SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
AMERICAN CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
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(Exact Name of Registrant as Specified in Charter)
4500 Main Street, Kansas City, MO 64141-6200
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 531-5575
David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64141-6200
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: June 13, 2000
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) [ ] on (date)
pursuant to paragraph (b) [x] 60 days after filing pursuant to paragraph
(a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of
rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
American Century
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Prospectus
Strategic Allocation: Conservative Fund
Strategic Allocation: Moderate Fund
Strategic Allocation: Aggressive Fund
July 1, 2000
Institutional Class
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or complete. Anyone who
tells you otherwise is committing a crime.
Funds Distributor, Inc. and
American Century Investment Services, Inc., Distributors
Dear Investor,
Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.
As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.
An Overview of the Funds - Learn about fund goals, strategies and risks, and who
may or may not want to invest.
Fund Performance History - See how the funds performed from year to year.
Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.
Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.
As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.
Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.
Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.
Sincerely,
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
Table of Contents
An Overview of the Funds................................................X
Fund Performance History................................................X
Fees and Expenses.......................................................X
Objectives, Strategies and Risks........................................X
Strategic Allocation: Conservative Fund
Strategic Allocation: Moderate Fund
Strategic Allocation: Aggressive Fund
Management..............................................................X
Investing with American Century........................................XX
Share Price and Distributions.........................................XX
Taxes..................................................................XX
Multiple Class Information.............................................XX
Performance Information of Other Class.................................XX
CALLOUTS
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in blue italics, look for its definition in
the left margin.
This symbol highlights special information and helpful tips.
An Overview of the Funds
What are the funds' investment objectives?
These funds are asset allocation funds. They seek the highest level of total
return consistent with their risk profiles. The risk profiles of the funds vary
because they invest in different mixes of asset types, such as stocks, bonds and
money market instruments.
What are the funds' primary investment strategies and principal risks?
The following table indicates each fund's neutral mix. The neutral mix
represents a benchmark as to how a fund's investments generally will be
allocated among the major asset classes over the long term.
Equity Fixed-Income or
Securities Debt Securities Cash
Fund (Stocks) (Bonds) Equivalents
Strategic Allocation: Conservative 45% 45% 10%
Strategic Allocation: Moderate 63% 31% 6%
Strategic Allocation: Aggressive 78% 20% 2%
In selecting stocks for the equity portion of the funds, the fund managers may
choose stocks of U.S. or foreign companies of any size. The fund managers invest
the fixed-income portion of the funds primarily in investment-grade debt
securities.
The funds' principal risks include
o Market Risk -- The value of a fund's shares will go up and down based on the
performance of the companies whose securities it owns and other factors
generally affecting the securities market.
o Interest Rate Risk -- When interest rates change, the value of the funds'
fixed-income securities will be affected.
o Credit Risk -- The value of a fund's fixed-income securities also will be
affected by the continued ability of the issuers of these securities to make
interest and principal payments as they become due.
o Principal Loss -- As with all mutual funds, if you sell your shares when
their value is less than the price you paid, you will lose money.
Who may want to invest in the funds?
The funds may be a good investment if you are
o seeking funds that combine the potential for long-term capital growth with
income
o seeking the convenience of funds that invest in both equity and fixed-income
securities
o comfortable with the risks associated with the funds' investment strategy
o investing through an IRA or other tax-advantaged retirement plan
Who may not want to invest in the funds?
The funds may not be a good investment if you are
o not seeking current income from your investment
o investing for a short period of time
o uncomfortable with volatility in the value of your investment
CALLOUT
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Total return includes capital appreciation plus dividend and interest income.
Fund Performance History
Strategic Allocation: Conservative Fund
Strategic Allocation: Moderate Fund
Strategic Allocation: Aggressive Fund
When the Institutional Class of a fund has investment results for a full
calendar year, this section will feature charts that show
o Annual Total Returns
o Highest and Lowest Quarterly Returns
o Average Annual Returns, including a comparison of these returns to a
benchmark index for the Institutional Class of the fund
In addition, investors can examine the performance of the fund's Investor Class
of shares. The Investor Class has a total expense ratio that is 0.20% higher
than the Institutional Class. If the Institutional Class had existed during the
periods presented, its performance would have been higher because of the lower
expense.
All past performance information is designed to help show you how fund returns
can vary. Keep in mind that past performance does not predict how the fund will
perform in the future
For current performance information, please call us at 1-800-345-2021 or visit
American Century's Web site at www.americancentury.com.
Fees and Expenses
There are no sales loads, fees or other charges
o to buy fund shares directly from American Century
o to reinvest dividends in additional shares
o to exchange into the Institutional Class shares of other American Century
funds
o to redeem your shares
The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.
Annual Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
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Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees Expenses(2) Operating Expenses
<S> <C> <C> <C> <C>
Strategic Allocation: Conservative 0.80% None 0.00% 0.80%
Strategic Allocation: Moderate 0.90% None 0.00% 0.90%
Strategic Allocation: Aggressive 1.00% None 0.00% 1.00%
</TABLE>
1 The funds have stepped fee schedules. As a result, the funds' management fee
rates generally decrease as fund assets increase.
2 Other expenses, which include the fees and expenses of the funds'
independent directors and their legal counsel as well as interest, are
expected to be less than 0.005% for the current fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .
o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year
o incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
Strategic Allocation: Conservative $82 $255 $443 $987
Strategic Allocation: Moderate $92 $286 $497 $1,104
Strategic Allocation: Aggressive $102 $318 $551 $1,219
CALLOUTS
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
Objectives, Strategies and Risks
Strategic Allocation: Conservative Fund
Strategic Allocation: Moderate Fund
Strategic Allocation: Aggressive Fund
What are the funds' investment objectives?
The funds are asset allocation funds. That is, they diversify their assets among
various classes of investments such as stocks, bonds and money market
instruments. Each fund holds a different mix of these asset types, which gives
it a distinct risk profile and return potential.
o Strategic Allocation: Conservative seeks regular income through its emphasis
on bonds and money market securities. It also has the potential for moderate
long-term total return as a result of its stake in equity securities.
o Strategic Allocation: Moderate seeks long-term capital growth with some
regular income. It emphasizes investments in equity securities, but maintains
a sizeable stake in bonds and money market securities.
o Strategic Allocation: Aggressive seeks long-term capital growth with a small
amount of income. It emphasizes investments in equity securities, but
maintains a portion of its assets in bonds and money market securities.
You should be aware that the names of the three asset allocation funds offered
in this Prospectus are intended to reflect the relative short-term price
volatility risk among the funds and are not an indication of the advisor'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.
How do the funds pursue their investment objectives?
The funds' strategic asset allocation strategy diversifies investments among
equity securities, bonds and cash-equivalent instruments. The funds may invest
in any type of U.S. or foreign equity security that meets certain fundamental
and technical standards. The fund advisor draws on growth, value and
quantitative investment techniques in managing the equity portion of the funds'
portfolios and diversifies the funds' equity investments among small, medium and
large companies.
The growth strategy looks for companies with earnings and revenues that are not
only growing, but growing at a successively faster, or accelerating, pace. This
strategy is based on the premise that, over the long term, the stocks of
companies with accelerating earnings and revenues have a greater-than-average
chance to increase in value. The value investment discipline seeks capital
growth by investing in equity securities of well-established companies that the
funds' managers believe to be temporarily undervalued. The primary quantitative
management technique the managers use is portfolio optimization. The managers
may construct a portion of the funds' portfolios to match the risk
characteristics of the S&P 500 and then optimize each portfolio to achieve the
desired balance of risk and return potential.
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 managers' opinion, such discipline or investment
category is undervalued relative to the other disciplines or categories.
The funds also invest in a variety of debt securities payable in both U.S. and
foreign currencies. The funds primarily invest in investment-grade securities,
that is, securities rated in the four highest categories by independent rating
organizations. 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. High-yield securities are higher risk,
nonconvertible debt obligations that are rated below investment-grade. The funds
may also invest in unrated securities based on the funds' advisor's assessment
of their credit quality. Under normal market conditions, the weighted average
maturity for the fixed-income portfolio will be in the three- to 10-year range.
The funds may invest the cash-equivalent portion of their portfolios in
high-quality money market investments (denominated in U.S. dollars or foreign
currencies).
The following table shows the operating ranges in which each fund's asset mix
generally will vary over short-term periods. These variations may be due to
differences in asset class performance or prevailing market conditions.
Operating Ranges
Equity Fixed Income or
Securities Debt Securities Cash
Fund (Stocks) (Bonds) Equivalents
Strategic Allocation:Conservative 39-51% 38-52% 5-20%
Strategic Allocation: Moderate 53-73% 21-41% 0-15%
Strategic Allocation: Aggressive 63-93% 10-30% 0-15%
What are the principal risks of investing in the funds?
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
The value of the funds' fixed-income securities will be affected primarily by
rising or falling interest rates and the continued ability of the issuers of
these securities to make payments of interest and principal as they become due.
When interest rates change, the amount of income a fund generates will be
affected. Generally, when interest rates rise, a fund's income and its share
value will decline. The opposite is true when interest rates decline.
The lowest-rated investment-grade bonds in which the funds may invest contain
some speculative characteristics. Having those bonds in the funds' portfolios
means the funds' value may go down more if interest rates or other economic
conditions change than if the funds contained only higher-rated bonds. In
addition, Strategic Allocation: Moderate and Strategic Allocation: Aggressive
may invest in higher-risk high-yield securities, sometimes referred to as junk
bonds. These securities are considered to be predominantly speculative and are
more likely to be negatively affected by changes in interest rates or other
economic conditions.
As with all funds, your shares may be worth more or less at any given time than
the price you paid for them. If you sell your shares when the value is less than
the price you paid, you will lose money.
Although the fund managers intend to invest the funds' assets primarily in U.S.
securities, the funds may invest in foreign securities. Foreign investment
involves additional risks, including fluctuations in currency exchange rates,
less stable political and economic structures, reduced availability of public
information, and lack of uniform financial reporting and regulatory practices
similar to those that apply in the United States. These factors make investing
in foreign securities generally riskier than investing in U.S. stocks.
These funds are intended for investors who seek to diversify their assets among
various classes of investments, such as stocks, bonds and money market
instruments, and who are willing to accept the risks associated with the funds'
investment strategies.
CALLOUT
Fixed-income securities are rated by nationally recognized securities rating
organizations (SROs), such as Moody's and Standard & Poor's. Each SRO has its
own system for classifying securities, but each tries to indicate a company's
ability to make timely payments of interest and principal. A detailed
description of SROs, their ratings system and what we do if a security isn't
rated is included in the Statement of Additional Information.
Management
Who manages the funds?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
The Board of Directors
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.
The Investment Advisor
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provides to the funds, the advisor receives a unified
management fee based on a percentage of the average net assets of the
Institutional Class shares of the funds. The amount of the management fee is
calculated on a class-by-class basis daily and paid monthly. Strategic
Allocation: Conservative will pay the advisor a unified management fee of 0.80%
of the first $1 billion of average net assets and 0.70% of $1 billion and over;
Strategic Allocation: Moderate will pay the advisor a unified management fee of
0.90% of the first $1 billion of average net assets and 0.80% of $1 billion and
over; and Strategic Allocation: Aggressive will pay the advisor a unified
management fee of 1.00% of the first $1 billion of average net assets and 0.90%
of $1 billion and over.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor pays all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees), and extraordinary expenses. A portion of the management fee may
be paid by the funds' advisor to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor.
The Fund Management Team
The advisor uses a team of portfolio managers, assistant portfolio managers and
analysts to manage the funds. The team meets regularly to review portfolio
holdings and discuss purchase and sale activity. Team members buy and sell
securities for a fund as they see fit, guided by the fund's investment objective
and strategy.
The portfolio managers on the investment team are identified below:
Jeffrey R. Tyler
Mr. Tyler, Senior Vice President and Senior Portfolio Manager, has been a member
of the team that manages the funds since their inception in February 1996. He
also is a member of the teams that manage Equity Growth, Income & Growth and
Balanced. He joined American Century as a Portfolio Manager in January 1988. He
has a bachelor's degree in business economics from the University of
California-Santa Barbara and an MBA in finance and economics from Northwestern
University. He is a Chartered Financial Analyst.
Christopher K. Boyd
Mr. Boyd, Vice President and Senior Portfolio Manager, has been a member of the
team that manages the funds since rejoining American Century in January 1998. He
is also a member of the teams that manage Giftrust and New Opportunities. With
the exception of 1997, he has been with American Century since March 1988 and
served as a Portfolio Manager since December 1992. During 1997, he was in
private practice as an investment advisor. He has a bachelor of science from the
University of Kansas and an MBA from Dartmouth College. He is a Chartered
Financial Analyst.
Phillip N. Davidson
Mr. Davidson, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages the funds since their inception in February
1996. He is also a member of the teams that manage Value and Equity Income.
Prior to joining American Century, he spent 11 years at Boatmen's Trust Company
in St. Louis and served as Vice President and Portfolio Manager responsible for
institutional value equity clients. He has a bachelor's degree in finance and an
MBA from Illinois State University.
Glenn A. Fogle
Mr. Fogle, Vice President and Senior Portfolio Manager, has been a member of the
team that manages the funds since their inception in February 1996. He also is a
member of the team that manages Vista, where he has been a Portfolio Manager
since March 1993. He joined American Century in September 1990 as an Investment
Analyst. He has a bachelor of arts and an MBA in finance from Texas Christian
University. He is a Chartered Financial Analyst.
C. Kim Goodwin
Ms. Goodwin, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages the funds since October 1997. She also is a
member of the team that manages Growth. She joined American Century in 1997.
Before joining American Century, she served as Senior Vice President and
Portfolio Manager at Putnam Investments from May 1996 to September 1997, and
Vice President and Portfolio Manager at Prudential Investments from February
1993 to April 1996. She has a bachelor of arts from Princeton University, an MBA
in finance and a master's in public affairs from the University of Texas.
Norman E. Hoops
Mr. Hoops, Senior Vice President and Senior Portfolio Manager, has been a member
of the team that manages the funds since their inception in February 1996. He
also is a member of the teams that manage Limited-Term Bond, Bond and the
fixed-income portion of Balanced. He joined American Century as Vice President
and Portfolio Manager in November 1989. In April 1993, he became Senior Vice
President. He has a bachelor of arts from Indiana University and an MBA from
Butler University.
Brian Howell
Mr. Howell, Vice President and Portfolio Manager, has been a member of the team
that manages the funds since May 1997. He joined American Century in 1988. He
was Portfolio Manager of the Capital Preservation Fund from May 1995 to May
1997. He has a bachelor's degree in mathematics/statistics and an MBA from the
University of California-Berkeley.
Mark S. Kopinski
Mr. Kopinski, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages the funds since April 1997. He also is a member
of the teams that manage International Growth, International Discovery and the
Emerging Markets Fund. Before rejoining American Century, he served as Vice
President and Portfolio Manager at Federated Investors, Inc. from June 1995 to
March 1997. From 1990 to 1995, he served as Vice President and a member of the
team that managed International Growth and International Discovery. He has a
bachelor's degree in business administration from Monmouth College and an MA in
Asian studies from the University of Illinois.
Scott A. Moore
Mr. Moore, Vice President and Portfolio Manager, has been a member of the team
that manages the funds since February 1999. He is also a member of the teams
that manage Value and Equity Income. He joined American Century in August 1993
as an Investment Analyst. He has a bachelor's degree in finance from Southern
Illinois University and an MBA in finance from the University of
Missouri-Columbia. He is a Chartered Financial Analyst.
John D. Seitzer
Mr. Seitzer, Vice President and Portfolio Manager, has been a member of the team
that manages the funds since December 1996. He also is a member of the team that
manages Giftrust. He joined American Century in June 1993 as an Investment
Analyst and was promoted to Portfolio Manager in July 1996. He has a bachelor's
degree in accounting and finance from Kansas State University and an MBA in
finance from Indiana University. He is a Chartered Financial Analyst and a
Certified Public Accountant.
