-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E1D4yC2cDqS1pf+cXD9j7bPFSvildQWpPi1FjgXW3762pouyFf0Be872V0Rzqatn RvI21VRzO4jf33tDwouQrg== 0000100334-96-000007.txt : 19960304 0000100334-96-000007.hdr.sgml : 19960304 ACCESSION NUMBER: 0000100334-96-000007 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 31 FILED AS OF DATE: 19960229 EFFECTIVENESS DATE: 19960229 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TWENTIETH CENTURY INVESTORS INC CENTRAL INDEX KEY: 0000100334 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 446006315 STATE OF INCORPORATION: MO FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-14213 FILM NUMBER: 96529370 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00816 FILM NUMBER: 96529371 BUSINESS ADDRESS: STREET 1: 4500 MAIN ST STREET 2: P O BOX 419200 CITY: KANSAS CITY STATE: MO ZIP: 64141 BUSINESS PHONE: 8165315575 MAIL ADDRESS: STREET 1: TWENTIETH CENTURY INVESTORS INC STREET 2: 4500 MAIN STREET CITY: KANSAS CITY STATE: MO ZIP: 64141-6200 485BPOS 1 POST-EFFECTIVE AMENDMENT As filed with the Securities and Exchange Commission on February 29, 1996 1933 Act File No. 2-14213; 1940 Act File No. 811-0816 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X__ Pre-Effective Amendment No.____ ____ Post-Effective Amendment No._73_ _X__ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X__ Amendment No._73_ (check appropriate box or boxes.) TWENTIETH CENTURY INVESTORS, INC. --------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111 ---------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: 816-531-5575 James E. Stowers III Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111 ---------------------------------------------------------------- (Name and address of Agent for service) Approximate Date of Proposed Public Offering: 3/1/96 It is proposed that this filing will become effective (check appropriate box) ____ immediately upon filing pursuant to paragraph (b) of Rule 485 __X_ on March 1, 1996 pursuant to paragraph (b) of Rule 485 ____ 60 days after filing pursuant to paragraph (a) of Rule 485 ____ on (date) pursuant to paragraph (a)(1) of Rule 485 ____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485 ____ on (date) after filing pursuant to paragraph (a)(2) of Rule 485 The Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the fiscal year ending October 31, 1995, was filed on November 14, 1995.
==================================================================================================================================== CROSS REFERENCE SHEET - ------------------------------------------------------------------------------------------------------------------------------------ ITEM PAGE PAGE PAGE PAGE NO. NO. NO. NO. NO. - --------------------------------------------------------------------------------------------------------------------------- Fixed Equity Income Giftrust Institutional Part A. Prospectus Prospectus Prospectus Prospectus - --------------------------------------------------------------------------------------------------------------------------- 1. Cover Page Cover Page Cover Page Cover Page Cover Page 2. Synopsis N/A N/A N/A N/A 3. Condensed Financial Information 4-6 4-7 4-5 5-8 4. General Description of Registrant 7-9, 31 8-12, 35 Cover Page, 9-13, 27 6, 26 5. Management of the Fund 28-30 33-35 24-27 24-25 6. Capital Stock and Other Securities 20-21, 22-26, 15-17, 21-22, 24, 26-28, 31 31-32, 35 21-24, 26 27 7. Purchase of Securities Being Offered 14-16 19-21 13-15 21 8. Redemption or Repurchase 16-21 21-26 15-17 21-22 9. Pending Legal Proceedings N/A N/A N/A N/A - --------------------------------------------------------------------------------------------------------------------------- Part B. - Statement of Additional Information - --------------------------------------------------------------------------------------------------------------------------- 10. Cover Page Cover Page 11. Table of Contents Cover Page 12. General Information N/A 13. Investment Objectives and Policies 2-13 14. Management of the Fund 13-18 15. Control Persons and Principal Holders of Securities 18 16. Investment Advisory and Other Services 16-19 17. Brokerage Allocation 19-20 18. Capital Stock and Other Securities 18 19. Purchase, Redemptions and Pricing of Securities Being Offered N/A 20. Tax Status N/A 21. Underwriters N/A 22. Calculation of Performance Data 20-22 23. Financial Statements 23 =========================================================================================================================
TWENTIETH CENTURY INVESTORS, INC. EQUITY FUNDS PROSPECTUS MARCH 1, 1996 - -------------------------------------------------------------------------------- Twentieth Century Investors, Inc., a member of the Twentieth Century family of funds, offers 16 no-load mutual funds covering a variety of investment opportunities. Six of the funds that invest primarily in equity securities are described in this prospectus. Their investment objectives are listed on the inside cover of this prospectus. The other funds are described in separate prospectuses. NO-LOAD MUTUAL FUNDS Twentieth Century's funds are "no-load" investments, which means there are no sales charges or commissions. Twentieth Century has no 12b-1 plan or other deferred sales charges. There is no minimum investment requirement for any of the funds described in this prospectus. However, if the value of the shares held in any one fund account is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish an automatic investment program of $50 or more per month in each such account. (See "Automatic Investments," page 15 and "Automatic Redemption of Shares," page 21.) This prospectus gives you information about Twentieth Century that you should know before investing. You should read this prospectus carefully and retain it for future reference. Additional information is included in the statement of additional information dated March 1, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Investors, Inc. 4500 Main Street * P.O. Box 419200 Kansas City, MO 64141-6200 1-800-345-2021 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-634-4113 In Missouri: 816-753-1865 - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- EQUITY FUNDS SELECT INVESTORS HERITAGE INVESTORS seek capital growth. The funds intend to pursue their investment objectives by investing primarily in common stocks of companies that are considered by management to have better-than-average prospects for appreciation. As a matter of fundamental policy, 80% of the assets of Select Investors and of Heritage Investors must be invested in securities of companies that have a record of paying dividends or have committed themselves to the payment of regular dividends, or otherwise produce income. GROWTH INVESTORS ULTRA INVESTORS VISTA INVESTORS seek capital growth. The funds intend to pursue their investment objectives by investing primarily in common stocks that are considered by management to have better-than-average prospects for appreciation. BALANCED FUND BALANCED INVESTORS seeks capital growth and current income. It is management's intention to maintain approximately 60% of the fund's assets in common stocks that are considered by management to have better-than-average prospects for appreciation and the balance in bonds and other fixed income securities. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY TWENTIETH CENTURY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS TRANSACTION AND OPERATING EXPENSE TABLE .......... 4 FINANCIAL HIGHLIGHTS ............................. 5 INFORMATION REGARDING THE FUNDS INFORMATION ABOUT INVESTMENT POLICIES OF THE FUNDS 7 Equity Funds ..................................... 7 Select and Heritage Investors ............... 7 Growth, Ultra and Vista Investors ........... 7 Balanced Fund .................................... 7 Balanced Investors .......................... 8 OTHER INVESTMENT PRACTICES ....................... 9 Foreign Securities ............................... 9 Forward Currency Exchange Contracts .............. 9 Portfolio Turnover ............................... 10 Repurchase Agreements ............................ 10 Derivative Securities ............................ 11 Portfolio Lending ................................ 11 When-Issued Securities ........................... 12 Rule 144A Securities ............................. 12 Short Sales ...................................... 12 PERFORMANCE ADVERTISING .......................... 13 HOW TO INVEST WITH TWENTIETH CENTURY TWENTIETH CENTURY FAMILY OF FUNDS ................ 14 INVESTING IN TWENTIETH CENTURY ................... 14 By Mail ..................................... 14 By Telephone ................................ 14 By Wire ..................................... 14 Automatic Investments ....................... 15 Additional Information About Investments .... 15 Tax Identification Number ................... 15 Certificates ................................ 16 SPECIAL SHAREHOLDER SERVICES ..................... 16 HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER .................................. 16 By Telephone ................................ 17 By Mail ..................................... 17 Additional Information About Exchanges ...... 17 HOW TO REDEEM SHARES ............................. 18 By Telephone ................................ 18 By Mail ..................................... 18 By Check-A-Month ............................ 18 Signature Guarantee ......................... 19 REDEMPTION PROCEEDS .............................. 19 By Mail ..................................... 19 By Wire and Electronic Funds Transfer ....... 20 Special Requirements for Large Redemptions .. 20 Automatic Redemption of Shares .............. 21 Additional Information About Redemptions .... 21 TELEPHONE SERVICES ............................... 21 Investors Line .............................. 21 Automated Information Line .................. 22 HOW TO CHANGE YOUR ADDRESS OF RECORD ............. 22 TAX-QUALIFIED RETIREMENT PLANS ................... 22 HOW TO TRANSFER AN INVESTMENT TO A TWENTIETH CENTURY RETIREMENT PLAN ........... 22 COLLEGE INVESTMENT PROGRAM ....................... 23 HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON .... 23 REPORTS TO SHAREHOLDERS .......................... 23 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ...................................... 25 When Share Price Is Determined .............. 25 How Share Price Is Determined ............... 25 Where to Find Information About Share Price ........................... 26 DISTRIBUTIONS .................................... 26 Equity Funds ................................ 26 Balanced Fund ............................... 26 General Information About Distributions ..... 26 TAXES ............................................ 27 MANAGEMENT ....................................... 28 Investment Management ....................... 28 Code of Ethics .............................. 30 Transfer and Administrative Services ........ 30 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ...... 31 3 TRANSACTION AND OPERATING EXPENSE TABLE - -------------------------------------------------------------------------------- Applicable to Select, Heritage, Growth, Ultra, Vista, and Balanced SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases none Maximum Sales Load Imposed on Reinvested Dividends none Deferred Sales Load none Redemption Fee(1) none Exchange Fee none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(2) 1.00% 12b-1 Fees none Other Expenses(3) 0.00% Total Fund Operating Expenses 1.00% Example You would pay the following expenses on a $1,000 1 year $10 investment, assuming (1) a 5% annual return 3 years 32 and (2) redemption at the end of each time period: 5 years 55 10 years 122 The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in shares of the Twentieth Century funds offered by this prospectus. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. (1) Redemption proceeds sent by wire are subject to a $10 processing fee. (2) A portion of the management fee may be paid by the funds' manager to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager. See "Management-Transfer and Administrative Services," page 30. (3) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were 0.0014 of 1% of average net assets for the most recent fiscal year. 4
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - ------------------------------------------------------------------------------------------------------------------------------------ The Financial Highlights for each of the periods presented (except as noted) have been audited by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the statement of additional information. The annual report contains additional performance information and will be made available upon request and without charge. INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------- ------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) SELECT INVESTORS Year Ended Oct. 31, 1986 $26.48 $.43 $ 9.01 $ 9.44 $(.515) -- -- $(.515) $35.40 36.13% 1987 35.40 .33 .80 1.13 (.380) $(3.462) -- (3.842) 32.69 3.47% 1988 32.69 .64 1.37 2.01 (.481) (6.367) -- (6.848) 27.85 7.31% 1989 27.85 1.10 7.74 8.84 (.707) -- -- (.707) 35.98 32.59% 1990 35.98 .62 (1.29) (.67) (1.116) -- -- (1.116) 34.19 (2.03%) 1991 34.19 .63 8.17 8.80 (.652) (1.551) -- (2.203) 40.79 27.05% 1992 40.79 .53 .34 .87 (.653) (1.823) -- (2.476) 39.18 1.76% 1993 39.18 .46 7.94 8.40 (.495) (1.313) $(.016) (1.824) 45.76 22.20% 1994 45.76 .40 (3.59) (3.19) (.432) (4.466) -- (4.898) 37.67 (7.37%) 1995 37.67 .33 4.68 5.01 (.281) (2.750) (.125) (3.156) 39.52 15.02% HERITAGE INVESTORS Nov. 10, 1987 (inception) through Oct. 31, 1988 $5.00 $.06 $1.16 $1.22 $(.013) -- -- $(.013) $6.21 25.75% Year Ended Oct. 31, 1989 6.21 .08 1.93 2.01 (.066) -- -- (.066) 8.15 32.65% 1990 8.15 .10 (.94) (.84) (.065) $(.691) -- (.756) 6.55 (11.62%) 1991 6.55 .11 2.04 2.15 (.110) -- -- (.110) 8.59 33.25% 1992 8.59 .10 .72 .82 (.113) -- -- (.113) 9.30 9.65% 1993 9.30 .07 2.43 2.50 (.093) (.679) -- (.772) 11.03 28.64% 1994 11.03 .07 (.21) (.14) (.068) (.500) $(.006) (.574) 10.32 (1.13%) 1995 10.32 .05 1.96 2.01 (.033) (.514) $(.030) (.577) 11.75 21.04% GROWTH INVESTORS Year Ended Oct. 31, 1986 $14.16 $.12 $ 5.37 $ 5.49 $(.182) -- -- $(.182) $19.47 39.09% 1987 19.47 .01 1.30 1.31 (.086) $(5.076) -- (5.162) 15.62 9.32% 1988 15.62 .30 .13 .43 (.046) (3.460) -- (3.506) 12.54 3.18% 1989 12.54 .08 5.14 5.22 (.320) -- -- (.320) 17.44 42.74% 1990 17.44 .09 (2.05) (1.96) (.079) (.592) -- (.671) 14.81 (11.72%) 1991 14.81 .04 8.47 8.51 (.111) (.891) -- (1.002) 22.32 60.64% 1992 22.32 (.02) 1.35 1.33 (.013) -- -- (.013) 23.64 5.96% 1993 23.64 .06 1.94 2.00 -- (.353) $(.013) (.366) 25.27 8.48% 1994 25.27 .06 .48 .54 (.056) (2.764) (.002) (2.822) 22.99 2.66% 1995 22.99 .08 4.08 4.16 (.051) (3.183) (.040) (3.274) 23.88 22.31% [table continued below] [table continued] RATIOS/SUPPLEMENTAL DATA Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) SELECT INVESTORS Year Ended Oct. 31, 1986 1.01% 1.6% 85% $1,978,449 1987 1.00% 1.1% 123% 2,416,527 1988 1.00% 2.2% 140% 2,366,730 1989 1.00% 3.4% 93% 2,720,968 1990 1.00% 1.8% 83% 2,953,030 1991 1.00% 1.7% 84% 4,163,105 1992 1.00% 1.4% 95% 4,534,264 1993 1.00% 1.1% 82% 5,159,963 1994 1.00% 1.0% 126% 4,277,843 1995 1.00% .9% 106% 4,008,438 1995 average commission paid per share traded $.046 HERITAGE INVESTORS Nov. 10, 1987 (inception) through Oct. 31, 1988 1.00%(2) 1.4%(2) 130%(2) $55,389 Year Ended Oct. 31, 1989 1.00% 1.3% 159% 116,880 1990 1.00% 1.6% 127% 198,999 1991 1.00% 1.5% 146% 268,891 1992 1.00% 1.1% 119% 368,651 1993 1.00% .7% 116% 701,504 1994 1.00% .7% 136% 896,763 1995 .99% .5% 121% 1,008,323 1995 average commission paid per share traded $.042 GROWTH INVESTORS Year Ended Oct. 31, 1986 1.01% .6% 105% $964,742 1987 1.00% .2% 114% 1,187,933 1988 1.00% 2.4% 143% 1,228,587 1989 1.00% .5% 98% 1,596,571 1990 1.00% .6% 118% 1,696,667 1991 1.00% .2% 69% 3,193,381 1992 1.00% (.1%) 53% 4,471,882 1993 1.00% .2% 94% 4,641,187 1994 1.00% .3% 100% 4,363,476 1995 1.00% .4% 141% 5,129,894 1995 average commission paid per share traded $.040
(1) Actual total return for period indicated. (2) Annualized. 5
FINANCIAL HIGHLIGHTS (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------- -------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Distributions Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) ULTRA INVESTORS Year Ended Oct. 31, 1986 $7.13 $.00 $1.94 $1.94 $(.010) -- -- $ (.010) $9.06 27.22% 1987 9.06 (.07) (.22) (.29) (.007) -- -- (.007) 8.76 (3.23%) 1988 8.76 (.02) 1.38 1.36 -- $(3.258) -- (3.258) 6.86 19.52% 1989 6.86 .19 2.58 2.77 -- -- -- -- 9.63 40.37% 1990 9.63 (.03) (.73) (.76) (.196) (.947) -- (1.143) 7.73 (9.02%) 1991 7.73 (.03) 7.86 7.83 -- (.028) -- (.028) 15.53 101.51% 1992 15.53 (.05) (.02) (.07) -- -- -- -- 15.46 (.45%) 1993 15.46 (.09) 6.24 6.15 -- -- -- -- 21.61 39.78% 1994 21.61 (.03) (.42) (.45) -- -- -- -- 21.16 (2.08%) 1995 21.16 (.07) 7.58 7.51 -- (.645) -- (.645) 28.03 36.89% VISTA INVESTORS Year Ended Oct. 31, 1986 $4.68 $(.02) $2.22 $2.20 -- -- -- -- $6.88 47.00% 1987 6.88 (.05) (.45) (.50) -- $(.651) -- $(.651) 5.73 (7.70%) 1988 5.73 .01 .63 .64 -- (.462) -- (.462) 5.91 11.41% 1989 5.91 (.03) 2.87 2.84 $(.012) -- -- (.012) 8.74 48.19% 1990 8.74 (.01) (1.76) (1.77) -- (.693) -- (.693) 6.28 (22.17%) 1991 6.28 (.02) 4.27 4.25 -- -- -- -- 10.53 67.67% 1992 10.53 (.04) .52 .48 -- -- -- -- 11.01 4.55% 1993 11.01 (.07) 1.95 1.88 -- (.641) $(.006) (.647) 12.24 17.71% 1994 12.24 (.08) .45 .37 -- (1.663) (.012) (1.675) 10.94 4.16% 1995 10.94 (.08) 4.90 4.82 -- (.30) -- (.30) 15.73 44.20% BALANCED INVESTORS Oct. 20, 1988 (inception) through Oct. 31, 1988 $10.22 $.01 $(.10) $(.09) -- -- -- -- $10.13 (.88%) Year Ended Oct. 31, 1989 10.13 .37 1.71 2.08 $(.372) -- -- $(.372) 11.84 20.94% 1990 11.84 .41 (.62) (.21) (.417) $(.320) -- (.737) 10.89 (2.10%) 1991 10.89 .38 4.22 4.60 (.384) -- -- (.384) 15.11 42.92% 1992 15.11 .33 (.23) .10 (.322) -- -- (.322) 14.89 .63% 1993 14.89 .38 1.62 2.00 (.375) -- -- (.375) 16.52 13.64% 1994 16.52 .42 (.58) (.16) (.416) -- -- (.416) 15.94 (.93%) 1995 15.94 .48 2.03 2.51 (.475) (.274) -- (.749) 17.70 16.36% [table continued below] [table continued] RATIOS/SUPPLEMENTAL DATA ----------------------------------------------- Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) ULTRA INVESTORS Year Ended Oct. 31, 1986 1.01% -- 99% $314,672 1987 1.00% (.5%) 137% 235,865 1988 1.00% (.3%) 140% 258,320 1989 1.00% 2.2% 132% 346,593 1990 1.00% (.3%) 141% 330,005 1991 1.00% (.5%) 42% 2,147,654 1992 1.00% (.4%) 59% 4,275,200 1993 1.00% (.6%) 53% 8,037,417 1994 1.00% (.1%) 78% 10,344,273 1995 1.00% (.3%) 87% 14,375,902 1995 average commission paid per share traded $0.33 VISTA INVESTORS Year Ended Oct. 31, 1986 1.01% (.3%) 121% $159,889 1987 1.00% (.7%) 123% 187,272 1988 1.00% .2% 145% 206,434 1989 1.00% (.4%) 125% 263,876 1990 1.00% (.1%) 103% 340,621 1991 1.00% (.3%) 92% 622,140 1992 1.00% (.4%) 87% 829,678 1993 1.00% (.6%) 133% 847,470 1994 1.00% (.8%) 111% 792,343 1995 .98% (.6%) 89% 1,675,917 1995 average commission paid per share traded $0.33 BALANCED INVESTORS Oct. 20, 1988 (inception) through Oct. 31, 1988 1.00%(2) 4.4%(2) 99%(2) $2,786 Year Ended Oct. 31, 1989 1.00% 4.2% 171% 30,156 1990 1.00% 3.8% 104% 66,407 1991 1.00% 3.1% 116% 254,884 1992 1.00% 2.4% 100% 654,123 1993 1.00% 2.4% 95% 705,698 1994 1.00% 2.7% 94% 703,866 1995 .98% 2.9% 85%(3) 815,570 1995 average commission paid per share traded $0.39 (1) Actual total return for period indicated. (2) Annualized. (3) The portfolio turnover rate of the equity and fixed income components of the portfolio was 90% and 71%, respectively.
6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INFORMATION ABOUT INVESTMENT POLICIES OF THE FUNDS Twentieth Century has adopted certain investment restrictions applicable to the funds that are set forth in the statement of additional information. Those restrictions, as well as the investment objectives of the funds identified on the inside front cover page of this prospectus, and any other investment policies designated as "fundamental" in this prospectus or in the statement of additional information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this prospectus, are not designated as fundamental policies and may be changed without shareholder approval. The descriptions that follow are designed to help you choose the fund that best fits your investment objectives. You may want to pursue more than one objective by investing in more than one of these funds. EQUITY FUNDS All of Twentieth Century's equity funds and the equity portion of the portfolio of Balanced Investors seek capital growth by investing in securities, primarily common stocks, that meet certain fundamental and standards of selection and have, in the opinion of Twentieth Century's management, better-than-average potential for appreciation. So long as a sufficient number of such securities are available, Twentieth Century intends to stay fully invested in these securities regardless of the movement of stock prices generally. In most circumstances, the funds' actual level of cash and cash equivalents will fluctuate between 0% and 10% of total assets with 90% to 100% of its assets committed to equity and equity equivalent investments. The funds may purchase securities only of companies that have a record of at least three years continuous operation. SELECT INVESTORS, HERITAGE INVESTORS Securities of companies chosen for Select and Heritage Investors are chosen primarily for their growth potential. Additionally, as a matter of fundamental policy 80% of the assets of Select Investors and of Heritage Investors must be invested in securities of companies that have a record of paying dividends, or have committed themselves to the payment of regular dividends, or otherwise produce income. The remaining 20% of fund assets may be invested in any otherwise permissible securities that the manager believes will contribute to the funds' stated investment objectives. The income payments of equity securities are only a secondary consideration; therefore, the income return that Select and Heritage provide may not be significant. Otherwise, Select and Heritage follow the same investment techniques described below for Growth, Ultra and Vista. Since Select is one of the largest of Twentieth Century's funds and Heritage is substantially smaller, Select will invest in shares of larger companies with larger share trading volume, and Heritage will tend to invest in smaller companies with smaller share trading volume. However, the two funds are not mutually exclusive, and a given security may be owned by both funds. For the reasons stated below under the caption "Growth Investors, Ultra Investors and Vista Investors" below, it should be expected that Heritage will be more volatile and subject to greater short-term risk and long-term opportunity than Select. Because of its size, and because it invests primarily in securities that pay dividends or are committed to the payment of dividends, Select may be expected to be the least volatile of the common stock funds described in this prospectus. GROWTH INVESTORS, ULTRA INVESTORS AND VISTA INVESTORS Management selects, for the portfolios of Growth, Ultra and Vista, securities of companies whose earnings and revenue trends meet management's standards of selection. They then deter- 7 mine to which of the three funds the selected securities would most contribute. Large, established companies are generally allocated to Growth. Medium-sized and smaller companies are allocated to Ultra and Vista. As of February 1, 1996, the size of the companies (as reflected by their capitalizations) held by the funds is as follows: Median Capitalization of Companies Held ---------------------------------------------- Growth Investors $5,076,231,000 Ultra Investors $3,542,263,000 Vista Investors $ 871,313,000 ---------------------------------------------- The median capitalization of the companies in a given fund may change over time. In addition, the criteria outlined above are not mutually exclusive, and a given security may be owned by more than one of the funds. The size of the fund and of its portfolio companies tends to give each fund its own characteristics of volatility and risk. These differences come about because developments such as new or improved products or methods, which would be relatively insignificant to a large portfolio company, may have a substantial impact on the earnings and revenues of a small company and create a greater demand and a higher value for its shares. However, a new product failure which could readily be absorbed by a large portfolio company can cause a rapid decline in the value of the shares of a smaller company. Hence, it could be expected that funds investing in smaller companies would be more volatile than funds investing in larger companies. BALANCED FUND BALANCED INVESTORS Balanced Investors seeks capital growth and current income. Selection of securities for the equity portion of its portfolio is discussed under "Equity Funds," page 7. Since a portion of the fund's portfolio will be invested in fixed income securities, the opportunity for capital appreciation may be expected to be less than the other funds described in this prospectus. Management intends to maintain approximately 40% of the fund's assets in fixed income securities with a minimum of 25% of that amount in fixed income senior securities. The fixed income securities in the fund will be chosen based on their level of income production and price stability. The fund may invest in a diversified portfolio of debt and other fixed-rate securities payable in United States currency. These may include obligations of the United States government, its agencies and instrumentalities; corporate securities (bonds, notes, preferreds and convertible issues), and sovereign government, municipal, mortgage-backed and other asset-backed securities. There are no maturity restrictions on the fixed income securities in which the fund invests. Under normal market conditions the weighted average portfolio maturity will be in the three- to 10-year range. Management will actively manage the portfolio, adjusting the weighted average portfolio maturity in response to expected changes in interest rates. During periods of rising interest rates, a shorter weighted average maturity may be adopted in order to reduce the effect of bond price declines on the fund's net asset value. When interest rates are falling and bond prices rising, a longer weighted average portfolio maturity may be adopted. It is management's intention to invest the fund's fixed income holdings in high-grade securities. At least 80% of fixed income assets will be invested in securities which at the time of purchase are rated within the three highest categories by a nationally recognized statistical rating organization [at least A by Moody's Investors Service, Inc. (Moody's) or Standard & Poor's Corp. (S&P)]. The remaining portion of the fixed income assets may be invested in issues in the fourth highest category (Baa by Moody's or BBB by S&P), or, if not rated, are of equivalent investment quality as determined by the management and which, in the opinion of management, can contribute meaningfully to the fund's results 8 without compromising its objectives. Such issues might include a lower-rated issue where research suggests the likelihood of a rating increase; or a convertible issue of a company deemed attractive by the equity management team. 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 or changing circumstances. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions Applicable to All Series of Shares" in the Statement of Additional Information. FOREIGN SECURITIES Each of Twentieth Century's funds described in this prospectus may invest an unlimited amount of its assets in the securities of foreign issuers, primarily from developed markets, when these securities meet its standards of selection. The funds may make such investments either directly in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign securities. DRs are securities listed on exchanges or quoted in the over-the-counter market in one country but represent the shares of issuers domiciled in other countries. DRs may be sponsored or unsponsored. Direct investments in foreign securities may be made either on foreign securities exchanges or in the over-the-counter markets. Subject to their individual investment objectives and policies, the funds 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 funds will limit their purchase of debt securities to investment grade obligations. Investments in foreign securities may present certain risks, including those resulting from fluctuations in currency exchange rates, future political and economic developments, reduced availability of public information concerning issuers, and the fact that foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic issuers. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the foreign securities held by the funds may be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent on the performance of a foreign security, as valued in the currency of its home country. As a result, the value of the funds' portfolios may be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be a factor in the overall performance of the funds. To protect against adverse movements in ex-change rates between currencies, the funds may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging 9 contracts with respect to all or a substantial portion of its foreign securities trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into forward currency exchange contracts to sell the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where it would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of the portfolio hedging to the extent deemed appropriate by the manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to protect a fund against adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationships between the foreign currency and the U.S. dollar. PORTFOLIO TURNOVER The total portfolio turnover rates of the funds are shown in the Financial Highlights table on pages 5 and 6 of this prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when management believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. Portfolio turnover may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or a broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase 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. Since 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 10 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 United States government, its agencies and instrumentalities, and will enter into such transactions with those banks and securities dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. No fund will invest more than 15% of its assets in repurchase agreements maturing in more than seven days. DERIVATIVE SECURITIES To the extent permitted by its investment objectives and policies, each of the funds may invest in securities that are commonly referred to as "derivative" securities. Generally, a derivative is a financial arrangement the value of which is based on, or "derived" from, a traditional security, asset, or market index. Certain derivative securities are more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), 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 since 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 a range of risks associated with derivative investments, including: * the risk that the underlying security, interest rate, market index or other financial asset will not move in the direction the portfolio manager anticipates; * the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; * the risk that adverse price movements in an instrument can result in a loss substantially greater than a fund's initial investment; and * the risk that the counterparty will fail to perform its obligations. The board of directors has approved the manager's policy regarding investments in derivative securities. That policy specifies factors that must be considered in connection with a purchase of derivative securities. The policy also establishes a committee that must review certain proposed purchases before the purchases can be made. The manager will report on fund activity in derivative securities to the board of directors as necessary. In addition, the board will review the manager's policy for investments in derivative securities annually. PORTFOLIO LENDING In order to realize additional income, each fund may lend its portfolio securities to persons not affiliated with it and who are deemed to be creditworthy. Such loans must be secured continuously by cash collateral maintained on a current basis in an amount at least equal to the market value of 11 the securities loaned, or by irrevocable letters of credit. During the existence of the loan, the fund must continue to receive the equivalent of the interest and dividends paid by the issuer on the securities loaned and interest on the investment of the collateral. The fund must have the right to call the loan and obtain the securities loaned at any time on five days' notice, including the right to call the loan to enable the fund to vote the securities. Such loans may not exceed one-third of the fund's net assets taken at market. Interest on loaned securities may not exceed 10% of the annual gross income of the fund (without offset for realized capital gains). The portfolio lending policy described in this paragraph is a fundamental policy that may be changed only by a vote of a majority of Twentieth Century's shareholders. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time commitment to purchase is made. Delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. RULE 144A SECURITIES The funds may, from time to time, purchase Rule 144A securities when they present attractive investment opportunities that otherwise meet Twentieth Century's criteria for selection. Rule 144A securities are securities that are privately placed with and traded among qualified institutional buyers rather than the general public. Although Rule 144A securities are considered "restricted securities," they are not necessarily illiquid. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of Twentieth Century has delegated the day-to-day function of determining the liquidity of Rule 144A securities to the manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities is limited to certain qualified institutional investors, the liquidity of such securities may be limited accordingly and a fund may, from time to time, hold a Rule 144A security that is illiquid. In such an event, Twentieth Century will consider appropriate remedies to minimize the effect on such fund's liquidity. No fund may invest more than 15% of its assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares). SHORT SALES Twentieth Century's funds described in this prospectus may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. 12 A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. PERFORMANCE ADVERTISING From time to time, Twentieth Century may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return and, with respect to the balanced fund, yield. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced a fund's cumulative total return over the same period if the fund's performance had remained constant throughout. A quotation of yield reflects a fund's income over a stated period expressed as a percentage of the fund's share price. With respect to Balanced Investors, yield is calculated by adding over a 30-day (or one-month) period all interest and dividend income (net of fund expenses) calculated on each day's market values, dividing this sum by the average number of fund shares outstanding during the period, and expressing the result as a percentage of the fund's share price on the last day of the 30-day (or one-month) period. The percentage is then annualized. Capital gains and losses are not included in the calculation. Yields are calculated according to accounting methods that are standardized in accordance with SEC rules for all stock and bond funds. Because yield accounting methods differ from the methods used for other accounting purposes, the fund's yield may not equal the income paid on your shares or the income reported in the fund's financial statements. The funds may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services or Donoghue's Money Fund Report) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. In addition, fund performance may be compared to well-known indices of market performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones Industrial Average. Fund performance may also be compared to other funds in the Twentieth Century family. It may also be combined or blended with other funds in the Twentieth Century family, and that combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. 13 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- TWENTIETH CENTURY FAMILY OF FUNDS In addition to the 16 funds offered by Twentieth Century Investors, Inc., the Twentieth Century family of funds also includes funds offered by Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., and Twentieth Century Strategic Asset Allocations, Inc. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. The Twentieth Century family of mutual funds now also includes the funds offered by The Benham Group as a result of the acquisition of Benham Management Corporation, investment manager of The Benham Group, by Twentieth Century Companies, Inc. The Benham Group offers several funds with investment objectives similar to the Twentieth Century funds, but with different fee structures. You may also wish to consider the funds of The Benham Group for your investment needs. For a prospectus and more information about those funds, please call 1-800-331-8331. INVESTING IN TWENTIETH CENTURY You may make an initial investment in any amount you choose in any of the funds offered by this prospectus. SUBSEQUENT INVESTMENTS TO PURCHASE ADDITIONAL SHARES IN ANY ONE FUND ACCOUNT MUST BE IN AN AMOUNT OF $50 OR MORE.* You may diversify your investments by choosing a combination of the funds for your investment program. (See "Information About Investment Policies of the Funds," page 7.) While there is no minimum investment requirement except as noted above, if you have one or more accounts in any fund with a share value of less than $2,500 [$1,000 for Uniform Gifts/Transfers to Minors Act ("UGMA/ UTMA") accounts], you must establish an automatic investment to purchase additional shares in each such fund account in an amount of $50 a month or more per month.** (See "Automatic Investments," page 15 and "Automatic Redemption of Shares," page 21.) * THIS REQUIREMENT DOES NOT APPLY TO 403(B) ACCOUNTS AND OTHER TYPES OF TAX-DEFERRED RETIREMENT PLAN ACCOUNTS. ** THIS REQUIREMENT DOES NOT APPLY TO INDIVIDUAL RETIREMENT ACCOUNTS, 403(B) ACCOUNTS AND OTHER TYPES OF TAX-DEFERRED RETIREMENT PLAN ACCOUNTS. You may invest in the following ways: BY MAIL Send your application and check or money order to Twentieth Century. Checks must be payable in U.S. dollars. ADDITIONAL INVESTMENTS. When making additional investments by mail, please enclose your check with the return remittance portion of the confirmation of your previous investment, if available. If the remittance slip is not available, indicate on your check or a separate piece of paper your name, address and account number. Orders to purchase shares are effective on the day Twentieth Century receives your check or money order. (See "When Share Price is Determined," page 25.) BY TELEPHONE Once your account is open, you may make investments by telephone if you have elected the service authorizing Twentieth Century to draw on your bank account when you call with instructions. Investments made by phone are effective at the time of your call. (See "When Share Price Is Determined," page 25.) BY WIRE You may make your initial or subsequent investments in Twentieth Century by wiring funds. To do so: 14 (1) Instruct your bank to wire funds to the Boatmen's First National Bank of Kansas City, Missouri, ABA routing number 101000035. (2) BE SURE TO SPECIFY ON THE WIRE: (A) TWENTIETH CENTURY INVESTORS, INC. (B) THE FUND YOU ARE BUYING AND ACCOUNT NUMBER (IF YOU HAVE ONE). (C) YOUR NAME. (D) YOUR CITY AND STATE. (E) YOUR TAXPAYER IDENTIFICATION NUMBER. Wired funds are considered received on the day they are deposited in Twentieth Century's account if they are deposited before the close of business on the New York Stock Exchange, usually 3 p.m. Central time. (See "When Share Price Is Determined," page 25.) AUTOMATIC INVESTMENTS Once your account is open, you may make investments automatically by electing the service authorizing Twentieth Century to draw on your bank account. SUCH INVESTMENTS MUST BE IN AMOUNTS OF NOT LESS THAN $50 IN ANY ONE ACCOUNT. You should inquire at your bank whether it will honor a preauthorized electronic draft. Contact Twentieth Century if your bank cannot accept electronic drafts or if it requires additional documentation. You may change the date or amount of your automatic investment anytime by letter or telephone call to Twentieth Century at least five business days before the change is to become effective. ADDITIONAL INFORMATION ABOUT INVESTMENTS TWENTIETH CENTURY CANNOT ACCEPT INVESTMENTS SPECIFYING A CERTAIN PRICE, DATE OR NUMBER OF SHARES AND WILL RETURN THESE INVESTMENTS. Once you have mailed or otherwise trans-mitted your investment instruction to Twentieth Century, it may not be modified or cancelled. 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. Additionally, purchases may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the funds. Twentieth Century intends, upon 60 days' prior notice, to involuntarily redeem shares in any account that does not meet the minimum value or automatic investment requirements applicable to such account. Twentieth Century reserves the right to change the amount of these minimums from time to time or waive them in whole or in part for certain classes of investors. (See "Automatic Investments," this page and "Automatic Redemption of Shares," page 21.) Transactions in shares of the funds may be executed by brokers or investment advisers who charge a fee for their services. You should be aware of the fact that these transactions may be made directly with Twentieth Century without incurring such fees. TAX IDENTIFICATION NUMBER You must furnish Twentieth Century with your tax identification number and state whether or not you are subject to withholding for prior under-reporting, certified under penalties of perjury as prescribed by the Internal Revenue Code and Regulations. Unless previously furnished, investments received without such certifications will be returned. Instructions to exchange or transfer shares held in established accounts will be refused unless the certifications have been provided, and redemption of such shares will be subject to federal tax withholding at the rate of 31%. In addition, redemption proceeds will be reduced by $50 to reimburse Twentieth Century for the penalty that the IRS will impose on the company for failure to report your tax identification number on information reports. Please avoid 15 these penalties by correctly furnishing your tax identification number. CERTIFICATES At your written request, Twentieth Century will issue negotiable stock certificates. Unless your shares are purchased with wired funds, a certificate will not be issued until 15 days have elapsed from the time of purchase, or Twentieth Century has satisfactory proof of payment, such as a copy of your cancelled check. Negotiable certificates will not be issued for fund shares held in accounts that do not meet the minimum account value requirement for that fund. SPECIAL SHAREHOLDER SERVICES You may establish one or more special services designed to provide an easy way to do business with Twentieth Century. By electing these services on your application or by completing the appropriate forms, you may authorize: * Investments by phone. * Automatic investments. * Exchanges and redemptions by phone. * Exchanges and redemptions in writing signed by any one registered owner. * Redemptions without a signature guarantee. * Transmission of redemption proceeds by wire or electronic funds transfer. An election to establish any of the above services, except automatic investments, will also apply to all existing and future accounts in the Twentieth Century family of funds listed under the same social security number or employer identification number. With regard to the service which enables you to exchange and redeem by phone or in writing signed by only one registered owner and with respect to redemptions without a signature guarantee, Twentieth Century, its transfer agent and investment adviser will not be responsible for any loss for instructions that they reasonably believe are genuine. Twentieth Century intends to employ reasonable procedures to confirm that instructions received by Twentieth Century for your account in fact are genuine. Such procedures will include requiring personal information to verify the identity of callers, providing written confirmations of telephone transactions, and recording telephone calls. If Twentieth Century does not employ reasonable procedures to confirm the genuineness of instructions, then Twentieth Century may be liable for losses due to unauthorized or fraudulent instructions. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER You may exchange your shares for shares of other funds in the Twentieth Century family of funds, subject to any applicable minimum initial investment requirements of the funds into which you wish to exchange. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. Except as noted below, exchanges from any one fund account are limited to six times in any one calendar year. In addition, the shares being exchanged and the shares of each fund being acquired must have a current value of at least $100 and otherwise meet the minimum investment requirement, if any, of the fund being acquired. If you would like to exchange your shares, please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. (See "Additional Information About Exchanges," page 17.) Shares of the funds may be received in exchange for shares of any series issued by the other members of the Twentieth Century family of funds. THE EXCHANGE PRIVILEGE IS NOT DESIGNED TO AFFORD SHAREHOLDERS A WAY TO PLAY SHORT-TERM SWINGS IN THE MARKET. TWENTIETH CENTURY IS NOT SUITABLE FOR THAT PURPOSE. 16 BY TELEPHONE You may exchange your shares by phone if you have authorized Twentieth Century to accept telephone instructions. (Before calling, read "Additional Information About Exchanges," on this page.) BY MAIL You may direct Twentieth Century in writing to exchange your shares. If you have authorized Twentieth Century to accept written instructions from any one registered owner, and if the shares are owned by two or more persons, only one signature is required on your written exchange request. Otherwise, the request should be signed by each person in whose name the shares are registered. All signatures should be exactly as the name appears in the registration; for example, if an owner's name is registered as John Robert Jones, he should sign that way and not as John R. Jones. (Before writing, read "Additional Information About Exchanges," on this page.) ADDITIONAL INFORMATION ABOUT EXCHANGES (1) IN A EXCHANGE FROM ONE ACCOUNT TO ANOTHER ACCOUNT, THE SHARES BEING SOLD AND THE NEW SHARES BEING PURCHASED MUST HAVE A CURRENT VALUE OF AT LEAST $100 AND YOU MUST MEET ANY INVESTMENT MINIMUM IMPOSED BY THE FUND BEING ACQUIRED. (2) EXCHANGES FROM ANY ONE FUND ACCOUNT ARE LIMITED TO SIX TIMES IN ANY ONE CALENDAR YEAR except for the exchange of shares pursuant to an automatic exchange program. [This limitation will not apply to automatic Twentieth Century College Investment Program exchanges or to shares held in 403(b) accounts and certain pooled accounts owned by institutional investors.] (3) The shares being acquired must be qualified for sale in your state of residence. (4) If the shares are represented by a negotiable stock certificate, the certificate must be returned before the exchange can be effected. (5) ONCE YOU HAVE TELEPHONED OR MAILED YOUR EXCHANGE REQUEST, IT IS IRREVOCABLE AND MAY NOT BE MODIFIED OR CANCELLED. (6) If, in any 90-day period, the total of your exchanges and your redemptions from any one account in the equity funds or the balanced fund exceeds the lesser of $250,000 or 1% of such fund's assets, further exchanges will be subject to special requirements to comply with Twentieth Century's policy on large redemptions. (See "Special Requirements for Large Redemptions," page 20.) (7) For the purposes of processing exchanges, the value of the shares surrendered and the value of the shares acquired are the net asset values of such shares next computed after receipt of your exchange order. (8) Shares MAY NOT be exchanged unless you have furnished Twentieth Century with your tax identification number, certified as prescribed by the Internal Revenue Code and Regulations. (See "Tax Identification Number," page 15.) (9) An exchange of shares is, for federal income tax purposes, a sale of the shares, on which you may realize a taxable gain or loss. (10 If the request is made by a corporation, partnership, trust, fiduciary, agent or unincorporated association, Twentieth Century will require evidence satisfactory to it of the authority of the individual signing the request. 17 HOW TO REDEEM SHARES Twentieth Century will buy back ("redeem") your shares at any time at the net asset value next determined after receipt of a redemption request in good order. (Before redeeming, please read "Special Requirements for Large Redemptions," page 20, "Additional Information About Redemptions," page 21 and "When Share Price Is Determined," page 25.) Your redemption proceeds may be delayed if you have owned your shares less than 15 days. (See "Redemption Proceeds," page 19.) ALL REQUESTS TO REDEEM SHARES HAVING A VALUE OF $25,000 OR MORE, THE PROCEEDS OF WHICH ARE TO BE PAID BY CHECK, MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE) MUST BE IN WRITING. ADDITIONALLY, THE REQUEST MUST BE SIGNED BY EACH PERSON IN WHOSE NAME THE SHARES ARE OWNED, AND ALL SIGNATURES MUST BE GUARANTEED. (See "Signature Guarantee," page 19 and "How to Change Your Address of Record," page 22.) BY TELEPHONE If you have authorized Twentieth Century to accept telephone instructions, you may redeem your shares by telephone. ONCE MADE, YOUR TELEPHONE REQUEST MAY NOT BE MODIFIED OR CANCELLED. If you call before the close of the New York Stock Exchange, usually 3 p.m. Central time, you will receive that day's closing price. (Before calling, read "Additional Information About Redemptions," page 21.) BY MAIL Your written instructions to redeem shares may be in any one of the following forms: * A redemption form, available from Twentieth Century. * A letter to Twentieth Century. * An assignment form or stock power. * An endorsement on the back of your negotiable stock certificate, if you have one. ONCE MAILED TO TWENTIETH CENTURY, THE REDEMPTION REQUEST IS IRREVOCABLE AND MAY NOT BE MODIFIED OR CANCELLED. If you have authorized Twentieth Century to accept written instructions from any one registered owner without a signature guarantee, only one signature is required on your written redemption request and it need not be guaranteed. If you have not elected this special service, all signatures must be guaranteed. (See "Signature Guarantee," page 19.) The request must be signed by each person in whose name the shares are registered; for example, in the case of joint ownership, each owner must sign. All signatures should be exactly as the name appears in the registration. If the owner's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. (Before writing, see "Additional Information About Redemptions," page 21.) BY CHECK-A-MONTH Twentieth Century's Check-A-Month plan automatically redeems enough shares each month to provide you with a check for a minimum of $25. To set up a Check-A-Month plan, call Twentieth Century for instructions. Shares will be redeemed on the 20th day of each month or the next business day, and your check will be mailed the next day. If your monthly checks exceed the dividends, interest and capital appreciation on your shares, the payments will deplete your investment. Amounts paid to you by Check-A-Month are not a return on your investment. They are derived from the redemption of shares in your account, and you must report on your income tax return gains or losses that you realize. 