-----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, BIIVfr82/sKSTiPav8INVVytBRITYkWeZ6X9D+4thdC5SXGlDExzWG5K9vPvzjYG Gsgd1L3BjKOuP52LZSUMSw== 0000100334-99-000049.txt : 19990902 0000100334-99-000049.hdr.sgml : 19990902 ACCESSION NUMBER: 0000100334-99-000049 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CENTURY MUTUAL FUNDS 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: 485APOS SEC ACT: SEC FILE NUMBER: 002-14213 FILM NUMBER: 99704326 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-00816 FILM NUMBER: 99704327 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 FORMER COMPANY: FORMER CONFORMED NAME: TWENTIETH CENTURY INVESTORS INC DATE OF NAME CHANGE: 19920703 485APOS 1 POST-EFFECTIVE AMENDMENT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 85 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 85 [X] (Check appropriate box or boxes.) AMERICAN CENTURY MUTUAL FUNDS, INC. _________________________________________________________________ (Exact Name of Registrant as Specified in Charter) 4500 Main Street, Kansas City, MO 64141-6200 _________________________________________________________________ (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (816) 531-5575 David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111 _________________________________________________________________ (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: November 14, 1999 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [X] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485. If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. - -------------------------------------------------------------------------------- American Century Prospectus - -------------------------------------------------------------------------------- AC Fund AC Large-Cap Fund INVESTOR CLASS NOVEMBER 14, 1999 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME. DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. Dear Investor, Reading a prospectus doesn't have to be a chore. We've done the hard work so you can focus on what's important--learning about the funds and tracking your investments. Take a look inside, and you'll see this prospectus is different. It takes a clear-cut approach to fund information. Here's what you'll find: o The funds' primary investments and risks o A description of who may or may not want to invest in the funds o An overview of services available and ways to manage your accounts o Helpful tips and definitions of key investment terms Whether you're a current investor or investing in mutual funds for the first time, this prospectus will give you a clear understanding of the funds. If you have questions, our Investor Relations Representatives are available weekdays 7 a.m. to 7 p.m. and Saturdays 9 a.m. to 2 p.m. Central time. Our toll-free number is 1-800-345-2021. We look forward to helping you achieve your financial goals. Sincerely, Mark Killen Senior Vice President American Century Investment Services, Inc. Table of Contents An Overview of the Funds.......................................................2 Fund Performance History.......................................................3 Fees and Expenses..............................................................4 Information about the Funds AC Fund AC Large-Cap Fund..............................................................5 Management.....................................................................7 Investing with American Century...............................................XX Share Price and Distributions.................................................XX Taxes.........................................................................XX Multiple Class Information....................................................XX CALLOUT Throughout this book you'll find definitions of key investment terms and phrases. When you see a word printed in green italics, look for its definition in the left margin. This symbol highlights special information and helpful tips. An Overview of the Funds What are the funds' investment objectives? These funds seek long-term capital growth. What are the funds' primary investment strategies and principal risks? The funds use a systematic, highly-automated approach to common stock investing. This approach is designed to identify companies that are growing and whose share price patterns suggest their stocks are likely to increase in value. A more detailed description of the funds' investment style begins on page __. The funds' principal risks include o High Turnover - The funds'portfolio turnover may be very high. This could result in relatively high commission costs and capital gains tax liabilities for the funds and their shareholders, which may hurt the funds' performance. o Market Risk - The value of a fund's shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. o Price Volatility - The value of the funds' shares may fluctuate significantly in the short term. o Principal Loss - As with all mutual funds, if you sell your shares when their value is less than the price you paid, you will lose money. o Nondiversification - From time to time, the funds may pursue investment opportunities that cause them to become temporarily nondiversified. In a nondiversified fund, a price change in a single security may have a greater impact on the fund's share price than would be the case in a diversified fund. Who may want to invest in the funds? The funds may be a good investment if you are o seeking long-term capital growth from your investment o comfortable with the funds' short-term price volatility o comfortable with the risks associated with the funds' investment strategy o investing through an IRA or other tax-advantaged retirement plan Who may not want to invest in the funds? The funds may not be a good investment if you are o seeking current income from your investment o investing for a short period of time o uncomfortable with short-term volatility in the value of your investment CALLOUT Portfolio turnover is a measure of how frequently a fund buys and sells portfolio securities. CALLOUT A nondiversified fund may invest a greater percentage of its assets in a particular portfolio security than may a diversified fund. CALLOUT An investment in the funds is not a bank deposit, and it is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Fund Performance History As new funds, the funds' performance history is not available as of the date of this Prospectus. CALLOUT For current performance information, please call us at 1-800-345-2021 or visit American Century's Web site at www.americancentury.com. Fees and Expenses There are no sales loads, fees or other charges o to buy fund shares directly from American Century o to reinvest dividends in additional shares The following table describes the fees and expenses that you will pay if you buy and hold shares of the funds. Shareholder Transaction Expenses (fees paid directly from your investment) Redemption/Exchange Fee(as a percentage of amount redeemed/exchanged) Shares held for less than five years (1) 2.0% Shares held for five years or more None 1 The fee withheld from redemption/exchange proceeds is retained by the fund. Annual Operating Expenses (expenses that are deducted from fund assets) Management Distribution and Other Total Annual Fund Fee Service (12b-1) Fees Expenses(1) Operating Expenses --- -------------------- ----------- ------------------ AC Fund 1.50% None 0.00% 1.50% AC Large-Cap 1.35% None 0.00% 1.35%
1 Other expenses, which include the fees and expenses of the funds' independent directors, their legal counsel and interest, are expected to be less than 0.005% for the current fiscal year. Example The examples in the table below are intended to help you compare the costs of investing in a fund with the costs of investing in other mutual funds. Assuming you ... o invest $10,000 in the fund o redeem all of your shares at the end of the periods shown below o earn a 5% return each year o incur the same operating expenses as shown above ... your cost of investing in the fund would be: 1 year 3 years AC Fund $359 $693 AC Large-Cap $344 $648 You would pay the following expenses if you did not redeem your shares: 1 year 3 years AC Fund $152 $472 AC Large-Cap $137 $426 CALLOUT Use this example to compare the costs of investing in other funds. Of course, your actual costs may be higher or lower. Information about the Funds AC Fund AC Large-Cap Fund What are the funds' investment objectives? These funds seek long-term capital growth. How do the funds pursue their investment objectives? The funds use a systematic, highly-automated approach to common stock investing developed by American Century. This approach relies heavily on quantitative tools to identify attractive investment opportunities on a disciplined, consistent basis. It utilizes a fundamental screening process to identify attractive companies and a technical signal generator to determine optimum buy and sell points based on a stock's historical price trends. The quantitative tools used to identify attractive companies do so by screening thousands of publicly traded securities to identify those that are growing. The methodology identifies companies whose earnings and revenues are growing at a successively faster, or accelerating, pace. A second portion of the methodology attempts to identify companies whose share price patterns suggest that they are likely to either rise or fall in price (commonly referred to as technical analysis). This process is particularly oriented to identifying attractive price patterns for companies demonstrating the accelerating growth described above. These would be candidates for purchase. Conversely, companies whose share price patterns suggest they are likely to decline in price would be candidates for sale, if owned by the fund. On occasion, the process may look favorably on share price patterns that appear attractive even though the earnings of the underlying company are not growing at an accelerating rate. Although the funds are expected to invest primarily in U.S. companies, there is no limit on the amount of assets the funds can invest in foreign companies. Investments in foreign securities present some unique risks that are more fully described in the funds' Statement of Additional Information. The fund managers do not attempt to time the market. Instead, they intend to keep the funds essentially fully invested in stocks regardless of the movement of stock prices generally. However, in the fund managers' discretion, the funds may invest up to 100% of their assets in U.S. government securities if the funds' investment methodology fails to generate sufficient investment ideas or to respond to adverse market, economic, political or other conditions. The funds may not achieve their investment objectives while taking such a temporary defensive position. When the managers believe that it is prudent, the funds also may invest a portion of their assets in convertible securities, short-term instruments, and non-leveraged futures and options. Futures and options can help the funds' cash assets remain liquid while performing more like stocks. The funds have a policy governing futures and options and similar derivative securities to help manage the risk of these types of investments. A complete description of the derivatives policy is included in the Statement of Additional Information. CALLOUT Accelerating growth is shown, for example, by growth that is faster this quarter than last or faster this year than the year before. CALLOUT Non-leveraged means that the fund may not invest in futures contracts where it would be possible to lose more than the fund invested. What kinds of securities do the funds buy? The funds will usually purchase common stocks of U.S. and foreign companies, but they can purchase other types of securities as well, such as domestic and foreign preferred stocks, convertible securities, equity equivalent securities, notes, bonds and other debt securities. The funds limit their purchase of debt securities to investment-grade obligations. What are the differences between the funds? AC Large-Cap generally invests in larger companies. Companies considered to be large generally have a market capitalization in excess of $5 billion. AC Fund, by contrast, may invest in companies of any size. What are the primary risks of investing in the funds? The process driving the funds is specifically designed to respond quickly to changing stock market conditions. As a result, the funds' portfolio turnover may be significantly higher than that of many other funds. This heavy turnover, perhaps as much as 200-300% per year or more, could result in relatively high commission costs, substantial capital gain realizations for the funds, and capital gains tax liabilities for the funds' shareholders. The value of a fund's shares depends on the value of the stocks and other securities it owns. The value of the individual securities a fund owns will go up and down depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fund managers may buy a large amount of a company's stock quickly, and often will dispose of it quickly if the company's earnings or revenues decline. While the managers believe this strategy provides substantial appreciation potential over the long term, in the short term it can create a significant amount of share price volatility. This volatility can be greater than that of the average stock fund. As with all funds, at any given time the value of your shares may be worth more or less than the price you paid. If you sell your shares when the value is less than the price you paid, you will lose money. Market performance tends to be cyclical, and in the various cycles, certain investment styles may fall in and out of favor. If the market is not favoring the funds' style, the funds' gains may not be as big as, or their losses may be bigger than, other equity funds using different investment styles. Although the fund managers intend to invest the funds' assets primarily in U.S. stocks, the funds may invest in securities of foreign companies. To the extent a fund invests in foreign securities, the overall risk of the fund could be affected. Foreign securities can have certain unique risks, including fluctuations in currency exchange rates, less stable political and economic structures, reduced availability of public information, and lack of uniform financial reporting and regulatory practices similar to those that apply in the United States. These factors make investing in foreign securities generally riskier than investing in U.S. stocks. CALLOUT Market capitalization is the value of a company as determined by multiplying the number of shares of its stock outstanding by its current market price per share. Management Who manages the funds? The Board of Directors, investment advisor and fund management team play key roles in the management of the funds. The Board of Directors The Board of Directors oversees the management of the funds and meets at least quarterly to review reports about fund operations. Although the Board of Directors does not manage the funds, it has hired an investment advisor to do so. More than two-thirds of the directors are independent of the funds' advisor; that is, they are not employed by and have no financial interest in the advisor. The Investment Advisor The funds' investment advisor is American Century Investment Management, Inc. The advisor has been managing mutual funds since 1958. American Century is headquartered at 4500 Main Street, Kansas City, Missouri 64111. The advisor is responsible for managing the investment portfolios of the funds and directing the purchase and sale of their investment securities. The advisor also arranges for transfer agency, custody and all other services necessary for the funds to operate. For the services it provides to the funds, the advisor receives a unified management fee of 1.50% of the average net assets of the Investor Class shares of AC Fund and 1.35% of the average net assets of the Investor Class shares of AC Large-Cap. The amount of the management fee is calculated on a class-by-class basis daily and paid monthly. The Statement of Additional Information contains detailed information about the calculation of the management fee. Out of that fee, the advisor pays all expenses of managing and operating the funds except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses. A portion of the management fee may be paid by the funds' advisor to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the advisor. The Fund Management Teams The advisor uses teams of portfolio managers, assistant portfolio managers and analysts to manage the funds. Teams meet regularly to review portfolio holdings and to discuss purchase and sale activity. Team members buy and sell securities for a fund as they see fit, guided by the fund's investment objective and strategy. The portfolio managers on the investment teams are identified below: James E. Stowers III Mr. Stowers, Chief Executive Officer and Portfolio Manager, has been a member of the team that manages the funds since their inception in November 1999. He also is the Chief Investment Officer-U.S. Growth Equities and as such oversees the investment discipline used by the funds and seven other growth funds. He joined American Century in 1981. He has a bachelor's degree in finance from Arizona State University. John Small Jr. Mr. Small, Portfolio Manager, has been a member of the team that manages the funds since their inception in November 1999. He was promoted to Portfolio Manager in February 1999. Since 1994 he has worked as an analyst and Portfolio Manager for the Ultra fund. He joined American Century in May 1991. He has more than 20 years experience with the U.S. Air Force. He has a bachelor's degree from Rockford College and a master's degree in laser optics physics from the Air Force Institute of Technology. He also has an MBA from Baker University. CALLOUT Code of Ethics American Century has a Code of Ethics designed to ensure that the interests of fund shareholders come before the interests of the people who manage the funds. Among other provisions, the Code of Ethics prohibits portfolio managers and other investment personnel from buying securities in an initial public offering or from profiting from the purchase and sale of the same security within 60 calendar days. In addition, the Code of Ethics requires portfolio managers and other employees with access to information about the purchase or sale of securities by the funds to obtain approval before executing permitted personal trades. Fundamental Investment Policies Fundamental investment policies contained in the Statement of Additional Information and the investment objectives of the funds may not be changed without a shareholder vote. The Board of Directors may change any other policies and investment strategies. Year 2000 Issues Many of the world's computer systems were originally programmed in a way that prevented them from properly recognizing or processing date-sensitive information relating to the Year 2000 and beyond. Because this may impact the computer systems of various American Century-affiliated and external service providers for the funds, American Century formally initiated a Year 2000 readiness project in July 1997. It involves a team of information technology professionals assisted by outside consultants and guided by a senior-level steering committee. The team's goal is to assess the impact of the Year 2000 on American Century's systems, renovate or replace noncompliant critical systems and test those systems. In addition, the team has been working to gather information about the Year 2000 efforts of the funds' other major service providers. Although American Century believes its critical systems will function properly in the Year 2000, this is not guaranteed. If the efforts of American Century or its external service providers are not successful, the funds' business, particularly the provision of shareholder services, may be hampered. In addition, the issuers of securities the funds own could have Year 2000 computer problems. Foreign issuers, especially those in emerging markets, may be more susceptible to such problems than U.S. issuers. These problems could negatively affect the value of the issuers' securities, which, in turn, could impact the funds' performance. The advisor has established a process to gather publicly available information about the Year 2000 readiness of these issuers. However, this process may not uncover all relevant information, and the information gathered may not be complete and accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors the fund managers may consider when making investment decisions, and other factors may receive greater weight. Investing With American Century Services Automatically Available to You You automatically will have access to the services listed below when you open your account. If you do not want these services, see "Conducting Business in Writing" below. Conducting Business in Writing If you prefer to conduct business in writing only, you can indicate this on the account application. If you choose this option, you must provide written instructions to invest, exchange and redeem. All account owners must sign transaction instructions (with signatures guaranteed for redemptions in excess of $100,000). If you want to add services later, you can complete an Investor Service Options form.
Ways to Manage Your Account - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- By telephone Open an account Make additional investments Investor Relations If you are a current investor, you can open Call us or use our Automated Information Line 1-800-345-2021 an account by exchanging shares from another if you have authorized us to invest from your American Century account. bank account. Business, Not-For-Profit and Employer-Sponsored Exchange shares Sell shares Retirement Plans Call us or use our Automated Information Call an Investor Relations Representative. 1-800-345-3533 Line if you have authorized us to accept telephone instructions. Automated Information Line 1-800-345-8765 - ---------------------------------- ---------------------------------------------- ----------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- By mail or fax Open an account Make additional investments P.O. Box 419200 Send a signed, completed application and Send us your check or money order for at Kansas City, MO 64141-6200 check or money order payable to American least $50 with an investment slip or $250 Century Investments. without an investment slip. If you don't have Fax an investment slip, include your name, 816-340-7962 Exchange shares address and account number on your check or Send us written instructions to exchange money order. your shares from one American Century account to another. Sell shares Send us written instructions or a redemption form to sell shares. Call an Investor Relations Representative to request a form. - ---------------------------------- ---------------------------------------------- ----------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- Online Open an account Make additional investments www.americancentury.com If you are a current investor, you can open Make an additional investment into an an account by exchanging shares from another established American Century account if you American Century account. have authorized us to invest from your bank account. Exchange shares Exchange shares from another American Sell shares Century account. Not available. A Note about Mailings to Shareholders To reduce expenses and demonstrate respect for our environment, we will deliver most financial reports, prospectuses and account statements to households in a single envelope, even if the accounts are registered under different names. If you would like additional copies of financial reports and prospectuses or separate mailing of account statements, please call us. Your Guide to Services and Policies When you open an account, you will receive a services guide, which explains the services available to you and the policies of the funds and the transfer agent. - -------------------------------- ------------------------------------------------ ----------------------------------------------- - -------------------------------- ------------------------------------------------ ----------------------------------------------- By wire Open an account Make additional investments Call us to set up your account or mail a Follow the wire instructions provided in the completed application to the address provided "Open an account" section. in the "By Mail" section and give your bank the following information. Sell shares Our bank information: You can receive redemption proceeds by wire Please remember that if you Commerce Bank N.A. or electronic transfer. request redemptions by wire, Routing No. 101000019 $10 will be deducted from the Account No. 2804918 amount redeemed. Your bank The fund name also may charge a fee. Your American Century account number* Your name Exchange shares The contribution year (for IRAs only) Not available. *For additional investments only - -------------------------------- ------------------------------------------------ ----------------------------------------------- - -------------------------------- ------------------------------------------------ ----------------------------------------------- Automatically Open an account Make additional investments Not available. With the automatic investment privilege, you can purchase shares on a regular basis. You Exchange shares must invest at least $600 per year per Send us written instructions to set up an account. automatic exchange of your shares from one American Century account to another. Sell shares If you have at least $10,000 in your account, you may sell shares automatically by establishing Check-A-Month or Automatic Redemption plans. - -------------------------------- ------------------------------------------------ ----------------------------------------------- - -------------------------------- ------------------------------------------------------------------------------------------------ In person If you prefer to handle your transactions in person, visit one of our Investor Centers and a representative can help you open an account, make additional investments and sell or exchange shares. 4500 Main St. 4917 Town Center Drive Kansas City, Missouri Leawood, Kansas 8 a.m. to 5:30 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday 8 a.m. to noon, Saturday 1665 Charleston Road 9445 East County Line Road, Suite A Mountain View, California Englewood, Colorado 8 a.m. to 5 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday 8 a.m. to noon, Saturday