Henrik Strabo
Mr. Strabo, Chief Investment Officer-International Equities, has been a member
of the team that manages the funds since their inception in February 1996. He
also is a member of the team that manages Global Growth, International Growth
and International Discovery. He joined American Century in 1993 as an Investment
Analyst and was promoted to Portfolio Manager in April 1994. He has a bachelor's
degree in business from the University of Washington.
Denise Tabacco
Ms. Tabacco, Portfolio Manager, has been a member of the team that manages the
funds since January 1998. She also is a member of the team that manages the
Prime Money Market Fund. She joined American Century in 1988, becoming a member
of its portfolio department in 1991. She has a bachelor's degree in accounting
from San Diego State University and an MBA in finance from Golden Gate
University.
CALLOUT
Code of Ethics
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the funds to obtain approval before executing permitted personal trades.
Fundamental Investment Policies
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Directors may change any other policies
and investment strategies.
Investing with American Century
Eligibility for Institutional Class Shares
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
retirement plans, endowments, foundations and financial advisors that meet the
funds' minimum investment requirements. Institutional Class shares are not
available for purchase by insurance companies for variable annuity and variable
life products.
Minimum Initial Investment Amounts
The minimum investment is $5 million ($3 million for endowments and foundations)
per fund. If you invest with us through a financial intermediary, the minimum
investment requirement may be met by aggregating the investments of various
clients of your financial intermediary. The minimum investment requirement may
be waived if you or your financial intermediary, if applicable, has an aggregate
investment in our family of funds of $10 million or more ($5 million for
endowments and foundations). In addition, financial intermediaries or plan
recordkeepers may require retirement plans to meet certain additional
requirements, such as plan size or a minimum level of assets per participant, in
order to be eligible to purchase Institutional Class shares.
Redemption of Shares in Low-Balance Accounts
If your balance or the balance of your financial intermediary, if applicable,
falls below the minimum investment requirements due to redemptions or exchanges,
we reserve the right to convert your shares to Investor Class shares of the same
fund. The Investor Class shares have a unified management fee that is 0.20%
higher than the Institutional Class.
Services Automatically Available to You
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing below.
Conducting Business in Writing
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
<TABLE>
<CAPTION>
Ways to Manage Your Account
<S> <C> <C>
By telephone Open an account Make additional investments
- --------------------------------- If you are a current investor, you can open Call if you have authorized us to invest from
Service Representative an account by exchanging shares from another your bank account.
1-800-345-3533 American Century account.
Sell shares
Exchange shares Call a Service Representative.
Call or use our Automated Information Line
if you have authorized us to accept
telephone instructions.
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By mail or fax Open an account Make additional investments
P.O. Box 419385 Send a signed, completed application and Send your check or money order for at least
Kansas City, MO 64141-6385 check or money order payable to American $50 with an investment slip or $250 without
Century Investments. an investment slip. If you don't have an
Fax investment slip, include your name, address
816-340-4655 Exchange shares and account number on your check or money
Send written instructions to exchange your order.
shares from one American Century account to
another. Sell shares
Send written instructions or a redemption form to
sell shares. Call a Service Representative to
request a form.
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Automatically Open an account Make additional investments
Not available. With the automatic investment privilege, you
can purchase shares on a regular basis. You
Exchange shares must invest at least $600 per year per
Send written instructions to set up an account.
automatic exchange of your shares from one
American Century account to another. Sell shares
If you have at least $10,000 in your account, you
may sell shares automatically by establishing
Check-A-Month or Automatic Redemption plans.
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By wire Open an account Make additional investments
Call to set up your account or mail a Follow the wire instructions.
completed application to the address
provided in the "By mail" section. Give your Sell shares
bank the following information to wire money. You can receive redemption proceeds by wire
Our bank information: or electronic transfer.
o Please remember if you Commerce Bank N.A.
request redemptions by Routing No. 101000019
wire, $10 will be deducted Account No. 2804918
from the amount redeemed. The fund name
Your bank also may charge a Your American Century account number* Exchange shares
fee. Your name Not available.
The contribution year (for IRAs only)
*For additional investments only
</TABLE>
Modifying or Canceling an Investment
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. Each fund reserves the right to suspend the offering of shares for a period
of time, and each fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.
Abusive Trading Practices
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
Special Requirements for Large Redemptions
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice.
Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining investors.
Investing through Financial Intermediaries
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
|X| minimum investment requirements
|X| exchange policies
|X| fund choices
|X| cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although fund shares transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds. American Century has contracts with certain
financial intermediaries requiring them to track the time investment orders are
received and to comply with procedures relating to the transmission of orders.
The funds have authorized these intermediaries to accept orders on each fund's
behalf up to the time at which the net asset value is determined. If those
orders are transmitted to American Century and paid for in accordance with the
contract, they will be priced at the net asset value next determined after your
request is received in the form required by the intermediary on a fund's behalf.
CALLOUT
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
Share Price and Distributions
Share Price
American Century determines the net asset value (NAV) of each fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), we do not calculate the NAV. The NAV of a
fund share is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets and on some electronic trading networks may take place on weekends or
holidays when a fund's NAV is not calculated. So, the value of a fund's
portfolio may be affected on days when you can't purchase or redeem shares of
the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
Distributions
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that the funds will not be subject to state or federal
income tax on amounts distributed. The distributions generally consist of
dividends and interest received by a fund, as well as capital gains realized on
the sale of investment securities.
The funds pay distributions of substantially all of their income quarterly, with
the exception of Strategic Allocation: Aggressive, which pays such distributions
annually. Distributions from realized capital gains are generally paid twice a
year, usually in March and December. The funds may make more frequent
distributions, if necessary, to comply with Internal Revenue Code provisions.
The funds' distributions may be taxable as ordinary income, capital gains or a
combination of the two. Capital gains are taxed at different rates depending on
the length of time the fund held the securities that were sold. Distributions
are reinvested automatically in additional shares unless you choose another
option.
You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day that a distribution is declared, you will not receive that distribution. If
you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any such distributions
received with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash.
CALLOUTS
The net asset value, or NAV, of a fund is the price of the fund's shares.
Capital gains are increases in the values of capital assets, such as stock, from
the time the assets are purchased.
Taxes
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a
professional tax advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
Type of Distribution Tax Rate for 15% Bracket Tax Rate for
28% Bracket or Above
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. American Century will inform you of the
tax status of fund distributions for each calendar year in an annual tax mailing
(Form 1099-DIV).
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and remit 31% of dividends, capital
gains distributions and redemptions to the IRS.
CALLOUTS
Buying a Dividend
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The funds distribute those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
Multiple Class Information
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Institutional Class shares and are offered primarily through employer-sponsored
retirement plans, or through institutions like banks, broker-dealers and
insurance companies.
The other classes have different fees, expenses and/or minimum investment
requirements from the Institutional Class. The difference in the fee structures
between the classes is the result of their separate arrangements for shareholder
and distribution services and not the result of any difference in amounts
charged by the advisor for core investment advisory services. Accordingly, the
core investment advisory expenses do not vary by class. Different fees and
expenses will affect performance. For additional information concerning the
other classes of shares not offered by this Prospectus, call us at
|X| 1-800-345-2021 for Investor Class shares
|X| 1-800-345-3533 for Advisor Class shares
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
Performance Information of Other Class
The following financial information is provided to show the performance of the
funds' original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.20% higher than the Institutional Class. The
Institutional Class is made available to institutional shareholders or through
financial intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower unified management
fee. If the Institutional Class existed during the periods presented, its
performance would have been higher because of the lower expense.
The table on the next page itemizes what contributed to the changes in share
price during the period. It also shows the changes in share price for this
period in comparison to changes over the last five fiscal years or less, if the
share class is not five years old.
On a per-share basis, the table includes as appropriate
o share price at the beginning of the period
o investment income and capital gains or losses
o distributions of income and capital gains paid to investors
o share price at the end of the period
The table also includes some key statistics for the period as appropriate
o Total Return - the overall percentage of return of the fund, assuming the
reinvestment of all distributions
o Expense Ratio - operating expenses as a percentage of average net assets
o Net Income Ratio - net investment income as a percentage of average net
assets
o Portfolio Turnover - the percentage of the fund's buying and selling
activity
The Financial Highlights have been audited by Deloitte & Touche LLP, independent
auditors. Their Independent Auditors' Report is included in the funds' annual
report for the year ended November 30, 1999, which is incorporated by reference
into the Statement of Additional Information, and is available upon request.
Strategic Allocation: Conservative Fund
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
1999 1998 1997 1996(1)
PER-SHARE DATA
Net Asset Value,
Beginning of Period .............. $5.59 $5.55 $5.26 $5.00
-------- -------- --------- ---------
Income From Investment Operations
Net Investment Income(2) ......... 0.17 0.18 0.19 0.13
Net Realized and Unrealized
Gain on Investment Transactions .. 0.28 0.31 0.36 0.22
-------- -------- --------- ---------
Total From Investment Operations . 0.45 0.49 0.55 0.35
-------- -------- --------- ---------
Distributions
From Net Investment Income ....... (0.16) (0.19) (0.17) (0.09)
From Net Realized Gain on
Investment Transactions .......... (0.19) (0.26) (0.09) --
-------- -------- --------- ---------
Total Distributions .............. (0.35) (0.45) (0.26) (0.09)
-------- -------- --------- ---------
Net Asset Value, End of Period ..... $5.69 $5.59 $5.55 $5.26
======== ======== ========= =========
Total Return(3) .................. 8.47% 9.43% 10.87% 7.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............ 1.00% 1.00% 1.00% 1.01%(4)
Ratio of Net Investment Income
to Average Net Assets ............ 3.01% 3.35% 3.48% 3.67%(4)
Portfolio Turnover Rate ............ 105% 113% 124% 44%
Net Assets, End of Period
(in thousands) ...................$167,083 $180,970 $156,733 $33,110
(1) February 15, 1996 (inception) through November 30, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
Strategic Allocation: Moderate Fund
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
1999 1998 1997 1996(1)
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............... $6.22 $5.98 $5.42 $5.00
-------- --------- -------- ---------
Income From Investment Operations
Net Investment Income(2) .......... 0.12 0.15 0.14 0.10
Net Realized and Unrealized Gain
on Investment Transactions ........ 0.88 0.45 0.56 0.39
-------- --------- -------- ---------
Total From Investment Operations .. 1.00 0.60 0.70 0.49
-------- --------- -------- ---------
Distributions
From Net Investment Income ........ (0.12) (0.16) (0.13) (0.07)
From Net Realized Gain on
Investment Transactions ........... (0.21) (0.20) (0.01) --
-------- --------- -------- ---------
Total Distributions ............... (0.33) (0.36) (0.14) (0.07)
-------- --------- -------- ---------
Net Asset Value, End of Period ...... $6.89 $6.22 $5.98 $5.42
======== ========= ======== =========
Total Return(3) ................... 16.97% 10.32% 13.02% 9.91%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............. 1.10% 1.10% 1.10% 1.10%(4)
Ratio of Net Investment Income
to Average Net Assets ............. 1.92% 2.38% 2.43% 2.52%(4)
Portfolio Turnover Rate ............. 107% 127% 119% 78%
Net Assets, End of Period
(in thousands) ....................$375,592 $261,721 $201,384 $57,836
(1) February 15, 1996 (inception) through November 30, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
Strategic Allocation: Aggressive Fund
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
1999 1998 1997 1996(1)
PER-SHARE DATA
Net Asset Value,
Beginning of Period ............... $6.54 $6.25 $5.53 $5.00
-------- --------- -------- --------
Income From Investment Operations
Net Investment Income(2) .......... 0.07 0.10 0.09 0.07
Net Realized and Unrealized Gain
on Investment Transactions ........ 1.55 0.49 0.67 0.46
-------- --------- -------- --------
Total From Investment Operations .. 1.62 0.59 0.76 0.53
-------- --------- -------- --------
Distributions
From Net Investment Income ........ (0.08) (0.09) (0.04) --
From Net Realized Gain on
Investment Transactions ........... (0.17) (0.21) -- --
-------- --------- -------- --------
Total Distributions ............... (0.25) (0.30) (0.04) --
-------- --------- -------- --------
Net Asset Value, End of Period ...... $7.91 $6.54 $6.25 $5.53
======== ========= ======== ========
Total Return(3) ................... 25.69% 9.93% 13.84% 10.60%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............. 1.20% 1.20% 1.20% 1.20%(4)
Ratio of Net Investment Income
to Average Net Assets ............. 1.02% 1.49% 1.58% 1.72%(4)
Portfolio Turnover Rate ............. 115% 134% 135% 64%
Net Assets, End of Period
(in thousands) ....................$192,831 $145,125 $109,497 $46,276
(1) February 15, 1996 (inception) through November 30, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
More information about the funds is contained in these documents
Annual and Semiannual Reports
These reports contain more information about the funds' investments and the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
On the Internet o EDGAR database at www.sec.gov
o By email request at [email protected]
By mail SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-8532
American Century Investments
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
0007
SH-PRS-xxxxx
<PAGE>
Strategic Allocation: Conservative Fund
Strategic Allocation: Moderate Fund
Strategic Allocation: Aggressive Fund
July 1, 2000
American Century Strategic
Asset Allocations, Inc.
This Statement of Additional Information adds to the discussion in the funds'
Investor and Advisor Class Prospectuses dated April 1, 2000 and the funds'
Institutional Class Prospectus dated July 1, 2000, but is not a prospectus. The
Statement of Additional Information should be read in conjunction with the
funds' current Prospectus. If you would like a copy of a Prospectus, please
contact us at one of the addresses or telephone numbers listed on the back cover
or visit American Century's Web site at www.americancentury.com.
This Statement
of Additional Information incorporates by reference certain information that
appears in the funds' annual and semiannual reports, which are delivered to all
investors. You may obtain a free copy of the funds' annual or semiannual reports
by calling 1-800-345-2021.
Funds Distributor, Inc. and American Century Investment Services, Inc.,
Distributors
TABLE OF CONTENTS
The Funds' History.................................................2
Fund Investment Guidelines.........................................2
Fund Investments and Risks.........................................5
Investment Strategies and Risks..............................5
Investment Policies.........................................17
Portfolio Turnover..........................................19
Management........................................................20
The Board of Directors......................................20
Officers....................................................23
Code of Ethics..............................................24
The Funds' Principal Shareholders.................................24
Service Providers.................................................25
Investment Advisor..........................................25
Transfer Agent and Administrator............................27
Distributor.................................................27
Other Service Providers...........................................28
Custodian Banks.............................................28
Independent Auditors........................................28
Brokerage Allocation..............................................28
The Equity Portion of the Funds.............................28
The Fixed-Income Portion of the Funds.......................29
Information About Fund Shares.....................................29
Multiple Class Structure....................................30
Buying and Selling Fund Shares..............................33
Valuation of the Funds' Securities..........................33
Taxes.............................................................34
Federal Income Taxes........................................34
State and Local Taxes.......................................35
How Fund Performance Information Is Calculated....................35
Performance Comparisons.....................................36
Permissible Advertising Information.........................36
Multiple Class Performance Advertising......................37
Financial Statements..............................................37
Explanation of Fixed-Income Securities Ratings....................38
THE FUNDS' HISTORY
American Century Strategic Asset Allocations, Inc. is a registered open-end
management investment company that was organized as a Maryland corporation on
April 4, 1994. Prior to January 1, 1997, it was known as Twentieth Century
Strategic Asset Allocations, Inc. Throughout this Statement of Additional
Information, we refer to American Century Strategic Asset Allocations, Inc. as
the corporation.
Each fund described in this Statement of Additional Information is a separate
series of the corporation and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, tax identification and stock registration numbers.
<TABLE>
<CAPTION>
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
Fund Ticker Inception Date Ticker Inception Date Ticker Inception Date
<S> <C> <C> <C> <C> <C> <C>
Strategic Allocation: Conservative TWSCX 2/15/1996 ACCAX 10/2/1996 N/A N/A
Strategic Allocation: Moderate TWSMX 2/15/1996 ACOAX 10/2/1996 N/A N/A
Strategic Allocation: Aggressive TWSAX 2/15/1996 ACVAX 10/2/1996 N/A N/A
</TABLE>
FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc., can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, Investment Strategies and Risks,
which begins on page 5. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussions contained in the
Prospectus.
