodian.
11. POWERS OF ATTORNEY.
Upon request, each Fund shall deliver to the Custodian such
proxies, powers of attorney or other instruments as may be required in
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connection with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement.
12. TERMINATION AND ASSIGNMENT.
Any Fund Company or the Custodian may terminate this Agreement
by notice in writing, delivered or mailed, postage prepaid (certified mail,
return receipt requested) to the other not less than 60 days prior to the date
upon which such termination shall take effect. Upon termination of this
Agreement, IRC shall pay to the Custodian such fees as may be due the Custodian
hereunder as well as its reimbursable disbursements, costs and expenses paid or
incurred. Upon termination of this Agreement, the Custodian shall deliver, at
the terminating party's expense, all Assets held by it hereunder to the
appropriate Fund Company or as otherwise designated by such Fund Company by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any
Fund Company without the respective consent of the other, duly authorized by a
resolution by its Board of Directors or Trustees.
13. ADDITIONAL FUNDS.
Additional Fund Companies may become party to this Agreement
after the date hereof by an instrument in writing to such effect signed by such
Fund Company or Companies and the Custodian. If this Agreement is terminated as
to one or more of the Fund Companies (but less than all of the Fund Companies)
or if an additional Fund Company or Companies shall become a party to this
Agreement, there shall be delivered to each party an Appendix B or an amended
Appendix B, signed by each of the additional Fund Companies (if any) and each of
the remaining Fund Companies as well as the Custodian, deleting or adding such
Fund Company or Companies, as the case may be. The termination of this Agreement
as to less than all of the Fund Companies shall not affect the obligations of
the Custodian and the remaining Fund Companies hereunder as set forth on the
signature page hereto and in Appendix B as revised from time to time.
14. NOTICES.
As to IRC and each Fund Company, notices, requests,
instructions and other writings delivered to Investors Research Corporation,
4500 Main Street, Kansas City, Missouri 64111, Attention: General Counsel,
postage prepaid, or to such other address as any particular Fund Company may
have designated to the Custodian in writing, shall be deemed to have been
properly delivered or given to IRC and the Fund Companies.
Notices, requests, instructions and other writings delivered
to the Securities Administration Department of the Custodian at its office at
928
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Grand Avenue, Kansas City, Missouri, or mailed postage prepaid, to the
Custodian's Securities Administration Department, Post Office Box 226, Kansas
City, Missouri 64141, or to such other addresses as the Custodian may have
designated to each Fund Company in writing, shall be deemed to have been
properly delivered or given to the Custodian hereunder; provided, however, that
procedures for the delivery of Instructions and Special Instructions shall be
governed by Section 2(c) hereof.
15. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State
of Missouri and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement
shall be binding upon, and inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended,
modified or waived, in any manner except in writing, properly executed by both
parties hereto; provided, however, Appendix A may be amended from time to time
as Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians, and
Securities Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for
convenience of reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of
execution hereof.
(f) This Agreement may be executed simultaneously in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning
of this Agreement, and the definitions thereof are found in the following
sections of the Agreement:
23
<PAGE>
Term Section
Account 4(b)(3)(ii)
ADR's 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories and
Clearing Agencies 5(b)
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held
to be illegal, in conflict with any law or otherwise invalid by any court of
competent jurisdiction, the remaining portion or portions shall be considered
severable and shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof, and
accordingly supersedes, as of the effective date of this Agreement, any
custodian agreement heretofore in effect between the Fund Companies and the
Custodian.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Custody
Agreement to be executed by their respective duly authorized officers.
ATTEST: INVESTORS RESEARCH CORPORATION
By: /s/ William M. Lyons
Name: William M. Lyons
Title: Executive V.P. & General
Counsel
Date:
ATTEST: UMB BANK, N.A.
By: /s/ David Swan
Name: David Swan
Title: SVP
Date: 9-12-95
25
<PAGE>
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRY FOREIGN SUBCUSTODIANS CENTRAL DEPOSITORY
Argentina Citibank Caja de Valores
Australia Australia and New Zealand Bank CHESS
Austria Creditanstalt Bankverein OKB
Bangladesh Standard Chartered Bank N/A
Belgium Banque Bruxelles Lambert CIK
Botswana Barclays Bank of Botswana N/A
Brazil Banco de Boston BOVESPA
Rio De Janeiro Stock
Exchange
Canada Toronto Dominion Bank CDS
Chile Citibank N.A. Depositorio Central
de Valores
China Hongkong & Shanghai Bank Corp.