Minimum Initial Investment Amount To open an account, the minimum investment is $10,000 Redemption of Shares in Low-Balance Accounts If your redemption activity causes your account balance to fall below the minimum initial investment amount, we will notify you and give you 90 days to meet the minimum. If you do not meet the deadline, American Century will redeem the shares in the account and send the proceeds to your address of record. Abusive Trading Practices We do not permit market timing or other abusive trading practices in our funds. Excessive, short-term (market timing) or other abusive trading practices may disrupt portfolio management strategies and harm fund performance. To minimize harm to the funds and their shareholders, we reserve the right to reject any purchase order (including exchanges) from any investor we believe has a history of abusive trading or whose trading, in our judgment, has been or may be disruptive to a fund. In making this judgment, we may consider trading done in multiple accounts under common ownership or control. We also reserve the right to delay delivery of your redemption proceeds--up to seven days--or to honor certain redemptions with securities, rather than cash, as described in the next section. Special Requirements for Large Redemptions If, during any 90-day period, you redeem fund shares worth more than $250,000 (or 1% of the assets of the fund if that percentage is less than $250,000), we reserve the right to pay part or all of the redemption proceeds in excess of this amount in readily marketable securities instead of cash. If we make payment in securities, we will value the securities selected by the fund managers, in the same manner as we do in computing the fund's net asset value. We may provide these securities in lieu of cash without prior notice. If your redemption would exceed this limit and you would like to avoid being paid in securities, please provide us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. This minimizes the effect of the redemption on the fund and its remaining shareholders. Investing through Financial Intermediaries If you do business with us through a financial intermediary or a retirement plan, your ability to purchase, exchange and redeem shares will depend on the policies of that entity. Some policy differences may include o minimum investment requirements o exchange policies o fund choices o cutoff time for investments Please contact your financial intermediary or plan sponsor for a complete description of its policies. Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by American Century's transfer agent. In some circumstances, American Century will pay the service provider a fee for performing those services. Although transactions in fund shares may be made directly with American Century at no charge, you also may purchase, redeem and exchange fund shares through financial intermediaries that charge a transaction-based or other fee for their services. Those charges are retained by the intermediary and are not shared with American Century or the funds. American Century has contracts with certain financial intermediaries requiring them to track the time investment orders are received and to comply with procedures relating to the transmission of orders. The funds have authorized those intermediaries to accept orders on each fund's behalf up to the time at which the net asset value is determined. If those orders are transmitted to American Century and paid for in accordance with the contract, they will be priced at the net asset value next determined after your request is received in the form required by the intermediary on a fund's behalf. CALLOUT Financial intermediaries include banks, broker-dealers, insurance companies and investment advisors. Share Price and Distributions Share Price American Century determines the net asset value (NAV) of the funds as of the close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern time) on each day the Exchange is open. On days when the Exchange is not open (including certain U.S. holidays), we do not calculate the NAV. The NAV of a fund share is the current value of the fund's assets, minus any liabilities, divided by the number of fund shares outstanding. If current market prices of securities owned by a fund are not readily available, the advisor may determine their fair value in accordance with procedures adopted by the fund's Board. Trading of securities in foreign markets may not take place every day the Exchange is open. Also, trading in some foreign markets may take place on weekends or holidays when a fund's NAV is not calculated. So, the value of a fund's portfolio may be affected on days when you can't purchase or redeem shares of the fund. We will price your purchase, exchange or redemption at the NAV next determined after we receive your transaction request in good order. Distributions Federal tax laws require each fund to make distributions to its shareholders in order to qualify as a "regulated investment company." Qualification as a regulated investment company means that the funds will not be subject to state or federal income tax on amounts distributed. The distributions generally consist of dividends and interest received, as well as capital gains realized on the sale of investment securities. Each fund generally pays distributions from net income and capital gains, if any, once a year in December. They may make more frequent distributions if necessary to comply with Internal Revenue Code provisions. You will participate in fund distributions, when they are declared, starting on the day after your purchase is effective. For example, if you purchase shares on a day that a distribution is declared, you will not receive that distribution. If you redeem shares, you will receive any distribution declared on the day you redeem. If you redeem all shares, we will include any distributions received with your redemption proceeds. Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing through taxable accounts, we will reinvest distributions unless you elect to receive them in cash. Please consult your services guide for further information regarding distributions and your distribution options. CALLOUTS The net asset value of a fund is the price of the fund's shares. Capital gains are increases in the values of capital assets, such as stock, from the time the assets are purchased. Tax becomes due on capital gains once an asset is sold. Taxes The tax consequences of owning shares of the funds will vary depending on whether you own them through a taxable or tax-deferred account. Tax consequences result from distributions by the funds of dividend and interest income they have received or capital gains they have generated through their investment activities. Tax consequences also result from sales of fund shares by investors after the net asset value has increased or decreased. Tax-Deferred Accounts If you purchase fund shares through a tax-deferred account, such as an IRA or a qualified employer-sponsored retirement or savings plan, income and capital gains distributions usually will not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Likewise, moving from one fund to another fund within a plan or tax-deferred account generally will not cause you to be taxed. For information about the tax consequences of making purchases or withdrawals through an employer-sponsored retirement or savings plan, or through an IRA, please consult your plan administrator, your summary plan description or a professional tax advisor. Taxable Accounts If you own fund shares through a taxable account, distributions by the fund and sales by you of fund shares may cause you to be taxed. Taxability of Distributions Fund distributions may consist of income earned by the fund from sources such as dividends and interest, or capital gains generated from the sale of fund investments. Distributions of income are taxed as ordinary income. Distributions of capital gains are classified either as short term or long term and are taxed as follows: Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above - ------------------------------------------ ---------------------------------------- ----------------------------------------- Short-term capital gains Ordinary income rate Ordinary income rate Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long the fund held the underlying security that was sold, not by how long you have been invested in the fund or whether you reinvest your distributions in additional shares or take them in cash. American Century will send you the tax status of fund distributions for each calendar year in an annual tax mailing (Form 1099-DIV) from the fund. Distributions also may be subject to state and local taxes. Because everyone's tax situation is unique, always consult your tax professional about federal, state and local tax consequences. Taxes on Transactions Your redemptions -- including exchanges to other American Century funds -- are subject to capital gains tax. The table above can provide a general guide for your potential tax liability when selling or exchanging fund shares. Short-term capital gains are gains on fund shares you held for 12 months or less. Long-term capital gains are gains on fund shares you held for more than 12 months. If your shares decrease in value, their sale or exchange will result in a long-term or short-term capital loss. However, you should note that 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 gains to you with respect to such shares. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the wash sale rules of the Internal Revenue Code. This may result in a postponement of the recognition of such loss for federal income tax purposes. If you have not certified to us that your Social Security number or tax identification number is correct and that you are not subject to 31% withholding, we are required to withhold and remit 31% of dividends, capital gains distributions and redemptions to the IRS. CALLOUT Buying a Dividend Purchasing fund shares in a taxable account shortly before a distribution is sometimes known as buying a dividend. In taxable accounts, you must pay income taxes on the distribution whether you reinvest the distribution or take it in cash. In addition, you will have to pay taxes on the distribution whether the value of your investment decreased, increased or remained the same after you bought the fund shares. The risk in buying a dividend is that a fund's portfolio may build up taxable gains throughout the period covered by a distribution, as securities are sold at a profit. We distribute those gains to you, after subtracting any losses, even if you did not own the shares when the gains occurred. If you buy a dividend, you incur the full tax liability of the distribution period, but you may not enjoy the full benefit of the gains realized in the fund's portfolio. Multiple Class Information American Century offers three classes of the funds: Investor Class, Institutional Class and Advisor Class. The shares offered by this Prospectus are Investor Class shares and have no up-front or deferred charges, commissions or 12b-1 fees. American Century offers the other classes of shares primarily to institutional investors through institutional distribution channels, such as employer-sponsored retirement plans, or through banks, broker-dealers and insurance companies. The other classes have different fees, expenses and/or minimum investment requirements than the Investor Class. The difference in the fee structures between the classes is the result of their separate arrangements for shareholder and distribution services and not the result of any difference in amounts charged by the advisor for core investment advisory services. Accordingly, the core investment advisory expenses do not vary by class. Different fees and expenses will affect performance. For additional information concerning the other classes of shares not offered by this Prospectus, call us at 1-800-345-3533 for Advisor or Institutional Class shares. You also can contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences between the classes are (a) each class may be subject to different expenses specific to that class; (b) each class has a different identifying designation or name; (c) each class has exclusive voting rights with respect to matters solely affecting such class; (d) each class may have different exchange privileges; and (e) the Institutional Class may provide for automatic conversion from that class into shares of the Investor Class of the same fund. More information about the funds is contained in these documents Annual and Semiannual Reports. These reports contain more information about the funds' investments and the market conditions and investment strategies that significantly affected the funds' performance during the most recent fiscal period. Statement of Additional Information. The SAI contains a more detailed, legal description of the funds' operations, investment restrictions, policies and practices. The SAI is incorporated by reference into this Prospectus. This means that it is legally part of this Prospectus, even if you don't request a copy. You may obtain a free copy of the SAI or annual and semiannual reports, and ask questions about the funds or your accounts, by contacting American Century at the address or telephone numbers listed below. You also can get information about the funds (including the SAI) from the Securities and Exchange Commission (SEC). In person SEC Public Reference Room Washington, D.C. Call 1-800-SEC-0330 for location and hours. On the internet WWW.SEC.GOV. By mail SEC Public Reference Section Washington, D.C. 20549-6009 (The SEC will charge a fee for copying the documents.) Investment Company Act File No. 811-0816 American Century Investments P.O. Box 419200 Kansas City, Missouri 64141-6200 1-800-345-2021 or 816-531-5575 9910 SH-PRS-xxxxx American Century Prospectus AC Fund AC Large-Cap Fund INSTITUTIONAL CLASS NOVEMBER 8, 1999 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME. DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. Dear Investor, Reading a prospectus doesn't have to be a chore. We've done the hard work so you can focus on what's important--learning about the funds and tracking your investments. Take a look inside, and you'll see this prospectus is different. It takes a clear-cut approach to fund information. Here's what you'll find: o The funds' primary investments and risks o A description of who may or may not want to invest in the funds o An overview of services available and ways to manage your accounts o Helpful tips and definitions of key investment terms Whether you're a current investor or investing in mutual funds for the first time, this prospectus will give you a clear understanding of the funds. If you have questions, our Service Representatives are available weekdays 8 a.m. to 5 p.m. Central time. Our toll-free number is 1-800-345-3533. We look forward to helping you achieve your financial goals. Sincerely, Mark Killen Senior Vice President American Century Investment Services, Inc. Table of Contents An Overview of the Funds.......................................................2 Fund Performance History.......................................................3 Fees and Expenses..............................................................4 Information about the Funds AC Fund AC Large-Cap Fund..............................................................5 Management.....................................................................7 Investing with American Century...............................................XX Share Price and Distributions.................................................XX Taxes.........................................................................XX CALLOUT Throughout this book you'll find definitions of key investment terms and phrases. When you see a word printed in green italics, look for its definition in the left margin. This symbol highlights special information and helpful tips. An Overview of the Funds What are the funds' investment objectives? These funds seek long-term capital growth. What are the funds' primary investment strategies and principal risks? The funds use a systematic, highly-automated approach to common stock investing. This approach is designed to identify companies that are growing and whose share price patterns suggest their stocks are likely to increase in value. A more detailed description of the funds' investment style begins on page __. The funds' principal risks include o High Turnover - The funds'portfolio turnover may be very high. This could result in relatively high commission costs and capital gains tax liabilities for the funds and their shareholders, which may hurt the funds' performance. o Market Risk - The value of a fund's shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. o Price Volatility - The value of the funds' shares may fluctuate significantly in the short term. o Principal Loss - As with all mutual funds, if you sell your shares when their value is less than the price you paid, you will lose money. o Nondiversification - From time to time, the funds may pursue investment opportunities that cause them to become temporarily nondiversified. In a nondiversified fund, a price change in a single security may have a greater impact on the fund's share price than would be the case in a diversified fund. Who may want to invest in the funds? The funds may be a good investment if you are o seeking long-term capital growth from your investment o comfortable with the funds' short-term price volatility o comfortable with the risks associated with the funds' investment strategy o investing through an IRA or other tax-advantaged retirement plan Who may not want to invest in the funds? The funds may not be a good investment if you are o seeking current income from your investment o investing for a short period of time o uncomfortable with short-term volatility in the value of your investment CALLOUT Portfolio turnover is a measure of how frequently a fund buys and sells portfolio securities. CALLOUT A nondiversified fund may invest a greater percentage of its assets in a particular portfolio security than may a diversified fund. CALLOUT An investment in the funds is not a bank deposit, and it is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Fund Performance History As new funds, the funds' performance history is not available as of the date of this Prospectus. CALLOUT For current performance information, please call us at 1-800-345-3533 or visit American Century's Web site at www.americancentury.com. Fees and Expenses There are no sales loads, fees or other charges o to buy fund shares directly from American Century o to reinvest dividends in additional shares The following table describes the fees and expenses that you will pay if you buy and hold shares of the funds. Shareholder Transaction Expenses (fees paid directly from your investment) Redemption/Exchange Fee(as a percentage of amount redeemed/exchanged) Shares held for less than five years (1) 2.0% Shares held for five years or more None 1 The fee withheld from redemption/exchange proceeds is retained by the fund. Annual Operating Expenses (expenses that are deducted from fund assets) Management Distribution and Other Total Annual Fund Fee Service (12b-1) Fees Expenses(1) Operating Expenses --- -------------------- ----------- ------------------ AC Fund 1.30% None 0.00% 1.30% AC Large-Cap 1.15% None 0.00% 1.15%
1 Other expenses, which include the fees and expenses of the funds' independent directors, their legal counsel and interest, are expected to be less than 0.005% for the current fiscal year. Example The examples in the table below are intended to help you compare the costs of investing in a fund with the costs of investing in other mutual funds. Assuming you ... o invest $10,000 in the fund o redeem all of your shares at the end of the periods shown below o earn a 5% return each year o incur the same operating expenses as shown above ... your cost of investing in the fund would be: 1 year 3 years AC Fund $339 $633 AC Large-Cap $324 $588 You would pay the following expenses if you did not redeem your shares: 1 year 3 years AC Fund $132 $410 AC Large-Cap $117 $364 CALLOUT Use this example to compare the costs of investing in other funds. Of course, your actual costs may be higher or lower. Information about the Funds AC Fund AC Large-Cap Fund What are the funds' investment objectives? These funds seek long-term capital growth. How do the funds pursue their investment objectives? The funds use a systematic, highly-automated approach to common stock investing developed by American Century. This approach relies heavily on quantitative tools to identify attractive investment opportunities on a disciplined, consistent basis. It utilizes a fundamental screening process to identify attractive companies and a technical signal generator to determine optimum buy and sell points based on a stock's historical price trends. The quantitative tools used to identify attractive companies do so by screening thousands of publicly traded securities to identify those that are growing. The methodology identifies companies whose earnings and revenues are growing at a successively faster, or accelerating, pace. A second portion of the methodology attempts to identify companies whose share price patterns suggest that they are likely to either rise or fall in price (commonly referred to as technical analysis). This process is particularly oriented to identifying attractive price patterns for companies demonstrating the accelerating growth described above. These would be candidates for purchase. Conversely, companies whose share price patterns suggest they are likely to decline in price would be candidates for sale, if owned by the fund. On occasion, the process may look favorably on share price patterns that appear attractive even though the earnings of the underlying company are not growing at an accelerating rate. Although the funds are expected to invest primarily in U.S. companies, there is no limit on the amount of assets the funds can invest in foreign companies. Investments in foreign securities present some unique risks that are more fully described in the funds' Statement of Additional Information. The fund managers do not attempt to time the market. Instead, they intend to keep the funds essentially fully invested in stocks regardless of the movement of stock prices generally. However, in the fund managers' discretion, the funds may invest up to 100% of their assets in U.S. government securities if the funds' investment methodology fails to generate sufficient investment ideas or to respond to adverse market, economic, political or other conditions. The funds may not achieve their investment objectives while taking such a temporary defensive position. When the managers believe that it is prudent, the funds also may invest a portion of their assets in convertible securities, short-term instruments, and non-leveraged futures and options. Futures and options can help the funds' cash assets remain liquid while performing more like stocks. The funds have a policy governing futures and options and similar derivative securities to help manage the risk of these types of investments. A complete description of the derivatives policy is included in the Statement of Additional Information. CALLOUT Accelerating growth is shown, for example, by growth that is faster this quarter than last or faster this year than the year before. CALLOUT Non-leveraged means that the fund may not invest in futures contracts where it would be possible to lose more than the fund invested. What kinds of securities do the funds buy? The funds will usually purchase common stocks of U.S. and foreign companies, but they can purchase other types of securities as well, such as domestic and foreign preferred stocks, convertible securities, equity equivalent securities, notes, bonds and other debt securities. The funds limit their purchase of debt securities to investment-grade obligations. What are the differences between the funds? AC Large-Cap generally invests in larger companies. Companies considered to be large generally have a market capitalization in excess of $5 billion. AC Fund, by contrast, may invest in companies of any size. What are the primary risks of investing in the funds? The process driving the funds is specifically designed to respond quickly to changing stock market conditions. As a result, the funds' portfolio turnover may be significantly higher than that of many other funds. This heavy turnover, perhaps as much as 200-300% per year or more, could result in relatively high commission costs, substantial capital gain realizations for the funds, and capital gains tax liabilities for the funds' shareholders. The value of a fund's shares depends on the value of the stocks and other securities it owns. The value of the individual securities a fund owns will go up and down depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fund managers may buy a large amount of a company's stock quickly, and often will dispose of it quickly if the company's earnings or revenues decline. While the managers believe this strategy provides substantial appreciation potential over the long term, in the short term it can create a significant amount of share price volatility. This volatility can be greater than that of the average stock fund. As with all funds, at any given time the value of your shares may be worth more or less than the price you paid. If you sell your shares when the value is less than the price you paid, you will lose money. Market performance tends to be cyclical, and in the various cycles, certain investment styles may fall in and out of favor. If the market is not favoring the funds' style, the funds' gains may not be as big as, or their losses may be bigger than, other equity funds using different investment styles. Although the fund managers intend to invest the funds' assets primarily in U.S. stocks, the funds may invest in securities of foreign companies. To the extent a fund invests in foreign securities, the overall risk of the fund could be affected. Foreign securities can have certain unique risks, including fluctuations in currency exchange rates, less stable political and economic structures, reduced availability of public information, and lack of uniform financial reporting and regulatory practices similar to those that apply in the United States. These factors make investing in foreign securities generally riskier than investing in U.S. stocks. CALLOUT Market capitalization is the value of a company as determined by multiplying the number of shares of its stock outstanding by its current market price per share. Management Who manages the funds? The Board of Directors, investment advisor and fund management team play key roles in the management of the funds. The Board of Directors The Board of Directors oversees the management of the funds and meets at least quarterly to review reports about fund operations. Although the Board of Directors does not manage the funds, it has hired an investment advisor to do so. More than two-thirds of the directors are independent of the funds' advisor; that is, they are not employed by and have no financial interest in the advisor. The Investment Advisor The funds' investment advisor is American Century Investment Management, Inc. The advisor has been managing mutual funds since 1958. American Century is headquartered at 4500 Main Street, Kansas City, Missouri 64111. The advisor is responsible for managing the investment portfolios of the funds and directing the purchase and sale of their investment securities. The advisor also arranges for transfer agency, custody and all other services necessary for the funds to operate. For the services it provides to the funds, the advisor receives a unified management fee of 1.30% of the average net assets of the Institutional Class shares of AC Fund and 1.15% of the average net assets of the Institutional Class shares of AC Large-Cap. The amount of the management fee is calculated on a class-by-class basis daily and paid monthly. The Statement of Additional Information contains detailed information about the calculation of the management fee. Out of that fee, the advisor pays all expenses of managing and operating the funds except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses. A portion of the management fee may be paid by the funds' advisor to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the advisor. The Fund Management Teams The advisor uses teams of portfolio managers, assistant portfolio managers and analysts to manage the funds. Teams meet regularly to review portfolio holdings and to discuss purchase and sale activity. Team members buy and sell securities for a fund as they see fit, guided by the fund's investment objective and strategy. The portfolio managers on the investment teams are identified below: James E. Stowers III Mr. Stowers, Chief Executive Officer and Portfolio Manager, has been a member of the team that manages the funds since their inception in November 1999. He also is the Chief Investment Officer-U.S. Growth Equities and as such oversees the investment discipline used by the funds and seven other growth funds. He joined American Century in 1981. He has a bachelor's degree in finance from Arizona State University. John Small Jr. Mr. Small, Portfolio Manager, has been a member of the team that manages the funds since their inception in November 1999. He was promoted to Portfolio Manager in February 1999. Since 1994 he has worked as an analyst and Portfolio Manager for the Ultra fund. He joined American Century in May 1991. He has more than 20 years experience with the U.S. Air Force. He has a bachelor's degree from Rockford College and a master's degree in laser optics physics from the Air Force Institute of Technology. He also has an MBA from Baker University. CALLOUT Code of Ethics American Century has a Code of Ethics designed to ensure that the interests of fund shareholders come before the interests of the people who manage the funds. Among other provisions, the Code of Ethics prohibits portfolio managers and other investment personnel from buying securities in an initial public offering or from profiting from the purchase and sale of the same security within 60 calendar days. In addition, the Code of Ethics requires portfolio managers and other employees with access to information about the purchase or sale of securities by the funds to obtain approval before executing permitted personal trades. Fundamental Investment Policies Fundamental investment policies contained in the Statement of Additional Information and the investment objective of the funds may not be changed without a shareholder vote. The Board of Directors may change any other policies and investment strategies. Year 2000 Issues Many of the world's computer systems were originally programmed in a way that prevented them from properly recognizing or processing date-sensitive information relating to the Year 2000 and beyond. Because this may impact the computer systems of various American Century-affiliated and external service providers for the funds, American Century formally initiated a Year 2000 readiness project in July 1997. It involves a team of information technology professionals assisted by outside consultants and guided by a senior-level steering committee. The team's goal is to assess the impact of the Year 2000 on American Century's systems, renovate or replace noncompliant critical systems and test those systems. In addition, the team has been working to gather information about the Year 2000 efforts of the funds' other major service providers. Although American Century believes its critical systems will function properly in the Year 2000, this is not guaranteed. If the efforts of American Century or its external service providers are not successful, the funds' business, particularly the provision of shareholder services, may be hampered. In addition, the issuers of securities the funds own could have Year 2000 computer problems. Foreign issuers, especially those in emerging markets, may be more susceptible to such problems than U.S. issuers. These problems could negatively affect the value of the issuers' securities, which, in turn, could impact the funds' performance. The advisor has established a process to gather publicly available information about the Year 2000 readiness of these issuers. However, this process may not uncover all relevant information, and the information gathered may not be complete and accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors the fund managers may consider when making investment decisions, and other factors may receive greater weight. Investing With American Century Eligibility for Institutional Class Shares The Institutional Class shares are made available for purchase by large institutional shareholders, such as bank trust departments, corporations, retirement plans, endowments, foundations and financial advisors that meet the funds' minimum investment requirements. Institutional Class shares are not available for purchase by insurance companies for variable annuity and variable life products. Minimum Initial Investment Amounts The minimum investment is $5 million ($3 million for endowments and foundations) per fund. If you invest with us through a financial intermediary, the minimum investment requirement may be met by aggregating the investments of various clients of your financial intermediary. The minimum investment requirement may be waived if you or your financial intermediary, if applicable, has an aggregate investment in our family of funds of $10 million or more ($5 million for endowments and foundations). In addition, financial intermediaries or plan recordkeepers may require retirement plans to meet certain additional requirements, such as plan size or a minimum level of assets per participant, in order to be eligible to purchase Institutional Class shares. Redemption of Shares in Low-Balance Accounts If your balance or the balance of your financial intermediary, if applicable, falls below the minimum investment requirements due to redemptions or exchanges, we reserve the right to convert your shares to Investor Class shares of the same fund. The Investor Class shares have a unified management fee that is 0.20% higher than the Institutional Class. Services Automatically Available to You You automatically will have access to the services listed below when you open your account. If you do not want these services, see "Conducting Business in Writing" below. Conducting Business in Writing If you prefer to conduct business in writing only, you can indicate this on the account application. If you choose this option, you must provide written instructions to invest, exchange and redeem. All account owners must sign transaction instructions (with signatures guaranteed for redemptions in excess of $100,000). If you want to add services later, you can complete an Investor Service Options form.