Each fund is a diversified open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act). Diversified means
that, with respect to 75% of its total assets, each fund will not invest more
than 5% of its total assets in the securities of a single issuer or own more
than 10% of the outstanding voting securities of a single issuer.
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year
(1) no more than 25% of its total assets are invested in the securities of a
single issuer (other than the U.S government or a regulated investment
company), and
(2) with respect to at least 50% of its total assets, no more than 5% of its
total assets are invested in the securities of a single issuer.
In general, within the restrictions outlined here and in the funds' Prospectus,
the fund managers have broad powers to decide how to invest fund assets,
including the power to hold them uninvested.
Investments are varied according to what is judged advantageous under changing
economic conditions. It is the advisor's policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described in the funds' Prospectus and below.
As described in the funds' Prospectus, each fund's assets are allocated among
major asset classes based on the fund's target allocation 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.
The equity portion of a fund's portfolio may be invested in any type of domestic
or foreign equity or equity-equivalent security, primarily common stocks, that
meets certain fundamental and technical standards of selection. 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. Equity equivalents
also may include securities whose value or return is derived from the value or
return of a different security. Depositary receipts, which are described below
under the heading Foreign Securities, are an example of the type of derivative
security in which the funds might invest. Derivative securities are discussed in
greater detail below under the heading Derivative Securities.
The funds' managers use several investment disciplines in managing the equity
portion of each fund's portfolio, including growth, value and quantitative
management strategies. The growth discipline seeks long-term capital
appreciation by investing in companies whose earnings and revenue trends meet
the advisor's standards of selection, which generally means that the companies
have demonstrated, or, in the managers' opinion, have the prospects for
demonstrating, accelerating earnings and revenues as compared to prior period
and/or industry competitors. The value investment discipline seeks capital
growth by investing in equity securities of well-established companies that the
managers believe to be temporarily undervalued.
The advisor believes 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 the price of growth stocks 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.
The funds' managers also may apply quantitative management techniques to a
portion of each fund's portfolio. These techniques combine elements of both
growth and value investing and are intended to reduce overall volatility
relative to the market. Quantitative management combines two investment
management approaches. The first is active management, which allows the managers
to select investments for a fund without reference to an index or investment
model. The second is indexing, in which the managers try to match a portion of a
fund's portfolio composition to that of a particular index.
The primary quantitative management technique the managers use is portfolio
optimization. The managers construct a portion of the funds' portfolios to match
the risk characteristics of the S&P 500 and then optimize each portfolio to
achieve the desired balance of risk and return potential.
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 managers' opinion, such discipline or investment
category is undervalued relative to the other disciplines or categories.
The fixed-income portion of a fund's portfolio may 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 nonconvertible debt obligations issued by U.S. or foreign corporations. The
funds also may invest in mortgage-related and other asset-backed securities,
which are described in greater detail under the heading Mortgage-Related and
Other Asset-Backed Securities. 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 managers'
strategy is to actively manage the portfolio by investing the fund's assets in
sectors they believe are undervalued (relative to the other sectors) and that
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 be limited primarily 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 managers. 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,
nonconvertible 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 managers to determine,
to the extent reasonably possible, that the planned investment is consistent
with the investment objective of the fund.
Under normal market conditions, the weighted average maturity for the
fixed-income portfolio will be in the three- to 10-year range.
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.
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 overconcentration in a
particular industry or issuer.
The funds are "strategic" rather than "tactical" allocation funds, which means
the managers do not try to time the market to identify the exact time when a
major reallocation should be made. Instead, the managers use a longer-term
approach in pursuing the funds' investment objectives, and thus select a blend
of investments in the various asset classes.
The managers regularly review each fund's investments and allocations and may
make changes in the securities holdings within each asset class or to a fund's
asset mix (within the defined operating ranges) to favor investments that they
believe 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 managers will generally attempt to reallocate assets
gradually.
In determining the allocation of assets among U.S. and foreign capital markets,
the managers consider the condition and growth potential of the various
economies; the relative valuations of the markets; and social, political and
economic factors that may affect the markets.
In selecting securities in foreign currencies, the managers consider, among
other factors, the impact of foreign exchange rates relative to the U.S. dollar
value of such securities. The managers 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.
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.
FUND INVESTMENT AND RISKS
INVESTMENT STRATEGIES AND RISKS
In addition to investing in common stocks, bonds and cash-equivalent
instruments, the funds' managers also may use the various investment vehicles
and techniques described in this section in managing the funds' assets. This
section also details the risks associated with each, because each investment
vehicle and technique contributes to a fund's overall risk profile.
Foreign Securities
Each fund may invest in the securities (including debt securities) of foreign
issuers, including foreign governments, when these securities meet its standards
of selection. Securities of foreign issuers may trade in the U.S. or foreign
securities markets.
The following table shows the operating ranges in which each
fund's assets invested in securities of foreign issuers generally will vary.
Fund Percentage Generally Invested
in Foreign Securiities
Strategic Allocation: Conservative 3-15%
Strategic Allocation: Moderate 5-25%
Strategic Allocation: Aggressive 10-30%
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 debt
securities purchased by each fund are also applicable to its foreign securities
investments.
Investments in foreign securities may present certain risks, including:
Currency Risk
The value of the foreign investments held by the funds may be significantly
affected by changes in currency exchange rates. The dollar value of a foreign
security generally decreases when the value of the dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. In addition, the value of
fund assets may be affected by losses and other expenses incurred in converting
between various currencies in order to purchase and sell foreign securities, and
by currency restrictions, exchange control regulation, currency devaluations and
political developments.
Political and Economic Risk
The economies of many of the countries in which the funds invest are not as
developed as the economy of the United States and may be subject to
significantly different forces. Political or social instability, expropriation,
nationalization, confiscatory taxation and limitations on the removal of funds
or other assets, also could adversely affect the value of investments. Further,
the funds may encounter difficulties or be unable to enforce ownership rights,
pursue legal remedies or obtain judgments in foreign courts.
Regulatory Risk
Foreign companies generally are not subject to the regulatory controls imposed
on U.S. issuers and, in general, there is less publicly available information
about foreign securities than is available about domestic securities. Many
foreign companies are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to domestic companies. Income from foreign securities owned by the funds may be
reduced by a withholding tax at the sources, which would reduce dividend income
payable to shareholders.
Market and Trading Risk
Brokerage commission rates in foreign countries, which generally are fixed
rather than subject to negotiation as in the United States, are likely to be
higher. The securities markets in many of the countries in which the funds may
invest have substantially less trading volume than the principal U.S. markets.
As a result, the securities of some companies in these countries may be less
liquid and more volatile than comparable U.S. securities. Furthermore, one
securities broker may represent all or a significant part of the trading volume
in a particular country, resulting in higher trading costs and decreased
liquidity due to a lack of alternative trading partners. There generally is less
government regulation and supervision of foreign stock exchanges, brokers and
issuers, which may make it difficult to enforce contractual obligations.
Clearance and Settlement Risk
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in clearance and settlement could
result in temporary periods when assets of the funds are uninvested and no
return is earned. The inability of the funds to make intended security purchases
due to clearance and settlement problems could cause the funds to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to clearance and settlement problems could result either in
losses to the funds due to subsequent declines in the value of the portfolio
security or, if the fund has entered into a contract to sell the security,
liability to the purchaser.
Ownership Risk
Evidence of securities ownership may be uncertain in many foreign countries. As
a result, there is a risk that a fund's trade details could be incorrectly or
fraudulently entered at the time of the transaction, resulting in a loss to the
fund.
Investing in Emerging Market Countries
Strategic Allocation: Moderate and Strategic Allocation: Aggressive may invest a
minority 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 advisor to be
developing or emerging countries. Currently, the countries not included in this
category for the funds are the United States, Canada, Japan, the United Kingdom,
Germany, Austria, France, Hong Kong, Italy, Ireland, Luxembourg, Singapore,
Spain, Belgium, the Netherlands, Portugal, Switzerland, Sweden, Finland, Norway,
Denmark, Australia and New Zealand. In addition, as used in this Statement of
Additional Information, "securities of issuers in emerging market countries"
means (i) securities of issuers, for which the principal securities trading
market is an emerging market country or (ii) securities of issuers having their
principal place of business or principal office in an emerging market country.
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 generally
are 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 economies. 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 or 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 relatively 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.
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 that 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. As with other fixed-income securities,
when interest rates rise, the value of a mortgage-related security generally
will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. government, as in the case of securities guaranteed
by the Government National Mortgage Association (GNMA), or guaranteed by
agencies or instrumentalities of the U.S. government, as 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 also may 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:
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; and
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
Each fund may purchase and sell foreign currency on a spot (i.e., cash) basis
and may engage in forward currency contracts, currency options and futures
transactions for hedging or any other lawful purpose. See Derivative Securities,
page 10.
The funds expect to use forward contracts under two circumstances:
(1) When a fund's managers wish to lock in the U.S. dollar price of a security
when the 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 a fund's managers believe the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar, the fund would be
able to enter into a forward contract to sell foreign currency for a fixed
U.S. dollar amount approximating the value of some or all of its portfolio
securities either denominated in, or whose value is tied to, such foreign
currency.
In the first circumstance, when a fund enters into a trade for the purchase or
sale of a security denominated in a foreign currency, it may be desirable to
establish (lock in) the U.S. dollar cost or proceeds. By entering into forward
contracts in U.S. dollars for the purchase or sale of a foreign currency
involved in an underlying security transaction, the 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 a fund's managers believe the currency of a
particular country may suffer a substantial decline relative to the U.S. dollar,
the fund could enter into a foreign contract to sell for a fixed dollar amount
the amount in foreign currencies approximating the value of some or all of its
portfolio securities either denominated in, or whose value is tied to, such
foreign currency. The fund will segregate on its records cash or securities in
an amount sufficient to cover its obligations under the contract.
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible because the future values of
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 short-term hedging strategy
is highly uncertain. The funds' managers do not intend to enter into such
contracts on a regular basis. Normally, consideration of the prospect for
currency parities will be incorporated into the long-term investment decisions
made with respect to overall diversification strategies. However, the funds'
managers believe it is important to have flexibility to enter into such forward
contracts when they determine that a fund's best interests may be served.
At the maturity of the forward contract, the fund may either sell the portfolio
security and 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.
Convertible Debt Securities
A convertible debt security is a fixed-income security that offers the potential
for capital appreciation through a conversion feature that enables the holder to
convert the fixed-income security into a stated number of shares of common
stock. As fixed-income securities, convertible debt securities provide a stable
stream of income, with generally higher yields than common stocks. Convertible
debt securities offer the potential to benefit from increases in the market
price of the underlying common stock, however, they generally offer lower yields
than nonconvertible securities of similar quality. Of course, as with all
fixed-income securities, there can be no assurance of current income because the
issuers of the convertible debt securities may default on their obligations. In
addition, there can be no assurance of capital appreciation because the value of
the underlying common stock will fluctuate.
Convertible debt securities generally are subordinated to other similar but
nonconvertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar nonconvertible securities.
Unlike a convertible security that is a single security, a synthetic convertible
security is comprised of two distinct securities that together resemble
convertible securities in certain respects. Synthetic convertible securities are
created by combining nonconvertible bonds or preferred stocks with warrants or
stock call options. The options that will form elements of synthetic convertible
securities will be listed on a securities exchange or NASDAQ. The two components
of a synthetic convertible security, which will be issued with respect to the
same entity, generally are not offered as a unit, and may be purchased and sold
by the fund at different times. Synthetic convertible securities differ from
convertible securities in certain respects. Each component of a synthetic
convertible security has a separate market value and responds differently to
market fluctuations. Investing in a synthetic convertible security involves the
risk normally found in holding the securities comprising the synthetic
convertible security.
Each fund will limit its holdings of convertible debt securities to those that,
at the time of purchase, are rated at least B- by S&P or B3 by Moody's, or, if
not rated by S&P or Moody's, are of equivalent investment quality as determined
by the funds' managers. 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.
Short Sales
A fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire securities equivalent in kind and amount to the
securities being sold short.
In a short sale, the seller does not immediately deliver the securities sold and
is said to have a short position in those securities until delivery occurs. To
make delivery to the purchaser, the executing broker borrows the securities
being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. While the short sale is open, the fund will
maintain in a segregated custodial account an amount of securities convertible
into, or exchangeable for, such equivalent securities at no additional cost.
These securities would constitute the fund's long position.
A fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. There will be
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.
Portfolio Lending
In order to realize additional income, a fund may lend its portfolio securities.
Such loans may not exceed one-third of the fund's total assets valued at market
except
o through the purchase of debt securities in accordance with its investment
objective, policies and limitations, or
o by engaging in repurchase agreements with respect to portfolio securities.
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 described more accurately as
index/structured securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators (reference indices).
Some derivatives, such as mortgage-related and other asset-backed securities,
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices or currency exchange rates and for cash management purposes as a low-cost
method of gaining exposure to a particular securities market without investing
directly in those securities.
No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the fund managers anticipate;
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 advisor's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The advisor will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the board will
review the advisor's policy for investments in the derivative securities
annually.
Investment In Companies with Limited Operating Histories
The funds may invest a portion of their assets in the securities of issuers with
limited operating histories. The managers consider an issuer to have a limited
operating history if that issuer has a record of less than three years of
continuous operation. The managers will consider periods of capital formation,
incubation, consolidations, and research and development in determining whether
a particular issuer has a record of three years of continuous operation.
Investments in securities of issuers with limited operating histories may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating histories and financial
information upon which the managers may base their investment decision on behalf
of the funds. In addition, financial and other information regarding such
issuers, when available, may be incomplete or inaccurate.
Repurchase Agreements
Each fund may invest in repurchase agreements when they present an attractive
short-term return on cash that is not otherwise committed to the purchase of
securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time a fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to purchase it on a specified
date in the future at an agreed-upon price. The repurchase price reflects an
agreed-upon interest rate during the time the fund's money is invested in the
security.
Because the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued by
the U.S. government and its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy by the funds' advisor.
No fund will invest more than 15% of its assets in repurchase agreements
maturing in more than seven days and other illiquid securities.
Variable- and Floating-Rate Obligations
Variable- and floating-rate demand obligations (VRDOs and FRDOs) carry rights
that permit holders to demand payment of the unpaid principal plus accrued
interest, from the issuers or from financial intermediaries. Floating-rate
securities, or floaters, have interest rates that change whenever there is a
change in a designated base rate; variable-rate instruments provide for a
specified, periodic adjustment in the interest rate, which typically is based on
an index. These rate formulas are designed to result in a market value for the
VRDO or FRDO that approximates par value.
Obligations with Term Puts Attached
Fixed-rate bonds subject to third-party puts and participation interests in such
bonds held by a bank in trust or otherwise have tender options or demand
features that permit the funds to tender (or put) their bonds to an institution
at periodic intervals and to receive the principal amount thereof.
The managers expect the funds will pay more for securities with puts attached
than for securities without these liquidity features.
Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put, puts normally will be determined to have a value of zero,
regardless of whether any direct or indirect consideration is paid. Accordingly,
puts as separate securities are not expected to affect the funds' weighted
average maturities. When a fund has paid for a put, the cost will be reflected
as unrealized depreciation on the underlying security for the period the put is
held. Any gain on the sale of the underlying security will be reduced by the
cost of the put.
There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when (or if) a fund attempts to exercise the put. To
minimize such risks, the funds will purchase obligations with puts attached only
from sellers deemed creditworthy by the fund managers under the direction of the
Board of Directors.
When-Issued and Forward Commitment Agreements
The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Market rates of interest on debt securities at the time of
delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of that security may decline prior to delivery,
which could result in a loss to the fund. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.
In purchasing securities on a when-issued or forward commitment basis, a fund
will establish and maintain until the settlement date a segregated account
consisting of cash, cash equivalents or other appropriate liquid securities in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, the fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.
Inverse Floaters
An inverse floater is a type of derivative security that bears an interest rate
that moves inversely to market interest rates. As market interest rates rise,
the interest rate on inverse floaters goes down, and vice versa. Generally, this
is accomplished by expressing the interest rate on the inverse floater as an
above-market fixed rate of interest, reduced by an amount determined by
reference to a market-based or bond-specific floating interest rate (as well as
by any fees associated with administering the inverse floater program).