Shenzhen Exchange: Citibank, N.A.
Standard Chartered Bank
Hongkong & Shanghai
Bank Corp.
Shanghai Exchange: Shanghai Exchange
Colombia Cititrust N/A
Czech Republic ING Bank SCP
Denmark Den Danske Bank VP
Finland Union Bank of Finland N/A
France Banque Indosuez SICOVAM
Germany BHF Bank DKV
Ghana Barclays Bank of Ghana N/A
Greece Citibank N.A. N/A
26
<PAGE>
Hong Kong Hongkong & Shanghai Bank Corp. CCASS
Hungary Euroclear (see Austria) OKB
Citibank Budapest KELER
India Standard Chartered Bank N/A
Indonesia Hongkong & Shanghai Bank Corp. N/A
Ireland Allied Irish Bank N/A
Israel Bank Leumi SECH
Italy Barclays Bank Monte Titoli S.p.A.
Japan Morgan Stanley International JASDEC
Mutual Fund Clients: Mitsubishi Bank Ltd.
Jordan Arab Bank ple N/A
Kenya Barclays Bank of Kenya N/A
Korea Standard Chartered Bank KCD
Luxembourg Euroclear/Bankque Bruxelles
Lambert N/A
Malaysia Oversea Chinese Banking Corp. MCD
Mauritius Hongkong & Shanghai Bank Corp. N/A
Mexico Citibank N.A. S.D. Indeval
Morocco Banque Commerciale du Maroc N/A
Netherlands ABN Amro Bank NECIGEF
New Zealand Australia and New Zealand Bank AUSTRACLEAR
Norway Den Norske Bank VPS
Pakistan Standard Chartered Bank SCD
Papua New Guinea Australia and New Zealand Bank N/A
(see Australia)
Peru Citibank N.A. Caja de Valores
Phillippines Hongkong & Shanghai Bank Corp. N/A
Poland Citibank S.A. NDS
Portugal Banco Comercial Portugues N/A
Singapore Oversea Chinese Banking Corp. CDP
South Africa First National Bank of Southern
Africa N/A
Spain Banco Santander SCLV
Sri Lanka Hongkong & Shanghai Bank Corp. CDS
Swaziland Barclays Bank of Swaziland N/A
Sweden Svenska Handelsbanken VPS
Switzerland Bank Leu SEGA
Taiwan Hongkong & Shanghai Bank Corp. TSCD
Thailand Standard Chartered Bank TSD
Turkey Citibank N.A. N/A
United Kingdom Barclays Bank PLC N/A
USA DTC DTC
Chemical Bank N/A
Uruguay Citibank N.A. N/A
Venezuela Citibank N.A. N/A
Zambia Barclays Bank of Zambia N/A
Zimbabwe Barclays Bank of Zimbabwe N/A
27
<PAGE>
Investors Research Corporation UMB Bank, n.a.
By: /s/ William M. Lyons By: /s/ David Swan
Name: Name: David Swan
Title: Title: SVP
Date: Date: 9-12-95
28
<PAGE>
APPENDIX B
CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are
hereby made parties to the Custody Agreement dated September 12, 1995, with UMB
Bank, n.a. ("Custodian") and Investors Research Corporation, and agree to be
bound by all the terms and conditions contained in said Agreement:
LIST OF FUNDS
Twentieth Century Growth Investors
Twentieth Century Select Investors
Twentieth Century Ultra Investors
Twentieth Century Vista Investors
Twentieth Century Giftrust Investors
Twentieth Century Heritage Investors
Twentieth Century Balanced Investors
Twentieth Century Equity Investors
Twentieth Century Value Investors
Twentieth Century International Equity Income
Twentieth Century International Emerging Growth
TCI Growth
TCI Balanced
TCI Advantage
TCI International
ATTEST: INVESTORS RESEARCH CORPORATION
By: /s/ William M. Lyons
Name:
Title:
Date:
ATTEST: UMB BANK, N.A.