18 You may specify a Check-A-Month when you make your first investment. If you order a Check-A-Month thereafter, then, as in any redemption, the request for a Check-A-Month or any increase in amount must be signed by all owners with their signatures guaranteed unless Twentieth Century has been authorized to accept instructions from any one owner, by telephone or in writing without a signature guarantee. You may request that the Check-A-Month be sent to an address other than the address of record at the time of your first investment. Thereafter, a request to send a Check-A-Month to an address other than the address of record must be signed by all owners, with their signatures guaranteed. Twentieth Century may terminate the Check- A-Month at any time, upon notice to you, and you likewise may terminate it or change the amount of the Check-A-Month, by notice to Twentieth Century in writing or by telephone. Termination or change will become effective within five business days following receipt of your instruction. Your Check-A-Month plan may begin anytime after you have owned your shares for 15 days. SIGNATURE GUARANTEE When a signature guarantee is required, each signature MUST be guaranteed by a domestic bank or trust company, credit union, broker, dealer, national securities exchange, registered securities association, clearing agency or savings association as defined by federal law. The institution providing the guarantee must use a signature guarantee ink stamp or medallion which states "Signature(s) Guaranteed" and be signed in the name of the guarantor by an authorized person with that person's title and the date. Twentieth Century may reject a signature guarantee if the guarantor is not a member of or participant in a signature guarantee program. Shareholders living abroad may acknowledge their signatures before a U.S. consular officer. Military personnel in foreign countries may acknowledge their signatures before officers authorized to take acknowledgements (e.g., legal officers and adjutants). Twentieth Century may waive the signature guarantee on a redemption of $25,000 or less if it is able to verify the signatures of all registered owners from its account records. Twentieth Century reserves the right to amend or discontinue this waiver policy at any time and, with regard to a particular redemption transaction, to require a signature guarantee at its discretion. REDEMPTION PROCEEDS Redemption proceeds may be sent to you: BY MAIL If your redemption check is mailed, it is usually mailed on the second business day after receipt of your redemption request, but not later than seven days afterwards. When a redemption occurs shortly after a recent purchase made by check or electronic draft, Twentieth Century may hold the redemption proceeds beyond seven days but only until the purchase funds have cleared, which may take up to 15 days or more. No interest is paid on the redemption proceeds after the redemption is processed but before your redemption check is mailed. IF YOU ANTICIPATE REDEMPTIONS SOON AFTER YOU PURCHASE YOUR SHARES, YOU ARE ADVISED TO WIRE FUNDS TO AVOID DELAY. Except for a direct transfer of proceeds from an IRA or 403(b) to a custodian of another IRA or 403(b), and as noted below, all checks will be made payable to the registered owner of the shares and will be mailed only to the address of record. If you would like a redemption check made payable to someone other than the registered owner of the shares and/or mailed to an address other than the address of record, your request to redeem must (1) be made in writing; (2) include an instruction to make the check payable to someone other than the registered owner of the shares and/or mail it to an address other than 19 the address of record; and (3) be signed by all registered owners with their signatures guaranteed. (See "Signature Guarantee," on page 19.) Redemptions from UGMA/UTMA accounts and from certain types of retirement accounts, such as IRA, 403(b) and qualified retirement plan accounts, will not be eligible for this special service. If you would like to use this special service but are not certain that a redemption from your account is eligible, please call Twentieth Century prior to submitting your request. (See "Telephone Services," page 21.) BY WIRE AND ELECTRONIC FUNDS TRANSFER You may authorize Twentieth Century to transmit redemption proceeds by wire or electronic funds transfer. These services will be effective 30 days after Twentieth Century receives the authorization. Proceeds from the redemption of shares will normally be transmitted on the first business day, but not later than the seventh day, following the date of redemption. Your bank usually will receive wired funds the day they are transmitted or the next day. Electronically transferred funds will ordinarily be received within one to seven days after transmission. Once the funds are transmitted, the time of receipt and the availability of the funds are not within Twentieth Century's control. Wired funds are subject to a charge of $10 to cover bank wire charges, which is deducted from redemption proceeds. If your bank account changes, you must send a new "voided" check, preprinted with your bank registration, with written instructions, including tax identification number. The change will be effective 30 days after receipt by Twentieth Century. Redemption proceeds will be transmitted by wire or electronic funds transfer only after Twentieth Century is satisfied that checks or electronic drafts that paid for the shares have cleared, i.e., after 15 days have elapsed from the time of purchase, or you have furnished Twentieth Century with satisfactory proof that the purchase funds have cleared. If a purchase were made by check, for example, a copy of the cancelled check would be satisfactory proof. No interest is paid on the redemption proceeds after the redemption and before the funds are transmitted. IF YOU ANTICIPATE REDEMPTIONS WITHIN 15 DAYS AFTER YOU PURCHASE SHARES, YOU ARE ADVISED TO WIRE FUNDS TO PAY FOR YOUR PURCHASES TO AVOID DELAY. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS Twentieth Century has elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, Twentieth Century reserves the right to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided to you in lieu of cash without prior notice. If you expect to make a large redemption and would like to avoid any possibility of being paid in securities, you may do so by providing Twentieth Century with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. Receipt of your instruction 15 days prior to the transaction provides the fund with sufficient time to raise the cash in an orderly manner to pay the redemption and thereby minimizes the effect of the redemption on the fund and its remaining shareholders. Despite its right to redeem fund shares through a redemption-in-kind, Twentieth Century 20 does not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, Twentieth Century expects redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. AUTOMATIC REDEMPTION OF SHARES If at any time you have a fund account that falls into either of the following categories: (i) you invested the required minimum initial investment amount for the fund, currently $2,500 ($1,000 for UGMA/UTMA accounts), but due to exchanges or redemptions you have made, the account now has a value of less than the minimum initial investment amount; or (ii) you have not invested the minimum initial investment amount, and an automatic investment program of $50 or more each month does not exist for the account; a notification will be sent advising you of the need to either make an investment to bring the value of the shares held in the account up to the minimum initial investment amount or to establish an automatic investment program of $50 or more each month. If the investment is not made or the automatic investment is not established within 60 days from the date of notification, the shares held in the fund account will be redeemed and the proceeds from the redemption will be sent by check to your address of record. The automatic redemption of shares will not apply to College Investment Program accounts in the rebalancing phase, Individual Retirement Accounts, 403(b) accounts and other types of tax-deferred retirement plan accounts. In addition, Twentieth Century reserves the right to modify its policies regarding the automatic redemption of shares, or to waive such policies in whole or in part for certain classes of investors. ADDITIONAL INFORMATION ABOUT REDEMPTIONS If you experience difficulty in making a telephone redemption during periods of drastic economic or market changes, your redemption request may be made by regular or express mail. It will be implemented at the net asset value next determined after your request has been received by Twentieth Century in good order. Twentieth Century reserves the right to revise or terminate the telephone redemption privilege at any time. REDEMPTIONS SPECIFYING A CERTAIN DATE OR PRICE CANNOT BE ACCEPTED AND WILL BE RETURNED. If the shares are represented by a negotiable stock certificate, the certificate must be returned before the redemption can be effected. ALL REDEMPTIONS ARE MADE AND THE PRICE IS DETERMINED ON THE DAY WHEN ALL DOCUMENTATION, PROPERLY COMPLETED, IS RECEIVED BY TWENTIETH CENTURY. (SEE "WHEN SHARE PRICE IS DETERMINED," PAGE 25.) If a request to redeem is made by a corporation, partnership, trust, fiduciary, agent, or unincorporated association, Twentieth Century will require evidence satisfactory to it of the authority of the individual signing the request. Please call or write Twentieth Century for further information. A request to redeem shares in an IRA or 403(b) plan must be accompanied by an IRS Form W-4P and a reason for withdrawal as specified by the IRS. TELEPHONE SERVICES INVESTORS LINE You may reach a Twentieth Century Investor Services Representative by calling our Investors Line at 1-800-345-2021. On our Investors Line you may request information about 21 our funds and a current prospectus, speak with an Investor Services Representative about your account, or get answers to any questions that you may have about the funds and the services we offer. In addition, if you have authorized telephone transactions in your account, you may have an Investor Services Representative help you with investment, exchange and redemption transactions. UNUSUAL STOCK MARKET CONDITIONS HAVE IN THE PAST RESULTED IN AN INCREASE IN THE NUMBER OF SHAREHOLDER TELEPHONE CALLS.IF YOU EXPERIENCE DIFFICULTY IN REACHING TWENTIETH CENTURY ON THE INVESTORS LINE DURING SUCH PERIODS, YOU SHOULD CONSIDER SENDING YOUR TRANSACTION INSTRUCTIONS BY MAIL, EXPRESS MAIL OR COURIER SERVICE OR USING OUR AUTOMATED INFORMATION LINE, IF YOU HAVE REQUESTED AND RECEIVED AN ACCESS CODE AND ARE NOT ATTEMPTING TO REDEEM SHARES. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. You may also obtain an access code that will allow you to use the Automated Information Line to make investment and exchange transactions in your accounts and obtain information about your share balance, account value and the most recent transaction. REDEMPTION TRANSACTIONS CANNOT BE MADE ON THE AUTOMATED INFORMATION LINE. Please call our Investors Line at 1-800-345-2021 for more information on how to obtain an access code for our Automated Information Line. HOW TO CHANGE YOUR ADDRESS OF RECORD You may notify Twentieth Century of changes in your address of record either by writing us or calling our Investors Line. Because your address of record impacts every piece of information we send to you, you are urged to notify us promptly of any change of address. TO PROTECT YOU AND TWENTIETH CENTURY, ALL REQUESTS TO REDEEM SHARES HAVING A VALUE OF $25,000 OR MORE, THE PROCEEDS OF WHICH ARE TO BE PAID BY CHECK, MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE) MUST BE MADE IN WRITING, SIGNED BY EACH PERSON IN WHOSE NAME THE SHARES ARE OWNED, AND ALL SIGNATURES MUST BE GUARANTEED. (See "Signature Guarantee," page 19.) TAX-QUALIFIED RETIREMENT PLANS Twentieth Century's funds are available for your tax-deferred retirement plan. Call or write Twentieth Century and request the appropriate forms for: * Individual Retirement Accounts (IRAs). * 403(b) plans for employees of public school systems and non-profit organizations. * Profit sharing plans and pension plans for corporations and other employers. HOW TO TRANSFER AN INVESTMENT TO A TWENTIETH CENTURY RETIREMENT PLAN It is easy to transfer your tax-deferred plan to Twentieth Century from another company or custodian. Call or write Twentieth Century for a Request to Transfer form. If you direct Twentieth Century to transfer funds from an existing non-retirement Twentieth Century account into a retirement account, the shares in your non-retirement account will be redeemed. The redemption proceeds will be invested in your Twentieth Century IRA or other tax-qualified retirement plan. The redemption is a taxable event resulting in a taxable gain or loss. 22 COLLEGE INVESTMENT PROGRAM Through this special service, you can systematically invest for a child's college education. You may make automatic investments in any amount you choose (minimum of $50) in shares of Select Investors. As the child nears college age, or another age you select, Twentieth Century will automatically begin reallocating a predetermined percentage of your investment from shares of Select Investors to shares of our money market fund, Cash Reserve. (See Twentieth Century's Fixed Income Funds Prospectus.) The percentage of your investment that will be reallocated is based on the number of years over which you want the reallocation to occur. Call Twentieth Century for additional information about this service. HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON You may transfer ownership of your shares to another person or organization by written instructions to Twentieth Century, SIGNED BY ALL OWNERS AND WITH SIGNATURES GUARANTEED AS DESCRIBED UNDER "SIGNATURE GUARANTEE," PAGE 19. IF THE SHARES ARE REPRESENTED BY A NEGOTIABLE STOCK CERTIFICATE, THE CERTIFICATE MUST BE RETURNED WITH YOUR TRANSFER INSTRUCTIONS. REPORTS TO SHAREHOLDERS At the end of each quarter, Twentieth Century will send you a consolidated statement that summarizes all of your Twentieth Century holdings. At the same time, you will also receive an individual statement for each Twentieth Century fund you own with complete year-to-date information on activity in your account. You may at any time also request a statement of your account activity be sent to you. With the exception of the automatic transactions noted below, each time you invest, redeem, transfer or exchange shares, Twentieth Century will send you a confirmation of the transaction. Automatic investment purchases and 403(b) purchases (other than transfers), exchange made in an automatic exchange program, purchases made by direct deposit and transfers made in a Transfer-A-Month program will be confirmed on your next consolidated quarterly statement. Please carefully review all information in your confirmation or consolidated statement relating to transactions to ensure that your instructions have been acted on properly. Please notify Twentieth Century in writing if there is an error. If you fail to provide notification of an error with reasonable promptness i.e., within 30 days of non-automatic transactions or within 30 days of the date of your consolidated quarterly statement, in the case of automatic transactions noted above, we will deem you to have ratified the transaction. No later than January 31 of each year, Twentieth Century will send you the following reports, which you may use in completing your U.S. income tax return: Form 1099-DIV Reports taxable distribu-tions during the preceding year. (If you did not receive taxable distributions in the previous year, you will not receive a 1099-DIV.) Form 1099-B Reports proceeds paid on redemptions during the preceding year. Form 1099-R Reports distributions from IRAs and 403(b) plans during the preceding year. At such time as prescribed by law, Twentieth Century will send you a Form 5498, which reports contributions to your IRA for the previous calendar year. In December of each year, Twentieth Century will send you an annual report that includes audited financial statements for the fiscal year ending the preceding October 31 and a list of securities in its portfolios on that date. In 23 June of each year, Twentieth Century will send you a semiannual report that includes unaudited financial statements for the six months ending the preceding April 30, as well as a list of securities in its portfolios on that date. Twentieth Century does not publish interim lists of portfolio securities. Twentieth Century usually prepares and mails to the address of record a new prospectus dated March 1 of each year. Each year that an annual meeting is held you will receive a notice of the annual meeting of shareholders (and of special meetings, if any) and a proxy statement. BECAUSE TWENTIETH CENTURY NEEDS YOUR VOTE TO CONDUCT ITS ANNUAL MEETING OF SHAREHOLDERS, YOU ARE URGED TO RETURN PROXIES PROMPTLY. IT IS IMPORTANT THAT YOU NOTIFY TWENTIETH CENTURY PROMPTLY OF ANY CHANGE OF ADDRESS. (See "How to Change Your Address of Record," page 22.) 24 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is their net asset value next determined after receipt of your instruction to purchase, exchange or redeem. Net asset value is determined by calculating the total value of a fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined on each day that the New York Stock Exchange is open. Investments and requests to redeem shares will receive the share price next determined after receipt by Twentieth Century of the investment or redemption request. For example, investments and requests to redeem shares received by Twentieth Century before the close of business on the New York Stock Exchange are effective on, and will receive the price determined, that day as of the close of the Exchange. Redemption requests received thereafter are effective on, and receive the price determined as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received only when your check or wired funds are received by Twentieth Century. Wired funds are considered received on the day they are deposited in Twentieth Century's bank account if they are deposited before the close of business on the Exchange, usually 3 p.m. Central time. Investments by telephone pursuant to your prior authorization to Twentieth Century to draw on your bank account are considered received at the time of your telephone call. Investment and transaction instructions received by Twentieth Century on any business day by mail at its office prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Investments and instructions received after that time, will receive the price determined on the next business day. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: The portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked 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 good faith by the board of directors. Debt securities not traded on a principal securities exchange are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the board of directors. Pursuant to a determination by Twentieth Century's board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That value is then 25 exchanged 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 by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset values of Twentieth Century's funds are published in leading newspapers daily. The net asset values may also be obtained by calling Twentieth Century. (See "Telephone Services," page 21.) DISTRIBUTIONS In general, distributions from net investment income and net realized securities gains, if any, are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. EQUITY FUNDS Distributions from investment income and from net profits realized on the sale of securities, if any, will be declared annually on or before December 31. THE OBJECTIVE OF THESE FUNDS IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU MAY MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. BALANCED FUND Distributions from investment income will be paid quarterly in March, June, September and December. Distributions from net profits realized on the sale of securities, if any, will be paid annually on or before December 31. GENERAL INFORMATION ABOUT DISTRIBUTIONS Distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares held in Individual Retirement Accounts and 403(b) plans paid in cash only if you are 59-1/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, real- 26 ized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. Because such gains and dividends are in- cluded in the value of your shares, when they are distributed the value of your shares is reduced by the amount of the distribution. If you buy your shares just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," on this page.) If your distribution is reinvested in additional shares, the distribution has no effect on the value of your investment; while you own more shares, the value of each share has been reduced by the amount of the distribution. Likewise, if you take your distribution in cash, the value of your shares after the record date plus the cash received is equal to the value of the shares before the record date. For example, if your shares immediately before the distribution have a value of $10, including $2 in dividends and capital gains realized by the fund during the year, and if the $2 is distributed, the value will decline to $8. If the $2 is reinvested at $8 per share, you will receive .250 shares, so that, after the distribution, you will have 1.250 shares at $8 per share, or $10, the same as before. TAXES Twentieth Century has elected to be taxed under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders it pays no income tax. Distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by 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 in respect of investments by non-resident investors. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter 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. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, 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 may also 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 it to shareholders. Distributions are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in 27 the securities held in the investment portfolio of the fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," on page 26.) In January of the year following the distribution, Twentieth Century will send you a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. Distributions may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. PAYMENTS REPORTED BY TWENTIETH CENTURY THAT OMIT YOUR SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER WILL SUBJECT TWENTIETH CENTURY TO A PENALTY OF $50, WHICH WILL BE CHARGED AGAINST YOUR ACCOUNT IF YOU FAIL TO PROVIDE THE CERTIFICATION BY THE TIME THE REPORT IS FILED, AND IS NOT REFUNDABLE. (See "Tax Identification Number," page 15.) Redemption of shares of a fund will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of Twentieth Century. Acting pursuant to an investment advisory agreement entered into with Twentieth Century, Investors Research Corporation ("Investors Research") serves as the investment manager of Twentieth Century. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to Twentieth Century since it was founded in 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment advisor to the Benham Group of Mutual Funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be pro- 28 viding investment management services to Benham funds. Investors Research supervises and manages the investment portfolios of Twentieth Century and directs the purchase and sale of its investment securities. Investors Research utilizes teams of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The teams meet regularly to review portfolio holdings and to discuss purchase and sale activity. The teams adjust holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio manager members of the team may also adjust portfolio holdings of the funds as necessary between team meetings. The portfolio manager members of the teams managing the funds described in this prospectus and their work experience for the last five years are as follows: JAMES E. STOWERS III, President and Portfolio Manager, joined Twentieth Century in 1981. He is a member of the teams that manage Growth Investors, Ultra Investors and Vista Investors. ROBERT C. PUFF JR., Executive Vice President and Chief Investment Officer, has been a Portfolio Manager since joining Twentieth Century in 1983. In his position as Chief Investment Officer, Mr. Puff oversees the investment activities of all of the teams that manage Twentieth Century funds. CHARLES M. DUBOC, Senior Vice President and Portfolio Manager, joined Twentieth Century in August 1985, and served as Fixed Income Portfolio Manager from that time until April 1993. In April 1993, Mr. Duboc joined Twentieth Century's equity investment efforts. He is a member of the team that manages Select Investors, Heritage Investors and the equity portion of Balanced Investors. CHRISTOPHER K. BOYD, Vice President and Portfolio Manager, joined Twentieth Century in March 1988 as an Investment Analyst, a position he held until December 1990. At that time he was promoted to Assistant Portfolio Manager, and then was promoted to Portfolio Manager in December 1992. He is a member of the team that manages Growth Investors and Ultra Investors. GLENN A. FOGLE, Vice President and Portfolio Manager, joined Twentieth Century in September 1990 as an Investment Analyst, a position he held until March 1993. At that time he was promoted to Portfolio Manager. He is a member of the team that manages Vista Investors. DEREK FELSKE, Vice President and Portfolio Manager, joined Twentieth Century in September 1993 as a Portfolio Manager. He is a member of the team that manages Growth Investors and Ultra Investors. Prior to joining Twentieth Century, Mr. Felske served as a member of the portfolio management team of RCM Capital Management, a San Francisco, California-based investment management firm, a position he held from May 1991 to September 1993. From September 1989 to May 1991, Mr. Felske attended the University of Pennsylvania-Wharton School of Business, where he obtained an MBA in finance. NANCY B. PRIAL, Vice President and Portfolio Manager, joined Twentieth Century in February 1994 as a Portfolio Manager. She is a member of the team that manages Select Investors, Heritage Investors and the equity portion of Balanced Investors. For more than four years prior to joining Twentieth Century, Ms. Prial served as Senior Vice President and Portfolio Manager at Frontier Capital Management Company, Boston, Massachusetts. NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager, joined Twentieth Century as Vice President and Portfolio Manager in November 1989. In April 1993, he became Senior Vice President. He is a member of the team that manages the fixed income portion of Balanced Investors. The activities of Investors Research are subject only to directions of Twentieth Century's board of directors. Investors Research pays all the 29 expenses of Twentieth Century except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to Twentieth Century, Investors Research receives an annual fee of 1% of the average net assets of each series of shares offered by this prospectus. On the first business day of each month, each series of shares pays a management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the series' net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). The management fees paid by the funds to Investors Research may be higher than that paid by many investment companies. However, most if not all of such companies also pay in addition certain of their own expenses, while virtually all of Twentieth Century's expenses except as specified above are paid by Investors Research. CODE OF ETHICS Twentieth Century and Investors Research have adopted a Code of Ethics that restricts personnel investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111, acts as transfer agent and dividend-paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century, and is paid for such services by Investors Research. Certain recordkeeping and administrative services that would otherwise be performed by Twentieth Century Services, Inc., may be performed by an insurance company or other entity providing similar services for various retirement plans using shares of Twentieth Century as a funding medium, or by broker dealers for their customers investing in shares of Twentieth Century or by sponsors of multi mutual fund no- low-transaction fee programs. Investors Research may enter into contracts to pay them for such recordkeeping and administrative services out of its unified management fee. From time to time, special services may be offered to shareholders who maintain higher share balances in the funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman of the board of Twentieth Century Investors, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. 30 FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century Investors, Inc. was organized as a Maryland corporation on July 2, 1990. The corporation commenced operations on February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a Delaware corporation which had been in business since October 1958. Pursuant to the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland corporation was the surviving entity and continued the business of the Delaware corporation with the same officers and directors, the same shareholders and the same investment objectives, policies and restrictions. Twentieth Century is a diversified, open-end management investment company whose shares are presently held by more than 1.5 million shareholders. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century is Twentieth Century Tower, 4500 Main Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by mail to that address, or by phone to 1-800-345-2021. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century issues 16 series of $.01 par value shares. The assets belonging to each series of shares are held separately by the custodian, and in effect each series is a separate fund. Each share, irrespective of series, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series of shares affected. Matters affecting only one series are voted upon only by that series. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the shares will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for Twentieth Century to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to Twentieth Century's by-laws, the holders of shares representing at least 10% of the votes entitled to be cast may request Twentieth Century to hold a special meeting of shareholders. Twentieth Century will assist in the communication with other shareholders. TWENTIETH CENTURY RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 31 TWENTIETH CENTURY INVESTORS, INC. EQUITY FUNDS PROSPECTUS MARCH 1, 1996 [company logo] ------------------------------ P.O. Box 419200 ------------------------------ Kansas City, Missouri ------------------------------ 64141-6200 ------------------------------ 1-800-345-2021 or 816-531-5575 ------------------------------ [company logo] ----------------------------------------------------------------------- SH-BKT-4299 9603 (C) 1996 Twentieth Century Services, Inc. Recycled TWENTIETH CENTURY INVESTORS, INC. FIXED INCOME FUNDS PROSPECTUS MARCH 1, 1996 - -------------------------------------------------------------------------------- Twentieth Century Investors, Inc., a member of the Twentieth Century family of funds, offers 16 no-load mutual funds covering a variety of investment opportunities. Nine of the funds invest in fixed income or debt instruments and are described in this prospectus. Their investment objectives are listed on the inside cover of this prospectus. The seven funds that invest primarily in equity securities are described in separate prospectuses. NO-LOAD MUTUAL FUNDS Twentieth Century's funds are "no-load" investments, which means there are no sales charges or commissions. Twentieth Century has no 12b-1 plan or other deferred sales charges. The minimum investment requirement for each of the funds offered by this prospectus is stated on the inside cover. (See "Automatic Redemption of Shares," page 26.) This prospectus gives you information about Twentieth Century that you should know before investing. You should read this prospectus carefully and retain it for future reference. Additional information is included in the statement of additional information dated March 1, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Investors, Inc. 4500 Main Street * P.O. Box 419200 Kansas City, MO 64141-6200 1-800-345-2021 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-634-4113 In Missouri: 816-753-1865 - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- CASH RESERVE is a money market fund which seeks to obtain maximum current income consistent with the preservation of principal and maintenance of liquidity. The fund intends to pursue its investment objective by investing substantially all of its assets in a portfolio of money market instru-ments and maintaining a weighted average maturity of not more than 90 days. AN INVESTMENT IN CASH RESERVE IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE. MINIMUM INVESTMENT $1,000. U.S. GOVERNMENTS SHORT-TERM seeks income. The fund intends to pursue its investment objective by investing in securities of the United States government and its agencies and maintaining a weighted average maturity of three years or less. MINIMUM INVESTMENT $2,500. U.S. GOVERNMENTS INTERMEDIATE-TERM seeks a competitive level of income. The fund intends to pursue its investment objective by investing in securities of the United States government and its agencies and maintaining a weighted average maturity of three to 10 years. MINIMUM INVESTMENT $2,500. LIMITED-TERM BOND seeks income. The fund intends to pursue its investment objective by investing in bonds and other debt obligations and maintaining a weighted average maturity of five years or less. MINIMUM INVESTMENT $2,500. INTERMEDIATE-TERM BOND seeks a competitive level of income. The fund intends to pursue its investment objective by investing in bonds and other debt obligations and maintaining a weighted average maturity of three to 10 years. MINIMUM INVESTMENT $2,500. LONG-TERM BOND seeks a high level of income. The fund intends to pursue its investment objective by investing in bonds and other debt obligations and maintaining a weighted average maturity of 10 years or greater. MINIMUM INVESTMENT $2,500. TAX-EXEMPT SHORT-TERM seeks income generally exempt from federal income taxes. The fund intends to pursue its investment objective by investing in tax-exempt bonds and maintaining a weighted average maturity of three years or less. MINIMUM INVESTMENT $5,000. TAX-EXEMPT INTERMEDIATE-TERM seeks a competitive level of income generally exempt from federal income taxes. The fund intends to pursue its investment objective by investing in tax-exempt bonds and maintaining a weighted average maturity of three to 10 years. MINIMUM INVESTMENT $5,000. TAX-EXEMPT LONG-TERM seeks a high level of income generally exempt from federal income taxes. The fund intends to pursue its investment objective by investing in longer-term tax-exempt bonds and maintaining a weighted average maturity of 10 years or greater. MINIMUM INVESTMENT $5,000. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY TWENTIETH CENTURY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS TRANSACTION AND OPERATING EXPENSE TABLE ................ 4 FINANCIAL HIGHLIGHTS ................................... 5 INFORMATION REGARDING THE FUNDS INFORMATION ABOUT INVESTMENT POLICIES OF THE FUNDS ................................ 8 Cash Reserve ......................................... 8 U.S. Governments Short-Term and U.S. Governments Intermediate-Term ................. 8 Limited-Term Bond, Intermediate-Term Bond and Long-Term Bond ................................... 10 Tax-Exempt Funds: Short-Term, Intermediate-Term and Long-Term ...................... 11 FUNDAMENTALS OF FIXED INCOME INVESTING ............................... 12 TAX-EXEMPT SECURITIES .................................. 13 OTHER INVESTMENT PRACTICES ............................. 14 Portfolio Turnover ................................... 14 Repurchase Agreements ................................ 14 Derivative Securities ................................ 15 Portfolio Lending .................................... 15 Foreign Securities ................................... 16 When-Issued Securities ............................... 16 Rule 144A Securities ................................. 16 Interest Rate Futures Contracts and Options Thereon ...................................... 17 PERFORMANCE ADVERTISING ................................ 17 HOW TO INVEST WITH TWENTIETH CENTURY TWENTIETH CENTURY FAMILY OF FUNDS ....................... 19 INVESTING IN TWENTIETH CENTURY .......................... 19 By Mail .............................................. 19 By Telephone ......................................... 19 By Wire .............................................. 19 Automatic Investments ................................ 20 Additional Information About Investments ............. 20 Tax Identification Number ............................ 20 Certificates ......................................... 20 SPECIAL SHAREHOLDER SERVICES ............................ 21 HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER ........................................... 21 By Telephone ......................................... 21 By Mail .............................................. 21 Additional Information About Exchanges ............... 22 HOW TO REDEEM SHARES .................................... 22 By Telephone ......................................... 23 By Mail .............................................. 23 By Check-A-Month ..................................... 23 By Check Writing ..................................... 24 Signature Guarantee .................................. 24 REDEMPTION PROCEEDS ..................................... 25 By Mail .............................................. 25 By Wire and Electronic Funds Transfer ................ 25 Automatic Redemption of Shares ....................... 26 Additional Information About Redemptions ............. 26 TELEPHONE SERVICES ...................................... 26 Investors Line ....................................... 26 Automated Information Line ........................... 26 HOW TO CHANGE YOUR ADDRESS OF RECORD .................... 27 TAX-QUALIFIED RETIREMENT PLANS .......................... 27 HOW TO TRANSFER AN INVESTMENT TO A TWENTIETH CENTURY RETIREMENT PLAN .................... 27 COLLEGE INVESTMENT PROGRAM .............................. 28 HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON .................................... 28 REPORTS TO SHAREHOLDERS ................................. 28 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ............................................. 30 When Share Price Is Determined ....................... 30 How Share Price Is Determined ........................ 30 Where to Find Information About Share Price .................................. 31 DISTRIBUTIONS ........................................... 31 TAXES ................................................... 31 MANAGEMENT .............................................. 33 Investment Management ................................ 33 Code of Ethics ....................................... 34 Transfer and Administrative Services ................. 34 FURTHER INFORMATION ABOUT TWENTIETH CENTURY .............................. 35 3
TRANSACTION AND OPERATING EXPENSE TABLE - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Short-Term, Cash Reserve, Tax-Exempt Intermediate- U.S. Governments Intermediate- Term Bond, U.S. Short-Term and Term and Long-Term Governments Limited-Term Tax-Exempt Bond Intermediate-Term Bond Long-Term SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases none none none none Maximum Sales Load Imposed on Reinvested Dividends none none none none Deferred Sales Load none none none none Redemption Fee(1) none none none none Exchange Fee none none none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(2) .80% .75% .70% .60% 12b-1 Fees none none none none Other Expenses(3) 0.00% 0.00% 0.00% 0.00% Total Fund Operating Expenses .80% .75% .70% .60% EXAMPLE You would pay the following expenses on a $1,000 investment, assuming (1) a 5% annual return and (2) redemption the end of each time period: 1 year $ 8 $ 8 $ 7 $ 6 3 years 26 24 22 19 5 years 44 42 39 34 10 years 99 93 87 75
The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the shares of the Twentieth Century funds offered by this prospectus. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. (1) Redemption proceeds sent by wire are subject to a $10 processing charge. (2) A portion of the management fee may be paid by the funds' manager to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager. See "Management - Transfer and Administrative Services," page 34. (3) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were 0.0014 of 1% of average net assets for the most recent fiscal year. 4
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - ------------------------------------------------------------------------------------------------------------------------------------ The Financial Highlights for each of the periods presented (except as noted) have been audited by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the statement of additional information. The annual report contains additional performance information and will be made available upon request and without charge. INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------- --------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) CASH RESERVE (2) Year Ended Oct. 31, 1986 $ 1.00 $.06 $.001 $.06 $(.062) $(.001) -- $(.063) $1.00 6.46% 1987 1.00 .06 -- .06 (.056) -- -- (.056) 1.00 5.75% 1988 1.00 .07 -- .07 (.065) -- -- (.065) 1.00 6.73% 1989 1.00 .08 -- .08 (.083) -- -- (.083) 1.00 8.66% 1990 1.00 .07 -- .07 (.074) -- -- (.074) 1.00 7.67% 1991 1.00 .06 -- .06 (.058) -- -- (.058) 1.00 5.95% 1992 1.00 .04 -- .04 (.037) -- -- (.037) 1.00 3.74% 1993 1.00 .02 -- .02 (.023) -- -- (.023) 1.00 2.30% 1994 1.00 .03 -- .03 (.032) -- -- (.032) 1.00 3.21% 1995 1.00 .05 -- .05 (.052) -- -- (.052) 1.00 5.38% U.S. GOVERNMENTS SHORT-TERM(4) Year Ended Oct. 31, 1986 $ 9.95 $.87 $ .27 $1.14 $(.871) $(.056) -- $(.927) $10.16 11.89% 1987 10.16 .79 (.49) .30 (.792) (.122) -- (.914) 9.55 3.14% 1988 9.55 .81 (.13) .68 (.816) -- -- (.816) 9.41 7.44% 1989 9.42 .84 (.10) .74 (.843) -- -- (.843) 9.32 8.36% 1990 9.32 .79 (.24) .55 (.789) -- -- (.789) 9.08 6.28% 1991 9.08 .63 .33 .96 (.635) -- -- (.635) 9.41 10.99% 1992 9.41 .44 .20 .64 (.441) -- -- (.441) 9.61 6.85% 1993 9.61 .36 (.26) .10 (.036) -- -- (.036) 9.67 4.45% 1994 9.67 .40 (.40) -- (.402) -- -- (.402) 9.27 .07% 1995 9.27 .52 (.24) .76 (.519) -- -- (.519) 9.51 8.42% U.S. GOVERNMENTS INTERMEDIATE-TERM Mar. 1, 1994 (inception) through Oct. 31, 1994 $10.00 $.34 $(.45) $(.11) $(.343) -- -- $(.343) $ 9.55 (1.01%) Year Ended Oct. 31, 1995 9.55 .58 .49 1.07 (.583) -- -- (.583) 10.04 11.58% (table continued below) (table continued) RATIOS/SUPPLEMENTAL DATA ----------------------------------- Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) CASH RESERVE(2) Year Ended Oct. 31, 1986 1.01% 5.83% -- $ 134,958 1987 1.00% 5.80% -- 447,917 1988 1.00% 6.52% -- 488,781 1989 1.00% 8.35% -- 639,115 1990 1.00 % 7.40% -- 953,687 1991 .97%(3) 5.75% -- 1,236,309 1992 .98%(3) 3.62% -- 1,487,961 1993 1.00% 2.30% -- 1,256,012 1994 .80% 3.18% -- 1,298,982 1995% .70% 5.27% -- 1,469,546 U.S. GOVERNMENTS SHORT-TERM(4) Year Ended Oct. 31, 1986 1.01% 8.54% 464% $ 254,714 1987 1.00% 8.10% 468% 335,601 1988 1.00% 8.60% 578% 440,380 1989 1.00% 9.10% 567% 443,475 1990 1.00% 8.64% 620% 455,536 1991 .99%(3) 6.88% 779% 534,515 1992 .99%(3) 4.62% 391% 569,430 1993 1.00% 3.73% 413% 511,981 1994 .81% 4.17% 470% 396,753 1995 .70% 5.53% 128% 391,331 U.S. GOVERNMENTS INTERMEDIATE-TERM Mar. 1, 1994 (inception) through Oct. 31, 1994 .75%(5) 5.43%(5) 205%(5) $ 6,280 Year Ended Oct. 31, 1995 74% 5.99% 137% 21,981 (1) Actual total return for period indicated, unless otherwise noted. (2) The data presented has been restated to give effect to a 100 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (3) Expenses are shown net of management fees waived by Investors Research Corporation for low-balance account fees collected during period. (4) The data presented has been restated to give effect to a 10 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (5) Annualized.
5
FINANCIAL HIGHLIGHTS (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ----------------------------------- -------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) LIMITED-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 $10.00 $.31 $(.32) $(.01) $(.312) -- -- $(.312) $ 9.68 (.08%) 1995 9.68 .56 .28 .84 (.557) -- -- (.557) 9.96 8.89% INTERMEDIATE-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 $10.00 $.34 $(.47) $(.13) $(.337) -- -- $(.337) $ 9.53 (1.24%) Year Ended Oct. 31, 1995 9.53 .59 .54 1.13 (.587) -- -- (.587) 10.07 12.19% LONG-TERM BOND(3) Mar. 2, 1987 (inception) through Oct. 31, 1987 $10.00 $ .48 $(1.05) $(.57) $(.475) -- -- $(.475) $ 8.96 (8.63%)(2) Year Ended Oct. 31, 1988 8.96 .84 .23 1.07 (.836) -- -- (.836) 9.19 12.31% 1989 9.18 .82 .36 1.18 (.819) -- -- (.819) 9.54 13.51% 1990 9.54 .80 (.64) .16 (.796) $(.006) -- (.802) 8.90 1.93% 1991 8.90 .75 .66 1.41 (.746) -- -- (.746) 9.56 16.44% 1992 9.56 .63 .35 .98 (.622) -- -- (.622) 9.92 10.40% 1993 9.92 .66 1.88 2.54 (.662) (1.587) -- (2.249) 10.21 11.81% 1994 10.21 .58 (1.12) (.54) (.576) (.186) -- (.762) 8.91 (5.47%) 1995 8.91 .61 .87 1.48 (.611) -- -- (.611) 9.78 17.16% TAX-EXEMPT SHORT-TERM Mar. 1, 1993 (inception) through Oct. 31, 1993 $10.00 $ .21 $.04 $.25 $(.214) -- -- $(.214) $10.04 3.83%(2) Year Ended Oct. 31, 1994 10.04 .36 (.09) .27 (.362) -- -- (.362) 9.95 2.75% 1995 9.95 .44 .14 .58 (.440) -- -- (.440) 10.09 5.95% (table continued below) (table continued) RATIOS/SUPPLEMENTAL DATA ---------------------------------------------- Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) LIMITED-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 .70%(2) 4.79%(2) 48% $4,375 Year Ended Oct. 31, 1995 .69% 5.70% 116% 7,193 INTERMEDIATE-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 .75%(2) 5.23%(2) 48% $ 4,262 YEAR ENDED OCT. 31, 1995 .74% 6.05% 133% 12,827 LONG-TERM BOND(3) MAR. 2, 1987 (INCEPTION) THROUGH OCT. 31, 1987 1.00%(2) 8.10%(2) 146%(2) $ 9,403 YEAR ENDED OCT. 31, 1988 1.00% 9.15% 280% 25,788 1989 1.00% 8.83% 216% 62,302 1990 1.00% 8.81% 98% 77,270 1991 .96%(4) 8.06% 219% 114,342 1992 .98%(4) 6.30% 186% 154,031 1993 1.00% 6.54% 113% 172,120 1994 .88% 6.07% 78% 121,012 1995 .78% 6.53% 105% 149,223 TAX-EXEMPT SHORT-TERM Mar. 1, 1993 (inception) through Oct. 31, 1993 --(5) 3.09%(2) 3%(2) $52,265 Year Ended Oct. 31, 1994 --(5) 3.62% 42% 60,857 1995 --(5) 4.38% 78% 58,837 (1) Actual total return for period indicated, unless otherwise noted. (2) Annualized. (3) The data presented has been restated to give effect to a 10 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (4) Expenses are shown net of management fees waived by Investors Research Corporation for low-balance account fees collected during period. (5) Investors Research Corporation voluntarily waived its management fee on the Tax-Exempt Short-Term fund from fund inception until December 31, 1995. In the absence of the waiver, the ratio of operating expenses to average net assets would have been .60%.
6
FINANCIAL HIGHLIGHTS (CONTINUED) INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------- -------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) TAX-EXEMPT INTERMEDIATE-TERM(2) Mar. 2, 1987 (inception) through Oct. 31, 1987 $10.00 $.30 $(.58) $(.28) $(.300) -- -- $(.300) $ 9.42 (4.34%)(3) Year Ended Oct. 31, 1988 9.42 .54 .31 .85 (.539) -- -- (.539) 9.73 9.18% 1989 9.73 .56 (.06) .50 (.558) -- -- (.558) 9.67 5.30% 1990 9.67 .56 (.01) .55 (.560) -- -- (.560) 9.66 5.89% 1991 9.66 .54 .40 .94 (.536) -- -- (.536) 10.06 9.91% 1992 10.06 .48 .21 .69 (.481) -- -- (.481) 10.27 7.00% 1993 10.27 .48 .55 1.03 (.476) $(.078) -- (.554) 10.75 10.25% 1994 10.75 .48 (.61) (.13) (.476) (.133) -- (.609) 10.01 (1.25%) 1995 10.01 .49 .52 1.01 (.487) (.082) -- (.569) 10.45 10.41% TAX-EXEMPT LONG-TERM(2) Mar. 2, 1987 (inception) through Oct. 31, 1987 $10.00 $.37 $(.91) $(.54) $(.370) -- -- $(.370) $ 9.09 (8.21%)(2) Year Ended Oct. 31, 1988 9.09 .61 .64 1.25 (.609) -- -- (.609) 9.73 14.15% 1989 9.73 .62 .11 .73 (.623) -- -- (.623) 9.84 7.75% 1990 9.84 .60 (.12) .48 (.604) $(.094) -- (.698) 9.62 5.04% 1991 9.62 .57 .61 1.18 (.572) -- -- (.572) 10.23 12.54% 1992 10.23 .53 .22 .75 (.530) (.088) -- (.618) 10.36 7.43% 1993 10.36 .53 .90 1.43 (.529) (.161) $(.003) (.693) 11.10 14.32% 1994 11.10 .52 (1.01) (.49) (.519) (.342) -- (.861) 9.75 (4.70%) 1995 9.75 .53 .83 1.36 (.532) (.044) -- (.576) 10.54 14.45% (table continued below) (table continued) RATIOS/SUPPLEMENTAL DATA -------------------------------------- Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) TAX-EXEMPT INTERMEDIATE-TERM(2) Mar. 2, 1987 (inception) through Oct. 31, 1987 1.00%(3) 4.80%(3) 92%(3) $ 8,262 Year Ended Oct. 31, 1988 1.00% 5.57% 86% 14,286 1989 1.00% 5.79% 74% 20,616 1990 1.00% 5.80% 102% 25,587 1991 .96%(4) 5.40% 62% 45,359 1992 .98%(4) 4.68% 36% 76,745 1993 .72% 4.51% 38% 98,740 1994 .60% 4.59% 74% 81,400 1995 .60% 4.77% 32% 80,248 TAX-EXEMPT LONG-TERM(2) Mar. 2, 1987 (inception) through Oct. 31, 1987 1.00%(2) 6.20%(2) 94%(2) $ 6,426 Year Ended Oct. 31, 1988 1.00% 6.43% 215% 12,407 1989 1.00% 6.36% 120% 20,217 1990 1.00% 6.22% 144% 27,862 1991 .96%(4) 5.73% 110% 39,229 1992 .98%(4) 5.07% 88% 61,825 1993 .73% 4.90% 81% 70,757 1994 .60% 5.00% 66% 50,964 1995 .59% 5.24% 61% 57,997 (1) Actual total return for period indicated, unless otherwise noted. (2) The data presented has been restated to give effect to a 10 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (3) Annualized. (4) Expenses are shown net of management fees waived by Investors Research Corporation for low-balance account fees collected during period.