Inverse floaters may be issued in conjunction with an equal amount of Dutch
Auction floating-rate bonds (floaters), or a market-based index may be used to
set the interest rate on these securities. A Dutch Auction is an auction system
in which the price of the security is gradually lowered until it meets a
responsive bid and is sold. Floaters and inverse floaters may be brought to
market (1) by a broker-dealer who purchases fixed-rate bonds and places them in
a trust; or (2) by an issuer seeking to reduce interest expenses by using a
floater/inverse floater structure in lieu of fixed-rate bonds.
In the case of a broker-dealer structured offering (where underlying fixed-rate
bonds have been placed in a trust), distributions from the underlying bonds are
allocated to floater and inverse floater holders in the following manner:
(i) Floater holders receive interest based on rates set at a six-month interval
or at a Dutch Auction, which is typically held every 28 to 35 days. Current
and prospective floater holders bid the minimum interest rate that they are
willing to accept on the floaters, and the interest rate is set just high
enough to ensure that all of the floaters are sold.
(ii) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.
Procedures for determining the interest payment on floaters and inverse floaters
brought to market directly by the issuer are comparable, although the interest
paid on the inverse floaters is based on a presumed coupon rate that would have
been required to bring fixed-rate bonds to market at the time the floaters and
inverse floaters were issued.
Where inverse floaters are issued in conjunction with floaters, inverse floater
holders may be given the right to acquire the underlying security (or to create
a fixed-rate bond) by calling an equal amount of corresponding floaters. The
underlying security may then be held or sold. However, typically, there are time
constraints and other limitations associated with any right to combine interests
and claim the underlying security.
Floater holders subject to a Dutch Auction procedure generally do not have the
right to put back their interests to the issuer or to a third party. If a Dutch
Auction fails, the floater holder may be required to hold its position until the
underlying bond matures, during which time interest on the floater is capped at
a predetermined rate.
The secondary market for floaters and inverse floaters may be limited. The
market value of inverse floaters tends to be significantly more volatile than
the market value of fixed-rate bonds. The interest rates on inverse floaters may
be significantly reduced, even to zero, if interest rates rise.
Other Investment Companies
Each of the funds may invest up to 10% of its total assets in other mutual
funds, including those managed by the advisor, provided that the investment is
consistent with the fund's investment policies and restrictions. Under the
Investment Company Act, each fund's investment in such securities, subject to
certain exceptions, currently is limited to (a) 3% of the total voting stock of
any one investment company, (b) 5% of the fund's total assets with respect to
any one investment company; and (c) 10% of the fund's total assets in the
aggregate. Such purchases will be made in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the customary
brokers' commissions. As a shareholder of another investment company, a fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the management fee that each fund bears directly in connection
with its own operations.
Futures and Options
Each fund may enter into futures contracts, options or options on futures
contracts. Generally, futures transactions will be used to
o protect against a decline in market value of the funds' securities (taking a
short futures position), or
o protect against the risk of an increase in market value for securities in
which the fund generally invests at a time when the fund is not fully
invested (taking a long futures position), or
o provide a temporary substitute for the purchase of an individual security
that may not be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and
writing calls, hedge a fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure. Although other techniques may be used to control a
fund's exposure to market fluctuations, the use of futures contracts may be a
more effective means of hedging this exposure. While a fund pays brokerage
commissions in connection with opening and closing out futures positions, these
costs are lower than the transaction costs incurred in the purchase and sale of
the underlying securities.
For example, the sale of a future by a fund means the fund becomes
obligated to deliver the security (or securities, in the case of an index
future) at a specified price on a specified date. The purchase of a future means
the fund becomes obligated to buy the security (or securities) at a specified
price on a specified date. Futures contracts provide for the sale by one party
and purchase by another party of a specific security at a specified future time
and price. The fund managers may engage in futures and options transactions
based on securities indices that are consistent with the funds' investment
objectives. Examples of indices that may be used include the Bond Buyer Index of
Municipal Bonds for the fixed-income portion of the funds, or the S&P 500 Index
for the equity portion of the funds. The managers also may engage in futures and
options transactions based on specific securities, such as U.S. Treasury bonds
or notes. Futures contracts are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission (CFTC), a U.S. government agency.
Index futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).
Unlike when the fund purchases or sells a bond, no price is paid or received by
the fund upon the purchase or sale of the future. Initially, the fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute a margin
transaction for purposes of the funds' investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin account generally is not
income-producing. Subsequent payments to and from the broker, called variation
margin, will be made on a daily basis as the price of the underlying debt
securities or index fluctuates, making the future more or less valuable, a
process known as marking the contract to market. Changes in variation margin are
recorded by the fund as unrealized gains or losses. At any time prior to
expiration of the future, the fund may elect to close the position by taking an
opposite position that will operate to terminate its position in the future. A
final determination of variation margin is then made; additional cash is
required to be paid by or released to the fund and the fund realizes a loss or
gain.
Risks Related to Futures and Options Transactions
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the fund managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower a fund's return.
A fund could suffer losses if it is unable to close out its position because of
an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the fund managers consider it appropriate or desirable to
do so. In the event of adverse price movements, a fund would be required to
continue making daily cash payments to maintain its required margin. If the fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the fund managers would not otherwise elect
to do so. In addition, a fund may be required to deliver or take delivery of
instruments underlying futures contracts it holds. The fund managers will seek
to minimize these risks by limiting the contracts entered into on behalf of the
funds to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.
A fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Options on Futures
By purchasing an option on a futures contract, a fund obtains the right, but not
the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the funds may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the funds would give up some
ability to participate in a price increase on the underlying security. If a fund
were to engage in options transactions, it would own the futures contract at the
time a call were written and would keep the contract open until the obligation
to deliver it pursuant to the call expired.
Restrictions on the Use of Futures Contracts and Options
Each fund may enter into futures contracts, options or options on futures
contracts.
Under the Commodity Exchange Act, a fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the fund's total assets. To the extent required by law, each
fund will segregate cash or securities on its records in an amount sufficient to
cover its obligations under the futures contracts and options.
Restricted and Illiquid Securities
The funds may, from time to time, purchase restricted or illiquid securities,
including Rule 144A securities, when they present attractive investment
opportunities that otherwise meet the funds' criteria for selection. Rule 144A
securities are 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 (SEC) has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. 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 fund
managers. The board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Because 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 or other
security that is illiquid. In such an event, the fund managers will consider
appropriate remedies to minimize the effect on such fund's liquidity.
Zero-Coupon, Step-Coupon and Pay-In-Kind Securities
Zero-coupon, step-coupon and pay-in-kind securities are debt securities that do
not make regular cash interest payments. Zero-coupon and step-coupon securities
are sold at a deep discount to their face value. Pay-in-kind securities pay
interest through the issuance of additional securities. Because such securities
do not pay current cash income, the price of these securities can be volatile
when interest rates fluctuate. While these securities do not pay current cash
income, federal income tax law requires the holders of zero-coupon, step-coupon
and pay-in-kind securities to include in income each year the portion of the
original issue discount and other noncash income on such securities accrued
during that year. In order to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code and avoid certain excise tax,
the funds may be required to dispose of other portfolio securities, which may
occur in periods of adverse market prices, in order to generate cash to meet
these distribution requirements.
Loan Interests
Loan interests are interests in amounts owed by a corporate, governmental or
other borrower to lenders or lending syndicates. Loan interests purchased by the
funds may have a maturity of any number of days or years, and may be acquired
from U.S. and foreign banks, insurance companies, finance companies or other
financial institutions that have made loans or are members of a lending
syndicate or from the holders of loan interests. Loan interests involve the risk
of loss in case of default or bankruptcy of the borrower and, in the case of
participation interests, involve a risk of insolvency of the agent lending bank
or other financial intermediary. Loan interests are not rated by any nationally
recognized securities rating organization and are, at present, not readily
marketable and may be subject to contractual restrictions on resale.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the restrictions described below apply at the time a fund enters into
a transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a fund's net assets will not be considered
in determining whether it has complied with its investment restrictions.
Fundamental Investment Policies
The funds' fundamental investment restrictions are set forth below. These
investment restrictions may not be changed without approval of a majority of the
outstanding votes of shareholders of a fund, as determined in accordance with
the Investment Company Act.
Subject Policy
Senior Securities A fund may not issue senior securities, except as permitted
under the Investment Company Act. Borrowing A fund may not
borrow money, except for temporary or emergency purposes
(not for leveraging or investment) in an amount not
exceeding 331/3% of the fund's total assets.
Lending A fund may not lend any security or make any other loan if, as
a result, more than 331/3% of the fund's total assets would be
lent to other parties, except (i) through the purchase of debt
securities in accordance with its investment objective,
policies and limitations or (ii) by engaging in repurchase
agreements with respect to portfolio securities.
Real Estate A fund may not purchase or sell real estate unless
acquired as a result of ownership of securities or other
instruments. This policy shall not prevent a fund from
investing in securities or other instruments backed by real
estate or securities of companies that deal in real estate or
are engaged in the real estate business.
Concentration A fund may not concentrate its investments in securities of
issuers in a particular industry (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities).
Underwriting A fund may not act as an underwriter of securities issued by
others, except to the extent that the fund may be considered
an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities.
Commodities A fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other
instruments, provided that this limitation shall not prohibit
the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments
backed by physical commodities.
Control A fund may not invest for purposes of exercising control over
management.
For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding interfund
lending. Under the terms of the exemptive order, the funds may borrow money from
or lend money to other funds, advised by ACIM, that permit such transactions.
All such transactions will be subject to the limits set above for borrowing and
lending. The funds will borrow money through the program only when the costs are
equal to or lower than the cost of short-term bank loans. Interfund loans and
borrowing normally extend only overnight, but can have a maximum duration of
seven days. The funds will lend through the program only when the returns are
higher than those available for other short-term instruments (such as repurchase
agreements). The funds may have to borrow from a bank at a higher interest rate
if an interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or additional
borrowing charges.
For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, and electric and telephone will each be
considered a separate industry, and (d) personal credit and business credit
businesses will be considered separate industries.
Nonfundamental Investment Policies
In addition, the funds are subject to the following investment restrictions that
are not fundamental and may be changed by the Board of Directors.
Subject Policy
Leveraging A fund may not purchase additional investment securities at
any time during which outstanding borrowings exceed 5% of
the total assets of the fund.
Liquidity A fund may not purchase any security or enter into a
repurchase agreement if, as a result, more than 15% of its
net assets would be invested in illiquid securities.
Illiquid securities include repurchase agreements not
entitling the holder to payment of principal and interest
within seven days, and securities that are illiquid by
virtue of legal or contractual restrictions on resale or the
absence of a readily available market.
Short Sales A fund may not sell securities short, unless it owns
or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed
to constitute selling securities short.
Margin A fund may not purchase securities on margin, except to
obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on
margin.
Futures & Options A fund may enter into futures contracts, and write
and buy put and call options relating to futures contracts.
A fund may not, however, enter into leveraged futures
transactions if it would be possible for the fund to lose
more money than it invested.
Issuers with A fund may invest up to 5% of its assets in the securities
Limited Operating of issuers with limited operating histories. An issuer is
Histories considered to have a limited operating history if that
issuer has a record of less than three years of continuous
operation. Periods of capital formation, incubation,
consolidations, and research and development may be
considered in determining whether a particular issuer has a
record of three years of continuous operation.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the funds of securities issued by insurance companies,
broker-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. Neither the SEC nor any other federal or state
government participates in or supervises the management of the funds or their
investment practices or policies.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial Highlights
tables in the Prospectus.
With respect to each fund, the managers will purchase and sell securities
without regard to the length of time the security has been held. Accordingly,
each fund's rate of portfolio turnover may be substantial.
The fund managers intend to purchase a given security whenever they believe it
will contribute to the stated objective of the fund. In order to achieve each
fund's investment objective, the fund managers may sell a given security, no
matter for how long or for 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 managers
believe that the security is not fulfilling its purpose, either because, among
other things, it did not live up to the managers' expectations, or because it
may be replaced with another security holding greater promise, or because it has
reached its optimum potential, or because of a change in the circumstances of a
particular company or industry or in general economic conditions, or because of
some combination of such reasons.
When a general decline in security prices is anticipated, 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.
Because investment decisions are based on the anticipated contribution of the
security in question to a fund's objectives, the managers believe the rate of
portfolio turnover is irrelevant when they believe a change is in order to
achieve those objectives. As a result, a fund's annual portfolio turnover rate
cannot be anticipated and may be higher than that of other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost the funds pay directly. Portfolio
turnover also may affect the character of capital gains realized and distributed
by the fund, if any, because short-term capital gains are taxable as ordinary
income. This disclosure regarding portfolio turnover is a statement of
fundamental policy and may be changed only by a vote of the shareholders.
Because the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of accomplishing any
particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.
MANAGEMENT
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired the advisor to do so.
Two-thirds of the directors are independent of the funds' advisor; that is, they
are not employed by and have no financial interest in the advisor.
The individuals listed in the following table whose names are marked by an
asterisk (*) are interested persons of the funds (as defined in the Investment
Company Act) by virtue of, among other considerations, their affiliation with
either the funds; their advisor, American Century Investment Management, Inc.
(ACIM); the funds' agent for transfer and administrative services, American
Century Services Corporation (ACSC); the parent corporation, American Century
Companies, Inc. (ACC); ACC's subsidiaries (including ACIM and ACSC); the funds'
distribution agent and co-administrator, Funds Distributor, Inc. (FDI); the
funds' other distribution agent, American Century Investment Services, Inc.
(ACIS) or other funds advised by the advisor. Each director listed below serves
as a director of six registered investment companies in the American Century
family of funds, which are also advised by the advisor.
<TABLE>
<CAPTION>
Name (Age) Position(s) Held With Funds Principal Occupation(s) during Past five Years
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<S> <C> <C>
James E. Stowers, Jr.* (76) Director, Chairman, Director and controlling shareholder, ACC,
4500 Main St. Chairman of the Board Chairman, ACIM, ACSC, ACIS and six other ACC
Kansas City, MO 64111 subsidiaries
Director, ACIM, ACSC, ACIS and 10 other ACC subsidiaries(1)
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James E. Stowers III* (41) Director Chief Executive Officer and Director, ACC
4500 Main St. Chief Executive Officer, ACIM, ACSC, ACIS and six other
Kansas City, MO 64111 ACC subsidiaries
Director, ACIM, ACSC, ACIS and 11 other ACC subsidiaries(2)
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Thomas A. Brown (60) Director Director of Plains States Development, Applied
4500 Main St. Industrial Technologies, Inc., a corporation engaged Kansas
City, MO 64111 in the sale of bearings and power transmission products
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Robert W. Doering, M.D. (67) Director Retired, formerly a general surgeon
4500 Main St.
Kansas City, MO 64111
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Andrea C. Hall, Ph.D. (55) Director Senior Vice President and Director, Midwest
4500 Main St. Research Institute
Kansas City, MO 64111
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D.D. (Del) Hock (65) Director Retired, formerly Chairman, Public Service Company
4500 Main St. of Colorado; Director, Service Tech, Inc., Hathaway Kansas
City, MO 64111 Corporation, and J.D. Edwards & Company
- ------------------------------------------------------------------------------------------------------------------------------------
Donald H. Pratt (62) Director, Chairman and Director, Butler Manufacturing
4500 Main St. Vice Chairman of the Board Company
Kansas City, MO 64111 Director, Atlas-Copco North America Inc.
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M. Jeannine Strandjord (54) Director Senior Vice President, Long Distance Finance, Sprint
4500 Main St. Corporation; Director, DST Systems, Inc.
Kansas City, MO 64111
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</TABLE>
(1)Father of James E. Stowers III
(2)Son of James E. Stowers, Jr.
Committees
The Board has four committees to oversee specific functions of the funds'
operations. Information about these committees appears in the table below. The
Director first named serves as chairman of the committee.
