PROSPECTUS
[company logo]
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
AMERICAN
CENTURY
GROUP
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
ADVISOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP(R) AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
[inside front cover]
PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997
Strategic Allocation: Conservative o Strategic
Allocation: Moderate o Strategic Allocation: Aggressive
ADVISOR CLASS
AMERICAN CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
American Century Strategic Asset Allocations, Inc., is a part of American
Century Investments, a family of funds that includes nearly 70 no-load and
low-load mutual funds covering a variety of investment opportunities. Three of
the funds that diversify their investments among stocks, bonds and money market
instruments are described in this Prospectus. Their investment objectives are
listed on page 2 of this Prospectus. The other funds are described in separate
prospectuses.
Each fund's shares offered in this Prospectus (the Advisor Class shares)
are sold at their net asset value with no sales charges or commissions. The
Advisor Class shares are subject to a Rule 12b-1 shareholder services fee and
distribution fee as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference.
To obtain a copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY
STRATEGIC ALLOCATION: CONSERVATIVE
AMERICAN CENTURY
STRATEGIC ALLOCATION: MODERATE
AMERICAN CENTURY
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. See "Investment Policies of the Funds," page 6.
There is no assurance that the funds will achieve their respective
investment objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Transaction and Operating Expense Table ..............................4
Financial Highlights .................................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds .....................................6
Asset Allocation Funds ..........................................6
Investment Strategy and Asset Diversification ...................6
Investment Approach and Practices ...............................7
General Portfolio Management ....................................8
Other Investment Practices, Their Characteristics and Risks ..........9
Equity Securities ...............................................9
Foreign Securities ..............................................9
Mortgage-Related and Other Asset-Backed Securities .............10
Forward Currency Exchange Contracts and Options Thereon ........11
Portfolio Turnover .............................................12
Repurchase Agreements ..........................................12
Futures Contracts ..............................................12
Derivative Securities ..........................................13
When-Issued Securities .........................................14
Short Sales ....................................................14
Rule 144A Securities ...........................................14
Performance Advertising .............................................14
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American Century Funds .....................16
How to Exchange from One American Century Fund to Another ...........16
How to Redeem Shares ................................................16
Special Requirements for Large Redemptions .....................16
Telephone Services ..................................................17
Investors Line .................................................17
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................18
When Share Price Is Determined .................................18
How Share Price Is Determined ..................................18
Where to Find Information About Share Price ....................19
Distributions .......................................................19
Taxes ...............................................................19
Tax-Deferred Accounts ..........................................19
Taxable Accounts ...............................................19
Management ..........................................................20
Investment Management ..........................................20
Code of Ethics .................................................22
Transfer and Administrative Services ...........................22
Distribution of Fund Shares .........................................22
Service and Distribution Fees ..................................22
Further Information About American Century ..........................23
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Strategic Allocation: Strategic Allocation: Strategic Allocation:
Conservative Moderate Aggressive
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
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 ................................................ none none none
Exchange Fee .................................................. none none none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees ............................................... 0.65%(1) 0.85% (2) 0.95% (3)
12b-1 Fees(4) ................................................. 0.50% 0.50% 0.50%
Other Expenses(5) ............................................. 0.00% 0.00% 0.00%
Total Fund Operating Expenses ................................. 1.25% 1.35% 1.45%
EXAMPLE:
You would pay the following expenses on 1 year $13 $14 $15
a $1,000 investment, assuming a 5% annual return 3 years 40 43 46
and redemption at the end of each time period(6):
</TABLE>
(1) The fund pays an annual management fee equal to 0.75% of its first $1
billion of average net assets and 0.65% of average net assets over $1
billion.
(2) The fund pays an annual management fee equal to 0.85% of its first $1
billion of average net assets and 0.75% of average net assets over $1
billion.
(3) The fund pays an annual management fee equal to 0.95% of its first $1
billion of average net assets and 0.85% of average net assets over $1
billion.