Ways to Manage Your Account - ---------------------------------- ---------------------------------------------- ----------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- By telephone Open an account Make additional investments Service Represetative If you are a current investor, you can open Call us if you have authorized us to invest 1-800-345-3533 an account by exchanging shares from another from your bank account. American Century account. Sell shares Exchange shares Call a Service Representative. Call us or use our Automated Information Line if you have authorized us to accept telephone instructions. - ---------------------------------- ---------------------------------------------- ----------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- By mail or fax Open an account Make additional investments P.O. Box 419385 Send a signed, completed application and Send us your check or money order for at Kansas City, MO 64141-6385 check or money order payable to American least $50 with an investment slip or $250 Century Investments. without an investment slip. If you don't have Fax an investment slip, include your name, 816-340-4655 Exchange shares address and account number on your check or Send us written instructions to exchange money order. your shares from one American Century account to another. Sell shares Send us written instructions or a redemption form to sell shares. Call a Service Representative to request a form. - ---------------------------------- ---------------------------------------------- ----------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- By wire Open an account Make additional investments Call us to set up your account or mail a Follow the wire instructions provided in the completed application to the address "Open an account" section provided in the "By Mail" section and give your bank the following information. Sell shares Our bank information: You can receive redemption proceeds by wire * Please remember that if Commerce Bank N.A. or electronic transfer. you request redemptions by Routing No. 101000019 wire, $10 will be deducted Account No. 2804918 from the amount redeemed. The fund name Your bank also may charge a Your American Century account number* fee. Your name Exchange shares The contribution year (for IRAs only) Not available. *For additional investments only - ---------------------------------- ---------------------------------------------- ----------------------------------------------- - ---------------------------------- ---------------------------------------------- ----------------------------------------------- Automatically Open an account Make additional investments Not available. Select "Establish Automatic Investments" on your account application to make automatic Exchange shares purchases of shares on a regular basis. You Send us written instructions to set up an must invest at least $600 per year per automatic exchange of your shares from one account. American Century account to another. Sell shares If you have at least $10,000 in your account, you may sell shares automatically by establishing Check-A-Month or Automatic Redemption plans.
Abusive Trading Practices We do not permit market timing or other abusive trading practices in our funds. Excessive, short-term (market timing) or other abusive trading practices may disrupt portfolio management strategies and harm fund performance. To minimize harm to the funds and their shareholders, we reserve the right to reject any purchase order (including exchanges) from any investor we believe has a history of abusive trading or whose trading, in our judgment, has been or may be disruptive to a fund. In making this judgment, we may consider trading done in multiple accounts under common ownership or control. We also reserve the right to delay delivery of your redemption proceeds--up to seven days--or to honor certain redemptions with securities, rather than cash, as described in the next section. Special Requirements for Large Redemptions If, during any 90-day period, you redeem fund shares worth more than $250,000 (or 1% of the assets of the fund if that percentage is less than $250,000), we reserve the right to pay part or all of the redemption proceeds in excess of this amount in readily marketable securities instead of cash. If we make payment in securities, we will value the securities selected by the fund managers, in the same manner as we do in computing the fund's net asset value. We may provide these securities in lieu of cash without prior notice. If your redemption would exceed this limit and you would like to avoid being paid in securities, please provide us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. This minimizes the effect of the redemption on the fund and its remaining shareholders. Investing through Financial Intermediaries If you own or are considering purchasing shares through a financial intermediary or a retirement plan, your ability to purchase, exchange and redeem shares will depend on the policies of that entity. Some policy differences may include * minimum investment requirements * exchange policies * fund choices * cutoff time for investments Please contact your financial intermediary or plan sponsor for a complete description of its policies. Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by American Century's transfer agent. In some circumstances, American Century will pay the service provider a fee for performing those services. Although transactions in fund shares may be made directly with American Century at no charge, you also may purchase, redeem and exchange fund shares through financial intermediaries that charge a transaction-based or other fee for their services. Those charges are retained by the intermediary and are not shared with American Century or the funds. American Century has contracts with certain financial intermediaries requiring them to track the time investment orders are received and to comply with procedures relating to the transmission of orders. The funds have authorized those intermediaries to accept orders on each fund's behalf up to the time at which the net asset value is determined. If those orders are transmitted to American Century and paid for in accordance with the contract, they will be priced at the net asset value next determined after your request is received in the form required by the intermediary on a fund's behalf. CALLOUT Financial intermediaries include banks, broker-dealers, insurance companies and investment advisors. Share Price and Distributions Share Price American Century determines the net asset value (NAV) of the funds as of the close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern time) on each day the Exchange is open. On days when the Exchange is not open (including certain U.S. holidays), we do not calculate the NAV. The NAV of a fund share is the current value of the fund's assets, minus any liabilities, divided by the number of fund shares outstanding. If current market prices of securities owned by a fund are not readily available, the advisor may determine their fair value in accordance with procedures adopted by the fund's Board. Trading of securities in foreign markets may not take place every day the Exchange is open. Also, trading in some foreign markets may take place on weekends or holidays when a fund's NAV is not calculated. So, the value of a fund's portfolio may be affected on days when you can't purchase or redeem shares of the fund. We will price your purchase, exchange or redemption at the NAV next determined after we receive your transaction request in good order. Distributions Federal tax laws require each fund to make distributions to its shareholders in order to qualify as a "regulated investment company." Qualification as a regulated investment company means that the funds will not be subject to state or federal income tax on amounts distributed. The distributions generally consist of dividends and interest received, as well as capital gains realized on the sale of investment securities. Each fund generally pays distributions from net income and capital gains, if any, once a year in December. They may make more frequent distributions if necessary to comply with Internal Revenue Code provisions. You will participate in fund distributions, when they are declared, starting on the day after your purchase is effective. For example, if you purchase shares on a day that a distribution is declared, you will not receive that distribution. If you redeem shares, you will receive any distribution declared on the day you redeem. If you redeem all shares, we will include any distributions received with your redemption proceeds. Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing through taxable accounts, we will reinvest distributions unless you elect to receive them in cash. CALLOUTS The net asset value of a fund is the price of the fund's shares. Capital gains are increases in the values of capital assets, such as stock, from the time the assets are purchased. Tax becomes due on capital gains once an asset is sold. Taxes The tax consequences of owning shares of the funds will vary depending on whether you own them through a taxable or tax-deferred account. Tax consequences result from distributions by the funds of dividend and interest income they have received or capital gains they have generated through their investment activities. Tax consequences also result from sales of fund shares by investors after the net asset value has increased or decreased. Tax-Deferred Accounts If you purchase fund shares through a tax-deferred account, such as an IRA or a qualified employer-sponsored retirement or savings plan, income and capital gains distributions usually will not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Likewise, moving from one fund to another fund within a plan or tax-deferred account generally will not cause you to be taxed. For information about the tax consequences of making purchases or withdrawals through an employer-sponsored retirement or savings plan, or through an IRA, please consult your plan administrator, your summary plan description or a professional tax advisor. Taxable Accounts If you own fund shares through a taxable account, distributions by the fund and sales by you of fund shares may cause you to be taxed. Taxability of Distributions Fund distributions may consist of income earned by the fund from sources such as dividends and interest, or capital gains generated from the sale of fund investments. Distributions of income are taxed as ordinary income. Distributions of capital gains are classified either as short term or long term and are taxed as follows: Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above - ------------------------------------------ ---------------------------------------- ----------------------------------------- Short-term capital gains Ordinary income rate Ordinary income rate Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long the fund held the underlying security that was sold, not by how long you have been invested in the fund or whether you reinvest your distributions in additional shares or take them in cash. American Century will send you the tax status of fund distributions for each calendar year in an annual tax mailing (Form 1099-DIV) from the fund. Distributions also may be subject to state and local taxes. Because everyone's tax situation is unique, always consult your tax professional about federal, state and local tax consequences. Taxes on Transactions Your redemptions -- including exchanges to other American Century funds -- are subject to capital gains tax. The table above can provide a general guide for your potential tax liability when selling or exchanging fund shares. Short-term capital gains are gains on fund shares you held for 12 months or less. Long-term capital gains are gains on fund shares you held for more than 12 months. If your shares decrease in value, their sale or exchange will result in a long-term or short-term capital loss. However, you should note that 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 gains to you with respect to such shares. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the wash sale rules of the Internal Revenue Code. This may result in a postponement of the recognition of such loss for federal income tax purposes. If you have not certified to us that your Social Security number or tax identification number is correct and that you are not subject to 31% withholding, we are required to withhold and remit 31% of dividends, capital gains distributions and redemptions to the IRS. CALLOUT Buying a Dividend Purchasing fund shares in a taxable account shortly before a distribution is sometimes known as buying a dividend. In taxable accounts, you must pay income taxes on the distribution whether you reinvest the distribution or take it in cash. In addition, you will have to pay taxes on the distribution whether the value of your investment decreased, increased or remained the same after you bought the fund shares. The risk in buying a dividend is that a fund's portfolio may build up taxable gains throughout the period covered by a distribution, as securities are sold at a profit. We distribute those gains to you, after subtracting any losses, even if you did not own the shares when the gains occurred. If you buy a dividend, you incur the full tax liability of the distribution period, but you may not enjoy the full benefit of the gains realized in the fund's portfolio. Multiple Class Information American Century offers three classes of the funds: Investor Class, Institutional Class and Advisor Class. The shares offered by this Prospectus are Institutional Class shares and are offered primarily to institutional investors through institutional distribution channels, such as employer-sponsored retirement plans, or through banks, broker-dealers and insurance companies. The Investor Class, which has no up-front or deferred charges, commissions or 12b-1 fees, is offered primarily to retail investors. The other classes have different fees, expenses and/or minimum investment requirements than the Institutional Class. The difference in the fee structures between the classes is the result of their separate arrangements for shareholder and distribution services and not the result of any difference in amounts charged by the advisor for core investment advisory services. Accordingly, the core investment advisory expenses do not vary by class. Different fees and expenses will affect performance. For additional information concerning the other classes of shares not offered by this Prospectus, call us at * 1-800-345-2021 for Investor Class shares * 1-800-345-3533 for Advisor Class shares You also can contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of the funds have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences between the classes are (a) each class may be subject to different expenses specific to that class; (b) each class has a different identifying designation or name; (c) each class has exclusive voting rights with respect to matters solely affecting such class; (d) each class may have different exchange privileges; and (e) the Institutional Class may provide for automatic conversion from that class into shares of the Investor Class of the same fund. More information about the funds is contained in these documents Annual and Semiannual Reports. These reports contain more information about the funds' investments and the market conditions and investment strategies that significantly affected the funds' performance during the most recent fiscal period. Statement of Additional Information. The SAI contains a more detailed, legal description of the funds' operations, investment restrictions, policies and practices. The SAI is incorporated by reference into this Prospectus. This means that it is legally part of this Prospectus, even if you don't request a copy. You may obtain a free copy of the SAI or annual and semiannual reports, and ask questions about the funds or your accounts, by contacting American Century at the address or telephone numbers listed below. You also can get information about the funds (including the SAI) from the Securities and Exchange Commission (SEC). In person SEC Public Reference Room Washington, D.C. Call 1-800-SEC-0330 for location and hours. On the internet WWW.SEC.GOV. By mail SEC Public Reference Section Washington, D.C. 20549-6009 (The SEC will charge a fee for copying the documents.) Investment Company Act File No. 811-0816 American Century Investments P.O. Box 419385 Kansas City, Missouri 64141-6385 1-800-345-3533 or 816-531-5575 9910 SH-PRS-xxxxx American Century Prospectus AC Fund AC Large-Cap Fund ADVISOR CLASS NOVEMBER 14, 1999 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME. DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME. DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. Dear Investor, Reading a prospectus doesn't have to be a chore. We've done the hard work so you can focus on what's important--learning about the funds and tracking your investments. Take a look inside, and you'll see this prospectus is different. It takes a clear-cut approach to fund information. Here's what you'll find: o The funds' primary investments and risks o A description of who may or may not want to invest in the funds o An overview of services available and ways to manage your accounts o Helpful tips and definitions of key investment terms Whether you're a current investor or investing in mutual funds for the first time, this prospectus will give you a clear understanding of the funds. If you have questions, our Service Representatives are available weekdays 8 a.m. to 5 p.m. Central time. Our toll-free number is 1-800-345-3533. We look forward to helping you achieve your financial goals. Sincerely, Mark Killen Senior Vice President American Century Investment Services, Inc. Table of Contents An Overview of the Funds....................................................2 Fund Performance History....................................................3 Fees and Expenses...........................................................4 Information about the Funds AC Fund AC Large-Cap Fund...........................................................5 Management..................................................................7 Investing with American Century............................................XX Share Price and Distributions..............................................XX Taxes......................................................................XX Multiple Class Information.................................................XX CALLOUT Throughout this book you'll find definitions of key investment terms and phrases. When you see a word printed in green italics, look for its definition in the left margin. This symbol highlights special information and helpful tips. An Overview of the Funds What are the funds' investment objectives? These funds seek long-term capital growth. What are the funds' primary investment strategies and principal risks? The funds use a systematic, highly-automated approach to common stock investing. This approach is designed to identify companies that are growing and whose share price patterns suggest their stocks are likely to increase in value. A more detailed description of the funds' investment style begins on page __. The funds' principal risks include o High Turnover - The funds'portfolio turnover may be very high. This could result in relatively high commission costs and capital gains tax liabilities for the funds and their shareholders, which may hurt the funds' performance. o Market Risk - The value of a fund's shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. o Price Volatility - The value of the funds' shares may fluctuate significantly in the short term. o Principal Loss - As with all mutual funds, if you sell your shares when their value is less than the price you paid, you will lose money. o Nondiversification - From time to time, the funds may pursue investment opportunities that cause them to become temporarily nondiversified. In a nondiversified fund, a price change in a single security may have a greater impact on the fund's share price than would be the case in a diversified fund. Who may want to invest in the funds? The funds may be a good investment if you are o seeking long-term capital growth from your investment o comfortable with the funds' short-term price volatility o comfortable with the risks associated with the funds' investment strategy o investing through an IRA or other tax-advantaged retirement plan Who may not want to invest in the funds? The funds may not be a good investment if you are o seeking current income from your investment o investing for a short period of time o uncomfortable with short-term volatility in the value of your investment CALLOUT Portfolio turnover is a measure of how frequently a fund buys and sells portfolio securities. CALLOUT A nondiversified fund may invest a greater percentage of its assets in a particular portfolio security than may a diversified fund. CALLOUT An investment in the funds is not a bank deposit, and it is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Fund Performance History As new funds, the funds' performance history is not available as of the date of this Prospectus. CALLOUT For current performance information, please call us at 1-800-345-3533 or visit American Century's Web site at www.americancentury.com. Fees and Expenses There are no sales loads, fees or other charges o to buy fund shares directly from American Century o to reinvest dividends in additional shares The following table describes the fees and expenses that you will pay if you buy and hold shares of the funds. Shareholder Transaction Expenses (fees paid directly from your investment) Redemption/Exchange Fee(as a percentage of amount redeemed/exchanged) Shares held for less than five years (1) 2.0% Shares held for five years or more None 1 The fee withheld from redemption/exchange proceeds is retained by the fund. Annual Operating Expenses (expenses that are deducted from fund assets) Management Distribution and Other Total Annual Fund Fee Service (12b-1) Fees Expenses(1) Operating Expenses AC Fund 1.25% 0.50% 0.00% 1.75% AC Large-Cap 1.10% 0.50% 0.00% 1.60%
1 Other expenses, which include the fees and expenses of the funds' independent directors, their legal counsel and interest, are expected to be less than 0.005% for the current fiscal year. Example The examples in the table below are intended to help you compare the costs of investing in a fund with the costs of investing in other mutual funds. Assuming you ... o invest $10,000 in the fund o redeem all of your shares at the end of the periods shown below o earn a 5% return each year o incur the same operating expenses as shown above ... your cost of investing in the fund would be: 1 year 3 years AC Fund $383 $767 AC Large-Cap $369 $723 You would pay the following expenses if you did not redeem your shares: 1 year 3 years AC Fund $177 $548 AC Large-Cap $162 $502 CALLOUT Use this example to compare the costs of investing in other funds. Of course, your actual costs may be higher or lower. Information about the Funds AC Fund AC Large-Cap Fund What are the funds' investment objectives? These funds seek long-term capital growth. How do the funds pursue their investment objectives? The funds use a systematic, highly-automated approach to common stock investing developed by American Century. This approach relies heavily on quantitative tools to identify attractive investment opportunities on a disciplined, consistent basis. It utilizes a fundamental screening process to identify attractive companies and a technical signal generator to determine optimum buy and sell points based on a stock's historical price trends. The quantitative tools used to identify attractive companies do so by screening thousands of publicly traded securities to identify those that are growing. The methodology identifies companies whose earnings and revenues are growing at a successively faster, or accelerating, pace. A second portion of the methodology attempts to identify companies whose share price patterns suggest that they are likely to either rise or fall in price (commonly referred to as technical analysis). This process is particularly oriented to identifying attractive price patterns for companies demonstrating the accelerating growth described above. These would be candidates for purchase. Conversely, companies whose share price patterns suggest they are likely to decline in price would be candidates for sale, if owned by the fund. On occasion, the process may look favorably on share price patterns that appear attractive even though the earnings of the underlying company are not growing at an accelerating rate. Although the funds are expected to invest primarily in U.S. companies, there is no limit on the amount of assets the funds can invest in foreign companies. Investments in foreign securities present some unique risks that are more fully described in the funds' Statement of Additional Information. The fund managers do not attempt to time the market. Instead, they intend to keep the funds essentially fully invested in stocks regardless of the movement of stock prices generally. However, in the fund managers' discretion, the funds may invest up to 100% of their assets in U.S. government securities if the funds' investment methodology fails to generate sufficient investment ideas or to respond to adverse market, economic, political or other conditions. The funds may not achieve their investment objectives while taking such a temporary defensive position. When the managers believe that it is prudent, the funds also may invest a portion of their assets in convertible securities, short-term instruments, and non-leveraged futures and options. Futures and options can help the funds' cash assets remain liquid while performing more like stocks. The funds have a policy governing futures and options and similar derivative securities to help manage the risk of these types of investments. A complete description of the derivatives policy is included in the Statement of Additional Information. CALLOUT Accelerating growth is shown, for example, by growth that is faster this quarter than last or faster this year than the year before. CALLOUT Non-leveraged means that the fund may not invest in futures contracts where it would be possible to lose more than the fund invested. What kinds of securities do the funds buy? The funds will usually purchase common stocks of U.S. and foreign companies, but they can purchase other types of securities as well, such as domestic and foreign preferred stocks, convertible securities, equity equivalent securities, notes, bonds and other debt securities. The funds limit their purchase of debt securities to investment-grade obligations. What are the differences between the funds? AC Large-Cap generally invests in larger companies. Companies considered to be large generally have a market capitalization in excess of $5 billion. AC Fund, by contrast, may invest in companies of any size. What are the primary risks of investing in the funds? The process driving the funds is specifically designed to respond quickly to changing stock market conditions. As a result, the funds' portfolio turnover may be significantly higher than that of many other funds. This heavy turnover, perhaps as much as 200-300% per year or more, could result in relatively high commission costs, substantial capital gain realizations for the funds, and capital gains tax liabilities for the funds' shareholders. The value of a fund's shares depends on the value of the stocks and other securities it owns. The value of the individual securities a fund owns will go up and down depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fund managers may buy a large amount of a company's stock quickly, and often will dispose of it quickly if the company's earnings or revenues decline. While the managers believe this strategy provides substantial appreciation potential over the long term, in the short term it can create a significant amount of share price volatility. This volatility can be greater than that of the average stock fund. As with all funds, at any given time the value of your shares may be worth more or less than the price you paid. If you sell your shares when the value is less than the price you paid, you will lose money. Market performance tends to be cyclical, and in the various cycles, certain investment styles may fall in and out of favor. If the market is not favoring the funds' style, the funds' gains may not be as big as, or their losses may be bigger than, other equity funds using different investment styles. Although the fund managers intend to invest the funds' assets primarily in U.S. stocks, the funds may invest in securities of foreign companies. To the extent a fund invests in foreign securities, the overall risk of the fund could be affected. Foreign securities can have certain unique risks, including fluctuations in currency exchange rates, less stable political and economic structures, reduced availability of public information, and lack of uniform financial reporting and regulatory practices similar to those that apply in the United States. These factors make investing in foreign securities generally riskier than investing in U.S. stocks. CALLOUT Market capitalization is the value of a company as determined by multiplying the number of shares of its stock outstanding by its current market price per share. Management Who manages the funds? The Board of Directors, investment advisor and fund management team play key roles in the management of the funds. The Board of Directors The Board of Directors oversees the management of the funds and meets at least quarterly to review reports about fund operations. Although the Board of Directors does not manage the funds, it has hired an investment advisor to do so. More than two-thirds of the directors are independent of the funds' advisor; that is, they are not employed by and have no financial interest in the advisor. The Investment Advisor The funds' investment advisor is American Century Investment Management, Inc. The advisor has been managing mutual funds since 1958. American Century is headquartered at 4500 Main Street, Kansas City, Missouri 64111. The advisor is responsible for managing the investment portfolios of the funds and directing the purchase and sale of their investment securities. The advisor also arranges for transfer agency, custody and all other services necessary for the funds to operate. For the services it provides to the funds, the advisor receives a unified management fee of 1.25% of the average net assets of the Advisor Class shares of AC Fund and 1.10% of the average net assets of the Advisor Class shares of AC Large-Cap. The amount of the management fee is calculated on a class-by-class basis daily and paid monthly. The Statement of Additional Information contains detailed information about the calculation of the management fee. Out of that fee, the advisor pays all expenses of managing and operating the funds except brokerage expenses, taxes, interest, fees and expenses of the independent directors (including legal counsel fees), and extraordinary expenses. A portion of the management fee may be paid by the funds' advisor to unaffiliated third parties who provide recordkeeping and administrative services that would otherwise be performed by an affiliate of the advisor. The Fund Management Teams The advisor uses teams of portfolio managers, assistant portfolio managers and analysts to manage the funds. Teams meet regularly to review portfolio holdings and to discuss purchase and sale activity. Team members buy and sell securities for a fund as they see fit, guided by the fund's investment objective and strategy. The portfolio managers on the investment teams are identified below: James E. Stowers III Mr. Stowers, Chief Executive Officer and Portfolio Manager, has been a member of the team that manages the funds since their inception in November 1999. He also is the Chief Investment Officer-U.S. Growth Equities and as such oversees the investment discipline used by the funds and seven other growth funds. He joined American Century in 1981. He has a bachelor's degree in finance from Arizona State University. John Small Jr. Mr. Small, Portfolio Manager, has been a member of the team that manages the funds since their inception in November 1999. He was promoted to Portfolio Manager in February 1999. Since 1994 he has worked as an analyst and Portfolio Manager for the Ultra fund. He joined American Century in May 1991. He has more than 20 years experience with the U.S. Air Force. He has a bachelor's degree from Rockford College and a master's degree in laser optics physics from the Air Force Institute of Technology. He also has an MBA from Baker University. CALLOUT Code of Ethics American Century has a Code of Ethics designed to ensure that the interests of fund shareholders come before the interests of the people who manage the funds. Among other provisions, the Code of Ethics prohibits portfolio managers and other investment personnel from buying securities in an initial public offering or from profiting from the purchase and sale of the same security within 60 calendar days. In addition, the Code of Ethics requires portfolio managers and other employees with access to information about the purchase or sale of securities by the funds to obtain approval before executing permitted personal trades. Fundamental Investment Policies Fundamental investment policies contained in the Statement of Additional Information and the investment objectives of the funds may not be changed without a shareholder vote. The Board of Directors may change any other policies and investment strategies. Year 2000 Issues Many of the world's computer systems were originally programmed in a way that prevented them from properly recognizing or processing date-sensitive information relating to the Year 2000 and beyond. Because this may impact the computer systems of various American Century-affiliated and external service providers for the funds, American Century formally initiated a Year 2000 readiness project in July 1997. It involves a team of information technology professionals assisted by outside consultants and guided by a senior-level steering committee. The team's goal is to assess the impact of the Year 2000 on American Century's systems, renovate or replace noncompliant critical systems and test those systems. In addition, the team has been working to gather information about the Year 2000 efforts of the funds' other major service providers. Although American Century believes its critical systems will function properly in the Year 2000, this is not guaranteed. If the efforts of American Century or its external service providers are not successful, the funds' business, particularly the provision of shareholder services, may be hampered. In addition, the issuers of securities the funds own could have Year 2000 computer problems. Foreign issuers, especially those in emerging markets, may be more susceptible to such problems than U.S. issuers. These problems could negatively affect the value of the issuers' securities, which, in turn, could impact the funds' performance. The advisor has established a process to gather publicly available information about the Year 2000 readiness of these issuers. However, this process may not uncover all relevant information, and the information gathered may not be complete and accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors the fund managers may consider when making investment decisions, and other factors may receive greater weight. Investing With American Century Eligibility for Advisor Class Shares The Advisor Class shares are intended for purchase by participants in employer-sponsored retirement or savings plans and for persons purchasing shares through broker-dealers, banks, insurance companies and other financial intermediaries that provide various administrative and distribution services. Investing through Financial Intermediaries If you do business with us through a financial intermediary or a retirement plan, your ability to purchase, exchange and redeem shares will depend on the policies of that entity. Some policy differences may include * minimum investment requirements * exchange policies * fund choices * cutoff time for investments Please contact your financial intermediary or plan sponsor for a complete description of its policies. Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by American Century's transfer agent. In some circumstances, American Century will pay the service provider a fee for performing those services. Although transactions in fund shares may be made directly with American Century at no charge, you also may purchase, redeem and exchange fund shares through financial intermediaries that charge a transaction-based or other fee for their services. Those charges are retained by the intermediary and are not shared with American Century or the funds. American Century has contracts with certain financial intermediaries requiring them to track the time investment orders are received and to comply with procedures relating to the transmission of orders. The funds have authorized those intermediaries to accept orders on each fund's behalf up to the time at which the net asset value is determined. If those orders are transmitted to American Century and paid for in accordance with the contract, they will be priced at the net asset value next determined after your request is received in the form required by the intermediary on a fund's behalf. CALLOUT Financial intermediaries include banks, broker-dealers, insurance companies and investment advisors. Abusive Trading Practices We do not permit market timing or other abusive trading practices in our funds. Excessive, short-term (market timing) or other abusive trading practices may disrupt portfolio management strategies and harm fund performance. To minimize harm to the funds and their shareholders, we reserve the right to reject any purchase order (including exchanges) from any investor we believe has a history of abusive trading or whose trading, in our judgment, has been or may be disruptive to a fund. In making this judgment, we may consider trading done in multiple accounts under common ownership or control. We also reserve the right to delay delivery of your redemption proceeds--up to seven days--or to honor certain redemptions with securities, rather than cash, as described in the next section. Special Requirements for Large Redemptions If, during any 90-day period, you redeem fund shares worth more than $250,000 (or 1% of the assets of the fund if that percentage is less than $250,000), we reserve the right to pay part or all of the redemption proceeds in excess of this amount in readily marketable securities instead of cash. If we make payment in securities, we will value the securities selected by the fund managers, in the same manner as we do in computing the fund's net asset value. We may provide these securities in lieu of cash without prior notice. If your redemption would exceed this limit and you would like to avoid being paid in securities, please provide us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. This minimizes the effect of the redemption on the fund and its remaining shareholders. Share Price and Distributions Share Price American Century determines the net asset value (NAV) of the funds as of the close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern time) on each day the Exchange is open. On days when the Exchange is not open (including certain U.S. holidays), we do not calculate the NAV. The NAV of a fund share is the current value of the fund's assets, minus any liabilities, divided by the number of fund shares outstanding. If current market prices of securities owned by a fund are not readily available, the advisor may determine their fair value in accordance with procedures adopted by the fund's Board. Trading of securities in foreign markets may not take place every day the Exchange is open. Also, trading in some foreign markets may take place on weekends or holidays when a fund's NAV is not calculated. So, the value of a fund's portfolio may be affected on days when you can't purchase or redeem shares of the fund. We will price your purchase, exchange or redemption at the NAV next determined after we receive your transaction request in good order. Distributions Federal tax laws require each fund to make distributions to its shareholders in order to qualify as a "regulated investment company." Qualification as a regulated investment company means that the funds will not be subject to state or federal income tax on amounts distributed. The distributions generally consist of dividends and interest received, as well as capital gains realized on the sale of investment securities. Each fund generally pays distributions from net income and capital gains, if any, once a year in December. They may make more frequent distributions if necessary to comply with Internal Revenue Code provisions. You will participate in fund distributions, when they are declared, starting on the day after your purchase is effective. For example, if you purchase shares on a day that a distribution is declared, you will not receive that distribution. If you redeem shares, you will receive any distribution declared on the day you redeem. If you redeem all shares, we will include any distributions received with your redemption proceeds. Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing through taxable accounts, we will reinvest distributions unless you elect to receive them in cash. CALLOUTS The net asset value of a fund is the price of the fund's shares. Capital gains are increases in the values of capital assets, such as stock, from the time the assets are purchased. Tax becomes due on capital gains once an asset is sold. Taxes The tax consequences of owning shares of the funds will vary depending on whether you own them through a taxable or tax-deferred account. Tax consequences result from distributions by the funds of dividend and interest income they have received or capital gains they have generated through their investment activities. Tax consequences also result from sales of fund shares by investors after the net asset value has increased or decreased. Tax-Deferred Accounts If you purchase fund shares through a tax-deferred account, such as an IRA or a qualified employer-sponsored retirement or savings plan, income and capital gains distributions usually will not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Likewise, moving from one fund to another fund within a plan or tax-deferred account generally will not cause you to be taxed. For information about the tax consequences of making purchases or withdrawals through an employer-sponsored retirement or savings plan, or through an IRA, please consult your plan administrator, your summary plan description or a professional tax advisor. Taxable Accounts If you own fund shares through a taxable account, distributions by the fund and sales by you of fund shares may cause you to be taxed. Taxability of Distributions Fund distributions may consist of income earned by the fund from sources such as dividends and interest, or capital gains generated from the sale of fund investments. Distributions of income are taxed as ordinary income. Distributions of capital gains are classified either as short term or long term and are taxed as follows: Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above - ------------------------------------------ ---------------------------------------- ----------------------------------------- Short-term capital gains Ordinary income rate Ordinary income rate Long-term capital gains 10% 20%
The tax status of any distributions of capital gains is determined by how long the fund held the underlying security that was sold, not by how long you have been invested in the fund or whether you reinvest your distributions in additional shares or take them in cash. American Century will send you the tax status of fund distributions for each calendar year in an annual tax mailing (Form 1099-DIV) from the fund. Distributions also may be subject to state and local taxes. Because everyone's tax situation is unique, always consult your tax professional about federal, state and local tax consequences. Taxes on Transactions Your redemptions -- including exchanges to other American Century funds -- are subject to capital gains tax. The table above can provide a general guide for your potential tax liability when selling or exchanging fund shares. Short-term capital gains are gains on fund shares you held for 12 months or less. Long-term capital gains are gains on fund shares you held for more than 12 months. If your shares decrease in value, their sale or exchange will result in a long-term or short-term capital loss. However, you should note that 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 gains to you with respect to such shares. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the wash sale rules of the Internal Revenue Code. This may result in a postponement of the recognition of such loss for federal income tax purposes. If you have not certified to us that your Social Security number or tax identification number is correct and that you are not subject to 31% withholding, we are required to withhold and remit 31% of dividends, capital gains distributions and redemptions to the IRS. CALLOUT Buying a Dividend Purchasing fund shares in a taxable account shortly before a distribution is sometimes known as buying a dividend. In taxable accounts, you must pay income taxes on the distribution whether you reinvest the distribution or take it in cash. In addition, you will have to pay taxes on the distribution whether the value of your investment decreased, increased or remained the same after you bought the fund shares. The risk in buying a dividend is that a fund's portfolio may build up taxable gains throughout the period covered by a distribution, as securities are sold at a profit. We distribute those gains to you, after subtracting any losses, even if you did not own the shares when the gains occurred. If you buy a dividend, you incur the full tax liability of the distribution period, but you may not enjoy the full benefit of the gains realized in the fund's portfolio. Multiple Class Information American Century offers three classes of the funds: Investor Class, Institutional Class and Advisor Class. The shares offered by this Prospectus are Advisor Class shares and are offered primarily to institutional investors through institutional distribution channels, such as employer-sponsored retirement plans, or through banks, broker-dealers and insurance companies. The Investor Class, which has no up-front or deferred charges, commissions or 12b-1 fees, is offered primarily to retail investors. The other classes have different fees, expenses and/or minimum investment requirements than the Advisor Class. The difference in the fee structures between the classes is the result of their separate arrangements for shareholder and distribution services and not the result of any difference in amounts charged by the advisor for core investment advisory services. Accordingly, the core investment advisory expenses do not vary by class. Different fees and expenses will affect performance. For additional information concerning the other classes of shares not offered by this Prospectus, call us at 1-800-345-2021 for Investor Class shares 1-800-345-3533 for Institutional Class shares. You also can contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of the funds have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences between the classes are (a) each class may be subject to different expenses specific to that class; (b) each class has a different identifying designation or name; (c) each class has exclusive voting rights with respect to matters solely affecting such class; (d) each class may have different exchange privileges; and (e) the Institutional Class may provide for automatic conversion from that class into shares of the Investor Class of the same fund. Service and Distribution Fees Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan to pay out of fund assets certain expenses associated with the distribution of their shares. The funds' Advisor Class shares have a 12b-1 Plan. Under the Plan, the fund pays an annual fee of 0.50% of fund assets, half for certain shareholder and administrative services and half for distribution services. The advisor, as paying agent for the funds, pays all or a portion of such fees to the banks, broker-dealers and insurance companies that make such shares available. Because these fees are paid out of the fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. For additional information about the Plan and its terms, see "Multiple Class Structure - Master Distribution and Shareholder Services Plan" in the Statement of Additional Information. More information about the funds is contained in these documents Annual and Semiannual Reports. These reports contain more information about the funds' investments and the market conditions and investment strategies that significantly affected the funds' performance during the most recent fiscal period. Statement of Additional Information. The SAI contains a more detailed, legal description of the funds' operations, investment restrictions, policies and practices. The SAI is incorporated by reference into this Prospectus. This means that it is legally part of this Prospectus, even if you don't request a copy. You may obtain a free copy of the SAI or annual and semiannual reports, and ask questions about the funds or your accounts, by contacting American Century at the address or telephone numbers listed below. You also can get information about the funds (including the SAI) from the Securities and Exchange Commission (SEC). In person SEC Public Reference Room Washington, D.C. Call 1-800-SEC-0330 for location and hours. On the internet WWW.SEC.GOV. By mail SEC Public Reference Section Washington, D.C. 20549-6009 (The SEC will charge a fee for copying the documents.) Investment Company Act File No. 811-0816 American Century Investments P.O. Box 419385 Kansas City, Missouri 64141-6385 1-800-345-3533 or 816-531-5575 9910 SH-PRS-xxxxx American Century Mutual Funds, Inc. Statement of Additional Information AC Fund AC Large-Cap Fund NOVEMBER 14, 1999 This Statement of Additional Information adds to the discussion in the funds' Prospectus, dated November 14, 1999, but is not a prospectus. The Statement of Additional Information should be read in conjunction with the funds' current Prospectus. If you would like a copy of a Prospectus, please contact us at the address or telephone numbers listed on the back cover or visit American Century's Web site at www.americancentury.com. This Statement of Additional Information incorporates by reference certain information that appears in the funds' annual and semiannual reports, which are delivered to all shareholders. You may obtain a free copy of the funds' annual or semiannual reports by calling 1-800-345-2021. Distributed by Funds Distributor, Inc. STATEMENT OF ADDITIONAL INFORMATION NOVEMBER 14, 1999 TABLE OF CONTENTS The Funds' History ........................................................ 2 Fund Investment Guidelines ................................................ 2 Detailed Information About the Funds ...................................... 7 Investment Strategies and Risks ................................. 7 Investment Policies ............................................. 17 Portfolio Turnover .............................................. 18 Management ................................................................ 19 The Board of Directors .......................................... 19 Officers ........................................................ 21 Service Providers ......................................................... 24 Investment Advisor .............................................. 24 Transfer Agent and Administrator ................................ 25 Distributor ..................................................... 25 Other Service Providers ................................................... 25 Custodian Banks Independent Auditor Brokerage Allocation ...................................................... 27 Information about Fund Shares ............................................. 28 Multiple Class Structure ........................................ 28 Buying and Selling Fund Shares .................................. 30 Valuation of a Fund's Securities ................................ 30 Taxes ..................................................................... 31 Federal Income Tax State Income Tax How Fund Performance Information Is Calculated ............................ 32 Performance Comparisons Permissible Advertising Information Multiple Class Performance Advertising THE FUNDS' HISTORY American Century Mutual Funds, Inc. is a registered open-end management investment company that was organized in 1957 as a Delaware corporation under the name Twentieth Century Investors, Inc. On July 2, 1990, the company reorganized as a Maryland corporation, and in January 1997 it changed its name to American Century Mutual Funds, Inc. Throughout this Statement of Additional Information we refer to American Century Mutual Funds, Inc. as the corporation. Each fund described in this Statement of Additional Information is a separate series of the corporation and operates for many purposes as if it were an independent company. Each fund has its own investment objective, strategy, management team, assets, tax identification and stock registration numbers. Investor Class Advisor Class Institutional Class Ticker Inception Ticker Inception Ticker Inception Fund Symbol Date Symbol Date Symbol Date - ---- ------ ---- ------ ---- ------ ---- AC Fund N/A 11/30/1999 N/A N/A N/A N/A AC Large-Cap N/A 11/30/1999 N/A N/A N/A N/A
FUND INVESTMENT GUIDELINES This section explains the extent to which the funds' advisor, American Century Investment Management, Inc., can use various investment vehicles and strategies in managing a fund's assets. Descriptions of the investment techniques and risks associated with each appear in the section, "Investment Strategies and Risks," which begins on page __. In the case of the funds' principal investment strategies, these descriptions elaborate upon discussions contained in the Prospectus. Each fund is an open-end, management investment company as defined in the Investment Company Act of 1940 (the Investment Company Act). Each fund will normally be diversified. Diversified means that, with respect to 75% of its total assets, each fund will not invest more than 5% of its total assets in the securities of a single issuer. However, from time to time the funds may pursue investment opportunities that cause them to become temporarily nondiversified. To meet federal tax requirements for qualification as a regulated investment company, each fund must limit its investments so that at the close of each quarter of its taxable year (1) no more than 25% of its total assets are invested in the securities of a single issuer (other than the U.S. government or a regulated investment company), and (2) with respect to at least 50% of its total assets, no more than 5% of its total assets are invested in the securities of a single issuer. In general, within the restrictions outlined here and in the funds' Prospectus, the fund managers have broad powers to decide how to invest fund assets, including the power to hold them uninvested. Investments are varied according to what is judged advantageous under changing economic conditions. It is the advisor's policy to retain maximum flexibility in management without restrictive provisions as to the proportion of one or another class of securities that may be held, subject to the investment restrictions described below. It is the advisor's intention that each fund generally will consist of domestic and foreign common stocks, and equity equivalent securities. However, subject to the specific limitations applicable to a fund, the funds' management teams may invest the assets of each fund in varying amounts using other instruments and techniques, such as those described in the next section, when such a course is deemed appropriate in order to attempt to attain a fund's investment objective. Senior securities that, in the opinion of the managers, are high-grade issues also may be purchased for defensive purposes. So long as a sufficient number of acceptable securities are available, the managers intend to keep the funds fully invested in stocks identified as attractive by the funds' investment methodology, regardless of the movement of stock prices, generally. However, should the funds' investment methodology fail to identify sufficient investment candidates, or for any other reason including the desire to take a temporary defensive position, the funds may invest up to 100% of their assets in U.S. government securities. In most circumstances, the funds' actual level of cash and cash equivalents will be less than 10%. The managers may use S&P 500 Index futures as a way to expose the funds' cash assets to the market, while maintaining liquidity. As mentioned in the Prospectus, the managers may not leverage the funds' portfolios, so there is no greater market risk to the funds than if they purchase stocks. See "Derivative Securities," page __, "Short-Term Securities," page __ and "Futures and Options," page __ . DETAILED INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS This section describes various investment vehicles and techniques that the fund managers can use in managing a fund's assets. It also details the risks associated with each, because each technique contributes to a fund's overall risk profile. Foreign Securities Each fund may invest an unlimited portion of its total assets in the securities of foreign issuers, including foreign governments, when these securities meet its standards of selection. Securities of foreign issuers may trade in the U.S. or foreign securities markets. Investments in foreign securities may present certain risks, including: Currency Risk. The value of the foreign investments held by the funds may be significantly affected by changes in currency exchange rates. The dollar value of a foreign security generally decreases when the value of the dollar rises against the foreign currency in which the security is denominated and tends to increase when the value of the dollar falls against such currency. In addition, the value of fund assets may be affected by losses and other expenses incurred in converting between various currencies in order to purchase and sell foreign securities and by currency restrictions, exchange control regulation, currency devaluations and political developments. Political and Economic Risk. The economies of many of the countries in which the funds invest are not as developed as the economy of the United States and may be subject to significantly different forces. Political or social instability, expropriation, nationalization, or confiscatory taxation, and limitations on the removal of funds or other assets, also could adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to enforce ownership rights, pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies generally are not subject to the regulatory controls imposed on U.S. issuers and, in general, there is less publicly available information about foreign securities than is available about domestic securities. Many foreign companies are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the funds may be reduced by a withholding tax at the sources, which would reduce dividend income payable to shareholders. Market and Trading Risk. Brokerage commission rates in foreign countries, which generally are fixed rather than subject to negotiation as in the United States, are likely to be higher. The securities markets in many of the countries in which the funds invest will have substantially less trading volume than the principal U.S. markets. As a result, the securities of some companies in these countries may be less liquid and more volatile than comparable U.S. securities. Furthermore, one securities broker may represent all or a significant part of the trading volume in a particular country, resulting in higher trading costs and decreased liquidity due to a lack of alternative trading partners. There generally is less government regulation and supervision of foreign stock exchanges, brokers and issuers, which may make it difficult to enforce contractual obligations. Clearance and Settlement Risk. Foreign securities markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in clearance and settlement could result in temporary periods when assets of the funds are uninvested and no return is earned thereon. The inability of the funds to make intended security purchases due to clearance and settlement problems could cause the funds to miss attractive investment opportunities. Inability to dispose of portfolio securities due to clearance and settlement problems could result either in losses to the funds due to subsequent declines in the value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. Ownership Risk. Evidence of securities ownership may be uncertain in many foreign countries. In many of these countries, the most notable of which is the Russian Federation, the ultimate evidence of securities ownership is the share register held by the issuing company or its registrar. While some companies may issue share certificates or provide extracts of the company's share register, these are not negotiable instruments and are not effective evidence of securities ownership. In an ownership dispute, the company's share register is controlling. As a result, there is a risk that a fund's trade details could be incorrectly or fraudulently entered on the issuer's share register at the time of the transaction, or that a fund's ownership position could thereafter be altered or deleted entirely, resulting in a loss to the fund. While the funds intend to limit their direct investments in Russian companies, if any, to those that utilize an independent registrar, there can be no assurance that such investments will not result in a loss to the funds. Convertible Debt Securities A convertible debt security is a fixed-income security that offers the potential for capital appreciation through a conversion feature that enables the holder to convert the fixed-income security into a stated number of shares of common stock. As fixed-income securities, convertible debt securities provide a stable stream of income, with generally higher yields than common stocks. Because convertible debt securities offer the potential to benefit from increases in the market price of the underlying common stock, however, they generally offer lower yields than non-convertible securities of similar quality. Of course, like all fixed- income securities, there can be no assurance of current income because the issuers of the convertible debt securities may default on their obligations. In addition, there can be no assurance of capital appreciation because the value of the underlying common stock will fluctuate. Convertible debt securities generally are subordinated to other similar but non-convertible debt securities of the same issuer, although convertible bonds, as corporate debt obligations, enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock of the same issuer. Because of the subordination feature, however, convertible securities typically have lower ratings than similar non-convertible securities. Unlike a convertible security that is a single security, a synthetic convertible security is comprised of two distinct securities that together resemble convertible securities in certain respects. Synthetic convertible securities are created by combining non-convertible bonds or preferred stocks with warrants or stock call options. The options that will form elements of synthetic convertible securities will be listed on a securities exchange or NASDAQ. The two components of a synthetic convertible security, which will be issued with respect to the same entity, generally are not offered as a unit, and may be purchased and sold by the fund at different times. Synthetic convertible securities differ from convertible securities in certain respects, including that each component of a synthetic convertible security has a separate market value and responds differently to market fluctuations. Investing in synthetic convertible securities involves the risk normally found in holding the securities comprising the synthetic convertible security. Short Sales A fund may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire securities equivalent in kind and amount to the securities being sold short. In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. To make delivery to the purchaser, the executing broker borrows the securities being sold short on behalf of the seller. While the short position is maintained, the seller collateralizes its obligation to deliver the securities sold short in an amount equal to the proceeds of the short sale plus an additional margin amount established by the Board of Governors of the Federal Reserve. If a fund engages in a short sale, the collateral account will be maintained by the fund's custodian. While the short sale is open, the fund will maintain in a segregated custodial account an amount of securities convertible into, or exchangeable for, such equivalent securities at no additional cost. These securities would constitute the fund's long position. A fund may make a short sale, as described above, when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes. There will be certain additional transaction costs associated with short sales, but the fund will endeavor to offset these costs with income from the investment of the cash proceeds of short sales. Portfolio Lending In order to realize additional income, a fund may lend its portfolio securities. Such loans may not exceed one-third of the fund's total assets valued at market except (i) through the purchase of debt securities in accordance with its investment objectives, policies and limitations, or (ii) by engaging in repurchase agreements with respect to portfolio securities. Derivative Securities To the extent permitted by its investment objectives and policies, each of the funds may invest in securities that are commonly referred to as derivative securities. Generally, a derivative is a financial arrangement, the value of which is based on, or derived from, a traditional security, asset, or market index. Certain derivative securities are described more accurately as index/structured securities. Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices or other financial indicators (reference indices). Some derivatives, such as mortgage-related and other asset-backed securities, are in many respects like any other investment, although they may be more volatile or less liquid than more traditional debt securities. There are many different types of derivatives and many different ways to use them. Futures and options are commonly used for traditional hedging purposes to attempt to protect a fund from exposure to changing interest rates, securities prices, or currency exchange rates and for cash management purposes as a low-cost method of gaining exposure to a particular securities market without investing directly in those securities. No fund may invest in a derivative security unless the reference index or the instrument to which it relates is an eligible investment for the fund. For example, a security whose underlying value is linked to the price of oil would not be a permissible investment because the funds may not invest in oil and gas leases or futures. The return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument to which it relates. There is a range of risks associated with derivative investments, including: o the risk that the underlying security, interest rate, market index or other financial asset will not move in the direction the fund managers anticipate; o the possibility that there may be no liquid secondary market, or the possibility that price fluctuation limits may be imposed by the exchange, either of which may make it difficult or impossible to close out a position when desired; o the risk that adverse price movements in an instrument can result in a loss substantially greater than a fund's initial investment; and o the risk that the counterparty will fail to perform its obligations. The Board of Directors has approved the advisor's policy regarding investments in derivative securities. That policy specifies factors that must be considered in connection with a purchase of derivative securities. The policy also establishes a committee that must review certain proposed purchases before the purchases can be made. The advisor will report on fund activity in derivative securities to the Board of Directors as necessary. In addition, the Board will review the advisor's policy for investments in the derivative securities annually. Investment in Companies with Limited Operating Histories The funds may invest up to 10% of their assets in the securities of issuers with limited operating histories. The fund managers consider an issuer to have a limited operating history if that issuer has a record of less than three years of continuous operation. The managers will consider periods of capital formation, incubation, consolidations, and research and development in determining whether a particular issuer has a record of three years of continuous operation. Investments in securities of issuers with limited operating histories may involve greater risks than investments in securities of more mature issuers. By their nature, such issuers present limited operating histories and financial information upon which the managers may base their investment decision on behalf of the funds. In addition, financial and other information regarding such issuers, when available, may be incomplete or inaccurate. Other Investment Companies Each of the funds may invest up to 10% of its total assets in other mutual funds, including those advised by the advisor, provided that the investment is consistent with the fund's investment policies and restrictions. Under the Investment Company Act, a fund's investment in such securities, subject to certain exceptions, currently is limited to (a) 3% of the total voting stock of any one investment company; (b) 5% of the fund's total assets with respect to any one investment company; and (c) 10% of a fund's total assets in the aggregate. Such purchases will be made in the open market where no commission or profit to a sponsor or dealer results from the purchase other than the customary brokers' commissions. As a shareholder of another investment company, a fund would bear, along with other shareholders, its pro rata portion of the other investment company's expenses, including advisory fees. These expenses would be in addition to the management fee that each fund bears directly in connection with its own operations. 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 purchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Because the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered a loan collateralized by the security purchased. The fund's risk is the ability of the seller to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, the fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under the bankruptcy laws, the disposition of the collateral may be delayed or limited. To the extent the value of the security decreases, the fund could experience a loss. The funds will limit repurchase agreement transactions to securities issued by the U.S. government and its agencies and instrumentalities, and will enter into such transactions with those banks and securities dealers who are deemed creditworthy 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. When-Issued and Forward Commitment Agreements The funds may sometimes purchase new issues of securities on a when-issued or forward commitment basis in which the transaction price and yield are each fixed at the time the commitment is made, but payment and delivery occur at a future date (typically 15 to 45 days later). When purchasing securities on a when-issued or forward commitment basis, a fund assumes the rights and risks of ownership, including the risks of price and yield fluctuations. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. While the fund will make commitments to purchase or sell securities with the intention of actually receiving or delivering them, it may sell the securities before the settlement date if doing so is deemed advisable as a matter of investment strategy. In purchasing securities on a when-issued or forward commitment basis, a fund will establish and maintain until the settlement date a segregated account consisting of cash, cash equivalents or other appropriate liquid securities in an amount sufficient to meet the purchase price. When the time comes to pay for the when-issued securities, a fund will meet its obligations with available cash, through the sale of securities, or, although it would not normally expect to do so, by selling the when-issued securities themselves (which may have a market value greater or less than the fund's payment obligation). Selling securities to meet when-issued or forward commitment obligations may generate taxable capital gains or losses. Restricted and Illiquid Securities The funds may, from time to time, purchase restricted or illiquid securities, including Rule 144A securities, when they present attractive investment opportunities that otherwise meet the funds' criteria for selection. Rule 144A securities are securities that are privately placed with and traded among qualified institutional investors rather than the general public. Although Rule 144A securities are considered restricted securities, they are not necessarily illiquid. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission (SEC) has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the Board of Directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the Board of Directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the Board of Directors of the funds has delegated the day-to-day function of determining the liquidity of Rule 144A securities to the fund managers. The Board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Because the secondary market for such securities is limited to certain qualified institutional investors, the liquidity of such securities may be limited accordingly and a fund may, from time to time, hold a Rule 144A or other security that is illiquid. In such an event, the fund managers will consider appropriate remedies to minimize the effect on such fund's liquidity. Short-Term Securities In order to meet anticipated redemptions, to hold pending the purchase of additional securities for a fund's portfolio, or, in some cases, for temporary defensive purposes, the funds may invest a portion of their assets in money market and other short-term securities. Examples of those securities include o Securities issued or guaranteed by the U.S. government and its agencies and instrumentalities o Commercial Paper o Certificates of Deposit and Euro Dollar Certificates of Deposit o Bankers' Acceptances o Short-term notes, bonds, debentures or other debt instruments o Repurchase agreements In addition, each fund may invest up to 5% of its total assets in any money market fund, including those advised by the advisor. Futures and Options Each fund may enter into futures contracts, options or options on futures contracts. The funds may not, however, enter into a futures transaction for speculative purposes. Generally, futures transactions will be used to: o protect against a decline in market value of the fund's securities (taking a short futures position), or o protect against the risk of an increase in market value for securities in which the fund generally invests at a time when the fund is not fully invested (taking a long futures position), or o provide a temporary substitute for the purchase of an individual security that may not be purchased in an orderly fashion. Some futures and options strategies, such as selling futures, buying puts and writing calls, hedge a fund's investments against price fluctuations. Other strategies, such as buying futures, writing puts and buying calls, tend to increase market exposure. Although other techniques may be used to control a fund's exposure to market fluctuations, the use of futures contracts may be a more effective means of hedging this exposure. While a fund pays brokerage commissions in connection with opening and closing out futures positions, these costs are lower than the transaction costs incurred in the purchase and sale of the underlying securities. For example, the sale of a future by a fund means the fund becomes obligated to deliver the security (or securities, in the case of an index future) at a specified price on a specified date. The purchase of a future means the fund becomes obligated to buy the security (or securities) at a specified price on a specified date. Futures contracts provide for the sale by one party and purchase by another party of a specific security at a specified future time and price. The fund managers may engage in futures and options transactions based on securities indices that are consistent with the fund's investment objectives. Examples of indices that may be used include the Bond Buyer Index of Municipal Bonds for fixed-income funds, or the S&P 500 Index for equity funds. The managers also may engage in futures and options transactions based on specific securities, such as U.S. Treasury bonds or notes. Futures contracts are traded on national futures exchanges. Futures exchanges and trading are regulated under the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC), a U.S. government agency. Index futures contracts differ from traditional futures contracts in that when delivery takes place, no stocks or bonds change hands. Instead, these contracts settle in cash at the spot market value of the index. Although other types of futures contracts by their terms call for actual delivery or acceptance of the underlying securities, in most cases the contracts are closed out before the settlement date. A futures position may be closed by taking an opposite position in an identical contract (i.e., buying a contract that has previously been sold or selling a contract that has previously been bought). Unlike when the fund purchases or sells a bond, no price is paid or received by the fund upon the purchase or sale of the future. Initially, the fund will be required to deposit an amount of cash or securities equal to a varying specified percentage of the contract amount. This amount is known as initial margin. The margin deposit is intended to ensure completion of the contract (delivery or acceptance of the underlying security) if it is not terminated prior to the specified delivery date. A margin deposit does not constitute a margin transaction for purposes of the fund's investment restrictions. Minimum initial margin requirements are established by the futures exchanges and may be revised. In addition, brokers may establish margin deposit requirements that are higher than the exchange minimums. Cash held in the margin account generally is not income-producing. Subsequent payments, 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 marking the contract to market. Changes in variation margin are recorded by the fund as unrealized gains or losses. At any time prior to expiration of the future, the fund may elect to close the position by taking an opposite position that will operate to terminate its position in the future. A final determination of variation margin is then made; additional cash is required to be paid by or released to the fund and the fund realizes a loss or gain. Risks Related to Futures and Options Transactions Futures and options prices can be volatile, and trading in these markets involves certain risks. If the fund managers apply a hedge at an inappropriate time or judge interest rate or equity market trends incorrectly, futures and options strategies may lower a fund's return. A fund could suffer losses if it is unable to close out its position because of an illiquid secondary market. Futures contracts may be closed out only on an exchange that provides a secondary market for these contracts, and there is no assurance that a liquid secondary market will exist for any particular futures contract at any particular time. Consequently, it may not be possible to close a futures position when the fund managers consider it appropriate or desirable to do so. In the event of adverse price movements, a fund would be required to continue making daily cash payments to maintain its required margin. If the fund had insufficient cash, it might have to sell portfolio securities to meet daily margin requirements at a time when the fund managers would not otherwise elect to do so. In addition, a fund may be required to deliver or take delivery of instruments underlying futures contracts it holds. The fund managers will seek to minimize these risks by limiting the contracts entered into on behalf of the funds to those traded on national futures exchanges and for which there appears to be a liquid secondary market. A fund could suffer losses if the prices of its futures and options positions were poorly correlated with its other investments, or if securities underlying futures contracts purchased by a fund had different maturities than those of the portfolio securities being hedged. Such imperfect correlation may give rise to circumstances in which a fund loses money on a futures contract at the same time that it experiences a decline in the value of its hedged portfolio securities. A fund also could lose margin payments it has deposited with a margin broker, if, for example, the broker became bankrupt. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of the trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond the limit. However, the daily limit governs only price movement during a particular trading day and, therefore, does not limit potential losses. In addition, the daily limit may prevent liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses. Options on Futures By purchasing an option on a futures contract, a fund obtains the right, but not the obligation, to sell the futures contract (a put option) or to buy the contract (a call option) at a fixed strike price. A fund can terminate its position in a put option by allowing it to expire or by exercising the option. If the option is exercised, the fund completes the sale of the underlying security at the strike price. Purchasing an option on a futures contract does not require a fund to make margin payments unless the option is exercised. Although they do not currently intend to do so, the funds may write (or sell) call options that obligate them to sell (or deliver) the option's underlying instrument upon exercise of the option. While the receipt of option premiums would mitigate the effects of price declines, the funds would give up some ability to participate in a price increase on the underlying security. If a fund were to engage in options transactions, it would own the futures contract at the time a call were written and would keep the contract open until the obligation to deliver it pursuant to the call expired. Restrictions on the Use of Futures Contracts and Options Each fund may enter into futures contracts, options or options on futures contracts. Under the Commodity Exchange Act, a fund may enter into futures and options transactions (a) for hedging purposes without regard to the percentage of assets committed to initial margin and option premiums or (b) for purposes other than hedging, provided that assets committed to initial margin and option premiums do not exceed 5% of the fund's total assets. To the extent required by law, each fund will segregate cash or securities on its records in an amount sufficient to cover its obligations under the futures contracts and options. Forward Currency Exchange Contracts Each fund may purchase and sell foreign currency on a spot (i.e., cash) basis and may engage in forward currency contacts, currency options and futures transactions for hedging or any other lawful purpose. See "Derivative Securities," page __. The funds expect to use forward contracts under two circumstances: (1) When the fund managers wish to lock in the U.S. dollar price of a security when a fund is purchasing or selling a security denominated in a foreign currency, the fund would be able to enter into a forward contract to do so; or (2) When the fund managers believe that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, a fund would be able to enter into a forward contract to sell foreign currency for a fixed U.S. dollar amount approximating the value of some or all of its portfolio securities either denominated in, or whose value is tied to, such foreign currency. In the first circumstance, when a fund enters into a trade for the purchase or sale of a security denominated in a foreign currency, it may be desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering into forward contracts in U.S. dollars for the purchase or sale of a foreign currency involved in an underlying security transaction, the fund will be able to protect itself against a possible loss between trade and settlement dates resulting from the adverse change in the relationship between the U.S. dollar and the subject foreign currency. Under the second circumstance, when the fund managers believe 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 segregate on its records cash or securities in an amount sufficient to cover its obligations under the contract. The precise matching of forward contracts in the amounts and values of securities involved generally would not be possible because the future values of such foreign currencies will change as a consequence of market movements in the values of those securities between the date the forward contract is entered into and the date it matures. Predicting short-term currency market movements is extremely difficult, and the successful execution of short-term hedging strategy is highly uncertain. The fund managers do not intend to enter into such contracts on a regular basis. Normally, consideration of the prospect for currency parities will be incorporated into the long-term investment decisions made with respect to overall diversification strategies. However, the fund managers believe that it is important to have flexibility to enter into such forward contracts when they determine that a fund's best interests may be served. At the maturity of the forward contract, the fund may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate the obligation to deliver the foreign currency by purchasing an offsetting forward contract with the same currency trader obligating the fund to purchase, on the same maturity date, the same amount of the foreign currency. It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for a fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency the fund is obligated to deliver. INVESTMENT POLICIES Unless otherwise indicated, with the exception of the percentage limitations on borrowing, the following restrictions apply at the time transactions are entered into. Accordingly, any later increase or decrease beyond the specified limitation resulting from a change in a fund's net assets will not be considered in determining whether it has complied with its investment restrictions. Fundamental Investment Policies The funds' fundamental investment restrictions are set forth below. These investment restrictions may not be changed without approval of a majority of the outstanding votes of shareholders of a fund, as determined in accordance with the Investment Company Act. For purposes of the investment restriction relating to concentration, a fund shall not purchase any securities that would cause 25% or more of the value of the fund's total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. government, any state, territory or possession of the United States, the District of Columbia or any of their authorities, agencies, instrumentalities or political subdivisions and repurchase agreements secured by such instruments, (b) wholly owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of the parents, (c) utilities will be divided according to their services, for example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry, and (d) personal credit and business credit businesses will be considered separate industries. Subject Policy - -------------------------------------------------------------------------------- Senior Securities A fund may not issue senior securities, except as permitted under the Investment Company Act. - -------------------------------------------------------------------------------- Borrowing A fund may not borrow money, except for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33-1/3% of the fund's total assets (including the amount borrowed) less liabilities (other than borrowings). - -------------------------------------------------------------------------------- Lending A fund may not lend any security or make any other loan if, as a result, more than 33-1/3% of the fund's total assets would be lent to other parties, except, (i) through the purchase of debt securities in accordance with its investment objective, policies and limitations or (ii) by engaging in repurchase agreements with respect to portfolio securities. - -------------------------------------------------------------------------------- Real Estate A fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments. This policy shall not prevent a fund from investing in securities or other instruments backed by real estate or securities of companies that deal in real estate or are engaged in the real estate business. - -------------------------------------------------------------------------------- Concentration A fund may not concentrate its investments in securities of issuers in a particular industry (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities). - -------------------------------------------------------------------------------- Underwriting A fund may not act as an underwriter of securities issued by others, except to the extent that the fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities. - -------------------------------------------------------------------------------- Commodities A fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments; provided that this limitation shall not prohibit the fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities. - -------------------------------------------------------------------------------- Control A fund may not invest for purposes of exercising control over management. - -------------------------------------------------------------------------------- Nonfundamental Investment Policies In addition, the funds are subject to the following additional investment restrictions that are not fundamental and may be changed by the Board of Directors. - -------------------------------------------------------------------------------- Subject Policy - -------------------------------------------------------------------------------- Borrowing A fund may not purchase additional investment securities at any time during which outstanding borrowings exceed 5% of the total assets of the fund. - -------------------------------------------------------------------------------- Liquidity A fund may not purchase any security or enter into a repurchase agreement if, as a result, more than 15% of its net assets would be invested in repurchase agreements not entitling the holder to payment of principal and interest within seven days and in securities that are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. - -------------------------------------------------------------------------------- Short Sales A fund may not sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. - -------------------------------------------------------------------------------- Margin A fund may not purchase securities on margin, except to obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. - -------------------------------------------------------------------------------- Futures and Options A fund may enter into futures contracts and write and buy put and call options relating to futures contracts. A fund may not, however, enter into leveraged futures transactions if it would be possible for the fund to lose more money than it invested. - -------------------------------------------------------------------------------- Issuers with A fund may invest up 10% of its assets in the securities of Limited Operating issues with limited operating histories. An issuer is Histories considered to have a limited operating history if that issuer has a record of less than three years of continuous operation. Periods of capital formation, incubation, consolidations, and research and development may be considered in determining whether a particular issuer has a record of three years of continuous operation. The Investment Company Act imposes certain additional restrictions upon acquisition by the funds of securities issued by insurance companies, broker-dealers, underwriters or investment advisors, and upon transactions with affiliated persons as therein defined. It also defines and forbids the creation of cross and circular ownership. Neither the SEC nor any other agency of the federal or state government participates in or supervises the management of the funds or their investment practices or policies. The Investment Company Act also provides that the funds may not invest more than 25% of their assets in the securities of issuers engaged in a single industry. For purposes of determining industry groups in connection with this restriction, the SEC ordinarily uses the Standard Industry Classification codes developed by the U.S. Office of Management and Budget. In the interest of ensuring adequate diversification, the funds monitor industry concentration using a more restrictive list of industry groups than that recommended by the SEC. The advisor believes that these classifications are reasonable and are not so broad that the primary economic characteristics of the companies in a single class are materially different. The use of these restrictive industry classifications may, however, cause the funds to forego investment possibilities that may otherwise be available to them under the Investment Company Act. PORTFOLIO TURNOVER The portfolio turnover rates of the funds will be shown in the Financial Highlights table in the Prospectus. The fund managers will purchase and sell securities without regard to the length of time the security has been held. Accordingly, the funds' rates of portfolio turnover may be substantial. The fund managers intend to purchase a given security whenever they believe it will contribute to the stated objective of the fund. In order to achieve each fund's investment objectives, the managers may sell a given security, no matter for how long or for how short a period it has been held in the portfolio, and no matter whether the sale is at a gain or at a loss, if the managers believe that the security is not fulfilling its purpose, either because, among other things, it did not live up to the managers' expectations, or because it may be replaced with another security holding greater promise, or because it has reached its optimum potential, or because of a change in the circumstances of a particular company or industry or in general economic conditions, or because of some combination of such reasons. When a general decline in security prices is anticipated, 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, it should be expected that the funds will, under most circumstances, be essentially fully invested in equity securities. Because investment decisions are based on the anticipated contribution of the security in question to a fund's objectives, the managers believe that the rate of portfolio turnover is irrelevant when they believe a change is in order to achieve the objectives. As a result, a fund's annual portfolio turnover rate cannot be anticipated and may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost the funds pay directly. Portfolio turnover also may affect the character of capital gains realized and distributed by the fund, if any, because short-term capital gains are taxable as ordinary income. This disclosure regarding portfolio turnover is a statement of fundamental policy and may be changed only by a vote of the shareholders. Because the managers do not take portfolio turnover rate into account in making investment decisions, (1) the managers have no intention of accomplishing any particular rate of portfolio turnover, whether high or low, and (2) the portfolio turnover rates in the past should not be considered as representative of the rates that will be attained in the future. MANAGEMENT The Board of Directors The Board of Directors oversees the management of the funds and meets at least quarterly to review reports about fund operations. Although the Board of Directors does not manage the funds, it has hired the advisor to do so. Two-thirds of the directors are independent of the funds' advisor, that is, they are not employed by and have no financial interest in the advisor. The individuals listed in the table below whose names are marked by an asterisk (*) are interested persons of the funds (as defined in the Investment Company Act) by virtue of, among other considerations, their affiliation with either the funds; the advisor, American Century Investment Management, Inc. (ACIM); the funds' agent for transfer and administrative services, American Century Services Corporation (ACSC); the parent corporation, American Century Companies, Inc. (ACC) or ACC's subsidiaries; the funds' distribution agent and co-administrator, Funds Distributor, Inc. (FDI); or other funds advised by the advisor. Each director listed below serves as a director of six registered investment companies in the American Century family of funds, which are also advised by the advisor.