<TABLE>
<CAPTION>
Committee Members Function of Committee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Executive James E. Stowers, Jr. The Executive Committee performs the functions of the Board of
James E. Stowers III Directors between Board meetings, subject to the limitations on its
Donald H. Pratt power set out in the Maryland General Corporaton Law, and except
for matters required by the Investment Company Act to be acted
upon by the whole Board.
- ------------------------------------------------------------------------------------------------------------------------------------
Compliance Thomas A. Brown The Compliance Committee reviews the results of the funds'
Donald H. Pratt compliance testing program, reviews quarterly reports from the
Andrea C. Hall, Ph.D advisor to the Board regarding various compliance
matters and monitors the implementation of the funds' Code of
Ethics, including any violations.
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Audit M. Jeannine Strandjord The Audit Committee recommends the engagement of the funds'
Robert W. Doering, M.D. independent auditors and oversees its activities. The Committee
D.D. (Del) Hock receives reports from the advisor's Internal Audit Department,
which is accountable to the Committee. The Committee also
receives reporting about compliance matters affecting the funds.
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Nominating Donald H. Pratt The Nominating Committee primarily considers and recommends
Andrea C. Hall, PhD individuals for nomination as directors. The names of potential
D.D. (Del) Hock 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.
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</TABLE>
Compensation of Directors
The directors also serve as directors for five American Century investment
companies other than the corporation. Each director who is not an interested
person as defined in the Investment Company Act receives compensation for
service as a member of the board of all six such companies based on a schedule
that takes into account the number of meetings attended and the assets of the
funds for which the meetings are held. These fees and expenses are divided among
the six investment companies based, in part, upon their relative net assets.
Under the terms of the management agreement with the advisor, the funds are
responsible for paying such fees and expenses.
The following table shows the aggregate compensation paid by the corporation for
the periods indicated and by the six investment companies served by the board to
each director who is not an interested person as defined in the Investment
Company Act.
Aggregate Director Compensation for Fiscal Year Ended November 30, 1999
Total Compensation Total Compensation from the
Name of Director from the Funds (1) American Century Family
of Funds (2)
Thomas A. Brown $738 $59,590
Robert W. Doering, M.D. $721 $55,750
Andrea C. Hall, Ph.D. $727 $56,250
D.D. (Del) Hock $700 $56,000
Donald H. Pratt $753 $57,497
Lloyd T. Silver, Jr.(3) $724 $56,000
M. Jeannine Strandjord $744 $58,000
1 Includes compensation paid to the directors during the fiscal year ended
November 30, 1999, and also includes amounts deferred at the election of the
directors under the Amended and Restated American Century Mutual Funds
Deferred Compensation Plan for Non-Interested Directors. The total amount of
deferred compensation included in the preceding table is as follows: Mr.
Brown, $210; Dr. Hall, $317; Mr. Hock, $435; Mr. Pratt, $218; Mr. Silver,
$372 and Ms. Strandjord, $595.
2 Includes compensation paid by the six investment company members of the
American Century family of funds served by this Board.
3 Mr. Silver retired from the board on March 4, 2000.
The funds have adopted the Amended and Restated American Century Mutual Funds
Deferred Compensation Plan for Non-Interested Directors. Under the plan, the
independent directors may defer receipt of all or any part of the fees to be
paid to them for serving as directors of the funds.
All deferred fees are credited to an account established in the name of the
directors. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the director. The account balance continues
to fluctuate in accordance with the performance of the selected fund or funds
until final payment of all amounts is credited to the account. Directors are
allowed to change their designation of mutual funds from time to time.
No deferred fees are payable until such time as a director resigns, retires or
otherwise ceases to be a member of the Board of Directors. Directors may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a director, all remaining deferred fee account balances are paid to
the director's beneficiary or, if none, to the director's estate.
The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of directors to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.
No deferred fees were paid to any director under the plan during the fiscal year
ended November 30, 1999.
OFFICERS
Background information about the officers of the funds is provided in the table
below. All persons named as officers of the funds also serve in similar
capacities for the 12 other investment companies advised by ACIM. Not all
officers of the funds are listed; only those officers with policy-making
functions for the funds are listed. No officer is compensated for his or her
service as an officer of the funds. The individuals listed in the following
table are interested persons of the funds (as defined in the Investment Company
Act) by virtue of, among other considerations, their affiliation with either the
funds, ACC, ACC's subsidiaries (including ACIM and ACSC), or the funds'
distributors (ACIS and FDI), as specified in the following table.
<TABLE>
<CAPTION>
Name (Age) Positions Held With Principal Occupation(s)
Address Funds During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
George A. Rio (45) President Executive Vice President and Director of Client Services, FDI
60 State St. (March 1998 to present)
Boston, MA 02109 Senior Vice President and Senior Key Account Manager, Putnam
Mutual Funds (June 1995 to March 1998)
Director Business Development, First Data Corporation
(May 1994 to June 1995)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (35) Vice President Vice President and Associate General Counsel, FDI (since July
60 State St. 1996)
Boston, MA 02109 Assistant Counsel, Forum Financial Group (April 1994 to July 1996)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary A. Nelson (35) Vice President Vice President and Manager of Treasury Services and
60 State St. Administration, FDI (1994 to present)
Boston, MA 02109
- ------------------------------------------------------------------------------------------------------------------------------------
Maryanne Roepke, CPA (44) Vice President Senior Vice President and Treasurer, ACSC
4500 Main St. and Treasurer
Kansas City, MO 64111
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David C. Tucker (41) Vice President Senior Vice President, ACIM, ACSC, ACIS and three other ACC
4500 Main St. subsidiaries (June 1998 to present)
Kansas City, MO 64111 General Counsel, ACC and nine ACC subsidiaries (June 1998 to present)
Consultant to mutual fund industry (May 1997 to April 1998)
Vice President and General Counsel, Janus Companies
(1990 to 1997)
- ------------------------------------------------------------------------------------------------------------------------------------
Paul J. Carrigan Jr.(50) Secretary Secretary, ACC (February 1998 to present)
4500 Main St. Director of Legal Operations (February 1996 to present)
Kansas City, MO 64111 Board Communications Manager, The Benham Company
(April 1994 to January 1996)
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C. Jean Wade (36) Controller Vice President and Controller-Fund Accounting, ACSC
4500 Main St.
Kansas City, MO 64111
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Merele May (37) Controller Vice President and Controller-Fund Accounting, ACSC
4500 Main St.
Kansas City, MO 64111
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Robert J. Leach (32) Controller Vice President and Controller-Fund Accounting, ACSC
4500 Main St.
Kansas City, MO 64111
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Jon Zindel (32) Tax Officer Vice President of Taxation, ACSC (1996 to present)
4500 Main St. Vice President, ACIM and 15 other ACC susidiaries (April 1999 to
Kansas City, MO 64111 present
Treasurer, American Century Ventures, Inc. (December 1999 to present)
Tax Manager, Price Waterhouse LLP (1989 to 1996)
</TABLE>
Code of Ethics
The funds, their investment advisor and principal underwriters have adopted
codes of ethics under Rule 17j-1 of the Investment Company Act. The codes of
ethics of the funds, their investment advisor and American Century Investment
Services, Inc., one of the funds' principal underwriters, permit access persons
(personnel who have access to portfolio transaction information) to invest in
securities, including securities that may be purchased or held by the funds,
provided that they first obtain approval from their appropriate compliance
department before making such investments. The code of ethics of FDI, the funds'
other principal underwriter, permits personnel subject to the code to invest in
publicly traded securities, without restrictions.
The Funds' Principal Shareholders
As of June 2, 2000, the following companies were the record owners of more than
5% of the outstanding shares of any class of a fund.
Percentage
of Shares
Fund Shareholder Outstanding
Strategic Allocation: Conservative info to come
Strategic Allocation: Moderate info to come
Strategic Allocation: Aggressive info to come
The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of any class of a fund's outstanding shares. As of June 2,
2000, the officers and directors of the funds, as a group, owned less than 1% of
any class of a fund's outstanding shares.
SERVICE PROVIDERS
The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds and is described below. ACIM
and ACSC are both wholly owned by ACC. James E. Stowers Jr., Chairman of ACC,
controls ACC by virtue of his ownership of a majority of its voting stock.
INVESTMENT ADVISOR
American Century Investment Management, Inc. serves as the investment advisor
for each of the funds. A description of the responsibilities of the advisor
appears in the Prospectus under the heading Management. For the services
provided to the funds, the advisor receives a monthly fee based on a percentage
of the average net assets of the fund.
For the services provided to the funds, the advisor receives a monthly fee based
on a percentage of the average net assets of the fund as follows:
Fund Class Percentage of Net Assets
Strategic Allocation: Conservative Investor 1.00% of first $1 billion
.90% $1 billion and over
Advisor .75% of first $1 billion
.65% $1 billion and over
Institutional .80% of first $1 billion
.70% $1 billion and over
Strategic Allocation: Moderate Investor 1.10% of first $1 billion
1.00% $1 billion and over
Advisor .85% of first $1 billion
.75% $1 billion and over
Institutional .90% of first $1 billion
.80% $1 billion and over
Strategic Allocation: Aggressive Investor 1.20% of first $1 billion
1.10% $1 billion and over
Advisor .95% of first $1 billion
.85% $1 billion and over
Institutional 1.00% of first $1 billion
.90% $1 billion and over
On the first business day of each month, the funds pay a management fee to the
advisor for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the fund by the
aggregate average daily closing value of a fund's net assets during the previous
month. This number is then multiplied by a fraction, the numerator of which is
the number of days in the previous month and the denominator of which is 365
(366 in leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by
(1) the funds' Board of Directors, or by the vote of a majority of outstanding
votes (as defined in the Investment Company Act) and
(2) (2) the vote of a majority of the directors of the funds who are not parties
to the agreement or interested persons of the advisor, cast in person at a
meeting called for the purpose of voting on 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 outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.
The management agreement states that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the advisor and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the funds and also for other
clients advised by the advisor. Investment decisions for the funds and other
clients are made with a view to achieving their respective investment objectives
after consideration of such factors as their current holdings, availability of
cash for investment and the size of their investment generally. A particular
security may be bought or sold for only one client or fund, or in different
amounts and at different times for more than one but less than all clients or
funds. In addition, purchases or sales of the same security may be made for two
or more clients or funds on the same date. Such transactions will be allocated
among clients in a manner believed by the advisor to be equitable to each. In
some cases this procedure could have an adverse effect on the price or amount of
the securities purchased or sold by a fund.
The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Directors
has approved the policy of the advisor with respect to the aggregation of
portfolio transactions. Where portfolio transactions have been aggregated, the
funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
Unified management fees incurred by each fund by class for the fiscal periods
ended November 30, 1999, 1998 and 1997, are indicated in the following table.
Unified Management Fees
Fund 1999 1998 1997
Strategic Allocation: Conservative
Investor $1,819,048 $1,702,193 $762,315
Advisor 52,077 42,903 30,490
Strategic Allocation: Moderate
Investor $3,445,446 $2,640,608 $1,498,878
Advisor 126,141 1,112,851 66,449
Strategic Allocation: Aggressive
Investor 1,983,696 $1,579,928 $1,011,207
Advisor 109,986 92,096 61,573
TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, serves as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software and personnel, for
the day-to-day administration of the funds and the advisor. The advisor pays
ACSC for these services.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the advisor.
Pursuant to a Sub-Administration Agreement with the advisor, Funds Distributor,
Inc. (FDI) serves as the co-Administrator for the funds. FDI is responsible for
(i) providing certain officers of the funds and (ii) reviewing and filing
marketing and sales literature on behalf of the funds. The fees and expenses of
FDI are paid by the advisor out of its unified fee.
DISTRIBUTOR
The funds' shares are distributed by FDI and ACIS, both registered
broker-dealers. FDI is a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. FDI's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109. ACIS is a wholly owned subsidiary of
ACC, and is located at 4500 Main Street, Kansas City, Missouri 64111. The
distributors are the principal underwriter of the funds' shares. The
distributors make a continuous, best-efforts underwriting of the funds' shares.
This means the distributors have no liability for unsold shares.
OTHER SERVICE PROVIDERS
Custodian Banks
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598,
and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves
as custodian of the assets of the funds. The custodians take no part in
determining the investment policies of the funds or in deciding which securities
are purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.
Independent AuditorS
Deloitte & Touche LLP is the independent auditor of the funds. The address of
Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri 64106. As
the independent auditor of the funds, Deloitte & Touche provides services
including (1) audit of the annual financial statements for each fund, (2)
assistance and consultation in connection with SEC filings, and (3) review of
the annual federal income tax return filed for each fund.
BROKERAGE ALLOCATION
THE EQUITY PORTION OF THE FUNDS
Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. The funds' policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. So long as that policy is
met, the advisor may take into consideration the factors discussed below when
selecting brokers.
The advisor receives statistical and other information and services, including
research, without cost from brokers and dealers. The advisor 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 advisor
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 services required to be performed by
the advisor. The advisor does not use brokers that provide such information and
services for the purpose of reducing the expense of providing required services
to the funds.
In the years ended November 30, 1999, 1998 and 1997, the brokerage
commissions of each fund were as follows:
Fund 1999 1998 1997
Strategic Allocation: Conservative $172,611 $198,409 $127,134
Strategic Allocation: Moderate 471,843 521,010 337,258
Strategic Allocation: Aggressive 303,115 359,809 254,195
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 research services provided by the broker. Research services
furnished by brokers through whom the funds effect securities transactions may
be used by the advisor in servicing all of its accounts, and not all such
services may be used by the advisor in managing the 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 advisor believe that the facilities, expert personnel and technological
systems of a broker often enable the funds to secure as good a net price by
dealing with a broker instead of a principal market maker, even after payment of
the compensation to the broker. The funds regularly place their over-the-counter
transactions with principal market makers, but also may deal on a brokerage
basis when utilizing electronic trading networks or as circumstances warrant.
The Fixed-Income Portion of the Funds
Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. In many transactions, the selection of the broker or dealer is
determined by the availability of the desired security and its offering price.
In other transactions, the selection of a broker or dealer is a function of the
selection of market and the negotiation of price, as well as the broker's
general execution and operational and financial capabilities in the type of
transaction involved. The advisor will seek to obtain prompt execution of orders
at the most favorable prices or yields. The advisor may choose to purchase and
sell portfolio securities to and from dealers who provide statistical and other
information and services, including research, to the funds and to the advisor.
Such information and services will be in addition to and not in lieu of the
services required to be performed by the advisor, and the expenses of the
advisor will not necessarily be reduced as a result of the receipt of such
supplemental information.
The funds generally purchase and sell debt securities through principal
transactions, meaning that the funds normally purchase securities directly from
the issuer or a primary market-maker acting as principal for the securities on a
net basis. The funds do not pay brokerage commissions on these transactions,
although the purchase price for debt securities usually includes an undisclosed
compensation. Purchases of securities from underwriters typically include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market-makers typically include a dealer's mark-up
(i.e., a spread between the bid and asked prices). During the fiscal years ended
November 30, 1997, 1998, and 1999, the funds did not pay any brokerage
commissions.
Information About Fund Shares
Each of the three funds named on the front of this Statement of Additional
Information is a series of shares issued by the corporation, and shares of each
fund have equal voting rights. In addition, each series (or fund) may be divided
into separate classes. See Multiple Class Structure, which follows. Additional
funds and classes may be added without a shareholder vote.
Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so investors holding more than 50% of the
corporation's (i.e., all funds') outstanding shares may be able to elect a Board
of Directors. The corporation undertakes dollar-based voting, meaning that the
number of votes a shareholder is entitled to is based upon the dollar amount of
the shareholder's investment. The election of directors is determined by the
votes received from all of the corporation's shareholders without regard to
whether a majority of shares of any one fund voted in favor of a particular
nominee or all nominees as a group.
The assets belonging to each series or class of shares are held separately by
the custodian and the shares of each series or class represent a beneficial
interest in the principal, earnings and profit (or losses) of investments and
other assets held for each series or class. Within their respective series or
class, all shares have equal redemption rights. Each share, when issued, is
fully paid and non-assessable.