(4) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, insurance companies and other financial
intermediaries. A portion of the fee is used to compensate them for ongoing
recordkeeping and administrative services that would otherwise be performed
by an affiliate of the manager, and a portion is used to compensate them
for distribution and other shareholder services. See "Service and
Distribution Fees," page 22.
(5) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, are expected to be 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.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the American 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.
The shares offered by this Prospectus are Advisor Class shares. The funds
offer two other classes of shares, one of which is primarily made available to
retail investors and one that is primarily made available to institutional
investors. The other classes have different fee structures than the Advisor
Class, resulting in different performance for those other classes. For
additional information about the various classes, see "Further Information About
American Century," page 23.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
The Advisor Class of the funds was established September 3, 1996. The
financial information in this table regarding selected per share data for each
of the funds reflects the performance of the funds' Investor Class of shares,
which has a total expense ratio that is 0.25% lower than the Advisor Class. Had
the Advisor Class been in existence for such funds for the time period
presented, the funds' performance information would be lower as a result of the
additional expense.
The Financial Highlights table below sets forth certain information
concerning the historic investment results of the funds. The financial data
included in the table, which is unaudited, has been derived from the financial
statements contained in the Statement of Additional Information. The semiannual
report contains additional performance information and will be made available
upon request and without charge. The information presented is for a share
outstanding throughout the period.
<TABLE>
STRATEGIC STRATEGIC STRATEGIC
ALLOCATION: ALLOCATION: ALLOCATION:
CONSERVATIVE(1) MODERATE(1) AGGRESSIVE(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................................... $5.00 $5.00 $5.00
------ ------ ------
Income from Investment Operations
Net Investment Income(2) ........................................... .05 .04 .03
Net Realized and Unrealized Gain (Loss) on Investment Transactions . (.02) .12 .20
------ ------ ------
Total from Investment Operations ................................... .03 .16 .23
------ ------ ------
Distributions
From Net Investment Income ......................................... (.02) (.02) --
------ ------ ------
Net Asset Value, End of Period .......................................... $5.01 $5.14 $5.23
====== ====== ======
Total Return(3) .................................................... .64% 3.11% 4.60%
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to Average Net Assets(4) .............................. 1.05% 1.12% 1.22%
Ratio of Net Investment Income to Average Net Assets(4) ................. 3.65% 2.74% 1.88%
Portfolio Turnover Rate ................................................. 25% 24% 34%
Average Commission Paid per Investment Security Traded .................. $.0206 $.0173 $.0198
Net Assets, End of Period (in thousands) ................................ $8,061 $14,953 $16,370
</TABLE>
(1) February 15, 1996 (inception) through May 31, 1996 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gain distributions, if
any.
(4) Annualized.
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
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 American Century family of funds.
ASSET ALLOCATION 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," 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%
- -----------------------------------------------------------------------------
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
6 Information Regarding the Funds American Century Investments
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% 10-30% 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.
The manager 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 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 9.
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 obliga-
Prospectus Information Regarding the Funds 7
tions 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 10. 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 higher
risk, non-convertible debt obligations that are rated below investment grade
securities, or are unrated, but with similar credit quality.
There are no credit or maturity restrictions on the fixed income securities
in which the high yield portion of a fund's portfolio may be invested. Debt
securities rated lower than Baa by Moody's or BBB by S&P or their equivalent are
considered by many to be predominantly speculative. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments on such securities than is the case with
higher quality debt securities. Regardless of rating levels, all debt securities
considered for purchase by the fund are analyzed by the investment manager to
determine, to the extent reasonably possible, that the planned investment is
sound, given the 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), 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
8 Information Regarding the Funds American Century Investments
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 and
Options Thereon," page 11.
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
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
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 Moody's, or
if not rated by S&P or Moody's are of equivalent investment quality as
determined by the manager. A fund's investments in convertible debt securities
and other high yield, non-convertible debt securities rated below investment
grade will comprise less than 35% of the fund's net assets. Debt securities
rated below the four highest categories are not considered "investment grade"
obligations. These securities have speculative characteristics and present more
credit risk than investment grade obligations. For a description of the S&P and
Moody's ratings categories, see "An Explanation of Fixed Income Securities
Ratings," in 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 of the funds 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. The manager defines "foreign issuer"
as an issuer of securities that is domiciled outside the United States, derives
at least 50% of its total revenue from production or sales outside the United
States, and/or whose principal trading market is outside the United States.
