STATEMENT OF ADDITIONAL INFORMATION
[company logo]
American
Century(sm)
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
AMERICAN
CENTURY
GROUP
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
[front cover]
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
AMERICAN CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
This Statement is not a prospectus but should be read in conjunction with the
current Prospectus of American Century Strategic Asset Allocations, Inc., dated
September 3, 1996, revised January 1, 1997. Please retain this document for
future reference. To obtain the Prospectus, call American Century toll-free at
1-800-345-2021 (international calls: 816-531-557), or write P.O.
Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Investment Objectives of the Funds ..........................2
Investment Restrictions .....................................2
Forward Currency Exchange Contracts .........................3
Futures Contracts ...........................................4
An Explanation of Fixed Income Securities Ratings ...........5
Investing in Emerging Markets ...............................7
Short Sales .................................................7
Portfolio Turnover ..........................................7
Officers and Directors ......................................8
Management .................................................10
Custodians .................................................11
Independent Auditors .......................................11
Capital Stock ..............................................11
Multiple Class Structure ...................................11
Taxes ......................................................13
Brokerage ..................................................14
Performance Advertising ....................................14
Redemptions in Kind ........................................15
Holidays ...................................................16
Financial Statements .......................................16
Statement of Additional Information 1
INVESTMENT OBJECTIVES OF THE FUNDS
The investment objective of each series of shares of American Century
Strategic Asset Allocations, Inc. is described on page 2 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 without shareholder approval.
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 our policy to retain maximum flexibility in management without
restrictive provisions as to the proportion of one or another class of
securities that may be held, subject to the investment restrictions described
below.
INVESTMENT RESTRICTIONS
Additional fundamental policies that may be changed only with shareholder
approval provide that each series of shares:
(1) Shall not, 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 not 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 not buy securities on margin nor 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 not issue any senior security.
(5) Shall not underwrite any securities.
(6) Shall not invest more than 15% of its assets in illiquid investments.
(7) Shall not lend its portfolio securities except to unaffiliated persons and
subject to the rules and regulations adopted under the Investment Company
Act. No such rules and regulations have been issued, but it is American
Century's policy that such loans must be secured continuously by cash
collateral maintained on a current basis in an amount at least equal to the
market value of the securities loaned or by irrevocable letters of credit.
During the existence of the loan, a fund must continue to receive the
equivalent of the interest and dividends paid by the issuer on the
securities loaned and interest on the investment of the collateral; the
fund must have the right to call the loan and obtain the securities loaned
at any time on five days' notice, including the right to call the loan to
enable the fund to vote the securities. To comply with the regulations of
certain state securities administrators, such loans may not exceed
one-third of the fund's net assets valued at market.
(8) Shall not borrow any money, except in an amount not in excess of 5% of the
total assets of the fund and then only for emergency and extraordinary
purposes. Note: This investment restriction does not prohibit escrow and
collateral arrangements in connection with investment in futures contracts
and related options by a fund.
(9) Shall not purchase or sell real estate, except that a fund may purchase
securities of issuers that deal in real estate and may purchase securities
that are secured by interests in real estate.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the fund of securities issued by insurance companies, brokers,
dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership.
2 American Century Investments
The Investment Company Act also provides that the funds may not invest more
than 25% of their assets in the securities of issuers engaged in a single
industry. In determining industry groups for purposes of this standard, the
Securities and Exchange Commission ordinarily uses the Standard Industry
Classification codes developed by the United States Office of Management and
Budget. In the interest of ensuring adequate diversification, the funds monitor
industry concentration using a more restrictive list of industry groups than
that recommended by the SEC. The funds believe that these classifications are
reasonable and are not so broad that the primary economic characteristics of the
companies in a single class are materially different. The use of these more
restrictive industry classifications may, however, cause the funds to forego
investment possibilities which may otherwise be available to them under the
Investment Company Act.
Neither the SEC nor any other federal or state agency participates in or
supervises the funds' management or their investment practices or policies.
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 forward currency exchange 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 the fund's
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 sufficient to cover its
obligation under the contract 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.
Statement of Additional Information 3
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 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.
4 American Century Investments
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 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, the funds may invest 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 manager with current assessment
of the credit rating of an issuer with respect to a specific fixed income
security. The following is a description of the rating categories utilized by
the rating services referenced in the Prospectus disclosure:
The following summarizes the ratings used by Standard & Poor's Corporation
for bonds:
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA--Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only to a small
degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default
and is dependent
Statement of Additional Information 5
upon favorable business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C--The rating C typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
To provide more detailed indications of credit quality, the ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the ratings used by Moody's Investors Service,
Inc. for bonds:
Aaa--Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin, and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present that make the long-term risk appear somewhat
larger than the Aaa securities.