Name (Age) Position(s) Held With Fund Principal Occupation(s) during Past Five Years - ------------------------------------------------------------------------------------------------------------------------------------ James E. Stowers, Jr.* (75) Director, Chairman, Director and controlling shareholder, ACC, 4500 Main Street Chairman of the Board Chairman and Director, ACIM, ACSC and ACIS(1) Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ James E. Stowers III*(40) Director Director and Chief Executive Officer, ACC, ACIM, ACSC and 4500 Main Street ACIS(2) Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ Thomas A. Brown (59) Director Director of Plains States Development, Applied Industrial 4500 Main Street Technologies, Inc., a corporation engaged in the sale of Kansas City, MO 64111 bearings and power transmission products - ------------------------------------------------------------------------------------------------------------------------------------ Robert W. Doering, M.D. (67) Director Retired, formerly a general surgeon 4500 Main Street Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ Andrea C. Hall, Ph.D. (54) Director Senior Vice President and Associate Director, Midwest 4500 Main Street Research Institute Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ D.D. (Del) Hock (64) Director Retired, formerly Chairman, Public Service Company of 4500 Main Street Colorado; Director, Service Tech, Inc., Hathaway Kansas City, MO 64111 Corporation, and J.D. Edwards & Company - ------------------------------------------------------------------------------------------------------------------------------------ Donald H. Pratt (61) Director Chairman and Director, Butler Manufacturing Company 4500 Main Street Vice Chairman Director, Atlas-Copco North America Inc. Kansas City, MO 64111 of the Board - ------------------------------------------------------------------------------------------------------------------------------------ Lloyd T. Silver, Jr. (71) Director President, LSC, Inc., manufacturer's representative 4500 Main Street Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ M. Jeannine Strandjord (53) Director Senior Vice President, Finance, Sprint Corporation; 4500 Main Street Director, DST Systems, Inc. Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ (1)Father of James E. Stowers III (2)Son of James E. Stowers, Jr. Committees The Board has four standing committees to oversee specific functions of the funds' operations. Information about these committees appears in the table below. The director first named serves as chairman of the committee. Committee Members Function of Committee - --------------------------- ----------------------------- -------------------------------------------------------------------------- - --------------------------- ----------------------------- -------------------------------------------------------------------------- Executive James E. Stowers, Jr. The Executive Committee performs the functions of the Board of James E. Stowers III Directors between Board meetings, subject to the limitations on its Donald H. Pratt power set out in the Maryland General Corporation Law, and except for matters required by the Investment Company Act to be acted upon by the whole Board. - --------------------------- ----------------------------- -------------------------------------------------------------------------- - --------------------------- ----------------------------- -------------------------------------------------------------------------- Compliance Thomas A. Brown The Compliance Committee reviews the results of the funds' compliance Donald H. Pratt testing program, reviews quarterly reports from the advisor to the Board Lloyd T. Silver, Jr. regarding various compliance matters and monitors the implementation of Andrea C. Hall, Ph.D. the funds' Code of Ethics, including any violations thereof. - --------------------------- ----------------------------- -------------------------------------------------------------------------- - --------------------------- ----------------------------- -------------------------------------------------------------------------- Audit M. Jeannine Strandjord The Audit Committee recommends the engagement of the funds' independent Robert W. Doering, M.D. auditors and oversees its activities. The committee receives reports from D.D. (Del) Hock the advisor's Internal Audit Department, which is accountable to the committee. The committee also receives reporting about compliance matters affecting the funds. - --------------------------- ----------------------------- -------------------------------------------------------------------------- - --------------------------- ----------------------------- -------------------------------------------------------------------------- Nominating Donald H. Pratt The Nominating Committee primarily considers and recommends individuals Andrea C. Hall, Ph.D. for nomination as directors. The names of potential director candidates D.D. (Del) Hock are drawn from a number of sources, including recommendations from members of the board, management and shareholders. The 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. - --------------------------- ----------------------------- --------------------------------------------------------------------------
Compensation of Directors The directors also serve as directors for five American Century investment companies other than the corporation. Each director who is not an interested person as defined in the Investment Company Act receives compensation for service as a member of the Board of all six such companies based on a schedule that takes into account the number of meetings attended and the assets of the funds for which the meetings are held. These fees and expenses are divided among the six investment companies based, in part, upon their relative net assets. Under the terms of the management agreement with the advisor, the funds are responsible for paying such fees and expenses. The following table shows the aggregate compensation paid by the corporation for the periods indicated and by the six investment companies served by this Board to each director who is not an interested person as defined in the Investment Company Act. Aggregate Director Compensation for Fiscal Year Ended October 31, 1999 - -------------------------------------------------------------------------------- Total Total Compensation Compensation from the from the American Century Name of Director Funds (1) Family of Funds(2) - ---------------- --------- ------------------ Thomas A. Brown $ $ Robert W. Doering, M.D. Andrea C. Hall, Ph.D. Info not yet available D.D. (Del) Hock Donald H. Pratt Lloyd T. Silver, Jr. M. Jeannine Strandjord - -------------------------------------------------------------------------------- 1 Includes compensation paid to the directors during the fiscal year ended October 31, 1999, and also includes amounts deferred at the election of the directors under the American Century Mutual Funds Deferred Compensation Plan for Non-Interested Directors and Trustees. 2 Includes compensation paid by the six investment company members of the American Century family of funds served by this Board. The funds have adopted the American Century Deferred Compensation Plan for Non-Interested Directors and Trustees. Under the plan, the independent directors may defer receipt of all or any part of the fees to be paid to them for serving as directors of the funds. All deferred fees are credited to an account established in the name of the directors. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the American Century funds that are selected by the director. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts credited to the account. Directors are allowed to change their designation of mutual funds from time to time. No deferred fees are payable until such time as a director resigns, retires or otherwise ceases to be a member of the Board of Directors. Directors may receive deferred fee account balances either in a lump sum payment or in substantially equal installment payments to be made over a period not to exceed 10 years. Upon the death of a director, all remaining deferred fee account balances are paid to the director's beneficiary or, if none, to the director's estate. The plan is an unfunded plan and, accordingly, the funds have no obligation to segregate assets to secure or fund the deferred fees. The rights of directors to receive their deferred fee account balances are the same as the rights of a general unsecured creditor of the funds. The plan may be terminated at any time by the administrative committee of the plan. If terminated, all deferred fee account balances will be paid in a lump sum. No deferred fees were paid to any director under the plan during the fiscal year ended October 31, 1999. Officers Background information for the officers of the funds is provided in the following table. All persons named as officers of the funds also serve in similar capacities for the 12 other investment companies advised by ACIM. Not all officers of the funds are listed; only those officers with policy-making functions for the funds are listed. No officer is compensated for his or her service as an officer of the funds. The individuals listed in the following table are interested persons of the funds (as defined in the Investment Company Act) by virtue of, among other considerations, their affiliation with either the funds; ACC; ACC's subsidiaries (including ACIM and ACSC); or the funds' distributor (FDI).
Name (Age) Positions Held With Principal Occupation(s) Address Fund During Past Five Years - ------------------------------------------------------------------------------------------------------------------------------------ George A. Rio (44) President Executive Vice President and Director of Client Services, FDI 60 State St. (March 1998 to present) Boston, MA 02109 Senior Vice President and Senior Key Account Manager, Putnam Mutual Funds (June 1995 to March 1998) Director Business Development, First Data Corporation (May 1994 to June 1995) - ------------------------------------------------------------------------------------------------------------------------------------ Christopher J. Kelley (34) Vice President Vice President and Associate General Counsel, FDI (July 1996 to 60 State St. present) Boston, MA 02109 Assistant Counsel, Forum Financial Group (April 1994 to July 1996) - ------------------------------------------------------------------------------------------------------------------------------------ Mary A. Nelson (35) Vice President Vice President and Manager of Treasury Services and 60 State St. Administration, FDI (1994 to present) Boston, MA 02109 - ------------------------------------------------------------------------------------------------------------------------------------ Maryanne Roepke, CPA (43) Vice President and Senior Vice President, Treasurer and Principal Accounting 9300 Ward Parkway Treasurer Officer, ACSC Kansas City, MO 64111 - ------------------------------------------------------------------------------------------------------------------------------------ David C. Tucker (41) Vice President Senior Vice President and General Counsel, ACSC and ACIM 4500 Main St. (June 1998 to present) Kansas City, MO 64111 General Counsel, ACC (June 1998 to present) Consultant to mutual fund industry (May 1997 to April 1998) Vice President and General Counsel, Janus Companies (1990 to 1997) - ------------------------------------------------------------------------------------------------------------------------------------ Paul Carrigan, Jr. (50) Secretary Secretary, ACC (December 1998 to present) 4500 Main St. Director of Legal Operations, ACSC (February 1996 to present) Kansas City, MO 64111 Board Communications Manager, The Benham Company (April 1994 to January 1996) - ------------------------------------------------------------------------------------------------------------------------------------ C. Jean Wade (35) Controller Controller-Fund Accounting, ACSC 9300 Ward Parkway Kansas City, MO 64114 - ------------------------------------------------------------------------------------------------------------------------------------ Merele A. May (36) Controller Vice President, Controller-Fund Accounting, ACSC 9300 Ward Parkway Kansas City, MO 64114 - ------------------------------------------------------------------------------------------------------------------------------------ Jon Zindel (32) Tax Officer Director of Taxation, ACSC (since 1996) 9300 Ward Parkway Tax Manager, PricewaterhouseCoopers LLP (1989) Kansas City, MO 64114 - ------------------------------------------------------------------------------------------------------------------------------------
SERVICE PROVIDERS The funds have no employees. To conduct the funds' day-to-day activities, the funds have hired a number of service providers. Each service provider has a specific function to fill on behalf of the funds and is described below. ACIM and ACSC, are both wholly owned by ACC. James E. Stowers Jr., Chairman of ACC, controls ACC by virtue of his ownership of a majority of its voting stock. INVESTMENT ADVISOR A description of the responsibilities of the advisor appears in the Prospectus under the heading "Management." For the services provided to the funds, the advisor receives a monthly fee based on a percentage of the average net assets of the fund as described in the Prospectus. On the first business day of each month, the funds pay a management fee to the advisor for the previous month at the specified rate. The fee for the previous month is calculated by multiplying the applicable fee for the fund by the aggregate average daily closing value of a fund's net assets during the previous month. This number is then multiplied by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). The management agreement shall continue in effect until the earlier of the expiration of two years from the date of its execution or until the first meeting of shareholders following such execution and for as long thereafter as its continuance is specifically approved at least annually by (1) the funds' Board of Directors, or by the vote of a majority of outstanding votes (as defined in the Investment Company Act) and (2) the vote of a majority of the directors of the funds who are not parties to the agreement or interested persons of the advisor, cast in person at a meeting called for the purpose of voting on such approval. The management agreement provides that it may be terminated at any time without payment of any penalty by the funds' Board of Directors, or by a vote of a majority of outstanding votes, on 60 days' written notice to the advisor, and that it shall be automatically terminated if it is assigned. The management agreement provides that the advisor shall not be liable to the funds or their shareholders for anything other than willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties. The management agreement also provides that the advisor and its officers, directors and employees may engage in other business, devote time and attention to any other business whether of a similar or dissimilar nature, and render services to others. Certain investments may be appropriate for the funds and also for other clients advised by the advisor. Investment decisions for the funds and other clients are made with a view to achieving their respective investment objectives after consideration of such factors as their current holdings, availability of cash for investment and the size of their investment generally. A particular security may be bought or sold for only one client or fund, or in different amounts and at different times for more than one but less than all clients or funds. In addition, purchases or sales of the same security may be made for two or more clients or funds on the same date. Such transactions will be allocated among clients in a manner believed by the advisor to be equitable to each. In some cases this procedure could have an adverse effect on the price or amount of the securities purchased or sold by a fund. The advisor may aggregate purchase and sale orders of the funds with purchase and sale orders of its other clients when the advisor believes that such aggregation provides the best execution for the funds. The Board of Directors has approved the policy of the advisor with respect to the aggregation of portfolio transactions. Where portfolio transactions have been aggregated, the funds participate at the average share price for all transactions in that security on a given day and share transaction costs on a pro rata basis. The advisor will not aggregate portfolio transactions of the funds unless it believes such aggregation is consistent with its duty to seek best execution on behalf of the funds and the terms of the management agreement. The advisor receives no additional compensation or remuneration as a result of such aggregation. Other Advisory Relationships In addition to managing the funds, the advisor also serves as an investment advisor to seven institutional accounts and to the following registered investment companies: American Century World Mutual Funds, Inc. American Century Premium Reserves, Inc. American Century Variable Portfolios, Inc. American Century Capital Portfolios, Inc. American Century Strategic Asset Allocations, Inc. American Century Municipal Trust American Century Government Income Trust American Century Investment Trust American Century Target Maturities Trust American Century Quantitative Equity Funds American Century International Bond Funds American Century California Tax-Free and Municipal Funds TRANSFER AGENT AND ADMINISTRATOR American Century Services Corporation, 4500 Main Street, Kansas City, Missouri 64111, serves as transfer agent and dividend-paying agent for the funds. It provides physical facilities, computer hardware and software and personnel, for the day-to-day administration of the funds and of the advisor. The advisor pays ACSC for such services. From time to time, special services may be offered to shareholders who maintain higher share balances in our family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters and a team of personal representatives. Any expenses associated with these special services will be paid by the advisor. Pursuant to a Sub-Administration Agreement with the advisor, Funds Distributor, Inc. (FDI) serves as the co-administrator for the funds. FDI is responsible for (i) providing certain officers of the funds and (ii) reviewing and filing marketing and sales literature on behalf of the funds. The fees and expenses of FDI are paid by the advisor out of its unified fee. DISTRIBUTOR The funds' shares are distributed by FDI, a registered broker-dealer. The distributor is a wholly owned indirect subsidiary of Boston Institutional Group, Inc. The distributor's principal business address is 60 State Street, Suite 1300, Boston, Massachusetts 02109. The distributor is the principal underwriter of the funds' shares. The distributor makes a continuous, best-efforts underwriting of the funds' shares. This means that the distributor has no liability for unsold shares. OTHER SERVICE PROVIDERS CUSTODIAN BANKS Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598, and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves as custodian of the assets of the funds. The custodians take no part in determining the investment policies of the funds or in deciding which securities are purchased or sold by the funds. The funds, however, may invest in certain obligations of the custodians and may purchase or sell certain securities from or to the custodians. INDEPENDENT AUDITORS Deloitte & Touche LLP is the independent auditor of the funds. The address of Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri 64106. As the independent auditor of the funds, Deloitte & Touche LLP provides services including (1) audit of the annual financial statements for each fund, (2) assistance and consultation in connection with SEC filings and (3) review of the annual federal income tax return filed for each fund. BROKERAGE ALLOCATION Under the management agreement between the funds and the advisor, the advisor has the responsibility of selecting brokers and dealers to execute portfolio transactions. The funds' policy is to secure the most favorable prices and execution of orders on its portfolio transactions. So long as that policy is met, the advisor may take into consideration the factors discussed below when selecting brokers. The advisor receives statistical and other information and services, including research, without cost from brokers and dealers. The advisor evaluates such information and services, together with all other information that it may have, in supervising and managing the investments of the funds. Because such information and services may vary in amount, quality and reliability, their influence in selecting brokers varies from none to very substantial. The advisor proposes to continue to place some of the funds' brokerage business with one or more brokers who provide information and services. Such information and services will be in addition to and not in lieu of services required to be performed by the advisor. The advisor does not utilize brokers that provide such information and services for the purpose of reducing the expense of providing required services to the funds. The brokerage commissions paid by the funds may exceed those that another broker might have charged for effecting the same transactions, because of the value of the brokerage and research services provided by the broker. Research services furnished by brokers through whom the funds effect securities transactions may be used by the advisor in servicing all of its accounts, and not all such services may be used by the advisor in managing the portfolios of the funds. The staff of the SEC has expressed the view that the best price and execution of over-the-counter transactions in portfolio securities may be secured by dealing directly with principal market makers, thereby avoiding the payment of compensation to another broker. In certain situations, the officers of the funds and the advisor believe that the facilities, expert personnel and technological systems of a broker often enable the funds to secure as good a net price by dealing with a broker instead of a principal market maker, even after payment of the compensation to the broker. The funds regularly place their over-the-counter transactions with principal market makers, but also may deal on a brokerage basis when utilizing electronic trading networks or as circumstances warrant. INFORMATION ABOUT FUND SHARES Each of the funds is a series of shares issued by the corporation, and shares of each fund have equal voting rights. In addition, each series (or fund) may be divided into separate classes. See "Multiple Class Structure," which follows. Additional funds and classes may be added without a shareholder vote. Each fund votes separately on matters affecting that fund exclusively. Voting rights are not cumulative, so that investors holding more than 50% of the corporation's (i.e., all funds') outstanding shares may be able to elect a Board of Directors. The corporation undertakes dollar-based voting, meaning that the number of votes a shareholder is entitled to is based upon the dollar amount of the shareholder's investment. The election of directors is determined by the votes received from all the corporation's shareholders without regard to whether a majority of shares of any one fund voted in favor of a particular nominee or all nominees as a group. The assets belonging to each series or class of shares are held separately by the custodian and the shares of each series or class represent a beneficial interest in the principal, earnings and profit (or losses) of investments and other assets held for each series or class. Your rights as a shareholder are the same for all series or classes of securities unless otherwise stated. Within their respective series or class, all shares have equal redemption rights. Each share, when issued, is fully paid and non-assessable. In the event of complete liquidation or dissolution of the funds, shareholders of each series or class of shares shall be entitled to receive, pro rata, all of the assets less the liabilities of that series or class. Each shareholder has rights to dividends and distributions declared by the fund he or she owns and to the net assets of such fund upon its liquidation or dissolution proportionate to his or her share ownership interest in the fund. MULTIPLE CLASS STRUCTURE The corporation's Board of Directors has adopted a multiple class plan (the Multiclass Plan) pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such plan, the funds may issue up to four classes of shares: an Investor Class, an Institutional Class, a Service Class and an Advisor Class. Not all funds offer all four classes. The Investor Class is made available to investors directly without any load or commission, for a single unified management fee. The Institutional, Service and Advisor Classes are made available to institutional shareholders or through financial intermediaries that do not require the same level of shareholder and administrative services from the advisor as Investor Class shareholders. As a result, the advisor is able to charge these classes a lower total management fee. In addition to the management fee, however the Advisor Class shares are subject to a Master Distribution and Shareholder Services Plan (described beginning on page 29). The plan has been adopted by the funds' Board of Directors and initial shareholder in accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act. RULE 12b-1 Rule 12b-1 permits an investment company to pay expenses associated with the distribution of its shares in accordance with a plan adopted by the investment company's Board of Directors and approved by its shareholders. Pursuant to such rule, the Board of Directors and initial shareholder of the funds' Advisor Class have approved and entered into a Master Distribution and Shareholder Services Plan, with respect to the Advisor Class (the Plan). The Plan is described below. In adopting the Plan, the Board of Directors (including a majority of directors who are not interested persons of the funds [as defined in the Investment Company Act], hereafter referred to as the independent directors) determined that there was a reasonable likelihood that the Plan would benefit the funds and the shareholders of the affected class. Pursuant to Rule 12b-1, information with respect to revenues and expenses under the Plan is presented to the Board of Directors quarterly for its consideration in connection with its deliberations as to the continuance of the Plan. Continuance of the Plan must be approved by the Board of Directors (including a majority of the independent directors) annually. The Plan may be amended by a vote of the Board of Directors (including a majority of the independent directors), except that