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.
Prospectus Information Regarding the Funds 9
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. The funds consider "emerging market
countries" to include all countries that are considered by the manager to be
developing or emerging countries. Currently, the countries not included in this
category for the funds offered by this Prospectus are the United States, Canada,
Japan, the United Kingdom, Germany, Austria, France, Hong Kong, Italy, Ireland,
Singapore, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland,
Norway, Denmark, Australia and New Zealand. In addition, as used in this
Prospectus, "securities of issuers in emerging market countries" means (i)
securities of issuers the principal securities trading market for which is an
emerging market country or (ii) securities of issuers having their principal
place of business or principal office in emerging market 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. Also, securities markets in emerging market countries
typically offer less regulatory protection for investors. See "Investing in
Emerging Market Countries," in 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
10 Information Regarding the Funds American Century Investments
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 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 U.S. dollar may be a factor in the overall performance of a
fund.
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 a 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.
A 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.
Each fund will make use of portfolio hedging to the extent deemed
appropriate by the manager.
Prospectus Information Regarding the Funds 11
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
The portfolio turnover rates of the funds are shown in the Financial
Highlights table on page 5 of this Prospectus.
Investment decisions to purchase and sell securities 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
determines a change is in order to achieve those objectives and, accordingly,
the annual portfolio turnover rate cannot be anticipated.
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 SEC 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
12 Information Regarding the Funds American Century Investments
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.
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.
Prospectus Information Regarding the Funds 13
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 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.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission 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 the funds 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, the funds' manager 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, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return. Performance
data may be quoted separately for the Advisor Class and the other classes
offered by the funds.
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.
14 Information Regarding the Funds American Century Investments
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 well-known indicies of market performance including the
Standard & Poor's (S&P) 500 Index and the Dow Jones Industrial Average. Fund
performance may also be compared, on a relative basis, to the other funds in our
fund family. This relative comparison, which may be based upon historical or
expected fund performance, volatility or other fund characteristics, may be
presented numerically, graphically or in text. Fund performance may also be
combined or blended with other funds in our fund 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.
Prospectus Information Regarding the Funds 15
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the funds offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN
CENTURY FUNDS
One or more of the funds offered by this Prospectus is available as an
investment option under your employer-sponsored retirement or savings plan or
through or in connection with a program, product or service offered by a
financial intermediary, such as a bank, broker-dealer or insurance company.
Since all records of your share ownership are maintained by your plan sponsor,
plan recordkeeper, or other financial intermediary, all orders to purchase,
exchange and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
how to select American Century funds.
If you have questions about a fund, see "Investment Policies of the Funds,"
page 6, or call one of our Institutional Service Representatives at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price is Determined," page 18.
We may discontinue offering shares generally in the funds (including any
class of shares of a fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY
FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of a fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
Exchanges are made at the respective net asset values, next computed after
receipt of the exchange instruction by us. If in any 90-day period, the total of
the exchanges and redemptions from the account of any one plan participant or
financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's
assets, further exchanges may be subject to special requirements to comply with
our policy on large equity fund redemptions. See "Special Requirements for Large
Redemptions," this page.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 18. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule18f-1 under the Investment Company
Act, which obligates each fund to redeem shares in cash, with respect to any one
participant account during any 90-day period, up to the lesser of $250,000 or 1%
of the assets of the fund. Although redemptions in excess of this limitation
will also normally be paid in cash, we reserve the
16 How to Invest with American Century Investments American Century Investments
right to honor these redemptions by making payment in whole or in part in
readily marketable securities (a "redemption-in-kind"). If payment is made in
securities, the securities will be selected by the fund, will be valued in the
same manner as they are in computing the fund's net asset value and will be
provided to the redeeming plan participant or financial intermediary in lieu of
cash without prior notice.