A--Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment some time in the
future.
Baa--Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
Ba--Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded, during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa--Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds that are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa through B. The modifier 1 indicates that the bond being rated
ranks
6 American Century Investments
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 Allocation: 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 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 funds intend to purchase a given security whenever the manager believes
it will contribute to the stated objective of a fund, even if the same
Statement of Additional Information 7
security has only recently been sold. In selling a given security, the manager
keeps in mind that (1) profits from sales of securities held less than three
months must be limited in order to meet the requirements of Subchapter M of the
Internal Revenue Code, and (2) profits from sales of securities are taxed to
shareholders. Subject to those considerations, a fund 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 the
manager believes that the security is not fulfilling its purpose, either
because, among other things, it did not live up to the manager's expectations,
or because it may be replaced with another security holding greater promise, or
because it has reached its optimum potential, or because of a change in the
circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
When a general decline in 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 it believes a change is in order to
achieve those objectives.
OFFICERS AND DIRECTORS
The principal officers and directors of the corporation, their principal
business experience during the past five years, and their affiliations with the
funds' investment manager, American Century Investment Management, Inc. and its
transfer agent, American Century Services Corporation, are listed below. Unless
otherwise noted, the business address of each director and officer is American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111. All persons named
as officers of the Corporation also serve in similar capacities for other funds
advised by the manager. Those directors that are "interested persons" as defined
in the Investment Company Act of 1940 are indicated by an asterisk(*).
JAMES E. STOWERS JR.,* Chairman of the Board and Director; Chairman of
the Board, Director and controlling shareholder of American Century Companies,
Inc., parent corporation of American Century Investment Management, Inc. and
American Century Services Corporation; Chairman of the Board and Director of
American Century Investment Management, Inc. and American Century Services
Corporation; father of James E. Stowers III.
JAMES E. STOWERS III,* President, Chief Executive Officer and Director;
President, Chief Executive Officer and Director, American Century Companies,
Inc., American Century Investment Management, Inc. and American Century
Services Corporation.
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.
ROBERT W. DOERING, M.D., Director; 6420 Prospect, Kansas City, Missouri;
general surgeon.
D. D. (DEL) HOCK, Director; 1225 Seventeenth Street #900, Denver,
Colorado; Chairman, President and Chief Executive Officer, Public Service
Company of Colorado.
LINSLEY L. LUNDGAARD, Vice Chairman of the Board and Director; 18648 White
Wing Drive, Rio Verde, Arizona; retired; formerly Vice President and National
Sales Manager, Flour Milling Division, Cargill, Inc.
DONALD H. PRATT, Director; P.O. Box 419917, Kansas City, Missouri;
President, Butler Manufacturing Company.
LLOYD T. SILVER JR., Director; 2300 West 70th Terrace, Mission Hills,
Kansas; President, LSC, Inc., manufacturer's representative.
M. JEANNINE STRANDJORD, Director; 908 West 121st Street, Kansas City,
Missouri; Senior Vice President and Treasurer, Sprint Corporation.
WILLIAM M. LYONS, Executive Vice President, Chief Operating Officer,
Secretary and General Counsel; Executive Vice President, Chief Operating
Officer and General Counsel, American Century Companies, Inc., American
Century Investment Management, Inc. and American Century Services Corporation.
8 American Century Investments
ROBERT T. JACKSON, Executive Vice President and Principal Financial
Officer; Executive Vice President and Treasurer, American Century Companies,
Inc., American Century Investment Management, Inc. and American Century
Services Corporation; formerly Executive Vice President, Kemper Corporation.
MARYANNE ROEPKE, CPA, Vice President, Treasurer and Principal Accounting
Officer; Vice President, American Century Services Corporation.
PATRICK A. LOOBY, Vice President; Vice President, American Century
Services Corporation.
MERELE A. MAY, Controller.
The Board of Directors has established four standing committees: the
Executive Committee, the Audit Committee, the Compliance Committee and the
Nominating Committee.
Messrs. Stowers Jr., Stowers III and Lundgaard 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.
Messrs. Lundgaard (chairman), Doering and Hock and Ms. Strandjord
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.