7 INFORMATION REGARDING THE FUNDS INFORMATION ABOUT INVESTMENT POLICIES OF THE FUNDS Twentieth Century has adopted certain investment restrictions applicable to the funds that are set forth in the statement of additional information. Those restrictions, as well as the investment objectives of the funds identified on the inside front cover page of this prospectus, and any other investment policies designated as "fundamental" in this prospectus or in the statement of additional information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this prospectus, are not designated as fundamental policies and may be changed without shareholder approval. The descriptions that follow are designed to help you choose the fund that best fits your investment objectives. You may want to pursue more than one objective by investing in more than one of these funds. For an explanation of the securities ratings referred to in the discussion of our fixed income funds, see "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information. CASH RESERVE Cash Reserve, which seeks to obtain a level of current income consistent with preservation of capital and maintenance of liquidity, requires a minimum investment of $1,000. Cash Reserve is designed for investors who want income and no fluctuation in their principal. Cash Reserve expects, but cannot guarantee, that it will maintain a constant share price of $1.00. The fund follows industry-standard guidelines on the quality and maturity of its investments, purchasing only securities having remaining maturities of not more than 13 months and by maintaining a weighted average portfolio maturity of not more than 90 days. Cash Reserve invests substantially all of its assets in a diversified portfolio of U.S. dollar denominated high quality money market instruments, consisting of: (1) Securities issued or guaranteed by the U.S. government and its agencies and instrumentalities. (For a description of such securities, see "U.S. Governments Short-Term and U.S. Governments Intermediate-Term," on this page.) (2) Commercial Paper. (3) Certificates of Deposit and Euro Dollar Certificates of Deposit. (4) Bankers' Acceptances. (5) Short-term notes, bonds, debentures, or other debt instruments. (6) Repurchase agreements. These classes of securities may be held in any proportion, and such proportion may vary as market conditions change. All portfolio holdings are limited to those which at the time of purchase have a short-term rating of A-1 by Standard & Poor's Corporation ("S&P") or P-1 by Moody's Investors Services ("Moody's"), or if they have no short-term rating are issued or guaranteed by an entity having a long-term rating of at least AA by S&P or Aa by Moody's. U.S. GOVERNMENTS SHORT-TERM AND U.S. GOVERNMENTS INTERMEDIATE-TERM These funds seek to provide a competitive level of income and limited price volatility by investing in securities of the United States government and its agencies. Both funds require a minimum investment of $2,500. The two funds differ in the weighted average maturities of their portfolios and accordingly, in their degree of risk and level of income. Generally, the longer the weighted average maturity of a fund's portfolio, the higher 8 the yield and the greater the price volatility. U.S. Governments Short-Term will maintain a weighted average portfolio maturity of three years or less. The fund is designed for investors who can accept some fluctuation in principal in order to earn a higher level of current income than is generally available from money market securities, but who do not want as much price volatility as is inherent in longer-term securities. U.S.Governments Intermediate-Term will maintain a weighted average portfolio maturity of three to 10 years. The fund is designed for investors seeking a higher level of current income than is generally available from shorter-term government securities and who are willing to accept a greater degree of price fluctuation. The market value of the securities in which U.S. Governments Short-Term and U.S. Governments Intermediate-Term invest will fluctuate, and accordingly, the value of your shares will vary from day to day. (See "Fundamentals of Fixed Income Investing," page 12.) Both funds may invest in (1) direct obligations of the United States, such as Treasury bills, notes and bonds, which are supported by the full faith and credit of the United States, and (2) obligations (including mortgage-related securities) issued or guaranteed by agencies and instrumentalities of the United States government that are established under an act of Congress. The securities of some of these agencies and instrumentalities, such as the Government National Mortgage Association, are guaranteed as to principal and interest by the U.S. Treasury, and other securities are supported by the right of the issuer, such as the Federal Home Loan Banks, to borrow from the Treasury. Other obligations, including those issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. Mortgage-related securities in which the funds may invest include collateralized mortgage obligations ("CMOs") issued by a United States agency or instrumentality. A CMO is a debt security that is collateralized by a portfolio or pool of mortgages or mortgage-backed securities. The issuer's obligation to make interest and principal payments is secured by the underlying pool or portfolio of mortgages or securities. The market value of mortgage-related securities, even those in which the underlying pool of mortgage loans is guaranteed as to the payment of principal and interest by the United States government, is not insured. When interest rates rise, the market value of those securities may decrease in the same manner as other debt, but when interest rates decline, their market value may not increase as much as other debt instruments because of the prepayment feature inherent in the underlying mortgages. If such securities are purchased at a premium, the fund will suffer a loss if the obligation is prepaid. Prepayments will be reinvested at prevailing rates, which may be less than the rate paid by the prepaid obligation. For the purpose of determining the weighted average portfolio maturity of the funds, management shall consider the maturity of a mortgage-related security to be the remaining expected average life of the security. The average life of such securities is likely to be substantially less than the original maturity as a result of prepayments of principal on the underlying mortgages, especially in a declining interest rate environment. In determining the remaining expected average life, management makes assumptions regarding prepayments on underlying mortgages. In a rising interest rate environment, those prepayments generally decrease, and may decrease below the rate of prepayment assumed by management when purchasing those securities. Such slowdown may cause the remaining maturity of those securities to lengthen, which will increase the relative volatility of those securities and, hence, the fund holding the securities. (See "Fundamentals of Fixed Income Investing," page 12.) 9 LIMITED-TERM BOND, INTERMEDIATE-TERM BOND AND LONG-TERM BOND These funds, which seek to provide investors with income through investments in bonds and other debt instruments, require a minimum investment of $2,500. The three funds differ in the weighted average maturities of their portfolios and accordingly in their degree of risk and level of income. Generally, the longer the weighted average maturity, the higher the yield and the greater the price volatility. Limited-Term Bond will invest primarily in investment grade corporate securities and other debt instruments and will maintain, under normal market conditions, a weighted average maturity of five years or less. The fund is designed for investors seeking a competitive level of current income with limited price volatility. Intermediate-Term Bond will invest primarily in investment grade corporate securities and other debt instruments and will maintain, under normal market conditions, a weighted average maturity of three to 10 years. The fund is designed for investors seeking a higher level of current income than is generally available from shorter-term corporate and government securities and who are willing to accept a greater degree of price fluctuation. Long-Term Bond will invest primarily in investment grade corporate bonds and other debt instruments and will maintain, under normal market conditions, a weighted average portfolio maturity of 10 years or greater. The fund is designed for investors whose primary goal is a level of current income higher than is generally provided by money market or short- and intermediate-term securities and who can accept the generally greater price volatility associated with longer-term bonds. The value of the shares of all three of these funds will vary from day to day. (See "Fundamentals of Fixed Income Investing," page 12.) Under normal market conditions, each fund will maintain at least 65% of the value of its total assets in investment grade bonds and other debt instruments. Under normal market conditions, each of the funds may invest up to 35% of its assets, and for temporary defensive purposes, up to 100% of its assets, in short-term money market instruments. Management will actively manage the portfolios, adjusting the weighted average portfolio maturities as necessary in response to expected changes in interest rates. During periods of rising interest rates, the weighted average maturity of a fund may be moved to the shorter end of its maturity range in order to reduce the effect of bond price declines on the fund's net asset value. When interest rates are falling and bond prices are rising, the weighted average portfolio maturity may be moved toward the longer end of its maturity range. To achieve their objectives, the funds may invest in diversified portfolios of high- and medium-grade debt securities payable in United States currency. The funds may invest in securities which at the time of purchase are rated by a nationally recognized statistical rating organization or, if not rated, are of equivalent investment quality as determined by the management, as follows: short-term notes within the two highest categories (for example, at least MIG-2 by Moody's or SP-2 by S&P); corporate, sovereign government, and municipal bonds within the four highest categories (for example, at least Baa by Moody's or BBB by S&P); securities of the United States government and its agencies and instrumentalities (see U.S. Governments Short-Term and U.S. Governments Intermediate-Term, page 8); other types of securities rated at least P-2 by Moody's or A-2 by S&P. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&Ps belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing 10 circumstances. As noted, each fund may invest up to 35% of its assets, and for temporary defensive purposes as determined by the manager, up to 100% of its assets in short-term money market instruments. Those instruments may include: (1) Securities issued or guaranteed by the U.S. government and its agencies and instrumentalities; (2) Commercial Paper; (3) Certificates of Deposit and Euro Dollar Certificates of Deposit; (4) Bankers' Acceptances; (5) Short-term notes, bonds, debentures, or other debt instruments; (6) Repurchase agreements; and must meet the rating standards set out above. To the extent a fund assumes a defensive position, the weighted average maturity of its portfolio may not fall within the ranges stated above for the fund. TAX-EXEMPT SHORT-TERM, TAX-EXEMPT INTERMEDIATE-TERM AND TAX-EXEMPT LONG-TERM These funds, which seek to provide investors with income generally exempt from federal income taxes, require a minimum initial investment of $5,000. The three funds differ in the weighted average maturities of their portfolios and accordingly in their degree of risk and level of income. Generally, the longer the weighted average maturity, the higher the yield and the greater the price volatility. Tax-Exempt Short-Term invests primarily in short-term tax-exempt bonds. The fund intends to maintain a weighted average portfolio maturity of three years or less. It is designed for investors who can accept some fluctuation in principal in order to earn a higher level of current income than is generally available on tax-exempt money market securities. Tax-Exempt Intermediate-Term invests in tax-exempt bonds and, under normal market conditions, will maintain a weighted average portfolio maturity of three to 10 years. It is designed for investors seeking a higher level of current income than is generally available on tax-exempt short-term bonds and money market securities and who are willing to accept a greater degree of fluctuation in principal. Tax-Exempt Long-Term invests in longer-term tax-exempt bonds and, under normal market conditions, will maintain a weighted average portfolio maturity of 10 years or greater. The fund is designed for the investor seeking a higher level of current income and who can accept the relatively high degree of price volatility associated with longer-term bonds. As a fundamental policy, at least 80% of each fund's portfolio will consist of securities whose income is not subject to federal income tax, including the alternative minimum tax. All such securities must be accompanied by an opinion of Counsel to the issuer that the income is not subject to federal income taxes. (See "Tax-Exempt Securities," page 13.) Under normal market conditions, Tax-Exempt Short-Term may invest up to 100% of its assets and Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term may invest up to 20% of their assets in tax-exempt short-term securities. For temporary defensive purposes, Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term may invest 100% of their assets in such securities and all three funds may invest up to 20% of assets in taxable short-term securities. The tax-exempt funds may invest in securities that, at the time of purchase, are rated by a nationally recognized statistical rating organization or, if not rated, are of equivalent investment quality as determined by the management, as follows: short-term notes within the two highest categories (for example, at least MIG-2 by Moody's or SP-2 by S&P); bonds within the four highest categories (for example, at least Baa by Moody's or BBB by S&P); other types of securities rated at least P-2 by Moody's or A-2 by S&P. 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 11 security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances. Management will actively manage each portfolio, adjusting the average maturity as necessary in response to expected changes in interest rates in general and for tax-exempt securities specifically. During periods of rising interest rates, the weighted average maturity of a fund may be moved to the shorter end of its maturity range in order to reduce the effect of bond price declines on the fund's net asset value. Conversely, when prevailing interest rates are falling and bond prices are rising, the weighted average portfolio maturity of a fund may be moved toward the longer end of its maturity range. Tax-exempt securities are issued by states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities. Interest on these securities is exempt from federal income taxes and, in some instances, applicable state or local income taxes. These securities are issued to obtain funds for various public purposes, or for specified privately operated facilities. From time to time, each fund may invest more than 25% of its assets in tax-exempt securities which are related in such a way that an economic, business, or political development or change affecting one such security could also affect the other securities; for example, securities whose issuers are located in the same state. Furthermore, each fund may invest up to 40% of its assets in securities issued on behalf of educational facilities and 40% in securities issued on behalf of qualified health facilities. To the extent that a fund's assets are concentrated in securities payable from revenues on similar facilities, the fund will be subject to the peculiar risks presented by such facilities to a greater extent than it would if the fund's assets were not so concentrated. Such facilities could be adversely affected by, among other things, legislation, regulatory actions, a decline in public and private support and increased competition. FUNDAMENTALS OF FIXED INCOME INVESTING [line graph] HISTORICAL YIELDS 30-YEAR 20-YEAR 3-MONTH TREASURY TAX-EXEMPT TREASURY BONDS BONDS BILLS 1/91 8.19 7.14 6.38 2/91 8.20 7.00 6.26 3/91 8.25 6.84 5.93 4/91 8.18 6.67 5.69 5/91 8.26 6.65 5.69 6/91 8.4 6.72 5.69 7/91 8.34 6.61 5.68 8/91 8.06 6.6 5.48 9/91 7.81 6.43 5.25 10/91 7.91 6.4 4.97 11/91 7.94 6.5 4.46 12/91 7.4 6.25 3.96 1/92 7.76 6.33 3.94 2/92 7.79 6.35 4.02 3/92 7.96 6.4 4.14 4/92 8.04 6.43 3.77 5/92 7.84 6.25 3.77 6/92 7.78 6.13 3.65 7/92 7.46 5.78 3.24 8/92 7.41 6.01 3.22 9/92 7.38 6.04 2.74 10/92 7.62 6.34 3.01 11/92 7.6 6.08 3.34 12/92 7.4 6.04 3.14 1/93 7.2 5.9 2.97 2/93 6.9 5.45 3 3/93 6.92 5.61 2.96 4/93 6.93 5.52 2.96 5/93 6.98 5.54 3.11 6/93 6.67 5.32 3.08 7/93 6.56 5.38 3.1 8/93 6.09 5.15 3.07 9/93 6.02 4.99 2.98 10/93 5.97 5 3.1 11/93 6.3 5.24 3.2 12/93 6.35 5.1 3.06 1/94 6.24 4.97 3.03 2/94 6.66 5.26 3.43 3/94 7.09 5.87 3.55 4/94 7.31 6.04 3.95 5/94 7.43 5.99 4.24 6/94 7.61 6.05 4.22 7/94 7.39 5.91 4.36 8/94 7.45 5.96 4.66 9/94 7.82 6.17 4.77 10/94 7.97 6.36 5.15 11/94 8 6.64 5.71 12/94 7.88 6.45 5.69 1/95 7.7 6.12 6 2/95 7.44 5.78 5.94 3/95 7.43 5.77 5.87 4/95 7.34 5.81 5.86 5/95 6.65 5.55 5.8 6/95 6.62 5.77 5.57 7/95 6.85 5.77 5.58 8/95 6.65 5.73 5.45 9/95 6.5 5.67 5.41 10/95 6.33 5.49 5.51 11/95 6.13 5.31 5.49 12/95 5.95 5.18 5.08 BOND PRICE VOLATILITY For a given change in interest rates, longer maturity bonds experience a greater change in price, as shown below: Price of a 7% Price of same coupon bond bond if its Percent Years to now trading yield increases change Maturity to yield 7% to 8% in price 1 year $100.00 $99.06 -0.94% 3 years 100.00 97.38 -2.62% 10 years 100.00 93.20 -6.80% 30 years 100.00 88.69 -11.31% [bar chart] YEARS TO MATURITY U.S. Governments Short-Term Likely Maturities of Individual Holdings 0-8 years Expected Weighted Average Portfolio Maturity Range 6 mos.-3 years U.S. Governments Intermediate-Term Likely Maturities of Individual Holdings 0-20 years Expected Weighted Average Portfolio Maturity Range 3-10 years Cash Reserve Likely Maturities of Individual Holdings 0-2 years Expected Weighted Average Portfolio Maturity Range 0-6 mos. Limited-Term Bond Likely Maturities of Individual Holdings 0-8 years Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years Intermediate-Term Bond Likely Maturities of Individual Holdings 0-20 years Expected Weighted Average Portfolio Maturity Range 3-10 years Long-Term Bond Likely Maturities of Individual Holdings 0-30 years Expected Weighted Average Portfolio Maturity Range 10-20 years Tax-Exempt Short-Term Likely Maturities of Individual Holdings 0-6 years Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years Tax-Exempt Intermediate-Term Likely Maturities of Individual Holdings 0-20 years Expected Weighted Average Portfolio Maturity Range 3-10 years Tax-Exempt Long-Term Likely Maturities of Individual Holdings 0-30 years Expected Weighted Average Portfolio Maturity Range 10-20 years 12 Over time, the level of interest rates available in the marketplace changes. As prevailing rates fall, the prices of bonds and other securities that trade on a yield basis rise. On the other hand, when prevailing interest rates rise, bond prices fall. Generally, the longer the maturity of a debt security, the higher its yield and the greater its price volatility. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. These factors operating in the marketplace have a similar impact on bond portfolios. A change in the level of interest rates causes the net asset value per share of any bond fund, except money market funds, to change. If sustained over time, it would also have the impact of raising or lowering the yield of the fund. In addition to the risk arising from fluctuating interest rate levels, debt securities are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and resultant bond ratings take into account the relative likelihood that such timely payment will occur. As a result, lower-rated bonds tend to sell at higher yield levels than top-rated bonds of similar maturity. AUTHORIZED QUALITY RANGES A-1 A-2 A-3 P-1 P-2 P-3 MIG-1 MIG-2 MIG-3 SP-1 SP-2 SP-3 AAA AA A BBB BB B CCC CC C D U. S. Governments Short-Term x U. S. Governments Intermediate-Term x Cash Reserve x x Limited-Term Bond x x x x Intermediate-Term Bond x x x x Long-Term Bond x x x x Tax-Exempt Short-Term x x x x Tax-Exempt Intermediate-Term x x x x Tax-Exempt Long-Term x x x x In addition, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with regard to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity. The investment practices of Twentieth Century's fixed income funds take into account these relationships. The maturity and asset quality of each fund have implications for the degree of price volatility and the yield level to be expected from each. TAX-EXEMPT SECURITIES Historically, interest paid on securities issued by states, cities, counties, school districts and other political subdivisions of the United States has been exempt from federal income taxes. Legislation since 1985, however, affects the tax treatment of certain types of municipal bonds issued after certain dates and, in some cases, subjects the income from certain bonds to differing tax treatment depending on the tax status of its recipient. The tax-exempt funds should be expected to invest some portion of their assets in bonds which, in the hands of some holders, would be subject to the alternative minimum tax, as long as management determines it is in the best interest of shareholders generally to invest in such securities. (See "Taxes," page 31.) As a prospective investor in tax-exempt securities, you should determine whether your after-tax return is likely to be higher with a taxable or with a tax-exempt security. To determine this, you may use the analysis shown in the following example: Suppose your maximum tax rate is 36% and you want to determine whether you should purchase a 6% tax-exempt yield or a 9% taxable security. 6% 6% -------------- = ----- = 9.375% taxable yield 1-.36 tax rate .64 13 Your after-tax return will be higher with the 6% tax-exempt yield if taxable yields are less than 9.375%. In this example, the tax-exempt is more attractive than the 9% taxable yield. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions Applicable to All Series of Shares" in the Statement of Additional Information. PORTFOLIO TURNOVER The total portfolio turnover rates of the funds, except Cash Reserve, are shown in the Financial Highlights table on pages 5, 6 and 7 of this prospectus. With respect to each series of shares, investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to the particular fund's objectives. The rate of portfolio turnover is irrelevant when management believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. A high turnover rate involves correspondingly higher transaction costs that are borne directly by a fund. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. However, it is not expected that the tax-exempt funds will make such investments, because the interest on them typically is not tax-exempt. Repurchase agreements are authorized investments for the tax-exempt funds, however, and could be used if it is deemed in the best interest of the funds' shareholders to invest in securities that are not exempt from federal income taxes. (See "Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and Tax-Exempt Long- Term," page 11.) A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or a broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase 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. Since 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 United States government, its agencies and instrumentalities, and will enter into such transactions with those banks and securities dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. Each of the funds may invest in repurchase agreements with respect to any security in which that fund is authorized to invest, even if the remaining maturity of the underlying security would make that security ineligible for purchase by such fund. No fund will invest more than 15% (10% in the case of Cash Reserve) of its assets in repurchase agreements maturing in more than seven days. 14 DERIVATIVE SECURITIES To the extent permitted by its investment objectives and policies, each of the funds may invest in securities that are commonly referred to as "derivative" securities. Generally, a derivative is a financial arrangement the value of which is based on, or "derived" from, a traditional security, asset, or market index. Certain derivative securities are more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), 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 bond whose interest rate is indexed to the return on two-year treasury securities would be a permissible investment (assuming it otherwise meets the other requirements for the funds), while a security whose underlying value is linked to the price of oil would not be a permissible investment since the funds may not invest in oil and gas leases or futures. The return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument to which it relates. There are a range of risks associated with derivative investments, including: * the risk that the underlying security, interest rate, market index or other financial asset will not move in the direction the portfolio manager anticipates; * the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; * the risk that adverse price movements in an instrument can result in a loss substantially greater than a fund's initial investment; and * the risk that the counterparty will fail to perform its obligations. The board of directors has approved the manager's policy regarding investments in derivative securities. That policy specifies factors that must be considered in connection with a purchase of derivative securities. The policy also establishes a committee that must review certain proposed purchases before the purchases can be made. The manager will report on fund activity in derivative securities to the board of directors as necessary. In addition, the board will review the manager's policy for investments in derivative securities annually. PORTFOLIO LENDING In order to realize additional income, each fund may lend its portfolio securities to persons not affiliated with it and who are deemed to be creditworthy. Such loans must be secured continuously by cash collateral maintained on a current basis in an amount at least equal to the market value of the securities loaned, or by irrevocable letters of credit. During the existence of the loan, the fund must continue to receive the equivalent of the interest and dividends paid by the issuer on the securities loaned and interest on the investment of the collateral. The fund must have the right to call the loan and obtain the securities loaned at any time on five days' notice, including,if applicable, the right to call the loan to enable 15 Twentieth Century to vote the securities. Such loans may not exceed one-third of the fund's net assets taken at market. Interest on loaned securities may not exceed 10% of the annual gross income of the fund (without offset for realized capital gains). The portfolio lending policy described in this paragraph is a fundamental policy that may be changed only by a vote of Twentieth Century's shareholders. The tax-exempt funds are not expected to participate in portfolio lending, because the interest earned on the loans is taxable. FOREIGN SECURITIES Cash Reserve and the corporate bond funds may invest an unlimited amount of their assets in the securities of foreign issuers, including foreign governments, when these securities meet their standards of selection. Securities of foreign issuers may trade in the U.S. or foreign securities markets. The funds will limit their purchase of debt securities to U.S. dollar denominated investment grade obligations. Such securities will be primarily from developed markets. Investments in foreign securities may present certain risks, including those resulting from future political and economic developments, reduced availability of public information concerning issuers, and the fact that foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic issuers. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without the limit when, in the opinion of the manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time commitment to purchase is made. Delivery of and payment for these securities typically occurs 15 to 45 days after the commitment to purchase. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of each security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. RULE 144A SECURITIES The funds may, from time to time, purchase Rule 144A securities when they present attractive investment opportunities that otherwise meet Twentieth Century's criteria for selection. Rule 144A securities are securities that are privately placed with and traded among qualified institutional buyers rather than the general public. Although Rule 144A securities are considered "restricted securities," they are not necessarily illiquid. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of Twentieth Century has delegated the day-to-day function of determining the liquidity of Rule 144A securities to the manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities is limited to certain qualified institutional 16 investors, the liquidity of such securities may be limited accordingly and a fund may, from time to time, hold a Rule 144A security that is illiquid. In such an event, Twentieth Century will consider appropriate remedies to minimize the effect on such fund's liquidity. No fund may invest more than 15% of its assets (10% of assets, with regard to Cash Reserve) in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares). INTEREST RATE FUTURES CONTRACTS AND OPTIONS THEREON The corporate bond funds and the tax-exempt funds may buy and sell interest rate futures contracts relating to debt securities ("debt futures," i.e., futures relating to debt securities, and "bond index futures," i.e., futures relating to indexes on types or groups of bonds) and write and buy put and call options relating to interest rate futures contracts. For options sold, a fund will segregate cash or high-quality debt securities equal to the value of securities underlying the option unless the option is otherwise covered. A fund will deposit in a segregated account with its custodian bank high-quality debt obligations maturing in one year or less, or cash, in an amount equal to the fluctuating market value of long futures contracts it has purchased, less any margin deposited on its long position. It may hold cash or acquire such debt obligations for the purpose of making these deposits. A fund will purchase or sell futures contracts and options thereon only for the purpose of hedging against changes in the market value of its portfolio securities or changes in the market value of securities that it may wish to include in its portfolio. A fund will enter into future and option transactions only to the extent that the sum of the amount of margin deposits on its existing futures positions and premiums paid for related options do not exceed 5% of its assets. Since futures contracts and options thereon can replicate movements in the cash markets for the securities in which a fund invests without the large cash investments required for dealing in such markets, they may subject a fund to greater and more volatile risks than might otherwise be the case. The principal risks related to the use of such instruments are (1) the offsetting correlation between movements in the market price of the portfolio investments (held or intended) being hedged and in the price of the futures contract or option may be imperfect; (2) possible lack of a liquid secondary market for closing out futures or option positions; (3) the need for additional portfolio management skills and techniques; and (4) losses due to unanticipated market price movements. For a hedge to be completely effective, the price change of the hedging instrument should equal the price change of the securities being hedged. Such equal price changes are not always possible because the investment underlying the hedging instrument may not be the same investment that is being hedged. Management will attempt to create a closely correlated hedge but hedging activity may not be completely successful in eliminating market value fluctuation. The ordinary spreads between prices in the cash and futures markets, due to the differences in the natures of those markets, are subject to distortion. Due to the possibility of distortion, a correct forecast of general interest rate trends by management may still not result in a successful transaction. Management may be incorrect in its expectations as to the extent of various interest rate movements or the time span within which the movements take place. See the Statement of Additional Information for further information about these instruments and their risks. PERFORMANCE ADVERTISING From time to time, Twentieth Century may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative 17 total return or average annual total return, yield, effective yield and tax-equivalent yield (for tax-exempt funds). Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced a fund's cumulative total return over the same period if the fund's performance had remained constant throughout. A quotation of yield reflects a fund's income over a stated period expressed as a percentage of the fund's share price. In the case of Cash Reserve, yield is calculated by measuring the income generated by an investment in the fund over a seven-day period (net of fund expenses). This income is then "annualized." That is, the amount of income generated by the investment over the seven-day period is assumed to be generated over each similar period each week throughout a full year and is shown as a percentage of the investment. The "effective yield" is calculated in a similar manner but, when annualized, the income earned by the investment is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of the assumed reinvestment. With respect to Twentieth Century's other fixed income funds, yield is calculated by adding over a 30-day (or one-month) period all interest and dividend income (net of fund expenses) calculated on each day's market values, dividing this sum by the average number of fund shares outstanding during the period, and expressing the result as a percentage of the fund's share price on the last day of the 30-day (or one-month) period. The percentage is then annualized. Capital gains and losses are not included in the calculation. Yields are calculated according to accounting methods that are standardized in accordance with SEC rules for all stock and bond funds. Because yield accounting methods differ from the methods used for other accounting purposes, a fund's yield may not equal the income paid on your shares or the income reported in a fund's financial statements. A tax-equivalent yield demonstrates the taxable yield necessary to produce an after-tax yield equivalent to that of a fund which invests in exempt obligations. (See "Tax-Exempt Securities," page 13, for a description of the method of comparing yields and tax-equivalent yields.) The funds may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services or Donoghue's Money Fund Report) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. In addition, fund performance may be compared to well-known indices of market performance including the Donoghue's Money Fund Average and the Bank Rate Monitor National Index of 21/2-year CD rates. Fund performance may also be compared to other funds in the Twentieth Century family. It may also be combined or blended with other funds in the Twentieth Century family, and that combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. 18 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- TWENTIETH CENTURY FAMILY OF FUNDS In addition to the 16 funds offered by Twentieth Century Investors, Inc., the Twentieth Century family of funds also includes funds offered by Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. The Twentieth Century family of mutual funds now also includes the funds offered by The Benham Group as a result of the acquisition of Benham Management Corporation, investment manager of The Benham Group, by Twentieth Century Companies, Inc. The Benham Group offers several funds with investment objectives similar to the Twentieth Century funds, but with different fee structures. You may also wish to consider the funds of The Benham Group for your investment needs. For a prospectus and more information about those funds, please call 1-800-331-8331. INVESTING IN TWENTIETH CENTURY Each of the funds offered by this prospectus requires an initial minimum investment, as follows: Cash Reserve, $1,000; the two U.S. Governments funds and the three corporate bond funds, $2,500; and the three tax-exempt funds, $5,000. *SUBSEQUENT INVESTMENTS TO PURCHASE ADDITIONAL SHARES IN ANY ONE FUND ACCOUNT MUST BE IN AN AMOUNT OF $50 OR MORE.** You may diversify your investments by choosing a combination of the funds for your investment program. (See "Information About Investment Policies of the Funds," page 8.) * THIS REQUIREMENT DOES NOT APPLY TO INDIVIDUAL RETIREMENT ACCOUNTS, 403(B) ACCOUNTS AND OTHER TYPES OF TAX-DEFERRED RETIREMENT PLAN ACCOUNTS. ** THIS REQUIREMENT DOES NOT APPLY TO 403(B) ACCOUNTS AND OTHER TYPES OF TAX-DEFERRED RETIREMENT PLAN ACCOUNTS. You may invest in the following ways: BY MAIL Send your application and check or money order to Twentieth Century. Checks must be payable in U.S. dollars. ADDITIONAL INVESTMENTS. When making additional investments by mail, please enclose your check with the return remittance portion of the confirmation of your previous investment, if available. If the remittance slip is not available, indicate on your check or a separate piece of paper your name, address and account number. Orders to purchase shares are effective on the day Twentieth Century receives your check or money order. (See "When Share Price Is Determined," page 30.) BY TELEPHONE Once your account is open, you may make investments by telephone if you have elected the service authorizing Twentieth Century to draw on your bank account when you call with instructions. Investments made by phone are effective at the time of your call. (See "When Share Price Is Determined," page 30.) BY WIRE You may make your initial or subsequent investments in Twentieth Century by wiring funds. To do so: (1) Instruct your bank to wire funds to the Boatmen's First National Bank of Kansas City, Missouri, ABA routing number 101000035. (2) BE SURE TO SPECIFY ON THE WIRE: (A) TWENTIETH CENTURY INVESTORS, INC. (B) THE FUND YOU ARE BUYING AND ACCOUNT NUMBER (IF YOU HAVE ONE). 19 (C) YOUR NAME. (D) YOUR CITY AND STATE. (E) YOUR TAXPAYER IDENTIFICATION NUMBER. Wired funds are considered received on the day they are deposited in Twentieth Century's account if they are deposited before the close of business on the New York Stock Exchange, usually 3 p.m. Central time. (See "When Share Price Is Determined," page 30.) AUTOMATIC INVESTMENTS Once your account is open, you may make investments automatically by electing the service authorizing Twentieth Century to draw on your bank account. SUCH INVESTMENTS MUST BE IN AMOUNTS OF NOT LESS THAN $50 IN ANY ONE ACCOUNT. You should inquire at your bank whether it will honor a preauthorized electronic draft. Contact Twentieth Century if your bank cannot accept electronic drafts or if it requires additional documentation. You may change the date or amount of your automatic investment anytime by letter or telephone call to Twentieth Century at least five business days before the change is to become effective. ADDITIONAL INFORMATION ABOUT INVESTMENTS TWENTIETH CENTURY CANNOT ACCEPT INVESTMENTS SPECIFYING A CERTAIN PRICE, DATE OR NUMBER OF SHARES AND WILL RETURN THESE INVESTMENTS. Once you have mailed or otherwise trans-mitted your investment instruction to Twentieth Century, it may not be modified or cancelled. 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, purchases may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the funds. Twentieth Century intends, upon 60 days' prior notice, to involuntarily redeem shares in any account if the total value of the shares is less than the required minimum. Twentieth Century reserves the right to change the amount of these minimums from time to time or waive them in whole or in part for certain classes of investors. (See "Automatic Redemption of Shares," page 26.) Transactions in shares of the fund may be executed by brokers or investment advisers who charge a fee for their services. You should be aware of the fact that these transactions may be made directly with Twentieth Century without incurring such fees. TAX IDENTIFICATION NUMBER You must furnish Twentieth Century with your tax identification number and state whether or not you are subject to withholding for prior under-reporting, certified under penalties of perjury as prescribed by the Internal Revenue Code and Regulations. Unless previously furnished, investments received without such certifications will be returned. Instructions to exchange or transfer shares held in established accounts will be refused unless the certifications have been provided, and redemption of such shares will be subject to federal tax withholding at the rate of 31%. In addition, redemption proceeds will be reduced by $50 to reimburse Twentieth Century for the penalty that the IRS will impose on the company for failure to report your tax identification number on information reports. Please avoid these penalties by correctly furnishing your tax identification number. CERTIFICATES At your written request, Twentieth Century will issue negotiable stock certificates. Unless your shares are purchased with wired funds, a certificate will not be issued until 15 days have elapsed from the time of purchase, or Twentieth Century has satisfactory proof of payment, such as a copy 20 of your cancelled check. Negotiable certificates will not be issued for fund shares held in accounts that do not meet the minimum account value requirement for that fund. SPECIAL SHAREHOLDER SERVICES You may establish one or more special services designed to provide an easy way to do business with Twentieth Century. By electing these services on your application or by completing the appropriate forms, you may authorize: * Investments by phone. * Automatic Investments. * Exchanges and redemptions by phone. * Exchanges and redemptions in writing signed by any one registered owner. * Redemptions without a signature guarantee. * Transmission of redemption proceeds by wire or electronic funds transfer. An election to establish any of the above services, except Automatic Investments, will also apply to all existing and future accounts in the Twentieth Century family of funds listed under the same social security number or employer identification number. With regard to the service which enables you to exchange and redeem by phone or in writing signed by only one registered owner and with respect to redemptions, without a signature guarantee, Twentieth Century, its transfer agent and investment adviser will not be responsible for any loss for instructions that they reasonably believe are genuine. Twentieth Century intends to employ reasonable procedures to confirm that instructions received by Twentieth Century for your account in fact are genuine. Such procedures will include requiring personal information to verify the identity of callers, providing written confirmations of telephone transactions, and recording telephone calls. If Twentieth Century does not employ reasonable procedures to confirm the genuineness of instructions, then Twentieth Century may be liable for losses due to unauthorized or fraudulent instructions. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER You may exchange your shares for shares of other funds in the Twentieth Century family of funds, subject to any applicable minimum initial investment requirements of the funds into which you wish to exchange. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. Except as noted below, exchanges from any one fund account are limited to six times in any one calendar year. In addition, the shares being exchanged and the shares of each fund being acquired must have a current value of at least $100 and otherwise meet the minimum investment requirement, if any, of the fund being acquired. If you would like to exchange your shares, please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. (See "Additional Information About Exchanges," page 22.) Shares of the funds may be received in exchange for shares of any series issued by the other members of the Twentieth Century family of funds. THE EXCHANGE PRIVILEGE IS NOT DESIGNED TO AFFORD SHAREHOLDERS A WAY TO PLAY SHORT-TERM SWINGS IN THE MARKET. TWENTIETH CENTURY IS NOT SUITABLE FOR THAT PURPOSE. BY TELEPHONE You may exchange your shares by phone if you have authorized Twentieth Century to accept telephone instructions. (Before calling, read "Additional Information About Exchanges," page 22.) BY MAIL You may direct Twentieth Century in writing 21 to exchange your shares. If you have authorized Twentieth Century to accept written instructions from any one registered owner, and if the shares are owned by two or more persons, only one signature is required on your written exchange request. Otherwise, the request should be signed by each person in whose name the shares are registered. All signatures should be exactly as the name appears in the registration; for example, if an owner's name is registered as John Robert Jones, he should sign that way and not as John R. Jones. (Before writing, read "Additional Information About Exchanges," below.) ADDITIONAL INFORMATION ABOUT EXCHANGES (1) IN AN EXCHANGE FROM ONE ACCOUNT TO ANOTHER ACCOUNT, THE SHARES BEING SOLD AND THE NEW SHARES BEING PURCHASED MUST HAVE A CURRENT VALUE OF AT LEAST $100 AND YOU MUST MEET ANY INVESTMENT MINIMUM IMPOSED BY THE FUND BEING ACQUIRED. A limited exception to this policy will permit an owner of shares of Cash Reserve to establish an automatic monthly exchange, Exchange-A-Month, from Cash Reserve to another Twentieth Century fund in an amount of $100 or more. To set up an Exchange-A-Month plan, call Twentieth Century for instructions. (2) EXCHANGES FROM ANY ONE FUND ACCOUNT ARE LIMITED TO SIX TIMES IN ANY ONE CALENDAR YEAR except for the exchange of shares of Cash Reserve and shares of any of the funds exchanged pursuant to an automatic monthly exchange. [This limitation will not apply to automatic Twentieth Century College Investment Program exchanges or to shares held in 403(b) accounts and certain pooled accounts owned by institutional investors.] (3) The shares being acquired must be qualified for sale in your state of residence. (4) If the shares are represented by a negotiable stock certificate, the certificate must be returned before the exchange can be effected. (5) ONCE YOU HAVE TELEPHONED OR MAILED YOUR EXCHANGE REQUEST, IT IS IRREVOCABLE AND MAY NOT BE MODIFIED OR CANCELLED. (6) For the purpose of processing exchanges, the value of the shares surrendered and the value of the shares acquired are the net asset values of such shares next computed after receipt of your exchange order. (7) Shares MAY NOT be exchanged unless you have furnished Twentieth Century with your tax identification number, certified as prescribed by the Internal Revenue Code and Regulations. (See "Tax Identification Number," page 20.) (8) An exchange of shares is, for federal income tax purposes, a sale of the shares, on which you may realize a taxable gain or loss. (9) If the request is made by a corporation, partnership, trust, fiduciary, agent or unincorporated association, Twentieth Century will require evidence satisfactory to it of the authority of the individual signing the request. HOW TO REDEEM SHARES Twentieth Century will buy back ("redeem") your shares at any time at the net asset value next determined after receipt of a redemption request in good order. (Before redeeming, please read "Additional Information About Redemptions," page 26 and "When Share Price Is Determined," page 30.) Your redemption proceeds may be delayed if you have owned your shares less than 15 days. (See "Redemption Proceeds," page 25.) ALL REQUESTS TO REDEEM SHARES HAVING A VALUE OF $25,000 OR MORE, THE PROCEEDS OF WHICH ARE TO BE PAID BY CHECK, MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE) MUST BE IN WRITING. ADDITIONALLY, THE REQUEST MUST BE SIGNED BY 22 EACH PERSON IN WHOSE NAME THE SHARES ARE OWNED, AND ALL SIGNATURES MUST BE GUARANTEED. (See "Signature Guarantee," page 24 and "How to Change Your Address of Record," page 27.) BY TELEPHONE If you have authorized Twentieth Century to accept telephone instructions, you may redeem your shares by telephone. ONCE MADE, YOUR TELEPHONE REQUEST MAY NOT BE MODIFIED OR CANCELLED. If you call before the close of the New York Stock Exchange, usually 3 p.m. Central time, you will receive that day's closing price. (Before calling, read "Additional Information About Redemptions," page 26.) BY MAIL Your written instructions to redeem shares may be in any one of the following forms: * A redemption form, available from Twentieth Century. * A letter to Twentieth Century. * An assignment form or stock power. * An endorsement on the back of your negotiable stock certificate, if you have one. ONCE MAILED TO TWENTIETH CENTURY, THE REDEMPTION REQUEST IS IRREVOCABLE AND MAY NOT BE MODIFIED OR CANCELLED. If you have authorized Twentieth Century to accept written instructions from any one registered owner without a signature guarantee, only one signature is required on your written redemption request and it need not be guaranteed. If you have NOT elected this special service, all signatures must be guaranteed. (See "Signature Guarantee," page 24.) The request must be signed by each person in whose name the shares are registered; for example, in the case of joint ownership, each owner must sign. All signatures should be exactly as the name appears in the registration. If the owner's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. (Before writing, see "Additional Information About Redemptions," page 26.) BY CHECK-A-MONTH Twentieth Century's Check-A-Month plan automatically redeems enough shares each month to provide you with a check for a minimum of $25. To set up a Check-A-Month plan, call Twentieth Century for instructions. Shares will be redeemed on the 20th day of each month or the next business day, and your check will be mailed the next day. If your monthly checks exceed the dividends, interest and capital appreciation on your shares, the payments will deplete your investment. Amounts paid to you by Check-A-Month are not a return on your investment. They are derived from the redemption of shares in your account, and you must report on your income tax return gains or losses that you realize. You may specify a Check-A-Month when you make your first investment. If you order a Check-A-Month thereafter, then, as in any redemption, the request for a Check-A-Month or any increase in amount must be signed by all owners with their signatures guaranteed, unless Twentieth Century has been authorized to accept instructions from any one owner, by telephone or in writing without a signature guarantee. You may request that the Check-A-Month be sent to an address other than the address of record at the time of your first investment. Thereafter, a request to send a Check-A-Month to an address other than the address of record must be signed by all owners, with their signatures guaranteed. Twentieth Century may terminate the Check-A-Month at any time, upon notice to you, and you likewise may terminate it or change the amount of the Check-A-Month, by notice to Twentieth Century in writing or by telephone. Termination or change will become effective within five business days following receipt of your instruction. 23 Your Check-A-Month plan may begin anytime after you have owned your shares for 15 days. BY CHECKWRITING You may redeem shares of Cash Reserve and shares of Tax-Exempt Short-Term by writing a draft ("check") against your account balance. (Shares held in certificate form may not be redeemed by check.) There is no limit on the number of checks you can write, but they must be for at least $100 and not more than $1,000,000. Checks can be drawn to the order of any payee. Checks will clear through Boatmen's First National Bank of Kansas City, Missouri. When checks are presented, Twentieth Century will redeem a sufficient number of shares from your account to pay the check amount. The shares will be redeemed at the net asset value determined for such shares on the date the check is presented for payment at Boatmen's. (See "Share Price," page 30.) You will receive confirmation of the CheckWriting redemption. Cancelled checks will not be returned to you; however, Twentieth Century will retain microfilmed copies of cancelled checks for your emergency needs and will provide a copy upon written request. You will continue to receive dividends on all shares until your check is presented for payment. If you redeem all shares in your account by check, any accrued distributions on the redeemed shares will be paid to you in cash on the next monthly distribution date. If you want to add CheckWriting to an existing Cash Reserve or Tax-Exempt Short-Term account, contact Twentieth Century by phone or mail for an appropriate form. For a new Cash Reserve or Tax-Exempt Short-Term account, you may elect CheckWriting on your purchase application. THE SHARES HELD IN YOUR CASH RESERVE ACCOUNT MUST HAVE A VALUE OF AT LEAST $1,000 AND THE SHARES HELD IN YOUR TAX-EXEMPT SHORT-TERM ACCOUNT MUST HAVE A VALUE OF $5,000 BEFORE CHECKS WILL BE ISSUED. You will receive an initial supply of checks usually within 14 days after your account has been established and your completed signature card is on file with the fund. CheckWriting is not available for any account held in a Twentieth Century-sponsored IRA or 403(b) plan. CheckWriting redemptions may only be made on checks provided by Twentieth Century. Currently, there is no charge for checks or for the CheckWriting service. However, Twentieth Century reserves the right to change, modify or terminate the CheckWriting service at any time. Checks must be signed in accordance with the instructions you furnished on your signature card. In all situations, including joint accounts, only one signature is necessary unless you indicated otherwise on the signature card. Twentieth Century will return checks that do not carry all required signatures or that contain other irregularities. Twentieth Century will also return checks drawn on insufficient funds or on funds from investments made by any means other than by wire within the previous 15 days unless Twentieth Century has previously received proof that any investment check or draft has been finally paid. Neither Twentieth Century nor Boatmen's will be liable for any loss or expenses associated with returned checks. You may request a stop payment on any check and Twentieth Century will attempt to carry out your request. Twentieth Century cannot guarantee that such efforts will be effective. SIGNATURE GUARANTEE When a signature guarantee is required, each signature MUST be guaranteed by a domestic bank or trust company, credit union, broker, dealer, national securities exchange, registered securities association, clearing agency or savings association as defined by Federal law. The institution providing the guarantee must use a signature guarantee ink stamp or medallion which states "Signature(s) Guaranteed" and be signed in the name of the guarantor by an authorized person with that person's title and the date. Twentieth Century may reject a signature guarantee if the guarantor is not a member of or participant in a 24 signature guarantee program. Shareholders living abroad may acknowledge their signatures before a U.S. consular officer. Military personnel in foreign countries may acknowledge their signatures before officers authorized to take acknowledgments, e.g., legal officers and adjutants. Twentieth Century may waive the signature guarantee on a redemption of $25,000 or less if it is able to verify the signatures of all registered owners from its account records. Twentieth Century reserves the right to amend or discontinue this waiver policy at any time and, with regard to a particular redemption transaction, to require a signature guarantee at its discretion. REDEMPTION PROCEEDS Redemption proceeds may be sent to you: BY MAIL If your redemption check is mailed, it is usually mailed on the second business day after receipt of your redemption request, but not later than seven days afterwards. When a redemption occurs shortly after a recent purchase made by check or electronic draft, Twentieth Century may hold the redemption proceeds beyond seven days but only until the purchase funds have cleared, which may take up to 15 days or more. No interest is paid on the redemption proceeds after the redemption is processed but before your redemption check is mailed. IF YOU ANTICIPATE REDEMPTIONS SOON AFTER YOU PURCHASE YOUR SHARES, YOU ARE ADVISED TO WIRE FUNDS TO AVOID DELAY. Except for a direct transfer of proceeds from an IRA or 403(b) to a custodian of another IRA or 403(b), and as noted below, all checks will be made payable to the registered owner of the shares and will be mailed only to the ADDRESS OF RECORD. If you would like a redemption check made payable to someone other than the registered owner of the shares and/or mailed to an address other than the address of record, your request to redeem must (1) be made in writing; (2) include an instruction to make the check payable to someone other than the registered owner of the shares and/or mail it to an address other than the address of record; and (3) be signed by all registered owners with their signatures guaranteed. (See "Signature Guarantee," page 24.) Redemp-tions from UGMA/UTMA accounts and from certain types of retirement accounts, such as IRA, 403(b) and qualified retirement plan accounts, will not be eligible for this special service. If you would like to use this special service but are not certain that a redemption from your account is eligible, please call Twentieth Century prior to submitting your request. (See "Telephone Services," page 26.) BY WIRE AND ELECTRONIC FUNDS TRANSFER You may authorize Twentieth Century to transmit redemption proceeds by wire or elec-tronic funds transfer. These services will be effective 30 days after Twentieth Century receives the authorization. Proceeds from the redemption of shares will normally be transmitted on the first business day, but not later than the seventh day, following the date of redemption. Your bank usually will receive wired funds the day they are transmitted or the next day. Electronically transferred funds will ordinarily be received within one to seven days after transmission. Once the funds are transmitted, the time of receipt and the availability of the funds are not within Twentieth Century's control. Wired funds are subject to a charge of $10 to cover bank wire charges, which is deducted from redemption proceeds. If your bank account changes, you must send a new "voided" check, preprinted with your bank registration, with written instructions, including tax identification number. The change will be effective 30 days after receipt by Twentieth Century. Redemption proceeds will be transmitted by wire or electronic funds transfer only after 25 Twentieth Century is satisfied that checks or electronic drafts that paid for the shares have cleared, i.e., after 15 days have elapsed from the time of purchase, or you have furnished Twentieth Century with satisfactory proof that the purchase funds have cleared. If a purchase were made by check, for example, copy of the cancelled check would be satisfactory proof. No interest is paid on the redemption proceeds after the redemption and before the funds are transmitted. IF YOU ANTICIPATE REDEMPTIONS WITHIN 15 DAYS AFTER YOU PURCHASE SHARES, YOU ARE ADVISED TO WIRE FUNDS TO PAY FOR YOUR PURCHASES TO AVOID DELAY. AUTOMATIC REDEMPTION OF SHARES If at any time you have a fund account that falls into either of the following categories: (i) you invested the required minimum initial investment amount for the fund (see inside front cover of this prospectus for current amounts), but due to exchanges or redemptions you have made, the account now has a value of less than the minimum initial investment amount; or (ii) you have not invested the minimum initial investment amount for the fund; a notification will be sent advising you of the need to make an investment to bring the value of the shares held in the account up to the minimum initial investment amount. If the investment is not made within 60 days from the date of notification, the shares held in the fund account will be redeemed and the proceeds from the redemption will be sent by check to your address of record. The automatic redemption of shares will not apply to College Investment Program accounts in the rebalancing phase, Individual Retirement Accounts, 403(b) accounts and other types of tax-deferred retirement plan accounts. In addition, Twentieth Century reserves the right to modify its policies regarding the automatic redemption of shares, or to waive such policies in whole or in part for certain classes of investors. ADDITIONAL INFORMATION ABOUT REDEMPTIONS If you experience difficulty in making a telephone redemption during periods of drastic economic or market changes, your redemption request may be made by regular or express mail. It will be implemented at the net asset value next determined after your request has been received by Twentieth Century in good order. Twentieth Century reserves the right to revise or terminate the telephone redemption privilege at any time. REDEMPTIONS SPECIFYING A CERTAIN DATE OR PRICE CANNOT BE ACCEPTED AND WILL BE RETURNED. If the shares are represented by a negotiable stock certificate, the certificate must be returned before the redemption can be effected. ALL REDEMPTIONS ARE MADE AND THE PRICE IS DETERMINED ON THE DAY WHEN ALL DOCUMENTATION, PROPERLY COMPLETED, IS RECEIVED BY TWENTIETH CENTURY. (SEE "WHEN SHARE PRICE IS DETERMINED," PAGE 30.) If a request to redeem is made by a corporation, partnership, trust, fiduciary, agent, or unincorporated association, Twentieth Century will require evidence satisfactory to it of the authority of the individual signing the request. Please call or write Twentieth Century for further information. A request to redeem shares in an IRA or 403(b) plan must be accompanied by an IRS Form W-4P and a reason for withdrawal as specified by the IRS. TELEPHONE SERVICES INVESTORS LINE You may reach a Twentieth Century Investor Services Representative by calling our Investors Line at 1-800-345-2021. On our Investors Line you may request information about our funds and a current prospectus, speak with an Investor Services Representative about your account, or get answers to any questions that you may have about the funds and the ser- 26 vices we offer. In addition, if you have authorized telephone transactions in your account, you may have an Investor Services Representative help you with investment, exchange and redemption transactions. UNUSUAL STOCK MARKET CONDITIONS HAVE IN THE PAST RESULTED IN AN INCREASE IN THE NUMBER OF SHAREHOLDER TELEPHONE CALLS. IF YOU EXPERIENCE DIFFICULTY IN REACHING TWENTIETH CENTURY ON THE INVESTORS LINE DURING SUCH PERIODS, YOU SHOULD CONSIDER SENDING YOUR TRANSACTION INSTRUCTIONS BY MAIL, EXPRESS MAIL OR COURIER SERVICE, OR USING OUR AUTOMATED INFORMATION LINE, IF YOU HAVE REQUESTED AND RECEIVED AN ACCESS CODE AND ARE NOT ATTEMPTING TO REDEEM SHARES. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. You may also obtain an access code that will allow you to use the Automated Information Line to make investment and exchange transactions in your accounts and obtain information about your share balance, account value and the most recent transaction. REDEMPTION TRANSACTIONS CANNOT BE MADE ON THE AUTOMATED INFORMATION LINE. Please call our Investors Line at 1-800-345-2021 for more information on how to obtain an access code for our Automated Information Line. HOW TO CHANGE YOUR ADDRESS OF RECORD You may notify Twentieth Century of changes in your address of record either by writing us or calling our Investors Line. Because your address of record impacts every piece of information we send to you, you are urged to notify us promptly of any change of address. TO PROTECT YOU AND TWENTIETH CENTURY, ALL REQUESTS TO REDEEM SHARES HAVING A VALUE OF $25,000 OR MORE, THE PROCEEDS OF WHICH ARE TO BE PAID BY CHECK, MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE) MUST BE MADE IN WRITING, SIGNED BY EACH PERSON IN WHOSE NAME THE SHARES ARE OWNED, AND ALL SIGNATURES MUST BE GUARANTEED. (See "Signature Guarantee," page 24.) TAX-QUALIFIED RETIREMENT PLANS Twentieth Century's funds are available for your tax-deferred retirement plan. Call or write Twentieth Century and request the appropriate forms for: * Individual Retirement Accounts (IRAs). * 403(b) plans for employees of public school systems and non-profit organizations. * Profit sharing plans and pension plans for corporations and other employers. Because income generated in these plans is tax-deferred, the tax-exempt funds may not be used for these plans. HOW TO TRANSFER AN INVESTMENT TO A TWENTIETH CENTURY RETIREMENT PLAN It is easy to transfer your tax-deferred plan to Twentieth Century from another company or custodian. Call or write Twentieth Century for a request to transfer form. If you direct Twentieth Century to transfer funds from an existing non-retirement Twentieth Century account into a retirement account, the shares in your non-retirement account will be redeemed. The redemption proceeds will be invested in your Twentieth Century IRA or other tax-qualified retirement plan. The redemption is a taxable event resulting in a taxable gain or loss. 27 COLLEGE INVESTMENT PROGRAM Through this special service, you can systematically invest for a child's college education. You may make automatic investments in any amount you choose (minimum of $50) in shares of Select Investors (See Twentieth Century's Equity Funds Prospectus). As the child nears college age, or another age you select, Twentieth Century will automatically begin reallocating a predetermined percentage of your investment from shares of Select Investors to shares of Cash Reserve. The percentage of your investment that will be reallocated is based on the number of years over which you want the reallocation to occur. Call Twentieth Century for additional information about this service. HOW TO TRANSFER YOUR SHARES TO ANOTHER PERSON You may transfer ownership of your shares to another person or organization by written instructions to Twentieth Century, SIGNED BY ALL OWNERS AND WITH SIGNATURES GUARANTEED AS DESCRIBED UNDER "SIGNATURE GUARANTEE," PAGE 24. IF THE SHARES ARE REPRESENTED BY A NEGOTIABLE STOCK CERTIFICATE, THE CERTIFICATE MUST BE RETURNED WITH YOUR TRANSFER INSTRUCTIONS. REPORTS TO SHAREHOLDERS At the end of each quarter, Twentieth Century will send you a consolidated statement that summarizes all of your Twentieth Century holdings. At the same time, you will also receive an individual statement for each Twentieth Century fund you own with complete year-to-date information on activity in your account. you may at any time also request a statement of your account activity be sent to you. With the exception of the automatic transactions noted below, each time you invest, redeem, transfer or exchange shares, Twentieth Century will send you a confirmation of the transaction. Automatic investment purchases and 403(b) purchases (other than transfers), exchanges made in an automatic exchange program, purchases made by direct deposit and transfers made in a Transfer-A-Month program, will be confirmed on your next consolidated quarterly statement. Please carefully review all information in your confirmation or consolidated statement relating to transactions to ensure that your instructions have been acted on properly. Please notify Twentieth Century in writing if there is an error. If you fail to provide notification of an error with reasonable promptness, i.e., within 30 days of non-automatic transactions (or within 30 days of the date of your consolidated quarterly statement, in the case of automatic transactions noted above), we will deem you to have ratified the transaction. No later than January 31 of each year, Twentieth Century will send you the following reports, which you may use in completing your U.S. income tax return: Form 1099-DIV Reports taxable distributions during the preceding year. (If you did not receive taxable distributions in the previous year, you will not receive a 1099-DIV.) Form 1099-B Reports proceeds paid on redemptions during the preceding year. Form 1099-R Reports distributions from IRAs and 403(b) plans during the preceding year. At such time as prescribed by law, Twentieth Century will send you a Form 5498, which reports contributions to your IRA for the previous calendar year. In December of each year, Twentieth 28 Century will send you an annual report that includes audited financial statements for the fiscal year ending the preceding October 31 and a list of securities in its portfolios on that date. In June of each year, Twentieth Century will send you a semiannual report that includes unaudited financial statements for the six months ending the preceding April 30, as well as a list of securities in its portfolios on that date. Twentieth Century does not publish interim lists of portfolio securities. Twentieth Century usually prepares and mails to the address of record a new prospectus dated March 1 of each year. Each year that an annual meeting is held you will receive a notice of the annual meeting of shareholders (and of special meetings, if any) and a proxy statement. BECAUSE TWENTIETH CENTURY NEEDS YOUR VOTE TO CONDUCT ITS ANNUAL MEETING OF SHAREHOLDERS, YOU ARE URGED TO RETURN PROXIES PROMPTLY. IT IS IMPORTANT THAT YOU NOTIFY TWENTIETH CENTURY PROMPTLY OF ANY CHANGE OF ADDRESS. (See "How to Change Your Address of Record," page 27.) 29 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is their net asset value next determined after receipt of your instruction to purchase, convert or redeem. Net asset value is determined by calculating the total value of a fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined on each day that the New York Stock Exchange is open. Investments and requests to redeem shares will receive the share price next determined after receipt by Twentieth Century of the investment or redemption request. For example, investments and requests to redeem shares received by Twentieth Century before the close of business on the New York Stock Exchange are effective on, and will receive the price determined, that day as of the close of the Exchange. Redemption requests received thereafter are effective on, and receive the price determined as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received only when your check or wired funds are received by Twentieth Century. Wired funds are considered received on the day they are deposited in Twentieth Century's bank account if they are deposited before the close of business on the Exchange, usually 3 p.m. Central time. Investments by telephone pursuant to your prior authorization to Twentieth Century to draw on your bank account are considered received at the time of your telephone call. Investment and transaction instructions received by Twentieth Century on any business day by mail at its office prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Investments and instructions received after that time will receive the price determined on the next business day. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: The portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked 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 good faith by the board of directors. Debt securities not traded on a principal securities exchange are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the board of directors. Pursuant to a determination by Twentieth Century's board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That value is then converted to dollars at the prevailing foreign exchange rate. 30 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 by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset values of Twentieth Century's funds are published in leading newspapers daily. The yield of Cash Reserve is published weekly in leading financial publications and daily in many local newspapers. The net asset values, as well as yield information on all of Twentieth Century's fixed income funds, may be obtained by calling Twentieth Century. (See "Telephone Services," page 26.) DISTRIBUTIONS At the close of each day, including Saturdays, Sundays and holidays, net income of the fixed income funds is determined and declared as a distribution. The distribution will be paid monthly on the last Friday of each month. You will begin to participate in the distributions the day after your purchase is effective. (See "When Share Price is Determined," page 30.) If you redeem shares, you will receive the distribution declared for the day of the redemption. If all shares are redeemed (other than by CheckWriting), the distribution on the redeemed shares will be included with your redemption proceeds. Distributions from net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Code, in all events in a manner consistent with the provisions of the Investment Company Act. Distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares held in Individual Retirement Accounts and 403(b) plans paid in cash only if you are 59 1/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. TAXES Twentieth Century has elected to be taxed under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Distributions of net investment income and net short-term capital gains are taxable to you as ordinary income, except as described below. The dividends from net income of the fixed income funds do not qualify for the 70% dividends received deduction for corporations since they are derived from interest income. Dividends representing income derived from tax-exempt bonds generally retain the bonds' tax-exempt character in a shareholder's hands. Distributions which represent short-term capital gains on the tax-exempt bond funds are taxable as ordinary 31 income. Distributions from net long-term capital gains are taxable, even on the tax-exempt bond funds, as long-term capital gains regardless of the length of time the shares on which such distributions are paid have been held by the shareholder. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Distributions are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of the fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. In January of the year following the distribution, Twentieth Century will send you a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. The tax-exempt funds anticipate that substantially all of the dividends to be paid by the funds will be exempt from federal income taxes to an individual unless, due to that person's own tax situation, he or she is subject to the alternative minimum tax. In that case, it is likely that a portion of the dividends will be taxable to that shareholder, while remaining tax-exempt in the hands of most other shareholders. The funds will advise shareholders of the percentage, if any, of the dividends not exempt from federal income tax, and the percentage, if any, subject to the individual alternative minimum tax should a shareholder be subject to it. Distributions may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. PAYMENTS REPORTED BY TWENTIETH CENTURY THAT OMIT YOUR SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER WILL SUBJECT TWENTIETH CENTURY TO A PENALTY OF $50, WHICH WILL BE CHARGED AGAINST YOUR ACCOUNT IF YOU FAIL TO PROVIDE THE CERTIFICATION BY THE TIME THE REPORT IS FILED, AND IS NOT REFUNDABLE. (See "Tax Identification Number," page 20.) Redemption of shares of a fund will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. 32 MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of Twentieth Century. Acting pursuant to an investment management agreement entered into with Twentieth Century, Investors Research Corporation ("Investors Research") serves as the investment manager of Twentieth Century. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri, 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. Investors Research supervises and manages the investment portfolio of Twentieth Century and directs the purchase and sale of its investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios and the funds' asset mix as it deems appropriate in pursuit of the funds' investment objectives. Individual portfolio manager members of the team may also adjust portfolio holdings of the funds or of sectors of the funds as necessary between team meetings. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to the Benham Group of Mutual Funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. The portfolio manager members of the teams managing the funds described in this prospectus and their work experience for the last five years are as follows: ROBERT C. PUFF JR., Executive Vice President and Chief Investment Officer, joined Twentieth Century in 1983. In his position as Chief Investment Officer, Mr. Puff oversees the investment activities of all of the teams that manage Twentieth Century funds. NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager, joined Twentieth Century as Vice President and Portfolio Manager in November 1989. In April 1993, he became Senior Vice President. He is a member of the team that manages Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond and the fixed income portion of Balanced Investors. G. DAVID MACEWEN joined Benham in 1991 as a Senior Municipal Portfolio Manager, and currently maintains principal management responsibility for six Benham funds. Mr. MacEwen is a member of the team that manages Tax-Exempt Long-Term. Prior to joining Benham, Mr. MacEwen was Vice President and Municipal Portfolio Manager with Provident Institutional Management Corporation, Wilmington, Delaware. JOEL SILVA joined Benham in 1989, serving first as a customer service representative, then moving to a position as a municipal bond trader. As a Municipal Portfolio Manager, Mr. Silva is responsible for the management of two Benham funds. He is a member of the team that manages Tax-Exempt Short-Term and Tax-Exempt Intermediate-Term. DAVID SCHROEDER, Vice President and Portfolio Manager for BMC, joined BMC in July 1990. Mr. Schroeder has primary responsibility for the day-to-day operations of the Benham Treasury Note, Benham Short-Term, and Benham Long-Term Funds. He also manages Benham Target Maturities Trust. ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for Twentieth 33 Century since May 1983. He became a Portfolio Manager in December 1991. Prior to that he served as Assistant Portfolio Manager. He is a member of the team that manages Cash Reserve and U.S. Governments Short-Term. AMY O'DONNELL joined Benham in 1988, becoming a member of its portfolio department in 1988. In 1992 she assumed her current position as a portfolio manager of three Benham funds. She is a member of the team that manages Cash Reserve. The activities of Investors Research are subject only to directions of Twentieth Century's board of directors. Investors Research pays all the expenses of Twentieth Century except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to Twentieth Century, Investors Research receives an annual fee at the following rates: * .60 of 1% of the average net assets of Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term; * .70 of 1% of the average net assets of Limited-Term Bond, Cash Reserve and U.S. Governments Short-Term; * .75 of 1% of the average net assets of Intermediate-Term Bond and U.S. Governments Intermediate-Term; and * .80 of 1% of the average net assets of Long-Term Bond. On the first business day of each month, each fund pays a management fee to the manager for the previous month at the specified rate. The fee for the previous month is calculated by multiplying the applicable fee for such fund by the aggregate average daily closing value of each fund's net assets during the previous month by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). CODE OF ETHICS Twentieth Century and Investors Research have adopted a Code of Ethics, which restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio managers and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri, 64111, acts as transfer, administrative services and dividend paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century and is paid for such services by Investors Research. Certain recordkeeping and administrative services that would otherwise be performed by Twentieth Century Services, Inc., may be performed by an insurance company or other entity providing similar services for various retirement plans using shares of Twentieth Century as a funding medium, by broker-dealers for their customers investing in shares of Twentieth Century or by sponsors of multi mutual fund no- or low-transaction fee programs. Investors Research may enter into contracts to pay them for such recordkeeping and administrative services out of its unified management fee. From time to time, special services may be offered to shareholders who maintain higher 34 share balances in the funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc., are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman of the board of Twentieth Century Investors, Inc., controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century Investors, Inc. was organized as a Maryland corporation on July 2, 1990. The corporation commenced operations on February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a Delaware corporation which had been in business since October 1958. Pursuant to the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland corporation was the surviving entity and continued the business of the Delaware corporation with the same officers and directors, the same shareholders and the same investment objectives, policies and restrictions. Twentieth Century is a diversified, open-end management investment company whose shares are presently held by more than 1.5 million shareholders. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century is Twentieth Century Tower, 4500 Main Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by mail to that address, or by phone to 1-800-345-2021. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century issues 16 series of $.01 par value shares. The assets belonging to each series of shares are held separately by the custodian, and in effect each series is a separate fund. Each share, irrespective of series, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except those matters which must be voted on separately by the series of shares affected. Matters affecting only one series are voted upon only by that series. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the shares will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for Twentieth Century to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to Twentieth Century's by-laws, the holders of shares representing at least 10% of the votes entitled to be cast may request Twentieth Century to hold a special meeting of shareholders. Twentieth Century will assist in the communication with other shareholders. TWENTIETH CENTURY RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 35 TWENTIETH CENTURY INVESTORS, INC. FIXED INCOME FUNDS PROSPECTUS MARCH 1, 1996 [company logo] ------------------------------ P.O. Box 419200 ------------------------------ Kansas City, Missouri ------------------------------ 64141-6200 ------------------------------ 1-800-345-2021 or 816-531-5575 ------------------------------ [company logo] ----------------------------------------------------------------------- SH-BKT-4300 9603 (C) 1996 Twentieth Century Services, Inc. Recycled TWENTIETH CENTURY INVESTORS, INC. GIFTRUST INVESTORS PROSPECTUS MARCH 1, 1996 [stylized "Giftrust" in scrpt across bottom center of page] TWENTIETH CENTURY INVESTORS, INC. GIFTRUST INVESTORS PROSPECTUS MARCH 1, 1996 - -------------------------------------------------------------------------------- Giftrust Investors seeks capital growth. It pursues its investment objective by investing primarily in common stocks that are considered by management to have better-than-average prospects for appreciation. There is no assurance that the fund will achieve its investment objective. Giftrust Investors is a unique way to give a gift to a child, grandchild or other individual. You may not invest in the fund. Rather, your gift, which is irrevocable, will be invested in the fund by the Giftrust Trustee in accordance with a trust established under a "Giftrust Agreement." The minimum initial gift requirement for Giftrust Investors is $500. This prospectus gives you information about Giftrust Investors that you should know before investing. You should read this prospectus carefully and retain it for future reference. Additional information is included in the statement of additional information dated March 1, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Investors, Inc. 4500 Main Street * P.O. Box 419200 Kansas City, MO 64141-6200 1-800-345-2021 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-634-4113 In Missouri: 816-753-1865 - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 1 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Transaction and Operating Expense Table ........................ 3 Financial Highlights ................. 4 INFORMATION REGARDING THE FUND A Unique Gift ........................ 6 Information About Investment Policies of the Fund ............... 6 Investment Approach .................. 6 Other Investment Practices ........... 7 Foreign Securities ................... 7 Forward Currency Exchange Contracts ................. 7 Portfolio Turnover ................... 9 Repurchase Agreements ................ 9 Derivative Securities ................ 9 Portfolio Lending .................... 10 When-Issued Securities ............... 11 Rule 144A Securities ................. 11 Short Sales .......................... 12 Performance Advertising .............. 12 How to Establish a Giftrust Account Twentieth Century Family of Funds .... 13 Purchase of Fund Shares .............. 13 By Mail .............................. 13 By Telephone ......................... 13 By Wire .............................. 13 Automatic Investments ................ 14 Additional Information About Gifts ........................ 14 Special Shareholder Services ......... 14 Exchanges of Fund Shares ............. 15 How to Redeem Shares ................. 15 By Telephone ......................... 15 By Mail .............................. 15 By Check-A-Month ..................... 16 Signature Guarantee .................. 16 Redemption Proceeds .................. 16 By Mail .............................. 16 By Wire and Electronic Funds Transfer ..................... 17 Additional Information About Redemptions .................... 17 Telephone Services ................... 17 Investors Line ....................... 17 Automated Information Line ........... 18 How to Change the Address of Record .................... 18 Reports to Shareholders .............. 18 ADDITIONAL INFORMATION YOU SHOULD KNOW Share Price .......................... 20 When Share Price Is Determined ....... 20 How Share Price Is Determined ........ 20 Where to Find Information About Share Price .................... 21 Distributions ........................ 21 Taxes ................................ 22 Management ........................... 24 Investment Management ................ 24 Code of Ethics ....................... 25 Transfer and Administrative Services ............ 25 Further Information About Twentieth Century ............ 26 - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY TWENTIETH CENTURY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY TWENTIETH CENTURY, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TRANSACTION AND OPERATING EXPENSE TABLE - -------------------------------------------------------------------------------- SHAREHOLDER TRANSACTION EXPENSES (1) Maximum Sales Load Imposed on Purchases none Maximum Sales Load Imposed on Reinvested Dividends none Deferred Sales Load none Redemption Fee (2) none Exchange Fee none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees 1.00% 12b-1 Fees none Other Expenses (3) 0.00% Total Fund Operating Expenses 1.00% EXAMPLE A $1,000 investment in Giftrust Investors would bear the expenses set forth to the right, assuming (1) a 5% annual return and (2) redemption at the end of each time period. It should be noted that, in most instances, a gift made in the fund must be made in trust for a minimum term of ten years. 1 year $ 10 3 years 32 5 years 55 10 years 122 The purpose of the table is to help you understand the various costs and expenses that an investment in the fund will bear directly or indirectly. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.L RETURNS (1) A $100 administrative fee will be charged against each Giftrust account established after March 1, 1996 to help cover the costs incurred as a result of the Giftrust reaching maturity. (See "Information About Investment Policies of the Fund," page 6.) (2) Redemption proceeds sent by wire are subject to a $10 processing fee. (3) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were 0.0014 of 1% of average net assets for the most recent fiscal year. Also, a $10 fee will be charged against each Giftrust account for which an annual tax return is filed. (See "Taxes," page 22.) 3 FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - -------------------------------------------------------------------------------- The Financial Highlights for each of the periods presented (except as noted) have been audited by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the fund's annual report, which is incorporated by reference into the statement of additional information. The annual report contains additional performance information and will be made available upon request and without charge.
INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------------------------- ----------------------------------------- Net Realized and Unrealized Gains Distributions Distributions (Losses) on from Net in Excess of Net Asset Net Investments Total Distributions Realized Net Realized Value, Investment and Foreign from from Net Gains on Gains on Beginning Income Currency Investment Investment Investment Investment of Period (Loss) Transactions Operations Income Transactions Transactions Giftrust Investors Year Ended Oct. 31, 1986 $ 5.75 $(.03) $ 2.65 $ 2.62 - $ (.179) - 1987 8.19 (.04) (.23) (.27) - (1.250) - 1988 6.67 (.01) 1.04 1.03 - (.856) - 1989 6.84 (.04) 3.35 3.31 - (.206) - 1990 9.94 (.05) (1.72) (1.77) - (.924) - 1991 7.25 (.06) 5.77 5.71 - (.025) - 1992 12.94 (.08) 1.41 1.33 - (.697) - 1993 13.57 (.09) 7.18 7.09 - (1.425) $(.007) 1994 19.23 (.10) 3.28 3.18 - (1.911) - 1995 20.50 (.16) (1) 6.37 6.21 - (1.085) - (table continues on next page) (1) Computed using net investment income and average shares outstanding for the period. 4 (table contineued from previous page) RATIOS/SUPPLEMENTAL DATA --------------------------------------------------------------- Ratio of Net Net Ratio of Investing Assets Net Asset Operating Income End of Average Value, Expenses (Loss) to Portfolio Period commission Total End of Total to Average Average Turnover (in paid per Distributions Period Return Net Assets Net Assets Rate thousands) share traded Giftrust Investors Year Ended Oct. 31, 1986$ (.179) $ 8.19 46.67% 1.01% (.4%) 123% $ 7,127 - 1987 (1.250) 6.67 (4.00%) 1.00% (.5%) 130% 9,560 - 1988 (.856) 6.84 16.28% 1.00% (.1%) 157% 13,167 - 1989 (.206) 9.94 49.81% 1.00% (.5%) 160% 22,541 - 1990 (.924) 7.25 (19.77%) 1.00% (.6%) 137% 25,296 - 1991 (.025) 12.94 79.04% 1.00% (.6%) 143% 54,963 - 1992 (.697) 13.57 10.32% 1.00% (.7%) 134% 77,518 - 1993 (1.432) 19.23 55.84% 1.00% (.7%) 143% 153,997 - 1994 (1.911) 20.50 18.75% 1.00% (.7%) 115% 265,601 - 1995 (1.085) 25.63 32.52% .98% (.7%) 105% 561,112 $.026
5 INFORMATION REGARDING THE FUND - -------------------------------------------------------------------------------- A UNIQUE GIFT A Giftrust is a unique way to give a gift to a child or any individual. You cannot establish or make investments in a Giftrust for yourself or your spouse, nor can a Giftrust be established that designates anyone other than an individual (such as a corporation, partnership or other profit or nonprofit organization) as a beneficiary. The minimum initial gift in Giftrust is $500. The shares in a Giftrust are held in trust by an independent trustee until the maturity date you specify. The duration of the trust may be as long as you wish, but must be at least 10 years from the time you make the first gift in the Giftrust or until the recipient reaches the age of majority, whichever is later. The recipient will then receive the shares in the account. The Giftrust is irrevocable. Before the maturity date you specify, neither you nor the beneficiary may amend the terms of the trust in any way. Additional investments may be made in amounts of $50 or more at any time without affecting the maturity date. After the maturity of the Giftrust, the beneficiary may continue to own the Giftrust shares but, except for reinvestment of distributions, may not make additional Giftrust investments. Each Giftrust account for which a tax return is filed will be charged a $10 fee to help offset a portion of the cost of preparing such return. (See "Taxes," page 22.) Additionally, each maturing Giftrust account established after March 1, 1996 will be charged a $100 administrative fee to help cover the costs incurred by the Trustee as a result of the Giftrust reaching maturity. The tax laws applicable to trusts in general are quite complex. You should consider consulting your tax adviser or attorney before opening a Giftrust account. (For information on Giftrusts and taxes, see "Taxes," page 22.) INFORMATION ABOUT INVESTMENT POLICIES OF THE FUND Twentieth Century has adopted certain investment restrictions applicable to the fund that are set forth in the statement of additional information. Those restrictions, as well as the investment objective of the fund identified on page 1 of this prospectus, and any other investment policies designated as "fundamental" in this prospectus or in the statement of additional information, cannot be changed without shareholder approval. The fund has implemented additional investment policies and practices to guide its activities in the pursuit of its investment objective. These policies and practices, which are described throughout this prospectus, are not designated as fundamental policies and may be changed without shareholder approval. INVESTMENT APPROACH Giftrust Investors seeks capital growth by investing in securities, primarily common stocks, that meet certain fundamental and technical standards of selection and have, in the 6 opinion of Twentieth Century's management, better-than-average potential for appreciation. So long as a sufficient number of such securities are available, the fund intends to stay fully invested in these securities regardless of the movement of stock prices generally. In most circumstances, the fund's actual level of cash and cash equivalents will fluctuate between 0% and 10% of total assets with 90% to 100% of its assets committed to equity and equity equivalent investments. The fund may purchase securities only of companies that have a record of at least three years continuous operation. The size of a fund and of its portfolio companies tends to give a fund its own characteristics of volatility and risk. These differences come about because developments such as new or improved products or methods, which would be relatively insignificant to a large portfolio company, may have a substantial impact on the earnings and revenues of a small company and create a greater demand and a higher value for its shares. However, a new product failure which could readily be absorbed by a large portfolio company can cause a rapid decline in the value of the shares of a smaller company. Hence, it could be expected that Giftrust Investors will be relatively more volatile than other Twentieth Century growth funds since it tends to invest in smaller companies. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions Applicable to All Series of Shares" in the statement of additional information. FOREIGN SECURITIES The fund may invest an unlimited amount of its assets in the securities of foreign issuers, primarily from developed markets, when these securities meet its standards of selection. The fund may make such investments either directly in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign securities. DRs are securities listed on exchanges or quoted in the over-the-counter market in one country but represent the shares of issuers domiciled in other countries. DRs may be sponsored or unsponsored. Direct investments in foreign securities may be made either on foreign securities exchanges or in the over-the-counter markets. The 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 fund will limit its purchase of debt securities to investment grade obligations. Investments in foreign securities may present certain risks, including those resulting from fluctuations in currency exchange rates, future political and economic developments, reduced availability of public information concerning issuers, and the fact that foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic issuers. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the foreign securities held by the fund may be denominated in 7 foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent on the performance of a foreign security, as valued in the currency of its home country. As a result, the value of the fund's portfolios may be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be a factor in the overall performance of the fund. To protect against adverse movements in exchange rates between currencies, the fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. The fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." The fund may enter into transaction hedging contracts with respect to all or a substantial portion of its foreign securities trades. When the manager believes that a particular currency may decline in value compared to the dollar, the fund may enter into forward currency exchange contracts to sell the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." The fund may not enter into a portfolio hedging transaction where it would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. The fund will make use of the portfolio hedging to the extent deemed appropriate by the manager. However, it is anticipated that the fund will enter into portfolio hedges much less frequently than transaction hedges. If the fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of the fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to protect the fund against adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency 8 exchange contracts tends to limit the potential gains that might result from a positive change in the relationships between the foreign currency and the U.S. dollar. PORTFOLIO TURNOVER The total portfolio turnover rate of the fund is shown in the Financial Highlights table on pages 4 and 5 of this prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to the fund's objectives. The rate of portfolio turnover is irrelevant when management believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of the fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that the fund pays directly. Portfolio turnover may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS The fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of the fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or a broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase 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. Since 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 fund will limit repurchase agreement transactions to securities issued by the United States government, its agencies and instrumentalities, and will enter into such transactions with those banks and securities dealers who are deemed creditworthy pursuant to criteria adopted by the fund's board of directors. The fund will invest no more than 15% of its assets in repurchase agreements maturing in more than seven days. DERIVATIVE SECURITIES To the extent permitted by its investment objectives and policies, the fund 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, 9 a traditional security, asset, or market index. Certain derivative securities are more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), 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. The fund may not 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 since the fund 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 a range of risks associated with derivative investments, including: * the risk that the underlying security, interest rate, market index or other financial asset will not move in the direction the portfolio manager anticipates; * the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; * the risk that adverse price movements in an instrument can result in a loss substantially greater than a fund's initial investment; and * the risk that the counterparty will fail to perform its obligations. The board of directors has approved the manager's policy regarding investments in derivative securities. That policy specifies factors that must be considered in connection with a purchase of derivative securities. The policy also establishes a committee that must review certain proposed purchases before the purchases can be made. The manager will report on fund activity in derivative securities to the board of directors as necessary. In addition, the board will review the manager's policy for investments in derivative securities annually. PORTFOLIO LENDING In order to realize additional income, the fund may lend its portfolio securities to persons not affiliated with it and who are deemed to be creditworthy. Such loans must be secured continuously by cash collateral maintained on a current basis in an amount at least equal to the market 10 value of the securities loaned, or by irrevocable letters of credit. During the existence of the loan, the fund must continue to receive the equivalent of the interest and dividends paid by the issuer on the securities loaned and interest on the investment of the collateral. The fund must have the right to call the loan and obtain the securities loaned at any time on five days' notice, including the right to call the loan to enable the fund to vote the securities. Such loans may not exceed one-third of the fund's net assets taken at market. Interest on loaned securities may not exceed 10% of the annual gross income of the fund (without offset for realized capital gains). The portfolio lending policy described in this paragraph is a fundamental policy that may be changed only by a vote of a majority of Twentieth Century's shareholders. WHEN-ISSUED SECURITIES The fund may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time commitment to purchase is made. Delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for the fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. RULE 144A SECURITIES The fund may, from time to time, purchase Rule 144A securities when they present attractive investment opportunities that otherwise meet Twentieth Century's criteria for selection. Rule 144A securities are securities that are privately placed with and traded among qualified institutional buyers rather than the general public. Although Rule 144A securities are considered "restricted securities," they are not necessarily illiquid. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of Twentieth Century has delegated the day-to-day function of determining the liquidity of Rule 144A securities to the manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. 11 Since the secondary market for such securities is limited to certain qualified institutional investors, the liquidity of such securities may be limited accordingly and the fund may, from time to time, hold a Rule 144A security that is illiquid. In such an event, Twentieth Century will consider appropriate remedies to minimize the effect on the fund's liquidity. The fund may not invest more than 15% of its assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares). SHORT SALES The fund may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow the fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. The fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. PERFORMANCE ADVERTISING From time to time, Twentieth Century may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced a fund's cumulative total return over the same period if the fund's performance had remained constant throughout. The fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services or Donoghue's Money Fund Report) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. In addition, fund performance may be compared to well-known indices of market performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones Industrial Average. Fund performance may also be compared to other funds in the Twentieth Century family. It may also be combined or blended with other funds in the Twentieth Century family, and that combined or blended performance may be compared to the same indices to which the fund may be compared. All performance information advertised by the fund is historical in nature and is not intended to represent or guarantee future results. 12 HOW TO ESTABLISH A GIFTRUST ACCOUNT - -------------------------------------------------------------------------------- TWENTIETH CENTURY FAMILY OF FUNDS In addition to the fund offered by this prospectus, the Twentieth Century family of funds also includes additional funds offered by Twentieth Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. The Twentieth Century family of mutual funds now also includes the funds offered by The Benham Group as a result of the acquisition of Benham Management Corporation, investment manager of The Benham Group, by Twentieth Century Companies, Inc. You may wish to consider the funds of The Benham Group for your investment needs. For a prospectus and more information about these funds, please call 1-800-331-8331. PURCHASE OF FUND SHARES The minimum initial gift to a Giftrust account is $500. SUBSEQUENT GIFTS TO PURCHASE ADDITIONAL SHARES MUST BE IN AN AMOUNT OF $50 OR MORE. Once a Giftrust has matured, no future investments (other than reinvestments of distributions) may be made. You may make gifts in the following ways: BY MAIL Send your completed Giftrust application and check or money order to Twentieth Century. Checks must be payable in U.S. dollars. ADDITIONAL GIFTS. When making additional gifts by mail, please enclose your check with the return remittance portion of the confirmation of your previous gift, if available. If the remittance slip is not available, indicate on your check or a separate piece of paper your name, address and account number. Orders to purchase shares are effective on the day Twentieth Century receives the purchase check or money order. (See "When Share Price is Determined," page 20.) BY TELEPHONE Once the Giftrust account is open, additional gifts may be made by telephone. Please call Twentieth Century for further details. BY WIRE You may make subsequent gifts in Giftrust Investors by wiring funds. To do so: (1) Instruct your bank to wire funds to the Boatmen's First National Bank of Kansas City, Missouri, ABA routing number 101000035. (2) BE SURE TO SPECIFY ON THE WIRE: (A) TWENTIETH CENTURY INVESTORS, INC. (B) THE ACCOUNT NUMBER. (C) YOUR NAME. (D) YOUR CITY AND STATE. 13 Wired funds are considered received on the day they are deposited in Twentieth Century's account if they are deposited before the close of business on the New York Stock Exchange, usually 3 p.m. Central time. (See "When Share Price Is Determined," page 20.) AUTOMATIC INVESTMENTS Once a Giftrust account is open, you may make additional gifts to the Giftrust account automatically by authorizing Twentieth Century to draw on your bank account. SUCH ADDITIONAL GIFTS MUST BE IN AMOUNTS OF NOT LESS THAN $50. You should inquire at your bank whether it will honor a preauthorized electronic draft. Contact Twentieth Century if your bank cannot accept electronic drafts or if it requires additional documentation. You may change the date or amount of your automatic gift anytime by letter or telephone call to Twentieth Century at least five business days before the change is to become effective. ADDITIONAL INFORMATION ABOUT GIFTS Twentieth Century cannot accept gifts to a Giftrust account specifying a certain price, date or number of shares and will return these requests. Once you have mailed or otherwise transmitted your gift instruction to Twentieth Century, it may not be modified or cancelled. The fund reserves the right to suspend the offering of shares for a period of time, and the fund reserves the right to reject any specific gift instruction. Additionally, gift instructions and requests may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the fund. SPECIAL SHAREHOLDER SERVICES As the grantor of a Giftrust, you may establish one or more special services designed to provide an easy way to do business with Twentieth Century. By electing these services on your application or by completing the appropriate forms, you may authorize: * Investments by phone * Automatic investments Once a Giftrust matures, the beneficiary may authorize: * Exchanges or redemptions by phone * Redemptions in writing without a signature guarantee With regard to the service which enables the beneficiary of a matured Giftrust to exchange and redeem by phone or in writing, and with respect to redemptions, without a signature guarantee, Twentieth Century, its transfer agent and investment adviser will not be responsible for any loss for instructions that they reasonably believe are genuine. Twentieth Century intends to employ reasonable procedures to confirm that instructions received by Twentieth Century in fact are genuine. Such procedures will include requiring personal information to verify the identity of callers, providing written confirmations of telephone transactions, and recording 14 telephone calls. If Twentieth Century does not employ reasonable procedures to confirm the genuineness of instructions, then Twentieth Century may be liable for losses due to unauthorized or fraudulent instructions. EXCHANGES OF FUND SHARES The beneficiary of a matured Giftrust may exchange his/her shares for shares of any of the other funds in the Twentieth Century family of funds, subject to any applicable minimum initial investment requirements of the funds into which the beneficiary wishes to exchange. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. Except as noted below, exchanges from a matured Giftrust account are limited to six times in any one calendar year. In addition, the shares being exchanged and the shares of each fund being acquired must have a current value of at least $100 and otherwise meet the minimum investment requirement, if any, of the fund being acquired. No exchanges out of a Giftrust account may be made prior to the maturity of the Giftrust account. Exchanges may be requested by phone (if such service has been authorized) or by mail. Once an exchange request is telephoned or mailed, it is irrevocable and may not be modified or cancelled. HOW TO REDEEM SHARES Twentieth Century will buy back ("redeem") shares of a matured Giftrust at any time at the net asset value next determined after receipt of a redemption request from the beneficiary in good order. Prior to the maturity of a Giftrust, redemptions are allowed only by the Trustee of the Giftrust, who is authorized by the Giftrust Agreement to make redemptions for the purpose of paying applicable fees, expenses and taxes of the Giftrust account. BY TELEPHONE The beneficiary of a matured Giftrust may redeem shares by telephone if that service has been authorized by the beneficiary. ONCE MADE, A TELEPHONE REQUEST MAY NOT BE MODIFIED OR CANCELLED. All calls received before the close of the New York Stock Exchange, usually 3 p.m. Central time, will receive that day's closing price. (Before calling, read "Additional Information About Redemptions," page 17.) BY MAIL The written instructions of a matured Giftrust beneficiary to redeem shares may be in any one of the following forms: * A redemption form, available from Twentieth Century. * A letter to Twentieth Century. ONCE MAILED TO TWENTIETH CENTURY, THE REDEMPTION REQUEST IS IRREVOCABLE AND MAY NOT BE MODIFIED OR CANCELLED. 15 If the beneficiary has authorized redemptions without signature guarantees, no signature guarantee is required. If this special service has not been elected, signatures must be guaranteed. (See "Signature Guarantee," on this page.) The signature should be exactly as the name appears in the registration. If the matured Giftrust's beneficiary's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. (Before writing, see "Additional Information About Redemptions," page 17.) BY CHECK-A-MONTH Twentieth Century's Check-A-Month plan automatically redeems enough shares each month to provide the beneficiary of a matured Giftrust with a check for a minimum of $25. Call Twentieth Century for more information about this service. SIGNATURE GUARANTEE When a signature guarantee is required, a signature must be guaranteed by a domestic bank or trust company, credit union, broker, dealer, national securities exchange, registered securities association, clearing agency or savings association as defined by federal law. The institution providing the guarantee must use a signature guarantee ink stamp or medallion which states "Signature(s) Guaranteed" and be signed in the name of the guarantor by an authorized person with that person's title and the date. Twentieth Century may reject a signature guarantee if the guarantor is not a member of or participant in a signature guarantee program. Shareholders living abroad may acknowledge their signatures before a U.S. consular officer. Military personnel in foreign countries may acknowledge their signatures before officers authorized to take acknowledgements (e.g., legal officers and adjutants). Twentieth Century may waive the signature guarantee on a redemption of $25,000 or less if it is able to verify the signature of the beneficiary from its account records. Twentieth Century reserves the right to amend or discontinue this waiver policy at any time and, with regard to a particular redemption transaction, to require a signature guarantee at its discretion. REDEMPTION PROCEEDS Redemption proceeds may be sent to the beneficiary of a mature Giftrust: BY MAIL If a redemption check is mailed, it is usually mailed on the second business day after receipt of a redemption request, but not later than seven days afterwards. Except as noted below, all checks will be made payable to the registered owner of the shares and will be mailed only to the address of record. In certain instances a redemption check can be made payable to someone other than the registered owner of the shares and/or mailed to an address other than the address of record. For information about this special service, please call Twentieth Century. (See "Telephone Services," page 17.) 16 BY WIRE AND ELECTRONIC FUNDS TRANSFER The beneficiary of a matured Giftrust may authorize Twentieth Century to transmit redemption proceeds by wire or electronic funds transfer. These services will be effective 30 days after Twentieth Century receives the authorization. Proceeds from the redemption of shares will normally be transmitted on the first business day, but not later than the seventh day, following the date of redemption. The destination bank usually will receive wired funds the day they are transmitted or the next day. Electronically transferred funds will ordinarily be received within one to seven days after transmission. Once the funds are transmitted, the time of receipt and the availability of the funds are not within Twentieth Century's control. Wired funds are subject to a charge of $10 to cover bank wire charges, which is deducted from redemption proceeds. ADDITIONAL INFORMATION ABOUT REDEMPTIONS If the beneficiary of a matured Giftrust experiences difficulty in making a telephone redemption during periods of drastic economic or market changes, the redemption request may be made by regular or express mail. It will be implemented at the net asset value next determined after the request has been received by Twentieth Century in good order. Twentieth Century reserves the right to revise or terminate the telephone redemption privilege at any time. REDEMPTIONS SPECIFYING A CERTAIN DATE OR PRICE CANNOT BE ACCEPTED AND WILL BE RETURNED. ALL REDEMPTIONS ARE MADE AND THE PRICE IS DETERMINED ON THE DAY WHEN ALL DOCUMENTATION, PROPERLY COMPLETED, IS RECEIVED BY TWENTIETH CENTURY. (See "When Share Price Is Determined," page 20.) Until a Giftrust matures, only the Trustee, as the legal owner of the shares, may redeem them. The ability of the beneficiary to compel the Trustee to redeem the shares is subject to the terms of the Giftrust. TELEPHONE SERVICES INVESTORS LINE The grantor of a Giftrust or the beneficiary of the Giftrust, if of legal age (or if not of legal age, the beneficiary's parents) may reach an Investor Services Representative by calling our Investors Line at 1-800-345-2021. On our Investors Line one may request information about our funds and a current prospectus, speak with an Investor Services Representative about his/her account, or get answers to any questions about the funds and the services we offer. UNUSUAL STOCK MARKET CONDITIONS HAVE IN THE PAST RESULTED IN AN INCREASE IN THE NUMBER OF SHAREHOLDER TELEPHONE CALLS. THOSE WHO EXPERIENCE DIFFICULTY IN REACHING TWENTIETH CENTURY ON THE INVESTORS LINE DURING SUCH PERIODS SHOULD CONSIDER SENDING TRANSACTION INSTRUCTIONS BY MAIL, EXPRESS MAIL OR COURIER SERVICE, OR USING OUR AUTOMATED INFORMATION LINE, IF THE CALLER HAS REQUESTED 17 AND RECEIVED AN ACCESS CODE AND IS NOT ATTEMPTING TO REDEEM SHARES. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, we can also be reached by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. The beneficiary of a matured Giftrust may also obtain an access code that will allow him/her to use the automated Information Line to make exchange transactions and obtain information about share balance, account value and the most recent transaction. REDEMPTION TRANSACTIONS CANNOT BE MADE ON THE AUTOMATED INFORMATION LINE. Please call our Investors Line at 1-800-345-2021 for more information on how to obtain an access code for our Automated Information Line. HOW TO CHANGE THE ADDRESS OF RECORD The grantor of a Giftrust or the beneficiary of the Giftrust, if of legal age (or if not of legal age, the beneficiary's parents) may notify Twentieth Century of changes in the address of record for the Giftrust account either by writing us or calling our Investors Line. Because the address of record impacts every piece of information we send to you, you are urged to notify us promptly of any change of address. TO PROTECT THE BENEFICIARY OF A MATURED GIFTRUST AND TWENTIETH CENTURY, ALL REQUESTS TO REDEEM SHARES HAVING A VALUE OF $25,000 OR MORE MADE WITHIN 30 DAYS OF OUR RECEIPT OF AN ADDRESS CHANGE (INCLUDING REQUESTS TO REDEEM THAT ACCOMPANY AN ADDRESS CHANGE), WHICH ARE TO BE PAID BY CHECK, MUST BE MADE IN WRITING, SIGNED BY EACH PERSON IN WHOSE NAME THE SHARES ARE OWNED, AND ALL SIGNATURES MUST BE GUARANTEED. (See "Signature Guarantee," page 16.) REPORTS TO SHAREHOLDERS At the end of each quarter, Twentieth Century will send to the address of record for the Giftrust a statement with the complete year-to-date information on activity in the account. The grantor, or the beneficiary, if of legal age (or if not of legal age, the beneficiary's parents) may at any time also request a statement of account activity to be sent to them. With the exception of the automatic transactions noted below, each time an investment, redemption or exchange of shares is made, Twentieth Century will send to the address of record for the Giftrust a confirmation of the transaction. Automatic investment purchases and exchanges made in an automatic exchange program will be confirmed on the next quarterly statement. Please carefully review all information in the confirmation or consolidated statement relating to transactions to ensure that instructions have been acted on properly. Please notify Twentieth Century in writing if there is an error. If you fail to provide notification of an error with reasonable 18 promptness (i.e., within 30 days of non-automatic transactions or within 30 days of the date of the quarterly statement, in the case of the automatic transactions noted above) we will deem the transaction to be ratified. No later than January 31 of each year, Twentieth Century will send to the address of record for the Giftrust account, when applicable, the following reports, which may be used in completing U.S. income tax returns: FORM 1099-DIV Reports taxable distributions during the preceding year. (If the beneficiary does not receive taxable distributions in the previous year, he or she will not receive a 1099-DIV.) FORM 1099-B Reports proceeds paid on redemptions during the preceding year. In December of each year, Twentieth Century will send to the address of record for the Giftrust account an annual report that includes audited financial statements for the fiscal year ending the preceding October 31 and a list of securities in the Giftrust Investors portfolio on that date. In June of each year, Twentieth Century will send a semiannual report that includes unaudited financial statements for the six months ending the preceding April 30, as well as a list of securities in its portfolio on that date. Twentieth Century does not publish interim lists of portfolio securities. Twentieth Century usually prepares and mails to the address of record a new prospectus dated March 1 of each year. IT IS IMPORTANT TO NOTIFY TWENTIETH CENTURY PROMPTLY OF ANY CHANGE OF ADDRESS. (See "How to Change the Address of Record," page 18.) 19 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of Giftrust shares is their net asset value next determined after receipt of an instruction to purchase or redeem. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined on each day that the New York Stock Exchange is open. Gifts and requests to redeem shares will receive the share price next determined after receipt by Twentieth Century of the gifts or redemption request. For example, gifts and requests to redeem shares received by Twentieth Century before the close of business on the New York Stock Exchange are effective on, and will receive the price determined, that day as of the close of the Exchange. Redemption requests received thereafter are effective on, and receive the price determined as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received from the Trustee only when the purchase check or wired funds representing gifts by a grantor are received by Twentieth Century. Wired funds are considered received on the day they are deposited in Twentieth Century's bank account if they are deposited before the close of business on the Exchange, usually 3 p.m. Central time. Gifts by telephone pursuant to an authorization to Twentieth Century to draw on a bank account are considered received at the time of the telephone call. Gifts and transaction instructions received by Twentieth Century on any business day by mail at its office prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Gifts and instructions received after that time, will receive the price determined on the next business day. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: 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. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked 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 20 value as determined in good faith by the board of directors. Debt securities not traded on a principal securities exchange are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the board of directors. Pursuant to a determination by Twentieth Century's board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That value is then converted to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, then that security would be valued at fair value as determined by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of the fund's portfolio may be affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset values of Twentieth Century's funds are published in leading newspapers daily. The net asset values may also be obtained by calling Twentieth Century. (See "Telephone Services," page 17.) DISTRIBUTIONS In general, distributions from net investment income and net realized securities gains, if any, are declared and paid annually on or before December 31, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. Distributions on shares of Giftrust accounts will not be paid in cash and will be reinvested. 21 The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of the fund does not increase the value of shares or total return. At any given time the value of shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. Because such gains and dividends are included in the value of shares, when they are distributed the value of shares is reduced by the amount of the distribution. If shares are bought just before the distribution, the full price will be paid for the shares, and then a portion of the purchase price will be distributed as a taxable distribution. (See "Taxes," on this page.) Reinvested distributions have no effect on the value of the account; while the account holds more shares, the value of each share has been reduced by the amount of the distribution. TAXES Twentieth Century has elected to be taxed under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders it pays no income tax. Distributions of net investment income and net short-term capital gains are taxable as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains. 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 in respect of investments by non-resident investors. The foreign taxes paid by the fund will reduce its dividends. If more than 50% of the value of the fund's total assets at the end of each quarter 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 shareholders. If the fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, 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 may also 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 it to shareholders. Distributions are taxable, even if the value of the shares is below their cost. If shares are purchased shortly 22 before a distribution, income taxes must be paid on the distribution, even though the value of the investment (plus cash received, if any) remains the same. In addition, the share price at the time shares are purchased may include unrealized gains in the securities held in the investment portfolio of the fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid as a distribution of capital gains and will be taxable as short-term or long-term capital gains. (See "Distributions," on page 21.) In January of the year following the distribution, Twentieth Century will send, when applicable, a Form 1099-DIV notifying the beneficiary of a matured Giftrust of the status of distributions for federal income tax purposes. Distributions may also 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 received 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. If the beneficiary of a matured Giftrust has not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require the beneficiary of a matured Giftrust to certify that the social security number or tax identification number provided is correct and that he/she is not subject to 31% withholding for previous under-reporting to the IRS. The beneficiary of a matured Giftrust will be asked to make the appropriate certification upon maturity of the Giftrust. Redemption of Giftrust shares will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. Because it is a gift of a future interest, an investment in a Giftrust does not qualify for the annual gift tax exclusion of $10,000. If you give a Giftrust, you must file a United States Gift Tax Return. If you make additional investments in subsequent years, a Gift Tax Return must be filed for each year's gift. No gift tax is payable until your cumulative lifetime gifts exceed the exemption equivalent of $600,000. Each gift is applied against the exemption equivalent that would otherwise be available in the future. The income of a Giftrust account is exempt from federal income tax until it exceeds $100. The Trustee of the Giftrust files federal income tax returns and pays the income tax out of the assets of the trust. A $10 fee will be charged against a Giftrust account in each year that the Trustee files a tax return on behalf of such account. The distribution to the beneficiary at 23 the maturity of the Giftrust may be subject to the throwback rules under the Internal Revenue Code. The throwback rules may create additional tax liability for a beneficiary who is age 21 or older at the time the Giftrust matures. More than one trust for the same beneficiary may be subject to the provisions of the Internal Revenue Code with respect to multiple trusts. The tax laws applicable to trusts in general are quite complex. You should consider consulting your tax adviser before opening a Giftrust account. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of Twentieth Century. Acting pursuant to an investment management agreement entered into with Twentieth Century, Investors Research Corporation ("Investors Research") serves as the investment manager of Twentieth Century. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to Twentieth Century since it was founded in 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to the Benham Group of Mutual Funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolios of Twentieth Century and directs the purchase and sale of its investment securities. Investors Research utilizes teams of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The teams meet regularly to review portfolio holdings and to discuss purchase and sale activity. The teams adjust holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio manager members of the team may also adjust portfolio holdings of the funds as necessary between team meetings. The portfolio manager members of the team managing Giftrust Investors and their work experience for the last five years are as follows: JAMES E. STOWERS III, President and Portfolio Manager, joined Twentieth Century in 1981. ROBERT C. PUFF JR., Executive Vice President and Chief Investment Officer, has been a Portfolio Manager since joining Twentieth Century in 1983. In his position as Chief Investment Officer, Mr. Puff oversees the investment activities of all of the teams that manage Twentieth Century funds. GLENN A. FOGLE, Vice President and Portfolio Manager, joined Twentieth Century in September 1990 as an Investment Analyst, a posi- 24 tion he held until March 1993. At that time he was promoted to Portfolio Manager. The activities of Investors Research are subject only to directions of Twentieth Century's board of directors. Investors Research pays all the expenses of Twentieth Century except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to Twentieth Century, Investors Research receives an annual fee of 1% of the average net assets the fund. On the first business day of each month, the fund pays a management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the series' net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). The unified management fee paid by the fund to Investors Research may be higher than that paid by many funds. However, most if not all of such funds also pay in addition certain of their own expenses, while virtually all of Giftrust Investors' expenses, except as specified above, are paid by Investors Research. CODE OF ETHICS Twentieth Century and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the fund's portfolios obtain preclearance before executing personal trades. With respect to portfolio managers and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111, acts as transfer, administrative services and dividend-paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century, and is paid for such services by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman of the board of Twentieth Century Investors, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. 25 FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century Investors, Inc. was organized as a Maryland corporation on July 2, 1990. The corporation commenced operations on February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a Delaware corporation which had been in business since October 1958. Pursuant to the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland corporation was the surviving entity and continued the business of the Delaware corporation with the same officers and directors, the same shareholders and the same investment objectives, policies and restrictions. The principal office of Twentieth Century is Twentieth Century Tower, 4500 Main Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by mail to that address, or by phone to 1-800-345-2021. (For local Kansas City area or international callers: 816-531-5575.) Giftrust Investors is one of 16 series of shares ($.01 par value per share) issued by Twentieth Century. The assets belonging to each series of shares are held separately by the custodian, and in effect each series is a separate fund. Each share, irrespective of series, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series of shares affected. Matters affecting only one series are voted upon only by that series. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the shares will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for Twentieth Century to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to Twentieth Century's by-laws, the holders of shares representing at least 10% of the votes entitled to be cast may request Twentieth Century to hold a special meeting of shareholders. Twentieth Century will assist in the communication with other shareholders. TWENTIETH CENTURY RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 26 This page is left blank intentionally. 27 This page is left blank intentionally. 28 [company logo] Investments That WorkTM ---------------------------------------- P.O. Box 419200 Kansas City, Missouri 64141-6200 ---------------------------------------- Person-to-person assistance: 1-800-345-2021 or 816-531-5575 ---------------------------------------- Automated information line: 1-800-345-8765 ---------------------------------------- Telecommunications Device for the Deaf: 1-800-634-4113 or 816-753-1865 ---------------------------------------- Fax: 816-340-7962 SH-BKT-4308 Recycled 9603 (C) 1996 Twentieth Century Services, Inc. TWENTIETH CENTURY INVESTORS, INC. INSTITUTIONAL PROSPECTUS MARCH 1, 1996 - -------------------------------------------------------------------------------- Twentieth Century Investors, Inc., a member of the Twentieth Century family of funds, offers 16 no-load mutual funds covering a variety of investment opportunities. Twelve of the funds are described in this prospectus. The investment objectives of the funds are listed on the inside cover of the prospectus. NO-LOAD MUTUAL FUNDS Twentieth Century's funds are "no-load" investments, which means there are no sales charges or commissions. Twentieth Century has no 12b-1 plan or other deferred sales charges. This prospectus is intended for participants in employer-sponsored retirement or savings plans. One or more of the funds described herein is available as an investment option in your employer's plan. There is no minimum investment requirement for plan participants. Other prospectuses containing information on the funds offered by Twentieth Century and information on how to open personal and other types of investment accounts are available by calling Twentieth Century at the number shown at right. This prospectus gives you information about Twentieth Century that you should know before investing. You should read this prospectus carefully and retain it for future reference. Additional information is included in the statement of additional information dated March 1, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Investors, Inc. 4500 Main Street * P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-345-1833 In Missouri: 816-753-0700 - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- EQUITY FUNDS SELECT INVESTORS HERITAGE INVESTORS seek capital growth. The funds intend to pursue their investment objectives by investing primarily in common stocks of companies that are considered by management to have better-than-average prospects for appreciation. As a matter of fundamental policy, 80% of the assets of Select Investors and of Heritage Investors must be invested in securities of companies that have a record of paying dividends or have committed themselves to the payment of regular dividends or otherwise produce income. GROWTH INVESTORS ULTRA INVESTORS VISTA INVESTORS seek capital growth. The funds intend to pursue their investment objectives by investing primarily in common stocks that are considered by management to have better-than-average prospects for appreciation. BALANCED FUND BALANCED INVESTORS seeks capital growth and current income. It is management's intention to maintain approximately 60% of the fund's assets in common stocks that are considered by management to have better-than-average prospects for appreciation and the balance in bonds and other fixed income securities. FIXED INCOME FUNDS CASH RESERVE is a money market fund which seeks to obtain maximum current income consistent with the preservation of principal and maintenance of liquidity. The fund intends to pursue its investment objective by investing substantially all of its assets in a portfolio of money market instruments and maintaining a weighted average maturity of not more than 90 days. AN INVESTMENT IN CASH RESERVE IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE. U.S. GOVERNMENTS SHORT-TERM seeks income. The fund intends to pursue its investment objective by investing in securities of the United States government and its agencies and maintaining a weighted average maturity of three years or less. U.S. GOVERNMENTS INTERMEDIATE-TERM seeks a competitive level of income. The fund intends to pursue its investment objective by investing in securities of the United States government and its agencies and maintaining a weighted average maturity of three to 10 years. LIMITED-TERM BOND seeks income. The fund intends to pursue its investment objective by investing in bonds and other debt obligations and maintaining a weighted average maturity of five years or less. INTERMEDIATE-TERM BOND seeks a competitive level of income. The fund intends to pursue its investment objective by investing in bonds and other debt obligations and maintaining a weighted average maturity of three to 10 years. LONG-TERM BOND seeks a high level of income. The fund intends to pursue its investment objective by investing in bonds and other debt obligations and maintaining a weighted average maturity of 10 years or greater. There is no assurance that the funds will achieve their respective objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY TWENTIETH CENTURY INVESTORS, INC. TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS TRANSACTION AND OPERATING EXPENSE TABLE .......... 4 FINANCIAL HIGHLIGHTS ............................. 5 INFORMATION REGARDING THE FUNDS Information About Investment Policies of the Funds 9 Equity Funds ..................................... 9 Select Investors, Heritage Investors ........ 9 Growth Investors, Ultra Investors and Vista Investors ......................... 9 Balanced Fund .................................... 10 Balanced Investors .......................... 10 Fixed Income Funds ............................... 11 Cash Reserve ................................ 11 U.S. Governments Short-Term and U.S. Governments Intermediate-Term ...... 11 Limited-Term Bond, Intermediate-Term Bond and Long-Term Bond ..................... 12 FUNDAMENTALS OF FIXED INCOME INVESTING ........... 13 OTHER INVESTMENT PRACTICES ....................... 14 Portfolio Turnover .......................... 14 Repurchase Agreements ....................... 15 Derivative Securities ....................... 15 Portfolio Lending ........................... 16 Foreign Securities .......................... 16 Forward Currency Exchange Contracts ......... 17 When-Issued Securities ...................... 17 Rule 144A Securities ........................ 18 Interest Rate Futures Contracts and Options Thereon ......................... 18 Short Sales ................................. 19 PERFORMANCE ADVERTISING .......................... 19 HOW TO INVEST WITH TWENTIETH CENTURY TWENTIETH CENTURY FAMILY OF FUNDS ................ 21 INVESTING IN TWENTIETH CENTURY ................... 21 HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER ............................. 21 HOW TO REDEEM SHARES ............................. 21 Special Requirements for Large Equity Fund Redemptions ................. 21 TELEPHONE SERVICES ............................... 22 Investors Line .............................. 22 Automated Information Line .................. 22 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ...................................... 23 When Share Price Is Determined .............. 23 How Share Price Is Determined ............... 23 Where to Find Information About Share Price . 24 DISTRIBUTIONS .................................... 24 Equity Funds ................................ 24 Balanced Fund ............................... 24 Fixed Income Funds .......................... 24 TAXES ............................................ 24 MANAGEMENT ....................................... 24 Investment Management ....................... 24 Code of Ethics .............................. 26 Transfer and Administrative Services ........ 26 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ...... 27 3
TRANSACTION AND OPERATING EXPENSE TABLE - ------------------------------------------------------------------------------------------------------------------------------------ Select, Heritage, Intermediate- Cash Reserve, Growth, Ultra Term Bond, U.S. U.S. Governments Vista and Long-Term Governments Short-Term and Balanced Bond Intermediate-Term Limited-Term Bond ---------------------------------------------------------------------------- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases none none none none Maximum Sales Load Imposed on Reinvested Dividends none none none none Deferred Sales Load none none none none Redemption Fee none none none none Exchange Fee none none none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets) Management Fees(1) 1.00% .80% .75% .70% 12b-1 Fees none none none none Other Expenses(2) 0.00% 0.00% 0.00% 0.00% Total Fund Operating Expenses 1.00% .80% .75% .70% EXAMPLE You would pay the following expenses on a $1,000 investment, assuming (1) a 5% annual return and (2) redemption the end of each time period: 1 year $ 10 $ 8 $ 8 $ 7 3 years 32 26 24 22 5 years 55 44 42 39 10 years 122 99 93 87
The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the shares of Twentieth Century offered by this prospectus. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. (1) A portion of the management fee may be paid by the funds' manager to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager. See "Management - Transfer and Administrative Services," page 26. (2) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were 0.0014 of 1% of average net assets for the most recent fiscal year. 4
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - ------------------------------------------------------------------------------------------------------------------------------------ The Financial Highlights for each of the periods presented (except as noted) have been audited by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the statement of additional information. The annual report contains additional performance information and will be made available upon request and without charge. INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS --------------------------------- --------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) SELECT INVESTORS Year Ended Oct. 31, 1986 $26.48 $.43 $ 9.01 $ 9.44 $(.515) -- -- $(.515) $35.40 36.13% 1987 35.40 .33 .80 1.13 (.380) $(3.462) -- (3.842) 32.69 3.47% 1988 32.69 .64 1.37 2.01 (.481) (6.367) -- (6.848) 27.85 7.31% 1989 27.85 1.10 7.74 8.84 (.707) -- -- (.707) 35.98 32.59% 1990 35.98 .62 (1.29) (.67) (1.116) -- -- (1.116) 34.19 (2.03%) 1991 34.19 .63 8.17 8.80 (.652) (1.551) -- (2.203) 40.79 27.05% 1992 40.79 .53 .34 .87 (.653) (1.823) -- (2.476) 39.18 1.76% 1993 39.18 .46 7.94 8.40 (.495) (1.313) $(.016) (1.824) 45.76 22.20% 1994 45.76 .40 (3.59) (3.19) (.432) (4.466) -- (4.898) 37.67 (7.37%) 1995 37.67 .33 4.68 5.01 (.281) (2.750) (.125) (3.156) 39.52 15.02% HERITAGE INVESTORS Nov. 10, 1987 (inception) through Oct. 31, 1988 $5.00 $.06 $1.16 $1.22 $(.013) -- -- $(.013) $6.21 25.75% Year Ended Oct. 31, 1989 6.21 .08 1.93 2.01 (.066) -- -- (.066) 8.15 32.65% 1990 8.15 .10 (.94) (.84) (.065) $(.691) -- (.756) 6.55 (11.62%) 1991 6.55 .11 2.04 2.15 (.110) -- -- (.110) 8.59 33.25% 1992 8.59 .10 .72 .82 (.113) -- -- (.113) 9.30 9.65% 1993 9.30 .07 2.43 2.50 (.093) (.679) -- (.772) 11.03 28.64% 1994 11.03 .07 (.21) (.14) (.068) (.500) $(.006) (.574) 10.32 (1.13%) 1995 10.32 .05 1.96 2.01 (.033) (.514) $(.030) (.577) 11.75 21.04% GROWTH INVESTORS Year Ended Oct. 31, 1986 $14.16 $.12 $ 5.37 $ 5.49 $(.182) -- -- $(.182) $19.47 39.09% 1987 19.47 .01 1.30 1.31 (.086) $(5.076) -- (5.162) 15.62 9.32% 1988 15.62 .30 .13 .43 (.046) (3.460) -- (3.506) 12.54 3.18% 1989 12.54 .08 5.14 5.22 (.320) -- -- (.320) 17.44 42.74% 1990 17.44 .09 (2.05) (1.96) (.079) (.592) -- (.671) 14.81 (11.72%) 1991 14.81 .04 8.47 8.51 (.111) (.891) -- (1.002) 22.32 60.64% 1992 22.32 (.02) 1.35 1.33 (.013) -- -- (.013) 23.64 5.96% 1993 23.64 .06 1.94 2.00 -- (.353) $(.013) (.366) 25.27 8.48% 1994 25.27 .06 .48 .54 (.056) (2.764) (.002) (2.822) 22.99 2.66% 1995 22.99 .08 4.08 4.16 (.051) (3.183) (.040) (3.274) 23.88 22.31% [table continued below] [table continued] RATIOS/SUPPLEMENTAL DATA Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) SELECT INVESTORS Year Ended Oct. 31, 1986 1.01% 1.6% 85% $1,978,449 1987 1.00% 1.1% 123% 2,416,527 1988 1.00% 2.2% 140% 2,366,730 1989 1.00% 3.4% 93% 2,720,968 1990 1.00% 1.8% 83% 2,953,030 1991 1.00% 1.7% 84% 4,163,105 1992 1.00% 1.4% 95% 4,534,264 1993 1.00% 1.1% 82% 5,159,963 1994 1.00% 1.0% 126% 4,277,843 1995 1.00% .9% 106% 4,008,438 1995 average commission paid per share traded $0.46 HERITAGE INVESTORS Nov. 10, 1987 (inception) through Oct. 31, 1988 1.00%(2) 1.4%(2) 130%(2) $55,389 Year Ended Oct. 31, 1989 1.00% 1.3% 159% 116,880 1990 1.00% 1.6% 127% 198,999 1991 1.00% 1.5% 146% 268,891 1992 1.00% 1.1% 119% 368,651 1993 1.00% .7% 116% 701,504 1994 1.00% .7% 136% 896,763 1995 .99% .5% 121% 1,008,323 1995 average commission paid per share traded $.042 GROWTH INVESTORS Year Ended Oct. 31, 1986 1.01% .6% 105% $964,742 1987 1.00% .2% 114% 1,187,933 1988 1.00% 2.4% 143% 1,228,587 1989 1.00% .5% 98% 1,596,571 1990 1.00% .6% 118% 1,696,667 1991 1.00% .2% 69% 3,193,381 1992 1.00% (.1%) 53% 4,471,882 1993 1.00% .2% 94% 4,641,187 1994 1.00% .3% 100% 4,363,476 1995 1.00% .4% 141% 5,129,894 1995 average commission paid per share traded $0.40
(1) Actual total return for period indicated. (2) Annualized. 5
FINANCIAL HIGHLIGHTS (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS --------------------------------- -------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) ULTRA INVESTORS Year Ended Oct. 31, 1986 $7.13 $.00 $1.94 $1.94 $(.010) -- -- $ (.010) $9.06 27.22% 1987 9.06 (.07) (.22) (.29) (.007) -- -- (.007) 8.76 (3.23%) 1988 8.76 (.02) 1.38 1.36 -- $(3.258) -- (3.258) 6.86 19.52% 1989 6.86 .19 2.58 2.77 -- -- -- -- 9.63 40.37% 1990 9.63 (.03) (.73) (.76) (.196) (.947) -- (1.143) 7.73 (9.02%) 1991 7.73 (.03) 7.86 7.83 -- (.028) -- (.028) 15.53 101.51% 1992 15.53 (.05) (.02) (.07) -- -- -- -- 15.46 (.45%) 1993 15.46 (.09) 6.24 6.15 -- -- -- -- 21.61 39.78% 1994 21.61 (.03) (.42) (.45) -- -- -- -- 21.16 (2.08%) 1995 21.16 (.07) 7.58 7.51 -- (.645) -- (.645) 28.03 36.89% VISTA INVESTORS Year Ended Oct. 31, 1986 $4.68 $(.02) $2.22 $2.20 -- -- -- -- $6.88 47.00% 1987 6.88 (.05) (.45) (.50) -- $(.651) -- $(.651) 5.73 (7.70%) 1988 5.73 .01 .63 .64 -- (.462) -- (.462) 5.91 11.41% 1989 5.91 (.03) 2.87 2.84 $(.012) -- -- (.012) 8.74 48.19% 1990 8.74 (.01) (1.76) (1.77) -- (.693) -- (.693) 6.28 (22.17%) 1991 6.28 (.02) 4.27 4.25 -- -- -- -- 10.53 67.67% 1992 10.53 (.04) .52 .48 -- -- -- -- 11.01 4.55% 1993 11.01 (.07) 1.95 1.88 -- (.641) $(.006) (.647) 12.24 17.71% 1994 12.24 (.08) .45 .37 -- (1.663) (.012) (1.675) 10.94 4.16% 1995 10.94 (.08) 4.90 4.82 -- (.30) -- (.30) 15.73 44.20% BALANCED INVESTORS Oct. 20, 1988 (inception) through Oct. 31, 1988 $10.22 $.01 $(.10) $(.09) -- -- -- -- $10.13 (.88%) YearEnded Oct. 31, 1989 10.13 .37 1.71 2.08 $(.372) -- -- $(.372) 11.84 20.94% 1990 11.84 .41 (.62) (.21) (.417) $(.320) -- (.737) 10.89 (2.10%) 1991 10.89 .38 4.22 4.60 (.384) -- -- (.384) 15.11 42.92% 1992 15.11 .33 (.23) .10 (.322) -- -- (.322) 14.89 .63% 1993 14.89 .38 1.62 2.00 (.375) -- -- (.375) 16.52 13.64% 1994 16.52 .42 (.58) (.16) (.416) -- -- (.416) 15.94 (.93%) 1995 15.94 .48 2.03 2.51 (.475) (.274) -- (.749) 17.70 16.36% [table continued below] [table continued] RATIOS/SUPPLEMENTAL DATA ------------------------------------- Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) ULTRA INVESTORS Year Ended Oct. 31, 1986 1.01% -- 99% $314,672 1987 1.00% (.5%) 137% 235,865 1988 1.00% (.3%) 140% 258,320 1989 1.00% 2.2% 132% 346,593 1990 1.00% (.3%) 141% 330,005 1991 1.00% (.5%) 42% 2,147,654 1992 1.00% (.4%) 59% 4,275,200 1993 1.00% (.6%) 53% 8,037,417 1994 1.00% (.1%) 78% 10,344,273 1995 1.00% (.3%) 87% 14,375,902 1995 average commission paid per share traded $.033 VISTA INVESTORS Year Ended Oct. 31, 1986 1.01% (.3%) 121% $159,889 1987 1.00% (.7%) 123% 187,272 1988 1.00% .2% 145% 206,434 1989 1.00% (.4%) 125% 263,876 1990 1.00% (.1%) 103% 340,621 1991 1.00% (.3%) 92% 622,140 1992 1.00% (.4%) 87% 829,678 1993 1.00% (.6%) 133% 847,470 1994 1.00% (.8%) 111% 792,343 1995 .98% (.6%) 89% 1,675,917 1995 average commission paid per share traded $.033 BALANCED INVESTORS Oct. 20, 1988 (inception) through Oct. 31, 1988 1.00%(2) 4.4%(2) 99%(2) $2,786 Year Ended Oct. 31, 1989 1.00% 4.2% 171% 30,156 1990 1.00% 3.8% 104% 66,407 1991 1.00% 3.1% 116% 254,884 1992 1.00% 2.4% 100% 654,123 1993 1.00% 2.4% 95% 705,698 1994 1.00% 2.7% 94% 703,866 1995 .98% 2.9% 85%(3) 815,570 1995 average commission paid per share traded $.039 (1) Actual total return for period indicated. (2) Annualized. (3) The portfolio turnover rate of the equity and fixed income components of the portfolio was 90% and 71%, respectively.