In the event of complete liquidation or dissolution of the funds, shareholders
of each series or class of shares will be entitled to receive, pro rata, all of
the assets less the liabilities of that series or class.
Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
Multiple Class Structure
The corporation's Board of Directors has adopted a multiple class plan (the
Multiclass Plan) pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the funds may issue up to four classes of shares: an Investor Class, an
Institutional Class, a Service Class and an Advisor Class. Not all funds offer
all four classes.
The Investor Class is made available to investors directly without any load or
commission, for a single unified management fee. The Institutional, 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 advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower total management
fee. In addition to the management fee, however, the Advisor Class shares are
subject to a Master Distribution and Shareholder Services Plan (described
below). The plan has been adopted by the funds' Board of Directors and initial
shareholder in accordance with Rule 12b-1 adopted by the SEC under the
Investment Company Act.
Rule 12b-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Directors and approved by its shareholders. Pursuant to such
rule, the Board of Directors and initial shareholder of the funds' Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan, with respect to the Advisor Class (the Plan). The Plan is described below.
In adopting the Plan, the Board of Directors (including a majority of directors
who are not interested persons of the funds [as defined in the Investment
Company Act], hereafter referred to as the independent directors) determined
that there was a reasonable likelihood that the Plan would benefit the funds and
the shareholders of the affected class. Pursuant to Rule 12b-1, information with
respect to revenues and expenses under the Plan is presented to the Board of
Directors quarterly for its consideration in connection with its deliberations
as to the continuance of the Plan. Continuance of the Plan must be approved by
the Board of Directors (including a majority of the independent directors)
annually. The Plan may be amended by a vote of the Board of Directors (including
a majority of the independent directors), except that the Plan may not be
amended to materially increase the amount to be spent for distribution without
majority approval of the shareholders of the affected class. The Plan terminates
automatically in the event of an assignment and may be terminated upon a vote of
a majority of the independent directors or by vote of a majority of the
outstanding voting securities of the affected class.
All fees paid under the Plan will be made in accordance with Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers (NASD).
Master Distribution and Shareholder Services Plan
As described in the Prospectus, the funds' Advisor Class 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. The funds' distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the funds' shares and/or
the use of the funds' shares in various investment products or in connection
with various financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for shareholders in
the Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
advisor 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 below) and 0.25% of which is paid
for distribution services. During the fiscal year ended November 30, 1999, the
aggregate amount of fees paid under the Plan was:
Strategic Allocation: Conservative $34,718
Strategic Allocation: Moderate $74,201
Strategic Allocation: Aggressive $57,888
Payments may be made for a variety of shareholder services, including, but not
limited to,
a) receiving, aggregating and processing purchase, exchange and redemption
requests from beneficial owners (including contract owners of insurance
products that utilize the funds as underlying investment media) of shares
and placing purchase, exchange and redemption orders with the funds'
distributor;
b) providing shareholders with a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized instructions;
c) processing dividend payments from a fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations
and addresses;
d) providing and maintaining elective services such as check-writing and wire
transfer services;
e) acting as shareholder of record and nominee for beneficial owners;
f) maintaining account records for shareholders and/or other beneficial owners;
g) issuing confirmations of transactions;
h) providing subaccounting with respect to shares beneficially owned by
customers of third parties or providing the information to a fund as
necessary for such subaccounting;
i) preparing and forwarding shareholder communications from the funds (such as
proxies, shareholder reports, annual and semiannual financial statements and
dividend, distribution and tax notices) to shareholders and/or other
beneficial owners; and
j) providing other similar administrative and sub-transfer agency services.
Shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the funds.
During the fiscal year ended November 30, 1999, the amount of fees paid under
the Plan for shareholder services was:
Strategic Allocation: Conservative $17,359
Strategic Allocation: Moderate $37,100
Strategic Allocation: Aggressive $28,944
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 not limited to,
a) the payment of sales commissions, ongoing commissions and other payments to
brokers, dealers, financial institutions or others who sell Advisor Class
shares pursuant to selling agreements;
b) compensation to registered representatives or other employees of the
distributors who engage in or support distribution of the funds' Advisor
Class shares;
c) compensation to, and expenses (including overhead and telephone expenses)
of, the distributors;
d) the printing of prospectuses, statements of additional information and
reports for other-than-existing shareholders;
e) the preparation, printing and distribution of sales literature and
advertising materials provided to the funds' shareholders and prospective
shareholders;
f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;
g) the providing of facilities to answer questions from prospective investors
about fund shares;
h) complying with federal and state securities laws pertaining to the sale of
fund shares;
i) assisting investors in completing application forms and selecting dividend
and other account options;
j) the providing of other reasonable assistance in connection with the
distribution of fund shares;
k) the organizing and conducting of sales seminars and payments in the form of
transactional and compensation or promotional incentives;
l) profit on the foregoing;
m) the payment of "service fees" for the provision of personal, continuing
services to investors, as contemplated by the Rules of Fair Practice of the
NASD; and
n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of the agreement between
the corporation and the funds' distributor and in accordance with Rule 12b-1
of the Investment Company Act.
During the fiscal year ended November 30, 1999, the amount of fees paid under
the Plan for distribution services was:
Strategic Allocation: Conservative $17,359
Strategic Allocation: Moderate $37,100
Strategic Allocation: Aggressive $28,944
BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in the
funds' Prospectus and Your Guide to American Century. The Prospectus and guide
are available to investors without charge and may be obtained by calling us.
VALUATION OF THE FUNDS' SECURITIES
Each fund's NAV, is calculated as of the close of business of the New York Stock
Exchange (the Exchange) each day the Exchange is open for business. The Exchange
usually closes at 4 p.m. Eastern time. The Exchange typically observes the
following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Although the funds expect the same holidays to be observed in the
future, the Exchange may modify its holiday schedule at any time.
Each fund's NAV is calculated by adding the value of all portfolio securities
and other assets, deducting liabilities and dividing the result by the number of
shares outstanding. Expenses and interest earned on portfolio securities are
accrued daily.
The portfolio securities of the 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 generally are valued at the preceding closing values of
such securities on the exchange where primarily traded. If no sale is reported,
or if local convention or regulation so provides, the mean of the latest bid and
asked prices is used. Depending on local convention or regulation, securities
traded over-the-counter are priced at the mean of the latest bid and asked
prices, or at the last sale price. When market quotations are not readily
available, securities and other assets are valued at fair value as determined 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 translated 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 that 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 and on some electronic trading networks on Saturdays or on other
days when the New York Stock Exchange is not open and on which the funds' net
asset values are 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 the funds' portfolio may be
affected on days when shares of the fund may not be purchased or redeemed.
TAXES
Federal Income Taxes
Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal income taxes to the extent that
it distributes substantially all of its net investment income and net realized
capital gains (if any) to shareholders. If a fund fails to qualify as a
regulated investment company, it will be liable for taxes, significantly
reducing its distributions to shareholders and eliminating shareholders' ability
to treat distributions of the funds in the manner they were realized by the
funds.
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. The dividends from net income may qualify for the 70%
dividends-received deduction for corporations to the extent that the fund held
shares receiving the dividend for more than 45 days.
Distributions from gains on assets held longer than 12 months are taxable as
long-term gains regardless of the length of time you have held the shares.
However, you should note that any loss realized upon the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any distributions of long-term capital gains to you with
respect to such shares.
Dividends and interest received by a fund on foreign securities may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Foreign countries generally do not impose taxes on capital gains with
respect to investments by non-resident investors. The foreign taxes paid by a
fund will reduce its dividends.
If more than 50% of the value of a fund's total assets at the end of its fiscal
year consists of securities of foreign corporations, the fund may qualify for
and make an election with the Internal Revenue Service with respect to such
fiscal year so that fund shareholders may be able to claim a foreign tax credit
in lieu of a deduction for foreign income taxes paid by the fund. If such an
election is made, the foreign taxes paid by the fund will be treated as income
received by you. In order for you to utilize the foreign tax credit, you must
have held your shares for 16 days or more during the 30-day period, beginning 15
days prior to the ex-dividend date for the mutual fund shares. The mutual fund
must meet a similar holding period requirement with respect to foreign
securities to which a dividend is attributable. Any portion of the foreign tax
credit that is ineligible as a result of the fund not meeting the holding period
requirement will be deducted in computing net investment income.
If a fund purchases the securities of certain foreign investment funds or trusts
called passive foreign investment companies (PFICs), capital gains on the sale
of such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund also may be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
them to shareholders. Any distribution attributable to a PFIC is characterized
as ordinary income.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, either American Century or your financial intermediary is
required by federal law to withhold and remit 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions) to the IRS.
Those regulations require you to certify that the Social Security number or tax
identification number you provide is correct and that you are not subject to 31%
withholding for previous under-reporting to the IRS. You will be asked to make
the appropriate certification on your application. Payments reported by us that
omit your Social Security number or tax identification number will subject us to
a penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed, and is not
refundable.
Redemption of shares of a fund (including redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
you generally will recognize gain or loss in an amount equal to the difference
between the basis of the shares and the amount received. If a loss is realized
on the redemption of fund shares, the reinvestment in additional fund shares
within 30 days before or after the redemption may be subject to the "wash sale"
rules of the Code, resulting in a postponement of the recognition of such loss
for federal income tax purposes.
State and Local Taxes
Distributions also may be subject to state and local taxes, even if all or a
substantial part of 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.
How Fund Performance Information is Calculated
The funds may quote performance in various ways. Fund performance may be shown
by presenting one or more performance measurements, including cumulative total
return, average annual total return or yield.
All performance information advertised by the funds is historical 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.
Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gains
distributions (if any) and any change in the fund's NAV during the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
The following tables set forth the average annual total return for the various
classes of the funds for the one-year period and the period since inception
ended November 30, 1999, the last day of the funds' fiscal year and the period
since inception.
Average Annual Total Returns-Investor Class
Fund 1 year From Inception
Strategic Allocation: Conservative(1) 8.47% 9.46%
Strategic Allocation: Moderate(1) 16.97% 13.26%
Strategic Allocation: Aggressive(1) 25.69% 15.73%
1 Commenced operations on February 15, 1996.
Average Annual Total Returns-Advisor Class
Fund 1 year From Inception
Strategic Allocation: Conservative(1) 8.32% 10.02%
Strategic Allocation: Moderate(1) 16.66% 13.61%
Strategic Allocation: Aggressive(1) 25.46% 16.19%
1 Commenced operations on October 2, 1996.
In addition to average annual total returns, each fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period, including periods other than one, five and 10 years.
Average annual and cumulative total returns may be quoted as percentages or as
dollar amounts and may be calculated for a single investment, a series of
investments or a series of redemptions over any time period. Total returns may
be broken down into their components of income and capital (including capital
gains and changes in share price) to illustrate the relationship of these
factors and their contributions to total return.
ADDITIONAL PERFORMANCE COMPARISONS
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that, unlike the American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to: U.S. Treasury bill, note and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund
rankings published in major, nationally distributed periodicals; data provided
by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills
and Inflation; major indices of stock market performance; and indices and
historical data supplied by major securities brokerage or investment advisory
firms. The funds also may utilize reprints from newspapers and magazines
furnished by third parties to illustrate historical performance or to provide
general information about the funds.
Permissible Advertising Information
From time to time, the funds may include, in addition to any other permissible
information, 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 rating organizations;
and
(9) testimonials describing the experience of persons who have invested in one
or more of the funds. The funds also may include calculations, such as
hypothetical compounding examples, which describe hypothetical investment
results 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.
Multiple Class Performance Advertising
Pursuant to the Multiple Class Plan, the corporation may issue additional
classes of existing funds or introduce new funds with multiple classes available
for purchase. To the extent a new class is added to an existing fund, the
advisor may, in compliance with SEC and NASD rules, regulations and guidelines,
market the new class of shares using the historical performance information of
the original class of shares. When quoting performance information for the new
class of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class and for periods after the first full quarter after inception, actual
performance of the new class will be used.
FINANCIAL STATEMENTS
The financial statements of the funds are included in the annual reports to
shareholders for the fiscal year ended November 30, 1999. The annual report is
incorporated herein by reference. You may receive copies of the reports without
charge upon request to American Century at the address and telephone numbers
shown on the back cover of this Statement of Additional Information.
EXPLANATION OF FIXED-INCOME SECURITIES RATINGS
As described in the Prospectus, the funds may invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the Prospectus. The following is a summary of the rating categories
referenced in the Prospectus disclosure.
Bond Ratings
S&P Moody's Description
AAA Aaa These are the highest ratings assigned by S&P and
Moody's to a debt obligation. They indicate an extremely
strong capacity to pay interest and repay principal.
AA Aa Debt rated in this category is considered to have a very
strong capacity to pay interest and repay principal and
differs from AAA/Aaa issues only in a small degree.
A A Debt rated A has a strong capacity to pay interest and
repay principal, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories.
BBB Baa Debt rated BBB/Baa is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in
higher-rated categories.
BB Ba Debt rated BB/Ba has less near-term vulnerability to
default than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse
business, financial or economic conditions that could lead
to inadequate capacity to meet timely interest and
principal payments. The BB rating category also is used for
debt subordinated to senior debt that is assigned an actual
or implied BBB- rating.
B B Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB/Ba or
BB-/Ba3 rating.
CCC Caa Debt rated CCC/Caa has a currently identifiable
vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the
event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC/Caa rating category
is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B-/B3 rating.
CC Ca The rating CC/Ca typically is applied to debt
subordinated to senior debt that is assigned an actual or
implied CCC/Caa rating.
C C The rating C typically is applied to debt subordinated to
senior debt, which is assigned an actual or implied
CCC/Caa3 debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D D Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are
not made on the date due even if the applicable grace
period has not expired, unless S&P believes that such
payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
To provide more detailed indications of credit quality, the Standard & Poor's
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1,2,3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.
<TABLE>
<CAPTION>
Commercial Paper Ratings
S&P Moody's Description
<S> <C> <C>
A-1 Prime-1 This indicates that the degree of safety regarding timely payment is strong.
(P-1) Standard & Poor's rates those issues determined to possess extremely strong
safety characteristics as A-1+.
A-2 Prime-2 Capacity for timely payment on commercial paper is satisfactory, but the
(P-2) relative degree of safety is not as high as for issues designated A-1. Earnings
trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics,
while still appropriated, may be more affected by
external conditions. Ample alternate liquidity is
maintained.
A-3 Prime-3 Satisfactory capacity for timely repayment. Issues that carry this rating
(P-3) are somewhat more vulnerable to the adverse changes in circumstances than
obligations carrying the higher designations.
</TABLE>
<TABLE>
<CAPTION>
Note Ratings
S&P Moody's Description
<S> <C> <C>
SP-1 MIG-1; VMIG-1 Notes are of the highest quality enjoying
strong protection from established cash flows of funds
for their servicing or from established and broad-based
access to the market for refinancing, or both.
SP-2 MIG-2; VMIG-2 Notes are of high quality with margins of protection ample,
although not so large as in the preceding group.
SP-3 MIG-3; VMIG-3 Notes are of favorable quality with all security elements accounted for, but lacking the
undeniable strength of the preceding grades. Market access for refinancing, in particular, is likely
to be less well established.
SP-4 MIG-4; VMIG-4 Notes are of adequate quality, carrying specific risk but having protection and not distinctly
or predominantly speculative.
</TABLE>
More information about the funds is contained in these documents
Annual and Semiannual Reports
These contain more information about the funds' investments and the market
conditions and investment strategies that significantly affected the funds'
performance during the most recent fiscal period. The annual and semiannual
reports are incorporated by reference into this SAI. This means that these are
legally part of this SAI.
You can receive a free copy of the annual and semiannual reports, and ask any
questions about the funds and your accounts, by contacting American Century at
the address or telephone numbers listed below.
If you own or are considering purchasing fund shares through
o an employer-sponsored retirement plan
o a bank
o a broker-dealer
o an insurance company
o another financial intermediary
you can receive the annual and semiannual reports directly from them.
You also can get information about the funds from the Securities and Exchange
Commission (SEC). The SEC charges a duplicating fee to provide copies of this
information.
o In person SEC Public Reference Room
Washington, D.C.
