-----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, HlMNFy3CL7mL0mqiiQ8u27uTzOUybCpUi0U/ToFGR1w16RoxRT8yidVENTAQAOF4 8RfjR85HayJnLVcEaVSiZw== 0000872825-96-000006.txt : 19960614 0000872825-96-000006.hdr.sgml : 19960614 ACCESSION NUMBER: 0000872825-96-000006 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19960613 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TWENTIETH CENTURY WORLD INVESTORS INC CENTRAL INDEX KEY: 0000872825 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-39242 FILM NUMBER: 96580299 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06247 FILM NUMBER: 96580300 BUSINESS ADDRESS: STREET 1: 4500 MAIN ST STREET 2: TWENTIETH CENTURY TOWER CITY: KANSAS CITY STATE: MO ZIP: 64111 BUSINESS PHONE: 8165315575 485APOS 1 POST-EFFECTIVE AMENDMENT As filed with the Securities and Exchange Commission on June 13, 1996 1933 Act File No. 33-39242; 1940 Act File No. 811-6247 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X__ Pre-Effective Amendment No.____ ____ Post-Effective Amendment No._7__ _X__ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X__ Amendment No._7__ (Check appropriate box or boxes) Twentieth Century World Investors, Inc. -------------------------------------------- (Exact Name of Registrant as Specified in Charter) Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111 ---------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: 816-531-5575 James E. Stowers, Jr. Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111 ---------------------------------------------------------------- (Name and address of Agent for service) Approximate Date of Proposed Public Offering: September 3, 1996 It is proposed that this filing become effective: ____ immediately upon filing pursuant to paragraph (b) of Rule 485 ____ on [date] pursuant to paragraph (b) of Rule 485 ____ 60 days after filing pursuant to paragraph (a) of Rule 485 ____ on [date] pursuant to paragraph (a)(1) of Rule 485 ____ 75 days afer filing pursuant to paragraph (a)(2) of Rule 485 _x__ on September 3, 1996 pursuant to paragraph (a)(2) of Rule 485 The Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the fiscal year ended November 30, 1995, was filed on January 24, 1996. ================================================================================
====================================================================================================================== Cross Reference Sheet Rule 481(a) - ---------------------------------------------------------------------------------------------------------------------- Item No. Page No. ====================================================================================================================== Part A. Prospectus - ---------------------------------------------------------------------------------------------------------------------- 1. Cover Page Cover Page - ---------------------------------------------------------------------------------------------------------------------- 2. Synopsis N/A - ---------------------------------------------------------------------------------------------------------------------- 3. Condensed Financial Information 5 - ---------------------------------------------------------------------------------------------------------------------- 4. General Description of Registrant Cover Page, 1-15, - ---------------------------------------------------------------------------------------------------------------------- 5. Management of the Fund 27-29 - ---------------------------------------------------------------------------------------------------------------------- 6. Capital Stock and Other Securities 29-30 - ---------------------------------------------------------------------------------------------------------------------- 7. Purchase of Securities Being Offered Cover Page, 17-18 - ---------------------------------------------------------------------------------------------------------------------- 8. Redemption or Repurchase 19-21 - ---------------------------------------------------------------------------------------------------------------------- 9. Pending Legal Proceedings N/A - ---------------------------------------------------------------------------------------------------------------------- Part B. - Statement of Additional Information - ---------------------------------------------------------------------------------------------------------------------- 10. Cover Page Cover Page - ---------------------------------------------------------------------------------------------------------------------- 11. Table of Contents Cover Page - ---------------------------------------------------------------------------------------------------------------------- 12. General Information and History N/A - ---------------------------------------------------------------------------------------------------------------------- 13. Investment Objectives and Policies 1-7 - ---------------------------------------------------------------------------------------------------------------------- 14. Management of the Fund 7-10 - ---------------------------------------------------------------------------------------------------------------------- 15. Control Persons and Principal Holders of Securities N/A - ---------------------------------------------------------------------------------------------------------------------- 16. Investment Advisory and Other Services 9-10 - ---------------------------------------------------------------------------------------------------------------------- 17. Brokerage Allocation 12 - ---------------------------------------------------------------------------------------------------------------------- 18. Capital Stock and Other Securities 14-16 - ---------------------------------------------------------------------------------------------------------------------- 19. Purchase, Redemption and Pricing of Securities Being Offered 16 - ---------------------------------------------------------------------------------------------------------------------- 20. Tax Status 15 - ---------------------------------------------------------------------------------------------------------------------- 21. Underwriters N/A - ---------------------------------------------------------------------------------------------------------------------- 22. Calculation of Performance Data N/A - ---------------------------------------------------------------------------------------------------------------------- 23. Financial Statements 18 - ----------------------------------------------------------------------------------------------------------------------
TWENTIETH CENTURY WORLD INVESTORS RETAIL CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company whose shares are offered to retail investors without a sales charge. Two series of shares offered by Twentieth Century, Twentieth Century International Equity and Twentieth Century International Small Company Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 9.) NO-LOAD MUTUAL FUNDS Twentieth Century offers retail investors a full line of "no-load" mutual funds that have no sales charges or commissions. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419200 Kansas City, MO 64141-6200 1-800-345-2021 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-634-4113 In Missouri: 816-753-1865 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. This fund has no minimum investment requirements. However, if the value of the shares held in any one fund account is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish an automatic investment program of $50 or more per month in each such account. (See "Automatic Investment Plan," page 18, and "Automatic Redemption of Shares," page 20.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. The minimum investment amount for this fund is $10,000. SHARES OF THE FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Transaction and Operating Expense Table ............................. 4 Financial Highlights ................................................ 5 INFORMATION REGARDING THE FUNDS Investment Policies of the Funds .................................... 7 International Equity ........................................... 7 Twentieth Century International Small Company Fund ............. 7 Policies Applicable to Both Funds .............................. 8 Risk Factors ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund ......... 11 Investing in Emerging Market Countries ......................... 11 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 12 Other Investment Practices .......................................... 12 Forward Currency Exchange Contracts ............................ 12 Indirect Foreign Investment .................................... 13 Sovereign Debt Obligations ..................................... 13 Portfolio Turnover ............................................. 13 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 14 Short Sales .................................................... 14 Rule 144A Securities ........................................... 15 Performance Advertising ............................................. 15 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP How to Open an Account .............................................. 17 By Mail ........................................................ 17 By Wire ........................................................ 17 By Exchange .................................................... 17 In Person ...................................................... 17 Subsequent Investments ......................................... 18 By Mail ........................................................ 18 By Telephone ................................................... 18 By Wire ........................................................ 18 In Person ...................................................... 18 Automatic Investment Plan ...................................... 18 How to Exchange from One Account to Another ......................... 18 By Mail ........................................................ 19 By Telephone ................................................... 19 How to Redeem Shares ................................................ 19 By Telephone ................................................... 19 By Mail ........................................................ 19 By Check-A-Month ............................................... 19 Other Automatic Redemptions .................................... 19 Redemption Proceeds ................................................. 19 By Check ....................................................... 20 By Wire and ACH ................................................ 20 Special Requirements for Large Redemptions ..................... 20 Automatic Redemption of Shares ................................. 20 Signature Guarantee ................................................. 21 Special Shareholder Services ........................................ 21 Automated Information Line ..................................... 21 Open Order Service ............................................. 21 Tax-Qualified Retirement Plans ................................. 22 Important Policies Regarding Your Investments ....................... 22 Reports to Shareholders ............................................. 23 Employer-sponsored Retirement Plans and Institutional Accounts ...... 23 ADDITIONAL INFORMATION YOU SHOULD KNOW Share Price ......................................................... 24 When Share Price Is Determined ................................. 24 How Share Price Is Determined .................................. 24 Where to Find Information About Share Price .................... 25 Distributions ....................................................... 25 General Information About Distributions ........................ 25 Taxes ............................................................... 26 Management .......................................................... 27 Investment Management .......................................... 27 Code of Ethics ................................................. 29 Transfer and Administrative Services ........................... 29 Distribution of Fund Shares ......................................... 29 Further Information About Twentieth Century ......................... 29 3
TRANSACTION AND OPERATING EXPENSE TABLE - -------------------------------------------------------------------------------------------- International International Small Company Equity Fund Shareholder Transaction Expenses: Maximum Sales Load Imposed on Purchases none none Maximum Sales Load Imposed on Reinvested Dividends none none Deferred Sales Load none none Redemption Fee(1) none none(2) Exchange Fee none none Annual Fund Operating Expenses (as a percentage of net assets): Management Fees(4) 1.45%(3) 1.75%(3) 12b-1 Fees none none Other Expenses(5) 0.00% 0.00% Total Fund Operating Expenses(4) 1.45%(3) 1.75%(3) Example You would pay the following expenses on a $1,000 1 year $ 15 $ 18 investment, assuming (1) a 5% annual return and 3 years 46 55 (2) redemption at the end of each time period (4): 5 years 79 94 10 years 172 205
(1) Redemption proceeds sent by wire are subject to a $10 processing fee. (2) Shares of International Small Company Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange from One Account to Another," page 18 and "How to Redeem Shares," page 19.) (3) The manager has voluntarily reduced its annual management fee on International Equity to 1.50% of the first $1 billion of average net assets, 1.20% of the next $1 billion, and 1.10% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.75% of the first $500 million of average net assets, 1.40% of the next $500 million average net assets, and 1.20% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 27. (4) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (5) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are retail class shares and have no up-front or deferred sales charges, commissions, or 12b-1 fees. The funds offer three other classes of shares, primarily to institutional investors, that have different fee structures than the retail class, resulting in different performance for the other classes. For additional information about the various classes, see "Further Information About Twentieth Century," at page 29. 4
- ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout The Period) The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY Years ended November 30, May 9, 1991 --------------------------------------------------------- (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD...................... $7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............... .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- (.036) (.005) -- In Excess of Net Investment Income................... -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions........................ (.372) (.402) -- -- -- ----- ----- ----- ----- ----- Total Distributions................. (.372) (.402) (.191) (.007) -- ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD............................ $7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)..................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate............. 169% 242% 255% 180% 84% Average Commission Paid per Share Traded............... $.002 -- -- -- -- Net Assets, End of Period (in thousands)........$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized
5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (Continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in equity securities of smaller foreign issuers(those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million). The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. The fund may invest up to 7 50% of its assets in securities of issuers in emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. POLICIES APPLICABLE TO BOTH FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity 8 securities and equity equivalents are preferred stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 24.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States , derives at least 50% of its total revenue from production or sales outside the United States, and/or whose principal trading market is outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the 9 fund's investments in the issuer's country (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 26). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 10 costs and decreased liquidity due to a lack of alternative trading partners. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing in the securities of companies having comparatively small market capitalizations and may invest up to 50% of its assets in issuers in emerging market countries. (See "Investing in Emerging Market Countries," on page 11 and "Investing in Smaller Companies," on page 12.) As a result, an investment in the fund should be considered to be speculative. The fund is intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that International Small Company Fund will pursue. An investment in the fund should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 11 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, and this volatility and limited liquidity may be reflected in the net asset value of the fund. INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific 12 purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. 13 The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment make take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. 14 RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the retail class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not 15 intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP - -------------------------------------------------------------------------------- The following section explains how to invest with Twentieth Century Mutual Funds and The Benham Group, including purchases, redemptions, exchanges and special services. You will find more detail about doing business with us by referring to the Shareholder Services Guide that you will receive when you open an account. If you own or are considering purchasing fund shares through an employer-sponsored retirement plan or through a bank, broker-dealer or other financial intermediary, the following sections may not apply to you. Please read "Employer-sponsored Retirement Plans and Institutional Accounts," page 23. HOW TO OPEN AN ACCOUNT To open an account, you must complete and sign an application, furnishing your taxpayer identification number. (You must also certify whether you are subject to withholding for failing to report income to the IRS.) Investments received without a certified taxpayer identification number will be returned. The minimum investment in International Equity is $2,500 [$1,000 for IRA and Uniform Gifts/Transfers to Minors Acts ("UGMA/UTMA") accounts]. This minimum will be waived if you establish an automatic investment plan to your account that is the equivalent of at least $50 per month. See "Automatic Investment Plan," page 18. The minimum investment in International Small Company Fund is $10,000. To keep an International Small Company Fund account open, a minimum share value of $10,000 must be maintained. If the share value of your account falls below $10,000, the shares in your account will be subject to automatic redemption. See "Automatic Redemption of Shares," on page 20. The minimum investment requirements may be different for some types of retirement accounts. Call one of our Investor Services representatives for information on our retirement plans, which are available for individual investors or for those investing through their employers. Please note: If you register your account as belonging to multiple owners (e.g., as joint tenants), you must provide us with specific authorization on your application in order for us to accept written or telephone instructions from a single owner. Otherwise, all owners will have to agree to any transactions that involve the account (whether the transaction request is in writing or over the telephone). You may invest in the following ways: BY MAIL Send a completed application and check or money order payable in U.S. dollars to Twentieth Century. BY WIRE You may make your initial investment by wiring funds. To do so: (1) Call us or mail a completed application. (2) Instruct your bank to wire funds to Commerce Bank of Kansas City, Missouri. ABA routing number 101000019. (3) Be sure to specify on the wire: (a) Twentieth Century Mutual Funds (b) The fund you are buying (and account number, if you have one) (c) The amount (d) Your name (e) Your city and state (f) Your taxpayer identification number BY EXCHANGE Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on opening an account by exchanging from another Twentieth Century or Benham account. See page 18 for more information on exchanges. IN PERSON If you prefer to work with a representative in person, please visit one of our Investors Centers, located at: 17 4500 Main Street Kansas City, MO 64111 816-340-7050 1665 Charleston Road Mountain View, CA 94043 415-965-8300 2000 S. Colorado Blvd. Denver, CO 80222 303-759-8382 SUBSEQUENT INVESTMENTS Subsequent investments may be made by an automatic bank, payroll or government direct deposit (see Automatic Investments, page 18) or by any of the methods below. The minimum investment requirement for subsequent investments: $250 for checks submitted without the remittance portion of a previous statement or confirmation, $50 for all other types of subsequent investments. BY MAIL When making subsequent investments, enclose your check with the remittance portion of the confirmation of a previous investment. If the remittance slip is not available, indicate your name, address and account number on your check or a separate piece of paper. (Please be aware that the investment minimum for subsequent purchases is higher without a remit slip.) BY TELEPHONE Once your account is open, you may make investments by telephone if you have authorized us (by choosing "Full Services" on your application) to draw on your bank account. You may call an Investor Services Representative or use our Automated Information Line. BY WIRE You may make subsequent investments by wire. Follow the wire transfer instructions on page 17 and indicate your account number. IN PERSON You may make subsequent investments in person at one of our Investors Centers. The locations of our three Investors Centers are listed on page 18. AUTOMATIC INVESTMENT PLAN You may elect on your application to make investments automatically by authorizing us to draw on your bank account regularly. Such investments must be at least the equivalent of $50 per month. You also may choose an automatic payroll or government direct deposit. If you are establishing a new account, check the appropriate box under "Automatic Investments" on your application to receive more information. If you would like to add a direct deposit to an existing account, please call one of our Investor Services Representatives. HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER As long as you meet any minimum initial investment requirements, you may exchange your fund shares to our other funds up to six times per year per account. For any single exchange, the shares of each fund being acquired must have a value of at least $100. However, we will allow investors to set up an Automatic Exchange Plan between any two funds in the amount of at least $50 per month. See our Shareholder Services Guide for further information about exchanges. If, in any 90-day period, the total of your exchanges and your redemptions from any one account exceeds the lesser of $250,000 or 1% or the fund's assets, further exchanges will be subject to special requirements to comply with our policy on large redemptions. See "Special Requirements for Large Redemptions," page 20. IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help 18 minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY MAIL You may direct us in writing to exchange your shares from one Twentieth Century or Benham account to another. For additional information, please see our Shareholder Services Guide. BY TELEPHONE You can make exchanges over the phone (either with an Investor Services Representative or using our Automated Information Line -- see page 21) if you have authorized us to accept telephone instructions. You can authorize this by selecting "Full Services" on your application or by calling us at 1-800-345-2021 to get the appropriate form. HOW TO REDEEM SHARES We will redeem or "buy back" your shares at any time. Redemptions will be made at the next net asset value determined after a complete redemption request is received. (For large redemptions, please read "Special Requirements for Large Redemptions," page 20.) Please note that a request to redeem shares in an IRA or 403(b) plan must be accompanied by an executed IRS Form W4-P and a reason for withdrawal as specified by the IRS. IN ORDER TO DISCOURAGE THE REDEMPTION OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, REDEMPTION OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES REDEEMED. This fee will be retained by the fund to help minimize the impact such redemptions have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first redeemed. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY TELEPHONE If you have authorized us to accept telephone instructions, you may redeem your shares by calling an Investor Services Representative. BY MAIL Your written instructions to redeem shares may be made either by a redemption form, which we will send you upon request, or by a letter to us. Certain redemptions may require a signature guarantee. Please see "Signature Guarantee," page 21. BY CHECK-A-MONTH If you have at least a $10,000 balance in your account, you may redeem shares by Check-A-Month. A Check-A-Month plan automatically redeems enough shares each month to provide you with a check for an amount you choose (minimum $50). To set up a Check-A-Month plan, please contact an Investor Services Representative or refer to the Shareholder Services Guide. OTHER AUTOMATIC REDEMPTIONS You may elect to make redemptions automatically by authorizing us to send funds directly to your account at a bank or other financial institution. To set up automatic redemptions, call one of our Investor Services Representatives. REDEMPTION PROCEEDS Please note that shortly after a purchase of shares is made by check or electronic draft (also known as an ACH draft) from your bank, we may wait up to 15 days or longer to send redemption proceeds (to allow your purchase funds to clear). No interest is paid on the redemption proceeds after the redemption is processed but before your redemption proceeds are sent. 19 Redemption proceeds may be sent to you in one of the following ways: BY CHECK Ordinarily, all redemption checks will be made payable to the registered owner of the shares and will be mailed only to the address of record. For more information, please refer to our Shareholder Services Guide. BY WIRE AND ACH You may authorize us to transmit redemption proceeds by wire or ACH. These services will be effective 15 days after we receive the authorization. Your bank will usually receive wired funds within 48 hours of transmission. Electronically transferred funds may be received up to seven days after transmission. Wired funds are subject to a $10 fee to cover bank wire charges, which is deducted from redemption proceeds. Once the funds are transmitted, the time of receipt and the funds' availability are not under our control. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS We have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund make certain redemptions in cash. This requirement to pay redemptions in cash applies to situations where one shareholder redeems, during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, we reserve the right under unusual circumstances to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided 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. Despite its right to redeem fund shares through a redemption-in-kind, we do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, we expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. AUTOMATIC REDEMPTION OF SHARES International Equity. If at any time you have an International Equity account that falls into either of the following categories: (i) you invested the required minimum initial investment amount for the fund, currently $2,500 ($1,000 for UGMA/UTMA accounts), but due to exchanges or redemptions you have made, the account now has a value of less than the minimum initial investment amount; or (ii) you have not invested the minimum initial investment amount, and an automatic investment program of $50 or more per month does not exist for the account; a notification will be sent advising you of the need to either make an investment to bring the value of the shares held in the account up to $2,500 ($1,000) or to establish an automatic investment program of $50 or more per month. If the investment is not made or the automatic investment is not established within 60 days from the date of notification, the shares held in the account will be redeemed and the proceeds from the 20 redemption will be sent by check to your address of record. The automatic redemption of shares of International Equity will not apply to Individual Retirement Accounts, 403(b) accounts and other types of tax-deferred retirement plan accounts. International Small Company Fund. If at any time you have an International Small Company Fund account that falls into either of the following categories: (i) you invested the required minimum initial investment amount of $10,000, but due to exchanges or redemptions you have made, the account now has a value of less than $10,000; or (ii) you have not invested $10,000; a notification will be sent advising you of the need to make an investment to bring the value of the shares held in the account up to $10,000. If the investment is not made within 60 days from the date of notification, the shares held in the fund account will be redeemed and the proceeds from the redemption will be sent by check to your address of record. The funds reserve the right to modify their policies regarding the automatic redemption of shares, or to waive such policies in whole or in part for certain classes of investors. SIGNATURE GUARANTEE To protect your accounts from fraud, some transactions will require a signature guarantee. Which transactions will require a signature guarantee will depend on which service options you elect when you open your account. For example, if you choose "In Writing Only," a signature guarantee would be required when: o Redeeming more than $25,000 o Establishing or increasing a Check-A-Month or automatic transfer on an existing account You can obtain a signature guarantee from a bank or trust company, credit union, broker, dealer, securities exchange or association, clearing agency or savings association, as defined by federal law. For a more in-depth explanation of our signature guarantee policy, or if you live outside the United States and would like to know how to obtain a signature guarantee, please consult our Shareholder Services Guide. We reserve the right to require a signature guarantee on any transaction, or to change this policy at any time. SPECIAL SHAREHOLDER SERVICES We offer several service options to make your account easier to manage. These are listed on the account application. Please make note of these options and elect the ones that are appropriate for you. Be aware that the Full Services option offers you the most flexibility. You will find more information about each of these service options in our Shareholder Services Guide. Our special shareholder services include: AUTOMATED INFORMATION LINE We offer an Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. You may also use the Automated Information Line to make investments into your accounts (if we have your bank information on file) and obtain your share balance, value and most recent transactions. If you have authorized us to accept telephone instructions, you also may exchange shares from one fund to another via the Automated Information Line. Redemption instructions cannot be given via the Automated Information Line. OPEN ORDER SERVICE Through our open order service, you may designate a price at which to buy shares of a variable-priced fund by exchange from one of our money market funds, or a price at which to sell shares of a variable-priced fund by exchange to one of our money market funds. The designated purchase price must be equal to or lower, or the designated sale price equal to or higher, than the variable-priced fund's net asset value at the time 21 the order is placed. If the designated price is met within 90 calendar days, we will execute your exchange order automatically at that price (or better). Open orders not executed within 90 days will be canceled. If the fund you have selected deducts a distribution from its share price, your order price will be adjusted accordingly so the distribution does not inadvertently trigger an open order transaction on your behalf. If you close or re-register the account from which the shares are to be redeemed, your open order will be canceled. Because of their time-sensitive nature, open order transactions are accepted only by telephone or in person. These transactions are subject to exchange limitations described in each fund's Prospectus, except that orders and cancellations received before 2 p.m. Central time are effective the same day, and orders or cancellations received after 2 p.m. Central time are effective the next business day. TAX-QUALIFIED RETIREMENT PLANS Each fund is available for your tax-deferred retirement plan. Call or write us and request the appropriate forms for: o Individual Retirement Accounts (IRAs) o 403(b) plans for employees of public school systems and non-profit organizations o Profit sharing plans and pension plans for corporations and other employers If your IRA and 403(b) accounts do not total $10,000, each account is subject to an annual $10 fee, up to a total of $30 per year. You can also transfer your tax-deferred plan to us from another company or custodian. Call or write us for a Request to Transfer form. IMPORTANT POLICIES REGARDING YOUR INVESTMENTS Every account is subject to policies that could affect your investment. Please refer to the Shareholder Services Guide for further information about the policies discussed below, as well as further detail about the services we offer. (1) We reserve the right for any reason to suspend the offering of shares for a period of time, or to reject any specific purchase order (including purchases by exchange). Additionally, purchases may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the fund. (2) We reserve the right to make changes to any stated investment requirements, including those that relate to purchases, transfers and redemptions. In addition, we may also alter, add to or terminate any investor services and privileges. Any changes may affect all shareholders or only certain series or classes of shareholders. (3) Shares being acquired must be qualified for sale in your state of residence. (4) Transactions requesting a specific price and date, other than open orders, will be refused. (5) If a transaction request is made by a corporation, partnership, trust, fiduciary, agent or unincorporated association, we will require evidence satisfactory to us of the authority of the individual making the request. (6) We have established procedures designed to assure the authenticity of instructions received by telephone. These procedures include requesting personal identification from callers, recording telephone calls, and providing written confirmations of telephone transactions. These procedures are designed to protect shareholders from unauthorized or fraudulent instructions. If we do not employ reasonable procedures to confirm the genuineness of instructions, then we may be liable for losses due to unauthorized or fraudulent instructions. The company, its transfer agent and investment adviser will not be responsible for any loss due to instructions they reasonably believe are genuine. (7) All signatures should be exactly as the name appears in the registration. If the owner's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. 22 (8) Unusual stock market conditions have in the past resulted in an increase in the number of shareholder telephone calls. If you experience difficulty in reaching us during such periods, you may send your transaction instructions by mail, express mail or courier service, or you may visit one of our Investors Centers. You may also use our Automated Information Line if you have requested and received an access code and are not attempting to redeem shares. (9) If you fail to provide us with the correct certified taxpayer identification number, we may reduce any redemption proceeds by $50 to cover the penalty the IRS will impose on us for failure to report your correct taxpayer identification number on information reports. (10) We will perform special inquiries on shareholder accounts. A research fee of $15 may be applied. REPORTS TO SHAREHOLDERS At the end of each calendar quarter, we will send you a consolidated statement that summarizes all of your Twentieth Century and Benham holdings, as well as an individual statement for each fund you own that reflects all year-to-date activity in your account. You may request a statement of your account activity at any time. With the exception of most automatic transactions, each time you invest, redeem, transfer or exchange shares, we will send you a confirmation of the transaction. See the Shareholder Services Guide for more detail. Carefully review all the information relating to transactions on your statements and confirmations to ensure that your instructions were acted on properly. Please notify us immediately in writing if there is an error. If you fail to provide notification of an error with reasonable promptness, i.e., within 30 days of non-automatic transactions or within 30 days of the date of your consolidated quarterly statement, in the case of automatic transactions, we will deem you to have ratified the transaction. No later than January 31 of each year, we will send you reports that you may use in completing your U.S. income tax return. See the Shareholder Services Guide for more information. Each year, we will send you an annual and a semiannual report relating to your fund. The annual report includes audited financial statements and a list of portfolio securities as of the fiscal year end. The semiannual report includes unaudited financial statements for the first six months of the fiscal year, as well as a list of portfolio securities at the end of the period. You also will receive an updated Prospectus at least once each year. Please read these materials carefully as they will help you understand your fund. EMPLOYER-SPONSORED RETIREMENT PLANS AND INSTITUTIONAL ACCOUNTS If you own or are considering purchasing fund shares through an employer-sponsored retirement plan, your ability to purchase shares of the funds, exchange them for shares of other Twentieth Century or Benham funds, and redeem them will depend on the terms of your plan. If you own or are considering purchasing fund shares through a bank, broker-dealer, insurance company or other financial intermediary, your ability to purchase, exchange and redeem shares will depend on your agreement with, and the policies of, such financial intermediary. You may reach one of our Institutional Investor Services Representatives by calling 800-345-3533 to request information about the funds, to obtain a current Prospectus or to get answers to any questions about the funds that you are unable to obtain through your plan administrator or financial intermediary. 23 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on, and receive the price determined, as of the close of the Exchange on the next day the Exchange is open. Investments are considered received only when your check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. Investments by telephone pursuant to your prior authorization to us to draw on your bank account are considered received at the time of your telephone call. Investment and transaction instructions received by us on any business day by mail prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Investments and instructions received after that time will receive the price determined on the next business day. If you invest in fund shares through an employer-sponsored retirement plan or other financial intermediary, it is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangement with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by 24 assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That value is then converted to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. The net asset value of each fund may be obtained by calling us (See "Automated Information Line," page 21.) DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. 25 Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," page 26.) TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the retail class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the retail class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment 26 portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 25.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. 27 Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity and International Small Company Fund team and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Equity and International Small Company Fund team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Equity and International Small Company Fund team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: Fund Percent of Average Net Assets - -------------------------------------------------------------------------------- International Equity 1.90% of first $1 billion 1.25% of the next $1 billion 1.00% over $2 billion International Small Company Fund 2.00% - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on the funds as follows: Fund Percent of Average Net Assets - -------------------------------------------------------------------------------- International Equity 1.50% of first $1 billion 1.20% of the next $1 billion 1.10% over $2 billion International Small Company Fund 1.75% of first $500 million 1.40% of the next $500 million 1.20% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the 28 fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected shareholders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. DISTRIBUTION OF FUND SHARES The funds' shares are distributed by Twentieth Century Securities, Inc. (The "Distributor"), a registered broker dealer and an affiliate of the funds' investment manager. Investors Research pays all expenses for promoting sales of, and distributing the retail class of, the fund shares offered by this Prospectus. The retail class of shares does not pay any commissions or other fees to the Distributor or to any other broker dealers or financial intermediaries in connection with the distribution of fund shares. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. 29 The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by mail to that address, or by phone to 1-800-345-2021. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues two series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are retail class shares and have no up-front charges, commissions, or 12b-1 fees. The other classes of shares are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the retail class. Different fees and expenses will affect performance. For additional information concerning the other classes of shares not offered by this Prospectus, call Twentieth Century at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) each class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY World Investors Retail Class Prospectus September 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. Box 419200 Kansas City, Missouri 64141-6200 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-2021 or 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-634-4113 or 816-753-1865 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: http://twentieth-century.com - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-5015 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS INSTITUTIONAL CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company. Two series of shares offered by Twentieth Century, Twentieth Century International Equity and Twentieth Century International Small Company Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS The funds offered by this Prospectus (the institutional class shares) are "no-load" investments, which means there are no sales charges or commissions. The institutional class shares are made available for purchase by large institutional shareholders, such as bank trust departments, corporations, endowments, foundations, and financial advisors. Institutional class shares are not available for purchase by insurance companies or participant-directed employer-sponsored retirement plans that meet the funds' minimum investment requirements. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-341-1833 In Missouri: 816-753-0700 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. MINIMUM INVESTMENT: $5 MILLION. TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly know as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. SHARES OF THE FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. THIS REDEMPTION FEE IS RETAINED BY THE FUND AND IS INTENDED TO DISCOURAGE SHAREHOLDERS FROM EXCHANGING OR REDEEMING THEIR SHARES SHORTLY AFTER THEIR PURCHASE, AS WELL AS MINIMIZE THE IMPACT SUCH EXCHANGES AND REDEMPTIONS HAVE ON FUND PERFORMANCE AND, HENCE, ON THE OTHER SHAREHOLDERS OF THE FUND. MINIMUM INVESTMENT: $5 MILLION. The minimum investment is $3 million for endowments and foundations. The minimum investment requirement may be waived if the investor has an aggregate investment in Twentieth Century funds of $10 million ($5 million for endowments and foundations) or more. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- TRANSACTION AND OPERATING EXPENSE TABLE ............................. 4 FINANCIAL HIGHLIGHTS ................................................ 5 INFORMATION REGARDING THE FUNDS INVESTMENT POLICIES OF THE FUNDS .................................... 7 International Equity ........................................... 7 Twentieth Century International Small Company Fund ............. 7 Policies Applicable to Both Funds .............................. 8 RISK FACTORS ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund ......... 11 Investing in Emerging Market Countries ......................... 11 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 12 OTHER INVESTMENT PRACTICES .......................................... 12 Forward Currency Exchange Contracts ............................ 12 Indirect Foreign Investment .................................... 13 Sovereign Debt Obligations ..................................... 13 Portfolio Turnover ............................................. 13 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 14 Short Sales .................................................... 14 Rule 144A Securities ........................................... 15 PERFORMANCE ADVERTISING ............................................. 15 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP HOW TO OPEN AN ACCOUNT .............................................. 17 By Mail ........................................................ 17 By Wire ........................................................ 17 By Exchange .................................................... 17 In Person ...................................................... 17 Subsequent Investments ......................................... 18 By Mail ........................................................ 18 By Telephone ................................................... 18 By Wire ........................................................ 18 In Person ...................................................... 18 Automatic Investment Plan ...................................... 18 HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER ......................... 18 By Mail ........................................................ 19 By Telephone ................................................... 19 HOW TO REDEEM SHARES ................................................ 19 By Telephone ................................................... 19 By Mail ........................................................ 19 By Check-A-Month ............................................... 19 Other Automatic Redemptions .................................... 19 REDEMPTION PROCEEDS ................................................. 19 By Check ....................................................... 20 By Wire and ACH ................................................ 20 Special Requirements for Large Redemptions ..................... 20 Automatic Redemption of Shares ................................. 20 SIGNATURE GUARANTEE ................................................. 21 SPECIAL SHAREHOLDER SERVICES ........................................ 21 Automated Information Line ..................................... 21 Open Order Service ............................................. 21 Tax-Qualified Retirement Plans ................................. 22 IMPORTANT POLICIES REGARDING YOUR INVESTMENTS ....................... 22 REPORTS TO SHAREHOLDERS ............................................. 23 EMPLOYER-SPONSORED RETIREMENT PLANS AND INSTITUTIONAL ACCOUNTS ...... 23 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ......................................................... 24 When Share Price Is Determined ................................. 24 How Share Price Is Determined .................................. 24 Where to Find Information About Share Price .................... 25 DISTRIBUTIONS ....................................................... 25 General Information About Distributions ........................ 25 TAXES ............................................................... 26 MANAGEMENT .......................................................... 27 Investment Management .......................................... 27 Code of Ethics ................................................. 29 Transfer and Administrative Services ........................... 29 DISTRIBUTION OF FUND SHARES ......................................... 29 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ......................... 29 3
TRANSACTION AND OPERATING EXPENSE TABLE - -------------------------------------------------------------------------------------- International International Equity Small Company Funds SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases none none Maximum Sales Load Imposed on Reinvested Dividends none none Deferred Sales Load none none Redemption Fee none none(1) Exchange Fee none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(3) 1.25%(2) 1.55%(2) 12b-1 Fees none none Other Expenses(4) 0.00% 0.00% Total Fund Operating Expenses(3) 1.25%(2) 1.55%(2) Example You would pay the following expenses on a $1,000 1 year $ 13 $ 16 investment, assuming (1) a 5% annual return and 3 years 39 49 (2) redemption at the end of each time period(3): 5 years 68 84 10 years 150 183
(1) Shares of International Small Company Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange Your Investment from One Twentieth Century Account to Another," page 17 and "How to Redeem Shares," page 17.) (2) The manager has voluntarily reduced its annual management fee on International Equity to 1.30% of the first $1 billion of average net assets, 1.00% of the next $1 billion, and 0.90% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.55% of the first $500 million of average net assets, 1.20% of the next $500 million average net assets, and 1.00% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 22. (3) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (4) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are institutional class shares. The funds offer three other classes of shares, one of which is primarily made available to retail investors and two that are primarily made available to institutional investors. The other classes have different fee structures than the institutional class, resulting in different performance for those classes. For additional information about the various classes, see "Further Information About Twentieth Century," page 29. 4 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) The institutional class of the funds was established September 3, 1996. The financial information in these tables regarding selected per share data for each of the funds reflects the performance of the funds' retail class of shares, which has a total expense ratio that is 0.20% higher than the institutional class. Had the institutional class been in existence for such funds for the time periods presented, the funds' performance information would be higher as a result of the lower expenses. The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY
Years ended November 30, May 9, 1991 ------------------------------------------------------------ (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD....................$7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................. .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions..... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............. .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................. -- -- (.036) (.005) -- In Excess of Net Investment Income................. -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions......................(.372) (.402) -- -- -- ------ ------ ------ ------ ------ Total Distributions...............(.372) (.402) (.191) (.007) -- ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD..........................$7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets................ 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets........................ .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate........... 169% 242% 255% 180% 84% Average Commission Paid per Share Traded.............$.002 -- -- -- -- Net Assets, End of Period (in thousands).....$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized
5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, (inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in equity securities of smaller foreign issuers(those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million). The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. The fund may invest up to 50% of its assets in securities of issuers in 7 emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. POLICIES APPLICABLE TO BOTH FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred 8 stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 19.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States , derives at least 50% of its total revenue from production or sales outside the United States, and/or whose principal trading market is outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country 9 (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: Currency Risk. The value of the foreign investments held by the funds may be signif-icantly 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 26). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 10 alternative trading partners. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing in the securities of companies having comparatively small market capitalizations and may invest up to 50% of its assets in issuers in emerging market countries. (See "Investing in Emerging Market Countries," on page 11 and "Investing in Smaller Companies," on page 12.) As a result, an investment in the fund should be considered to be speculative. The fund is intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that International Small Company Fund will pursue. An investment in the fund should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 value of the portfolio security or, if the fund has 11 entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, and this volatility and limited liquidity may be reflected in the net asset value of the fund. INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a 12 foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be 13 higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment make take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. 14 RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the institutional class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not 15 intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP - -------------------------------------------------------------------------------- The following section explains how to invest with Twentieth Century Mutual Funds and The Benham Group, including purchases, redemptions, exchanges and special services. You will find more detail about doing business with us by referring to the Shareholder Services Guide that you will receive when you open an account. If you own or are considering purchasing fund shares through an employer-sponsored retirement plan or through a bank, broker-dealer or other financial intermediary, the following sections may not apply to you. Please read "Employer-sponsored Retirement Plans and Institutional Accounts," page 23. HOW TO OPEN AN ACCOUNT To open an account, you must complete and sign an application, furnishing your taxpayer identification number. (You must also certify whether you are subject to withholding for failing to report income to the IRS.) Investments received without a certified taxpayer identification number will be returned. The minimum investment in the funds is $5 million. The minimum investment is $3 million for endowments and foundations. The minimum investment requirement may be waived if the investor has an aggregate investment of $10 million ($5 million for endowments or foundations) or more. If the share value of your account falls below the minimum investment, the shares in your account will be subject to automatic redemption. See "Automatic Redemption of Shares," on page 20. The minimum investment requirements may be different for some types of retirement accounts. Call one of our Investor Services representatives for information on our retirement plans, which are available for individual investors or for those investing through their employers. Please note: If you register your account as belonging to multiple owners (e.g., as joint tenants), you must provide us with specific authorization on your application in order for us to accept written or telephone instructions from a single owner. Otherwise, all owners will have to agree to any transactions that involve the account (whether the transaction request is in writing or over the telephone). You may invest in the following ways: BY MAIL Send a completed application and check or money order payable in U.S. dollars to Twentieth Century. BY WIRE You may make your initial investment by wiring funds. To do so: (1) Call us or mail a completed application. (2) Instruct your bank to wire funds to Commerce Bank of Kansas City, Missouri. ABA routing number 101000019. (3) Be sure to specify on the wire: (a) Twentieth Century Mutual Funds (b) The fund you are buying (and account number, if you have one) (c) The amount (d) Your name (e) Your city and state (f) Your taxpayer identification number BY EXCHANGE Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on opening an account by exchanging from another Twentieth Century or Benham account. See page 18 for more information on exchanges. IN PERSON If you prefer to work with a representative in person, please visit one of our Investors Centers, located at: 17 4500 Main Street Kansas City, MO 64111 816-340-7050 1665 Charleston Road Mountain View, CA 94043 415-965-8300 2000 S. Colorado Blvd. Denver, CO 80222 303-759-8382 SUBSEQUENT INVESTMENTS Subsequent investments may be made by an automatic bank, payroll or government direct deposit (see Automatic Investments, page 18) or by any of the methods below. The minimum investment requirement for subsequent investments: $250 for checks submitted without the remittance portion of a previous statement or confirmation, $50 for all other types of subsequent investments. BY MAIL When making subsequent investments, enclose your check with the remittance portion of the confirmation of a previous investment. If the remittance slip is not available, indicate your name, address and account number on your check or a separate piece of paper. (Please be aware that the investment minimum for subsequent purchases is higher without a remit slip.) BY TELEPHONE Once your account is open, you may make investments by telephone if you have authorized us (by choosing "Full Services" on your application) to draw on your bank account. You may call an Investor Services Representative or use our Automated Information Line. BY WIRE You may make subsequent investments by wire. Follow the wire transfer instructions on page 17 and indicate your account number. IN PERSON You may make subsequent investments in person at one of our Investors Centers. The locations of our three Investors Centers are listed on page 18. AUTOMATIC INVESTMENT PLAN You may elect on your application to make investments automatically by authorizing us to draw on your bank account regularly. Such investments must be at least the equivalent of $50 per month. You also may choose an automatic payroll or government direct deposit. If you are establishing a new account, check the appropriate box under "Automatic Investments" on your application to receive more information. If you would like to add a direct deposit to an existing account, please call one of our Investor Services Representatives. HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER As long as you meet any minimum initial investment requirements, you may exchange your fund shares to our other funds up to six times per year per account. For any single exchange, the shares of each fund being acquired must have a value of at least $100. However, we will allow investors to set up an Automatic Exchange Plan between any two funds in the amount of at least $50 per month. See our Shareholder Services Guide for further information about exchanges. If, in any 90-day period, the total of your exchanges and your redemptions from any one account exceeds the lesser of $250,000 or 1% or the fund's assets, further exchanges will be subject to special requirements to comply with our policy on large redemptions. See "Special Requirements for Large Redemptions," page 20. IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help 18 minimize the impact such exchanges have of fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY MAIL You may direct us in writing to exchange your shares from one Twentieth Century or Benham account to another. For additional information, please see our Shareholder Services Guide. BY TELEPHONE You can make exchanges over the phone (either with an Investor Services Representative or using our Automated Information Line -- see page 21) if you have authorized us to accept telephone instructions. You can authorize this by selecting "Full Services" on your application or by calling us at 1-800-345-2021 to get the appropriate form. HOW TO REDEEM SHARES We will redeem or "buy back" your shares at any time. Redemptions will be made at the next net asset value determined after a complete redemption request is received. (For large redemptions, please read "Special Requirements for Large Redemptions," page 20.) Please note that a request to redeem shares in an IRA or 403(b) plan must be accompanied by an executed IRS Form W4-P and a reason for withdrawal as specified by the IRS. IN ORDER TO DISCOURAGE THE REDEMPTION OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, REDEMPTION OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES REDEEMED. This fee will be retained by the fund to help minimize the impact such redemptions have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first redeemed. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY TELEPHONE If you have authorized us to accept telephone instructions, you may redeem your shares by calling an Investor Services Representative. BY MAIL Your written instructions to redeem shares may be made either by a redemption form, which we will send you upon request, or by a letter to us. Certain redemptions may require a signature guarantee. Please see "Signature Guarantee," page 21. BY CHECK-A-MONTH If you have at least a $10,000 balance in your account, you may redeem shares by Check-A-Month. A Check-A-Month plan automatically redeems enough shares each month to provide you with a check for an amount you choose (minimum $50). To set up a Check-A-Month plan, please contact an Investor Services Representative or refer to the Shareholder Services Guide. OTHER AUTOMATIC REDEMPTIONS You may elect to make redemptions automatically by authorizing us to send funds directly to your account at a bank or other financial institution. To set up automatic redemptions, call one of our Investor Services Representatives. REDEMPTION PROCEEDS Please note that shortly after a purchase of shares is made by check or electronic draft (also known as an ACH draft) from your bank, we may wait up to 15 days or longer to send redemption proceeds (to allow your purchase funds to clear). No interest is paid on the redemption proceeds after the redemption is processed but before your redemption proceeds are sent. 19 Redemption proceeds may be sent to you in one of the following ways: BY CHECK Ordinarily, all redemption checks will be made payable to the registered owner of the shares and will be mailed only to the address of record. For more information, please refer to our Shareholder Services Guide. BY WIRE AND ACH You may authorize us to transmit redemption proceeds by wire or ACH. These services will be effective 15 days after we receive the authorization. Your bank will usually receive wired funds within 48 hours of transmission. Electronically transferred funds may be received up to seven days after transmission. Wired funds are subject to a $10 fee to cover bank wire charges, which is deducted from redemption proceeds. Once the funds are transmitted, the time of receipt and the funds' availability are not under our control. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS We have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund make certain redemptions in cash. This requirement to pay redemptions in cash applies to situations where one shareholder redeems, during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, we reserve the right under unusual circumstances to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided 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. Despite its right to redeem fund shares through a redemption-in-kind, we do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, we expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. AUTOMATIC REDEMPTION OF SHARES If at any time your account falls into either of the following categories: (i) you invested the required minimum investment amount for the fund, but due to exchanges or redemptions you have made, the account now has a value of less than the minimum investment amount; or (ii) you have not invested the minimum initial investment amount; a notification will be sent advising you of the need to make an investment to bring the value of the shares held in the account up to the minimum investment. If the investment is not made or the automatic investment is not established within 60 days from the date of 20 notification, the shares held in the account will be redeemed and the proceeds from the redemption will be sent by check to your address of record. The automatic redemption of shares of the funds will not apply to Individual Retirement Accounts, 403(b) accounts and other types of tax-deferred retirement plan accounts. The funds reserve the right to modify their policies regarding the automatic redemption of shares, or to waive such policies in whole or in part for certain classes of investors. SIGNATURE GUARANTEE To protect your accounts from fraud, some transactions will require a signature guarantee. Which transactions will require a signature guarantee will depend on which service options you elect when you open your account. For example, if you choose "In Writing Only," a signature guarantee would be required when: o Redeeming more than $25,000 o Establishing or increasing a Check-A-Month or automatic transfer on an existing account You can obtain a signature guarantee from a bank or trust company, credit union, broker, dealer, securities exchange or association, clearing agency or savings association, as defined by federal law. For a more in-depth explanation of our signature guarantee policy, or if you live outside the United States and would like to know how to obtain a signature guarantee, please consult our Shareholder Services Guide. We reserve the right to require a signature guarantee on any transaction, or to change this policy at any time. SPECIAL SHAREHOLDER SERVICES We offer several service options to make your account easier to manage. These are listed on the account application. Please make note of these options and elect the ones that are appropriate for you. Be aware that the Full Services option offers you the most flexibility. You will find more information about each of these service options in our Shareholder Services Guide. Our special shareholder services include: AUTOMATED INFORMATION LINE We offer an Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. You may also use the Automated Information Line to make investments into your accounts (if we have your bank information on file) and obtain your share balance, value and most recent transactions. If you have authorized us to accept telephone instructions, you also may exchange shares from one fund to another via the Automated Information Line. Redemption instructions cannot be given via the Automated Information Line. OPEN ORDER SERVICE Through our open order service, you may designate a price at which to buy shares of a variable-priced fund by exchange from one of our money market funds, or a price at which to sell shares of a variable-priced fund by exchange to one of our money market funds. The designated purchase price must be equal to or lower, or the 21 designated sale price equal to or higher, than the variable-priced fund's net asset value at the time the order is placed. If the designated price is met within 90 calendar days, we will execute your exchange order automatically at that price (or better). Open orders not executed within 90 days will be canceled. If the fund you have selected deducts a distribution from its share price, your order price will be adjusted accordingly so the distribution does not inadvertently trigger an open order transaction on your behalf. If you close or re-register the account from which the shares are to be redeemed, your open order will be canceled. Because of their time-sensitive nature, open order transactions are accepted only by telephone or in person. These transactions are subject to exchange limitations described in each fund's Prospectus, except that orders and cancellations received before 2 p.m. Central time are effective the same day, and orders or cancellations received after 2 p.m. Central time are effective the next business day. TAX-QUALIFIED RETIREMENT PLANS Each fund is available for your tax-deferred retirement plan. Call or write us and request the appropriate forms for: o Individual Retirement Accounts (IRAs) o 403(b) plans for employees of public school systems and non-profit organizations o Profit sharing plans and pension plans for corporations and other employers If your IRA and 403(b) accounts do not total $10,000, each account is subject to an annual $10 fee, up to a total of $30 per year. You can also transfer your tax-deferred plan to us from another company or custodian. Call or write us for a Request to Transfer form. IMPORTANT POLICIES REGARDING YOUR INVESTMENTS Every account is subject to policies that could affect your investment. Please refer to the Shareholder Services Guide for further information about the policies discussed below, as well as further detail about the services we offer. (1) We reserve the right for any reason to suspend the offering of shares for a period of time, or to reject any specific purchase order (including purchases by exchange). Additionally, purchases may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the fund. (2) We reserve the right to make changes to any stated investment requirements, including those that relate to purchases, transfers and redemptions. In addition, we may also alter, add to or terminate any investor services and privileges. Any changes may affect all shareholders or only certain series or classes of shareholders. (3) Shares being acquired must be qualified for sale in your state of residence. (4) Transactions requesting a specific price and date, other than open orders, will be refused. (5) If a transaction request is made by a corporation, partnership, trust, fiduciary, agent or unincorporated association, we will require evidence satisfactory to us of the authority of the individual making the request. (6) We have established procedures designed to assure the authenticity of instructions received by telephone. These procedures include requesting personal identification from callers, recording telephone calls, and providing written confirmations of telephone transactions. These procedures are designed to protect shareholders from unauthorized or fraudulent instructions. If we do not employ reasonable procedures to confirm the genuineness of instructions, then we may be liable for losses due to unauthorized or fraudulent instructions. The company, its transfer agent and investment adviser will not be responsible for any loss due to instructions they reasonably believe are genuine. (7) All signatures should be exactly as the name appears in the registration. If the owner's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. 22 (8) Unusual stock market conditions have in the past resulted in an increase in the number of shareholder telephone calls. If you experience difficulty in reaching us during such periods, you may send your transaction instructions by mail, express mail or courier service, or you may visit one of our Investors Centers. You may also use our Automated Information Line if you have requested and received an access code and are not attempting to redeem shares. (9) If you fail to provide us with the correct certified taxpayer identification number, we may reduce any redemption proceeds by $50 to cover the penalty the IRS will impose on us for failure to report your correct taxpayer identification number on information reports. (10) We will perform special inquiries on shareholder accounts. A research fee of $15 may be applied. REPORTS TO SHAREHOLDERS At the end of each calendar quarter, we will send you a consolidated statement that summarizes all of your Twentieth Century and Benham holdings, as well as an individual statement for each fund you own that reflects all year-to-date activity in your account. You may request a statement of your account activity at any time. With the exception of most automatic transactions, each time you invest, redeem, transfer or exchange shares, we will send you a confirmation of the transaction. See the Shareholder Services Guide for more detail. Carefully review all the information relating to transactions on your statements and confirmations to ensure that your instructions were acted on properly. Please notify us immediately in writing if there is an error. If you fail to provide notification of an error with reasonable promptness, i.e., within 30 days of non-automatic transactions or within 30 days of the date of your consolidated quarterly statement, in the case of automatic transactions, we will deem you to have ratified the transaction. No later than January 31 of each year, we will send you reports that you may use in completing your U.S. income tax return. See the Shareholder Services Guide for more information. Each year, we will send you an annual and a semiannual report relating to your fund. The annual report includes audited financial statements and a list of portfolio securities as of the fiscal year end. The semiannual report includes unaudited financial statements for the first six months of the fiscal year, as well as a list of portfolio securities at the end of the period. You also will receive an updated Prospectus at least once each year. Please read these materials carefully as they will help you understand your fund. EMPLOYER-SPONSORED RETIREMENT PLANS AND INSTITUTIONAL ACCOUNTS If you own or are considering purchasing fund shares through an employer-sponsored retirement plan, your ability to purchase shares of the funds, exchange them for shares of other Twentieth Century or Benham funds, and redeem them will depend on the terms of your plan. If you own or are considering purchasing fund shares through a bank, broker-dealer, insurance company or other financial intermediary, your ability to purchase, exchange and redeem shares will depend on your agreement with, and the policies of, such financial intermediary. You may reach one of our Institutional Investor Services Representatives by calling 800-345-3533 to request information about the funds, to obtain a current Prospectus or to get answers to any questions about the funds that you are unable to obtain through your plan administrator or financial intermediary. 23 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on, and receive the price determined, as of the close of the Exchange on the next day the Exchange is open. Investments are considered received only when your check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. Investments by telephone pursuant to your prior authorization to us to draw on your bank account are considered received at the time of your telephone call. Investment and transaction instructions received by us on any business day by mail prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Investments and instructions received after that time will receive the price determined on the next business day. If you invest in fund shares through an employer-sponsored retirement plan or other financial intermediary, it is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangement with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at 24 its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That value is then converted to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. The net asset value of the institutional class may be obtained by calling us. DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. 25 Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," this page.) TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the retail class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the retail class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, 26 they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 20.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers 27 and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity and International Small Company Fund team and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Equity and International Small Company Fund team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Equity and International Small Company Fund team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.70% of first $1 billion 1.05% of the next $1 billion 0.80% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.80% - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on the funds as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.30% of first $1 billion 1.00% of the next $1 billion 0.90% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.55% of first $500 million 1.20% of the next $500 million 1.00% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the 28 expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected shareholders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. DISTRIBUTION OF FUND SHARES The funds' shares are distributed by Twentieth Century Securities, Inc. (The "Distributor"), a registered broker dealer and an affiliate of the funds' investment manager. Investors Research pays all expenses for promoting sales of, and distributing the institutional class of, the fund shares offered by this Prospectus. The institutional class of shares does not pay any commissions or other fees to the Distributor or to any other broker dealers or financial intermediaries in connection with the distribution of fund shares. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that address, or by phone to 1-800-345-3533. (For local Kansas City area or international callers: 816-531-5575.) 29 Twentieth Century World Investors issues two series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are institutional class shares and have no up-front charges, commissions, or 12b-1 fees. The retail class is primarily made available to retail investors. The service class and distribution class are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the institutional class. Different fees and expenses will affect performance. For additional information concerning the retail class of shares, call us at 1-800-345-2021. For additional information concerning the service class and distribution class, call us at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) the institutional class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY WORLD INVESTORS INSTITUTIONAL CLASS PROSPECTUS SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419385 KANSAS CITY, MISSOURI 64141-6385 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-3533 OR 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-634-4113 OR 816-753-1865 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: HTTP://TWENTIETH-CENTURY.COM - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-5017 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS ADVISOR CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company. Two series of shares offered by Twentieth Century, Twentieth Century International Equity and Twentieth Century International Small Company Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS The funds offered by this Prospectus (the advisor class shares) are "no-load" investments which means there are no sales charges or commissions. The advisor class shares are subject to a Rule 12b-1 services fee as described in this Prospectus. The advisor class shares are intended for purchase by participants in employer-sponsored retirement or savings plans and for persons purchasing shares through broker dealers, banks, insurance companies and other financial intermediaries that provide various administrative and distribution services. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-345-1833 In Missouri: 816-753-0700 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. This fund has no minimum investment requirements. However, if the value of the shares held in any one fund account is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish an automatic investment program of $50 or more per month in each such account. TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. The minimum investment amount for this fund is $10,000. SHARES OF THE FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- TRANSACTION AND OPERATING EXPENSE TABLE ............................. 4 FINANCIAL HIGHLIGHTS ................................................ 5 INFORMATION REGARDING THE FUNDS INVESTMENT POLICIES OF THE FUNDS .................................... 7 International Equity ........................................... 7 International Small Company Fund ............................... 7 Policies Applicable to Both Funds .............................. 8 RISK FACTORS ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund ......... 11 Investing in Emerging Market Countries ......................... 11 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 12 OTHER INVESTMENT PRACTICES .......................................... 12 Forward Currency Exchange Contracts ............................ 12 Indirect Foreign Investment .................................... 13 Sovereign Debt Obligations ..................................... 13 Portfolio Turnover ............................................. 13 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 14 Short Sales .................................................... 14 Rule 144A Securities ........................................... 15 PERFORMANCE ADVERTISING ............................................. 15 HOW TO INVEST WITH TWENTIETH CENTURY HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER .............................. 17 HOW TO REDEEM SHARES ................................................ 17 Special Requirements for Large Redemptions .................... 17 TELEPHONE SERVICES .................................................. 18 Investors Line ................................................. 18 Automated Information Line ..................................... 18 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ......................................................... 19 When Share Price Is Determined ................................. 19 How Share Price Is Determined .................................. 19 Where to Find Information About Share Price .................... 20 DISTRIBUTIONS ....................................................... 20 General Information About Distributions ........................ 20 TAXES ............................................................... 21 MANAGEMENT .......................................................... 22 Investment Management .......................................... 22 Code of Ethics ................................................. 24 Transfer and Administrative Services ........................... 24 DISTRIBUTION SERVICES ............................................... 24 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ......................... 25 3 TRANSACTION AND OPERATING EXPENSE TABLE - --------------------------------------------------------------------------------
International International Small Company Equity Funds SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases none none Maximum Sales Load Imposed on Reinvested Dividends none none Deferred Sales Load none none Redemption Fee(1) none none(2) Exchange Fee none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(4) 1.20%(3) 1.75%(3) 12b-1 Fees(5) 0.50% 0.50% Other Expenses(6) 0.00% 0.00% Total Fund Operating Expenses(4) 1.70%(3) 2.25%(3) Example You would pay the following expenses on a $1,000 1 year $ 17 $ 20 investment, assuming (1) a 5% annual return and 3 years 53 62 (2) redemption at the end of each time period(4): 5 years 92 107 10 years 199 231
(1) Redemption proceeds sent by wire are subject to a $10 processing fee. (2) Shares of International Small Company Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange Your Investment from One Twentieth Century Account to Another," page 17 and "How to Redeem Shares," page 17.) (3) The manager has voluntarily reduced its annual management fee on International Equity to 1.25% of the first $1 billion of average net assets, 0.95% of the next $1 billion, and 0.85% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.50% of the first $500 million of average net assets, 1.15% of the next $500 million average net assets, and 0.95% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 22. (4) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (5) The 12b-1 fee is designed to permit investors to purchase advisor class shares through broker dealers, banks, insurance companies and other financial intermediaries. A portion of the fee is used to compensate them for ongoing recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager, and a portion is used to compensate them for distribution and other shareholder services. See "Distribution Services," page 24. (6) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are advisor class shares. The funds offer three other classes of shares, one of which is primarily available to retail investors and two that are primarily available to institutional investors. The other classes have different fee structures than the advisor class, resulting in different performance for those classes. For additional information about the various classes, see "Further Information About Twentieth Century," at page 25. 4 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) The advisor class of the funds was established September 3, 1996. The financial information in these tables regarding selected per share data for each of the funds reflects the performance of the funds' retail class of shares, which has a total expense ratio that is 0.25% lower than the advisor class. Had the advisor class been in existence for such funds for the time periods presented, the funds' performance information would be lower as a result of the additional expense. The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY
Years ended November 30, May 9, 1991 ------------------------------------------------------------- (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD...................... $7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............... .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- (.036) (.005) -- In Excess of Net Investment Income................... -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions........................ (.372) (.402) -- -- -- ----- ----- ----- ----- ----- Total Distributions................. (.372) (.402) (.191) (.007) -- ----- ----- ----- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)..................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate............. 169% 242% 255% 180% 84% Average Commission Paid per Share Traded............... $.002 -- -- -- -- Net Assets, End of Period (in thousands)........$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, (inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in equity securities of smaller foreign issuers(those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million). The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. 7 The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. POLICIES APPLICABLE TO BOTH FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred stock, convertible preferred stock and convertible debt securities. Equity equivalents may also 8 include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 19.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States , derives at least 50% of its total revenue from production or sales outside the United States, and/or whose principal trading market is outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country (subject to the investment policies of the particular fund) or region. 9 At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 21). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 is generally less government regulation and supervision of 10 foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing in the securities of companies having comparatively small market capitalizations and may invest up to 50% of its assets in issuers in emerging market countries. (See "Investing in Emerging Market Countries," on page 11 and "Investing in Smaller Companies," on page 12.) As a result, an investment in the fund should be considered to be speculative. The fund is intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that International Small Company Fund will pursue. An investment in the fund should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. 11 INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, and this volatility and limited liquidity may be reflected in the net asset value of the fund. INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement 12 dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would 13 generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment make take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities 14 that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the advisor class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. 15 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. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- The following section explains how purchase, exchange and redeem advisor class shares of the funds offered by this Prospectus. One or more of the funds offered by this Prospectus is available as an investment option under your employer-sponsored retirement or savings plan or through or in connection with a program, product or service offered by a financial intermediary, such as a bank, broker dealer or an insurance company. Since all records of your share ownership are maintained by your plan sponsor, plan recordkeeper, or other financial intermediary, all orders to purchase, exchange and redeem shares must be made through your employer or other financial intermediary, as applicable. If you are purchasing through a retirement or savings plan, the administrator of your plan or your employee benefits office can provide you with information on how to participate in your plan and how to select a Twentieth Century fund as an investment option. If you are purchasing through a financial intermediary, you should contact your service representative at the financial intermediary for information about how to select a Twentieth Century fund. If you have questions about a fund, see "Information About Investment Policies of the Funds," page 7, or call Twentieth Century's Investors Line at 1-800-345-3533. Orders to purchase shares are effective on the day Twentieth Century receives payment. (See "When Share Price is Determined," page 19.) Twentieth Century may discontinue offering shares generally in the funds (including any class of shares of a fund) or in any particular state without notice to shareholders. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER Your plan or program may permit you to exchange your investment in the shares of a fund for shares of another fund. See your plan administrator, employee benefits office or financial intermediary for details on the rules in your plan governing exchanges. Exchanges are made at the respective net asset values, next computed after receipt of the exchange instruction by us. If in any 90-day period, the total of the exchanges and redemptions from the account of any one plan participant or financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's assets, further exchanges may be subject to special requirements to comply with the funds' policy on large redemptions. (See "Special Requirements for Large Redemptions," page 18.) IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. HOW TO REDEEM SHARES Subject to any restrictions imposed by your employer's plan or financial intermediary's program, you can sell ("redeem") your shares through the plan or financial intermediary at their net asset value. Your plan administrator, trustee, or financial intermediary or other designated person must provide us with redemption instructions. The shares will be redeemed at the net asset value next computed after receipt of the instructions in good order. (See "When Share Price Is Determined," page 19.) If you have any questions about how to redeem, contact your plan administrator, employee benefits office, or service representative at your financial intermediary, as applicable. 17 IN ORDER TO DISCOURAGE THE REDEMPTION OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, REDEMPTION OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES REDEEMED. This fee will be retained by the fund to help minimize the impact such redemptions have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first redeemed. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. REQUIREMENTS FOR LARGE REDEMPTIONS The funds have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund to redeem shares in cash, with respect to any one participant account during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, the funds reserve the right to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided to the redeeming plan participant or financial intermediary in lieu of cash without prior notice. If you expect to make a large redemption and would like to avoid any possibility of being paid in securities, you may do so by providing us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. Receipt of your instruction 15 days prior to the transaction provides the fund with sufficient time to raise the cash in an orderly manner to pay the redemption and thereby minimizes the effect of the redemption on the fund and its remaining shareholders. Despite its right to redeem fund shares through a redemption-in-kind, the funds do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, the funds expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. TELEPHONE SERVICES INVESTORS LINE You may reach an Investor Services Representative by calling our Investor Line at 1-800-345-3533. On our Investors Line you may request information about our funds and a current Prospectus, or get answers to any questions that you may have about the funds and the services we offer. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8675. By calling the Automated Information Line you may listen to fund prices, yields and total return figures. 18 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on, and receive the price determined, as of the close of the Exchange on the next day the Exchange is open. Investments are considered received only when your check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. It is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangement with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That 19 value is then converted to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. Because the total expense ratio for the advisor class shares is 25% higher than the retail class, their net asset values will be lower than the retail class. The net asset value of the advisor class may be obtained by calling us. DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," page 21.) 20 TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the advisor class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the advisor class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 20.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV notifying you of 21 the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, either Twentieth Century or your financial intermediary may be required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may 22 also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity and International Small Company Fund team and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Equity and International Small Company Fund team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Equity and International Small Company Fund team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: FUND Percent of Average Net Assets - ------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.65% of first $1 billion 1.00% of the next $1 billion 0.75% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.75% - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on the funds as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.25% of first $1 billion 0.95% of the next $1 billion 0.85% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.50% of first $500 million 1.15% of the next $500 million 0.95% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected share- 23 holders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. DISTRIBUTION SERVICES The funds' shares are distributed by Twentieth Century Securities, Inc. (the "Distributor"), a registered broker dealer and an affiliate of the investment manager. The Distributor enters into contracts with various banks, broker dealers, insurance companies and other financial intermediaries with respect to the sale of the funds' shares and/or the use of the funds' shares in various financial services. The Distributor pays all expenses incurred in promoting sales of, and distributing, the advisor class and in securing such services. Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under the 1940 Act permits investment companies that adopt a written plan to pay certain expenses associated with the distribution of their shares. Pursuant to that rule, the funds' Board of Directors and the initial shareholder of the funds' advisor class shares have approved and entered into a Master Distribution and Shareholder Services Plan (the "Plan") with the Distributor. Pursuant to the Plan, each fund pays the Distributor a shareholder services fee and a distribution fee, each equal to .25% (for a total of .50%) per annum of the average daily net assets of the shares of the funds' advisor class. The shareholder services fee is paid for the purpose of paying the costs of securing certain shareholder and administrative services, and the distribution fee is paid for the purpose of paying the costs of providing various distribution services. All or a portion of such fees are paid by the Distributor to the banks, broker dealers, insurance companies or other financial intermediaries through which such shares are made available. The plan has been adopted and will be administered in accordance with the requirements of Rule 12b-1 under the 1940 Act. For additional information about the Plan and its 24 terms, see "Master Distribution and Shareholder Services Plan" in the Statement of Additional Information. Fees paid pursuant to the Plan may be paid for shareholder services and the maintenance of accounts and therefore may constitute "service fees" for purposes of applicable rules of the National Association of Securities Dealers. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that address, or by phone to 1-800-345-3533. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues two series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are advisor class shares and have no up-front charges or commissions. The retail class is primarily made available to retail investors. The institutional class and service class are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the advisor class. Different fees and expenses will affect performance. For additional information concerning the retail class of shares, call a Twentieth Century retail investor services representative at 1-800-345-2021. For information concerning the institutional or service classes of shares not offered by this Prospectus, call a Twentieth Century institutional investor services representative at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) the institutional class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the 25 election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 26 (This page left blank intentionally.) 27 (This page left blank intentionally.) 28 (This page left blank intentionally.) 29 (This page left blank intentionally.) 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY WORLD INVESTORS ADVISOR CLASS PROSPECTUS SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419385 KANSAS CITY, MISSOURI 64141-6385 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-3533 OR 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-345-1833 OR 816-753-1865 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: http://twentieth-century.com - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-50?? 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS SERVICE CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company. Two series of shares offered by Twentieth Century, Twentieth Century International Equity and Twentieth Century International Small Company Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS The funds offered by this Prospectus (the service class shares) are "no-load" investments which means there are no sales charges or commissions. The service class shares are subject to a Rule 12b-1 services fee as described in this Prospectus. The service class shares are intended for purchase by participants in employer-sponsored retirement or savings plans and for persons purchasing shares through financial intermediaries, such as banks, broker dealers and insurance companies that provide various recordkeeping and administrative services. One or more of the funds described in this Prospectus is available as an investment option in your employer's plan or under a program or service offered by a financial institution or other entity that will provide you with various recordkeeping and other administrative services. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-345-1833 In Missouri: 816-753-0700 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. SHARES OF THE FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- TRANSACTION AND OPERATING EXPENSE TABLE ............................. 4 FINANCIAL HIGHLIGHTS ................................................ 5 INFORMATION REGARDING THE FUNDS INVESTMENT POLICIES OF THE FUNDS .................................... 7 International Equity ........................................... 7 International Small Company Fund ............................... 7 Policies Applicable to Both Funds .............................. 8 RISK FACTORS ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund ........................................ 11 Investing in Emerging Market Countries ......................... 11 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 12 OTHER INVESTMENT PRACTICES .......................................... 12 Forward Currency Exchange Contracts ............................ 12 Indirect Foreign Investment .................................... 13 Sovereign Debt Obligations ..................................... 13 Portfolio Turnover ............................................. 13 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 14 Short Sales .................................................... 14 Rule 144A Securities ........................................... 15 PERFORMANCE ADVERTISING ............................................. 15 HOW TO INVEST WITH TWENTIETH CENTURY HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER .............................. 17 HOW TO REDEEM SHARES ................................................ 17 Special Requirements for Large Redemptions ..................... 17 TELEPHONE SERVICES .................................................. 18 Investors Line ................................................. 18 Automated Information Line ..................................... 18 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ......................................................... 19 When Share Price Is Determined ................................. 19 How Share Price Is Determined .................................. 19 Where to Find Information About Share Price .................... 20 DISTRIBUTIONS ....................................................... 20 General Information About Distributions ........................ 20 TAXES ............................................................... 21 MANAGEMENT .......................................................... 22 Investment Management .......................................... 22 Code of Ethics ................................................. 24 Transfer and Administrative Services ........................... 24 SERVICE FEES ........................................................ 24 DISTRIBUTION SERVICES ............................................... 25 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ......................... 25 3 TRANSACTION AND OPERATING EXPENSE TABLE - --------------------------------------------------------------------------------
International International Small Company Equity Fund SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases none none Maximum Sales Load Imposed on Reinvested Dividends none none Deferred Sales Load none none Redemption Fee none none(1) Exchange Fee none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(3) 1.20%(2) 1.50%(2) 12b-1 Fees(4) 0.25% 0.25% Other Expenses(5) 0.00% 0.00% Total Fund Operating Expenses(3) 1.45%(2) 1.75%(2) Example You would pay the following expenses on a $1,000 1 year $ 15 $ 18 investment, assuming (1) a 5% annual return and 3 years 46 55 (2) redemption at the end of each time period(3): 5 years 79 94 10 years 172 205
(1) Shares of International Small Company Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange Your Investment from One Twentieth Century Account to Another," page 17 and "How to Redeem Shares," page 17.) (2) The manager has voluntarily reduced its annual management fee on International Equity to 1.25% of the first $1 billion of average net assets, 0.95% of the next $1 billion, and 0.85%% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.50% of the first $500 million of average net assets, 1.15% of the next $500 million average net assets, and 0.95% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 22. (3) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (4) The 12b-1 fee is designed to permit investors to purchase service class shares through retirement and pension plan administrators and other financial intermediaries and is used to compensate them for ongoing recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager. See "Service Fees," page 24. (5) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are service class shares. The funds offer three other classes of shares, one of which is primarily available to retail investors and two that are primarily available to institutional investors, that have different fee structures than the retail class, resulting in different performance for the other classes. For additional information about the various classes, see "Further Information About Twentieth Century," at page 25. 4 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) The service class of the funds was established September 3, 1996. The financial information in these tables regarding selected per share data for each of the funds reflects the performance of the funds' retail class of shares, which has the same total expense ratio as the service class shares. The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY
Years ended November 30, May 9, 1991 ------------------------------------------------------------- (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD....................$7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................. .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions..... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............. .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................. -- -- (.036) (.005) -- In Excess of Net Investment Income................. -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions......................(.372) (.402) -- -- -- ----- ----- ----- ----- ----- Total Distributions...............(.372) (.402) (.191) (.007) -- ----- ----- ----- ----- ----- NET ASSET VALUE, END OF PERIOD .........................$7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets................ 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets........................ .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate........... 169% 242% 255% 180% 84% Average Commission Paid per Share Traded.............$.002 -- -- -- -- Net Assets, End of Period (in thousands).....$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized
5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, (inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in equity securities of smaller foreign issuers(those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million). The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. The fund may invest up to 7 50% of its assets in securities of issuers in emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. POLICIES APPLICABLE TO BOTH FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred 8 stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 19.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States , derives at least 50% of its total revenue from production or sales outside the United States, and/or whose principal trading market is outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country 9 (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 21). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 10 alternative trading partners. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing in the securities of companies having comparatively small market capitalizations and may invest up to 50% of its assets in issuers in emerging market countries. (See "Investing in Emerging Market Countries," on page 11 and "Investing in Smaller Companies," on page 12.) As a result, an investment in the fund should be considered to be speculative. The fund is intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that International Small Company Fund will pursue. An investment in the fund should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 11 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, and this volatility and limited liquidity may be reflected in the net asset value of the fund. INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. 12 By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is 13 in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment make take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for 14 purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the service class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our 15 fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- The following section explains how purchase, exchange and redeem advisor class shares of the funds offered by this Prospectus. One or more of the funds offered by this Prospectus is available as an investment option under your employer-sponsored retirement or savings plan or through or in connection with a program, product or service offered by a financial intermediary, such as a bank, broker dealer or an insurance company. Since all records of your share ownership are maintained by your plan sponsor, plan recordkeeper, or other financial intermediary, all orders to purchase, exchange and redeem shares must be made through your employer or other financial intermediary, as applicable. If you are purchasing through a retirement or savings plan, the administrator of your plan or your employee benefits office can provide you with information on how to participate in your plan and how to select a Twentieth Century fund as an investment option. If you are purchasing through a financial intermediary, you should contact your service representative at the financial intermediary for information about how to select a Twentieth Century fund. If you have questions about a fund, see "Information About Investment Policies of the Funds," page 7, or call Twentieth Century's Investors Line at 1-800-345-3533. Orders to purchase shares are effective on the day Twentieth Century receives payment. (See "When Share Price is Determined," page 19.) Twentieth Century may discontinue offering shares generally in the funds (including any class of shares of a fund) or in any particular state without notice to shareholders. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH FUND TO ANOTHER Your plan or program may permit you to exchange your investment in the shares of a fund for shares of another fund. See your plan administrator, employee benefits office or financial intermediary for details on the rules in your plan governing exchanges. Exchanges are made at the respective net asset values, next computed after receipt of the exchange instruction by us. If in any 90-day period, the total of the exchanges and redemptions from the account of any one plan participant or financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's assets, further exchanges may be subject to special requirements to comply with the funds' policy on large redemptions. (See "Special Requirements for Large Redemptions," page 18.) IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. HOW TO REDEEM SHARES Subject to any restrictions imposed by your employer's plan or financial intermediary's program, you can sell ("redeem") your shares through the plan or financial intermediary at their net asset value. Your plan administrator, trustee, or financial intermediary or other designated person must provide us with redemption instructions. The shares will be redeemed at the net asset value next computed after receipt of the instructions in good order. (See "When Share Price Is Determined," page 19.) If you have any questions about how to redeem, contact your plan administrator, employee benefits office, or 17 service representative at your financial intermediary, as applicable. IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have of fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS The funds have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund to redeem shares in cash, with respect to any one participant account during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, the funds reserve the right to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided to the redeeming plan participant or financial intermediary in lieu of cash without prior notice. If you expect to make a large redemption and would like to avoid any possibility of being paid in securities, you may do so by providing us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. Receipt of your instruction 15 days prior to the transaction provides the fund with sufficient time to raise the cash in an orderly manner to pay the redemption and thereby minimizes the effect of the redemption on the fund and its remaining shareholders. Despite its right to redeem fund shares through a redemption-in-kind, the funds do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, the funds expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. TELEPHONE SERVICES INVESTORS LINE You may reach an Investor Services Representative by calling our Investor Line at 1-800-345-3533. On our Investors Line you may request information about our funds and a current Prospectus, or get answers to any questions that you may have about the funds and the services we offer. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8675. By calling the Automated Information Line you may listen to fund prices, yields and total return figures. 18 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on, and receive the price determined, as of the close of the Exchange on the next day the Exchange is open. Investments are considered received only when your check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. It is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time for receiving orders and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangements with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. That 19 value is then converted to dollars at the prevailing foreign exchange rate. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. The net asset value of the service class may be obtained by calling us. DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," page 21.) 20 TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the retail class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the retail class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 20.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV from either Twentieth Century or your financial 21 intermediary notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, either Twentieth Century or your financial intermediary is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may 22 also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity and International Small Company Fund team and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Equity and International Small Company Fund team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Equity and International Small Company Fund team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.65% of first $1 billion 1.00% of the next $1 billion 0.75% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.75% - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on the funds as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.25% of first $1 billion 0.95% of the next $1 billion 0.85% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.50% of first $500 million 1.15% of the next $500 million 0.95% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected share- 23 holders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for Twentieth Century. It provides facilities, equipment and personnel to Twentieth Century, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. SERVICE FEES Certain recordkeeping and administrative services that are provided by the funds' transfer agent for retail class shareholders may be performed by insurance companies, retirement and pension plan administrators and recordkeepers for retirement plans using service class shares as a funding medium, by broker dealers for their customers investing in shares of the funds, by sponsors of multi mutual fund no (or low) transaction fee programs and other financial intermediaries. The funds' boards of directors have adopted a Shareholder Services Plan with respect to the service class shares of each fund. Under the Plan, each fund pays Twentieth Century Securities, Inc. (the "Distributor" a shareholder services fee of 0.25% annually of the aggregate average daily assets of the funds' service class shares for the purpose of paying the costs and expenses incurred by such financial intermediaries in providing such services. The Distributor enters into contracts with each financial intermediary to make such shares available through such plans or programs and for the provision of such services. The Shareholder Services Plan has been adopted and will be administered in accordance with the requirements of Rule 12b-1 under the 1940 Act. For additional information about the Plan and its terms, see "Shareholder Services Plan" in the Statement of Additional Information. Fees paid pursuant to the Plan may be paid for shareholder services and the maintenance of accounts and therefore may constitute "service fees" for purposes of applicable NASD rules. 24 DISTRIBUTION OF FUND SHARES The funds' shares are distributed by the Distributor, a registered broker dealer and an affiliate of the funds' investment manager. Investors Research pays all expenses for promoting sales of, and distributing the service class of, the fund shares offered by this Prospectus. The service class of shares does not pay any commissions or other fees to the distributor or to any other broker dealers or financial intermediaries in connection with the distribution of fund shares. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that address, or by phone to 1-800-345-3533. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues two series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are service class shares and have no up-front charges or commissions. The retail class is primarily made available to retail investors. The institutional class and service class are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the advisor class. Different fees and expenses will affect performance. For additional information concerning the retail class of shares, call a Twentieth Century retail investor services representative at 1-800-345-2021. For information concerning the institutional or service classes of shares not offered by this Prospectus, call a Twentieth Century institutional investor services representative at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) the institutional class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can 25 elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 26 (This page left blank intentionally.) 27 (This page left blank intentionally.) 28 (This page left blank intentionally.) 29 (This page left blank intentionally.) 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY WORLD INVESTORS SERVICE CLASS PROSPECTUS SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419385 KANSAS CITY, MISSOURI 64141-6385 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-3533 OR 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-345-1833 OR 816-753-0700 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: HTTP://TWENTIETH-CENTURY.COM - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-5016 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS RETAIL CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company whose shares are offered to retail investors without a sales charge. Three series of shares offered by Twentieth Century, Twentieth Century International Equity, Twentieth Century International Small Company Funds, and Twentieth Century Emerging Markets Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS Twentieth Century offers retail investors a full line of "no-load" mutual funds that have no sales charges or commissions. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419200 Kansas City, MO 64141-6200 1-800-345-2021 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-634-4113 In Missouri: 816-753-1865 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. This fund has no minimum investment requirements. However, if the value of the shares held in any one fund account is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish an automatic investment program of $50 or more per month in each such account. (See "Automatic Investment Plan," page 18, and "Automatic Redemption of Shares," page 20.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. The minimum investment amount for this fund is $10,000. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Twentieth Century Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers in emerging market countries that are considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. The minimum investment amount for this fund is $10,000. SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Transaction and Operating Expense Table ............................. 4 Financial Highlights ................................................ 5 INFORMATION REGARDING THE FUNDS Investment Policies of the Funds .................................... 7 International Equity ............................................. 7 International Small Company Fund ................................. 7 Emerging Markets Fund ............................................ 8 Policies Applicable to All Funds ................................. 9 Risk Factors ........................................................ 10 Investing in Foreign Securities Generally ........................ 10 Speculative Nature of International Small Company Fund and Emerging Markets Fund ...................................... 11 Investing in Emerging Market Countries ........................... 12 Investing in Smaller Companies ................................... 12 Investing in Lower Quality Debt Instruments ...................... 13 Other Investment Practices .......................................... 13 Forward Currency Exchange Contracts .............................. 13 Indirect Foreign Investment ...................................... 14 Sovereign Debt Obligations ....................................... 14 Portfolio Turnover ............................................... 14 Repurchase Agreements ............................................ 14 When-Issued Securities ........................................... 15 Short Sales ...................................................... 15 Rule 144A Securities ............................................. 15 Performance Advertising ............................................. 16 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP How to Open an Account .............................................. 17 By Mail .......................................................... 17 By Wire .......................................................... 17 By Exchange ...................................................... 17 In Person ........................................................ 17 Subsequent Investments ........................................... 18 By Mail .......................................................... 18 By Telephone ..................................................... 18 By Wire .......................................................... 18 In Person ........................................................ 18 Automatic Investment Plan ........................................ 18 How to Exchange from One Account to Another ......................... 18 By Mail .......................................................... 19 By Telephone ..................................................... 19 How to Redeem Shares ................................................ 19 By Telephone ..................................................... 19 By Mail .......................................................... 19 By Check-A-Month ................................................. 19 Other Automatic Redemptions ...................................... 19 Redemption Proceeds ................................................. 19 By Check ......................................................... 20 By Wire and ACH .................................................. 20 Special Requirements for Large Redemptions ....................... 20 Automatic Redemption of Shares ................................... 20 Signature Guarantee ................................................. 21 Special Shareholder Services ........................................ 21 Automated Information Line ....................................... 21 Open Order Service ............................................... 21 Tax-Qualified Retirement Plans ................................... 22 Important Policies Regarding Your Investments ....................... 22 Reports to Shareholders ............................................. 23 Employer-sponsored Retirement Plans and Institutional Accounts ...... 23 ADDITIONAL INFORMATION YOU SHOULD KNOW Share Price ......................................................... 24 When Share Price Is Determined ................................... 24 How Share Price Is Determined .................................... 24 Where to Find Information About Share Price ...................... 25 Distributions ....................................................... 25 General Information About Distributions .......................... 25 Taxes ............................................................... 26 Management .......................................................... 27 Investment Management ............................................ 27 Code of Ethics ................................................... 29 Transfer and Administrative Services ............................. 29 Distribution of Fund Shares ......................................... 29 Further Information About Twentieth Century ......................... 30 3
TRANSACTION AND OPERATING EXPENSE TABLE - ---------------------------------------------------------------------------------------------------- International International Small Company Emerging Equity Fund Markets Shareholder Transaction Expenses: Maximum Sales Load Imposed on Purchases none none none Maximum Sales Load Imposed on Reinvested Dividends none none none Deferred Sales Load none none none Redemption Fee(1) none none(2) none(2) Exchange Fee none none none Annual Fund Operating Expenses (as a percentage of net assets): Management Fees(5) 1.45%(3) 1.75%(3) 2.00%(4) 12b-1 Fees none none none Other Expenses(6) 0.00% 0.00% 0.00% Total Fund Operating Expenses(5) 1.45%(3) 1.75%(3) 2.00% Example You would pay the following expenses on a $1,000 1 year $ 15 $ 18 $ 20 investment, assuming (1) a 5% annual return and 3 years 46 55 62 (2) redemption at the end of each time period(5): 5 years 79 94 107 10 years 172 205 231
(1) Redemption proceeds sent by wire are subject to a $10 processing fee. (2) Shares of International Small Company Fund or Emerging Markets Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange from One Account to Another," page 18 and "How to Redeem Shares," page 19.) (3) The manager has voluntarily reduced its annual management fee on International Equity to 1.50% of the first $1 billion of average net assets, 1.20% of the next $1 billion, and 1.10% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.75% of the first $500 million of average net assets, 1.40% of the next $500 million average net assets, and 1.20% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 27. (4) Emerging Markets Fund pays an annual management fee equal to 2.00% of the first $500 million of average net assets, 1.50% of the next $500 million average net assets, and 1.25% of average net assets over $1 billion. (5) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (6) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are retail class shares and have no up-front or deferred sales charges, commissions, or 12b-1 fees. The funds offer three other classes of shares, primarily to institutional investors, that have different fee structures than the retail class, resulting in different performance for the other classes. For additional information about the various classes, see "Further Information About Twentieth Century," at page 30. 4
- ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY Years ended November 30, May 9, 1991 ------------------------------------------------------------------ (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD...................... $7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............... .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- (.036) (.005) -- In Excess of Net Investment Income................... -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions........................ (.372) (.402) -- -- -- ----- ----- ----- ----- ----- Total Distributions................. (.372) (.402) (.191) (.007) -- ----- ----- ----- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)..................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate............. 169% 242% 255% 180% 84% Average Commission Paid per Share Traded............... $.002 -- -- -- -- Net Assets, End of Period (in thousands)........$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized
5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (Continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, nception) through 1995 Nov. 30, 1994 NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of smaller foreign issuers. Smaller foreign issuers are considered to be those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. 7 The majority of the fund's assets will be invested in the securities of smaller foreign issuers in developed markets. However, the fund may invest up to 50% of its assets in securities of issuers in emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of issuers in emerging market countries. The securities in which the fund may invest include not only the securities of issuers located or principally traded in emerging market countries, but also include the securities of issuers which derive a significant portion of their business from emerging market countries. (See "Policies Applicable to All Funds," page 9.) DUE TO THE 8 SIGNIFICANT RISKS ASSOCIATED WITH INVESTING IN EMERGING MARKETS, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. POLICIES APPLICABLE TO ALL FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities 9 holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 24.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States, derives at least 50% of its total revenue for production or sales outside the United States, and/or whose shares trade principally on an exchange or other market outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. 10 Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: Currency Risk. The value of the foreign investments held by the funds may be signif-icantly 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 26). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing primarily in the securities of companies having comparatively small market capitalizations, and Emerging Markets Fund will be investing primarily in securities of issuers in emerging market countries. Likewise, International Small Company Fund may invest up to 50% of its assets in issuers in emerging markets. (See "Investing in Emerging Market Countries" on page 12 and "Investing in Smaller Companies," on page 12.) As a result, investment in these funds should be considered to be speculative. The funds are intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that the funds will pursue. An investment in the funds 11 should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, and this volatility and limited liquidity may be reflected in the net asset value of the fund. 12 INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund and Emerging Markets Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade 13 securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as 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 14 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment may take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the 15 investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the retail class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP - -------------------------------------------------------------------------------- The following section explains how to invest with Twentieth Century Mutual Funds and The Benham Group, including purchases, redemptions, exchanges and special services. You will find more detail about doing business with us by referring to the Shareholder Services Guide that you will receive when you open an account. If you own or are considering purchasing fund shares through an employer-sponsored retirement plan or through a bank, broker-dealer or other financial intermediary, the following sections may not apply to you. Please read "Employer-sponsored Retirement Plans and Institutional Accounts," page 23. HOW TO OPEN AN ACCOUNT To open an account, you must complete and sign an application, furnishing your taxpayer identification number. (You must also certify whether you are subject to withholding for failing to report income to the IRS.) Investments received without a certified taxpayer identification number will be returned. The minimum investment in International Equity is $2,500 [$1,000 for IRA and Uniform Gifts/Transfers to Minors Acts ("UGMA/ UTMA") accounts]. This minimum will be waived if you establish an automatic investment plan to your account that is the equivalent of at least $50 per month. See "Automatic Investment Plan," page 18. The minimum investment in International Small Company Fund and Emerging Markets Fund is $10,000. To keep an International Small Company Fund or Emerging Markets Fund account open, a minimum share value of $10,000 must be maintained. If the share value of your account falls below $10 000, the shares in your account will be subject to automatic redemption. See "Automatic Redemption of Shares" on page 20. The minimum investment requirements may be different for some types of retirement accounts. Call one of our Investor Services representatives for information on our retirement plans, which are available for individual investors or for those investing through their employers. Please note: If you register your account as belonging to multiple owners (e.g., as joint tenants), you must provide us with specific authorization on your application in order for us to accept written or telephone instructions from a single owner. Otherwise, all owners will have to agree to any transactions that involve the account (whether the transaction request is in writing or over the telephone). You may invest in the following ways: BY MAIL Send a completed application and check or money order payable in U.S. dollars to Twentieth Century. BY WIRE You may make your initial investment by wiring funds. To do so: (1) Call us or mail a completed application. (2) Instruct your bank to wire funds to Commerce Bank of Kansas City, Missouri. ABA routing number 101000019. (3) Be sure to specify on the wire: (a) Twentieth Century Mutual Funds (b) The fund you are buying (and account number, if you have one) (c) The amount (d) Your name (e) Your city and state (f) Your taxpayer identification number BY EXCHANGE Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on opening an account by exchanging from another Twentieth Century or Benham account. See page 18 for more information on exchanges. IN PERSON If you prefer to work with a representative in person, please visit one of our Investors Centers, located at: 17 4500 Main Street Kansas City, MO 64111 816-340-7050 1665 Charleston Road Mountain View, CA 94043 415-965-8300 2000 S. Colorado Blvd. Denver, CO 80222 303-759-8382 SUBSEQUENT INVESTMENTS Subsequent investments may be made by an automatic bank, payroll or government direct deposit (see "Automatic Investment Plan", page 18) or by any of the methods below. The minimum investment requirement for subsequent investments: $250 for checks submitted without the remittance portion of a previous statement or confirmation, $50 for all other types of subsequent investments. BY MAIL When making subsequent investments, enclose your check with the remittance portion of the confirmation of a previous investment. If the remittance slip is not available, indicate your name, address and account number on your check or a separate piece of paper. (Please be aware that the investment minimum for subsequent purchases is higher without a remit slip.) BY TELEPHONE Once your account is open, you may make investments by telephone if you have authorized us (by choosing "Full Services" on your application) to draw on your bank account. You may call an Investor Services Representative or use our Automated Information Line. BY WIRE You may make subsequent investments by wire. Follow the wire transfer instructions on page 17 and indicate your account number. IN PERSON You may make subsequent investments in person at one of our Investors Centers. The locations of our three Investors Centers are listed on page 18. AUTOMATIC INVESTMENT PLAN You may elect on your application to make investments automatically by authorizing us to draw on your bank account regularly. Such investments must be at least the equivalent of $50 per month. You also may choose an automatic payroll or government direct deposit. If you are establishing a new account, check the appropriate box under "Automatic Investments" on your application to receive more information. If you would like to add a direct deposit to an existing account, please call one of our Investor Services Representatives. HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER As long as you meet any minimum initial investment requirements, you may exchange your fund shares to our other funds up to six times per year per account. For any single exchange, the shares of each fund being acquired must have a value of at least $100. However, we will allow investors to set up an Automatic Exchange Plan between any two funds in the amount of at least $50 per month. See our Shareholder Services Guide for further information about exchanges. If, in any 90-day period, the total of your exchanges and your redemptions from any one account exceeds the lesser of $250,000 or 1% or the fund's assets, further exchanges will be subject to special requirements to comply with our policy on large redemptions. See "Special Requirements for Large Redemptions," page 20. IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of 18 determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY MAIL You may direct us in writing to exchange your shares from one Twentieth Century or Benham account to another. For additional information, please see our Shareholder Services Guide. BY TELEPHONE You can make exchanges over the phone (either with an Investor Services Representative or using our Automated Information Line -- see page 21) if you have authorized us to accept telephone instructions. You can authorize this by selecting "Full Services" on your application or by calling us at 1-800-345-2021 to get the appropriate form. HOW TO REDEEM SHARES We will redeem or "buy back" your shares at any time. Redemptions will be made at the next net asset value determined after a complete redemption request is received. (For large redemptions, please read "Special Requirements for Large Redemptions," page 20.) Please note that a request to redeem shares in an IRA or 403(b) plan must be accompanied by an executed IRS Form W4-P and a reason for withdrawal as specified by the IRS. IN ORDER TO DISCOURAGE THE REDEMPTION OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, REDEMPTION OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES REDEEMED. This fee will be retained by the fund to help minimize the impact such redemptions have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first redeemed. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY TELEPHONE If you have authorized us to accept telephone instructions, you may redeem your shares by calling an Investor Services Representative. BY MAIL Your written instructions to redeem shares may be made either by a redemption form, which we will send you upon request, or by a letter to us. Certain redemptions may require a signature guarantee. Please see "Signature Guarantee," page 21. BY CHECK-A-MONTH If you have at least a $10,000 balance in your account, you may redeem shares by Check-A-Month. A Check-A-Month plan automatically redeems enough shares each month to provide you with a check for an amount you choose (minimum $50). To set up a Check-A-Month plan, please contact an Investor Services Representative or refer to the Shareholder Services Guide. OTHER AUTOMATIC REDEMPTIONS You may elect to make redemptions automatically by authorizing us to send funds directly to your account at a bank or other financial institution. To set up automatic redemptions, call one of our Investor Services Representatives. REDEMPTION PROCEEDS Please note that shortly after a purchase of shares is made by check or electronic draft (also known as an ACH draft) from your bank, we may wait up to 15 days or longer to send redemption proceeds (to allow your purchase funds to clear). No interest is paid on the redemption proceeds after the redemption is processed but before your redemption proceeds are sent. Redemption proceeds may be sent to you in one of the following ways: 19 BY CHECK Ordinarily, all redemption checks will be made payable to the registered owner of the shares and will be mailed only to the address of record. For more information, please refer to our Shareholder Services Guide. BY WIRE AND ACH You may authorize us to transmit redemption proceeds by wire or ACH. These services will be effective 15 days after we receive the authorization. Your bank will usually receive wired funds within 48 hours of transmission. Electronically transferred funds may be received up to seven days after transmission. Wired funds are subject to a $10 fee to cover bank wire charges, which is deducted from redemption proceeds. Once the funds are transmitted, the time of receipt and the funds' availability are not under our control. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS We have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund make certain redemptions in cash. This requirement to pay redemptions in cash applies to situations where one shareholder redeems, during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, we reserve the right under unusual circumstances to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided 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. Despite its right to redeem fund shares through a redemption-in-kind, we do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, we expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. AUTOMATIC REDEMPTION OF SHARES International Equity. If at any time you have an International Equity account that falls into either of the following categories: (i) you invested the required minimum initial investment amount for the fund, currently $2,500 ($1,000 for UGMA/UTMA accounts), but due to exchanges or redemptions you have made, the account now has a value of less than the minimum initial investment amount; or (ii) you have not invested the minimum initial investment amount, and an automatic investment program of $50 or more per month does not exist for the account; a notification will be sent advising you of the need to either make an investment to bring the value of the shares held in the account up to $2,500 ($1,000) or to establish an automatic investment program of $50 or more per month. If the investment is not made or the automatic investment is not established within 60 days from the date of notification, the shares held in the account will be redeemed and the proceeds from the redemption will be sent by check to your address of record. 20 The automatic redemption of shares of International Equity will not apply to Individual Retirement Accounts, 403(b) accounts and other types of tax-deferred retirement plan accounts. International Small Company Fund and Emerging Markets Fund. If at any time you have an International Small Company Fund or Emerging Markets Fund account that falls into either of the following categories: (i) you invested the required minimum initial investment amount of $10,000, but due to exchanges or redemptions you have made, the account now has a value of less than $10,000; or (ii) you have not invested $10,000; a notification will be sent advising you of the need to make an investment to bring the value of the shares held in the account up to $10,000. If the investment is not made within 60 days from the date of notification, the shares held in the fund account will be redeemed and the proceeds from the redemption will be sent by check to your address of record. The funds reserve the right to modify their policies regarding the automatic redemption of shares, or to waive such policies in whole or in part for certain classes of investors. SIGNATURE GUARANTEE To protect your accounts from fraud, some transactions will require a signature guarantee. Which transactions will require a signature guarantee will depend on which service options you elect when you open your account. For example, if you choose "In Writing Only," a signature guarantee would be required when: o Redeeming more than $25,000 o Establishing or increasing a Check-A-Month or automatic transfer on an existing account You can obtain a signature guarantee from a bank or trust company, credit union, broker, dealer, securities exchange or association, clearing agency or savings association, as defined by federal law. For a more in-depth explanation of our signature guarantee policy, or if you live outside the United States and would like to know how to obtain a signature guarantee, please consult our Shareholder Services Guide. We reserve the right to require a signature guarantee on any transaction, or to change this policy at any time. SPECIAL SHAREHOLDER SERVICES We offer several service options to make your account easier to manage. These are listed on the account application. Please make note of these options and elect the ones that are appropriate for you. Be aware that the Full Services option offers you the most flexibility. You will find more information about each of these service options in our Shareholder Services Guide. Our special shareholder services include: AUTOMATED INFORMATION LINE We offer an Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. You may also use the Automated Information Line to make investments into your accounts (if we have your bank information on file) and obtain your share balance, value and most recent transactions. If you have authorized us to accept telephone instructions, you also may exchange shares from one fund to another via the Automated Information Line. Redemption instructions cannot be given via the Automated Information Line. OPEN ORDER SERVICE Through our open order service, you may designate a price at which to buy shares of a variable-priced fund by exchange from one of our money market funds, or a price at which to sell shares of a variable-priced fund by exchange to one of our money market funds. The designated purchase price must be equal to or lower, or the designated sale price equal to or higher, than the variable-priced fund's net asset value at the time 21 the order is placed. If the designated price is met within 90 calendar days, we will execute your exchange order automatically at that price (or better). Open orders not executed within 90 days will be canceled. If the fund you have selected deducts a distribution from its share price, your order price will be adjusted accordingly so the distribution does not inadvertently trigger an open order transaction on your behalf. If you close or re-register the account from which the shares are to be redeemed, your open order will be canceled. Because of their time-sensitive nature, open order transactions are accepted only by telephone or in person. These transactions are subject to exchange limitations described in each fund's Prospectus, except that orders and cancellations received before 2 p.m. Central time are effective the same day, and orders or cancellations received after 2 p.m. Central time are effective the next business day. TAX-QUALIFIED RETIREMENT PLANS Each fund is available for your tax-deferred retirement plan. Call or write us and request the appropriate forms for: o Individual Retirement Accounts (IRAs) o 403(b) plans for employees of public school systems and non-profit organizations o Profit sharing plans and pension plans for corporations and other employers If your IRA and 403(b) accounts do not total $10,000, each account is subject to an annual $10 fee, up to a total of $30 per year. You can also transfer your tax-deferred plan to us from another company or custodian. Call or write us for a Request to Transfer form. IMPORTANT POLICIES REGARDING YOUR INVESTMENTS Every account is subject to policies that could affect your investment. Please refer to the Shareholder Services Guide for further information about the policies discussed below, as well as further detail about the services we offer. (1) We reserve the right for any reason to suspend the offering of shares for a period of time, or to reject any specific purchase order (including purchases by exchange). Additionally, purchases may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the fund. (2) We reserve the right to make changes to any stated investment requirements, including those that relate to purchases, transfers and redemptions. In addition, we may also alter, add to or terminate any investor services and privileges. Any changes may affect all shareholders or only certain series or classes of shareholders. (3) Shares being acquired must be qualified for sale in your state of residence. (4) Transactions requesting a specific price and date, other than open orders, will be refused. (5) If a transaction request is made by a corporation, partnership, trust, fiduciary, agent or unincorporated association, we will require evidence satisfactory to us of the authority of the individual making the request. (6) We have established procedures designed to assure the authenticity of instructions received by telephone. These procedures include requesting personal identification from callers, recording telephone calls, and providing written confirmations of telephone transactions. These procedures are designed to protect shareholders from unauthorized or fraudulent instructions. If we do not employ reasonable procedures to confirm the genuineness of instructions, then we may be liable for losses due to unauthorized or fraudulent instructions. The company, its transfer agent and investment adviser will not be responsible for any loss due to instructions they reasonably believe are genuine. (7) All signatures should be exactly as the name appears in the registration. If the owner's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. 22 (8) Unusual stock market conditions have in the past resulted in an increase in the number of shareholder telephone calls. If you experience difficulty in reaching us during such periods, you may send your transaction instructions by mail, express mail or courier service, or you may visit one of our Investors Centers. You may also use our Automated Information Line if you have requested and received an access code and are not attempting to redeem shares. (9) If you fail to provide us with the correct certified taxpayer identification number, we may reduce any redemption proceeds by $50 to cover the penalty the IRS will impose on us for failure to report your correct taxpayer identification number on information reports. (10) We will perform special inquiries on shareholder accounts. A research fee of $15 may be applied. REPORTS TO SHAREHOLDERS At the end of each calendar quarter, we will send you a consolidated statement that summarizes all of your Twentieth Century and Benham holdings, as well as an individual statement for each fund you own that reflects all year-to-date activity in your account. You may request a statement of your account activity at any time. With the exception of most automatic transactions, each time you invest, redeem, transfer or exchange shares, we will send you a confirmation of the transaction. See the Shareholder Services Guide for more detail. Carefully review all the information relating to transactions on your statements and confirmations to ensure that your instructions were acted on properly. Please notify us immediately in writing if there is an error. If you fail to provide notification of an error with reasonable promptness, i.e., within 30 days of non-automatic transactions or within 30 days of the date of your consolidated quarterly statement, in the case of automatic transactions, we will deem you to have ratified the transaction. No later than January 31 of each year, we will send you reports that you may use in completing your U.S. income tax return. See the Shareholder Services Guide for more information. Each year, we will send you an annual and a semiannual report relating to your fund. The annual report includes audited financial statements and a list of portfolio securities as of the fiscal year end. The semiannual report includes unaudited financial statements for the first six months of the fiscal year, as well as a list of portfolio securities at the end of the period. You also will receive an updated Prospectus at least once each year. Please read these materials carefully as they will help you understand your fund. EMPLOYER-SPONSORED RETIREMENT PLANS AND INSTITUTIONAL ACCOUNTS If you own or are considering purchasing fund shares through an employer-sponsored retirement plan, your ability to purchase shares of the funds, exchange them for shares of other Twentieth Century or Benham funds, and redeem them will depend on the terms of your plan. If you own or are considering purchasing fund shares through a bank, broker-dealer, insurance company or other financial intermediary, your ability to purchase, exchange and redeem shares will depend on your agreement with, and the policies of, such financial intermediary. You may reach one of our Institutional Investor Services Representatives by calling 1-800-345-3533 to request information about the funds, to obtain a current Prospectus or to get answers to any questions about the funds that you are unable to obtain through your plan administrator or financial intermediary. 