Messrs. Brown (chairman), Pratt and Silver constitute the Compliance
Committee. The functions of the Compliance Committee include reviewing the
results of the funds' compliance testing program, reviewing quarterly reports
from the manager to the Board regarding various compliance matters and
monitoring the implementation of the funds' Code of Ethics, including any
violations thereof.
The Nominating Committee has, as its principal role, the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the Board, management and shareholders. This
committee also reviews and makes recommendations to the Board with respect to
the composition of Board committees and other Board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Pratt
(chairman), Lundgaard and Stowers III.
The Directors of the corporation also serve as Directors for other funds
advised by the manager. Each Director who is not an "interested person" as
defined in the Investment Company Act receives for service as a member of the
Board of all six of such companies an annual director's fee of $44,000, a fee of
$1,000 per regular Board meeting attended and $500 per special Board meeting and
committee meeting attended. In addition, those directors who are not "interested
persons" who serve as chairman of a committee of the Board of Directors receive
an additional $2,000 for such services. These fees and expenses are divided
among the six investment companies based upon their relative net assets. Under
the terms of the management agreement with the manager, the funds are
responsible for paying such fees and expenses. Set forth below is the aggregate
compensation paid for the periods indicated by the funds and by the American
Century family of funds as a whole to each director of the corporation who is
not an "interested person" as defined in the Investment Company Act.
Aggregate Total Compensation from
Compensation the American Century
Director from the corporation 1 Family of Funds 2
- -----------------------------------------------------------------------------
Thomas A. Brown $15.58 $44,000
Robert W. Doering, M.D. 14.85 44,000
Linsley L. Lundgaard 15.58 46,000
Donald H. Pratt 14.85 28,000
Lloyd T. Silver, Jr. 14.85 44,000
M. Jeannine Strandjord 14.85 44,000
John M. Urie 15.58 46,000
- -----------------------------------------------------------------------------
1 Includes compensation actually paid by the corporation from February 15,
1996 through May 31, 1996.
2 Includes compensation paid by the fifteen investment company members of the
American Century family of funds for the calendar year ended December 31,
1995.
Statement of Additional Information 9
Those Directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a Director. The salaries of
such individuals, who also are officers of the funds, are paid by the manager.
MANAGEMENT
A description of the responsibilities and method of compensation of the
funds' investment manager, American Century Investment Management, Inc., 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 funds'
Board of Directors or by the vote of a majority of outstanding votes (as defined
in the Investment Company Act) and (ii) by the vote of a majority of the
Directors of the funds who are not parties to the agreement or interested
persons of the manager, cast in person at a meeting called for the purpose of
voting on such approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the funds' Board of Directors, or by a vote of
a majority of the funds' shareholders, on 60 days' written notice to the manager
and that it shall be automatically terminated if it is assigned.
The management agreement provides that the manager shall not be liable to
the funds or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the funds and also for other
clients advised by the manager. 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 the manager to be equitable to each. In some cases this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by a fund.
The manager may aggregate purchase and sale orders of the funds with
purchase and sale orders of its other clients when the manager believes that
such aggregation provides the best execution for the funds. The funds' Board of
Directors has approved the policy of the manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
manager will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The manager
receives no additional compensation or remuneration as a result of such
aggregation.
In addition to managing the funds, on February 1, 1996, the manager was
also acting as an investment adviser to 13 institutional accounts and to five
other registered investment companies: American Century Mutual Funds, Inc.,
American Century World Mutual Funds, Inc., American Century Premium Reserves,
Inc., TCI Portfolios, Inc. and American Century Capital Portfolios, Inc.
American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the funds and of the manager. The manager pays American
Century Services Corporation for such services.
As stated in the Prospectus, all of the stock of American Century
Services Corporation and American Century Investment Management, Inc. is owned
by American Century Companies, Inc.
10 American Century Investments
CUSTODIANS
The Chase Manhattan Bank, N.A., 770 Broadway, New York, New York 10003,
Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, 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 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 American Century.
CAPITAL STOCK
The funds' capital stock is described in the Prospectus under the caption
"Further Information About American Century."
The corporation currently has three series of shares outstanding. Each
series of shares is further divided into three classes. The funds may in the
future issue one or more additional series or class of shares without a vote of
the shareholders. The assets belonging to each series or class of shares are
held separately by the custodian and the shares of each series or class
represent a beneficial interest in the principal, earnings and profits (or
losses) of investment and other assets held for that series or class. Your
rights as a shareholder are the same for all series or classes of securities
unless otherwise stated. Within their respective series or class, all shares
will have equal redemption rights. Each share, when issued, is fully paid and
non-assessable. Each share, irrespective of series or class, is entitled to one
vote for each dollar of net asset value represented by such share on all
questions.