By: /s/ David Swan
Name: David Swan
Title: SVP
Date: 9-12-95
29
CUSTODIAN AGREEMENT
WHEREAS, TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC., a
Maryland corporation ("Corporation") desires to appoint a custodian with respect
to certain monies received from shareholders for the purchase of its shares; and
WHEREAS, UMB BANK, N.A., a nationally-chartered banking association
("Custodian"), desires to serve as a custodian for these assets of the
Corporation;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. During the term of this Agreement the Corporation shall maintain one
or more custody accounts (the "Accounts") with the Custodian and shall deposit
in the Accounts all Automated Clearing House (ACH) purchases designated for the
Corporation in payment for its shares.
2. The Custodian shall process all ACH purchases pursuant to that
certain Electronic Entries Agreement dated September 13, 1994, between the
Custodian and Twentieth Century Services, Inc.
3. The Custodian promptly and in a business-like manner shall process
the items so deposited in the Accounts and remit the funds deposited to United
States Trust Company of New York, the Corporation's Custodian, for deposit in
Corporation's accounts there. Any funds not remitted by the close of each day
shall be invested for the Corporation's benefit in such manner as the
Corporation and Custodian may from time to time agree upon. All income from such
investments shall be deposited in the Accounts. No funds shall be invested or
otherwise utilized for the benefit of the Custodian.
4. (a) The Custodian shall no later than 9 a.m. on every day
(Saturdays, Sundays and Holidays excluded) report to the Corporation the balance
in the Accounts and the amounts available for transfer to United States Trust
Company of New York.
(b) The Custodian shall furnish monthly bank statements of the
Accounts in the usual form.
(c) At least monthly the Custodian shall provide the Corporation
with an account analysis showing average ledger and collected balance for the
month, total items processed and other bank services used during the period.
5. If the Corporation instructs the Custodian in any capacity to take
any action with respect to any funds held by it hereunder, which action might
subject the Custodian in the opinion of the Custodian to liability for any cost,
loss, damage or expense, as a prerequisite to taking such action the Custodian
shall be and be kept indemnified in an amount and form satisfactory to it.
<PAGE>
6. This Agreement may be terminated by the Corporation in whole or in
part upon ten (10) days written notice delivered to the Custodian at 10th &
Grand Streets, Kansas City, Missouri 64105 (mailing address P.O. Box 419266,
Kansas City, Missouri 64141) or by the Custodian upon sixty (60) days written
notice delivered to the Corporation at 4500 Main Street, Kansas City, Missouri
64111 (mailing address P.O. Box 419200, Kansas City, Missouri 64141), and each
party may from time to time designate another address to which such notice shall
be delivered. Such notices shall be sent by registered mail and shall be deemed
delivered when deposited in the United States Mail, postage prepaid. In the
event of the inability of the Custodian to serve or other termination of this
Agreement by either party, the Corporation shall forthwith appoint a custodian
which qualifies as such under the Investment Company Act of 1940 or any other
applicable law and the Custodian shall deliver all funds to such successor
custodian (or to any other Custodian of the Corporation's assets) and such
delivery shall constitute a full and complete discharge of the Custodian's
obligations hereunder. If no such successor shall be found and there should be
no other custodian, the Corporation shall submit to the holders of shares of its
capital stock, before permitting delivery of such cash to anyone other than a
qualified custodian, the question whether the Corporation shall be dissolved or
shall function without a Custodian; and pending such decision the Custodian
shall,
(a) continue to hold the Accounts, or
(b) deliver the funds in the Accounts, and all other assets, if any,
to a Bank or Trust Company selected by it, such funds and assets to be held
subject to the terms of custody hereunder and any such delivery shall be a full
and complete discharge of its obligations hereunder.
7. If the Corporation shall be liquidated while this Agreement is in
force, the Custodian shall distribute the property of the Corporation to
creditors and shareholders in such manner as the Corporation may direct.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its officer or
officers duly authorized, as of the 1st day of February, 1996.
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
By: /s/James E. Stowers III
----------------------------
President
UMB BANK, N.A.
By: /s/Jeffrey T. Grasser
-------------------------
Jeffrey T. Grasser, Vice President
2
AMENDMENT NO. 1 TO CUSTODY AGREEMENT
THIS AMENDMENT NO. 1 TO CUSTODY AGREEMENT is made as of the 25th day of
January, 1996, by and among UMB BANK, N.A., a national banking association
("Custodian"), INVESTORS RESEARCH CORPORATION ("IRC"), and each of the
registered investment companies that have executed this Amendment below (each,
individually referred to as a "Fund Company" and collectively referred to as the
"Fund Companies"). Capitalized terms not otherwise defined herein shall have the
meaning ascribed to them in the Custody Agreement (defined below).