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FINANCIAL HIGHLIGHTS (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------- ------------------------------------------ Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) CASH RESERVE (2) Year Ended Oct. 31, 1986 $1.00 $.06 $.001 $.06 $(.062) $(.001) -- $(.063) $1.00 6.46% 1987 1.00 .06 -- .06 (.056) -- -- (.056) 1.00 5.75% 1988 1.00 .07 -- .07 (.065) -- -- (.065) 1.00 6.73% 1989 1.00 .08 -- .08 (.083) -- -- (.083) 1.00 8.66% 1990 1.00 .07 -- .07 (.074) -- -- (.074) 1.00 7.67% 1991 1.00 .06 -- .06 (.058) -- -- (.058) 1.00 5.95% 1992 1.00 .04 -- .04 (.037) -- -- (.037) 1.00 3.74% 1993 1.00 .02 -- .02 (.023) -- -- (.023) 1.00 2.30% 1994 1.00 .03 -- .03 (.032) -- -- (.032) 1.00 3.21% 1995 1.00 .05 -- .05 (.052) -- -- (.052) 1.00 5.38% U.S. GOVERNMENTS SHORT-TERM(4) Year Ended Oct. 31, 1986 $ 9.95 $.87 $ .27 $1.14 $(.871) $(.056) -- $(.927) $10.16 11.89% 1987 10.16 .79 (.49) .30 (.792) (.122) -- (.914) 9.55 3.14% 1988 9.55 .81 (.13) .68 (.816) -- -- (.816) 9.41 7.44% 1989 9.42 .84 (.10) .74 (.843) -- -- (.843) 9.32 8.36% 1990 9.32 .79 (.24) .55 (.789) -- -- (.789) 9.08 6.28% 1991 9.08 .63 .33 .96 (.635) -- -- (.635) 9.41 10.99% 1992 9.41 .44 .20 .64 (.441) -- -- (.441) 9.61 6.85% 1993 9.61 .36 (.26) .10 (.036) -- -- (.036) 9.67 4.45% 1994 9.67 .40 (.40) -- (.402) -- -- (.402) 9.27 .07% 1995 9.27 .52 (.24) .76 (.519) -- -- (.519) 9.51 8.42% U.S. GOVERNMENTS INTERMEDIATE-TERM Mar. 1, 1994 (inception) through Oct. 31, 1994 $10.00 $.34 $(.45) $ (.11) $(.343) -- -- $(.343) $9.55 (1.01%) Year Ended Oct. 31, 1995 9.55 .58 .49 1.07 (.583) -- -- (.583) 10.04 11.58% [table continued below] [table continued] RATIOS/SUPPLEMENTAL DATA Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portable Period to Average Average Turnover (in Net Assets Net Assets Rate 1 thousands) CASH RESERVE(2) Year Ended Oct. 31, 1986 1.01% 5.83% -- $134,958 1987 1.00% 5.80% -- 447,917 1988 1.00% 6.52% -- 488,781 1989 1.00% 8.35% -- 639,115 1990 1.00% 7.40% -- 953,687 1991 .97%(3) 5.75% -- 1,236,309 1992 .98%(3) 3.62% -- 1,487,961 1993 1.00% 2.30% -- 1,256,012 1994 .80% 3.18% -- 1,298,982 1995 .70% 5.27% -- 1,469,546 U.S. GOVERNMENTS SHORT-TERM(4) Year Ended Oct. 31, 1986 1.01% 8.54% 464% $254,714 1987 1.00% 8.10% 468% 335,601 1988 1.00% 8.60% 578% 440,380 1989 1.00% 9.10% 567% 443,475 1990 1.00% 8.64% 620% 455,536 1991 .99%(3) 6.88% 779% 534,515 1992 .99%(3) 4.62% 391% 569,430 1993 1.00% 3.73% 413% 511,981 1994 .81% 4.17% 470% 396,753 1995 .70% 5.53% 128% 391,331 U.S. GOVERNMENTS INTERMEDIATE-TERM Mar. 1, 1994 (inception) through Oct. 31, 1994 .75%(5) 5.43%(5) 205%(5) $ 6,280 Year Ended Oct. 31, 1995 .74% 5.99% 137% 21,981 (1) Actual total return for period indicated, unless otherwise noted. (2) The data presented has been restated to give effect to a 100 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (3) Expenses are shown net of management fees waived by Investors Research Corporation for low-balance account fees collected during period. (4) The data presented has been restated to give effect to a 10 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (5) Annualized.
7
FINANCIAL HIGHLIGHTS (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------- --------------------------------------------------------- Net Realized Distributions Distributions and from Net in Excess of Net Asset Unrealized Total Dividends Realized Net Realized Net Asset Value, Net Gains from from Net Gains on Gains on Value, Beginning Investment (Losses) on Investment Investment Investment Investment Total End of Total of Period Income Investments Operations Income Transactions Transactions Distributions Period Return(1) LIMITED-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 $10.00 $.31 $(.32) $(.01) $(.312) -- -- $(.312) $9.68 (.08%) Year Ended Oct. 31, 1995 9.68 .56 .28 .84 (.557) -- -- (.557) 9.96 8.89% INTERMEDIATE-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 $10.00 $.34 $(.47) $(.13) $(.337) -- -- $(.337) $ 9.53 (1.24%) Year Ended Oct. 31, 1995 9.53 .59 .54 1.13 (.587) -- -- (.587) 10.07 12.19% LONG-TERM BOND(3) Mar. 2, 1987 (inception) through Oct. 31, 1987 $10.00 $.48 $(1.05) $(.57) $(.475) -- -- $(.475) $ 8.96 (8.63%)(2) Year Ended Oct. 31, 1988 8.96 .84 .23 1.07 (.836) -- -- (.836) 9.19 12.31% 1989 9.18 .82 .36 1.18 (.819) -- -- (.819) 9.54 13.51% 1990 9.54 .80 (.64) .16 (.796) $(.006) -- (.802) 8.90 1.93% 1991 8.90 .75 .66 1.41 (.746) -- -- (.746) 9.56 16.44% 1992 9.56 .63 .35 .98 (.622) -- -- (.622) 9.92 10.40% 1993 9.92 .66 1.88 2.54 (.662) (1.587) -- (2.249) 10.21 11.81% 1994 10.21 .58 (1.12) (.54) (.576) (.186) -- (.762) 8.91 (5.47%) 1995 8.91 .61 .87 1.48 (.611) -- -- (.611) 9.78 17.16% [table continued below] [table continued] RATIOS/SUPPLEMENTAL DATA ------------------------------------ Ratio of Net Net Ratio of Investment Assets, Operating Income End of Expenses to Portfolio Period to Average Average Turnover (in Net Assets Net Assets Rate thousands) LIMITED-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 .70%(2) 4.79%(2) 48% $4,375 Year Ended Oct. 31, 1995 .69% 5.70% 116% 7,193 INTERMEDIATE-TERM BOND Mar. 1, 1994 (inception) through Oct. 31, 1994 .75%(2) 5.23%(2) 48% $4,262 Year Ended Oct. 31, 1995 .74% 6.05% 133% 12,827 LONG-TERM BOND(3) Mar. 2, 1987 (inception) through Oct. 31, 1987 1.00%(2) 8.10%(2) 146%(2) $9,403 Year Ended Oct. 31, 1988 1.00% 9.15% 280% 25,788 1989 1.00% 8.83% 216% 62,302 1990 1.00% 8.81% 98% 77,270 1991 .96%(4) 8.06% 219% 114,342 1992 .98%(4) 6.30% 186% 154,031 1993 1.00% 6.54% 113% 172,120 1994 .88% 6.07% 78% 121,012 1995 .78% 6.53% 105% 149,223 (1) Actual total return for period indicated, unless otherwise noted. (2) Annualized. (3) The data presented has been restated to give effect to a 10 shares for 1 stock split in the form of a stock dividend that occurred on November 13, 1993. (4) Expenses are shown net of management fees waived by Investors Research Corporation for low-balance account fees collected during period.
8 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INFORMATION ABOUT INVESTMENT POLICIES OF THE FUNDS Twentieth Century has adopted certain investment restrictions applicable to the funds that are set forth in the statement of additional information. Those restrictions, as well as the investment objectives of the funds, identified on the inside front cover page of this prospectus, and any other investment policies designated as "fundamental" in this prospectus or in the statement of additional information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this prospectus, are not designated as fundamental policies and may be changed without shareholder approval. The descriptions that follow are designed to help you choose the fund that best fits your investment objectives. You may want to pursue more than one objective by investing in more than one of these funds. EQUITY FUNDS All of Twentieth Century's equity funds and the equity portion of the portfolio of Balanced Investors seek capital growth by investing in securities, primarily common stocks, that meet certain fundamental and technical standards of selection and have, in the opinion of Twentieth Century's management, better-than-average potential for appreciation. So long as a sufficient number of such securities is available, Twentieth Century intends to stay fully invested in these securities regardless of the movement of stock prices generally. In most circumstances, the funds' actual level of cash and cash equivalents will fluctuate between 0% and 10% of total assets with 90% to 100% of its assets committed to equity and equity equivalent investments. The funds may purchase securities only of companies that have a record of at least three years continuous operation. SELECT INVESTORS, HERITAGE INVESTORS Securities of companies chosen for Select and Heritage Investors are chosen primarily for their growth potential. Additionally, as a matter of fundamental policy, 80% of the assets of Select Investors and of Heritage Investors must be invested in securities of companies that have a record of paying dividends, or have committed themselves to the payment of regular dividends or otherwise produce income. The remaining 20% of fund assets may be invested in any otherwise permissible securities that the manager believes will contribute to the funds' stated investment objectives. The income payments of equity securities are only a secondary consideration; therefore, the income return that Select and Heritage provide may not be significant. Otherwise, Select and Heritage follow the same investment techniques described below for Growth, Ultra and Vista. Since Select is one of the largest of Twentieth Century's funds and Heritage is substantially smaller, Select will invest in shares of larger companies with larger share trading volume, and Heritage will tend to invest in smaller companies with smaller share trading volume. However, the two funds are not mutually exclusive, and a given security may be owned by both funds. For the reasons stated below under the caption "Growth Investors, Ultra Investors and Vista Investors" below, it should be expected that Heritage will be more volatile and subject to greater short-term risk and long-term opportunity than Select. Because of its size, and because it invests primarily in securities that pay dividends or are committed to the payment of dividends, Select may be expected to be the least volatile of the common stock funds described in this prospectus. GROWTH INVESTORS, ULTRA INVESTORS AND VISTA INVESTORS Management selects, for the portfolios of Growth, Ultra and Vista, securities of companies whose earnings and revenue trends meet management's standards of selection. They then determine to which of the three funds the selected securities would most contribute. 9 Large, established companies are generally allocated to Growth. Medium-sized and smaller companies are allocated to Ultra and Vista. As of February 1, 1996, the size of the companies (as reflected by their capitalizations) held by the funds is as follows: MEDIAN CAPITALIZATION OF COMPANIES HELD - ----------------------------------------------- Growth Investors $5,076,231,000 Ultra Investors $3,542,263,000 Vista Investors $ 871,313,000 - ---------------------------------------------- The median capitalization of the companies in a given fund may change over time. In addition, the criteria outlined above are not mutually exclusive, and a given security may be owned by more than one of the funds. The size of the fund and of its portfolio companies tends to give each fund its own characteristics of volatility and risk. These differences come about because developments such as new or improved products or methods, which would be relatively insignificant to a large portfolio company, may have a substantial impact on the earnings and revenues of a small company and create a greater demand and a higher value for its shares. However, a new product failure which could readily be absorbed by a large portfolio company can cause a rapid decline in the value of the shares of a smaller company. Hence, it could be expected that funds investing in smaller companies would be more volatile than funds investing in larger companies. BALANCED FUND BALANCED INVESTORS Balanced Investors seeks capital growth and current income. Selection of securities for the equity portion of its portfolio is discussed under "Equity Funds," page 9. Since a portion of the fund's portfolio will be invested in fixed income securities, the opportunity for capital appreciation may be expected to be less than with Twentieth Century's funds that invest primarily in common stocks. Management intends to maintain approximately 40% of the fund's assets in fixed income securities with a minimum of 25% of that amount in fixed income senior securities. The fixed income securities in the fund will be chosen based on their level of income production and price stability. The fund may invest in a diversified portfolio of debt and other fixed-rate securities payable in United States currency. These may include obligations of the United States government, its agencies and instrumentalities; corporate securities (bonds, notes, preferreds and convertible issues), and sovereign government, municipal, mortgage-backed and other asset-backed securities. There are no maturity restrictions on the fixed income securities in which the fund invests. Under normal market conditions the weighted average portfolio maturity will be in the three- to 10-year range. The management will actively manage the portfolio, adjusting the weighted average portfolio maturity in response to expected interest rates. During periods of rising interest rates, a shorter weighted average maturity may be adopted in order to reduce the effect of bond price declines on the fund's net asset value. When interest rates are falling and bond prices rising, a longer weighted average portfolio maturity may be adopted. It is management's intention to invest the fund's fixed income holdings in high-grade securities. At least 80% of fixed income assets will be invested in securities which at the time of purchase are rated within the three highest categories by a nationally recognized statistical rating organization [at least A by Moody's Investors Service, Inc. (Moody's) or Standard & Poor's Corp. (S&P)]. The remaining portion of the fixed income assets may be invested in issues in the fourth highest category (Baa by Moody's or BBB by S&P), or, if not rated, are of equivalent investment quality as determined by the management and which, in the opinion of management, can contribute meaningfully to the fund's results without compromising its objectives. Such issues might include a lower-rated issue where research suggests the likelihood of a rating increase; or a convertible issue of a company deemed attractive by the equity management team. 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 10 belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances. (See "Fundamentals of Fixed Income Investing," page 13 and "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) FIXED INCOME FUNDS For an explanation of the securities ratings referred to in the discussion of our fixed income funds, see "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information. CASH RESERVE Cash Reserve seeks to obtain a level of current income consistent with preservation of capital and maintenance of liquidity. Cash Reserve is designed for investors who want income and no fluctuation in their principal. Cash Reserve expects, but cannot guarantee, that it will maintain a constant share price of $1.00. The fund follows industry-standard guidelines on the quality and maturity of its investments, purchasing only securities having remaining maturities of not more than 13 months and by maintaining a weighted average portfolio maturity of not more than 90 days. Cash Reserve invests substantially all of its assets in a diversified portfolio of U.S. dollar denominated high-quality money market instruments, consisting of: (1) Securities issued or guaranteed by the U.S. government and its agencies and instrumentalities. (For a description of such securities, see "U.S. Governments Short-Term and U.S. Governments Intermediate-Term," on this page.) (2) Commercial Paper. (3) Certificates of Deposit and Euro Dollar Certificates of Deposit. (4) Bankers' Acceptances. (5) Short-term notes, bonds, debentures, or other debt instruments. (6) Repurchase agreements. These classes of securities may be held in any proportion, and such proportion may vary as market conditions change. All portfolio holdings are limited to those which at the time of purchase have a short-term rating of A-1 by S&P or P-1 by Moody's, or if they have no short-term rating are issued or guaranteed by an entity having a long-term rating of at least AA by S&P or Aa by Moody's. U.S. GOVERNMENTS SHORT-TERM AND U.S. GOVERNMENTS INTERMEDIATE-TERM These funds seek to provide a competitive level of income and limited price volatility by investing in securities of the United States government and its agencies. The two funds differ in the weighted average maturities of their portfolios and accordingly in their degree of risk and level of income. Generally, the longer the weighted average maturity of a fund's portfolio, the higher the yield and the greater the price volatility. U.S. Governments Short-Term will maintain a weighted average portfolio maturity of three years or less. The fund is designed for investors who can accept some fluctuation in principal in order to earn a higher level of current income than is generally available from money market securities, but who do not want as much price volatility as is inherent in longer-term securities. U.S. Governments Intermediate-Term will maintain a weighted average portfolio maturity of three to 10 years. The fund is designed for investors seeking a higher level of current income than is generally available from shorter-term government securities and who are willing to accept a greater degree of price fluctuation. The market value of the securities in which U.S. Governments Short-Term and U.S. Governments Intermediate-Term invest will fluctuate, and accordingly, the value of your shares will vary from day to day. (See "Fundamentals of Fixed Income Investing," page 13.) Both funds may invest in (1) direct obligations of the United States, such as Treasury bills, notes and bonds, which are supported by the full faith and 11 credit of the United States, and (2) obligations (including mortgage-related securities) issued or guaranteed by agencies and instrumentalities of the United States government that are established under an act of Congress. The securities of some of these agencies and instrumentalities, such as the Government National Mortgage Association, are guaranteed as to principal and interest by the U.S. Treasury, and other securities are supported by the right of the issuer, such as the Federal Home Loan Banks, to borrow from the Treasury. Other obligations, including those issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, are supported only by the credit of the nstrumentality. Mortgage-related securities in which the funds may invest include collateralized mortgage obligations ("CMOs") issued by a United States agency or instrumentality. A CMO is a debt security that is collateralized by a portfolio or pool of mortgages or mortgage-backed securities. The issuer's obligation to make interest and principal payments is secured by the underlying pool or portfolio of mortgages or securities. The market value of mortgage-related securities, even those in which the underlying pool of mortgage loans is guaranteed as to the payment of principal and interest by the United States government, is not insured. When interest rates rise, the market value of those securities may decrease in the same manner as other debt, but when interest rates decline, their market value may not increase as much as other debt instruments because of the prepayment feature inherent in the underlying mortgages. If such securities are purchased at a premium, the fund will suffer a loss if the obligation is prepaid. Prepayments will be reinvested at prevailing rates, which may be less than the rate paid by the prepaid obligation. For the purpose of determining the weighted average portfolio maturity of the funds, management shall consider the maturity of a mortgage-related security to be the remaining expected average life of the security. The average life of such securities is likely to be substantially less than the original maturity as a result of prepayments of principal on the underlying mortgages, especially in a declining interest rate environment. In determining the remaining expected average life, management makes assumptions regarding prepayments on underlying mortgages. In a rising interest rate environment, those prepayments generally decrease, and may decrease below the rate of prepayment assumed by management when purchasing those securities. Such slowdown may cause the remaining maturity of those securities to lengthen, which will increase the relative volatility of those securities and, hence, the fund holding the securities. (See "Fundamentals of Fixed Income Investing," page 13.) LIMITED-TERM BOND, INTERMEDIATE-TERM BOND AND LONG-TERM BOND These funds seek to provide investors with income through investments in bonds and other debt instruments. The three funds differ in the weighted average maturities of their portfolios and accordingly in their degree of risk and level of income. Generally, the longer the weighted average maturity, the higher the yield and the greater the price volatility. Limited-Term Bond will invest primarily in investment grade corporate securities and other debt instruments and will maintain, under normal market conditions, a weighted average maturity of five years or less. The fund is designed for investors seeking a competitive level of current income with limited price volatility. Intermediate-Term Bond will invest primarily in investment grade corporate securities and other debt instruments and will maintain, under normal market conditions, a weighted average maturity of three to 10 years. The fund is designed for investors seeking a higher level of current income than is generally available from shorter-term corporate and government securities and who are willing to accept a greater degree of price fluctuation. Long-Term Bond will invest primarily in investment grade corporate bonds and other debt instruments and will, under normal market conditions, maintain a weighted average portfolio maturity of 10 years or greater. The fund is designed for investors whose primary goal is a level of current income higher than is generally provided by money 12 market or short- and intermediate-term securities and who can accept the generally greater price volatility associated with longer-term bonds. The value of the shares of all three of these funds will vary from day to day. (See "Fundamentals of Fixed Income Investing," on this page.) Under normal market conditions, each fund will maintain at least 65% of the value of its total assets in investment grade bonds and other debt instruments. Under normal market conditions, each of the funds may invest up to 35% of its assets, and for temporary defensive purposes up to 100% of its assets, in short-term money market instruments. Management will actively manage the portfolios, adjusting the weighted average portfolio maturities as necessary in response to expected changes in interest rates. During periods of rising interest rates, the weighted average maturity of a fund may be moved to the shorter end of its maturity range in order to reduce the effect of bond price declines on the fund's net asset value. When interest rates are falling and bond prices rising, the weighted average portfolio maturity may be moved toward the longer end of its maturity range. To achieve their objectives, the funds will invest in diversified portfolios of high- and medium-grade debt securities payable in United States currency. The funds will invest in securities which at the time of purchase are rated by a nationally recognized statistical rating organization or, if not rated, are of equivalent investment quality as determined by the management, as follows: short-term notes within the two highest categories (for example, at least MIG-2 by Moody's or SP-2 by S&P); corporate, sovereign government, and municipal bonds within the four highest categories (for example, at least Baa by Moody's or BBB by S&P); securities of the United States government and its agencies and instrumentalities (see "U.S. Governments Short-Term and U.S. Governments Intermediate-Term," page 11); other types of securities rated at least P-2 by Moody's or A-2 by S&P. 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 or changing circumstances. As noted, each fund may invest up to 35% of its assets, and for temporary defensive purposes as determined by the manager, up to 100% of its assets in short-term money market instruments. Those instruments may include: (1) Securities issued or guaranteed by the U.S. government and its agencies and instrumentalities; (2) Commercial Paper; (3) Certificates of Deposit and Euro Dollar Certificates of Deposit; (4) Bankers' Acceptances; (5) Short-term notes, bonds, debentures, or other debt instruments; (6) Repurchase agreements; and must meet the rating standards set out above. To the extent a fund assumes a defensive position, the weighted average maturity of its portfolio may not fall within the ranges stated above for the fund. FUNDAMENTALS OF FIXED INCOME INVESTING Over time, the level of interest rates available in the marketplace changes. As prevailing rates fall, the prices of bonds and other securities that trade on a yield basis rise. On the other hand, when prevailing interest rates rise, bond prices fall. Generally, the longer the maturity of a debt security, the higher its yield and the greater its price volatility. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. These factors operating in the marketplace have a similar impact on bond portfolios. A change in the level of interest rates causes the net asset value per share of any bond fund, except money market funds, to change. If sustained over time, it would also have the impact of raising or lowering the yield of the fund. In addition to the risk arising from fluctuating interest rate levels, debt securities are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and resultant bond ratings take into account the relative likelihood that 13 [line graph] HISTORICAL YIELDS 30-Year 3-Month Treasury Bonds Treasury Bills 1/91 8.19 6.38 2/91 8.20 6.26 3/91 8.25 5.93 4/91 8.18 5.69 5/91 8.26 5.69 6/91 8.4 5.69 7/91 8.34 5.68 8/91 8.06 5.48 9/91 7.81 5.25 10/91 7.91 4.97 11/91 7.94 4.46 12/91 7.4 3.96 1/92 7.76 3.94 2/92 7.79 4.02 3/92 7.96 4.14 4/92 8.04 3.77 5/92 7.84 3.77 6/92 7.78 3.65 7/92 7.46 3.24 8/92 7.41 3.22 9/92 7.38 2.74 10/92 7.62 3.01 11/92 7.6 3.34 12/92 7.4 3.14 1/93 7.2 2.97 2/93 6.9 3 3/93 6.92 2.96 4/93 6.93 2.96 5/93 6.98 3.11 6/93 6.67 3.08 7/93 6.56 3.1 8/93 6.09 3.07 9/93 6.02 2.98 10/93 5.97 3.1 11/93 6.3 3.2 12/93 6.35 3.06 1/94 6.24 3.03 2/94 6.66 3.43 3/94 7.09 3.55 4/94 7.31 3.95 5/94 7.43 4.24 6/94 7.61 4.22 7/94 7.39 4.36 8/94 7.45 4.66 9/94 7.82 4.77 10/94 7.97 5.15 11/94 8 5.71 12/94 7.88 5.69 1/95 7.7 6 2/95 7.44 5.94 3/95 7.43 5.87 4/95 7.34 5.86 5/95 6.65 5.8 6/95 6.62 5.57 7/95 6.85 5.58 8/95 6.65 5.45 9/95 6.5 5.41 10/95 6.33 5.51 11/95 6.13 5.49 12/95 5.95 5.08 [bar chart] YEARS TO MATURITY U.S. Governments Short-Term Likely Maturities of Individual Holdings 0-8 years Expected Weighted Average Portfolio Maturity Range 6 mos.-3 years U.S. Governments Intermediate-Term Likely Maturities of Individual Holdings 0-20 years Expected Weighted Average Portfolio Maturity Range 3-10 years Cash Reserve Likely Maturities of Individual Holdings 0-2 years Expected Weighted Average Portfolio Maturity Range 0-6 mos. Limited-Term Bond Likely Maturities of Individual Holdings 0-8 years Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years Intermediate-Term Bond Likely Maturities of Individual Holdings 0-20 years Expected Weighted Average Portfolio Maturity Range 3-10 years Long-Term Bond Likely Maturities of Individual Holdings 0-30 years Expected Weighted Average Portfolio Maturity Range 10-20 years BOND PRICE VOLATILITY For a given change in interest rates, longer maturity bonds experience a greater change in price, as shown below: Price of a 7% Price of same coupon bond bond if its Percent Years to now trading yield increases change Maturity to yield 7% to 8% in price - --------------------------------------------------------- 1 year $100.00 $99.06 (0.94%) 3 years 100.00 97.38 (2.62%) 10 years 100.00 93.20 (6.80%) 30 years 100.00 88.69 (11.31%)
AUTHORIZED QUALITY RANGES A-1 A-2 A-3 P-1 P-2 P-3 MIG-1 MIG-2 MIG-3 SP-1 SP-2 SP-3 AAA AA A BBB BB B CCC CC C D U. S. Governments Short-Term x U. S. Governments Intermediate-Term x Cash Reserve x x Limited-Term Bond x x x x Intermediate-Term Bond x x x x Long-Term Bond x x x x Balanced Investors x x x x
such timely payment will occur. As a result, lower- rated bonds tend to sell at higher yield levels than top-rated bonds of similar maturity. In addition, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with regard to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity. The investment practices of Twentieth Century's fixed income funds and the fixed income portion of the balanced fund take into account these relationships. The maturity and asset quality of each fund have implications for the degree of price volatility and the yield level to be expected from each. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions Applicable to All Series of Shares" in the Statement of Additional Information. PORTFOLIO TURNOVER The total portfolio turnover rates of the funds, except Cash Reserve, are shown in the Financial Highlights table on pages 5 to 8 of this prospectus. 14 With respect to each series of shares, investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to the particular fund's objectives. The rate of portfolio turnover is irrelevant when management believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. A high turnover rate involves correspondingly higher transaction costs that are borne directly by a fund. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or a broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase 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. Since 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 United States government, its agencies and instrumentalities, and will enter into such transactions with those banks and securities dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. Each of the funds may invest in repurchase agreements with respect to any security in which that fund is authorized to invest, even if the remaining maturity of the underlying security would make that security ineligible for purchase by such fund. No fund will invest more than 15% (10% in the case of Cash Reserve) of its assets in repurchase agreements maturing in more than seven days. DERIVATIVE SECURITIES To the extent permitted by its investment objectives and policies, each of the funds may invest in securities that are commonly referred to as "derivative" securities. Generally, a derivative is a financial arrangement the value of which is based on, or "derived" from, a traditional security, asset, or market index. Certain derivative securities are more accurately described as "index/structured" securities. Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), 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 bond whose interest rate is 15 indexed to the return on two-year treasury securities investments would be a permissible investment (assuming it otherwise meets the other requirements for the funds), while a security whose underlying value is linked to the price of oil would not be a permissible investment since the funds may not invest in oil and gas leases or futures. The return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument to which it relates. There are a range of risks associated with derivative investments, including: * the risk that the underlying security, interest rate, market index or other financial asset will not move in the direction the portfolio manager anticipates; * the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; * the risk that adverse price movements in an instrument can result in a loss substantially greater than a fund's initial investment; and * the risk that the counterparty will fail to perform its obligations. The board of directors has approved the manager's policy regarding investments in derivative securities. That policy specifies factors that must be considered in connection with a purchase of derivative securities. The policy also establishes a committee that must review certain proposed purchases before the purchases can be made. The manager will report on fund activity in derivative securities to the board of directors as necessary. In addition, the board will review the manager's policy for investments in derivative securities annually. PORTFOLIO LENDING In order to realize additional income, each fund may lend its portfolio securities to persons not affiliated with it and who are deemed to be creditworthy. Such loans must be secured continuously by cash collateral maintained on a current basis in an amount at least equal to the market value of the securities loaned, or by irrevocable letters of credit. During the existence of the loan, the fund must continue to receive the equivalent of the interest and dividends paid by the issuer on the securities loaned and interest on the investment of the collateral. The fund must have the right to call the loan and obtain the securities loaned at any time on five days' notice, including, if applicable, the right to call the loan to enable Twentieth Century to vote the securities. Such loans may not exceed one-third of the fund's net assets taken at market. Interest on loaned securities may not exceed 10% of the annual gross income of the fund (without offset for realized capital gains). The portfolio lending policy described in this paragraph is a fundamental policy that may be changed only by a vote of Twentieth Century's shareholders. FOREIGN SECURITIES Each of Twentieth Century's funds offered by this prospectus, except U.S. Governments Short-Term and U.S. Governments Intermediate-Term may invest an unlimited amount of its assets in the securities of foreign issuers, primarily from developed markets, when these securities meet its standards of selection. The funds may make such investments either directly in, or by purchasing Depositary Receipts ("DRs") for foreign securities. DRs are listed on an exchange or quoted in the over-the-counter market in one country but represent the shares of issuers domiciled in other countries. DRs may be sponsored or unsponsored. Direct investments in foreign securities may be made either on foreign securities exchanges or in the over-the-counter markets. Subject to their individual investment objectives and policies, the funds 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 funds will limit their purchase of debt securities to investment grade obligations. Investments in foreign securities may present certain risks, including those resulting from fluctua- 16 tions in currency exchange rates, future political and economic developments, reduced availability of public information concerning issuers, and the fact that foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic issuers. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the foreign securities held by the funds may be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent on the performance of a foreign security, as valued in the currency of its home country. As a result, the value of the funds' portfolios may be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be a factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, the funds may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its foreign securities trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into forward currency exchange contracts to sell the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where it would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of the portfolio hedging to the extent deemed appropriate by the manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to protect a fund against adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationships between the foreign currency and the U.S. dollar. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time commitment to 17 purchase is made. Delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. RULE 144A SECURITIES The funds may, from time to time, purchase Rule 144A securities when they present attractive investment opportunities that otherwise meet Twentieth Century's criteria for selection. Rule 144A securities are securities that are privately placed with and traded among qualified institutional buyers rather than the general public. Although Rule 144A securities are considered "restricted securities," they are not necessarily illiquid. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of Twentieth Century has delegated the day-to-day function of determining the liquidity of Rule 144A securities to the manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities is limited to certain qualified institutional investors, the liquidity of such securities may be limited accordingly and a fund may, from time to time, hold a Rule 144A security that is illiquid. In such an event, Twentieth Century will consider appropriate remedies to minimize the effect on such fund's liquidity. No fund may invest more than 15% of its assets (10% of assets, with regard to Cash Reserve) in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares). INTEREST RATE FUTURES CONTRACTS AND OPTIONS THEREON The corporate bond funds may buy and sell interest rate futures contracts relating to debt securities ("debt futures," i.e., futures relating to debt securities, and "bond index futures," i.e., futures relating to indexes on types or groups of bonds) and write and buy put and call options relating to interest rate futures contracts. For options sold, a fund will segregate cash or high-quality debt securities equal to the value of securities underlying the option unless the option is otherwise covered. A fund will deposit in a segregated account with its custodian bank high-quality debt obligations maturing in one year or less, or cash, in an amount equal to the fluctuating market value of long futures contracts it has purchased, less any margin deposited on its long position. It may hold cash or acquire such debt obligations for the purpose of making these deposits. A fund will purchase or sell futures contracts and options thereon only for the purpose of hedging against changes in the market value of its portfolio securities or changes in the market value of securities that it may wish to include in its portfolio. A fund will enter into future and option transactions only to the extent that the sum of the amount of margin deposits on its existing futures positions and premiums paid for related options do not exceed 5% of its assets. Since futures contracts and options thereon can replicate movements in the cash markets for the securities in which a fund invests without the large cash investments required for dealing in such markets, they may subject a fund to greater and 18 more volatile risks than might otherwise be the case. The principal risks related to the use of such instruments are (1) the offsetting correlation between movements in the market price of the portfolio investments (held or intended) being hedged and in the price of the futures contract or option may be imperfect; (2) possible lack of a liquid secondary market for closing out futures or option positions; (3) the need for additional portfolio management skills and techniques; and (4) losses due to unanticipated market price movements. For a hedge to be completely effective, the price change of the hedging instrument should equal the price change of the securities being hedged. Such equal price changes are not always possible because the investment underlying the hedging instrument may not be the same investment that is being hedged. Management will attempt to create a closely correlated hedge but hedging activity may not be completely successful in eliminating market value fluctuation. The ordinary spreads between prices in the cash and futures markets, due to the differences in the natures of those markets, are subject to distortion. Due to the possibility of distortion, a correct forecast of general interest rate trends by the management may still not result in a successful transaction. Management may be incorrect in its expectations as to the extent of various interest rate movements or the time span within which the movements take place. See the Statement of Additional Information for further information about these instruments and their risks. SHORT SALES Twentieth Century's funds described in this prospectus may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. PERFORMANCE ADVERTISING From time to time, Twentieth Century may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return and, with respect to the fixed income funds and the balanced fund, yield and effective yield. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced a fund's cumulative total return over the same period if the fund's performance had remained constant throughout. A quotation of yield reflects a fund's income over a stated period expressed as a percentage of the fund's share price. In the case of Cash Reserve, yield is calculated by measuring the income generated by an investment in the fund over a seven-day period (net of fund expenses). This income is then "annualized." That is, the amount of income generated by the investment over the seven-day period is assumed to be generated over each similar period each week throughout a full year and is shown as a percentage of the investment. The "effective yield" is calculated in a similar manner but, when annualized, the income earned by the investment is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of the assumed reinvestment. With respect to Twentieth Century's other fixed income funds and Balanced Investors, yield is calculated by adding over a 30-day (or one-month) period all interest and dividend income (net of fund expenses) calculated on each day's market values, dividing this sum by the average number of fund 19 shares outstanding during the period, and expressing the result as a percentage of the fund's share price on the last day of the 30-day (or one-month) period. The percentage is then annualized. Capital gains and losses are not included in the calculation. Yields are calculated according to accounting methods that are standardized in accordance with SEC rules for all stock and bond funds. Because yield accounting methods differ from the methods used for other accounting purposes, the fund's yield may not equal the income paid on your shares or the income reported in the fund's financial statements. The funds may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services or Donoghue's Money Fund Report) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. In addition, fund performance may be compared to well-known indices of market performance, including the Standard & Poor's (S&P) 500 Index, the Dow Jones Industrial Average, Donoghue's Money Fund Average and the Bank Rate Monitor National Index of 2 1/2-year CD rates. Fund performance may also be compared to other funds in the Twentieth Century family. It may also be combined or blended with other funds in the Twentieth Century family, and that combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. 20 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- TWENTIETH CENTURY FAMILY OF FUNDS In addition to the 16 funds offered by Twentieth Century Investors, Inc., the Twentieth Century family of funds also includes funds offered by Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. Please call the Investors Line for a prospectus and additional information about the other funds in the Twentieth Century family of funds. INVESTING IN TWENTIETH CENTURY One or more of the funds offered by this prospectus is available as an investment option in your employer-sponsored retirement or savings plan. All orders to purchase shares must be made through your employer. The administrator of your plan or your employee benefits office can provide you with information on how to participate in your plan and how to select a Twentieth Century fund as an investment option. If you have questions about a fund, see "Information About Investment Policies of the Funds," page 9, or call Twentieth Century's Investors Line at 1-800-345-3533. Orders to purchase shares are effective on the day Twentieth Century receives payment. (See "When Share Price is Determined," page 23.) Twentieth Century may discontinue offering shares generally in the funds or in any particular state without notice to shareholders. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER Your plan may permit you to exchange your investment in the shares of a fund for shares of another fund. See your plan administrator or employee benefits office for details on the rules in your plan governing exchanges, or call Twentieth Century's Investors Line at 1-800-345-3533. Exchanges will be accepted by Twentieth Century only as permitted by your plan. Exchanges are made at the respective net asset values, next computed after receipt of the exchange instruction by Twentieth Century. If in any 90-day period, the total of the exchanges and redemptions from any one plan participant's accounts in the equity funds or the balanced fund exceeds the lesser of $250,000 or 1% of a fund's assets, further exchanges will be subject to special requirements to comply with Twentieth Century's policy on large equity fund redemptions. (See "Special Requirements for Large Equity Fund Redemptions," on this page.) HOW TO REDEEM SHARES Subject to any restrictions imposed by your employer's plan, you can sell ("redeem") your shares through the plan at their net asset value. Your plan administrator, trustee, or other designated person must provide Twentieth Century with redemption instructions. The shares will be redeemed at the net asset value next computed after receipt of the instructions in good order. (See "When Share Price Is Determined," page 23.) If you have any questions about how to redeem, contact your plan administrator or your employee benefits office. SPECIAL REQUIREMENTS FOR LARGE EQUITY FUND REDEMPTIONS Twentieth Century has elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund to redeem shares in cash, with respect to any one participant account during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, Twentieth Century reserves the right to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they 21 are in computing the fund's net asset value and will be provided to the redeeming plan participant in lieu of cash without prior notice. If you expect to make a large redemption and would like to avoid any possibility of being paid in securities, you may do so by providing Twentieth Century with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. Receipt of your instruction 15 days prior to the transaction provides the fund with sufficient time to raise the cash in an orderly manner to pay the redemption and thereby minimizes the effect of the redemption on the fund and its remaining shareholders. Despite its right to redeem fund shares through a redemption-in-kind, Twentieth Century does not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, Twentieth Century expects redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. The special policies with respect to large redemptions described above apply only to the equity funds and the balanced fund. Redemptions from the fixed income funds will be paid in cash regardless of the redemption amount. TELEPHONE SERVICES INVESTORS LINE You may reach a Twentieth Century Investor Services Representative by calling our Investors Line at 1-800-345-3533. On our Investors Line you may request information about our funds and a current prospectus, or get answers to any questions that you may have about the funds and the services we offer. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line you may listen to fund prices, yields and total return figures. 22 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is their net asset value next determined after receipt of your instruction to purchase, convert or redeem. Net asset value is determined by calculating the total value of a fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined on each day that the New York Stock Exchange is open. Investments and requests to redeem shares will receive the share price next determined after receipt by Twentieth Century or its authorized agent of the investment or redemption request. For example, investments and requests to redeem shares received by Twentieth Century or its authorized agent before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Redemption requests received thereafter are effective on, and receive the price determined as of the close of the Exchange on, the next day the Exchange is open. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: The portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked 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 good faith by the board of directors. Debt securities not traded on a principal securities exchange are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the board of directors. Pursuant to a determination by Twentieth Century's board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That value is then converted to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined that was likely to materially change the net asset value, then that security would be valued at fair value as determined by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be affected on days when shares of the fund may not be purchased or redeemed. 23 WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset values of Twentieth Century's funds are published in leading newspapers daily. The yield of Cash Reserve is published weekly in leading financial publications and daily in many local newspapers. The net asset values, as well as yield information on all of Twentieth Century's fixed income funds, may be obtained by calling Twentieth Century. (See "Telephone Services," page 22.) DISTRIBUTIONS In general, distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. EQUITY FUNDS Distributions from investment income and from net profits realized on the sale of securities, if any, will be declared annually on or before December 31. THE OBJECTIVE OF THESE FUNDS IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU MAY MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. BALANCED FUND Distributions from investment income will be paid quarterly in March, June, September and December. Distributions from net profits realized on the sale of securities, if any, will be paid annually on or before December 31. FIXED INCOME FUNDS At the close of each day, including Saturdays, Sundays and holidays, net income of the fixed income funds is determined and declared as a distribution. The distribution will be paid monthly on the last Friday of each month. You will begin to participate in the distributions the day AFTER your purchase is effective. (See "When Share Price is Determined," page 23.) If you redeem shares, you will receive the distribution declared for the day of the redemption. Any net realized capital gains of the fixed income funds other than Cash Reserve will be distributed at least annually on or before December 31. Realized gains on securities in the Cash Reserve portfolio may be paid with the daily dividend. Otherwise, they will be distributed annually after October 31 and before December 31. TAXES Twentieth Century has elected to be taxed under Subchapter M of the Internal Revenue Code, which means that because Twentieth Century distributes all of its income, it pays no income taxes. If you choose to use one or more of Twentieth Century's funds as an investment option in your employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax adviser regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of Twentieth Century. Acting pursuant to an investment advisory agreement entered into with Twentieth Century, Investors Research Corporation ("Investors Research") serves as the investment manager of Twentieth Century. Its principal place of business is Twentieth 24 Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to Twentieth Century since it was founded in 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment advisor to the Benham Group of Mutual Funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolios of Twentieth Century and directs the purchase and sale of its investment securities. Investors Research utilizes teams of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The teams meet regularly to review portfolio holdings and to discuss purchase and sale activity. The teams adjust holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio manager members of the team may also adjust portfolio holdings of the funds as necessary between team meetings. The portfolio manager members of the teams managing the funds described in this prospectus and their work experience for the last five years are as follows: JAMES E. STOWERS III, President and Port-folio Manager, joined Twentieth Century in 1981. He is a member of the teams that manage Growth Investors, Ultra Investors and Vista Investors. ROBERT C. PUFF JR., Executive Vice President and Chief Investment Officer, has been a Portfolio Manager since joining Twentieth Century in 1983. In his position as Chief Investment Officer, Mr. Puff oversees the investment activities of all of the teams that manage Twentieth Century funds. CHARLES M. DUBOC, Senior Vice President and Portfolio Manager, joined Twentieth Century in August 1985, and served as Fixed Income Portfolio Manager from that time until April 1993. In April 1993, Mr. Duboc joined Twentieth Century's equity investment efforts. He is a member of the team that manages Select Investors, Heritage Investors and the equity portion of Balanced Investors. CHRISTOPHER K. BOYD, Vice President and Portfolio Manager, joined Twentieth Century in March 1988 as an Investment Analyst, a position he held until December 1990. At that time he was promoted to Assistant Portfolio Manager, and then was promoted to Portfolio Manager in December 1992. He is a member of the team that manages Growth Investors and Ultra Investors. GLENN A. FOGLE, Vice President and Portfolio Manager, joined Twentieth Century in September 1990 as an Investment Analyst, a position he held until March 1993. At that time he was promoted to Portfolio Manager. He is a member of the team that manages Vista Investors. DEREK FELSKE, Vice President and Portfolio Manager, joined Twentieth Century in September 1993 as a Portfolio Manager. He is a member of the team that manages Growth Investors and Ultra Investors. Prior to joining Twentieth Century, Mr. Felske served as a member of the portfolio management team of RCM Capital Management, a San Francisco, California-based investment management firm, a position he held from May 1991 to September 1993. From September 1989 to May 1991, Mr. Felske attended the University of Pennsylvania-Wharton School of Business, where he obtained an MBA in finance. NANCY B. PRIAL, Vice President and Portfolio Manager, joined Twentieth Century in February 1994 as a Portfolio Manager. She is a member of the team that manages Select Investors, Heritage Investors and the equity portion of Balanced Investors. For more than four years prior to joining Twentieth Century, Ms. Prial served as Senior Vice President and Portfolio Manager at Frontier Capital Management Company, Boston, Massachusetts. NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager, joined Twentieth Century as Vice President and Portfolio Manager in November 1989. In April 1993, he became Senior Vice President. He is a member of the team that manages Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond and the fixed income portion of Balanced Investors. 25 ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for Twentieth Century since May 1983. He became a Portfolio Manager in December 1991. Prior to that he served as Assistant Portfolio Manager. He is a member of the team that manages Cash Reserve, U.S. Governments Short-Term and U.S. Governments Intermediate-Term. DAVID SCHROEDER, Vice President and Portfolio Manager for BMC, joined BMC in July 1990. Mr. Schroeder has primary responsibility for the day-to-day operations of the Benham Treasury Note, Benham Short-Term, and Benham Long-Term Funds. He also manages Benham Target Maturities Trust. AMY O'DONNELL joined Benham in 1988, becoming a member of its portfolio department in 1988. In 1992 she assumed her current position as a portfolio manager of three Benham funds. She is a member of the team that manages Cash Reserve. The activities of Investors Research are subject only to directions of Twentieth Century's board of directors. Investors Research pays all the expenses of Twentieth Century except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to Twentieth Century, Investors Research receives an annual fee at the following rates: * 1% of the average net assets of Select, Heritage, Growth, Ultra, Vista and Balanced; * .80 of 1% of Long-Term Bond; * .75 of 1% of the average net assets of U.S. Governments Intermediate- Term and Intermediate-Term Bond; and * .70 of 1% of the average net assets of Limited-Term Bond, Cash Reserve and U.S. Governments Short-Term. On the first business day of each month, each series of shares pays a management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the series' net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). The management fees paid by the funds to Investors Research may be higher than those paid by many investment companies. However, most if not all of such companies also pay in addition certain of their own expenses, while virtually all of Twentieth Century's expenses except as specified above are paid by Investors Research. CODE OF ETHICS Twentieth Century and Investors Research have adopted a Code of Ethics, which restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio managers and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri, 64111, acts as transfer, administrative services and dividend paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century and is paid for such services by Investors Research. Certain recordkeeping and administrative services that would otherwise be performed by Twentieth Century Services, Inc., may be performed by an insurance company or other entity providing similar services for various retirement plans using shares of Twentieth Century as a funding medium, by broker-dealers for their customers investing in shares of Twentieth Century 26 or by sponsors of multi mutual fund no- or low-transaction fee programs. Investors Research may enter into contracts to pay them for such recordkeeping and administrative services out of its unified management fee. From time to time, special services may be offered to shareholders who maintain higher share balances in the funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman of the board of Twentieth Century Investors, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century Investors, Inc. was organized as a Maryland corporation on July 2, 1990. The corporation commenced operations on February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a Delaware corporation which had been in business since October 1958. Pursuant to the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland corporation was the surviving entity and continued the business of the Delaware corporation with the same officers and directors, the same shareholders and the same investment objectives, policies and restrictions. Twentieth Century is a diversified, open-end management investment company whose shares are presently held by more than 1.5 million shareholders. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century is Twentieth Century Tower, 4500 Main Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by mail to that address, or by phone to 1-800-345-3533. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century issues 16 series of $.01 par value shares. The assets belonging to each series of shares are held separately by the custodian, and in effect each series is a separate fund. Each share, irrespective of series, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except those matters which must be voted on separately by the series of shares affected. Matters affecting only one series are voted upon only by that series. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the shares will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for Twentieth Century to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to Twentieth Century's bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request Twentieth Century to hold a special meeting of shareholders. Twentieth Century will assist in the communication with other shareholders. TWENTIETH CENTURY RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 27 TWENTIETH CENTURY INVESTORS, INC. INSTITUTIONAL PROSPECTUS March 1, 1996 [company logo] ------------------------------ P.O. Box 419200 ------------------------------ Kansas City, Missouri ------------------------------ 64141-6200 ------------------------------ 1-800-345-2021 or 816-531-5575 ------------------------------ [company logo] ----------------------------------------------------------------------- IN-BKT-4302 9603 (C) 1996 Twentieth Century Services, Inc. Recycled TWENTIETH CENTURY INVESTORS, INC. STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1996 - -------------------------------------------------------------------------------- This statement is not a prospectus but should be read in conjunction with Twentieth Century's current prospectuses dated March 1, 1996. Please retain this document for future reference. To obtain the prospectus, call Twentieth Century toll-free at 1-800-345-2021 (816-531-5575 for local or international calls), or write to P.O. Box 419200, Kansas City, Missouri 64141-6200. TABLE OF CONTENTS