In the event of complete liquidation or dissolution of American Century,
shareholders of each series or class of shares will be entitled to receive, pro
rata, all of the assets less the liabilities of that series or class.
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.
MULTIPLE CLASS STRUCTURE
The funds' Board of Directors has adopted a multiple class plan (the
"Multiclass Plan") pursuant to Rule 18f-3 adopted by the Securities and Exchange
Commission ("SEC"). Pursuant to such plan, the funds may issue up to three
classes of shares: an Investor Class, a Service Class and an Advisor Class.
The Investor Class is made available to investors directly by the
investment manager through its affiliated broker dealer, American Century
Investment Services, Inc., for a single unified management fee, without any load
or commission. The Service and Advisor Classes are made available to
institutional shareholders or through financial intermediaries that do not
require the same level of shareholder and administrative services from the
manager as Investor Class shareholders. As a result, the manager is able to
charge these classes a lower management fee. In addition to the management fee,
however, Service Class shares are subject to a Shareholder Services Plan
(described below), and the Advisor Class shares are subject to a Master
Distribution and Shareholder Services Plan (also described below). Both plans
have been adopted by the funds' Board of Directors and initial shareholder in
accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act.
RULE 12B-1
Rule 12b-1 permits an investment company to pay expenses associated with
the distribution of its shares in accordance with a plan adopted by the
investment company's Board of Directors and approved by its shareholders.
Pursuant to such rule, the Board of Directors and initial shareholder of the
funds' Service Class and Advisor Class have approved and entered into a
Shareholder Services Plan, with respect to the Service Class, and a Master
Distribution and Shareholder Services Plan, with respect to the Advisor Class
(collectively, the "Plans"). Both Plans are described beginning on this page.
Statement of Additional Information 11
In adopting the Plans, the Board of Directors (including a majority of
directors who are not "interested persons" of the funds (as defined in the
Investment Company Act), hereafter referred to as the "independent directors")
determined that there was a reasonable likelihood that the Plans would benefit
the funds and the shareholders of the affected classes. Pursuant to Rule 12b-1,
information with respect to revenues and expenses under the Plans is presented
to the Board of Directors quarterly for its consideration in connection with its
deliberations as to the continuance of the Plans. Continuance of the Plans must
be approved by the Board of Directors (including a majority of the independent
directors) annually. The Plans may be amended by a vote of the Board of
Directors (including a majority of the independent directors), except that the
Plans may not be amended to materially increase the amount to be spent for
distribution without majority approval of the shareholders of the affected
class. The Plans terminate automatically in the event of an assignment and may
be terminated upon a vote of a majority of the independent directors or by vote
of a majority of the outstanding voting securities of the affected class.
All fees paid under the plans will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers.
SHAREHOLDER SERVICES PLAN
As described in the Prospectus, the funds' Service Class of shares are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. In such circumstances, certain
recordkeeping and administrative services that are provided by the funds'
transfer agent for the Investor Class shareholders may be performed by a plan
sponsor (or its agents) or by a financial intermediary. To enable the funds'
shares to be made available through such plans and financial intermediaries, and
to compensate them for such services, the funds' investment manager has reduced
its management fee by 0.25% per annum with respect to the Service Class shares
and the funds' Board of Directors has adopted a Shareholder Services Plan.
Pursuant to the Shareholder Services Plan, the Service Class shares pay a
shareholder services fee of 0.25% annually of the aggregate average daily net
assets of the funds' Service Class shares.
American Century Investment Services, Inc. (the "Distributor") enters into
contracts with each financial intermediary for the provision of certain
shareholder services and utilizes the shareholder services fees under the
Shareholder Services Plan to pay for such services. Payments may be made for a
variety of shareholder services, including, but are not limited to, (1)
receiving, aggregating and processing purchase, exchange and redemption request
from beneficial owners (including contract owners of insurance products that
utilize the funds as underlying investment medium) of shares and placing
purchase, exchange and redemption orders with the Distributor; (2) providing
shareholders with a service that invests the assets of their accounts in shares
pursuant to specific or pre-authorized instructions; (3) processing dividend
payments from a fund on behalf of shareholders and assisting shareholders in
changing dividend options, account designations and addresses; (4) providing and
maintaining elective services such as check writing and wire transfer services;
(5) acting as shareholder of record and nominee for beneficial owners; (6)
maintaining account records for shareholders and/or other beneficial owners; (7)
issuing confirmations of transactions; (8) providing subaccounting with respect
to shares beneficially owned by customers of third parties or providing the
information to a fund as necessary for such subaccounting; (9) preparing and
forwarding shareholder communications from the funds (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to shareholders and/or other beneficial owners;
(10) providing other similar administrative and sub-transfer agency services;
and (11) paying "service fees" for the provision of personal, continuing
services to investors, as contemplated by the Rules of Fair Practice of the NASD
(collectively referred to as "Shareholder Services"). Shareholder Services do
not include those activities and expenses that are primarily intended to result
in the sale of additional shares of the funds.