the Plan may not be amended to materially increase the amount to be spent for distribution without majority approval of the shareholders of the affected class. The Plan terminates automatically in the event of an assignment and may be terminated upon a vote of a majority of the independent directors or by vote of a majority of the outstanding voting securities of the affected class. All fees paid under the Plan will be made in accordance with Section 26 of the Rules of Fair Practice of the National Association of Securities Dealers (NASD). Master Distribution and Shareholder Services Plan As described in the Prospectus, the funds' Advisor Class of shares also is made available to participants in employer-sponsored retirement or savings plans and to persons purchasing through financial intermediaries such as banks, broker-dealers and insurance companies. The funds' distributor enters into contracts with various banks, broker-dealers, insurance companies and other financial intermediaries, with respect to the sale of the funds' shares and/or the use of the funds' shares in various investment products or in connection with various financial services. Certain recordkeeping and administrative services that are provided by the funds' transfer agent for the Investor Class shareholders may be performed by a plan sponsor (or its agents) or by a financial intermediary for shareholders in the Advisor Class. In addition to such services, the financial intermediaries provide various distribution services. To enable the funds' shares to be made available through such plans and financial intermediaries, and to compensate them for such services, the funds' advisor has reduced its management fee by 0.25% per annum with respect to the Advisor Class shares and the funds' Board of Directors has adopted a Master Distribution and Shareholder Services Plan. Pursuant to the Plan, the Advisor Class shares pay a fee of 0.50% annually of the aggregate average daily assets of the funds' Advisor Class shares, 0.25% of which is paid for Shareholder Services (as described below) and 0.25% of which is paid for distribution services. Payments may be made for a variety of shareholder services, including, but not limited to, (a) receiving, aggregating and processing purchase, exchange and redemption requests from beneficial owners (including contract owners of insurance products that utilize the funds as underlying investment media) of shares and placing purchase, exchange and redemption orders with the funds' distributor; (b) providing shareholders with a service that invests the assets of their accounts in shares pursuant to specific or pre-authorized instructions; (c) processing dividend payments from a fund on behalf of shareholders and assisting shareholders in changing dividend options, account designations and addresses; (d) providing and maintaining elective services such as check writing and wire transfer services; (e) acting as shareholder of record and nominee for beneficial owners; (f) maintaining account records for shareholders and/or other beneficial owners; (g) issuing confirmations of transactions; (h) providing subaccounting with respect to shares beneficially owned by customers of third parties or providing the information to a fund as necessary for such subaccounting; (i) preparing and forwarding shareholder communications from the funds (such as proxies, shareholder reports, annual and semiannual financial statements and dividend, distribution and tax notices) to shareholders and/or other beneficial owners; and (j) providing other similar administrative and sub-transfer agency services. Shareholder services do not include those activities and expenses that are primarily intended to result in the sale of additional shares of the funds. Distribution services include any activity undertaken or expense incurred that is primarily intended to result in the sale of Advisor Class shares, which services may include but are not limited to, (a) the payment of sales commissions, on-going commissions and other payments to brokers, dealers, financial institutions or others who sell Advisor Class shares pursuant to selling agreements; (b) compensation to registered representatives or other employees of distributor who engage in or support distribution of the funds' Advisor Class shares; (c) compensation to, and expenses (including overhead and telephone expenses) of, distributor; (d) the printing of prospectuses, statements of additional information and reports for other than existing shareholders; (e) the preparation, printing and distribution of sales literature and advertising materials provided to the funds' shareholders and prospective shareholders; (f) receiving and answering correspondence from prospective shareholders, including distributing prospectuses, statements of additional information, and shareholder reports; (g) the providing of facilities to answer questions from prospective investors about fund shares; (h) complying with federal and state securities laws pertaining to the sale of fund shares; (i) assisting investors in completing application forms and selecting dividend and other account options; (j) the providing of other reasonable assistance in connection with the distribution of fund shares; (k) the organizing and conducting of sales seminars and payments in the form of transactional and compensation or promotional incentives; (l) profit on the foregoing; (m) the payment of service fees for the provision of personal, continuing services to investors, as contemplated by the Rules of Fair Practice of the NASD; and (n) such other distribution and services activities as the advisor determines may be paid for by the funds pursuant to the terms of this agreement and in accordance with Rule 12b-1 of the Investment Company Act. BUYING AND SELLING FUND SHARES Information about buying, selling and exchanging fund shares is contained in the funds' Prospectus and in Your Guide to American Century Services. The Prospectus and guide are available to investors without charge and may be obtained by calling us. VALUATION OF A FUND'S SECURITIES Each fund's net asset value per share (NAV) is calculated as of the close of business of the New York Stock Exchange (the Exchange), usually at 4 p.m. Eastern time on each day the Exchange is open for business. The Exchange typically observes the following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect the same holidays to be observed in the future, the Exchange may modify its holiday schedule at any time. The advisor typically completes its trading on behalf of each fund in various markets before the Exchange closes for the day. Each fund's NAV is calculated by adding the value of all portfolio securities and other assets, deducting liabilities and dividing the result by the number of shares outstanding. Expenses and interest earned on portfolio securities are accrued daily. The portfolio securities of the funds, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. Portfolio securities primarily traded on foreign securities exchanges generally are valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. Debt securities not traded on a principal securities exchange are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the Board of Directors. Because there are hundreds of thousands of municipal issues outstanding, and the majority of them do not trade daily, the prices provided by pricing services for these types of securities are generally determined without regard to bid or last sale prices. In valuing securities, the pricing services generally take into account institutional trading activity, trading in similar groups of securities, and any developments related to specific securities. The methods used by the pricing service and the valuations so established are reviewed by the advisor under the general supervision of the Board of Directors. There are a number of pricing services available, and the advisor, on the basis of ongoing evaluation of these services, may use other pricing services or discontinue the use of any pricing service in whole or in part. Securities maturing within 60 days of the valuation date may be valued at cost, plus or minus any amortized discount or premium, unless the directors determine that this would not result in fair valuation of a given security. Other assets and securities for which quotations are not readily available are valued in good faith at their fair value using methods approved by the Board of Directors. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, if that is earlier. That value is then translated to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established, but before the net asset value per share was determined, that was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the Board of Directors. Trading of these securities in foreign markets may not take place on every exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the exchange is not open and on which the funds' net asset values are not calculated. Therefore, such calculations do not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of the funds' portfolios may be affected on days when shares of the funds may not be purchased or redeemed. TAXES FEDERAL INCOME TAX Each fund intends to qualify annually as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so qualifying, a fund will be exempt from federal income taxes to the extent that it distributes substantially all of its net investment income and net realized capital gains (if any) to shareholders. If a fund fails to qualify as a regulated investment company, it will be liable for taxes, significantly reducing its distributions to shareholders and eliminating shareholders' ability to treat distributions of the funds in the manner they were realized by the funds. If fund shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. The dividends from net income may qualify for the 70% dividends-received deduction for corporations to the extent that the fund held shares receiving the dividend for more than 45 days. Distributions from gains on assets held longer than 12 months are taxable as long-term gains regardless of the length of time you have held the shares. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distributions of long-term capital gains to you with respect to such shares. Dividends and interest received by a fund on foreign securities may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. Foreign countries generally do not impose taxes on capital gains with respect to investments by non-resident investors. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of its fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. In order for you to utilize the foreign tax credit, you must have held your shares for 16 days or more during the 30-day period, beginning 15 days prior to the ex-dividend date for the mutual fund shares. The mutual fund must meet a similar holding period requirement with respect to foreign securities to which a dividend is attributable. Any portion of the foreign tax credit that is ineligible as a result of the fund not meeting the holding period requirement will be separately disclosed and may be eligible as an itemized deduction. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies (PFIC), capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund also may be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments and distribute them to shareholders. Any distribution attributable to a PFIC is characterized as ordinary income. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, either American Century or your financial intermediary is required by federal law to withhold and remit 31% of reportable payments (which may include dividends, capital gains distributions and redemptions) to the IRS. Those regulations require you to certify that the Social Security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by us that omit your Social Security number or tax identification number will subject us to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed, and is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders generally will recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. STATE AND LOCAL TAXES Distributions also may be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax advisor about the tax status of such distributions in your own state. HOW FUND PERFORMANCE INFORMATION IS CALCULATED The funds may quote performance in various ways. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return, average annual total return or yield. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. Total returns quoted in advertising and sales literature reflect all aspects of a fund's return, including the effect of reinvesting dividends and capital gain distributions (if any) and any change in the fund's NAV during the period. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical historical investment in a fund during a stated period and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant throughout the period. For example, a cumulative total return of 100% over 10 years would produce an average annual return of 7.18%, which is the steady annual rate that would equal 100% growth on a compounded basis in 10 years. While average annual total returns are a convenient means of comparing investment alternatives, investors should realize that the funds' performance is not constant over time, but changes from year to year, and that average annual total returns represent averaged figures as opposed to actual year-to-year performance. In addition to average annual total returns, each fund may quote unaveraged or cumulative total returns reflecting the simple change in value of an investment over a stated period, including periods other than one, five and 10 years. Average annual and cumulative total returns may be quoted as percentages or as dollar amounts and may be calculated for a single investment, a series of investments, or a series of redemptions over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) to illustrate the relationship of these factors and their contributions to total return. As new funds, performance information for the funds is not available as of the date of this Statement of Additional Information. PERFORMANCE COMPARISONS The funds' performance may be compared with the performance of other mutual funds tracked by mutual fund rating services or with other indices of market performance. This may include comparisons with funds that, unlike the American Century funds, are sold with a sales charge or deferred sales charge. Sources of economic data that may be used for such comparisons may include, but are not limited to: U.S. Treasury bill, note and bond yields, money market fund yields, U.S. government debt and percentage held by foreigners, the U.S. money supply, net free reserves, and yields on current-coupon GNMAs (source: Board of Governors of the Federal Reserve System); the federal funds and discount rates (source: Federal Reserve Bank of New York); yield curves for U.S. Treasury securities and AA/AAA-rated corporate securities (source: Bloomberg Financial Markets); yield curves for AAA-rated, tax-free municipal securities (source: Telerate); yield curves for foreign government securities (sources: Bloomberg Financial Markets and Data Resources, Inc.); total returns on foreign bonds (source: J.P. Morgan Securities Inc.); various U.S. and foreign government reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures Index (source: Commodity Index Report); the price of gold (sources: London a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund rankings published in major, nationally distributed periodicals; data provided by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indices of stock market performance; and indices and historical data supplied by major securities brokerage or investment advisory firms. The funds also may utilize reprints from newspapers and magazines furnished by third parties to illustrate historical performance or to provide general information about the funds. PERMISSIBLE ADVERTISING INFORMATION From time to time, the funds may, 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 who have invested in one or more of the funds. The funds also may include calculations, such as hypothetical compounding examples, which describe hypothetical investment results. Such performance examples will be based on an express set of assumptions and are not indicative of the performance of any of the funds. MULTIPLE CLASS PERFORMANCE ADVERTISING Pursuant to the Multiple Class Plan, the funds may issue additional classes of existing funds or introduce new funds with multiple classes available for purchase. To the extent a new class is added to an existing fund, the advisor may, in compliance with SEC and NASD rules, regulations and guidelines, market the new class of shares using the historical performance information of the original class of shares. When quoting performance information for the new class of shares for periods prior to the first full quarter after inception, the original class' performance will be restated to reflect the expenses of the new class, and for periods after the first full quarter after inception, actual performance of the new class will be used. More information about the funds is contained in these documents Annual and Semiannual Reports These contain more information about the funds' investments and the market conditions and investment strategies that significantly affected the funds' performance during the most recent fiscal period. The annual and semiannual reports are incorporated by reference into this SAI. This means that these are legally part of this SAI. You can receive a free copy of the annual and semiannual reports, and ask questions about the funds and your accounts, by contacting American Century at the address or telephone numbers listed below. If you own or are considering purchasing fund shares through o an employer-sponsored retirement plan o a bank o a broker-dealer o an insurance company o another financial intermediary you can receive the annual and semiannual reports directly from them. You also can get information about the funds from the Securities and Exchange Commission (SEC). o In person SEC Public Reference Room Washington, D.C. Call 1-800-SEC-0330 for location and hours. o On the Internet www.sec.gov o By mail SEC Public Reference Section Washington, D.C. 20549-6009 (The SEC will charge a fee for copying the documents.) Investment Company Act File No. 811-0816 American Century Investments P.O. Box 419200 Kansas City, Missouri 64141-6200 SH-PRS-xxxxx 9911 PART C. OTHER INFORMATION. ITEM 23. Exhibits (all exhibits not filed herewith are being incorporated herein by reference) (a) (1) Articles of Incorporation of Twentieth Century Investors, Inc., dated June 26, 1990 (filed electronically as Exhibit b1a to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (2) Articles of Amendment of Twentieth Century Investors, Inc., dated November 19, 1990 (filed electronically as Exhibit b1b to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (3) Articles of Merger of Twentieth Century Investors, Inc., a Maryland corporation and Twentieth Century Investors, Inc., a Delaware corporation, dated February 22, 1991 (filed electronically as Exhibit b1c to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (4) Articles of Amendment of Twentieth Century Investors, Inc., dated August 10, 1993 (filed electronically as Exhibit b1d to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (5) Articles Supplementary of Twentieth Century Investors, Inc., dated September 3, 1993 (filed electronically as Exhibit b1e to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (6) Articles Supplementary of Twentieth Century Investors, Inc., dated April 24, 1995 (filed electronically as Exhibit b1f to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (7) Articles Supplementary of Twentieth Century Investors, Inc., dated October 11, 1995 (filed electronically as Exhibit b1g to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (8) Articles Supplementary of Twentieth Century Investors, Inc., dated January 22, 1996 (filed electronically as Exhibit b1h to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (9) Articles Supplementary of Twentieth Century Investors, Inc., dated March 11, 1996 (filed electronically as Exhibit b1i to Post-Effective Amendment No. 75 on Form N-1A on June 14, 1996). (10) Articles Supplementary of Twentieth Century Investors, Inc. dated September 9, 1996 is included herein. (11) Articles of Amendment of Twentieth Century Investors, Inc., dated December 2, 1996 (filed electronically as Exhibit b1j to Post-Effective Amendment No. 76 on Form N-1A on February 28, 1997). (12) Articles Supplementary of American Century Mutual Funds, Inc., dated December 2, 1996 (filed electronically as Exhibit b1k to Post-Effective Amendment No. 76 on Form N-1A on February 28, 1997). (13) Articles Supplementary of American Century Mutual Funds, Inc., dated July 28, 1997 (filed electronically as Exhibit b1l to Post-Effective Amendment No. 78 on Form N-1A on February 26, 1998). (14) Articles Supplementary of American Century Mutual Funds, Inc., dated November 28, 1997 (filed electronically as Exhibit a13 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (15) Certificate of Correction to Articles Supplementary of American Century Mutual Funds, Inc., dated December 18, 1997 (filed electronically as Exhibit a14 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (16) Articles Supplementary of American Century Mutual Funds, Inc., dated December 18, 1997 (filed electronically as Exhibit b1m to Post-Effective Amendment No. 78 on Form N-1A on February 26, 1998). (17) Articles Supplementary of American Century Mutual Funds, Inc., dated January 25, 1999 (filed electronically as Exhibit a16 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (18) Articles Supplementary of American Century Mutual Funds, Inc., dated February 16, 1999 (filed electronically as Exhibit a17 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (19) Articles Supplementary of American Century Mutual Funds, Inc. (to be filed by amendment). (b) (1) By-laws of Twentieth Century Investors, Inc. (filed electronically as Exhibit b2 to Post-Effective Amendment No. 73 on Form N-1A on February 29, 1996). (2) Amendment to Bylaws of American Century Mutual Funds, Inc. (filed electronically as Exhibit b2b to Post-Effective Amendment No. 9 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on February 17, 1998). (c) Registrant hereby incorporates by reference, as though set forth fully herein, Article Fifth, Article Seventh, and Article Eighth, of Registrants Articles of Incorporation, appearing as Exhibit (a)(1) to Post-Effective Amendment No. 76 on Form N-1A of the Registrant, and Article Fifth of Registrants Articles of Amendment, appearing as Exhibit (a)(4) to Post-Effective Amendment No. 76 to the Registration Statement on February 28, 1997; and Sections 3, 4, 5, 6, 7, 8, 9, 10, 11, 22, 24, 25, 30, 31, 33, 39, 45 and 46 of Registrants By-Laws appearing as Exhibit (b)(1) to Post-Effective Amendment No. 73 on Form N-1A, and Sections 25, 30 & 31 of Registrants By-Laws appearing as Exhibit (b)(2) to Post-Effective Amendment No. 9 on Form N-1A of American Century Capital Portfolios, Inc., Commission No. 33-64872. (d) (1) Management Agreement between American Century Mutual Funds, Inc. and American Century Investment Management, Inc. dated August 1, 1997 (filed electronically as Exhibit b5 to Post-Effective Amendment No. 78 on Form N-1A on February 26, 1998). (2) Addendum to Management Agreement between American Century Mutual Funds, Inc. and American Century Investment Management, Inc., dated February 16, 1999 (filed electronically as Exhibit d2 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (3) Addendum to Management Agreement between American Century Mutual Funds, Inc. and American Century Investment Management, Inc. (to be filed by amendment). (e) (1) Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated January 15, 1998 (filed electronically as Exhibit b6 to Post-Effective Amendment No. 28 on Form N-1A of American Century Target Maturities Trust, File No. 2-94608, on January 30, 1998). (2) Amendment No. 1 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated June 1, 1998 (filed electronically as Exhibit b6b to Post-Effective Amendment No. 11 to the Registration Statement of American Century Capital Portfolios, Inc., File No. 33-64872, on June 26, 1998). (3) Amendment No. 2 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated December 1, 1998 (filed electronically as Exhibit b6c to Post-Effective Amendment No. 12 to the Registration Statement of American Century World Mutual Funds, Inc., File No. 33-39242, on November 13, 1998). (4) Amendment No. 3 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated January 29, 1999 (filed electronically as Exhibit e4 to Post-Effective Amendment No. 24 to the Registration Statement of American Century Variable Portfolios, Inc., File No. 33-14567, on January 15, 1999). (5) Amendment No. 4 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated July 30, 1999 (filed electronically as Exhibit e5 to Post-Effective Amendment No. 16 to the Registration Statement of American Century Capital Portfolios, Inc., File No. 33-64872, on July 29, 1999). (6) Amendment No. 5 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. (to be filed by amendment). (f) Not Applicable. (g) (1) Global Custody Agreement between The Chase Manhattan Bank and the Twentieth Century and Benham funds, dated August 9, 1996 (filed electronically as Exhibit 8 to Post-Effective Amendment No. 31 on Form N-1A of American Century Government Income Trust, File No. 2-99222, on February 7, 1997). (2) Master Agreement between Commerce Bank, N.A. and Twentieth Century Services, Inc. dated January 22, 1997 (filed electronically as Exhibit 8e to Post-Effective Amendment No. 76 on Form N-1A on February 28, 1997). (h) (1) Transfer Agency Agreement between Twentieth Century Investors, Inc. and Twentieth Century Services, Inc. dated March 1, 1991 (filed electronically as Exhibit 9 to Post-Effective Amendment No. 76 on Form N-1A on February 28, 1997). (2) Credit Agreement between American Century Funds and The Chase Manhattan Bank, as Administrative Agent dated as of December 18, 1998 (filed electronically as Exhibit h2 to Post-Effective Amendment No. 37 to the Registration Statement of American Century Government Income Trust on May 7, 1999, File No. 2-99222). (i) Opinion and Consent of Counsel (to be filed by amendment). (j) Power of Attorney dated February 19, 1999 (filed electronically as Exhibit j2 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (k) Not applicable. (l) Not applicable. (m) (1) Master Distribution and Shareholder Services Plan of Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century World Investors, Inc. (Advisor Class) dated September 3, 1996 (filed electronically as Exhibit b15a to Post-Effective Amendment No. 9 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on February 17, 1998). (2) Amendment No. 1 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated June 13, 1997 (filed electronically as Exhibit b15d to Post-Effective Amendment No. 77 on Form N-1A on July 17, 1997). (3) Amendment No. 2 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated September 30, 1997 (filed electronically as Exhibit b15c to Post-Effective Amendment No. 78 on Form N-1A on February 26, 1998). (4) Amendment No. 3 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated June 30, 1998 (filed electronically as Exhibit b15e to Post-Effective Amendment No. 11 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on June 26, 1998). (5) Amendment No. 4 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated November 13, 1998 (filed electronically as Exhibit b15e to Post-Effective Amendment No. 12 on Form N-1A of American Century World Mutual Funds, Inc., File No. 33-39242, on November 13, 1998). (6) Amendment No. 5 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated February 16, 1999 (filed electronically as Exhibit m6 to Post-Effective Amendment No. 83 on Form N-1A on February 26, 1999). (7) Amendment No. 6 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated July 30, 1999 (filed electronically as Exhibit m7 to Post-Effective Amendment No. 16 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on July 29, 1999). (8) Amendment No. 7 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) (to be filed by amendment). (9) Shareholder Services Plan of Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century World Investors, Inc. (Service Class) dated September 3, 1996 (filed electronically as Exhibit b15b to Post-Effective Amendment No. 9 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on February 17, 1998). (n) Not applicable. (o) (1) Multiple Class Plan of Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century World Investors, Inc. dated September 3, 1996 (filed electronically as Exhibit b18b to Post-Effective Amendment 9 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on February 17, 1998). (2) Amendment No. 1 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated June 13, 1997 (filed electronically as Exhibit b18b to Post-Effective Amendment No. 77 on Form N-1A on July 17, 1997). (3) Amendment No. 2 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated September 30, 1997 (filed electronically as Exhibit b18c to Post-Effective Amendment No. 78 on Form N-1A on February 26, 1998). (4) Amendment No. 3 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated June 30, 1998 (filed electronically as Exhibit b18d to Post-Effective Amendment No. 11 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on June 26, 1998). (5) Amendment No. 4 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated November 13, 1998 (filed electronically as Exhibit b18e to Post-Effective Amendment No. 12 on Form N-1A of American Century World Mutual Funds, Inc., File No. 33-39242, on November 13, 1998). (6) Amendment No. 5 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated January 29, 1999 (filed electronically as Exhibit b18f to Post-Effective Amendment No. 14 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on December 29, 1998). (7) Amendment No. 6 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated July 30, 1999 (filed electronically as Exhibit o7 to Post-Effective Amendment No. 16 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on July 29, 1999). (8) Amendment No. 7 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (to be filed by amendment). ITEM 24. Persons Controlled by or Under Common Control with Registrant. Not Applicable. ITEM 25. 