RECITALS
WHEREAS, Custodian, Investors Research and the Fund Companies (other
than Twentieth Century Strategic Asset Allocations, Inc. ("TCSAA")) are parties
to a certain Custody Agreement dated September 12, 1995 (the "Custody
Agreement"); and
WHEREAS, Custodian, Investors Research and the Fund Companies now
desire to amend the Custody Agreement to add TCSAA as a party thereto;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
1. Appendix B to the Custody Agreement is hereby amended by deleting
the text thereof in its entirety and inserting in lieu therefor the Appendix B
attached hereto.
2. After the date hereof, all references to the "Custody Agreement"
shall be deemed to mean the Custody Agreement, as amended by this Amendment No.
1.
3. In the event of a conflict between the terms of this Amendment No. 1
and the Custody Agreement, it is the intention of the parties that the terms of
this Amendment No. 1 shall control and the Custody Agreement shall be
interpreted on that basis. To the extent the provisions of the Custody
Agreement have not been amended by this Amendment No. 1, the parties hereby
confirm and ratify the Custody Agreement.
4. This Amendment No. 1 may be executed in two or more counterparts,
each of which shall be an original and all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of the date first above written.
UMB BANK, N.A. INVESTORS RESEARCH CORPORATION
By: /s/David Swan By: /s/William M. Lyons
----------------- -----------------------
Name: David Swan William M. Lyons
Title: Senior Vice President Executive Vice President
TWENTIETH CENTURY INVESTORS, INC.
TWENTIETH CENTURY WORLD INVESTORS, INC.
TWENTIETH CENTURY PREMIUM RESERVES, INC.
TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC.
TWENTIETH CENTURY STRATEGIC ASSET
ALLOCATIONS, INC.
By: /s/William M. Lyons
-----------------------
William M. Lyons
Executive Vice President of each
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT, made as of February 1, 1996, is by and between
TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC., a Maryland corporation
("TCSAA"), and TWENTIETH CENTURY SERVICES, INC., a Missouri corporation
("Services").
1. By action of its Board of Directors taken on December 12, 1995,
TCSAA appointed Services as its transfer agent, and Services accepted such
appointment.
2. As transfer agent for TCSAA, Services shall perform all the
functions usually performed by transfer agents of investment companies, in
accordance with the policies and practices of TCSAA as disclosed in its
prospectus or otherwise communicated to Services from time to time, including,
but not limited to, the following:
(a) Recording the ownership, transfer, conversion and
cancellation of ownership of shares of TCSAA on the books
of TCSAA;
(b) Causing the issuance, transfer, conversion and
cancellation of stock certificates of TCSAA;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment of redemption proceeds due
from TCSAA on redemption of shares and notices of reinvestment
in additional shares of dividends, stock dividends or stock
splits declared by TCSAA on shares of TCSAA;
(e) Furnishing to shareholders such information as may be
reasonably required by TCSAA, including confirmation of
shareholder transactions and appropriate income tax
information;
(f) Addressing and mailing to shareholders prospectuses, annual
and semiannual reports; addressing and mailing proxy materials
for shareholder meetings prepared by or on behalf of TCSAA,
and tabulating the proxy votes;
(g) Replacing allegedly lost, stolen or destroyed stock
certificates in accordance with and subject to usual and
customary procedures and conditions;
(h) Maintaining such books and records relating to
transactions effected by Services pursuant to this
Agreement as are required by the Investment Company Act
of 1940, or by rules or regulations thereunder, or by any
other applicable provisions of law, to be maintained by
TCSAA or its transfer agent with respect to such
transactions; preserving, or causing to be preserved, any
such books and records for such periods as may be
required by any such law, rule or regulation; furnishing
TCSAA such information as to such transactions and at
such times as
<PAGE>
may be reasonably required by it to comply with applicable
laws and regulations, including but not limited to the laws of
the several states of the United States;
(i) Dealing with and answering all correspondence from or on
behalf of shareholders relating to its functions under
this Agreement.