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectus, the funds' Advisor Class of shares are
also made available to participants
12 American Century Investments
in employer-sponsored retirement or savings plans and to persons purchasing
through financial intermediaries, such as banks, broker-dealers and insurance
companies. The Distributor enters into contracts with various banks, broker
dealers, insurance companies and other financial intermediaries with respect to
the sale of the funds' shares and/or the use of the funds' shares in various
investment products or in connection with various financial services.
As with the Service Class, certain recordkeeping and administrative
services that are provided by the funds' transfer agent for the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for shareholders in the Advisor Class. In addition to
such services, the financial intermediaries provide various distribution
services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
investment manager has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares and the funds' Board of Directors has
adopted a Master Distribution and Shareholder Services Plan (the "Distribution
Plan"). Pursuant to such Plan, the Advisor Class shares pay a fee of 0.50%
annually of the aggregate average daily net assets of the funds' Advisor Class
shares, 0.25% of which is paid for Shareholder Services (as described above) and
0.25% of which is paid for distribution services.
Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (1) the payment of sales
commission, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant to
Selling Agreements; (2) compensation to registered representatives or other
employees of Distributor who engage in or support distribution of the funds'
Advisor Class shares; (3) compensation to, and expenses (including overhead and
telephone expenses) of, Distributor; (4) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (5) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' shareholders and prospective
shareholders; (6) receiving and answering correspondence from prospective
shareholders, including distributing prospectuses, statements of additional
information, and shareholder reports; (7) the providing of facilities to answer
questions from prospective investors about fund shares; (8) complying with
federal and state securities laws pertaining to the sale of fund shares; (9)
assisting investors in completing application forms and selecting dividend and
other account options; (10) the providing of other reasonable assistance in
connection with the distribution of fund shares; (11) the organizing and
conducting of sales seminars and payments in the form of transactional
compensation or promotional incentives; (12) profit on the foregoing; (13) the
payment of "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD and (14)
such other distribution and services activities as the manager determines may be
paid for by the funds pursuant to the terms of this Agreement and in accordance
with Rule 12b-1 of the Investment Company Act.
TAXES
Each fund intends to qualify under the Internal Revenue 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.
Statement of Additional Information 13
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 Internal Revenue 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 the funds and the
manager, the manager has the responsibility of selecting brokers to execute
portfolio transactions. The funds' policy is to secure the most favorable prices
and execution of orders on its portfolio transactions. So long as that policy is
met, the manager may take into consideration the factors discussed below when
selecting brokers.
The manager receives statistical and other information and services without
cost from brokers and dealers. The manager evaluates such information and
services, together with all other information that it may have, in supervising
and managing the investments of the funds. Because such information and services
may vary in amount, quality and reliability, their influence in selecting
brokers varies from none to very substantial. The manager proposes to continue
to place some of the funds' 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 the
manager. The manager does not utilize brokers who provide such information and
services for the purpose of reducing the expense of providing required services
to the funds.
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 the funds effect securities
transactions may be used by the manager in servicing all of its accounts, and
not all such services may be used by the manager in managing the portfolios of
the funds.
The staff of the SEC has expressed the view that the best price and
execution of over-the-counter transactions in portfolio securities may be
secured by dealing directly with principal market makers, thereby avoiding the
payment of compensation to another broker. In certain situations, the officers
of the funds and the manager believe that the facilities, expert personnel and
technological systems of a broker enable the funds to secure as good a net price
by dealing with a broker instead of a principal market maker, even after payment
of the compensation to the broker. The funds normally place their
over-the-counter transactions with principal market makers but also may deal on
a brokerage basis when utilizing electronic trading networks or as circumstances
warrant.