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 26. Business and Other Connections of Investment Advisor. None. ITEM 27. Principal Underwriters. (a) Funds Distributor, Inc. (the "Distributor") acts as principal underwriter for the following investment companies. American Century California Tax-Free and Municipal Funds American Century Capital Portfolios, Inc. American Century Government Income Trust American Century International Bond Funds American Century Investment Trust American Century Municipal Trust American Century Mutual Funds, Inc. American Century Premium Reserves, Inc. American Century Quantitative Equity Funds American Century Strategic Asset Allocations, Inc. American Century Target Maturities Trust American Century Variable Portfolios, Inc. American Century World Mutual Funds, Inc. The Brinson Funds Dresdner RCM Capital Funds, Inc. Dresdner RCM Equity Funds, Inc. J.P. Morgan Institutional Funds J.P. Morgan Funds JPM Series Trust JPM Series Trust II LaSalle Partners Funds, Inc. Kobrick Investment Trust Merrimac Series Monetta Fund, Inc. Monetta Trust The Montgomery Funds I The Montgomery Funds II The Munder Framlington Funds Trust The Munder Funds Trust The Munder Funds, Inc. National Investors Cash Management Fund, Inc. Orbitex Group of Funds SG Cowen Funds, Inc. SG Cowen Income + Growth Fund, Inc. SG Cowen Standby Reserve Fund, Inc. SG Cowen Standby Tax-Exempt Reserve Fund, Inc. SG Cowen Series Funds, Inc. St. Clair Funds, Inc. The Skyline Funds Waterhouse Investors Family of Funds, Inc. WEBS Index Fund, Inc. The Distributor is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers. The Distributor is located at 60 State Street, Suite 1300, Boston, Massachusetts 02109. The Distributor is an indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a holding company all of whose outstanding shares are owned by key employees. (b) The following is a list of the executive officers, directors and partners of the Distributor:
Name and Principal Business Address* Positions and Offices with Positions and Offices with Underwriter Registrant Marie E. Connolly Director, President and Chief none Executive Officer George A. Rio Executive Vice President President, Principal Executive and Principal Financial Officer Donald R. Roberson Executive Vice President none William S. Nichols Executive Vice President none Margaret W. Chambers Senior Vice President, General None Counsel, Chief Compliance Officer, Secretary and Clerk Joseph F. Tower, III Director, Senior Vice President, None Treasurer and Chief Financial Officer Paula R. David Senior Vice President None Gary S. MacDonald Senior Vice President None Judith K. Benson Senior Vice President None William J. Nutt Chairman and Director None - -------------------- * All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
(c) Not applicable. ITEM 28. Location of Accounts and Records. All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in the possession of American Century Mutual Funds, Inc., American Century Services Corporation and American Century Investment Management, Inc., all located at American Century Tower, 4500 Main Street, Kansas City, Missouri 64111. ITEM 29. Management Services Not Applicable. ITEM 30. Undertakings. Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it has duly caused this Post-Effective Amendment No. 85 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kansas City, State of Missouri on the 1st day of September, 1999. American Century Mutual Funds, Inc. (Registrant) By: /*/George A. Rio George A. Rio President and Principal Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 85 has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- *George A. Rio President, Principal Executive September 1, 1999 George A. Rio and Principal Financial Officer *Maryanne Roepke Vice President and Treasurer September 1, 1999 Maryanne Roepke *James E. Stowers, Jr. Chairman of the Board and September 1, 1999 James E. Stowers, Jr. Director *James E. Stowers III Director September 1, 1999 James E. Stowers III *Thomas A. Brown Director September 1, 1999 Thomas A. Brown *Robert W. Doering, M.D. Director September 1, 1999 Robert W. Doering, M.D. *Andrea C. Hall, Ph.D. Director September 1, 1999 Andrea C. Hall, Ph.D. *Donald H. Pratt Director September 1, 1999 Donald H. Pratt *Lloyd T. Silver, Jr. Director September 1, 1999 Lloyd T. Silver, Jr. *M. Jeannine Strandjord Director September 1, 1999 M. Jeannine Strandjord *D. D. (Del) Hock Director September 1, 1999 D. D. (Del) Hock *By /s/Charles A. Etherington Charles A. Etherington Attorney-in-Fact EX-99 2 EXHIBIT INDEX EXHIBIT INDEX EXHIBIT DESCRIPTION OF DOCUMENT NUMBER EX-99.a1 Articles of Incorporation of Twentieth Century Investors, Inc., dated June 26, 1990 (filed as Exhibit b1a of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a2 Articles of Amendment of Twentieth Century Investors, Inc., dated November 19, 1990 (filed as Exhibit b1b of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a3 Articles of Merger of Twentieth Century Investors, Inc., a Maryland corporation and Twentieth Century Investors, Inc., a Delaware corporation, dated February 22, 1991 (filed as Exhibit b1c of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a4 Articles of Amendment of Twentieth Century Investors, Inc., dated August 10, 1993 (filed as Exhibit b1d of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a5 Articles Supplementary of Twentieth Century Investors, Inc., dated September 3, 1993 (filed as Exhibit b1e of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a6 Articles Supplementary of Twentieth Century Investors, Inc., dated April 28, 1995 (filed as Exhibit b1f of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a7 Articles Supplementary of Twentieth Century Investors, dated October 11, 1995 (filed as Exhibit b1g of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a8 Articles Supplementary of Twentieth Century Investors, Inc., dated January 22, 1996 (filed as Exhibit b1h of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.a9 Articles Supplementary of Twentieth Century Investors, Inc., dated March 11, 1996 (filed as Exhibit b1i of Post-Effective Amendment No. 75 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on June 14, 1996, and incorporated herein by reference). EX-99.a10 Articles Supplementary of Twentieth Century Investors, Inc. dated September 9, 1996 is included herein. EX-99.a11 Articles of Amendment of Twentieth Century Investors, Inc. dated December 2, 1996 (filed as Exhibit b1j of Post-Effective Amendment No. 76 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 28, 1997, and incorporated herein by reference). EX-99.a12 Articles Supplementary of American Century Mutual Funds, Inc. dated December 2, 1996 (filed as Exhibit b1k of Post-Effective Amendment No. 76 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 28, 1997, and incorporated herein by reference). EX-99.a13 Articles Supplementary of American Century Mutual Funds, Inc. dated July 28, 1997 (filed as Exhibit b1l of Post-Effective Amendment No. 78 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1998, and incorporated herein by reference). EX-99.a14 Articles Supplementary of American Century Mutual Funds, Inc. dated November 28, 1997 (filed as Exhibit a13 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.a15 Certificate of Correction to Articles Supplementary of American Century Mutual Funds, Inc. dated December 18, 1997 (filed as Exhibit a14 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.a16 Articles Supplementary of American Century Mutual Funds, Inc. dated December 18, 1997 (filed as Exhibit b1m of Post-Effective Amendment No. 78 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, (filed on February 26, 1998, and incorporated herein by reference). EX-99.a17 Articles Supplementary of American Century Mutual Funds, Inc. dated January 25, 1999 (filed as Exhibit a16 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.a18 Articles Supplementary of American Century Mutual Funds, Inc. dated February 16, 1999 (filed as Exhibit a17 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.a19 Articles Supplementary of American Century Mutual Funds, Inc. (to be filed by amendment). EX-99.b1 Bylaws of Twentieth Century Investors, Inc. (filed as Exhibit b2 of Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 29, 1996, and incorporated herein by reference). EX-99.b2 Amendment of Bylaws of American Century Mutual Funds, Inc. (filed as Exhibit b2b of Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on February 17, 1998, and incorporated herein by reference). EX-99.d1 Management Agreement between American Century Mutual Funds, Inc. and American Century Investment Management, Inc. dated August 1, 1997 (filed as Exhibit b5 of Post-Effective Amendment No. 78 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1998, and incorporated herein by reference). EX-99.d2 Addendum to Management Agreement between American Century Mutual Funds, Inc. and American Century Investment Management, Inc. dated February 16, 1999 (filed as Exhibit d2 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.d3 Addendum to Management Agreement between American Century Mutual Funds, Inc. and American Century Investment Management, Inc. (to be filed by amendment). EX-99.e1 Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, dated January 15, 1998 (filed as Exhibit b6 of Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A of American Century Target Maturities Trust, File No. 2-94608, filed on January 30, 1998, and incorporated herein by reference). EX-99.e2 Amendment No. 1 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated June 1, 1998 (filed as Exhibit b6b of Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on June 26, 1998, and incorporated herein by reference). EX-99.e3 Amendment No. 2 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated December 1, 1998 (filed as Exhibit b6c of Post-Effective Amendment No. 12 to the Registration Statement on Form N-1A of American Century World Mutual Funds, Inc., File No. 33-39242, filed on November 13, 1998, and incorporated herein by reference). EX-99.e4 Amendment No. 3 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated January 29, 1999 (filed as Exhibit e4 of Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of American Century Variable Portfolios, Inc., File No. 33-14567, filed on January 15, 1999, and incorporated herein by reference). EX-99.e5 Amendment No. 4 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. dated July 30, 1999 (filed as Exhibit e5 of Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on July 29, 1999, and incorporated herein by reference). EX-99.e6 Amendment No. 5 to the Distribution Agreement between American Century Mutual Funds, Inc. and Funds Distributor, Inc. (to be filed by amendment). EX-99.g1 Global Custody Agreement between The Chase Manhattan Bank and the Twentieth Century and Benham funds, dated August 9, 1996 (filed as Exhibit 8 of Post-Effective Amendment No. 31 to the Registration Statement on Form N-1A of American Century Government Income Trust, File No. 2-99222, filed on February 7, 1997, and incorporated herein by reference). EX-99.g2 Master Agreement between Commerce Bank, N.A. and Twentieth Century Services, Inc. dated January 22, 1997 (filed as Exhibit 8e of Post-Effective Amendment No. 76 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 28, 1997, and incorporated herein by reference). EX-99.h1 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 of Post-Effective Amendment No. 76 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 28, 1997, and incorporated herein by reference). EX-99.h2 Credit Agreement between American Century Funds and The Chase Manhattan Bank, as Administrative Agent dated as of December 18, 1998 (filed electronically as Exhibit h2 to Post-Effective Amendment No. 37 to the Registration Statement on Form N-1A of American Century Government Income Trust, File No. 2-99222, filed on May 7, 1999, and incorporated herein by reference). EX-99.i Opinion and Consent of Counsel (to be filed by amendment). EX-99.j Power of Attorney dated February 19, 1999 (filed as Exhibit j2 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.m1 Master Distribution and Shareholder Services Plan of Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century World Investors, Inc. (Advisor Class) dated September 3, 1996 (filed as Exhibit b15a of Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on February 17, 1998, and incorporated herein by reference). EX-99.m2 Amendment No. 1 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated June 13, 1997 (filed as Exhibit b15d of Post-Effective Amendment No. 77 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on July 17, 1997, and incorporated herein by reference). EX-99.m3 Amendment No. 2 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated September 30, 1997 (filed as Exhibit b15c of Post-Effective Amendment No. 78 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1998, and incorporated herein by reference). EX-99.m4 Amendment No. 3 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated June 30, 1998 (filed as Exhibit b15e of Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on June 26, 1998, and incorporated herein by reference). EX-99.m5 Amendment No. 4 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated November 13, 1998 (filed as Exhibit b15e of Post-Effective Amendment No. 12 to the Registration Statement on Form N-1A of American Century World Mutual Funds, Inc., File No. 33-39242, filed on November 13, 1998, and incorporated herein by reference). EX-99.m6 Amendment No. 5 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated February 16, 1999 (filed as Exhibit m6 of Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1999, and incorporated herein by reference). EX-99.m7 Amendment No. 6 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) dated July 30, 1999 (filed electronically as Exhibit m7 to Post-Effective Amendment No. 16 on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on July 29, 1999, and incorporated herein by reference). EX-99.m8 Amendment No. 7 to Master Distribution and Shareholder Services Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (Advisor Class) (to be filed by amendment). EX-99.m9 Shareholder Services Plan of Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century World Investors, Inc. (Service Class) dated September 3, 1996 (filed as Exhibit b15b of Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on February 17, 1998, and incorporated herein by reference). EX-99.o1 Multiple Class Plan of Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset Allocations, Inc. and Twentieth Century World Investors, Inc. dated September 3, 1996 (filed as Exhibit b18b of Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on February 17, 1998, and incorporated herein by reference). EX-99.o2 Amendment No. 1 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated June 13, 1997 (filed as Exhibit b18b of Post-Effective Amendment No. 77 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on July 17, 1997, and incorporated herein by reference). EX-99.o3 Amendment No. 2 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated September 30, 1997 (filed as Exhibit b18c of Post-Effective Amendment No. 78 to the Registration Statement on Form N-1A of the Registrant, File No. 2-14213, filed on February 26, 1998, and incorporated herein by reference). EX-99.o4 Amendment No. 3 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated June 30, 1998 (filed as Exhibit b18d of Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, filed on June 26, 1998, and incorporated herein by reference). EX-99.o5 Amendment No. 4 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated November 13, 1998 (filed as Exhibit b18e of Post-Effective Amendment No. 12 to the Registration Statement on Form N-1A of American Century World Mutual Funds, Inc., File No. 33-39242, filed on November 13, 1998, and incorporated herein by reference). EX-99.o6 Amendment No. 5 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated January 29, 1999 (filed as Exhibit b18f of Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872, filed on December 29, 1998, and incorporated herein by reference). EX-99.o7 Amendment No. 6 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. dated July 30, 1999 (filed electronically as Exhibit o7 to Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A of American Century Capital Portfolios, Inc., File No. 33-64872, on July 29, 1999, and incorporated herein by reference). EX-99.o8 Amendment No. 7 to Multiple Class Plan of American Century Capital Portfolios, Inc., American Century Mutual Funds, Inc., American Century Strategic Asset Allocations, Inc. and American Century World Mutual Funds, Inc. (to be filed by amendment). EX-99.A10 3 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 Articles of Incorporation of the Corporation, the Board of Directors of the Corporation has duly established a new series of shares titled Twentieth Century New Opportunities Fund (hereinafter referred to as a "Series") for the Corporation's stock and has allocated One Hundred Million (100,000,000) 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 Million Dollars ($1,000,000) to the new Series. As a result of the action taken by the Board of Directors referenced in this Article FIRST of these Articles Supplementary, the seventeen (17) Series of stock of the Corporation and the number of shares and aggregate par value of each is as follows: SERIES NUMBER OF SHARES AGGREGATE PAR VALUE - ------ ---------------- ------------------- Growth Investors 1,000,000,000 $10,000,000 Select Investors 500,000,000 5,000,000 Ultra Investors 1,500,000,000 15,000,000 Vista Investors 1,000,000,000 10,000,000 Heritage Investors 500,000,000 5,000,000 Giftrust Investors 200,000,000 2,000,000 Balanced Investors 200,000,000 2,000,000 Cash Reserve 4,000,000,000 40,000,000 U.S. Governments Short-Term 200,000,000 2,000,000 Long-Term Bond 200,000,000 2,000,000 Tax-Exempt Intermediate-Term 200,000,000 2,000,000 Tax-Exempt Long-Term 200,000,000 2,000,000 Tax Exempt Short-Term 200,000,000 2,000,000 U.S. Governments Intermediate-Term 200,000,000 2,000,000 Limited Term Bond 200,000,000 2,000,000 Intermediate-Term Bond 200,000,000 2,000,000 Twentieth Century New Opportunities Fund 100,000,000 1,000,000 The par value of each share of stock in each Series is One Cent ($0.01) per share. SECOND: Pursuant to authority expressly vested in the Board of Directors by Section 2-605(a)(4) of the Maryland General Corporation Law and by Article FIFTH and Article SEVENTH of the Articles of Incorporation, the Board of Directors of the Corporation (a) has duly established multiple classes of shares (each hereinafter referred to as a "Class") for twelve (12) of the Series of the capital stock of the Corporation and (b) has reallocated the shares designated to each Series in Article FIRST above among the Classes of shares. As a result of the action taken by the Board of Directors, the Classes of shares of the seventeen (17) Series of stock of the Corporation and the number of shares and aggregate par value of each is as follows:
NUMBER OF SHARES NUMBER OF SHARES AGGREGATE SERIES NAME CLASS NAME BEFORE REALLOCATION AS REALLOCATED PAR VALUE - ----------- ---------- ------------------- -------------- --------- Growth Investors N/A 1,000,00,000 0 Investor 0 500,000,000 $5,000,000 Institutional 0 80,000,000 800,000 Service 0 210,000,000 2,100,000 Advisor 0 210,000,000 2,100,000 Select Investors N/A 500,000,00 0 Investor 0 250,000,000 2,500,000 Institutional 0 41,000,000 410,000 Service 0 105,000,000 1,050,000 Advisor 0 105,000,000 1,050,000 Ultra Investors N/A 1,500,00,000 0 Investor 0 750,000,000 7,500,000 Institutional 0 125,000,000 1,250,000 Service 0 312,500,000 3,125,000 Advisor 0 312,500,000 3,125,000 Vista Investors N/A 1,000,00,000 0 Investor 0 500,000,000 500,000 Institutional 0 80,000,000 800,000 Service 0 210,000,000 2,100,000 Advisor 0 210,000,000 2,100,000 Heritage Investors N/A 500,000,00 0 Investor 0 250,000,000 2,500,000 Institutional 0 41,000,000 410,000 Service 0 105,000,000 1,050,000 Advisor 0 105,000,000 1,050,000 Giftrust Investors N/A 200,000,000 200,000,000 2,000,000 NUMBER OF SHARES NUMBER OF SHARES AGGREGATE SERIES NAME CLASS NAME BEFORE REALLOCATION AS REALLOCATED PAR VALUE - ----------- ---------- ------------------- -------------- --------- Balanced Investors N/A 200,000,000 0 Investor 0 100,000,000 $1,000,000 Institutional 0 16,000,000 160,000 Service 0 50,000,000 500,000 Advisor 0 50,000,000 500,000 Cash Reserve N/A 4,000,000,000 0 Investor 0 2,000,000,000 20,000,000 Service 0 1,000,000,000 10,000,000 Advisor 0 1,000,000,000 10,000,000 U.S. Governments N/A 200,000,000 0 Short-Term Investor 0 100,000,000 1,000,000 Service 0 50,000,000 500,000 Advisor 0 50,000,000 500,000 Long-Term Bond N/A 200,000,000 0 Investor 0 100,000,000 1,000,000 Service 0 50,000,000 500,000 Advisor 0 50,000,000 500,000 Tax-Exempt N/A 200,000,000 200,000,000 2,000,000 Intermediate-Bond Tax-Exempt N/A 200,000,000 200,000,000 2,000,000 Long-Term Tax-Exempt N/A 200,000,000 200,000,000 2,000,000 Short-Term U.S. Governments N/A 200,000,000 0 Intermediate-Term Investor 0 100,000,000 1,000,000 Service 0 50,000,000 500,000 Advisor 0 50,000,000 500,000 Limited Term Bond N/A 200,000,000 0 Investor 0 100,000,000 1,000,000 Service 0 50,000,000 500,000 Advisor 0 50,000,000 500,000 NUMBER OF SHARES NUMBER OF SHARES AGGREGATE SERIES NAME CLASS NAME BEFORE REALLOCATION AS REALLOCATED PAR VALUE - ----------- ---------- ------------------- -------------- --------- Intermediate-Term N/A 200,000,000 0 Bond Investor 0 100,000,000 $1,000,000 Service 0 50,000,000 500,000 Advisor 0 50,000,000 500,000 Twentieth Century N/A 100,00,000 100,000,000 1,000,000 New Opportunities Fund
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 Class or any unissued shares that have not been allocated to a Series or Class, and to fix or alter all terms thereof, to the full extent provided by the Articles of Incorporation of the corporation. FOURTH: A description of the series and classes of shares, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption is set forth in the Articles of Incorporation of the Corporation and is not changed by these Articles Supplementary, except with respect to the creation and/or designation of the various Series. FIFTH: The Board of Directors of the Corporation duly adopted resolutions dividing into Series the authorized capital stock of the Corporation and allocating shares to each Series as set forth in these Articles Supplementary. SIXTH: The Board of Directors of the Corporation duly adopted resolutions authorizing the new Series and allocating shares to the Series, as set forth in Article FIRST, and dividing the Series of capital stock of the Corporation into Classes and reallocating shares to each Class, as set forth in Article SECOND. 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 9th day of September, 1996. TWENTIETH CENTURY ATTEST: INVESTORS, INC. /*/Patrick A. Looby By: /*/William M. Lyons Name: Patrick A. Looby Name: William M. Lyons Title: Secretary Title: Executive Vice President THE UNDERSIGNED Executive 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: September 9, 1996 /*/William M. Lyons William M. Lyons, Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----