If you expect to make a large redemption and would like to avoid any
possibility of being paid in securities, you may do so by providing us with an
unconditional instruction to redeem at least 15 days prior to the date on which
the redemption transaction is to occur. The instruction must specify the dollar
amount or number of shares to be redeemed and the date of the transaction.
Receipt of your instruction 15 days prior to the transaction provides the fund
with sufficient time to raise the cash in an orderly manner to pay the
redemption and thereby minimizes the effect of the redemption on the fund and
its remaining shareholders.
Despite its right to redeem fund shares through a redemption-in-kind, we do
not expect to exercise this option unless a fund has an unusually low level of
cash to meet redemptions and/or is experiencing unusually strong demands for its
cash. Such a demand might be caused, for example, by extreme market conditions
that result in an abnormally high level of redemption requests concentrated in a
short period of time. Absent these or similar circumstances, we expect
redemptions in excess of $250,000 to be paid in cash in any fund with assets of
more than $50 million if total redemptions from any one account in any 90-day
period do not exceed one-half of 1% of the total assets of the fund.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
Prospectus How to Invest with American Century Investments 17
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for Target Maturities is determined one hour prior to the
close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the net asset value
of the fund is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.
Investments are considered received only when your check or wired funds are
received by us. Wired funds are considered received on the day they are
deposited in our bank account if they are deposited before the net asset value
is determined.
It is the responsibility of your plan recordkeeper or financial
intermediary to transmit your purchase, exchange and redemption requests to the
funds' transfer agent prior to the applicable cut-off time and to make payment
for any purchase transactions in accordance with the fund's procedures or any
contractual arrangement with the funds or the funds' distributor in order for
you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of 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 accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined, which was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days
18 Additional Information You Should Know American Century Investments
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 Investor Class of the funds will be published
in leading newspapers daily. Because the total expense ratio for the Advisor
Class shares is 0.25% higher than the Investor Class, their net asset values
will be lower than the Investor Class. The net asset value of the Advisor Class
of each fund may be obtained by calling us.
DISTRIBUTIONS
Distributions from net investment income are declared and paid quarterly
by Strategic Allocation: Conservative and Strategic Allocation: Moderate. Such
distributions are declared and paid annually by Strategic Allocation:
Aggressive. Distributions from net realized securities gains, if any, are
declared and paid annually, usually in December, 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.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing in taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase, made by check or ACH, may be held up to 15 days. You
may elect to have distributions on shares of Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time, the value of your shares
includes the undistributed net gains, if any, realized by the fund on the sale
of portfolio securities and undistributed dividends and interest received, less
fund expenses.
Because undistributed gains and dividends are included in the value of your
shares prior to distribution, when they are distributed, the value of your
shares will be reduced by the amount of the distribution. If you buy your shares
through a taxable account just before the distribution, you will pay the full
price for your shares and then receive a portion of the purchase price back as a
taxable distribution. See "Taxes," this page.
TAXES
Each fund 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.
TAX-DEFERRED ACCOUNTS
If Advisor Class shares are purchased through tax-deferred accounts, such
as a qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If Advisor Class shares are purchased through taxable accounts,
distributions of net investment income and net short-term capital gains are
taxable to you as ordinary income. Distributions from net long-term capital
gains are taxable as long-term capital gains regardless of the length of time
you have held the shares on which such distributions are paid. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any distribution of long-term capital gain to you with respect to such
shares.
Prospectus Additional Information You Should Know 19
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 "Distributions," page 19.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive 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 advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, either we or your financial intermediary 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 us that
omit your Social Security number or tax identification number will subject us to
a penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed. This charge is not
refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
management services to investment companies and institutional clients since it
was founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to American Century
funds,
20 Additional Information You Should Know American Century Investments
while certain American Century employees provide investment management services
to Benham funds.
The manager supervises and manages the investment portfolio of each fund
and directs the purchase and sale of its investment securities. It 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.
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:
CHRISTOPHER K. BOYD, Vice President and Portfolio Manager, joined American
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 and Ultra.