PERFORMANCE ADVERTISING
Average annual total return is calculated by determining each fund's
cumulative total return for the stated period and then computing the annual
compound return that would produce the cumulative total return if the fund's
performance had been constant over that period. The following table sets forth
the cumulative total return since inception for the funds for the period from
February 15, 1996 through
14 American Century Investments
May 31, 1996. Cumulative total return includes all elements of return, including
reinvestment of dividends and capital gains distribution. Annualization of a
fund's return assumes that the partial year performance will be constant
throughout the period. Actual return through the period may be greater or less
than the annualized data.
Fund Cumulative Total Return (1)
- -----------------------------------------------------------------------------
Strategic Allocation: Conservative .64%
Strategic Allocation: Moderate 3.11%
Strategic Allocation: Aggressive 4.60%
- -----------------------------------------------------------------------------
(1) For the period February 15, 1996 (inception) through May 31, 1996.
The funds also may elect to advertise cumulative total return and average
annual total return, computed as described above, over periods of time other
than one, five and 10 years and cumulative total return over various time
periods.
ADDITIONAL PERFORMANCE COMPARISONS
Investors may judge the performance of the funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as 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 21/2-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.
PERMISSIBLE ADVERTISING INFORMATION
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;
(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.
REDEMPTIONS IN KIND
The funds' policy with regard to large redemptions is described in detail
in the Prospectus under the heading "Special Requirements for Large
Redemptions."
The funds have elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, pursuant to which the funds are 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. If shares are redeemed in
kind, the redeeming shareholder might
Statement of Additional Information 15
incur brokerage costs in converting the assets to cash. The securities delivered
will be selected at the sole discretion of the manager and will not necessarily
be representative of the entire portfolio and will be securities that the
manager regards as least desirable. The method of valuing securities used to
make redemptions in kind will be the same as the method of valuing portfolio
securities described in the Prospectus under the heading "How Share Price is
Determined," and such valuation will be made as of the same time the redemption
price is determined.
HOLIDAYS
The funds do 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 unaudited financial statements of the funds for the period from
February 15, 1996 (inception) to May 31, 1996 are included in this statement of
additional information. While the financial statements respecting such fund
contained herein are unaudited, in the opinion of management, all adjustments
necessary for a fair presentation of the financial position and results of
operations for the period from February 15, 1996 (inception) to May 31, 1996,
have been made. The results of operations for the period indicated are not
necessarily indicative of the results for an entire year.
16 American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
STRATEGIC STRATEGIC STRATEGIC
ALLOCATION: ALLOCATION: ALLOCATION:
CONSERVATIVE MODERATE AGGRESSIVE
May 31, 1996 (Unaudited)
ASSETS
<S> <C> <C> <C>
Investment securities, at value (identified
cost of $8,076,468, $14,622,761 and
$15,666,174, respectively) (Note 3) ........... $8,075,074 $14,980,472 $16,247,257
Cash ............................................. 46,417 100,162 154,851
Receivable for investments sold .................. 27,451 63,065 119,375
Dividends and interest receivable ................ 39,758 76,218 73,787
----------- ----------- -----------
8,188,700 15,219,917 16,595,270
----------- ----------- -----------
LIABILITIES
Disbursements in excess of demand deposit cash ... -- 27 816
Payable for investments purchased ................ 114,030 244,770 202,643
Payable for capital shares redeemed .............. 7,632 9,667 6,794
Accrued management fees (Note 2) ................. 6,333 12,804 15,241
Other liabilities ................................ 4 25 49
----------- ----------- -----------
127,999 267,293 225,543
----------- ----------- -----------
NET ASSETS APPLICABLE
TO OUTSTANDING SHARES ............................ $8,060,701 $14,952,624 $16,369,727
=========== =========== ===========
CAPITAL SHARES, $.01 PAR VALUE
Authorized ....................................... 100,000,000 100,000,000 100,000,000
=========== =========== ===========
Outstanding ...................................... 1,607,830 2,906,975 3,127,215
=========== =========== ===========
NET ASSET VALUE PER SHARE ........................ $ 5.01 $ 5.14 $ 5.23
=========== =========== ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .......... $8,020,386 $14,574,621 $15,842,319
Undistributed net investment income .............. 41,346 57,291 52,851
Accumulated undistributed net realized
gain (loss) from investment and foreign
currency transactions ......................... 370 (36,976) (106,534)
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies (Note 3) (1,401) 357,688 581,091