Call 1-202-942-8090 for
location and hours.
o On the Internet o EDGAR database at www.sec.gov
o By email request at [email protected]
o By mail SEC Public Reference Section
Washington, D.C.
20549-0102
Investment Company Act File No. 811-8532
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
Investor Relations
1-800-345-2021 or 816-531-5575
www.americancentury.com
Automated Information Line
1-800-345-8765
Fax
816-340-7962
Telecommunications Device for the Deaf
1-800-634-4113 or 816-444-3485
Business; Not-For-Profit and
Employer-Sponsored Retirement Plans
1-800-345-3533
SH-SAI-19561 0004
<PAGE>
PART C. OTHER INFORMATION.
ITEM 23. Exhibits (all exhibits not filed herewith are being incorporated
herein by reference).
(a) (1) Articles of Incorporation of Twentieth Century
Strategic Asset Allocations, Inc. (filed electronically
as an Exhibit to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A on December 1,
1995).
(2) Articles of Amendment of Twentieth Century Strategic
Asset Allocations, Inc., dated November 28, 1995 (filed
electronically as an Exhibit to Pre-Effective Amendment
No. 3 to the Registration Statement on Form N-1A on
December 1, 1995).
(3) Articles Supplementary of Twentieth Century Strategic
Asset Allocations, Inc., dated December 28, 1995 (filed
electronically as an Exhibit to Pre-Effective Amendment
No. 4 to the Registration Statement on Form N-1A on
February 5, 1996).
(4) Articles of Amendment of Twentieth Century Strategic
Asset Allocations, Inc., dated January 30, 1996 (filed
electronically as an Exhibit to Pre-Effective Amendment
No. 4 to the Registration Statement on Form N-1A on
February 5, 1996).
(5) Articles Supplementary of Twentieth Century Strategic
Asset Allocations, Inc., dated January 30, 1996 (filed
electronically as an Exhibit to Pre-Effective Amendment
No. 4 to the Registration Statement on Form N-1A on
February 5, 1996).
(6) Articles Supplementary of Twentieth Century Strategic
Asset Allocations, Inc., dated September 9, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A on January 5, 1999).
(7) Articles of Amendment of Twentieth Century Strategic
Asset Allocations, Inc., dated December 2, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 2 to the Registration Statement on Form
N-1A on March 26, 1997).
(8) Articles Supplementary of American Century Strategic
Asset Allocations, Inc., dated December 2, 1996 (filed
electronically as an exhibit to Post-Effective
Amendment No. 2 to the Registration Statement on Form
N-1A on March 26, 1997).
(9) Articles Supplementary of American Century Strategic
Asset Allocations, Inc., dated February 16, 1999
(filed electronically as an exhibit to Post-Effective
Amendment No. 6 to the Registration Statement on Form
N-1A on March 30, 1999)
(10) Articles Supplementary of American Century Strategic
Asset Allocations, Inc., dated August 2, 1999, (filed
electronically as an exhibit to Post-Effective
Amendment No. 7 to the Registration Statement on Form
N-1A on March 31, 2000).
(11) Articles Supplementary of American Century Strategic
Asset Allocations, Inc. (to be filed by amendment).
(b) (1) By-Laws of Twentieth Century Strategic Asset
Allocations, Inc. (filed electronically as an Exhibit
to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A on December 1, 1995).
(2) Amendment to By-Laws of American Century Strategic
Asset Allocations, Inc. (filed electronically as an
Exhibit to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A of American Century
Capital Portfolios, Inc., No. 33-64872).
(c) Registrant hereby incorporates by reference, as though set
forth fully herein, Article Fifth, Article Seventh, Article
Eighth and Article Ninth of Registrant's Articles of
Incorporation, appearing as Exhibit (a)(1) to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A
of the Registrant; and Sections 3, 4, 5, 7, 8, 9, 10, 11,
22, 25, 30, 31, 33, 39 and 45 of Registrant's By-Laws
appearing as Exhibit (b)(1) to Pre-Effective Amendment No. 3
to the Registration Statement on Form N-1A and Sections 25,
30 and 31 of Registrant's By-Laws appearing as Exhibit
(b)(2) to Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A of American Century Capital
Portfolios, Inc., No. 33-64872.
(d)(1) Management Agreement, between American Century Strategic
Asset Allocations, Inc. and American Century Investment
Management, Inc., dated August 1, 1997 (filed electronically
as an Exhibit to Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A on April 1, 1998,
File No. 33-79482).
(d)(2) Addendum to the Management Agreement, between American
Century Strategic Asset Allocations, Inc. and American
Century Investment Management, Inc.(to be filed by
amendment).
(e)(1) Distribution Agreement between American Century
Strategic Asset Allocations, Inc. and Funds
Distributor, Inc. dated January 15, 1998 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 28 to the Registration Statement on Form
N-1A of American Century Target Maturities Trust
on January 30, 1998, File No. 2-94608).
(2) Amendment No. 1 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
Funds Distributor, Inc. dated June 1, 1998 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 11 to the Registration Statement on Form
N-1A of American Century Capital Portfolios, Inc.
on June 26, 1998, File. No. 33-64872).
(3) Amendment No. 2 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
Funds Distributor, Inc. dated November 13, 1998 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 12 to the Registration Statement on Form
N-1A of American Century World Mutual Funds, Inc. on
November 13, 1998, File No. 33-39242).
(4) Amendment No. 3 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
Funds Distributor, Inc. dated January 29, 1999 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 28 to the Registration Statement on Form
N-1A of American Century California Tax-Free and
Municipal Funds, on December 28, 1998, File No.
2-82734).
(5) Amendment No. 4 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
Funds Distributor, Inc. dated July 30, 1999 (filed
electronically as an Exhibit to Post-Effective Amendment
No. 16 to the Registration Statement of American Century
Capital Portfolios, Inc., on July 29, 1999, File No.
33-64872).
(6) Amendment No. 5 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
Funds Distributor, Inc.(filed electronically as an Exhibit
to Post-Effective Amendment No. 87 to the Registration
Statement of American Century Mutual Funds, Inc.
on November 29, 1999, File No. 2-14213).
(7) Amendment No. 6 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
Funds Distributor, Inc. (to be filed by amendment).
(8) Distribution Agreement between American Century Strategic
Asset Allocations, Inc. and American Century Investment
Services, Inc. dated March 13, 2000 (filed electronically
as an Exhibit to Post-Effective Amendment No. 17 to the
Registration Statement of American Century World Mutual
Funds, Inc. on March 30, 2000, File No 33-39242).
(9) Amendment No. 1 to the Distribution Agreement between
American Century Strategic Asset Allocations, Inc. and
American Century Investment Services, Inc. (to be filed
by amendment).
(f) Not applicable.
(g) (1) Global Custody Agreement between The Chase Manhattan
Bank and The Twentieth Century and Benham Funds, dated
August 9, 1996 (filed electronically as an Exhibit to
Post-Effective Amendment No. 31 to the Registration
Statement on Form N1-A of American Century Government
Income Trust, File No. 2-99222).
(2) Master Agreement between Commerce Bank, N.A. and
Twentieth Century Services, Inc. dated January 22, 1997
(filed electronically as an Exhibit to Post-Effective
Amendment No. 76 to the Registration Statement on Form
N-1A of American Century Mutual Funds, Inc.,
File No. 2-14213).
(h) (1) Transfer Agency Agreement, dated as of February 1,
1996, by and between Twentieth Century Strategic Asset
Allocations, Inc. and Twentieth Century Services, Inc.
(filed electronically as an Exhibit to Pre-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A on February 5, 1996, File No. 33-79482).
(2) Credit Agreement between American Century Funds and The
Chase Manhattan Bank, as Administrative Agent dated as
of December 21, 1999 (filed electronically as Exhibit
h3 to Post-Effective Amendment No. 29 to the
Registration Statement of American Century California
Tax-Free and Municipal Funds on December 29, 1999,
File No. 2-82734).
(i) Opinion and Consent of Counsel is included herein.
(j) (1) Consent of Deloitte & Touche LLP is included herein.
(2) Power of Attorney (filed electronically as an Exhibit
to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A on March 30, 1999,
File No. 33-79482).
(k) Not applicable.
(l) Not applicable.
(m) (1) Master Distribution and Shareholder Services Plan of
Twentieth Century Capital Portfolios, Inc. Twentieth
Century Investors, Inc., Twentieth Century Strategic
Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. (Advisor Class) dated September 3, 1996
(filed electronically as an Exhibit to Post-Effective
Amendment No. 9 to the Registration Statement on Form
N-1A of American Century Capital Portfolios, Inc.,
File No. 33-64872).
(2) Amendment No. 1 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) dated
June 13, 1997 (filed electronically as an Exhibit to
Post-Effective Amendment No. 77 to the Registration
Statement on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213).
(3) Amendment No. 2 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) dated
September 30, 1997 (filed electronically as an Exhibit
to Post-Effective Amendment No. 78 to the Registration
Statement on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213).
(4) Amendment No. 3 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) dated
June 30, 1998 (filed electronically as an Exhibit to
Post-Effective Amendment No. 11 to the Registration
Statement on Form N-1A of American Century Capital
Portfolios, Inc. on June 26, 1998, File No. 33-64872).
(5) Amendment No. 4 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) dated
November 13, 1998 (filed electronically as an Exhibit
to Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A of American Century World Mutual
Funds, Inc. on November 13, 1998, File No. 33-39242).
(6) Amendment No. 5 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) dated
February 16, 1999 (filed electronically as an Exhibit
to Post-Effective Amendment No. 83 to the Registration
Statement on Form N-1A of American Century Mutual
Funds, Inc. on February 26, 1999, File No. 2-14213).
(7) Amendment No. 6 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) dated
July 30, 1999 (filed electronically as an Exhibit to
Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A of American Century Capital
Portfolios, Inc. on July 29, 1999, File No. 33-64872).
(8) Amendment No. 7 to Master Distribution and Shareholder
Services Plan of American Century Capital Portfolios,
Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (Advisor Class) (filed
electronically as an Exhibit to Post-Effective
Amendment No. 87 to the Registration Statement on Form
N-1A of American Century Mutual Funds, Inc. on November
29, 1999, File No. 2-14213).
(9) Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc.,
Twentieth Century Strategic Asset Allocations, Inc.,
and Twentieth Century World Investors, Inc. (Service
Class) dated September 3, 1996 (filed electronically as
an Exhibit to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A of American Century
Capital Portfolios, Inc., File No. 33-64872).
(o) (1) Multiple Class Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc.,
Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century World Investors, Inc. dated September
3, 1996, (filed electronically as an Exhibit to
Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872).
(2) Amendment No. 1 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual
Funds, Inc. dated June 13, 1997 (filed electronically
as an Exhibit to Post-Effective Amendment No. 77 to the
Registration Statement on Form N-1A of American Century
Mutual Funds, Inc., File No. 2-14213).
(3) Amendment No. 2 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual
Funds, Inc. dated September 30, 1997 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 78 to the Registration Statement on Form
N-1A of American Century Mutual Funds, Inc.,
File No. 2-14213).
(4) Amendment No. 3 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual
Funds, Inc. dated June 30, 1998 (filed electronically
as an Exhibit to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of American Century
Capital Portfolios, Inc. on June 26, 1998, File No.
33-64872).
(5) Amendment No. 4 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual
Funds, Inc. dated November 13, 1998 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 12 to the Registration Statement on Form
N-1A of American Century World Mutual Funds, Inc. on
November 13, 1998, File No. 33-39242).
(6) Amendment No. 5 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual
Funds, Inc. dated January 29, 1999 (filed
electronically as an Exhibit to Post-Effective
Amendment No. 14 to the Registration Statement on Form
N-1A of American Century Capital Portfolios, Inc. on
December 29, 1998, File No. 33-64872).
(7) Amendment No. 6 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World
Mutual Funds, Inc. dated July 30, 1999 (filed
electronically as Exhibit o7 to Post-Effective
Amendment No. 16 to the Registration Statement on Form
N-1A of American Century Capital Portfolios, Inc. on
July 29, 1999, File No. 33-64872).
(8) Amendment No. 7 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World
Mutual Funds, Inc. dated November 19, 1999 (filed
electronically as Exhibit o8 to Post-Effective
Amendment No. 87 to the Registration Statement on Form
N-1A of American Century Mutual Funds, Inc. on
November 29, 1999, File No. 2-14213).
(9) Amendment No. 8 to Multiple Class Plan of American
Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World
Mutual Funds, Inc. (to be filed by amendment).
(p) (1) American Century Investments Code of Ethics, (filed
electronically as an Exhibit to Post-Effective
Amendment No. 16 to the Registration Statement on Form
N-1A of American Century World Mutual Funds, Inc. on
March 10, 2000, File No. 33-39242).
(2) Funds Distributor, Inc. Code of Ethics (filed
electronically as an Exhibit to Post-Effective
Amendment No. 16 to the Registration Statement on Form
N-1A of American Century World Mutual Funds, Inc. on
March 10, 2000, File No. 33-39242).
ITEM 24. Persons Controlled by or Under Common Control with Registrant:
NONE.
ITEM 25. Indemnification.
The Registrant is a Maryland corporation. Section 2-418 of the
Maryland General Corporation Law allows a Maryland corporation to
indemnify its officers, directors, employees and agents to the extent
provided in such statute.
Article Ninth of the Registrant's Articles of Incorporation requires
the indemnification of the Registrant's directors and officers to the
extent permitted by Section 2-418 of the Maryland General Corporation
Law, the Investment Company Act of 1940 and all other applicable laws.
The Registrant has purchased an insurance policy insuring its officers
and directors against certain liabilities that such officers and
directors may incur while acting in such capacities and providing
reimbursement to the Registrant for sums which it may be permitted or
required to pay to its officers and directors by way of
indemnification against such liabilities, subject in either case to
clauses respecting deductibility and participation.
ITEM 26. Business and Other Connections of Investment Advisor.
NONE.
ITEM 27 Principal Underwriters.
I. (a) Funds Distributor, Inc. ("FDI") acts as principal underwriter for the
following investment companies.
American Century California Tax-Free and Municipal Funds American Century
Capital Portfolios, Inc. American Century Government Income Trust American
Century International Bond Funds American Century Investment Trust American
Century Municipal Trust American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
CDC MPT+ Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
The Saratoga Advantage Trust
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
The Skyline Funds
SoGen Funds, Inc.
SoGen Variable Funds, Inc.
St. Clair Funds, Inc.
TD Waterhouse Family of Funds, Inc.
TD Waterhouse Trust
WEBS Index Fund, Inc.
FDI is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
FDI is located at 60 State Street, Suite 1300, Boston, Massachusetts 02109. FDI
is an indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a
holding company all of whose outstanding shares are owned by key employees.
(b) The following is a list of the executive officers, directors and
partners of FDI:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- --------------------------------------------------------------------------------
<S> <C> <C>
Marie E. Connolly Director, President and Chief none
Executive Officer
George A. Rio Executive Vice President President,
Principal Executive
and Principal
Financial Officer
Donald R. Roberson Executive Vice President none
William S. Nichols Executive Vice President none
Margaret W. Chambers Senior Vice President, none
General Counsel, Chief
Compliance Officer,
Secretary and Clerk
Joseph F. Tower, III Director, Senior Vice President none
and Treasurer
Paula R. David Senior Vice President none
Gary S. MacDonald Senior Vice President none
Judith K. Benson Senior Vice President none
William J. Nutt Chairman and Director none
William J. Stetter Vice President and none
Chief Financial Officer
- --------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
(c) Not applicable.
</TABLE>
II. (a) American Century Investment Services, Inc. (ACIS) acts as principal
underwriter for the following investment companies:
American Century California Tax-Free and Municipal Funds American Century
Capital Portfolios, Inc. American Century Government Income Trust American
Century International Bond Funds American Century Investment Trust American
Century Municipal Trust American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly-owned subsidiary of American Century Companies, Inc.