3. TCSAA may perform on site inspection of records and accounts and
perform audits directly pertaining to TCSAA shareholder accounts serviced by
Services hereunder at Services' facilities in accordance with reasonable
procedures at the frequency necessary to show proper administration of this
agreement and the proper audit of TCSAA's financial statements. Services will
cooperate with TCSAA's auditors and the representatives of appropriate
regulatory agencies and furnish all reasonably requested records and data.
4. (a) Services will at all times exercise due diligence and good faith
in performing its duties hereunder. Services will make every reasonable effort
and take all reasonably available measures to assure the adequacy of its
personnel and facilities as well as the accurate performance of all services to
be performed by it hereunder within the time requirements of any applicable
statutes, rules or regulations or as disclosed in TCSAA's prospectus.
(b) Services shall not be responsible for, and TCSAA agrees to
indemnify Services, for any losses, damages or expenses (including reasonable
counsel fees and expenses) (a) resulting from any claim, demand, action or suit
not resulting from Services failure to exercise good faith or due diligence and
arising out of or in connection with Services' duties on behalf of the fund
hereunder; (b) for any delay, error, or omission by reason or circumstance
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties (except with response to Services employees),
fire, mechanical breakdowns beyond its control, flood or catastrophe, act of
God, insurrection, war, riot or failure beyond its control of transportation,
communication or power supply; or (c) for any action taken or omitted to be
taken by Services in good faith in reliance on (i) the authenticity of any
instrument or communication reasonably believed by it to be genuine and to have
been properly made and signed or endorsed by an appropriate person, or (ii) the
accuracy of any records or information provided to it by TCSAA, (iii) any
authorization or instruction contained in any officers' instruction, or (iv) any
advise of counsel approved by TCSAA who may be internally employed counsel or
outside counsel, in either case for TCSAA or Services.
5. Services shall not look to TCSAA for compensation for its services
described herein. It shall be compensated entirely by Investors Research
Corporation, pursuant to the management agreement between Investors Research
Corporation and TCSAA, which requires Investors Research Corporation to pay,
with certain exceptions, all of the expenses of TCSAA.
6. (a) This Agreement may be terminated by either party at any time
without penalty upon giving the other party 60 days written notice (which notice
may be waived by either party).
2
<PAGE>
(b) Upon termination, Services will deliver to TCSAA all microfilm
records pertaining to shareholder accounts of TCSAA, and all records of
shareholder accounts in machine readable form in the format in which they are
maintained by Services.
(c) All data processing programs used by Services in connection with
the performance of its duties under this Agreement are the sole and exclusive
property of Services, and after the termination of this Agreement, TCSAA shall
have no right to use the same.
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
TWENTIETH CENTURY STRATEGIC
ASSET ALLOCATIONS, INC.
By: /s/ James E. Stowers III
------------------------
James E. Stowers III
President
TWENTIETH CENTURY SERVICES, INC.
By: /s/ William M. Lyons
--------------------
William M. Lyons
Executive Vice President
3
February 5, 1996
Twentieth Century Strategic Asset Allocations, Inc.
Twentieth Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to Twentieth Century Strategic Asset Allocations, Inc. I am
generally familiar with its affairs. Based upon this familiarity, and upon the
examination of such documents as I have deemed relevant, it is my opinion that
the shares of the Corporation described in Pre-Effective Amendment No. 4 to its
Registration Statement on Form N-1A to be filed with the Securities and Exchange
Commission on February 5, 1996, will, when issued, be validly issued, fully paid
and nonassessable.
For the record, it should be stated that I am an officer and employee of
Twentieth Century Services, Inc., an affiliated corporation of Investors
Research Corporation, the investment adviser of Twentieth Century Strategic
Asset Allocations, Inc.
I hereby consent to the use of this opinion as an exhibit to Pre-Effective
Amendment No. 4.
Very truly yours,
/s/ Charles A. Etherington
Charles A. Etherington
Assistant General Counsel
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Independent
Auditors" and "Financial Statements" and to the use of our report dated February
1, 1996, in the Registration Statement (Form N-1A) and related Prospectus of
Twentieth Century Strategic Asset Allocations, Inc. filed with the Securities
and Exchange Commission in this Pre-Effective Amendment No. 4 to the
Registration Statement under the Securities Act of 1933 (Registration No.
33-79482) and under the Investment Company Act of 1940 (Registration No.
811-8532).
Ernst & Young LLP
Kansas City, Missouri
February 5, 1996