----------- ----------- -----------
$8,060,701 $14,952,624 $16,369,727
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
Statement of Additional Information 17
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
STRATEGIC STRATEGIC STRATEGIC
February 15, 1996 (Inception) through ALLOCATION: ALLOCATION: ALLOCATION:
May 31, 1996 (Unaudited) CONSERVATIVE MODERATE AGGRESSIVE
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld
of $234, $1,429 and $1,654, respectively) ... $12,670 $ 31,141 $ 32,559
Interest ...................................... 71,360 75,540 54,663
----------- ----------- -----------
84,030 106,681 87,222
----------- ----------- -----------
Expenses:
Management fees (Note 2) ...................... 17,689 29,853 33,108
Directors' fees and expenses .................. 1,155 1,156 1,263
----------- ----------- -----------
18,844 31,009 34,371
----------- ----------- -----------
NET INVESTMENT INCOME ............................ 65,186 75,672 52,851
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) (Note 3)
Net realized gain (loss) during the period on:
Investments ................................... 1,824 (35,052) (104,324)
Foreign currency transactions ................. (1,454) (1,924) (2,210)
----------- ----------- -----------
370 (36,976) (106,534)
----------- ----------- -----------
Change in net unrealized appreciation
(depreciation) during the period on:
Investments ................................... (1,394) 357,711 581,083
Translation of assets and liabilities in
foreign currencies .......................... (7) (23) 8
----------- ----------- -----------
(1,401) 357,688 581,091
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY ................. (1,031) 320,712 474,557
----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................ $64,155 $396,384 $527,408
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
18 American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
STRATEGIC STRATEGIC STRATEGIC
February 15, 1996 (Inception) through ALLOCATION: ALLOCATION: ALLOCATION:
May 31, 1996 (Unaudited) CONSERVATIVE MODERATE AGGRESSIVE
INCREASE IN NET ASSETS
OPERATIONS
<S> <C> <C> <C>
Net investment income ............................ $ 65,186 $ 75,672 $ 52,851
Net realized gain (loss) on investments
and foreign currency transactions ............. 370 (36,976) (106,534)
Change in net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
in foreign currencies ......................... (1,401) 357,688 581,091
----------- ----------- -----------
Net increase in net assets resulting
from operations ............................... 64,155 396,384 527,408
----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ....................... (23,840) (18,381) --
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................ 9,121,198 19,244,744 19,648,392
Proceeds from reinvestment of distributions ...... 23,840 18,381 --
Payments for shares redeemed ..................... (1,124,652) (4,688,504) (3,806,073)
----------- ----------- -----------
Net increase in net assets from capital
share transactions ............................ 8,020,386 14,574,621 15,842,319
----------- ----------- -----------
NET INCREASE IN NET ASSETS ....................... 8,060,701 14,952,624 16,369,727
NET ASSETS
Beginning of period .............................. -- -- --
----------- ----------- -----------
End of period .................................... $ 8,060,701 $14,952,624 $16,369,727
=========== =========== ===========
Undistributed net investment
income ....................................... $ 41,346 $ 57,291 $ 52,851
=========== =========== ===========
TRANSACTIONS IN SHARES OF THE FUNDS:
Sold ............................................. 1,829,412 3,833,979 3,865,343
Issued in reinvestment of distributions .......... 4,826 3,684 --
Redeemed ......................................... (226,408) (930,688) (738,128)
----------- ----------- -----------
Net increase ..................................... 1,607,830 2,906,975 3,127,215
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
Statement of Additional Information 19
NOTES TO FINANCIAL STATEMENTS
May 31, 1996 (Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization--
American Century Strategic Asset Allocations, Inc. (the Corporation) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. Three series of shares are currently issued as
Strategic Allocation: Conservative, Strategic Allocation: Moderate and
Strategic Allocation: Aggressive (the Funds). The following significant
accounting policies related to the Funds are in accordance with accounting
policies generally accepted in the investment company industry.
Security Valuations--
Portfolio securities traded primarily on a principal securities exchange
are valued at the last reported sales price, or the mean between the latest bid
and asked prices where no last sales price is available. Securities traded
over-the-counter are valued at the mean of the latest bid and asked prices or,
in the case of certain foreign securities, at the last reported sales price.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the mean of the most
recent bid and asked prices. Short-term securities are valued at amortized cost,
which approximates value. When valuations are not readily available, securities
are valued at fair value as determined in good faith by the board of directors.
Security Transactions--
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which is
also used for federal income tax purposes.