Fixed Equity Income Funds Funds Institutional Page Prospectus Prospectus Prospectus Herein Page Page Page Investment Objectives of the Funds 2 2 2 2 Fundamental Policies of the Funds 2 7 8 9 Investment Restrictions Applicable to All Series of Shares 4 -- -- -- Forward Currency Exchange Contracts 6 9 -- 17 An Explanation of Fixed Income Securities Ratings 7 -- -- -- Short Sales 8 12 -- 19 Portfolio Turnover 8 10 14 14 Interest Rate Futures Contracts and Related Options 9 -- 17 18 Municipal Leases 13 -- -- -- Officers and Directors 13 -- -- -- Management 16 28 33 24 Custodians 18 -- -- -- Independent Accountants 18 -- -- -- Capital Stock 18 -- -- -- Brokerage 19 -- -- -- Performance Advertising 20 13 17 19 Redemptions in Kind 22 20 -- 21 Holidays 23 -- -- -- Financial Statements 23 -- -- --
================================================================================ - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES OF THE FUNDS The investment objective of each fund comprising Twentieth Century Investors, Inc. is described on the inside front cover page of the applicable prospectus. One feature of the various series of shares (funds) merits further explanation. As described in the equity funds prospectus, the chief investment difference among Growth, Ultra and Vista, and between Select and Heritage, is the size of the fund, which affects the nature of the investments in the fund's portfolio. A smaller fund tends to be more responsive to changes in the value of its portfolio securities. For example, if a $1,000,000 fund buys $5,000 of stock which then doubles in value, the value of the fund increases by only one-half of 1%. However, if a $100,000 fund buys $5,000 of such stock which then doubles in value, the value of the fund increases by 5%, or at a rate 10 times as great. By the same token, if the value of such stock declines by one-half, the small fund would decline in value by 2.5%, while the larger fund would decline in value by only one-half of 1% or at a rate only one-tenth as great. Thus, a small fund with the same objective as a large fund, and similarly managed, has a greater potential for profit and for loss as well. FUNDAMENTAL POLICIES OF THE FUNDS In achieving their objectives, the funds must conform to certain fundamental policies that may not be changed without shareholder approval, as follows: SELECT, HERITAGE, GROWTH, ULTRA, VISTA, GIFTRUST AND THE EQUITY INVESTMENTS OF BALANCED INVESTORS In general, within the restrictions outlined herein, Twentieth Century has broad powers with respect to investing funds or holding them uninvested. Invest-ments are varied according to what is judged advantageous under changing economic conditions. It will be the policy of Twentieth Century to retain maximum flexibility in management without restrictive provisions as to the proportion of one or another class of securities that may be held subject to the investment restrictions described below. It is management's intention that each of these portfolios will generally consist of common stocks. However, the investment manager may invest the assets of each series in varying amounts in other instruments and in senior securities, such as bonds, debentures, preferred stocks and convertible issues, when such a course is deemed appropriate in order to attempt to attain its financial objectives. Senior securities that, in the opinion of management, are high-grade issues may also be purchased for defensive purposes. [Note: The above statement of fundamental policy gives Twentieth Century authority to invest in securities other than common stocks and traditional debt and convertible issues. Though the funds have not made such investments in the past, management may invest in master limited partnerships (other than real estate partnerships) and royalty trusts which are traded on domestic stock exchanges when such investments are deemed appropriate for the attainment of the funds' investment objectives.] BALANCED INVESTORS Management will invest approximately 60% of the Balanced portfolio in common stocks and the balance in fixed income securities. Common stock investments are described above. At least 80% of the fixed income assets will be invested in securities that are rated at the time of purchase by a nationallyrecognized statistical rating organization to be within the three highest categories. The fund may invest in securities of the United States government and its agencies and instrumentalities, corporate, sovereign government, municipal, mortgage-backed, and other asset-backed securities. It can be expected that management will invest from time to time in bonds and preferred stock convertible into common stock. CASH RESERVE Management will invest the Cash Reserve portfolio in debt securities payable in United States currency. Such securities may be obligations issued or guaranteed by the United States government or its agencies and instrumentalities or obligations issued 2 by corporations and others, including repurchase agreements, of such quality and with such maturities to permit Cash Reserve to be designated as a money market fund and to enable it to maintain a stable offering price per share. The fund operates pursuant to a rule under the Investment Company Act that permits valuation of portfolio securities on the basis of amortized cost. As required by the rule, the board of directors has adopted procedures designed to stabilize, to the extent reasonably possible, the fund's price per share as computed for the purpose of sales and redemptions at $1.00. While the day-to-day operation of the fund has been delegated to the manager, the quality requirements established by the procedures limit investments to certain United States dollar-denominated instruments which the board of directors has determined present minimal credit risks and which have been rated in one of the two highest rating categories as determined by a nationally recognized statistical rating organization or, in the case of an unrated security, of comparable quality. The procedures require review of the fund's portfolio holdings at such intervals as are reasonable in light of current market conditions to determine whether the fund's net asset value calculated by using available market quotations deviates from the per-share value based on amortized cost. The procedures also prescribe the action to be taken if such deviation should occur. U.S. GOVERNMENTS SHORT-TERM AND U.S. GOVERNMENTS INTERMEDIATE-TERM Management will invest the portfolios of U.S. Governments Short-Term and U.S. Governments Intermediate-Term in direct obligations of the United States, such as Treasury bills, Treasury notes and U.S. government bonds, that are supported by the full faith and credit of the United States. Manage-ment may also invest in agencies and instrumentalities of the United States government that are established under the authority of an act of Congress. The securities of some of such agencies and instrumentalities are supported by the full faith and credit of the United States Treasury; others are supported by the right of the issuer to borrow from the Treasury; still others are supported only by the credit of the instrumentality. Such agencies and instrumentalities include, but are not limited to, the Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Farm Credit Banks, Federal Home Loan Banks, and Resolution Funding Corporation. Purchase of such securities may be made outright or on a when-issued basis and may be made subject to repurchase agreements. LIMITED-TERM BOND, INTERMEDIATE-TERM BOND AND LONG-TERM BOND Management will invest the portfolios of the corporate bond funds in high- and medium-grade debt securities payable in United States currency. The funds may invest in securities that, at the time of purchase, are rated by a nationally recognized statistical rating organization or, if not rated, are of equivalent investment quality as determined by the management, as follows: short-term notes within the two highest categories; corporate, sovereign government and municipal bonds within the four highest categories; securities of the United States government and its agencies and instrumentalities; and other types of securities rated at least P-2 by Moody's or A-2 by S&P. The funds may also purchase securities under repurchase agreements as described in the prospectus and purchase and sell interest rate futures contracts and related options. (See "Interest Rate Futures Contracts and Related Options," page 9.) TAX-EXEMPT SHORT-TERM, TAX-EXEMPT INTERMEDIATE-TERM AND TAX-EXEMPT LONG-TERM Management will invest the tax-exempt portfolios in high- and medium-grade securities. At least 80% of each fund's net assets will be invested in securities whose income is not subject to federal income taxes, including the alternative minimum tax. The two principal classifications of tax-exempt securities are notes and bonds. Tax-exempt notes are of short maturity, generally less than three years, and are issued to provide for short-term 3 capital needs. These include tax anticipation notes and revenue anticipation notes, among others, as well as tax-exempt commercial paper. Tax-exempt bonds, which meet long-term capital needs, generally have maturities longer than one year. The two categories of tax-exempt bonds, general obligation and revenue, may be held by the funds in any proportion. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenue derived from a project or facility or from the proceeds of a specific revenue source, but not from the general taxing power. Industrial development revenue bonds are a type of revenue bond secured by payments from a private user, and generally do not enjoy a call upon the resources of the municipality that issued the bond on behalf of the user. The funds may invest in fixed-, floating- and variable-rate securities. Fixed-rate securities pay interest at the fixed rate until maturity. Floating- and variable-rate securities normally have a stated maturity in excess of one year, but may have a provision permitting the holder to demand payment of principal and interest upon not more than seven days' notice. Floating rates of interest are tied to a percentage of a designated base rate, such as rates on Treasury bills or the prime rate at a major bank, and change whenever the designated rate changes. Variable-rate securities provide for a periodic adjustment in the rate. For the purpose of determining the maturity of an individual security or the average weighted portfolio maturity of one of the funds, management shall consider the maturity to be the shorter of final maturity, the remaining expected average life of a sinking fund bond, the remaining time until a mandatory put date, the time until payment as the result of exercising a put or demand-for-payment option, or the remaining time until the pre-refunding payment date of a security whose redemption on a call date in advance of final maturity is assured through contractual agreement and with high-quality collateral in escrow. The funds may invest in securities that, at the time of purchase, are rated by a nationally recognized statistical rating organization or, if not rated, are of equivalent investment quality as determined by the management, as follows: short-term notes within the two highest categories, bonds within the four highest categories, and other types of securities rated at least P-2 by Moody's or A-2 by S&P. The funds may invest more than 25% of their assets in industrial development revenue bonds. Each of the funds may invest in interest rate futures contracts and related options. (See "Interest Rate Futures Contracts and Related Options," page 9.) LONG-TERM BOND, TAX-EXEMPT SHORT-TERM, TAX-EXEMPT INTERMEDIATE-TERM AND TAX-EXEMPT LONG-TERM Long-Term Bond, Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term (the funds) may buy and sell interest rate futures contracts relating to debt securities ("debt futures," i.e., futures relating to debt securities, and "bond index futures," i.e., futures relating to indexes on types or groups of bonds) and write and buy put and call options relating to interest rate futures contracts for the purpose of hedging against (i) declines or possible declines in the market value of debt securities or (ii) inability to participate in advances in the market values of debt securities at times when the funds are not fully invested in long-term debt securities; provided that, the funds may not purchase or sell futures contracts or related options if immediately thereafter the sum of the amount of margin deposits on a fund's existing futures positions and premiums paid for related options would exceed 5% of the fund's assets. INVESTMENT RESTRICTIONS APPLICABLE TO ALL SERIES OF SHARES Additional fundamental policies that may be changed only with shareholder approval provide that each series of shares: (1) Shall not invest more than 15% of its assets in illiquid investments, except for any fund intended to be a money market fund, which shall not invest more than 10% of its assets in illiquid investments. (2) Shall not invest in the securities of companies that, including predecessors, have a record of less than three years of continuous operation. (3) Shall not lend its portfolio securities except 4 to unaffiliated persons, and is subject to the rulesand regulations adopted under the InvestmentCompany Act. No such rules and regulations have been promulgated, but it is the corporation's policy that such loans must be secured continuously by cash collateral maintained on a current basis in an amount at least equal to the market value of the securities loaned, or by irrevocable letters of credit. During the existence of the loan, the corporation must continue to receive the equivalent of the interest and dividends paid by the issuer on the securities loaned and interest on the investment of the collateral; the corporation must have the right to call the loan and obtain the securities loaned at any time on five days' notice, including the right to call the loan to enable the corporation to vote the securities. To comply with the regulations of certainstate securities administrators, such loans may not exceed one-third of the corporation's net assets taken at market. It is the policy of the corporation not to permit interest on loaned securities of any series to exceed 10% of the annual gross income of that series (without offset for realized capital gains). (4) Shall not purchase the security of any one issuer if such purchase would cause more than 5% of the corporation's assets at market to be invested in the securities of such issuer, exceptUnited States government securities, or if the purchase would cause more than 10% of the outstanding voting securities of any one issuer to be held in the corporation's portfolio. (5) Shall not invest for control or for management, or concentrate its investment in a particular company or a particular industry. No more than 25% of the assets of each series, exclusive of cash and government securities, will be invested in securities of any one industry. The corporation's policy in this respect includes the statement, "The management's definition of the phrase `any one industry'shall be conclusive unless clearly unreasonable." That statement may be ineffective because it may be an attempt to waive a provision of the law, and such waivers are void. (6) Shall not buy securities on margin nor sell short (unless it owns, or by virtue of its ownership of, other securities has the right to obtain securities equivalent in kind and amount to the securities sold); however, the corporation's fundmay make margin deposits in connection with the use of any financial instrument or any transaction in securities permitted by their fundamental policies. (7) Shall not invest in the securities of other investment companies except by purchases in the open market involving only customary brokers'commissions and no sales charges. (8) Shall not issue any senior security. (9) Shall not underwrite any securities. (10) Shall not purchase or sell real estate. (In the opinion of management, this restriction will not preclude the corporation from investing in securities of corporations that deal in real estate.) (11) Shall not purchase or sell commodities or commodity contracts; except that Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond, Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term may, for non-speculative purposes, buy or sell interest rate futures contracts on debt securities (debt futures and bond index futures) and related options. (12) Shall not borrow any money with respect to any series of its stock, except in an amount not in excess of 5% of the total assets of the series, and then only for emergency and extraordinary purposes; this does not prohibit the escrow and collateral arrangements in connection with investment in interest rate futures contracts and related options by Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond, Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term. The Investment Company Act imposes certain additional restrictions upon acquisition by the corporation of securities issued by insurance companies, brokers, dealers, underwriters or investment advisers, and upon transactions with affiliated persons as therein defined. It also defines and forbids the creation of cross and circular ownership. Neither the Securities and Exchange Commission nor any other agency of the federal government participates in or supervises the corporation's management or its investment practices or policies. To comply with the requirements of a state 5 securities administrator, the corporation has agreed not to invest in oil, gas or other mineral leases, or in warrants, except that the corporation may purchase securities with warrants attached. FORWARD CURRENCY EXCHANGE CONTRACTS The funds conduct their foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward foreign currency exchange contracts to purchase or sell foreign currencies. The funds expect to use forward contracts under two circumstances: (1) When the manager wishes to "lock in" the U.S. dollar price of a security when a fund is purchasing or selling a security denominated in a foreign currency, the fund would be able to enter into a forward contract to do so; (2) When the manager believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, a fund would be able to enter into a forward contract to sell foreign currency for a fixed U.S. dollar amount approximating the value of some or all of its fund's portfolio securities either denominated in, or whose value is tied to, such foreign currency. As to the first circumstance, when a fund enters into a trade for the purchase or sale of a security denominated in a foreign currency, it may be desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering into forward contracts in U.S. dollars for the purchase or sale of a foreign currency involved in an underlying security transaction, the fund will be able to protect itself against a possible loss between trade and settlement dates resulting from the adverse change in the relationship between the U.S. dollar at the subject foreign currency. Under the second circumstance, when the manager believes that the currency of a particular country may suffer a substantial decline relative to the U.S. dollar, a fund could enter into a 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 place cash or high-grade liquid securities in a separate account with its custodian in an amount sufficient to cover its obligation under the contract. If the value of the securities placed in the separate account declines, additional cash or securities will be placed in the account on a daily basis so that the value of the account equals the amount of the fund's commitments with respect to such contracts. The precise matching of forward contracts in the amounts and values of securities involved would not generally be possible since the future values of such foreign currencies will change as a consequence of market movements in the values of those securities between the date the forward contract is entered into and the date it matures. Predicting short-term currency market movements is extremely difficult, and the successful execution of short-term hedging strategy is highly uncertain. The manager does not intend to enter into such contracts on a regular basis. Normally, consideration of the prospect for currency parities will be incorporated into the long-term investment decisions made with respect to overall diversification strategies. However, the manager believes that it is important to have flexibility to enter into such forward contracts when it determines that a fund's best interests may be served. Generally, a fund will not enter into a forward contract with a term of greater than one year. At the maturity of the forward contract, the fund may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate the obligation to deliver the foreign currency by purchasing an "offsetting" forward contract with the same currency trader obligating the fund to purchase, on the same maturity date, the same amount of the foreign currency. It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for a fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency the fund is obligated to deliver. 6 AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS As described in the applicable prospectus, certain of the funds will have, at any given time, investments in fixed income securities. Those investments, however, are subject to certain credit quality restrictions, as noted in the applicable prospectus. The following is a description of the rating categories referenced in the prospectus fund disclosure. The following summarizes the highest four ratings used by Standard & Poor's Corporation ("S&P") for bonds: AAA - This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay interest and repay principal. AA - Debt rated AA is considered to have a very strong capacity to pay interest and repay principal and differs from AAA issues only in a small degree. A - Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher- rated categories. BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. To provide more detailed indications of credit quality, the AA, A and BBB ratings may be modified by the addition of a plus or minus sign to show relative standing within these major rating categories. Commercial paper rated A-1 by S&P indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted A-1+. Capacity for timely payment on commercial paper rated A-2 is satisfactory, but the relative degree of safety is not as high as for issues designated A-1. The rating SP-1 is the highest rating assigned by S&P to municipal notes and indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are given a plus (+) designation. The following summarizes the highest four ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds: Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large, or by an exceptionally stable, margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A - Debt which is rated A possesses many favorable investment attributes and is to be considered as an upper medium-grade obligation. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa - Debt which is rated Baa is considered as a medium-grade obligation, i.e., it is neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such debt lacks outstanding investment characteristics and in fact has speculative characteristics as well. Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds rated Aa, A and Baa. The modifier 1 indicates that the bond being rated ranks in 7 the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower end of its generic rating category. The rating Prime-1 or P-1 is the highest commercial paper rating assigned by Moody's. Issuers rated Prime-1 (or related supporting institutions) are considered to have a superior capacity for repayment of short-term promissory obligations. Issuers rated Prime-2 or P-2 (or related supporting institutions) are considered to have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics of issuers rated Prime-1 but to a lesser degree. 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. The following summarized the highest rating used by Moody's for short-term notes and variable rate demand obligations: MIG-1; VMIG-1 - Obligations bearing these designations are of the best quality, enjoying strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. SHORT SALES Twentieth Century's common stock funds and the balanced fund may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. To make delivery to the purchaser, the executing broker borrows the securities being sold short on behalf of the seller. While the short position is maintained, the seller collateralizes its obligation to deliver the securities sold short in an amount equal to the proceeds of the short sale plus an additional margin amount established by the Board of Governors of the Federal Reserve. If a fund engages in a short sale the collateral account will be maintained by the fund's custodian. 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 and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. In such a case, any future losses in the fund's long position should be reduced by a gain in the short position. The extent to which such gains or losses are reduced would depend upon the amount of the security sold short relative to the amount the fund owns. 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 TURNOVER The portfolio turnover rates of the funds are shown in the Financial Highlights table in the prospectuses. With respect to each series of shares, the management will purchase and sell securities without regard to the length of time the security has been held and, accordingly, it can be expected that the rate of portfolio turnover may be substantial. The corporation intends to purchase a given security whenever management believes it will contribute to the stated objective of the series, even if the same security has only recently been sold. In selling a given security, management keeps in mind that (1) profits from sales of securities held less than three months must be limited in order to meet the requirements of Subchapter M of the Internal Revenue Code, and (2) profits from sales of securities are taxed to shareholders as ordinary income. Subject to those considerations, the corporation will sell a given security, no matter for how long or for 8 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 management believes that it is not fulfilling its purpose, either because, among other things, it did not live up to management's expectations, or because it may be replaced with another security holding greater promise, or because it has reached its optimum potential, or because of a change in the circumstances of a particular company or industry or in general economic conditions, or because of some combination of such reasons. When a general decline in security prices is anticipated, the equity funds may decrease or eliminate entirely their equity positions and increase their cash positions, and when a rise in price levels is anticipated, the equity funds may increase their equity positions and decrease their cash positions. However, these funds have followed the practice of remaining essentially fully invested in equity securities. Since investment decisions are based on the anticipated contribution of the security in question to the corporation's objectives, the rate of portfolio turnover is irrelevant when management believes a change is in order to achieve those objectives, and the corporation's annual portfolio turnover rate cannot be anticipated and may be comparatively high. This disclosure regarding portfolio turnover is a statement of fundamental policy and may be changed only by a vote of the shareholders. Since the management does not take portfolio turnover rate into account in making investment decisions, (1) the management has 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 a representation of the rates which will be attained in the future. INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS Limited-Term Bond, Intermediate-Term Bond, Long-Term Bond, Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and Tax-Exempt Long-Term (the funds) may buy and sell interest rate futures contracts relating to debt securities ("debt futures," i.e., futures relating to debt securities, and "bond index futures," i.e., futures relating to indexes on types or groups of bonds) and write and buy put and call options relating to interest rate futures contracts. A fund will not purchase or sell futures contracts and options thereon for speculative purposes but rather only for the purpose of hedging against changes in the market value of its portfolio securities or changes in the market value of securities that Investors Research Corporation (manager) anti-cipates that it may wish to include in the portfolio of a fund. A fund may sell a future or write a call or purchase a put on a future if the manager anticipates that a general market or market sector decline may adversely affect the market value of any or all of the fund's holdings. A fund may buy a future or purchase a call or sell a put on a future if the manager anticipates a significant market advance in the type of securities it intends to purchase for the fund's portfolio at a time when the fund is not invested in debt securities to the extent permitted by its investment policies. A fund may purchase a future or a call option thereon as a temporary substitute for the purchase of individual securities which may then be purchased in an orderly fashion. As securities are purchased, corresponding futures positions would be terminated by offsetting sales. The "sale" of a debt future means the acquisition by the fund of an obligation to deliver the related debt securities (i.e., those called for by the contract) at a specified price on a specified date. The "purchase" of a debt future means the acquisition by the fund of an obligation to acquire the related debt securities at a specified time on a specified date. The "sale" of a bond index future means the acquisition by the fund of an obligation to deliver an amount of cash equal to a specified dollar amount times the difference between the index value at the close of the last trading day of the future and the price at which the future is originally struck. No physical delivery of the bonds making up the index is expected to be made. The "purchase" of a bond index future means the acquisition by the fund of an obligation to take delivery of such an amount of cash. Unlike when the fund purchases or sells a bond, no price is paid or received by the fund upon the 9 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. Cash held in the margin account is not income producing. Subsequent payments, called variation margin, to and from the broker, 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 mark to the 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 a gain. When a fund writes an option on a futures contract it becomes obligated, in return for the premium paid, to assume a position in a futures contract at a specified exercise price at any time during the term of the option. If a fund has written a call, it becomes obligated to assume a "long" position in a futures contract, which means that it is required to take delivery of the underlying securities. If it has written a put, it is obligated to assume a "short" position in a futures contract, which means that it is required to deliver the underlying securities. When the fund purchases an option on a futures contract it acquires a right in return for the premium it pays to assume a position in a futures contract. If a fund writes an option on a futures contract it will be required to deposit initial and variation margin pursuant to requirements similar to those applicable to futures contracts. Premiums received from the writing of an option on a future are included in the initial margin deposit. For options sold, the fund will segregate cash or high-quality debt securities equal to the value of securities underlying the option unless the option is otherwise covered. A fund will deposit in a segregated account with its custodian bank high-quality debt obligations maturing in one year or less, or cash, in an amount equal to the fluctuating market value of long futures contracts it has purchased less any margin deposited on its long position. It may hold cash or acquire such debt obligations for the purpose of making these deposits. Changes in variation margin are recorded by a fund as unrealized gains or losses. Initial margin payments will be deposited in the fund's custodian bank in an account registered in the broker's name; access to the assets in that account may be made by the broker only under specified conditions. At any time prior to expiration of a futures contract or an option thereon, a fund may elect to close the position by taking an opposite position that will operate to terminate its position in the futures contract or option. A final determination of variation margin is made at that time; additional cash is required to be paid by or released to it and it realizes a loss or gain. Although futures contracts by their terms call for the actual delivery or acquisition of the underlying securities or cash, in most cases the contractual obligation is so fulfilled without having to make or take delivery. The funds do not intend to make or take delivery of the underlying obligation. All transactions in futures contracts and options thereon are made, offset or fulfilled through a clearinghouse associated with the exchange on which the instruments are traded. Although the funds intend to buy and sell futures contracts only on exchanges where there appears to be an active secondary market, there is no assurance that a liquid secondary market will exist for any particular future at any particular time. In such event, it may not be possible to close a futures contract position. Similar market liquidity risks occur with respect to options. The use of futures contracts and options thereon to attempt to protect against the market risk of a decline in the value of portfolio securities is referred to as having a "short futures position." The use of futures contracts and options thereon to attempt to protect against the market risk that a fund might not be fully invested at a time when the value of the securities in which it invests is increasing is referred to as having a "long futures position." The funds must operate within certain restrictions as to long and short positions in futures contracts and options thereon under a rule (CFTC Rule) adopted by the Commodity Futures Trading Commission (CFTC) 10 under the Commodity Exchange Act (CEA) to be eligible for the exclusion provided by the CFTC Rule from registration by the fund with the CFTC as a "commodity pool operator" (as defined under the CEA), and must represent to the CFTC that it will operate within such restrictions. Under these restrictions a fund will not, as to any positions, whether long, short or a combination thereof, enter into futures contracts and options thereon for which the aggregate initial margins and premiums exceed 5% of the fair market value of the fund's assets after taking into account unrealized profits and losses on options the fund has entered into; in the case of an option that is "in-the-money" (as defined under the CEA), the in-the-money amount may be excluded in computing such 5%. (In general, a call option on a futures contract is in-the-money if the value of the future exceeds the strike, i.e., exercise, price of the call; a put option on a futures contract is in-the-money if the value of the futures contract that is the subject of the put is exceeded by the strike price of the put.) Under the restrictions, a fund also must, as to short positions, use futures contracts and options thereon solely for bona fide hedging purposes within the meaning and intent of the applicable provisions under the CEA. As to its long positions that are used as part of a fund's portfolio strategy and are incidental to the fund's activities in the underlying cash market, the "underlying commodity value" (see below) of the fund's futures contract and options thereon must not exceed the sum of (i) cash set aside in an identifiable manner, or short-term U.S. debt obligations or other U.S. dollar-denominated, high-quality, short-term money market instruments so set aside, plus any funds deposited as margin; (ii) cash proceeds from existing investments due in 30 days; and (iii) accrued profits held at the futures commission merchant. [There are described above the segregated accounts that a fund must maintain with its custodian bank as to its options and futures contracts activities due to Securities and Exchange Commis-sion (SEC) requirements. The fund will, as to its long positions, be required to abide by the more restrictive of these SEC and CFTC requirements.] The underlying commodity value of a futures contract is computed by multiplying the size (dollar amount) of the futures contract by the daily settlement price of the futures contract. For an option on a futures contract, that value is the underlying commodity value of the future underlying the option. Since futures contracts and options thereon can replicate movements in the cash markets for the securities in which a fund invests without the large cash investments required for dealing in such markets, they may subject a fund to greater and more volatile risks than might otherwise be the case. The principal risks related to the use of such instruments are (i) the offsetting correlation between movements in the market price of the portfolio investments (held or intended) being hedged and in the price of the futures contract or option may be imperfect; (ii) possible lack of a liquid secondary market for closing out futures or options positions; (iii) the need for additional portfolio management skills and techniques; (iv) losses due to unanticipated market price movements; and (v) the bankruptcy or failure of a futures commission merchant holding margin deposits made by the funds and the funds' inability to obtain repayment of all or part of such deposits. For a hedge to be completely effective, the price change of the hedging instrument should equal the price change of the security being hedged. Such equal price changes are not always possible because the investment underlying the hedging instrument may not be the same investment that is being hedged. The manager will attempt to create a closely correlated hedge, but hedging activity may not be completely successful in eliminating market value fluctuation. The ordinary spreads between prices in the cash and futures markets, due to the differences in the natures of those markets, are subject to the following factors which may create distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into off-setting transactions rather than making or taking delivery. To the extent participants decide to make or 11 take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of distortion, a correct forecast of general interest trends by the manager may still not result in a successful transaction. The manager may be incorrect in its expectations as to the extent of various interest rate movements or the time span within which the movements take place. The risk of imperfect correlation between movements in the price of a bond index future and movements in the price of the securities that are the subject of the hedge increases as the composition of a fund's portfolio diverges from the securities included in the applicable index. The price of the bond index future may move more than or less than the price of the securities being hedged. If the price of the bond index future moves less than the price of the securities that are the subject of the hedge, the hedge will not be fully effective, but if the price of the securities being hedged has moved in an unfavorable direction, the fund would be in a better position than if it had not hedged at all. If the price of the securities being hedged has moved in a favorable direction, this advantage will be partially offset by the futures contract. If the price of the futures contract moves more than the price of the security, a fund will experience either a loss or a gain on the futures contract that will not be completely offset by movements in the price of the securities that are the subject of the hedge. To compensate for the imperfect correlation of movements in the price of the securities being hedged and movements in the price of the bond index futures, a fund may buy or sell bond index futures in a greater dollar amount than the dollar amount of securities being hedged if the historical volatility of the prices of such securities being hedged is less than the historical volatility of the bond index. It is also possible that, where a fund has sold futures contracts to hedge its securities against a decline in the market, the market may advance and the value of securities held in the portfolio may decline. If this occurred, a fund would lose money on the futures contract and also experience a decline in value in its portfolio securities. However, while this could occur for a brief period or to a very small degree, over time the value of a portfolio of debt securities will tend to move in the same direction as the market indexes upon which the futures contracts are based. Where bond index futures are purchased to hedge against a possible increase in the price of bonds before a fund is able to invest in securities in an orderly fashion, it is possible that the market may decline instead; if the fund then concludes not to invest in securities at that time because of concern as to possible further market decline or for other reasons, it will realize a loss on the futures contract that is not offset by a reduction in the price of the securities it had anticipated purchasing. The risks of investment in options on bond indexes may be greater than options on securities. Because exercises of bond index options are settled in cash, when a fund writes a call on a bond index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A fund can offset some of the risk of its writing position by holding a portfolio of bonds similar to those on which the underlying index is based. However, a fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as the underlying index and, as a result, bears a risk that the value of the securities held will vary from the value of the index. Even if a fund could assemble a portfolio that exactly reproduced the composition of the underlying index, it still would not be fully covered from a risk standpoint because of the "timing risk" inherent in writing index options. When an index option is exercised, the amount of cash that the holder is entitled to receive is determined by the difference between the exercise price and the closing index level on the date when the option is exercised. As with other kinds of options, a fund, as the call writer, will not learn that it has been assigned until the next business day at the earliest. The time lag between exercise and notice of assignment poses no risk for the writer of a covered call on a specific underlying security because there, 12 the writer's obligation is to deliver the underlying security, not to pay its value as of a fixed time in the past. So long as the writer already owns the underlying security, it can satisfy its settlement obligations by simply delivering it, and the risk that its value may have declined since the exercise date is borne by the exercising holder. In contrast, even if the writer of an index call holds securities that exactly match the composition of the underlying index, it will not be able to satisfy its assignment obligations by delivering those securities against payment of the exercise price. Instead, it will be required to pay cash in an amount based on the closing index value of the exercise date; and by the time it learns that it has been assigned, the index may have declined with a corresponding decline in the value of its portfolio. This "timing risk" is an inherent limitation on the ability of index call writers to cover their risk exposure by holding securities positions. If a fund has purchased an index option and exercises it before the closing index value for that day is available, it runs the risk that the level of the underlying index may subsequently change. If such a change causes the exercised option to fall out-of-the-money, the fund exercising the option must pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer. MUNICIPAL LEASES The tax-exempt funds may invest in municipal lease obligations and certificates of participation in such obligations (collectively, lease obligations). A lease obligation does not constitute a general obligation of the municipality for which the municipality's taxing power is pledged, although the lease obligation is ordinarily backed by the municipality's covenant to budget for the payments due under the lease obligation. Certain lease obligations contain "non-appropriation" clauses which provide that the municipality has no obligation to make lease obligation payments in future years unless money is appropriated for such purpose on a yearly basis. Although "non-appropriation" lease obligations are secured by the leased property, disposition of the property in the event of foreclosure might prove difficult. In evaluating a potential investment in such a lease obligation, management will consider: (i) the credit quality of the obligor, (ii) whether the underlying property is essential to a governmental function, and (iii) whether the lease obligation contains covenants prohibiting the obligor from substituting similar property if the obligor fails to make appropriations for the lease obligation. Municipal lease obligations may be determined to be liquid in accordance with the guidelines established by the funds' board of directors for purposes of complying with the funds' investment restrictions. In determining the liquidity of a lease obligation, the manager will consider: (1) the frequency of trades and quotes for the lease obligation, (2) the number of dealers willing to purchase or sell the lease obligation and the number of other potential purchasers, (3) dealer undertakings to make a market in the lease obligation, (4) the nature of the marketplace trades, including the time needed to dispose of the lease obligation, the method of soliciting offers, and the mechanics of transfer, (5) whether the lease obligation is of a size that will be attractive to institutional investors, (6) whether the lease obligation contains a non-appropriation clause and the likelihood that the obligor will fail to make an appropriation therefore, and (7) such other factors as the manager may determine to be relevant to such determination. OFFICERS AND DIRECTORS The principal officers and directors of the corporation, their principal business experience during the past five years, and their affiliations with Investors Research Corporation and its affiliated companies are listed below. Unless otherwise noted, the business address of each director and officer is 4500 Main Street, Kansas City, Missouri 64111. Those directors who are "interested persons" as defined in the Investment Company Act are indicated by an asterisk (*). JAMES E. STOWERS JR.,* chairman, principal executive officer and director; chairman, director and controlling shareholder of Twentieth Century Companies, Inc., parent corporation of Investors 13 Research Corporation and Twentieth Century Services, Inc.; chairman and director of Investors Research Corporation, Twentieth Century Services, Inc., TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. JAMES E. STOWERS III,* president and director; president and director, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc., Twentieth Century Companies, Inc., Investors Research Corporation and Twentieth Century Services, Inc. THOMAS A. BROWN, director; 2029 Wyandotte, Kansas City, Missouri; chief executive officer, Associated Bearing Company, a corporation engaged in the sale of bearings and power transmission products; director, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. ROBERT W. DOERING, M.D., director; 6406 Prospect, Kansas City, Missouri; general surgeon; director, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. LINSLEY L. LUNDGAARD, director; 18648 White Wing Drive, Rio Verde, Arizona; retired; formerly vice president and national sales manager, Flour Milling Division, Cargill, Inc.; director, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. DONALD H. PRATT, director; P.O. Box 419917, Kansas City, Missouri; president, Butler Manufacturing Company; director, Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., TCI Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. LLOYD T. SILVER JR., director; 2300 West 70th Terrace, Mission Hills, Kansas; president, LSC, Inc., manufacturer's representative; director, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. M. JEANNINE STRANDJORD, director; 2330 Shawnee Mission Parkway, Westwood, Kansas; senior vice president and treasurer, Sprint Corporation; director, Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., TCI Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. JOHN M. URIE, director; 5511 NW Flint Ridge Road, Kansas City, Missouri; consultant; formerly, director of finance, City of Kansas City, Missouri; director, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. WILLIAM M. LYONS, executive vice president, secretary and general counsel; executive vice president, secretary and general counsel, Twentieth Century World Investors, Inc. and Twentieth Century Strategic Asset Allocations, Inc.; executive vice president and general counsel, TCI Portfolios, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Companies, Inc., Investors Research Corporation and Twentieth Century Services, Inc. ROBERT T. JACKSON, executive vice president and principal financial officer; treasurer, Twentieth Century Companies, Inc. and Investors Research Corporation; executive vice president and treasurer, Twentieth Century Services, Inc.; executive vice president-finance, TCI Portfolios, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc.; formerly executive vice president, Kemper Corporation. MARYANNE ROEPKE, CPA, vice president, treasurer and principal accounting officer; vice president and treasurer, TCI Portfolios, Inc., Twentieth 14 Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc.; vice president, Twentieth Century Services, Inc. PATRICK A. LOOBY, vice president; vice president and secretary, Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and TCI Portfolios, Inc.; vice president, Twentieth Century World Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century Services, Inc. MERELE A. MAY, controller; controller, TCI Portfolios, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. C. JEAN WADE, CPA, controller; controller, Twentieth Century Premium Reserves, Inc. and Twentieth Century Strategic Asset Allocations, Inc.; formerly, accountant, Baird, Kurtz & Dobson. The board of directors has established three standing committees, the executive committee, the audit committee and the nominating committee. Messrs. Stowers Jr., Stowers III, and Urie constitute the executive committee of the board of directors. The committee performs the functions of the board of directors between meetings of the board, subject to the limitations on its power set out in the Maryland General Corporation Law, and except for matters required by the Investment Company Act to be acted upon by the whole board. Those directors who are not "interested persons" constitute the audit committee. The functions of the audit committee include recommending the engagement of the corporation's independent accountants, reviewing the arrangements for and scope of the annual audit, reviewing comments made by the independent accountants with respect to internal controls and the considerations given or the corrective action taken by management, and reviewing nonaudit services provided by the independent accountants. The nominating committee has as its principal role the consideration and recommendation of individuals for nomination as directors. The names of potential director candidates are drawn from a number of sources, including recommendations from members of the board, management and shareholders. This committee also reviews and makes recommendations to the board with respect to the composition of board committees and other board-related matters, including its organization, size, composition, responsibilities, functions and compensation. The members of the nominating committee are Messrs. Urie (Chairman), Lundgaard and Stowers III. The directors of the corporation also serve as directors of Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc., registered investment companies. Each director who is not an "interested person" as defined in the Investment Company Act receives for service as a member of the board of all Twentieth Century investment companies an annual director's fee of $36,000, and an additional fee of $1,000 per regular board meeting attended and $500 per special board meeting and audit committee meeting attended. In addition, those directors who are not "interested persons" who serve as chairman of a committee of the board of directors receive an additional $2,000 for such services. These fees and expenses are divided among the Twentieth Century investment companies based upon their relative net assets. Under the terms of the management agreement with Investors Research Corporation, the corporation is responsible for paying such fees and expenses. Set forth below is the aggregate compensation paid for the periods indicated by the corporation and by the Twentieth Century family of mutual funds as a whole to each director of the corporation who is not an "interested person" as defined in the Investment Company Act. Aggregate Total Compensation from Compensation the Twentieth Century Director from the corporation 1 Family of Funds 2 - -------------------------------------------------------------------------------- Thomas A. Brown $37,370.13 $44,000 Robert W. Doering, M.D. 37,370.13 44,000 Linsley L. Lundgaard 38,052.39 44,000 Donald H. Pratt 21,292.80 32,000 Lloyd T. Silver Jr. 37,370.13 44,000 M. Jeannine Strandjord 37,370.13 44,000 John M. Urie 39,269.48 46,000 1 Includes compensation actually paid by the corporation during the fiscal year ended October 31, 1995. 2 Includes compensation paid by the twelve investment company members of the Twentieth Century family of funds for the calendar year ended December 31, 1995. 15 The corporation has adopted the Twentieth Century Mutual Funds Deferred Compensation Plan for Non-Interested Directors. Under the Plan, the non-interested person directors may defer receipt of all or any part of the fees to be paid to them for serving as directors of the corporation. Under the Plan, all deferred fees are credited to an account established in the name of the participating 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 Twentieth Century Mutual Funds that are selected by the participating director. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts 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 participating 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, Twentieth Century has no obligation to segregate assets to secure or fund the deferred fees. The rights of directors to receive their deferred fee account balances are the same as the rights of a general unsecured creditor of the corporation. 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 participating directors under the Plan during the fiscal year ended October 31, 1995. Those directors who are "interested persons," as defined in the Investment Company Act, receive no fee as such for serving as a director. The salaries of such individuals, who are also officers of the corporation, are paid by Investors Research Corporation. MANAGEMENT A description of the responsibilities and method of compensation of Twentieth Century's investment manager, Investors Research Corporation (Investors Research), appears in the prospectus under the caption, "Management." During the past three years, the management fees of Investors Research were: Fund Year Ended October 31 - -------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------- Select Investors Management fees $ 40,918,896 $ 46,147,911 $ 48,480,096 Average net assets 4,100,172,070 4,616,441,587 4,848,159,470 Heritage Investors Management fees 8,900,956 8,238,322 5,498,048 Average net assets 899,947,177 822,480,118 548,884,570 Growth Investors Management fees 45,713,727 43,916,916 47,176,779 Average net assets 4,575,064,437 4,404,299,518 4,709,124,282 Ultra Investors Management fees 113,284,379 91,474,921 60,984,145 Average net assets 11,330,063,925 9,149,558,371 6,112,235,221 Vista Investors Management fees 11,104,694 7,226,302 8,705,024 Average net assets 1,123,979,069 732,311,586 871,068,426 Giftrust Investors Management fees 3,840,425 1,875,098 1,124,267 Average net assets 389,827,724 189,487,155 112,725,430 Balanced Investors Management fees 7,303,148 6,861,248 6,958,709 Average net assets 743,379,550 687,079,027 693,537,849 Cash Reserve Management fees 9,546,843 10,282,495 13,085,631 Average net assets 1,367,481,447 1,294,838,404 1,306,730,840 U.S. Governments Short-Term Management fees 2,708,850 3,611,805 5,286,712 Average net assets 387,845,926 447,658,784 530,918,127 Long-Term Bond Management fees 1,038,120 1,233,251 1,639,343 Average net assets 132,239,065 141,750,838 164,545,497 Tax-Exempt Short-Term Management fees 0 0 0 Average net assets 59,645,970 57,545,359 35,996,656 16 Fund Year Ended October 31 - -------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------- Tax-Exempt Intermediate-Term Management fees $ 471,159 $ 537,893 $ 632,802 Average net assets 78,781,379 89,751,385 87,858,747 Tax-Exempt Long-Term Management fees 317,622 361,732 471,123 Average net assets 53,244,618 60,383,665 64,889,290 Limited-Term Bond Management fees 40,530 17,509 -- Average net assets 5,906,790 3,690,814 -- Intermediate-Term Bond Management fees 59,552 17,532 -- Average net assets 8,128,357 3,458,399 -- U.S. Governments Intermediate-Term Management fees 104,141 19,566 -- Average net assets 14,092,947 3,821,083 -- - -------------------------------------------------------------------------------- The management agreement shall continue in effect until the earlier of the expiration of two years from the date of its execution, or until the first meeting of shareholders following such execution, and for as long thereafter as its continuance is specifically approved at least annually by (i) the board of directors of Twentieth Century, or by the vote of a majority of the outstanding votes (as defined in the Investment Company Act) of Twentieth Century, and (ii) by the vote of a majority of the directors of Twentieth Century who are not parties to the agreement or interested persons of Investors Research, cast in person at a meeting called for the purpose of voting on such approval. The management agreement provides that it may be terminated at any time without payment of any penalty by the board of directors of Twentieth Century, or by a vote of a majority of Twentieth Century's shareholders, on 60 days' written notice to Investors Research, and that it shall be automatically terminated if it is assigned. The management agreement provides that Investors Research shall not be liable to Twentieth Century or its shareholders for anything other than willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties. The management agreement also provides that Investors Research and its officers, directors and employees may engage in other business, devote time and attention to any other business whether of a similar or dissimilar nature, and render services to others. Certain investments may be appropriate for one or more series of shares of Twentieth Century and also for other clients advised by Investors Research. Investment decisions for Twentieth Century 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 series, or in different amounts and at different times for more than one but less than all clients or series. In addition, purchases or sales of the same security may be made for two or more clients or series on the same date. Such transactions will be allocated among clients or series in a manner believed by Investors Research to be equitable to each. In some cases this procedure could have an adverse effect on the price or amount of the securities purchased or sold by a fund. On February 1, 1996, Investors Research was acting as investment adviser to 10 institutional accounts with an aggregate value of $369,906,144. While each of these clients has unique investment restrictions and guidelines, they have all elected to have their portfolios managed in a manner similar to the portfolio of either Growth Investors or Select Investors. Accordingly, anytime a security is being bought or sold for the Growth or Select funds, it may also be bought or sold for some or all of such institutional accounts. Investors Research anticipates acquiring additional such accounts in the future. Twentieth Century Services, Inc. provides physical facilities, including computer hardware and software and personnel, for the day-to-day administration of Twentieth Century and of Investors Research. Investors Research pays Twentieth Century Services, Inc. for such services. The payments by Investors Research to Twentieth Century Services, Inc. for the years ending October 31, 1995, 1994 and 1993 have been, respectively, $100,504,910, $139,895,701, and $99,610,260. As stated in the prospectus, all of the stock 17 of Twentieth Century Services, Inc. and Investors Research is owned by Twentieth Century Companies, Inc. CUSTODIANS Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598, Boatmen's First National Bank of Kansas City, 10th and Baltimore, Kansas City, Missouri 64105, and United Missouri Bank of Kansas City, N.A., 10th and Grand, Kansas City, Missouri 64105, each serves as custodian of 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 ACCOUNTANTS Baird, Kurtz & Dobson, 1100 Main Street, Kansas City, Missouri 64105, serves as Twentieth Century's independent accountants, providing services including (1) audit of the annual financial statements, (2) assistance and consultation in connection with SEC filings and (3) review of the annual federal income tax return filed for each fund by Twentieth Century. CAPITAL STOCK Twentieth Century's capital stock is described in the prospectuses under the caption, "Further Information About Twentieth Century." Twentieth Century may in the future issue additional series of shares without a vote of shareholders. The assets belonging to each series of shares are held separately by the custodian and the shares of each series represent a beneficial interest in the principal, earnings and profit (or losses) of investments and other assets held for each series. Your rights as a shareholder are the same for all series of securities unless otherwise stated. Within their respective series, all shares have equal redemption rights. Each share, when issued, is fully-paid and non-assessable. Each share, irrespective of series, is entitled to one vote for each dollar of net asset value represented by such share on all questions. In the event of complete liquidation or dissolution of Twentieth Century, shareholders of each series of shares shall be entitled to receive, pro rata, all of the assets less the liabilities of that series. As of February 5, 1996, in excess of 5% of the outstanding shares of the following funds were owned of record by: Name of Shareholder Fund and Percentage ------------------------------------------------------------------------ Growth Investors Nationwide Life Insurance Company Columbus, Ohio -- 12.2% Ultra Investors Charles Schwab & Co. San Francisco, California -- 9.2% Vista Investors Charles Schwab & Co.-- 9.8% Heritage Investors Charles Schwab & Co.-- 6.6% Bankers Trust Company as trustee for Kraft General Foods -- 7.3% Cash Reserve Twentieth Century Companies, Inc.-- 5.6% Kansas City, Missouri Tax-Exempt Short-Term Twentieth Century Companies, Inc.-- 11.9% Tax-Exempt Long-Term Twentieth Century Companies, Inc.-- 6.4% Limited-Term Bond Twentieth Century Companies, Inc.-- 36.5% Intermediate-Term Bond Twentieth Century Companies, Inc.-- 19.3% The Chase Manhattan Bank as Trustee for Gza Geo Environmental Inc. Restated 401(k) Profit Sharing Plan and Trust New York, New York -- 5.6% The Chase Manhattan Bank as trustee for Fujisawa USA Inc. Savings and Retirement Plan Trust New York, New York -- 5.3% U.S. Governments Short-Term Nationwide Life Insurance Company-- 8.6% U.S. Governments Intermediate-Term The Chase Manhattan Bank as Trustee for Robert Bosch Corporation Star Plan and Trust New York, New York -- 15.7% The Chase Manhattan Bank as Trustee for The Petroleum Helicopters Inc. 401(k) Retirement Plan and Trust New York, New York -- 5.7% 18 BROKERAGE SELECT, HERITAGE, GROWTH, ULTRA, VISTA, GIFTRUST AND THE EQUITY INVESTMENTS OF BALANCED INVESTORS Under the management agreement between Twentieth Century and Investors Research, Investors Research has the responsibility of selecting brokers to execute portfolio transactions. Twentieth Century's policy is to secure the most favorable prices and execution of orders on its portfolio transactions. So long as that policy is met, Investors Research may take into consideration the factors discussed under this caption when selecting brokers. Investors Research receives statistical and other information and services without cost from brokers and dealers. Investors Research evaluates such information and services, together with all other information that it may have, in supervising and managing the investment portfolios of Twentieth Century. Because such information and services may vary in amount, quality and reliability, their influence in selecting brokers varies from none to very substantial. Investors Research proposes to continue to place some of Twentieth Century's brokerage business with one or more brokers who provide information and services. Such information and services will be in addition to and not in lieu of services required to be performed by Investors Research. Investors Research does not utilize brokers that provide such information and services for the purpose of reducing the expense of providing required services to Twentieth Century. In the years ended October 31, 1995, 1994 and 1993, the brokerage commissions of each fund were as follows: Year Ended October 31 - -------------------------------------------------------------------------------- Fund 1995 1994 1993 - -------------------------------------------------------------------------------- Select Investors $11,363,976 $14,844,437 $10,619,773 Heritage Investors 3,180,082 3,620,144 1,952,642 Growth Investors 13,577,767 10,144,618 10,384,958 Ultra Investors 18,911,590 19,240,703 9,269,314 Vista Investors 1,750,665 1,895,400 3,034,885 Giftrust Investors 571,349 588,145 359,785 Balanced Investors 875,207 979,903 1,023,195 In 1995, $43,452,273 of the total brokerage commissions was paid to brokers and dealers who provided information and services on transactions of $24,992,668,210 (69% of all transactions). The brokerage commissions paid by Twentieth Century may exceed those which another broker might have charged for effecting the same trans-actions, because of the value of the brokerage and research services provided by the broker. Research services furnished by brokers through whom Twentieth Century effects securities transactions may be used by Investors Research in servicing all of its accounts, and not all such services may be used by Investors Research in managing the portfolios of Twentieth Century. The staff of the Securities and Exchange Commission has expressed the view that the best price and execution of over-the-counter transactions in portfolio securities may be secured by dealing directly with principal market makers, thereby avoiding the payment of compensation to another broker. In certain situations, the officers of Twentieth Century and the manager believe that the facilities, expert personnel and technological systems of a broker often enable the corporation to secure as good a net price by dealing with a broker instead of a principal market maker, even after payment of the compensation to the broker. Twentieth Century regularly places its over-the-counter transactions with principal market makers, but may also deal on a brokerage basis when utilizing electronic trading networks or as circumstances warrant. 19 CASH RESERVE, U.S. GOVERNMENTS SHORT-TERM, U.S. GOVERNMENTS INTERMEDIATE-TERM, LIMITED-TERM BOND, INTERMEDIATE-TERM BOND, LONG-TERM BOND, TAX-EXEMPT SHORT-TERM, TAX-EXEMPT INTERMEDIATE-TERM, TAX-EXEMPT LONG-TERM AND THE FIXED INCOME INVESTMENTS OF BALANCED INVESTORS Under the management agreement between Twentieth Century and Investors Research, Investors Research 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 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. Investors Research will seek to obtain prompt execution of orders at the most favorable prices or yields. Investors Research may choose to purchase and sell portfolio securities to and from dealers who provide services or research, statistical and other information to Twentieth Century and to Investors Research. Such information or services will be in addition to and not in lieu of the services required to be performed by Investors Research, and the expenses of Investors Research will not necessarily be reduced as a result of the receipt of such supplemental information. PERFORMANCE ADVERTISING Individual fund performance may be compared to various indices including the Standard & Poor's 500 index, the Dow Jones Industrial Average, Donoghue's Money Fund Average and the Bank Rate Monitor National Index of 2 1/2-year CD rates. EQUITY FUNDS The following table sets forth the average annual total return of Twentieth Century's equity funds and the balanced fund for the one-, five- and 10-year periods (or period since inception) ended October 31, 1995, the last day of the funds' fiscal year. Average annual total return is calculated by determining each fund's cumulative total return for the stated period and then computing the annual compound return that would produce the cumulative total return if the fund's performance had been constant over that period. Cumulative total return includes all elements of return, including reinvest-ment of dividends and capital gains distributions. From Fund 1 year 5 year 10 year Inception 1 ------------------------------------------------------------- Select Investors 15.02% 10.98% 12.70% -- Heritage Investors 21.04% 17.60% -- 16.23% Growth Investors 22.31% 18.32% 16.45% -- Ultra Investors 36.89% 30.32% 21.59% -- Vista Investors 44.20% 25.39% 18.38% -- Giftrust Investors 32.52% 37.11% 25.29% -- Balanced Investors 16.36% 13.51% -- 11.95% 1 Data from inception shown for funds that are less than 10 years old. The funds may also advertise average annual total return over periods of time other than one, five and 10 years and cumulative total return over various time periods. The following table shows the cumulative total return of the Twentieth Century equity funds and the balanced fund since their respective dates of inception. The table also shows annual compound rates for Growth and Select from June 30, 1971, which corresponds with Twentieth Century's implementation of its current investment philosophy and practices and for all other funds from their respective dates of inception (as noted previously) through October 31, 1995. 20 Cumulative Total Average Annual Fund Return Since Inception Compound Rate --------------------------------------------------------------- Select Investors 3972.41% 16.45% Heritage Investors 231.68% 16.23% Growth Investors 6212.00% 18.56% Ultra Investors 939.25% 18.21% Vista Investors 406.80% 14.57% Giftrust Investors 1002.15% 22.28% Balanced Investors 121.18% 11.95% -------------------------------------------------------------- FIXED INCOME FUNDS AND THE BALANCED FUND Cash Reserve. The yield of Cash Reserve is calculated by measuring the income generated by an investment in the fund over a seven-day period (net of fund expenses). This income is then "annualized." That is, the amount of income generated by the investment over the seven-day period is assumed to be generated over each similar period throughout a full year and is shown as a percentage of the investment. The "effective yield" is calculated in a similar manner but, when annualized, the income earned by the investment is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of the assumed reinvestment. Based upon these methods of computation, the yield and effective yield for Cash Reserve for the seven days ended October 31, 1995, the last seven days of the fund's fiscal year, was 5.16% and 5.30%, respectively. Other Fixed Income Funds and the Balanced Fund. Yield is calculated by adding over a 30-day (or one-month) period all interest and dividend income (net of fund expenses) calculated on each day's market values, dividing this sum by the average number of fund shares outstanding during the period, and expressing the result as a percentage of the fund's share price on the last day of the 30-day (or one-month) period. The percentage is then annualized. Capital gains and losses are not included in the calculation. The following table sets forth yield quotations for Twentieth Century's fixed income funds (other than Cash Reserve) and the balanced fund for the 30-day period ended October 31, 1995, the last day of the fiscal year pursuant to computation methods prescribed by the Securities and Exchange Commission. U.S. U.S Intermediate- Governments Governments Limited-Term Term Short-Term Intermediate-Term Bond Bond - -------------------------------------------------------------------------------- 5.18% 5.39% 5.59% 5.63% - -------------------------------------------------------------------------------- Tax-Exempt Long-Term Tax-Exempt Intermediate- Tax-Exempt Balanced Bond Short-Term Term Long-Term Investors - -------------------------------------------------------------------------------- 6.16% 4.18% 4.21% 4.79% 2.42% - -------------------------------------------------------------------------------- The following table sets forth tax-equivalent yields for the Tax-Exempt Short-Term, Tax-Exempt Intermediate-Term and the Tax-Exempt Long-Term funds for the 30-day period ended October 31, 1995. The example assumes a 36% tax rate. The tax-equivalent yield is computed as follows: tax- equivalent = {(tax-exempt yield) over (1-assumed tax rate)} + non tax-exempt yield yield Tax-Exempt Tax-Exempt Tax-Exempt Short-Term Intermediate-Term Long-Term - -------------------------------------------------------------------------------- 6.53% 6.58% 7.48% - -------------------------------------------------------------------------------- The fixed income funds may also elect to advertise cumulative total return and average annual total return, computed as described above. The table below shows the cumulative total return and the average annual total return of Twentieth Century's fixed income funds since their respective dates of inception (as noted below) through October 31, 1995. Cumulative Total Return Average Annual Date of Fund Since Inception Total Return Inception - -------------------------------------------------------------------------------- U.S. Governments Short-Term 154.81% 7.53% 12/15/82 U.S. Governments Intermediate-Term 10.46% 6.14% 3/1/94 Limited-Term Bond 8.81% 5.19% 3/1/94 Intermediate-Term Bond 10.80% 6.34% 3/1/94 Long-Term Bond 95.10% 8.02% 3/2/87 Tax-Exempt Short-Term 11.65% 4.22% 3/1/93 Tax-Exempt Intermediate-Term 67.17% 6.11% 3/2/87 Tax-Exempt Long-Term 84.24% 7.31% 3/2/87 - -------------------------------------------------------------------------------- 21 ADDITIONAL PERFORMANCE COMPARISONS Investors may judge the performance of the funds by comparing their performance to the performance of other mutual funds or mutual fund portfolios with comparable investment objectives and policies through various mutual fund or market indices such as the EAFE(R) Index and those prepared by Dow Jones & Co., Inc., Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and The Russell 2000 Index, and to data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. and the Consumer Price Index. Comparisons may also be made to indices or data published in Money, Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week, Pensions and Investments, USA Today, and other similar publications or services. In addition to performance information, general information about the funds that appears in a publication such as those mentioned above or in the prospectus under the heading "Performance Advertising" may be included in advertisements and in reports to shareholders. PERMISSIBLE ADVERTISING INFORMATION From time to time, the funds may, in addition to any other permissible information, include the following types of information in advertisements, supplemental sales literature and reports to shareholders: (1) discussions of general economic or financial principles (such as the effects of compounding and the benefits of dollar-cost averaging); (2) discussions of general economic trends; (3) presentations of statistical data to supplement such discussions; (4) descriptions of past or anticipated portfolio holdings for one or more of the funds; (5) descriptions of investment strategies for one or more of the funds; (6) descriptions or comparisons of various savings and investment products (including, but not limited to, qualified retirement plans and individual stocks and bonds), which may or may not include the funds; (7) comparisons of investment products (including the funds) with relevant market or industry indices or other appropriate benchmarks; (8) discussions of fund rankings or ratings by recognized rating organizations; and (9) testimonials describing the experience of persons that have invested in one or more of the funds. The funds may also include calculations, such as hypothetical compounding examples, which describe hypothetical investment results in such communications. Such performance examples will be based on an express set of assumptions and are not indicative of the performance of any of the funds. REDEMPTIONS IN KIND Twentieth Century's policy with regard to redemptions in excess of the lesser of one half of 1% of a fund's assets or $250,000 from its equity funds and Balanced Investors is described in the equity funds prospectus under the heading "Special Requirements for Large Redemptions" and in the institutional prospectus under the heading "Special Requirements for Large Equity Fund Redemptions." The corporation has elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which the corporation is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of a fund during any 90-day period for any one shareholder. If shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets to cash. The method of valuing portfolio securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described in the prospectus under the caption "How Share Price is Determined," and such valuation will be made as of the same time the redemption price is determined. 22 HOLIDAYS Twentieth Century does not determine the net asset value of its shares on days when the New York Stock Exchange is closed. Currently, the Exchange is closed on Saturdays and Sundays, and on holidays, namely New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. FINANCIAL STATEMENTS The financial statements of the various series of shares of Twentieth Century for the fiscal year ended October 31, 1995, are included in the annual reports to shareholders, which are incorporated herein by reference. You may receive copies without charge upon request to Twentieth Century at the address and phone number shown on the cover of this statement. 23 TWENTIETH CENTURY INVESTORS, INC. STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1996 [company logo] - --------------------------------------- P.O. Box 419200 - --------------------------------------- Kansas City, Missouri - --------------------------------------- 64141-6200 - --------------------------------------- 1-800-345-2021 or 816-531-5575 - --------------------------------------- ================================================================================ - -------------------------------------------------------------------------------- SH-BKT-4301 9603 (C) 1996 Twentieth Century Services, Inc. Recycled PART C. OTHER INFORMATION. ITEM 24. Financial Statements and Exhibits. (a) Financial Statements (i) Financial Statements filed in Part A of the Registration Statement: 1. Financial Highlights. (ii) Financial Statements filed in Part B of the Registration Statement (each of the following financial statements is contained in the Registrant's Annual Reports dated October 31, 1995, which appear as Exhibit 12 to this Registration Statement, and which are incorporated by reference in Part B of this Registration Statement): 1. Statement of Assets and Liabilities at October 31, 1995. 2. Statement of Operations for the year ended October 31, 1995. 3. Statements of Changes in Net Assets for the year ended October 31, 1995. 4. Notes to Financial Statements as of October 31, 1995. 5. Schedule of Investments at October 31, 1995. 6. Report of Independent Certified Public Accountants dated November 27, 1995. (b) Exhibits (all footnoted exhibits being incorporated herein by reference) 1. (a) Articles of Incorporation of Twentieth Century Investors, Inc., dated July 2, 1990 (EX-99.B1a). (b) Articles of Amendment of Twentieth Century Investors, Inc., dated November 20, 1990 (EX-99.B1b). (c) Articles of Merger of Twentieth Century Investors, Inc., a Maryland corporation and Twentieth Century Investors, Inc., a Delaware corporation, dated February 22, 1991 (EX-99.B1c). (d) Articles of Amendment of Twentieth Century Investors, Inc., dated August 11, 1993 (EX-99.B1d). (e) Articles Supplementary of Twentieth Century Investors, Inc., dated September 3, 1993 (EX-99.B1e). (f) Articles Supplementary of Twentieth Century Investors, Inc., dated April 28, 1995 (EX-99.B1f). (g) Articles Supplementary of Twentieth Century Investors, Inc., dated November 17, 1995 (EX-99.B1g). (h) Articles Supplementary of Twentieth Century Investors, Inc., dated January 30, 1996 (EX-99.B1h). 2. By-laws of Twentieth Century Investors, Inc. (EX-99.B2). 3. Voting Trust Agreements - None. 4. Specimen copy of stock certificate - all series. (1) 5. Management Agreement between Twentieth Century Investors, Inc. and Investors Research Corporation dated August 1, 1994.(2) 6. Underwriting Agreements - None. 7. Bonus and Profit Sharing Plan, Etc. - None. 8. (a) Custodian Agreement between Twentieth Century Investors, Inc. and United States Trust Company of New York. (3) (b) Letter Re Remuneration dated May 8, 1985. (4) (c) Letter Agreement between Twentieth Century Investors, Inc. and United States Trust Company of New York dated February 28, 1991. (1) (d) Custodian Agreement between Twentieth Century Investors, Inc. and First National Bank of Kansas City. (5) (e) Letter Agreement between Twentieth Century Investors, Inc. and Boatmen's First National Bank of Kansas City. (1) (f) Custodian Agreement dated September 21, 1994 for ACH transactions, between Twentieth Century Investors, Inc. and United Missouri Bank of Kansas City, N.A. (6) (g) Custody Agreement dated September 12, 1995, between UMB Bank, N.A., Investors Research Corporation, Twentieth Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc. and Twentieth Century Capital Portfolios, Inc. (7) (h) Amendment No. 1 to Custody Agreement dated January 25, 1996, between UMB Bank, N.A., Investors Research Corporation, Twentieth Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. (7) 9. Transfer Agency Agreement between Twentieth Century Investors, Inc. and Twentieth Century Services, Inc. (8) 10. Opinion and Consent of Counsel (EX-99.B10). 11. Consent of Baird, Kurtz & Dobson (EX-99.B11). 12. Equity Funds and Fixed Income Funds Annual Reports, dated October 31, 1995. (9) 13. Agreements for Initial Capital, Etc. - None. 14. Model Retirement Plans. (10) 15. Copy of Rule 12b-1 plan - None. 16. Schedules For Computation of Advertising Performance Quotations (EX-99.B16). 17. Power of Attorney (EX-99.B17). 27. (a) Financial Data Schedule for Growth Investors (EX-27.1.1). (b) Financial Data Schedule for Select Investors (EX-27.1.2). (c) Financial Data Schedule for Ultra Investors (EX-27.1.3). (d) Financial Data Schedule for Vista Investors (EX-27.1.4). (e) Financial Data Schedule for Giftrust Investors (EX-27.1.5). (f) Financial Data Schedule for U.S. Governments Short-Term (EX-27.5.6). (g) Financial Data Schedule for Cash Reserve (EX-27.4.7). (h) Financial Data Schedule for Long-Term Bond (EX-27.5.8). (i) Financial Data Schedule for Tax-Exempt Intermediate-Term (EX-27.5.9). (j) Financial Data Schedule for Tax-Exempt Long-Term (EX-27.5.10). (k) Financial Data Schedule for Heritage Investors (EX-27.1.11). (l) Financial Data Schedule for Balanced Investors (EX-27.7.12). (m) Financial Data Schedule for Tax-Exempt Short-Term (EX-27.5.13). (n) Financial Data Schedule for Limited-Term (EX-27.5.14). (o) Financial Data Schedule for Intermediate-Term (EX-27.5.15). (p) Financial Data Schedule for U.S. Governments Intermediate-Term (EX-27.5.16). ITEM 25. Persons Controlled by or Under Common Control with Registrant - None. ITEM 26. Mumber of Holders of Securities Title of Class Number of Record Holders as of December 31, 1995 Twentieth Century Growth Investors 325,254 Twentieth Century Select Investors 305,296 Twentieth Century Ultra Investors 840,365 Twentieth Century U.S. Governments Short Term 28,088 Twentieth Century Vista Investors 142,841 Twentieth Century Giftrust Investors 201,120 Twentieth Century Cash Reserve 124,940 Twentieth Century Long-Term Bond 13,318 Twentieth Century Tax-Exempt Short Term 1,376 Twentieth Century Tax-Exempt Intermediate Term 2,675 Twentieth Century Tax-Exempt Long Term 1,927 Twentieth Century Heritage Investors 98,036 Twentieth Century Balanced Investors 64,760 Twentieth Century Limited Term Bond 372 Twentieth Century Intermediate Term Bond 831 Twentieth Century U.S. Governments Intermediate Term 1,135 ITEM 27. Indemnification. The Corporation is a Maryland corporation. Section 2-418 of the General Corporation Law of Maryland allows a Maryland corporation to indemnify its directors, officers, employees and agents to the extent provided in such statute. Article Eighth of the Articles of Incorporation requires the indemnification of the corporation's directors and officers to the extent permitted by the General Corporation Law of Maryland, the Investment Company Act and all other applicable laws. The registrant has purchased an insurance policy insuring its officers and directors against certain liabilities which such officers and directors may incur while acting in such capacities and providing reimbursement to the registrant for sums which it may be permitted or required to pay to its officers and directors by way of indemnification against such liabilities, subject in either case to clauses respecting deductibility and participation. ITEM 28. Business and Other Connections of Investment Advisor. Investors Research Corporation, the investment advisor, is engaged in the business of managing investments for deferred compensation plans and other institutional investors. ITEM 29. Principal Underwriters - None. ITEM 30. Location of Accounts and Records. All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in the possession of Twentieth Century Investors, Inc., Twentieth Century Services, Inc. and Investors Research Corporation, all located at Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. ITEM 31. Management Services - None. ITEM 32. Undertakings a. Not Applicable. b. Not Applicable. c. Registrant hereby undertakes to furnish each person to whom a prospectus is delivered a copy of Registrant's latest annual report to shareholders, upon request and without charge. d. The Registrant hereby undertakes that it will, if requested to do so by the holders of at least 10% of the Registrant's outstanding shares, call a meeting of shareholders for the purpose of voting upon the question of the removal of a director and to assist in communication with other shareholders as required by Section 16(c). _________________________________________________________________ (1) Filed as an Exhibit to Post-Effective Amendment No. 67 on Form N-1A, File No. 2-14213. (2) Filed as an Exhibit to Post-Effective Amendment No. 71 on Form N-1A, File No. 2-14213. (3) Filed as an Exhibit to Post-Effective Amendment No. 46 on Form N-1A, File No. 2-14213. (4) Filed as an Exhibit to Post-Effective Amendment No. 53 on Form N-1A, File No. 2-14213. (5) Filed as an Exhibit to Post-Effective Amendment No. 49 on Form N-1A, File No. 2-14213. (6) Filed as an Exhibit to Post-Effective Amendment No. 72 on Form N-1A, File No. 2-14213. (7) Filed as Exhibits 8(c) and 8(e) to Pre-Effective Amendment No. 4 to the Registration Statement on Form N-1A of Twentieth Century Strategic Asset Allocations, Inc., Commission File No. 33-79482, filed February 5, 1996. (8) Filed as an Exhibit to Post-Effective Amendment No. 66 on Form N-1A, File No. 2-14213. (9) Filed on December 22, 1995. (10) Filed as Exhibits 14(a), 14(b), 14(c) and 14(d) to Pre-Effective Amendment No. 2 to the Registration Statement on Form N-1A of Twentieth Century World Investors, Inc., Commission File No. 33- 39242, filed May 6, 1991. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Twentieth Century Investors, Inc., the Registrant, certifies that it meets all the requirements for effectiveness of this Post-Effective Amendment No. 73 to its Registration Statement pursuant to Rule 485(b) promulgated under the Securities Act of 1933, as amended, and has duly caused this Post-Effective Amendment No. 73 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 29th day of February, 1996. Twentieth Century Investors, Inc. (Registrant) By: /s/ James E. Stowers III James E. Stowers III, President Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 73 has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date *James E. Stowers, Jr. Chairman, Director and February 29, 1996 James E. Stowers, Jr. Principal Executive Officer /s/ James E. Stowers III President and Director February 29, 1996 James E. Stowers III /s/ Robert T. Jackson Executive Vice President February 29, 1996 Robert T. Jackson and Principal Financial Officer *Maryanne Roepke Vice President, Treasurer and February 29, 1996 Maryanne Roepke Principal Accounting Officer *Thomas A. Brown Director February 29, 1996 Thomas A. Brown *Robert W. Doering, M.D. Director February 29, 1996 Robert W. Doering, M.D. *Linsley L. Lundgaard Director February 29, 1996 Linsley L. Lundgaard *Donald H. Pratt Director February 29, 1996 Donald H. Pratt *Lloyd T. Silver, Jr. Director February 29, 1996 Lloyd T. Silver, Jr. *M. Jeannine Strandjord Director February 29, 1996 M. Jeannine Strandjord *John M. Urie Director February 29, 1996 John M. Urie *By /s/ James E. Stowers III James E. Stowers III Attorney-in-Fact EX-99 2 EXHIBIT INDEX EXHIBIT INDEX EXHIBIT DESCRIPTION OF DOCUMENT NUMBER EX-99.B1a Articles of Incorporation of Twentieth Century Investors, Inc., dated July 2, 1990. EX-99.B1b Articles of Amendment of Twentieth Century Investors, Inc., dated November 20, 1990. EX-99.B1c Articles of Merger of Twentieth Century Investors, Inc., a Maryland corporation and Twentieth Century Investors, Inc., a Delaware corporation, dated February 22, 1991. EX-99.B1d Articles of Amendment of Twentieth Century Investors, Inc., dated August 11, 1993. EX-99.B1e Articles Supplementary of Twentieth Century Investors, Inc., dated September 3, 1993. EX-99.B1f Articles Supplementary of Twentieth Century Investors, Inc., dated April 28, 1995. EX-99.B1g Articles Supplementary of Twentieth Century Investors, dated November 17, 1995. EX-99.B1h Articles Supplementary of Twentieth Century Investors, Inc., dated January 30, 1996. EX-99.B2 Bylaws of Twentieth Century Investors, Inc. EX-99.B4 Specimen certificate representing shares of common stock of Twentieth Century Investors, Inc. (filed as Exhibit 4 to Post-Effective Amendment No. 67 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 31, 1991, and incorporated herein by reference). EX-99.B5 Investment Management Agreement, dated as of August 1, 1994, between Twentieth Century Investors, Inc. and Investors Research Corporation (filed as Exhibit 5 to Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A f the Registrant, Commission File No. 2-14213, filed on February 27, 1995, and incorporated herein by reference). EX-99.B8a Custodian Agreement, dated as of December 1, 1982, by and between Twentieth Century Investors, Inc. and United States Trust Company of New York (filed as Exhibit 8(a) to Post-Effective Amendment No. 46 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 31, 1982, and incorporated herein by reference). EX-99.B8b Letter Agreement re Remuneration dated May 8, 1985 (filed as Exhibit 8(b) to Post-Effective Amendment No. 51 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 31, 1985, and incorporated herein by reference). EX-99.B8c Letter Agreement between Twentieth Century Investors, Inc. and United States Trust Company of New York, dated February 28, 1991 (filed as Exhibit 8(c) to Post-Effective Amendment No. 67 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 31, 1991, and incorporated herein by reference). EX-99.B8d Custodian Agreement between Twentieth Century Investors, Inc. and First National Bank of Kansas City (filed as Exhibit 8(d) to Post-Effective Amendment No. 49 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 30, 1993, and incorporated herein by reference). EX-99.B8e Letter Agreement between Twentieth Century Investors, Inc. and Boatmen's First National Bank of Kansas City (filed as Exhibit 8(e) to Post-Effective Amendment No. 67 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 31, 1991, and incorporated herein by reference). EX-99.B8f Custodian Agreement for ACH transactions, dated September 21, 1994 between Twentieth Century Investors, Inc. and United Missouri Bank of Kansas City, N.A. (filed as Exhibit 8(f) to Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on February 27, 1995, and incorporated herein by reference). EX-99.B8g Custody Agreement dated September 12, 1995, between United Missouri Bank of Kansas City, N.A., Investors Research Corporation, Twentieth Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc. and Twentieth Century Capital Portfolios, Inc. (filed as Exhibit 8(e) to Pre-Effective Amendment No. 4 to the Registration Statement on Form N-1A of Twentieth Century Strategic Asset Allocations, Inc., Commission File No. 33-79482, filed February 5, 1996). EX-99.B8h Amendment No. 1 to Custody Agreement dated January 25, 1996, between United Missouri Bank of Kansas City, N.A., Investors Research Corporation, Twentieth Century Investors, Inc., Twentieth Century World Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic Asset Allocations, Inc. (filed as Exhibit 8(e) to Pre-Effective Amendment No. 4 to the Registration Statement on Form N-1A of Twentieth Century Strategic Asset Allocations, Inc., Commission File No. 33-79482, filed February 5, 1996). EX-99.B9 Transfer Agency Agreement dated as of March 1, 1991, by and between Twentieth Century Investors, Inc. and Twentieth Century Services, Inc. (filed as Exhibit 9 to Post-Effective Amendment No. 66 to the Registration Statement on Form N-1A of the Registrant, Commission File No. 2-14213, filed on December 31, 1990, and incorporated herein by reference). EX-99.B10 Opinion and Consent of Patrick A. Looby, Esq. EX-99.B11 Consent of Baird, Kurtz & Dobson. EX-99.B12 Equity Funds Annual Report and Fixed Income Funds Annual Reports of Twentieth Century Investors, Inc. for the year ended October 31, 1995, filed on December 22, 1995, and incorporated herein by reference. EX-99.B14 Model Retirement Plans (filed as Exhibits 14(a), 14(b), 14(c) and 14(d) to Pre-Effective Amendment No. 2 to the Registration Statement on Form N-1A of Twentieth Century World Investors, Inc., Commission File No. 33-39242, filed May 6, 1991, and incorporated herein by reference). EX-99.B16 Schedules for Computations of Advertising Performance Quotations. EX-99.B17 Power of Attorney. EX-27.1.1 Financial Data Schedule for Growth Investors EX-27.1.2 Financial Data Schedule for Select Investors EX-27.1.3 Financial Data Schedule for Ultra Investors EX-27.1.4 Financial Data Schedule for Vista Investors EX-27.1.5 Financial Data Schedule for Giftrust Investors EX-27.5.6 Financial Data Schedule for U.S. Governments Short-Term EX-27.4.7 Financial Data Schedule for Cash Reserve EX-27.5.8 Financial Data Schedule for Long-Term Bond EX-27.5.9 Financial Data Schedule for Tax-Exempt Intermediate-Term EX-27.5.10 Financial Data Schedule for Tax-Exempt Long-Term EX-27.1.11 Financial Data Schedule for Heritage Investors EX-27.7.12 Financial Data Schedule for Balanced Investors EX-27.5.13 Financial Data Schedule for Tax-Exempt Short-Term EX-27.5.14 Financial Data Schedule for Limited-Term EX-27.5.15 Financial Data Schedule for Intermediate-Term EX-27.5.16 Financial Data Schedule for U.S. Governments Intermediate-Term EX-99.B1A 3 ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION OF TWENTIETH CENTURY FUNDS, INC. FIRST: I, the undersigned, William M. Lyons, whose post office address is 4500 Main Street, P.O. Box 418210, Kansas City, Missouri 64141-9210, being at least 18 years of age, do, under and by virtue of the general laws of the State of Maryland, execute and acknowledge these Articles of Incorporation as incorporator with the intention of forming a corporation. SECOND: The name of the Corporation is Twentieth Century Funds, Inc. THIRD: The purposes for which the Corporation is formed are: 1. To carry on the business of an investment company. 2. To engage in any or all lawful business for which corporations may be organized under the Maryland General Corporation Law except insofar as such business may be limited by the Investment Company Act of 1940 as from time to time amended, or by any other law of the United States regulating investment companies, or by limitations imposed by the laws of the several states wherein the corporation offers its shares. FOURTH: The name of the resident agent of the Corporation in this state is The Corporation Trust Company, a corporation of this state, and the post office address of the resident agent is 32 South Street, Baltimore, Maryland 21202. The current address of the principal office of the Corporation in the State of Maryland is c/o The Corporation Trust Company, 32 South Street, Baltimore, Maryland 21202. FIFTH: 1. The total number of shares of stock which the Corporation shall have authority to issue is One Billion One Hundred Million (1,100,000,000) shares of a par value of one cent ($0.01) each, and an aggregate value of 11 Million Dollars ($11,000,000). All such shares are herein classified as "Common Stock" subject, however, to the authority herein granted to the Board of Directors to divide such shares into such classes and series as the Board of Directors may from time to time determine. The Board of Directors shall have the power to fix the number of shares in each such class or series and to fix such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption thereof as are not stated in these Articles of Incorporation. 2. The preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption thereof shall be as follows: (a) The holder of each share of stock of the Corporation shall be entitled to one vote for each share of stock, and to a fractional vote for each fractional share, irrespective of the class or series, then standing in his name on the books of the Corporation; provided, however, that (1) matters affecting only one class or series shall be voted upon only by that class or series, and (2) where required by the Investment Company Act of 1940 or the regulations adopted thereunder or any other applicable law, certain matters shall be voted on separately by each class or series of shares affected. (b) All payments received by the Corporation for the sale of stock of each class or series and the investment and reinvestment thereof and the income, earnings and profits thereon shall belong to the class or series of shares with respect to which such payments were received, and are herein referred to as "assets belonging to" such class or series. Any assets which are not readily identifiable as belonging to any particular class or series shall be allocated to any one or more of any class or series in such manner as the Board of Directors in its sole discretion deems fair and equitable. (c) The assets belonging to each class or series shall be charged with the liabilities of the Corporation in respect of that class or series, and any liabilities of the Corporation that are not readily identifiable as belonging to any particular class or series shall be allocated to any one or more of any class or series as the Board of Directors in its sole discretion deems fair and equitable. (d) The holders of the outstanding shares of each class or series of capital stock of the Corporation shall be entitled to receive dividends from ordinary income and distributions from capital gains of the assets belonging to such class or series in such amounts, if any, and payable in such manner, as the Board of Directors may from time to time determine. Such dividends and distributions may be declared and paid by means of a formula or other method of determination at meetings held less frequently than the declaration and payment of such dividends and distributions. (e) In the event of the liquidation or dissolution of the Corporation or of any class or series thereof, shareholders of each class or series shall be entitled to receive the assets belonging to such class or series to be distributed among them in proportion to the number of shares of such class or series held by them. (f) Each holder of any class or series of stock of the Corporation, upon proper documentation and the payment of all taxes in connection therewith, may require the Corporation to redeem or repurchase such stock at the net asset value thereof, less a redemption charge or discount determined by the Board of Directors. Payment shall be made in cash or in kind as determined by the Corporation. (g) Each holder of any class or series of stock of the Corporation may, upon proper documentation and the payment of all taxes in connection therewith, convert the shares represented thereby into shares of stock of any other class or series of the Corporation on the basis of their relative net asset values less a conversion charge or discount determined by the Board of Directors, provided, however, that the Board of Directors may abolish, limit or suspend such right of conversion. (h) The Corporation may cause the shares of any stockholder to be redeemed whenever the number of shares owned by such stockholder or their dollar value is below the minimum fixed by the Board of Directors. SIXTH: The number of directors of the Corporation shall be 7, which number may be changed in accordance with the by-laws of the Corporation but shall never by less than 3. The names of the directors who shall act until the first annual meeting and until their successors are elected and qualify are: Thomas A. Brown Robert W. Doering, M.D. Linsley L. Lundgaard Lloyd T. Silver James E. Stowers, Jr. James E. Stowers III John M. Urie SEVENTH: The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation, its directors and stockholders: 1. The Board of Directors has exclusive authority to make, amend, and repeal the By-laws of the Corporation. 2. The Board of Directors is authorized to increase or decrease the aggregate number of shares which the Corporation has authority to issue. 3. The Board of Directors is authorized to increase or decrease the number of shares of any series or class, and to classify and reclassify any unissued stock into classes and series within classes that may be established and designated from time to time and to set or change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of stock, of any class or series, which are not stated in these Articles of Incorporation. 4. No holder of shares of stock of any class or series shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class or series or of securities convertible into shares of stock of any class or series, whether now or hereafter authorized or whether issued for money, for a consideration other than money, or by way of dividend. 5. Notwithstanding any provisions of law requiring a greater proportion than a majority of the votes of all classes or series or of any class or series of stock entitled to be cast to take or authorize any action, the Corporation may take or authorize such action upon the concurrence of a majority of the aggregate number of the votes entitled to be cast thereon. 6. The Corporation reserves the right from time to time to make any amendments of its charter, now or hereafter authorized by law, including any amendment which alters the contract rights, as expressly set forth in its charter, or any outstanding stock. 7. The Corporation is not required to hold an annual meeting in any year in which the election of directors is not required to be acted upon under the Investment Company Act of 1940. EIGHTH: The Corporation shall indemnify to the full extent permitted by law each person who has served at any time as director or officer of the Corporation, and his heirs, administrators, successors and assigns, against any and all reasonable expenses, including counsel fees, amounts paid upon judgments, and amounts paid in settlement (before or after suit is commenced) actually incurred by such person in connection with the defense or settlement of any claim, action, suit or proceeding in which he is made a party, or which may be asserted against him, by reason of being or having been a director or officer of the corporation. Such indemnification shall be in addition to any other rights to which such person may be entitled under any law, bylaw, agreement, vote of stockholders, or otherwise. Notwithstanding the foregoing, no officer or director of the Corporation shall be indemnified against any liability, whether or not there is an adjudication of liability, arising by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of duties within the meaning of Section 17 (and the interpretations thereunder) of the Investment Company Act of 1940. Any determination to indemnify under this Article Eight shall be made by "reasonable and fair means" within the meaning of Section 17 and shall otherwise comply with the Act and interpretations thereunder. NINTH: All of the provisions of these Articles of Incorporation are subject to, and shall be effective only in compliance with, the Investment Company Act of 1940, all other applicable laws of the United States, the applicable laws of the several states and the applicable rules and regulations of administrative agencies having jurisdiction, as such laws, rules and regulations may from time to time be amended. IN WITNESS WHEREOF, the undersigned, who executed the foregoing Articles of Incorporation, hereby acknowledges the same to be his act and states, that to the best of his knowledge, information and belief, the matters and facts therein are true in all material respects, and that this statement is made under penalties of perjury. Dated this 26th day of June, 1990. /s/ William M. Lyons EX-99.B1B 4 ARTICLES OF AMENDMENT ARTICLES OF AMENDMENT OF TWENTIETH CENTURY FUNDS, INC. The undersigned, William M. Lyons, in accordance with the Maryland General Corporation Law, does hereby certify that: 1. He is duly appointed Vice President of Twentieth Century Funds, Inc., a Maryland corporation (the "Corporation"). 2. The amendment to the Articles of Incorporation of the Corporation, which was unanimously approved by resolution of the Board of Directors of the Corporation at a meeting held on November 17, 1990, is as follows: The Articles of Incorporation of the Corporation be amended by deleting all of the present Article SECOND and inserting in lieu thereof the following Article SECOND: SECOND: The name of the Corporation is Twentieth Century Investors, Inc. 3. No stock entitled to be voted on the amendment was outstanding or subscribed for at the time of the approval of such amendment by the Board of Directors. IN WITNESS WHEREOF, the undersigned hereby acknowledges that this Articles of Amendment is the act of the Corporation and states, that to the best of his knowledge, information and belief, the matters and fact stated therein are true in all material respects, and that this statement is made under penalties of perjury. Dated this 19th day of November, 1990. /s/ William M. Lyons William M. Lyons Vice President Witness: /s/ John H. Hartenbach John H. Hartenbach Secretary EX-99.B1C 5 ARTICLES OF MERGER ARTICLES OF MERGER OF TWENTIETH CENTURY INVESTORS, INC. A MARYLAND CORPORATION, AND TWENTIETH CENTURY INVESTORS, INC., A DELAWARE CORPORATION Twentieth Century Investors, Inc., a Maryland corporation, and Twentieth Century Investors, Inc., a Delaware corporation, do hereby enter into and execute these Articles of Merger. (1) Each party to these Articles, namely Twentieth Century Investors, Inc., a Maryland corporation, and Twentieth Century Investors, Inc., a Delaware corporation, agrees to merge. (2) Twentieth Century Investors, Inc., a Maryland corporation, is incorporated in the state of Maryland. Twentieth Century Investors, Inc., a Delaware corporation, is incorporated in the state of Delaware. The successor corporation in the merger shall be Twentieth Century Investors, Inc., a Maryland corporation. (3) Twentieth Century Investors, Inc., a Delaware corporation, was incorporated on December 30, 1957 under general law. It is not registered or qualified to do business in the state of Maryland. (4) Twentieth Century Investors, Inc., a Maryland corporation, has its principal office in the city of Baltimore, Maryland. Twentieth Century Investors, Inc., a Delaware corporation, has no office in the state of Maryland. Neither of the parties to the merger owns an interest in land in any county in the state of Maryland. (5) The terms and conditions of the transaction set forth in these Articles were advised, authorized and approved by each corporation party to the Articles in the manner and by the vote required by its charter and the laws of the place where it is organized in the following manner: On November 17, 1990, the Board of Directors of Twentieth Century Investors, Inc., a Maryland corporation, adopted a resolution declaring the merger to be advisable on substantially the terms and conditions referred to in the resolution and directed that the proposed transaction be submitted for consideration at a special meeting of the stockholders. At a special meeting of the stockholders on February 11, 1991, the merger was approved by the stockholders by the unanimous vote of the votes entitled to be cast on the matter. The Agreement and Plan of Merger was approved by Unanimous Written Consent of the Board of Directors of Twentieth Century Investors, Inc., a Delaware corporation, on June 1, 1990, and was submitted to the stockholders of the corporation on July 27, 1990, and a majority of the stock entitled to vote thereon voted for the adoption of the agreement. (7) The total number of shares of all classes of stock which Twentieth Century Investors, Inc., a Maryland corporation, has authority to issue is one billion one hundred million (1,100,000,000) shares of common stock of the par value of one cent ($0.01) per share with an aggregate par value of eleven million dollars ($11,000,000). (8) The total number of shares of stock of all classes which Twentieth Century Investors, Inc., a Delaware corporation, has authority to issue is one billion one hundred million (1,100,000,000) shares of common stock of the par value of one dollar ($1.00) per share and an aggregate par value of all shares of all classes of one billion one hundred million dollars ($1,100,000,000). (9) The manner and basis of converting or exchanging the issued stock of Twentieth Century Investors, Inc., a Delaware corporation, and Twentieth Century Investors, Inc., a Maryland corporation, is that each full and fractional share of common stock of Twentieth Century Investors, Inc., a Delaware corporation, shall be converted into an equal number of full and fractional shares of the corresponding series of common stock of Twentieth Century Investors, Inc., a Maryland corporation, on the effective date of the merger. (10) The effective date of the merger shall be February 28, 1991. IN WITNESS WHEREOF, each corporation party to these Articles has executed these Articles on February 20, 1991. Twentieth Century Investors, Inc., a Delaware corporation By: /s/ James E. Stowers James E. Stowers, President Attest: /s/ John Hartenbach John H. Hartenbach, Secretary Twentieth Century Investors, Inc. a Maryland corporation By: /s/ James E. Stowers James E. Stowers, President Attest: /s/ John Hartenbach John H. Hartenbach, Secretary State of Missouri ) ) ss County of Jackson ) On this 20th day of February, 1991, before me, a notary public appeared James E. Stowers, President of Twentieth Century Investors, Inc., a Delaware corporation, and acknowledged that he executed the foregoing Articles as his free act and deed and as the free act and deed of the corporation and that, to the best of his knowledge, information and belief the matters and facts set forth in the document are true in all material respects, and that this statement is made under the penalties for perjury. /s/ Deborah J. McMullin Notary Public Notary Public-State of Missouri Commissioned in Clay County My Commission Expires July 31, 1992 State of Missouri ) ) ss County of Jackson ) On this 20th day of February, 1990, before me, a notary public appeared James E. Stowers, President of Twentieth Century Investors, Inc., a Maryland corporation, and acknowledged that he executed the foregoing Articles as his free act and deed and as the free act and deed of the corporation and that, to the best of his knowledge, information and belief the matters and facts set forth in the document are true in all material respects, and that this statement is made under the penalties for perjury. /s/ Deborah J. McMullin Notary Public Notary Public-State of Missouri Commissioned in Clay County My Commission Expires July 31, 1992 EX-99.B1D 6 ARTICLES OF AMENDMENT ARTICLES OF AMENDMENT OF TWENTIETH CENTURY INVESTORS, INC. The undersigned, John H. Hartenbach, does hereby certify that: 1. He is the duly elected Vice-President of Twentieth Century Investors, Inc., a Maryland corporation (the "Corporation"). 2. The amendment to the Articles of Incorporation of the Corporation set forth below, by resolution unanimously adopted by the Board of Directors of the Corporation at a meeting held on May 8, 1993, was deemed advisable and directed to be presented for a vote of the stockholders of the corporation. The stockholders of the corporation, at a meeting held on July 28, 1993, approved the adoption of the amendment as required by the general Corporation Law of the State of Maryland and the corporation's Articles of Incorporation. 3. The amendment of the Articles of Incorporation proposed by the Board of Directors and adopted by the stockholders of the Corporation is as follows: RESOLVED, that the articles of Incorporation of Twentieth Century Investors, Inc., a Maryland corporation, be, and they hereby are, amended by deleting all of paragraph 2(a) of the present Article FIFTH thereof, and by inserting in lieu thereof the following new paragraph 2(a) of Articles FIFTH, providing in its entirety as follows (all remaining paragraphs of Article FIFTH being unchanged hereby): FIFTH. 2. The preferences, conversion or other rights, voting powers, restrictions, limitation as to dividends, qualifications and terms or conditions of redemption thereof shall be as follows: (a) Holders of shares of stock of the Corporation shall be entitled to one vote for each dollar, and a fractional vote for each fraction of a dollar, of net asset value per share for each share of stock held, irrespective of the class or series; provided, however, that (1) matters affecting only one class or series shall be voted upon only by that class or series, and (2) where required by the Investment Company Act of 1940 or the regulations adopted thereunder or any other applicable law, certain matters shall be voted on separately by each class or series of shares affected. IN WITNESS WHEREOF, the undersigned hereby acknowledges that this Articles of Amendment is that act of Twentieth Century Investors, Inc. and states, that to the best of his knowledge, information and belief, the matters and fact stated therein are true in all material respects, and that this statement is made under penalties of perjury. Dated this 10th day of August, 1993. /s/ John Hartenbach John H. Hartenbach Vice President Witness: /s/ Patrick A. Looby Patrick A. Looby Assistant Secretary EX-99.B1E 7 ARTICLES SUPPLEMENTARY ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC. Twentieth Century Investors, Inc., ("Twentieth Century"), a Maryland corporation, hereby states: 1. Twentieth Century is registered as an open-end investment company under the Investment Company Act of 1940. 2. On July 29, 1993, the Board of Directors, acting pursuant to the authority of Section 2-105(c) of the Maryland General Corporation Law, increased the total number of shares of capital stock that Twentieth Century has authority to issue. 3. Immediately prior to the increase Twentieth Century had authority to issue one billion one hundred million (1,100,000,000) shares of capital stock. Following the increase, Twentieth Century has the authority to issue eleven billion one hundred million (11,100,000,000) shares of capital stock. 4. Both immediately prior to and after the increase, all shares authorized were and are classified as capital stock. 5. The par value of shares of Twentieth Century's capital stock before the increase was and after the increase is $0.01 per share. 6. Immediately prior to the increase, the aggregate par value of all shares of stock that Twentieth Century was authorized to issue was $11,000,000. After giving effect to the increase, the aggregate par value of all shares of stock that Twentieth Century is authorized to issue is $111,000,000. IN WITNESS WHEREOF, the undersigned, William M. Lyons, Executive Vice President of Twentieth Century, acknowledges that these Articles Supplementary are the act of Twentieth Century, and states that, to the best of his knowledge, information and belief, the matters and facts stated herein are true in all material respects, and that this statement is made under penalties of perjury. Dated this 2nd day of September, 1993. /s/ William M. Lyons William M. Lyons Executive Vice President Witness /s/ John Hartenbach John H. Hartenbach Secretary EX-99.B1F 8 ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC. ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC., a Maryland corporation whose principal Maryland office is located in Baltimore, Maryland (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article SEVENTH of the Charter of the Corporation, the Board of Directors of the Corporation has duly established sixteen (16) different series for the Corporation's stock (each hereinafter referred to as a "Series") and allocated Three Billion Four Hundred Eighty Six Million (3,486,000,000) shares of the Eleven Billion One Hundred Million (11,100,000,000) shares of authorized capital stock of the Corporation, par value One Cent ($.01) per share for an aggregate par value of One Hundred Eleven Million Dollars ($111,000,000), among such Series as follows:
Series Number of Shares Aggregate Par Value Growth Investors 230,000,000 $2,300,000 Select Investors 150,000,000 1,500,000 Ultra Investors 600,000,000 6,000,000 Vista Investors 110,000,000 1,100,000 Heritage Investors 120,000,000 1,200,000 Giftrust Investors 20,000,000 200,000 Balanced Investors 60,000,000 600,000 Cash Reserve 2,000,000,000 20,000,000 U.S. Governments Short-Term 60,000,000 600,000 Long-Term Bond 21,000,000 210,000 Tax-Exempt Intermediate-Term 14,000,000 140,000 Tax-Exempt Long-Term 11,000,000 110,000 Tax-Exempt Short-Term 30,000,000 300,000 U.S. Governments Intermediate-Term 20,000,000 200,000 Limited Term Bond 20,000,000 200,000 Intermediate-Term Bond 20,000,000 200,000
The par value of each share of stock in each Series is One Cent ($0.01) per share. SECOND: Except as otherwise provided by the express provisions of these Articles Supplementary, nothing herein shall limit, by inference or otherwise, the discretionary right of the Board of Directors to serialize, classify or reclassify and issue any unissued shares of any Series or any unissued shares that have not been allocated to a Series, and to fix or alter all terms thereof, to the full extent provided by the Charter of the Corporation. THIRD: A description of the Series, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption is set forth in the Charter of the Corporation and is not changed by these Articles Supplementary, except with respect to the creation of the various Series. FOURTH: The Board of Directors of the Corporation duly adopted resolutions dividing into Series the authorized capital stock of the Corporation and allocating shares to each Series as set forth in these Articles Supplementary. IN WITNESS WHEREOF, TWENTIETH CENTURY INVESTORS, INC. has caused these Articles Supplementary to be signed and acknowledged in its name and on its behalf by its Vice President and its corporate seal to be hereunto affixed and attested to by its Secretary on this 24th day of April, 1995. ATTEST: TWENTIETH CENTURY INVESTORS, INC. /s/ William M. Lyons By: /s/ Patrick A. Looby Name: William M. Lyons Name: Patrick A. Looby Title: Secretary Title: Vice President THE UNDERSIGNED Vice President of TWENTIETH CENTURY INVESTORS, INC., who executed on behalf of said Corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name of and on behalf of said Corporation, the foregoing Articles Supplementary to the Charter to be the corporate act of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects under the penalties of perjury. Dated: April 24, 1995 /s/ Patrick A. Looby Patrick A. Looby, Vice President EX-99.B1G 9 ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC. ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC., a Maryland corporation whose principal Maryland office is located in Baltimore, Maryland (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Corporation is registered as an open-end company under the Investment Company Act of 1940. SECOND: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article SEVENTH of the Charter of the Corporation, the Board of Directors of the Corporation has duly established sixteen (16) different series for the Corporation's stock (each hereinafter referred to as a "Series") and allocated Three Billion Five Hundred Fifty Six Million (3,556,000,000) shares of the Eleven Billion One Hundred Million (11,100,000,000) shares of authorized capital stock of the Corporation, par value One Cent ($.01) per share for an aggregate par value of One Hundred Eleven Million Dollars ($111,000,000), among such Series as follows:
Number Number of Shares of Shares Aggregate Series Before Increase As Increased Par Value Growth Investors 230,000,000 230,000,000 $2,300,000 Select Investors 150,000,000 150,000,000 1,500,000 Ultra Investors 600,000,000 600,000,000 6,000,000 Vista Investors 110,000,000 160,000,000 1,600,000 Heritage Investors 120,000,000 120,000,000 1,200,000 Giftrust Investors 20,000,000 40,000,000 400,000 Balanced Investors 60,000,000 60,000,000 600,000 Cash Reserve 2,000,000,000 2,000,000,000 20,000,000 U.S. Governments Short-Term 60,000,000 60,000,000 600,000 Long-Term Bond 21,000,000 21,000,000 210,000 Tax-Exempt Intermediate-Term 14,000,000 14,000,000 140,000 Tax-Exempt Long-Term 11,000,000 11,000,000 110,000 Tax-Exempt Short-Term 30,000,000 30,000,000 300,000 U.S. Governments Intermediate-Term 20,000,000 20,000,000 200,000 Limited Term Bond 20,000,000 20,000,000 200,000 Intermediate-Term Bond 20,000,000 20,000,000 200,000
The par value of each share of stock in each Series is One Cent ($0.01) per share. THIRD: Except as otherwise provided by the express provisions of these Articles Supplementary, nothing herein shall limit, by inference or otherwise, the discretionary right of the Board of Directors to serialize, classify or reclassify and issue any unissued shares of any Series or any unissued shares that have not been allocated to a Series, and to fix or alter all terms thereof, to the full extent provided by the Charter of the Corporation. FOURTH: A description of the Series, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption is set forth in the Charter of the Corporation and is not changed by these Articles Supplementary. FIFTH: The Board of Directors of the Corporation duly adopted resolutions dividing into Series the authorized capital stock of the Corporation and allocating shares to each Series as set forth in these Articles Supplementary. IN WITNESS WHEREOF, TWENTIETH CENTURY INVESTORS, INC. has caused these Articles Supplementary to be signed and acknowledged in its name and on its behalf by its Vice President and its corporate seal to be hereunto affixed and attested to by its Secretary on this 11th day of October, 1995. ATTEST: TWENTIETH CENTURY INVESTORS, INC. /s/ William M. Lyons By: /s/ Patrick A. Looby Name: William M. Lyons Name: Patrick A. Looby Title: Secretary Title: Vice President THE UNDERSIGNED Vice President of TWENTIETH CENTURY INVESTORS, INC., who executed on behalf of said Corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name of and on behalf of said Corporation, the foregoing Articles Supplementary to the Charter to be the corporate act of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects under the penalties of perjury. Dated: October 11, 1995 /s/ Patrick A. Looby Patrick A. Looby Vice President EX-99.B1H 10 ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC. ARTICLES SUPPLEMENTARY TWENTIETH CENTURY INVESTORS, INC., a Maryland corporation whose principal Maryland office is located in Baltimore, Maryland (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Corporation is registered as an open-end company under the Investment Company Act of 1940. SECOND: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article SEVENTH of the Charter of the Corporation, the Board of Directors of the Corporation has duly established sixteen (16) different series for the Corporation's stock (each hereinafter referred to as a "Series") and allocated Three Billion Six Hundred Twenty-Six Million (3,626,000,000) shares of the Eleven Billion One Hundred Million (11,100,000,000) shares of authorized capital stock of the Corporation, par value One Cent ($.01) per share, for an aggregate par value of One Hundred Eleven Million Dollars ($111,000,000), among such Series as follows:
Number Number of Shares of Shares Aggregate Series Before Increase As Increased Par Value Growth Investors 230,000,000 300,000,000 $3,000,000 Select Investors 150,000,000 150,000,000 1,500,000 Ultra Investors 600,000,000 600,000,000 6,000,000 Vista Investors 110,000,000 160,000,000 1,600,000 Heritage Investors 120,000,000 120,000,000 1,200,000 Giftrust Investors 20,000,000 40,000,000 400,000 Balanced Investors 60,000,000 60,000,000 600,000 Cash Reserve 2,000,000,000 2,000,000,000 20,000,000 U.S. Governments Short-Term 60,000,000 60,000,000 600,000 Long-Term Bond 21,000,000 21,000,000 210,000 Tax-Exempt Intermediate-Term 14,000,000 14,000,000 140,000 Tax-Exempt Long-Term 11,000,000 11,000,000 110,000 Tax-Exempt Short-Term 30,000,000 30,000,000 300,000 U.S. Governments Intermediate-Term 20,000,000 20,000,000 200,000 Limited Term Bond 20,000,000 20,000,000 200,000 Intermediate-Term Bond 20,000,000 20,000,000 200,000
The par value of each share of stock in each Series is One Cent ($0.01) per share. THIRD: Except as otherwise provided by the express provisions of these Articles Supplementary, nothing herein shall limit, by inference or otherwise, the discretionary right of the Board of Directors to serialize, classify or reclassify and issue any unissued shares of any Series or any unissued shares that have not been allocated to a Series, and to fix or alter all terms thereof, to the full extent provided by the Charter of the Corporation. FOURTH: A description of the Series, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption is set forth in the Charter of the Corporation and is not changed by these Articles Supplementary. FIFTH: The Board of Directors of the Corporation duly adopted resolutions dividing into Series the authorized capital stock of the Corporation and allocating shares to each Series as set forth in these Articles Supplementary. IN WITNESS WHEREOF, TWENTIETH CENTURY INVESTORS, INC. has caused these Articles Supplementary to be signed and acknowledged in its name and on its behalf by its Vice President and its corporate seal to be hereunto affixed and attested to by its Secretary as of the 18th day of November, 1995. ATTEST: TWENTIETH CENTURY INVESTORS, INC. /s/ William M. Lyons By: /s/ Patrick A. Looby Name: William M. Lyons Name: Patrick A. Looby Title: Secretary Title: Vice President THE UNDERSIGNED Vice President of TWENTIETH CENTURY INVESTORS, INC., who executed on behalf of said Corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges, in the name of and on behalf of said Corporation, the foregoing Articles Supplementary to the Charter to be the corporate act of said Corporation, and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects under the penalties of perjury. Dated: January 22, 1996 /s/ Patrick A. Looby Patrick A. Looby Vice President EX-99.B2 11 BYLAWS TWENTIETH CENTURY INVESTORS, INC. BY-LAWS OFFICES Section 1. The registered office shall be in the City of Baltimore, State of Maryland. Section 2. The Corporation may also have offices at such other places both within and without the State of Maryland as the Board of Directors may from time to time determine or the business of the Corporation may require. MEETINGS OF STOCKHOLDERS Section 3. Meetings of the stockholders shall be held at the office of the Corporation in Kansas City, Missouri or at any other place within the United States as shall be designated from time to time by the Board of Directors and stated in the notice of meeting. Section 4. The Corporation shall not be required to hold an annual meeting of its stockholders in any year in which the election of Directors is not required by the Investment Company Act of 1940, as amended (the "Investment Company Act"), to be acted upon by the holders of any class or series of stock of the Corporation. The use of the term "annual meeting," wherever found in these By-laws, shall not be construed to imply a requirement that a stockholder meeting be held annually. In the event that the Corporation shall be required by the Investment Company Act to hold an annual meeting of stockholders to elect Directors, such meeting shall be held at a date and time set by the Board of Directors in accordance with the Investment Company Act (but in no event later than 120 days after the occurrence of the event requiring the election of Directors). Any annual meeting that is not required by the Investment Company Act shall be held on a date and time during the month of July set by the Board of Directors. At any annual meeting, the stockholders shall elect a Board of Directors and may transact any business within the powers of the Corporation. Any business of the Corporation may be transacted at an annual meeting without being specially designated in the notice, except such business as is specifically required by statute to be stated in the notice. Section 5. The presence at any stockholders meeting, in person or by proxy, of stockholders entitled to cast one third of the votes entitled to vote thereat shall constitute a quaorum for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws. Where the approval of any particular item of business to come before a meeting requires the approval of one or more than one class or series of stock, voting separately, the holders of one third of the votes of each of such classes or series entitled to vote must be present to constitute a quorum for the transaction of such item of business. If, however, a quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 90 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat. Section 6. When a quorum is present at any meeting, a majority of all the votes cast is sufficient to approve any matter which properly comes before the meeting, unless a different vote for such matter is specified by law, by the Articles of Incorporation or by these By-laws, in which case such different specified vote shall be required to approve such matter. Section 7. Special meetings of the stockholders may be called at any time by the Board of Directors, or by the Chairman of the Board, the President, a Vice President, the Secretary or an Assistant Secretary. Section 8. Special meetings of the stockholders shall be called by the Secretary upon written request of stockholders entitled to cast at least 25 percent of all the votes entitled to be cast at such meeting. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. After verification of the sufficiency of such request, the Secretary shall then inform the requesting stockholders of the reasonably estimated cost of preparing and mailing such notice of the meeting. Upon payment to the Corporation of such costs the Secretary shall give notice stating the purpose or purposes of the meeting to all stockholders entitled to notice of such meeting; provided, however, unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, no special meeting need be called to consider any matter which is substantially the same as a matter voted upon at any special meeting of the stockholders held during the preceding 12 months. Section 9. Not less than ten nor more than 90 days before the date of every stockholders' meeting, the Secretary shall give to each stockholder entitled to vote at such meeting, and to each stockholder not entitled to vote who is entitled by statute to notice, written or printed notice stating (i) the time and place of the meeting and, (ii) the purpose or purposes for which the meeting is called if the meeting is a special meeting, or if notice of the purpose of the meeting is required by statute to be given. Such notice shall be given either by mail or by presenting it to the stockholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid. Section 10. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice of the meeting. Section 11. At all meetings of stockholders, a stockholder may vote the shares owned of record by him on the record date (determined in accordance with Section 39 hereof) for each such stockholders' meeting either in person or by written proxy signed by the stockholder or by his duly authorized attorney-in-fact. No proxy shall be valid after 11 months from its date, unless otherwise provided in the proxy. At all meetings of stockholders, unless the voting is conducted by inspectors, all questions relating to the qualifications of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. DIRECTORS Section 12. The number of Directors of the Corporation shall be seven. By vote of a majority of the entire Board of Directors, the number of Directors fixed by the Articles of Incorporation or by these By-laws may be increased or decreased from time to time to a number not exceeding 15 nor less than three, but the tenure of office of a Director shall not be affected by any decrease in the number of Directors so made by the Board. Until the first annual meeting of stockholders or until successors are duly elected and qualify, the Board shall consist of the persons named as such in the Articles of Incorporation. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect Directors to hold office until the next annual meeting or until their successors are elected and qualify, a plurality of all the votes cast at an annual meeting at which a quorum is present shall be required to elect Directors of the Corporation. Each Director, upon his election, shall qualify by accepting the Office of Director, and his attendance at, or his written approval of the minutes of, any meeting of the newly-elected directors shall constitute his acceptance of such office, or he may execute such acceptance by a separate writing, which shall be placed in the minute book. Directors need not be stockholders of the Corporation. Section 13. The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all the powers of the Corporation, except such as are by law and by the Articles of Incorporation or by these By-laws conferred upon or reserved to the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 14. Meetings of the Board of Directors, regular or special, may be held at any place in or out of the State of Maryland as the Board may from time to time determine. Section 15. The first meeting of each newly-elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting, and no notice of such meeting shall be necessary to the newly-elected Directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly-elected Board of Directors, or if such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the Directors. Section 16. Regular meetings of the Board of Directors may be held at such time and place as shall from time to time be fixed by resolution adopted by the full Board of Directors. Adoption of such resolution shall constitute notice of all meetings held pursuant thereto. Section 17. Special meetings of the Board of Directors may be called at any time by the Board of Directors or the Executive Committee, if one be constituted, by vote at a meeting, or by the Chairman of the Board, the President or by a majority of the Directors or a majority of the members of the Executive Committee in writing with or without a meeting. Special meetings may be held at such place or places within or without Maryland as may be designated from time to time by the Board of Directors; in the absence of such designation, such meetings shall be held at such places as may be designated in the call. Section 18. Notice of the place and time of every special meeting of the Board of Directors shall be served on each Director or sent to him by telegraph, or by leaving the same at his residence or usual place of business at least three days before the date of the meeting, or by mail at least seven days before the date of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the Director at his address as it appears on the records of the Corporation, with postage thereon prepaid. Section 19. At all meetings of the Board a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the action of a majority of the Directors present at any meeting at which a quorum is present shall be the action of the Board of Directors unless the concurrence of a greater proportion is required for such action by law, the Articles of Incorporation or these By-laws. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may by a majority vote adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 20. Unless otherwise restricted by the Articles of Incorporation or these By-laws, members of the Board of Directors of the Corporation, or any committee designated by the Board, may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by that means shall constitute presence in person at such meeting. Section 21. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board or committee. COMMITTEES OF DIRECTORS Section 22. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of two or more Directors, and may delegate to such committees any of the powers of the Board of Directors except the power to declare dividends or distributions on stock, recommend to the stockholders any action which requires stockholder approval, amend the By-laws, approve any merger or share exchange which does not require stockholder approval or issue stock. However, if the Board of Directors, subject to the terms and provisions of the Articles of Incorporation, has given general authorization for the issuance of stock, a committee of the Board, in accordance with a general formula or method specified by the Board of Directors by resolution or by adoption of a stock option or other plan, may fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued. In the absence of an appropriate resolution of the Board of Directors, each committee may adopt such rules and regulations governing its duties, proceedings, quorum and manner of acting as it shall deem proper and desirable, provided that the quorum shall not be less than two Directors. In the absence of any member of such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member. Section 23. All committees of the Board of Directors shall keep minutes of their proceedings and shall report the same to the Board of Directors at the next Board of Directors meeting. Any action by any of such committees shall be subject to the revision and alteration by the Board of Directors, provided that no rights of the third persons shall be affected by any such revision or alteration. WAIVER OF NOTICE Section 24. Whenever any notice of the time, place or purpose of any meeting of stockholders, Directors or committee is required to be given under the provisions of a statute or under the provisions of the Articles of Incorporation or these By-laws, each person who is entitled to the notice waives notices if (i) he, before or after the meeting, signs a waiver of notice which is filed with the records of the meeting, or (ii) such person is present in person at the meeting if the meeting in question is of the Board of Directors or a committee or, if the meeting in question is of the stockholders, if such person is present either in person or by proxy. OFFICERS Section 25. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Vice President, a Secretary and a Treasurer. The President shall be selected from among the Directors. The Board of Directors may also choose a Chairman of the Board, additional Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers. If chosen, the Chairman of the Board shall be selected from among the Directors. Except as otherwise specified in these By-laws, officers of the Corporation need not be members of the Board of Directors. Officers of the Corporation shall be elected by the Board of Directors at its first meeting after each annual meeting of stockholders. If no annual meeting of stockholders shall be held in any year, such election of officers may be held at any regular or special meeting of the Board of Directors as shall be determined by the Board of Directors. Section 26. Two or more offices, except those of President and Vice President, may be held by the same person but no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law, the Articles of Incorporation or these By-laws to be executed, acknowledged or verified by two or more officers. Section 27. The Board of Directors, at any meeting thereof, may appoint such additional officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 28. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. Section 29. The officers of the Corporation shall serve for one year and until their successors are chosen and qualify. Any officer or agent may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. If the office of any officer or officers becomes vacant for any reason, the vacancy may be filled by the Board of Directors at any meeting thereof. CHAIRMAN OF THE BOARD Section 30. If a Chairman of the Board be elected, he shall preside at all meetings of the stockholders and Directors at which he may be present and shall have such other duties, powers and authority as may be prescribed elsewhere in these By-laws. The Board of Directors may delegate such other authority and assign such additional duties to the Chairman of the Board, other than those conferred by law exclusively upon the President, as it may from time to time determine, an, to the extent permissible by law, the Board may designate the Chairman of the Board as the chief executive officer of the Corporation with all of the powers otherwise conferred upon the President of the Corporation under Section 31, or it may, from time to time, divide the responsibilities, duties and authority for the general control and management of the Corporation's business and affairs between the Chairman of the Board and the President. PRESIDENT Section 31. Unless the Board otherwise provides, the President shall be the chief executive officer of the Corporation with such general executive powers and duties of supervision and management as are usually vested in the office of the chief executive officer of a corporation, and he shall carry into effect all directions and resolutions of the Board. The President, in the absence of the Chairman of the Board or if there be no Chairman of the Board, shall preside at all meetings of the stockholders and Directors. He shall have such other or further duties and authority as may be prescribed elsewhere in these By-laws or from time to time by the Board of Directors. If a Chairman of the Board be elected or appointed and designated as the chief executive officer of the Corporation, as provided in Section 30, the President shall perform such duties as may be specifically delegated to him by the Board of Directors or are conferred by law exclusively upon him and in the absence, disability, or inability or refusal to act of the Chairman of the Board, the President shall perform the duties and exercise the powers of the Chairman of the Board. VICE PRESIDENTS Section 32. The Vice President, or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECRETARY AND ASSISTANT SECRETARIES Section 33. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. Section 34. The Assistant Secretary, if any, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURER Section 35. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipt and disbursements in books belonging to the Corporation and shall deposit all monies, and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 36. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall perform all of the acts incidental to the office of Treasurer, subject to the control of the Board of Directors. Section 37. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration other property of whatever kind in his possession or under his control belonging to the Corporation. Section 38. The Assistant Treasurer, if any, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, or if there be no such determination, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. GENERAL PROVISIONS CLOSING OF TRANSFER BOOKS Section 39. The Board of Directors may fix, in advance, a date as the record date for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders, or stockholders entitled to receive payment of any dividend or the allotment of any rights, or in order to make a determination of stockholders of record for any other proper purpose. Such date, in any case, shall be not more than 90 days, and in case of a meeting of stockholders not less than ten days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. In lieu of fixing a record date, prior to the date on which the particular action requiring such determination of stockholders is to be taken, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days immediately preceding such meeting. Section 40. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland. DIVIDENDS Section 41. Dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, in property, or in its own shares. The authority of the Board of Directors regarding the declaration and payment of dividends is Directors regarding the declaration and payment of dividends is subject, however, to the provisions of the Investment Company Act, the law of Maryland and the Articles of Incorporation. EXECUTION OF INSTRUMENTS Section 42. All documents, transfers, contracts, agreements, requisitions or orders, promissory notes, assignments, endorsements, checks, drafts, and orders for payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, and other instruments requiring execution by the Corporation, shall be signed by such officer or officers as the Board of Directors may from time to time designate or, in the absence of such designation, by the President. FISCAL YEAR Section 43. The fiscal year of the Corporation shall end on October 31 of each year unless the Board of Directors shall determine otherwise. SEAL Section 44. The corporate seal of the Corporation shall have inscribed thereon the name and the state of incorporation of the Corporation. The form of the seal shall be subject to alteration by the Board of Directors and the seal may be used by causing it or a facsimile to be impressed or affixed or printed or otherwise reproduced. In lieu of affixing the corporate seal to any document it shall be sufficient to meet the requirements of any law, rule or regulation relating to a corporate seal to affix the word "(Seal)" adjacent to the signature of the authorized officer of the Corporation. STOCK LEDGER Section 45. The Corporation shall maintain at its office in Kansas City, Missouri, an original stock ledger containing the names and addresses of all stockholders and the number of shares of each class held by each stockholder. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. STOCK CERTIFICATES Section 46. Certificates of stock of the Corporation shall be in the form approved by the Board of Directors. Subject to Section 47 below, every holder of stock of the Corporation shall be entitled to have a certificate, signed in the name of the Corporation by the President, or any Vice President and countersigned by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number and kind of shares owned by him in the Corporation. Such certificate may be sealed with the corporate seal of the Corporation. Such signatures may be either manual or facsimile signatures and the seal may be either facsimile or any other form of seal. In case any officer, transfer agent, or registrar who shall have signed any such certificate, or whose facsimile signature has been placed thereon, shall cease to be such an officer, transfer agent or registrar (because of death, resignation or otherwise) before such certificate is issued, such certificate may be issued and delivered by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 47. The Board of Directors, by resolution, may at any time authorize the issuance without certificates of some or all of the shares of one or more of the classes or series of the Corporation's stock. Such issuances without certificates shall be made in accordance with the requirements therefor set forth in Sections 2-210(c) and 2-211 of the Maryland General Corporation Law and Article 8 of the Maryland Commercial Law Article (or any successor provisions to such statutes). Such authorization will not affect shares already represented by certificates until such shares are surrendered to the Corporation for transfer, cancellation or other disposition. INDEMNIFICATION AND INSURANCE Section 48. (a) The Corporation shall indemnify any individual ("Indemnitee") who is a present or former director, officer, employee, or agent of the Corporation, or who, while a director, officer, employee, or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise or employee benefit plan who, by reason of his position was, is, or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter collectively referred to as a "Proceeding") against any judgments, penalties, fines, settlements, and reasonable expenses (including attorneys' fees) actually incurred by such Indemnitee in connection with any Proceeding, to the fullest extent that such indemnification may be lawful under Maryland law. The Corporation shall pay any reasonable expenses so incurred by such Indemnitee in defending a Proceeding in advance of the final disposition thereof to the fullest extent that such advance payment may be lawful under Maryland law. Subject to any applicable limitations and requirements set forth in the Corporation's Articles of Incorporation and in these By-laws, any payment of indemnification or advance of expenses shall be made in accordance with the procedures set forth in Maryland law. (b) Anything in this Section 48 to the contrary notwithstanding, nothing in this Section 48 shall protect or purport to protect any Indemnitee against any liability to the Corporation or its stockholders, whether or not there has been an adjudication of liability, to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office ("Disabling Conduct"). (c) Anything in this Section 48 to the contrary notwithstanding, no indemnification shall be made by the Corporation to an Indemnitee unless: (i) there is a final decision on the merits by a court or other body before whom the Proceeding was brought that the Indemnitee was not liable by reason of Disabling Conduct; or (ii) in the absence of such a decision, there is a reasonable determination, based upon a review of the facts, that the Indemnitee was not liable by reason of Disabling Conduct, which determination shall be made by: (A) the vote of a majority of a quorum of directors who are neither "interested persons" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act, nor parties to the Proceeding; or (B) an independent legal counsel in a written opinion. (d) Anything in this Section 48 to the contrary notwithstanding, any advance of expenses by the Corporation to any Indemnitee shall be made only upon the undertaking by such Indemnitee to repay the advance unless it is ultimately determined that such Indemnitee is entitled to indemnification as above provided, and only if one of the following conditions is met: (i) the Indemnitee provides a security for his undertaking; or (ii) the Corporation shall be insured against losses arising by reason of any lawful advances; or (iii) there is a determination, based on a review of readily available facts (which review shall not require a full trial-type inquiry), that there is reason to believe that the Indemnitee will ultimately be found entitled to indemnification, which determination shall be made by: (A) a majority of a quorum of directors who are neither "interested persons" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act, nor parties to the Proceeding; or (B) an independent legal counsel in a written opinion. Section 49. To the fullest extent permitted by applicable Maryland law and by Sections 17(h) and 17(i) of the Investment Company Act, or any successor provisions thereto or interpretations thereunder, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or who is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan, against any liability asserted against him and incurred by him in any such capacity or arising out of his position, whether or not the Corporation would have the power to indemnify him against such liability pursuant to Section 2-418 of the Maryland General Corporation Law. AMENDMENTS Section 50. The Board of Directors shall have the power, at any regular meeting or at any special meeting if notice thereof be included in the notice of such special meeting, to alter or repeal any or all By-laws of the Corporation and to adopt new By-laws. --------------------------------------- I, the undersigned, being the Secretary of Twentieth Century Investors, Inc., do hereby certify the foregoing to be the By-laws of said Corporation, as adopted at a meeting of the Board of Directors held the 17th day of November, 1990. /s/ John Hartenbach EX-99.B10 12 OPINION AND CONSENT OF COUNSEL Twentieth Century Investors, Inc. 4500 Main Street P.O. Box 419200 Kansas City, Missouri 64141-6200 February 29, 1996 VIA EDGAR Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Twentieth Century Investors, Inc. 1933 Act File No. 2-14213; 1940 Act File No. 811-0816 Post-Effective Amendment No. 73 to Registration Statement on Form N-1A Ladies/Gentlemen: Pursuant to Section 101(a) of Regulation S-T and Rule 485(b) under the Securities Act of 1933, the aforementioned Registrant hereby submits for filing the following Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A filed by the registrant. The principal purpose of this Post-Effective Amendment is to update the financial statements and to make such other changes as are deemed appropriate. As permitted by Rule 485(b), a new separate prospectus has been included in the Registration Statement for Giftrust Investors. Previously, it was included with the Equity Funds prospectus. The new Giftrust prospectus has not been redlined, as to do so would require the entire document to be redlined. Also, the Equity Funds prospectus has not been marked to show the Giftrust deletions. In the enclosed prospectuses, the term "conversion" has been changed to "exchange" and "automatic monthly investment" has been changed to "automatic investment." Because of the immaterial nature of these changes, they have not been redlined, either. Other than the changes referred to in this and the preceding paragraph, tags have been placed to denote changes made from Post-Effective Amendment No. 72. Pursuant to subsection (e) of Rule 485, I hereby represent that the Post-Effective Amendment does not contain disclosures which would render such Post-Effective Amendment ineligible to become effective pursuant to paragraph (b) of the aforementioned Rule 485. If there are any questions or comments regarding this filing, please contact the undersigned at (816) 340-4349. Very truly yours, /s/ Patrick A. Looby Patrick A. Looby Vice President and Associate General Counsel PL/dnh EX-99.B11 13 INDEPENDENT AUDITOR'S CONSENT CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT Twentieth Century Investors, Inc. Twentieth Century Tower 4500 Main Street Kansas City, Missouri 64111 We hereby consent to the use in this Post-Effective Amendment No. 73 to the Registration Statement under the Securities Act of 1933 and this Amendment No. 73 to the Registration Statement under the Investment Company Act of 1940, both on form N-1A, of our report dated November 27, 1995, accompanying and pertaining to the financial statements of Twentieth Century Investors, Inc., as of October 31, 1995, which are included in such Post-Effective Amendments. /s/ BAIRD, KURTZ & DODSON BAIRD, KURTZ & DOBSON Kansas City, Missouri February 27, 1996 EX-99.B16 14 SCHEDULES OF COMPUTATION Schedule of Computation of Performance Advertising Quotations A. Representative Total Return Calculations Set forth below are representative calculations of each type of total return performance quotation included in the Statement of Additional Information of Twentieth Century Investors, Inc. 1. Average annual total return. The five year average annual return of Growth Investors, as quoted in the Statement of Additional Information, was 18.32%. This return was calculated as follows: P(1+T)n=ERV where, P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of the hypothetical $1,000 payment at the end of 5 years. Applying the actual return figures of Growth Investors for the 5 year period ended October 31, 1995: 1,000 (1+18.32%)5 = $2,318.95 T = 2,318.95 1/5 - 1 1,000.00 T = 18.32% 2. Cumulative total return. The cumulative total return of Growth Investors from 6/30/71 to 10/31/95 as quoted in the Statement of Additional Information, was 6,212.00% This return was calculated as follows: C = (ERV - P) P where, C = cumulative total return P = a hypothetical initial payment of $1,000 ERV = ending redeemable value of the hypothetical $1,000 payment at the end of the 24.3 year period Applying the actual return figures of Growth Investors for the 24.3 year period ended October 31, 1995: C = (63,120 - 1,000) 1,000 C = 6,212.00% B. Yield Calculations Set forth below are representative calculations of each type of yield quotation included in the Statement of Additional Information of Twentieth Century Investors, Inc. 1. Cash Reserve Yield. The yield for Cash Reserve for the current seven days ended October 31, 1995, as quoted in the Statement of Additional Information, was 5.16%. The yield was computed as follows: Y = I x 365 B 7 where, Y = yield I = total income of hypothetical account of one share over seven day period B = beginning account value ($1) Applying the actual figures of Cash Reserve for the seven day period ended October 31, 1995: Y = .000990334 x 365 ---------- --- 1 7 Y = 5.16% Thirty-day yields are calculated similarly, with the appropriate substitutions. 2. Cash Reserve Effective Yield. The effective yield for Cash Reserve for the seven days ended October 31, 1995 as quoted in the Statement of Additional Information, was 5.30%. The effective yield was computed as follows: EF = (1 + I) - 1 B where, EF - effective yield I = total income of hypothetical account of one share over seven day period B = beginning account value ($1) Applying the actual figures of Cash Reserve for the seven day period ended October 31, 1994: EF = 1 + .0990334 365 - 1 -------- --- 1 7 EF = 5.30% 3. Other Fixed-Income Funds and the Balanced Fund Yield. The yield for U.S. Governments for the thirty days ended October 31, 1995, as quoted in the Statement of Additional Information, was 5.18%. The yield was calculated as follows: Y = a - b + 1 6 - 1 *2 ----- c*d where, Y = yield a = total income during thirty day period b = expense accrued for the period c = average daily number of shares outstanding during the period d = maximum offering price per share on last day of period Applying the actual figures of U.S. Governments for the thirty day period ended October 31, 1995: 1,891,818.76 - 220,043.54 +1 6 - 1 *2 ------------------------- 41,143,971.501 * 9.51 Y = 5.18% 4. Tax-Equivalent Yield. The tax-equivalent yield for Tax-Exempt Intermediate Term for the thirty days ended October 31, 1995, as quoted in the Statement of Additional Information, was 6.58%. The tax-equivalent yield was calculated as follows: EY = Y - Yt _______ + Yt 1 - A where, EY = tax-equivalent yield Y = yield (as computed above) A = assumed tax rate of 36% Yt = portion of the yield that was not tax-exempt Applying the actual figures of Tax-Exempt Intermediate Term for the thirty days ended October 31, 1995: EY = 4.21 1-.36 EY = 6.58% Cumulative total return and average annual total return quotations for the fixed-income funds (other than Cash Reserve) are calculated in the same manner as cumulative total return and average annual total return quotations for the Twentieth Century common stock funds and the Balanced Fund as described under paragraphs A1 and A2 of this Schedule. EX-99.B17 15 POWER OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Twentieth Century Investors, Inc., hereinafter called the "Corporation", and certain directors and officers of the Corporation, do hereby constitute and appoint James E. Stowers, Jr., James E. Stowers III, William M. Lyons, and Patrick A. Looby, and each of them individually, their true and lawful attorneys and agents to take any and all action and execute any and all instruments which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Act of 1933 and/or the Investment Company Act of 1940, as amended, and any rules, regulations, orders, or other requirements of the United States Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of 1933 and/or the Investment Company Act of 1940, as amended, including specifically, but without limitation of the foregoing, power and authority to sign the name of the Corporation in its behalf and to affix its corporate seal, and to sign the names of each of such directors and officers in their capacities as indicated, to any amendment or supplement to the Registration Statement filed with the Securities and Exchange Commission under the Securities Act of 1933 and/or the Investment Company Act of 1940, as amended, and to any instruments or documents filed or to be filed as a part of or in connection with such Registration Statement; and each of the undersigned hereby ratifies and confirms all that said attorneys and agents shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the Corporation has caused this Power to be executed by its duly authorized officers on this the 29th day of July, 1995. TWENTIETH CENTURY INVESTORS, INC. By: /s/ James E. Stowers III JAMES E. STOWERS III, President SIGNATURE AND TITLE /s/ James E. Stowers, Jr. /s/ Robert W. Doering, M.D. JAMES E. STOWERS, JR. ROBERT W. DOERING, M.D. Chairman, Director Director Principal Executive Officer /s/ James E. Stowers III /s/ Linsley L. Lundgaard JAMES E. STOWERS III LINSLEY L. LUNDGAARD President and Director Director /s/ Robert T. Jackson /s/ Donald H. Pratt ROBERT T. JACKSON DONALD H. PRATT Executive Vice President, Director Principal Financial Officer /s/ Maryanne Roepke /s/ Lloyd T. Silver MARYANNE ROEPKE LLOYD T. SILVER Vice President and Treasurer, Director Principal Accounting Officer /s/ Thomas A. Brown /s/ M. Jeannine Strandjord THOMAS A. BROWN M. JEANNINE STRANDJORD Director Director Attest: /s/ John M. Urie JOHN M. URIE By: /s/ William M. Lyons Director William M. Lyons, Secretary EX-27.1 16 FDS GROWTH INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 1 GROWTH INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 4344143 5206898 45561 4801 0 5257260 115368 0 11998 127366 2148 3610415 214805 189806 11867 0 639741 0 865723 5129894 54450 8941 0 45770 17621 642082 276216 935919 0 9560 610062 0 34079 42012 32932 766418 11142 600385 0 0 45714 0 45770 4579949 22.99 0.08 4.08 0.05 3.22 0 23.88 1.00 0 0
EX-27.1 17 FDS SELECT INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 2 SELECT INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 3499790 4033769 61001 8442 0 4103212 77121 0 17653 94774 1014 2989829 101434 113552 20688 0 462093 0 534814 4008438 70142 8029 0 40970 37201 455886 76341 569428 0 31233 319512 0 10704 33197 10375 (269405) 36129 304310 0 0 40919 0 40970 4091449 37.67 0.33 4.68 0.28 2.87 0 39.52 1.00 0 0
EX-27.1 18 FDS ULTRA INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 3 ULTRA INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 9128766 14297200 142318 9556 0 14449074 41100 0 32072 73172 5128 8531518 512810 488847 0 0 669968 0 5169288 14375902 49864 27303 0 113421 (36254) 619125 3146594 3729465 0 0 308428 0 143246 134889 15606 4031629 0 304953 0 0 113284 0 113421 11377593 21.16 (0.07) 7.58 0 0.65 0 28.03 1.00 0 0
EX-27.1 19 FDS VISTA INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 4 VISTA INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 1115763 1675577 21369 1232 0 1698178 17646 0 4615 22261 1065 1005259 106542 72451 0 0 109778 0 559815 1675917 316 3608 0 11118 (7194) 111473 328626 432905 0 0 2161 0 88066 54178 203 883574 0 467 0 0 11105 0 11118 1129411 10.94 (0.08) 4.90 0 0.03 0 15.73 0.98 0 0
EX-27.1 20 FDS GIFTRUST INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 5 GIFTRUST INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 421356 566494 6155 546 0 573195 11590 0 493 12083 219 367700 21896 12956 0 0 48055 0 145138 561112 181 907 0 3844 (2756) 50818 66656 114718 0 0 14781 0 8277 153 816 295511 0 14775 0 0 3840 0 3844 391410 20.50 (0.16) 6.37 0.00 1.09 0 25.63 0.98 0 0
EX-27.5 21 FDS U.S. GOVERNMENTS SHORT-TERM FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 6 U.S. GOVERMENTS SHORT-TERM - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 383464 387146 5920 0 0 393066 0 0 1735 1735 412 406856 41168 42810 0 0 (19619) 0 3682 391331 0 24200 0 2714 21486 506 9263 31255 0 21486 0 0 9240 13034 2152 (5422) 0 (20105) 0 0 2709 0 2714 388916 9.27 0.52 0.24 0.52 0 0 9.51 0.70 0 0
EX-27.4 22 FDS CASH RESERVE FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 7 CASH RESERVE - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 1470341 1470341 1305 6211 0 1477857 0 0 8311 8311 14696 1454930 1469626 1298982 0 0 (80) 0 0 1469546 0 81341 0 9564 71777 (80) 0 71697 0 71777 0 0 1917043 1815596 69197 170564 0 0 0 0 9547 0 9564 1379253 1.00 0.05 0 0.05 0 0 1.00 0.70 0 0
EX-27.5 23 FDS LONG-TERM BOND FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 8 LONG-TERM BOND - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 141217 146760 2732 0 10204 159696 9989 0 484 10473 153 143336 15251 13588 0 0 191 0 5543 149223 0 9707 0 1040 8667 412 12096 21175 0 8667 0 0 6052 5244 855 28211 0 (220) 0 0 1038 0 1040 140278 8.91 0.61 0.87 0.61 0 0 9.78 0.78 0 0
EX-27.5 24 FDS TAX-EXEMPT INTERMEDIATE-TERM FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 9 TAX-EXEMPT INT-TERM - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 75215 77736 3899 0 0 81635 0 0 1387 1387 77 77102 7677 8134 0 0 548 0 2521 80248 0 4236 0 472 3764 553 3482 7799 0 3764 639 0 1538 2366 371 (1152) 0 634 0 0 471 0 472 79476 10.01 0.49 0.52 0.49 0.08 0 10.45 0.60 0 0
EX-27.5 25 FDS TAX-EXEMPT LONG-TERM FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 10 TAX-EXEMPT LONG-TERM - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 54234 57070 955 64 0 58089 0 0 92 92 55 55133 5503 5230 0 0 (27) 0 2836 57997 0 3119 0 318 2801 (24) 4424 7201 0 2801 225 0 1921 1906 258 7033 0 222 0 0 317 0 318 55619 9.75 0.53 0.83 0.53 0.04 0 10.54 0.59 0 0
EX-27.1 26 FDS HERITAGE INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 11 HERITAGE INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 824572 1006229 15029 1443 0 1022701 12289 0 2089 14378 858 769742 85837 86923 3755 0 51932 0 182036 1008323 10789 2149 0 8912 4026 53285 110287 167598 0 2831 46480 0 23942 30345 5317 111560 4177 43510 0 0 8901 0 8912 903305 10.32 0.05 1.96 0.03 0.54 0.03 11.75 0.99 0 0
EX-27.7 27 FDS BALANCED INVESTORS FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 12 BALANCED INVESTORS - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 711568 808748 15901 1994 0 826643 9175 0 1898 11073 461 669332 46083 44160 2054 0 46454 0 97269 815570 5522 23509 0 7312 21719 47518 45137 114374 0 21381 12064 0 11370 11520 2073 111704 1820 10896 0 0 7303 0 7312 742695 15.94 0.48 2.03 0.48 0.27 0 17.70 0.98 0 0
EX-27.5 28 FDS TAX-EXEMPT SHORT-TERM FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 13 TAX-EXEMPT SHORT-TERM - 1995 1000 YEAR OCT-31-1995 OCT-31-1995 60601 61094 972 0 0 62066 2748 0 481 3229 58 58293 5829 6115 0 0 (7) 0 493 58837 0 2615 0 1 2614 25 829 3468 0 2614 0 0 3071 3589 232 (2020) 0 (32) 0 0 358 0 1 58423 9.95 0.44 0.14 0.44 0 0 10.09 0 0 0
EX-27.5 29 FDS LIMITED-TERM FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 14 LIMITED-TERM BOND - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 7061 7144 103 0 1 7248 0 0 55 55 7 7114 722 452 0 0 (11) 0 83 7193 0 378 0 41 337 15 167 519 0 337 0 0 377 140 33 2818 0 (26) 0 0 41 0 41 7766 9.68 0.56 0.28 0.56 0 0 9.96 0.69 0 0
EX-27.5 30 FDS INTERMEDIATE-TERM BOND FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 15 INTERMEDIATE-TERM BOND - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 12454 12661 188 0 11 12860 0 0 33 33 13 12476 1274 447 0 0 131 0 207 12827 0 550 0 60 490 152 340 982 0 490 0 0 1072 292 47 8565 0 (20) 0 0 60 0 60 9954 9.53 0.59 0.54 0.59 0 0 10.07 0.74 0 0
EX-27.5 31 FDS U.S. GOVERNMENTS INTERMEDIATE-TERM FUND WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 16 U.S. GOVERMENTS INTER-TERM - 1995 PORTFOLIO 1000 YEAR OCT-31-1995 OCT-31-1995 20841 21395 359 0 300 22054 0 0 73 73 22 21275 2190 657 0 0 130 0 554 21981 0 944 0 104 840 200 629 1669 0 840 0 0 2205 754 82 15701 0 (70) 0 0 104 0 104 17638 9.55 0.58 0.49 0.58 0.00 0 10.04 0.74 0 0
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