(b) The following is a list of the executive officers and partners of
ACIS:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- --------------------------------------------------------------------------------
W. Gordon Snyder President and Director none
James E. Stowers III Chief Executive Officer Director
William M. Lyons Executive Vice President none
and Director
Robert T. Jackson Executive Vice President none
and Chief Financial Officer
Kevin Cuccias Senior Vice President none
Brian Jeter Senior Vice President none
Mark Killen Senior Vice President none
Tom Kmak Senior Vice President none
David C. Tucker Senior Vice President none
James E. Stowers, Jr. Chairman and Director Director
- --------------------
* All addresses are 4500 Main Street, Kansas City, Missouri 64111
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder,
are in the possession of Registrant, American Century Services
Corporation and American Century Investment Management, Inc., all
located at 4500 Main Street, Kansas City, Missouri 64111.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 8 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Kansas City, State of Missouri on the 14st day of April, 2000.
American Century Strategic Asset Allocations, Inc.
(Registrant)
By: /*/George A. Rio
George A. Rio
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
*George A. Rio President, Principal Executive April 14, 2000
George A. Rio and Principal Financial Officer
*Maryanne Roepke Vice President and Treasurer April 14, 2000
Maryanne Roepke
*James E. Stowers, Jr. Chairman of the Board and April 14, 2000
James E. Stowers, Jr. Director
*James E. Stowers III Director April 14, 2000
James E. Stowers III
*Thomas A. Brown Director April 14, 2000
Thomas A. Brown
*Robert W. Doering, M.D. Director April 14, 2000
Robert W. Doering, M.D.
*Andrea C. Hall, Ph.D. Director April 14, 2000
Andrea C. Hall, Ph.D.
*Donald H. Pratt Director April 14, 2000
Donald H. Pratt
*M. Jeannine Strandjord Director April 14, 2000
M. Jeannine Strandjord
*D. D. (Del) Hock Director April 14, 2000
D. D. (Del) Hock
*By /s/Charles A. Etherington
Charles A. Etherington
Attorney-in-Fact
EXHIBIT INDEX
Exhibit Description of Document
Number
EX-99.a1 Articles of Incorporation of Twentieth Century Strategic Asset
Allocations, Inc. (filed electronically as Exhibit 1a to
Pre-Effective Amendment No. 3 to the Registration Statement on Form
N-1A, filed on December 1, 1995, and incorporated herein by
reference).
EX-99.a2 Articles of Amendment of Twentieth Century Strategic Asset
Allocations, Inc., dated November 28, 1995 (filed electronically as
Exhibit 1b to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A, filed December 1, 1995, and incorporated
herein by reference).
EX-99.a3 Articles Supplementary of Twentieth Century Strategic Asset
Allocations, Inc., dated December 26, 1995 (filed electronically as
Exhibit 1c to Pre-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on February 5, 1996, and incorporated
herein by reference).
EX-99.a4 Articles of Amendment of Twentieth Century Strategic Asset
Allocations, Inc., dated January 29, 1996 (filed electronically as
Exhibit 1d to Pre-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on February 5, 1996, and incorporated
herein by reference).
EX-99.a5 Articles Supplementary of Twentieth Century Strategic Asset
Allocations, Inc., dated January 29, 1996 (filed electronically as
Exhibit 1e to Pre-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on February 5, 1996, and incorporated
herein by reference).
EX-99.a6 Articles Supplementary of Twentieth Century Strategic Asset
Allocations, Inc., dated September 9, 1996 (filed electronically as
an exhibit to Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on January 5, 1999, and incorporated
herein by reference).
EX-99.a7 Articles of Amendment of Twentieth Century Strategic Asset
Allocations, Inc., dated December 2, 1996 (filed electronically as
Exhibit 1f to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on March 26, 1997, and incorporated
herein by reference).
EX-99.a8 Articles Supplementary of American Century Strategic Asset
Allocations, Inc., dated December 2, 1996 (filed electronically as
Exhibit 1g to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on March 26, 1997, and incorporated
herein by reference).
EX-99.a9 Articles Supplementary of American Century Strategic Asset
Allocations, Inc., dated February 16, 1999, (filed electronically
as an Exhibit to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A, filed on March 30, 1999, and incorporated
herein by reference).
EX-99.a10 Articles Supplementary of American Century Strategic Asset
Allocations, Inc., dated August 2, 1999,(filed electronically as an
Exhibit to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A, filed on March 31, 2000, and incorporated
herein by reference).
EX-99.a11 Articles Supplementary of American Century Strategic Asset
Allocations, Inc. (to be filed by amendment).
EX-99.b1 By-Laws of Twentieth Century Strategic Asset Allocations, Inc.
(filed electronically as Exhibit 2 to Pre-Effective Amendment No. 3
to the Registration Statement on Form N-1A, filed December 1, 1995,
and incorporated herein by reference).
EX-99.b2 Amendment of By-Laws of American Century Mutual Funds, Inc. (filed
as Exhibit 2b to Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A of American Century Capital Portfolios,
Inc., File No. 33-64872, and incorporated herein by reference).
EX-99.d1 Management Agreement between American Century Strategic Asset
Allocations, Inc. and American Century Investment Management, Inc.,
dated August 1, 1997 (filed electronically as Exhibit d to
Post-Effective Amendment No. 3 to the Registration Statement on
Form N-1A on April 1, 1998, File No. 33-79482, and incorporated
herein by reference).
EX-99.d2 Addendum to Management Agreement between American Century Strategic
Asset Allocations, Inc. and American Century Investment Management,
Inc. (to be filed by amendment).
EX-99.e1 Distribution Agreement between American Century Strategic Asset
Allocations, Inc., and Funds Distributor, Inc. dated January 15,
1998 (filed electronically as Exhibit 6 to Post-Effective Amendment
No. 28 to the Registration Statement on form N-1A of American
Century Target Maturities Trust, Inc., File No. 2-94608, and
incorporated herein by reference).
EX-99.e2 Amendment No. 1 to Distribution Agreement between American Century
Strategic Asset Allocations, Inc. and Funds Distributor, Inc. dated
June 1, 1998 (filed electronically as Exhibit B6b to Post-Effective
Amendment No. 11 to the Registration Statement on Form N-1A of
American Century Capital Portfolios, Inc. File No. 33-64872, filed
June 26, 1998, and incorporated herein by reference).
EX-99.e3 Amendment No. 2 to Distribution Agreement between American Century
Strategic Asset Allocations, Inc. and Funds Distributor, Inc. dated
November 13, 1998 (filed as a part of Post-Effective Amendment No.
12 to the Registration Statement on Form N-1A of American Century
World Mutual Funds, Inc., File No. 33-39242, filed November 13,
1998, and incorporated herein by reference).
EX-99.e4 Amendment No. 3 to Distribution Agreement between American Century
Strategic Asset Allocations, Inc. and Funds Distributor, Inc. dated
January 29, 1999 (filed electronically as Exhibit e4 to
Post-Effective Amendment No. 28 to the Registration Statement on
Form N-1A of American Century California Tax-Free and Municipal
Funds, File No. 2-82734, filed December 28, 1998, and incorporated
herein by reference).
EX-99.e5 Amendment No. 4 to the Distribution Agreement between American
Century Strategic Asset Allocations, Inc. and Funds Distributor,
Inc. dated July 30, 1999 (filed electronically as an Exhibit to
Post-Effective Amendment No. 16 to the Registration Statement of
American Century Capital Portfolios, Inc., File No. 33-64872, on
July 29, 1999, and incorporated herein by reference).
EX-99.e6 Amendment No. 5 to the Distribution Agreement between American
Century Strategic Asset Allocations, Inc. and Funds Distributor,
Inc. (filed electronically as an Exhibit to Post-Effective
Amendment No. 87 to the Registration Statement of American Century
Mutual Funds, Inc., File No. 2-14213 on November 29, 1999, and
incorporated herein by reference).
EX-99-e7 Amendment No. 6 to the Distribution Agreement between American
Century Strategic Asset Allocations, Inc. and Funds Distributor,
Inc. (to be filed by amendment).
EX-99.e8 Distribution Agreement between American Century Strategic Asset
Allocations, Inc. and American Century Investment Services, Inc.
dated March 13, 2000 (filed electronically as an Exhibit to
Post-Effective Amendment No. 17 to the Registration Statement on
Form N-1A of American Century World Mutual Funds, Inc., File No.
33-39242, on March 30, 2000, and incorporated herein by reference).
EX-99.e9 Amendment No. 1 to the Distribution Agreement between American
Century Strategic Asset Allocations, Inc. and American Century
Investment Services, Inc. (to be filed by amendment).
EX-99.g1 Global Custody Agreement between The Chase Manhattan Bank and The
Twentieth Century and Benham Funds, dated August 9, 1996 (filed
electronically as an Exhibit to Post-Effective Amendment No. 31 to
the Registration Statement on Form N1-A of American Century
Government Income Trust, Commission File No. 2-99222, and
incorporated herein by reference).
EX-99.g2 Master Agreement between Commerce Bank, N.A. and Twentieth Century
Services, Inc. dated January 22, 1997 (filed as Exhibit 8(d) to
Post-Effective Amendment No. 76 to the Registration Statement on
Form N-1A of American Century Mutual Funds, Inc., Commission File
No. 2-14213, and incorporated herein by reference).
EX-99.h1 Transfer Agency Agreement, dated as of February 1, 1996, by and
between Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century Services, Inc. (filed as Exhibit 9 to
Pre-Effective Amendment No. 4 to the Registration Statement on Form
N-1A, filed February 5, 1996, and incorporated herein by
reference).
EX-99.h2 Credit Agreement between American Century Funds and The Chase
Manhattan Bank as Administrative Agent dated as of December 21,
1999 (filed electronically as Exhibit h3 to Post-Effective
Amendment No. 29 to the Registration Statement of American Century
California Tax-Free and Municipal Funds, File No. 2-82734,
on December 29, 1999, and incorporated herein by reference).
EX-99.i Opinion and Consent of Counsel is included herein.
EX-99.j1 Consent of Deloitte & Touche LLP is included herein.
EX-99.j2 Power of Attorney dated February 19, 1999 (filed electronically as
an Exhibit to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A on March 30, 1999, File No. 33-79482, and
incorporated herein by reference).
EX-99.m1 Master Distribution and Shareholder Services Plan of Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century World Investors, Inc. (Advisor Class) dated
September 3, 1996 (filed electronically as a part of Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A of
American Century Capital Portfolios, Inc., Commission File No.
33-64872, and incorporated herein by reference).
EX-99.m2 Amendment No. 1 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated June 13, 1997 (filed as a part of Post-Effective Amendment
No. 77 to the Registration Statement on Form N-1A of American
Century Mutual Funds, Inc., Commission File No. 2-14213, and
incorporated herein by reference).
EX-99.m3 Amendment No. 2 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated September 30, 1997 (filed as a part of Post-Effective
Amendment No. 78 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., Commission File No. 2-14213,
and incorporated herein by reference).
EX-99.m4 Amendment No. 3 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated June 30, 1998 (filed as a part of Post-Effective Amendment
No. 11 to the Registration Statement on Form N-1A of American
Century Capital Portfolios, Inc., File No. 33-64872, filed on June
26, 1998, and incorporated herein by reference).
EX-99.m5 Amendment No. 4 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated November 13, 1998 (filed as a part of Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed
on November 13, 1998, and incorporated herein by reference).
EX-99.m6 Amendment No. 5 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated February 16, 1999 (filed electronically as a part of
Post-Effective Amendment No. 83 to the Registration Statement on
Form N-1A of American Century Mutual Funds, Inc., File No. 2-14213,
filed on February 26, 1999, and incorporated herein by reference).
EX-99.m7 Amendment No. 6 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc., (Advisor Class)
dated July 30, 1999 (filed electronically as an Exhibit to
Post-Effective Amendment No. 16 to the Registration Statement on
Form N-1A of American Century Capital Portfolios, Inc., File No.
33-64872, on July 29, 1999 and incorporated herein by reference).
EX-99.m8 Amendment No. 7 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. dated November
19, 1999 (Advisor Class)(filed electronically as an Exhibit to
Post-Effective Amendment No. 87 on Form N-1A of American Century
Mutual Funds, Inc., File No. 2-14213, on November 29, 1999 and
incorporated herein by reference).
EX-99.m9 Shareholder Services Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. (Service Class) dated September 3, 1996, (filed
electronically as a part of Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872). and incorporated herein by
reference).
EX-99.o1 Multiple Class Plan of Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Investors, Inc., Twentieth Century Strategic
Asset Allocations, Inc. and Twentieth Century World Investors, Inc.
dated September 3, 1996 (filed electronically as a part of
Post-Effective Amendment No. 9 to the Registration Statement on
Form N-1A of American Century Capital Portfolios, Inc., File
No. 33-64872, and incorporated herein by reference).
EX-99.o2 Amendment No. 1 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated June 13, 1997 (filed electronically
as a part of Post-Effective Amendment No. 77 to the Registration
Statement on Form N-1A of American Century Mutual Funds, Inc.,
File No. 2-14213, and incorporated herein by reference).
EX-99.o3 Amendment No. 2 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated September 30, 1997 (filed
electronically as a part of Post-Effective Amendment No. 78 to the
Registration Statement on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213, and incorporated herein by
reference).
EX-99.o4 Amendment No. 3 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated June 30, 1998 (filed as a part of
Post-Effective Amendment No. 11 to the Registration Statement on
Form N-1A of American Century Capital Portfolios, Inc., File No.
33-64872, filed on June 26, 1998, and incorporated herein by
reference).
EX-99.o5 Amendment No. 4 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated November 13, 1998 (filed as a part
of Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A of American Century World Mutual Funds, Inc., File No.
33-39242, filed on November 13, 1998, and incorporated herein by
reference).
EX-99.o6 Amendment No. 5 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated January 29, 1999 (filed as a part of
Post-Effective Amendment No. 14 to the Registration Statement on
Form N-1A of American Century Capital Portfolios, Inc., File No.
33-64872, filed on December 29, 1998, and incorporated herein by
reference).
EX-99.o7 Amendment No. 6 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated July 30, 1999 (filed electronically
as Exhibit o7 to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872, on July 29, 1999, and
incorporated herein by reference).
EX-99.o8 Amendment No. 7 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated November 19, 1999 (filed
electronically as Exhibit o8 to Post-Effective Amendment No. 87 to
the Registration Statement on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213, on November 29, 1999, and
incorporated herein by reference).
EX-99.o9 Amendment No. 8 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. (to be filed by amendment).
EX-99.p1 American Century Investments Code of Ethics (filed electronically
as an Exhibit to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A of American Century World
Mutual Funds, Inc., File No. 33-39242, on March 10, 2000, and
incorporated herein by reference).
EX-99.p2 Fund Distributor, Inc. Code of Ethics (filed electronically as an
Exhibit to Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A of American Century World Mutual Funds,
Inc., File No. 33-39242, on March 10, 2000, and incorporated
herein by reference).
Brian L. Brogan
ATTORNEY AT LAW
4500 MAIN STREET
KANSAS CITY, MISSOURI 64111
(816)340-7276
FACSIMILE (816)340-4964
April 13, 2000
American Century Strategic Asset Allocations, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to American Century Strategic Asset Allocations, Inc., I am
generally familiar with its affairs. Based upon this familiarity, and upon the
examination of such documents as I deemed relevant, it is my opinion that the
shares of the Corporation described in Post-Effective Amendment No. 8 to its
Registration Statement on Form N-1A, to be filed with the Securities and
Exchange Commission on April 14, 2000, will, when issued, be validly issued,
fully paid and nonassessable.
For the record, it should be stated that I am an employee of American
Century Services Corporation, an affiliated corporation of American Century
Investment Management, Inc., the investment advisor of the Corporation.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 8, referenced above.
Very truly yours,
/s/Brian L. Brogan
Brian L. Brogan
Independent Auditors' Consent
We consent to the incorporation by reference in this Post-Effective Amendment
No. 8 to the Registration Statement No. 33-79482 of American Century Strategic
Asset Allocations, Inc. on Form N-1A of our report dated January 12, 2000,
appearing in the Annual Report of the three funds comprising
American Century Strategic Asset Allocations, Inc., for the year ended November
30, 1999, and to the reference to us under the caption "Financial Highlights" in
the Prospectuses, which are part of such Registration Statement.
Kansas City, Missouri
April 12, 2000