C. CASEY COLTON, Portfolio Manager, 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
American Century in September 1993 as a Portfolio Manager. Prior to joining
American Century, Mr. Davidson served as an investment manager for Boatmen's
Trust Company in St. Louis, Missouri. He is a member of the team that manages
Value and Equity Income.
GLENN A. FOGLE, Vice President and Portfolio Manager, joined American
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 and Giftrust.
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager,
joined American 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, Benham Bond and the
fixed income portion of Balanced.
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 American
Century 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 American
Century in June 1993 as a Portfolio Manager. Prior to joining American
Century, Mr. Zuger served as an investment manager in the Trust Department of
NBD Bancorp in Detroit, Michigan. He is a member of the team that manages
Value and Equity Income.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Advisor Class of the funds, the manager
receives an annual fee of 0.75% of average net assets up to $1 billion and 0.65%
of average net assets in excess of $1 billion for Strategic Allocation:
Conservative, 0.85% of average net assets up to $1 billion and 0.75% of average
net assets in excess of $1 billion for Strategic Allocation: Moderate, and 0.95%
of average net assets up to
Prospectus Additional Information You Should Know 21
$1 billion and 0.85% 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).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager 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
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds and is paid for
such services by the manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in the American Century family of funds. These
services may include the waiver of minimum investment requirements, expedited
confirmation of shareholder transactions, newsletters and a team of personal
representatives. Any expenses associated with these special services will be
paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc., a registered broker dealer and an affiliate of the manager. As agent for
the funds and the manager, the distributor enters into contracts with various
banks, broker dealers, insurance companies and other financial intermediaries
with respect to the sale of the funds' shares and/or the use of the funds'
shares in various financial services. The manager (or an affiliate) pays all
expenses incurred in promoting sales of, and distributing, the Advisor Class and
in securing such services out of the Rule 12b-1 fees described in the section
that follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under
the Investment Company Act permits investment companies that adopt a written
plan to pay certain expenses associated with the distribution of their shares.
Pursuant to that rule, the funds' Board of Directors and the initial shareholder
of the funds' Advisor Class shares have approved and adopted a Master
Distribution and Shareholder Services Plan (the "Plan"). Pursuant to the Plan,
each fund pays the manager a shareholder services fee and a distribution fee,
each equal to 0.25% (for a total of 0.50%) per annum of the average daily net
assets of the shares of the fund's Advisor Class. The shareholder services fee
is paid for the purpose of paying the costs of securing certain shareholder and
administrative services, and the distribution fee is paid for the purpose of
paying the costs of providing various distribution services. All or a portion of
such fees are paid by the manager to the banks, broker-dealers, insurance
companies or other financial intermediaries through which such shares are made
available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and
22 Additional Information You Should Know American Century Investments
therefore may constitute "service fees" for purposes of applicable rules of the
National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Strategic Asset Allocations, Inc., the issuer of the
funds, was organized as a Maryland corporation on April 4, 1994.
The corporation 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 the funds is American Century Tower, 4500 Main
Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-3533
(international calls: 816-531-5575).
American Century Strategic Asset Allocations, Inc. issues three series of
$.01 par value shares. The assets belonging to each series of shares are held
separately by the custodian.
Each of the funds described in this Prospectus offers three classes of
shares: an Investor Class, a Service Class, and an Advisor Class. The shares
offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Service Class is primarily offered to institutional investors or through
institutional distribution channels, such as employer-sponsored retirement plans
or through banks, broker-dealers, insurance companies or other financial
intermediaries. The other classes have different fees, expenses, and/or minimum
investment requirements than the Advisor Class. Different fees and expenses will
affect performance. For additional information concerning the Investor Class of
shares, call one of our Investor Services Representatives at 1-800-345-2021. For
information concerning the Service Class of shares, call one of our
Institutional Service Representatives at 1-800-345-3533 or contact a sales
representative or financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, and (d) each class
may have different exchange privileges.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters that must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' bylaws, the holders of at least 10% of the votes
entitled to be cast may request the funds to hold a special meeting of
shareholders. We will assist in the communication with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 23
NOTES
24 Notes American Century Investments
NOTES
Prospectus Notes 25
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
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