Investment Income--
Dividend income less foreign taxes withheld (if any) is recorded as of the
ex-dividend date or upon receipt of ex-dividend notification in the case of
certain foreign securities. Interest income is recognized on the accrual basis
and includes amortization of discounts and premiums.
Foreign Currency Transactions--
The accounting records of the Funds are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign currency exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains or losses arise from changes in the value of assets and
liabilities other than portfolio securities at the end of the reporting period,
resulting from changes in the exchange rates.
20 American Century Investments
Forward Foreign Currency Exchange Contracts--
The Funds may enter into forward foreign currency exchange contracts for
the purpose of settling specific purchases or sales of securities denominated in
a foreign currency or to hedge the Funds' exposure to foreign currency exchange
rate fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Funds and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. Forward contracts involve elements of market risk in excess of the amount
reflected in the Statements of Assets and Liabilities. The Funds bear the risk
of an unfavorable change in the foreign currency exchange rate underlying the
forward contract. Additionally, losses may arise if the counterparties do not
perform under the contract terms.
Repurchase Agreements--
Securities pledged as collateral for repurchase agreements are held by the
Federal Reserve Bank and are designated as being held on the Fund's behalf by
its custodian under a book-entry system. The Funds monitor the adequacy of the
collateral daily and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the carrying
value of the repurchase agreement.
Income Tax Status--
It is the policy of the Funds to distribute all taxable income and
capital gains to shareholders and to otherwise qualify as a regulated
investment company under provisions of the Internal Revenue Code. Accordingly,
no provision has been made for federal or state taxes.
Distributions to Shareholders--
Distributions to shareholders are recorded on the ex-dividend date.
Distributions from net investment income are declared and paid quarterly, with
respect to Strategic Allocation: Conservative, and annually with respect to
Strategic Allocation: Moderate and Strategic Allocation: Aggressive.
Distributions from net realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differences
in the recognition of income and expense items for financial statement and tax
purposes.
Supplementary Information--
Certain officers and directors of the Corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Corporation's investment manager, American
Century Investment Management, Inc.
2. MANAGEMENT AGREEMENT
The Management Agreement with the manager provides for a monthly management
fee computed by multiplying the applicable fee for each Fund by the average
daily closing value of such Fund's net assets during the previous month. The
Agreement further provides that all expenses of the Funds, except brokerage
commissions, taxes, interest, expenses of those directors who are not considered
"interested persons" as defined in the Investment Company Act of 1940 (including
counsel fees) and extraordinary expenses, will be paid by the manager. The
agreement may be terminated by either party upon 60 days' written notice.
The current annual management fee for Strategic Allocation: Conservative is
1.00% of average net assets up to $1 billion and .90% of average net assets in
excess of $1 billion. The current annual management fee for Strategic
Allocation: Moderate is 1.10% of average net assets up to $1 billion and 1.00%
of average net assets in excess of $1 billion. The current annual management fee
for Strategic Allocation: Aggressive is 1.20% of average net assets up to $1
billion and 1.10% of average net assets in excess of $1 billion.
Statement of Additional Information 21
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period
ended May 31, 1996, were as follows:
<TABLE>
Conservative Moderate Aggressive
-------------------------------------------------------
PURCHASES
<S> <C> <C> <C>
Common Stocks $3,757,575 $10,157,518 $13,801,005
Preferred Stocks 35,999 87,387 197,492
U.S. Treasury & Agency Obligations 2,691,460 2,674,058 1,557,684
Other Debt Obligations 1,173,832 1,617,129 1,611,280
PROCEEDS FROM SALES
Common Stocks $977,842 $1,953,567 $2,927,796
Preferred Stocks -- 13,256 15,908
U.S. Treasury & Agency Obligations 109,719 -- 100,063
Other Debt Obligations 214,994 107,497 100,243
On May 31, 1996, the composition of unrealized appreciation and
(depreciation) of investment securities based on the aggregate cost of
investments for federal income tax purposes was as follows:
Appreciation (Depreciation) Net Federal Tax Cost
-------------------------------------------------------------------------
Conservative $172,401 $(178,347) $ (5,946) $ 8,081,020
Moderate 574,366 (231,206) 343,160 14,637,312
Aggressive 798,745 (247,118) 551,627 15,695,630
</TABLE>
22 American Century Investments
NOTES
Statement of Additional Information 23
NOTES
24 American Century Investments
NOTES
Statement of Additional Information 25
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
Internet: www.americancentury.com
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American
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SH-BKT-6588 Recycled