23 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on and receive the price determined, as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received only when check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. Investments by telephone pursuant to your prior authorization to us to draw on your bank account are considered received at the time of your telephone call. Investment and transaction instructions received by us on any business day by mail prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Investments and instructions received after that time will receive the price determined on the next business day. If you invest in fund shares through an employer-sponsored retirement plan or other financial intermediary, it is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangement with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at 24 its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. The net asset value of each fund may be obtained by calling us. (See "Automated Information Line," page 21.) DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. 25 Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," page 26.) TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the retail class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the retail class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment 26 portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 25.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. 27 Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity, International Small Company Fund and Emerging Markets Fund team (the "International Team") and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: Fund Percent of Average Net Assets - -------------------------------------------------------------------------------- International Equity 1.90% of first $1 billion 1.25% of the next $1 billion 1.00% over $2 billion International Small Company Fund 2.00% Emerging Markets Fund 2.00% of first $500 million 1.50% of the next $500 million 1.25% over $1 billion - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on International Equity and International Small Company Fund as follows: Fund Percent of Average Net Assets - -------------------------------------------------------------------------------- International Equity 1.50% of first $1 billion 1.20% of the next $1 billion 1.10% over $2 billion International Small Company Fund 1.75% of first $500 million 1.40% of the next $500 million 1.20% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. 28 Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected shareholders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for the funds. It provides facilities, equipment and personnel to the funds, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. DISTRIBUTION OF FUND SHARES The funds' shares are distributed by Twentieth Century Securities, Inc. (The "Distributor"), a registered broker dealer and an affiliate of the funds' investment manager. Investors Research pays all expenses for promoting sales of, and distributing the retail class of, the fund shares offered by this Prospectus. The retail class of shares does not pay any commissions or other fees to the Distributor or to any other broker dealers or financial intermediaries in connection with the distribution of fund shares. 29 FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by mail to that address, or by phone to 1-800-345-2021. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues three series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are retail class shares and have no up-front charges, commissions, or 12b-1 fees. The other classes of shares are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the retail class. Different fees and expenses will affect performance. For additional information concerning the other classes of shares not offered by this Prospectus, call Twentieth Century at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) each class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY World Investors Retail Class Prospectus SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ---------------------------------------------------- P.O. Box 419200 Kansas City, Missouri 64141-6200 - ---------------------------------------------------- Person-to-person assistance: 1-800-345-2021 or 816-531-5575 - ---------------------------------------------------- Automated information line: 1-800-345-8765 - ---------------------------------------------------- Telecommunications Device for the Deaf: 1-800-634-4113 or 816-753-1865 - ---------------------------------------------------- Fax: 816-340-7962 - ---------------------------------------------------- Internet address: http://twentieth-century.com - ---------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-5019 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS INSTITUTIONAL CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company. Three series of shares offered by Twentieth Century, Twentieth Century International Equity, Twentieth Century International Small Company Fund, and Twentieth Century Emerging Markets Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS The funds offered by this Prospectus (the institutional class shares) are "no-load" investments, which means there are no sales charges or commissions. The institutional class shares are made available for purchase by large institutional shareholders, such as bank trust departments, corporations, endowments, foundations, and financial advisors. Institutional class shares are not available for purchase by insurance companies or participant-directed employer-sponsored retirement plans that meet the funds' minimum investment requirements. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-341-1833 In Missouri: 816-753-0700 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. MINIMUM INVESTMENT: $5 MILLION. TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an inter-nationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. MINIMUM INVESTMENT: $5 MILLION. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Twentieth Century Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers in emerging market countries that are considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. MINIMUM INVESTMENT: $5 MILLION. SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. The minimum investment is $3 million for endowments and foundations. The minimum investment requirement may be waived if the investor has an aggregate investment in Twentieth Century funds of $10 million ($5 million for endowments and foundations) or more. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- TRANSACTION AND OPERATING EXPENSE TABLE ............................. 4 Financial Highlights ................................................ 5 INFORMATION REGARDING THE FUNDS INVESTMENT POLICIES OF THE FUNDS .................................... 7 International Equity ........................................... 7 International Small Company Fund ............................... 7 Emerging Markets Fund .......................................... 8 Policies Applicable to All Funds ............................... 9 RISK FACTORS ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund and Emerging Markets Fund ............................... 11 Investing in Emerging Market Countries ......................... 12 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 13 OTHER INVESTMENT PRACTICES .......................................... 13 Forward Currency Exchange Contracts ............................ 13 Indirect Foreign Investment .................................... 14 Sovereign Debt Obligations ..................................... 14 Portfolio Turnover ............................................. 14 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 15 Short Sales .................................................... 15 Rule 144A Securities ........................................... 15 PERFORMANCE ADVERTISING ............................................. 16 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP HOW TO OPEN AN ACCOUNT .............................................. 17 By Mail ........................................................ 17 By Wire ........................................................ 17 By Exchange .................................................... 17 In Person ...................................................... 17 SUBSEQUENT INVESTMENTS ......................................... 18 By Mail ........................................................ 18 By Telephone ................................................... 18 By Wire ........................................................ 18 In Person ...................................................... 18 AUTOMATIC INVESTMENT PLAN ...................................... 18 HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER ......................... 18 By Mail ........................................................ 19 By Telephone ................................................... 19 HOW TO REDEEM SHARES ................................................ 19 By Telephone ................................................... 19 By Mail ........................................................ 19 By Check-A-Month ............................................... 19 Other Automatic Redemptions .................................... 19 REDEMPTION PROCEEDS ................................................. 19 By Check ....................................................... 20 By Wire and ACH ................................................ 20 SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS ..................... 20 AUTOMATIC REDEMPTION OF SHARES ................................. 20 SIGNATURE GUARANTEE ................................................. 21 SPECIAL SHAREHOLDER SERVICES ........................................ 21 Automated Information Line ..................................... 21 Open Order Service ............................................. 21 Tax-Qualified Retirement Plans ................................. 22 IMPORTANT POLICIES REGARDING YOUR INVESTMENTS ....................... 22 REPORTS TO SHAREHOLDERS ............................................. 23 EMPLOYER-SPONSORED RETIREMENT PLANS AND INSTITUTIONAL ACCOUNTS ...... 23 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ......................................................... 24 When Share Price Is Determined ................................. 24 How Share Price Is Determined .................................. 24 Where to Find Information About Share Price .................... 25 DISTRIBUTIONS ....................................................... 25 General Information About Distributions ........................ 25 TAXES ............................................................... 26 MANAGEMENT .......................................................... 27 Investment Management .......................................... 27 Code of Ethics ................................................. 29 Transfer and Administrative Services ........................... 29 DISTRIBUTION OF FUND SHARES ......................................... 29 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ......................... 29 3 TRANSACTION AND OPERATING EXPENSE TABLE - --------------------------------------------------------------------------------
International International Small Company Emerging Equity Fund Markets Fund SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases none none none Maximum Sales Load Imposed on Reinvested Dividends none none none Deferred Sales Load none none none Redemption Fee none none(1) none(1) Exchange Fee none none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(4) 1.25%(2) 1.55%(2) 1.80%(3) 12b-1 Fees none none none Other Expenses(5) 0.00% 0.00% 0.00% Total Fund Operating Expenses(4) 1.25%(2) 1.55%(2) 1.80% Example You would pay the following expenses on a $1,000 1 year $ 13 $ 16 $ 18 investment, assuming (1) a 5% annual return and 3 years 39 49 56 (2) redemption at the end of each time period(4): 5 years 68 84 97 10 years 150 183 210
(1) Shares of International Small Company Fund or Emerging Markets Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange from One Account to Another," page 18 and "How to Redeem Shares," page 19.) (2) The manager has voluntarily reduced its annual management fee on International Equity to 1.30% of the first $1 billion of average net assets, 1.00% of the next $1 billion, and 0.90% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.55% of the first $500 million of average net assets, 1.20% of the next $500 million average net assets, and 1.00% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 22. (3) Emerging Markets Fund pays an annual management fee equal to 1.80% of the first $500 million of average net assets, 1.50% of the next $500 million average net assets, and 1.05% of average net assets over $1 billion. (4) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (5) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are institutional class shares. The funds offer three other classes of shares, one of which is primarily made available to retail investors and two that are primarily made available to institutional investors. The other classes have different fee structures than the institutional class, resulting in different performance for those classes. For additional information about the various classes, see "Further Information About Twentieth Century," page 29. 4 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) The institutional class of the funds was established September 3, 1996. The financial information in these tables regarding selected per share data for each of the funds reflects the performance of the funds' retail class of shares, which has a total expense ratio that is 0.20% higher than the institutional class. Had the institutional class been in existence for such funds for the time periods presented, the funds' performance information would be higher as a result of the lower expenses. The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY
Years ended November 30, May 9, 1991 ------------------------------------------------------------- (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.................... $7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................. .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions..... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............. .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................. -- -- (.036) (.005) -- In Excess of Net Investment Income................. -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions...................... (.372) (.402) -- -- -- Total Distributions............... (.372) (.402) (.191) (.007) -- ----- ----- ----- ----- ----- NET ASSET VALUE, END OF PERIOD.......................... $7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets................ 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets........................ .25% (.53%) (.34%) 95% .26 %(3) Portfolio Turnover Rate........... 169% 242% 255% 180% 84% Average Commission Paid per Share Traded............. $.002 -- -- -- -- Net Assets, End of Period (in thousands).........$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ----------------------------------------------------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized
5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, (inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................. .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions..... .28 .41 ----- ----- Total from Investment Operations............. .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................. -- -- In Excess of Net Investment Income................. -- -- From Net Realized Gains on Security Transactions...................... -- -- ----- ----- Total Distributions............... -- -- ----- ----- NET ASSET VALUE, END OF PERIOD.......................... $5.70 $5.39 ----- ----- TOTAL RETURN(2)................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets................ 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets........................ .27% (.48%)(3) Portfolio Turnover Rate........... 168% 56% Average Commission Paid per Share Traded............. $.004 -- Net Assets, End of Period (in thousands).......... $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of smaller foreign issuers. Smaller foreign issuers are considered to be those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. 7 The majority of the fund's assets will be invested in the securities of smaller foreign issuers in developed markets. However, the fund may invest up to 50% of its assets in securities of issuers in emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of issuers in emerging market countries. The securities in which the fund may invest include not only the securities of issuers located or principally traded in emerging market countries, but also include the securities of issuers which derive a significant portion of their business from emerging market countries. (See "Policies Applicable to All Funds," page 9.) DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH INVESTING IN 8 EMERGING MARKETS, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. POLICIES APPLICABLE TO ALL FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities holdings of a fund, impact the net asset value of 9 that fund's shares. (See "How Share Price is Determined," page 19.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States, derives at least 50% of its total revenue for production or sales outside the United States, and/or whose shares trade principally on an exchange or other market outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. Investments in the funds should not be 10 considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 26). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing primarily in the securities of companies having comparatively small market capitalizations, and Emerging Markets Fund will be investing primarily in securities of issuers in emerging market countries. Likewise, International Small Company Fund may invest up to 50% of its assets in issuers in emerging markets. (See "Investing in Emerging Market Countries" on page 12 and "Investing in Smaller Companies," on page 12.) As a result, investment in these funds should be considered to be speculative. The funds are intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that the funds will pursue. An investment in the funds should not be considered a complete investment 11 program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, and this volatility and limited liquidity may be reflected in the net asset value of the fund. 12 INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund and Emerging Markets Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian 13 bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as 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 14 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment may take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the 15 responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the institutional class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY MUTUAL FUNDS AND THE BENHAM GROUP - -------------------------------------------------------------------------------- The following section explains how to invest with Twentieth Century Mutual Funds and The Benham Group, including purchases, redemptions, exchanges and special services. You will find more detail about doing business with us by referring to the Shareholder Services Guide that you will receive when you open an account. If you own or are considering purchasing fund shares through an employer-sponsored retirement plan or through a bank, broker-dealer or other financial intermediary, the following sections may not apply to you. Please read "Employer-sponsored Retirement Plans and Institutional Accounts," page 23. HOW TO OPEN AN ACCOUNT To open an account, you must complete and sign an application, furnishing your taxpayer identification number. (You must also certify whether you are subject to withholding for failing to report income to the IRS.) Investments received without a certified taxpayer identification number will be returned. The minimum investment in the funds is $5 million. The minimum investment is $3 million for endowments and foundations. The minimum investment requirement may be waived if the investor has an aggregate investment in Twentieth Century funds of $10 million ($5 million for endowments or foundations) or more. The minimum investment requirements may be different for some types of retirement accounts. Call one of our Investor Services representatives for information on our retirement plans, which are available for individual investors or for those investing through their employers. Please note: If you register your account as belonging to multiple owners (e.g., as joint tenants), you must provide us with specific authorization on your application in order for us to accept written or telephone instructions from a single owner. Otherwise, all owners will have to agree to any transactions that involve the account (whether the transaction request is in writing or over the telephone). You may invest in the following ways: BY MAIL Send a completed application and check or money order payable in U.S. dollars to Twentieth Century. BY WIRE You may make your initial investment by wiring funds. To do so: (1) Call us or mail a completed application. (2) Instruct your bank to wire funds to Commerce Bank of Kansas City, Missouri. ABA routing number 101000019. (3) Be sure to specify on the wire: (a) Twentieth Century Mutual Funds (b) The fund you are buying (and account number, if you have one) (c) The amount (d) Your name (e) Your city and state (f) Your taxpayer identification number BY EXCHANGE Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on opening an account by exchanging from another Twentieth Century or Benham account. See page 18 for more information on exchanges. IN PERSON If you prefer to work with a representative in person, please visit one of our Investors Centers, located at: 17 4500 Main Street Kansas City, MO 64111 816-340-7050 1665 Charleston Road Mountain View, CA 94043 415-965-8300 2000 S. Colorado Blvd. Denver, CO 80222 303-759-8382 SUBSEQUENT INVESTMENTS Subsequent investments may be made by an automatic bank, payroll or government direct deposit (see "Automatic Investment Plan", page 18) or by any of the methods below. The minimum investment requirement for subsequent investments: $250 for checks submitted without the remittance portion of a previous statement or confirmation, $50 for all other types of subsequent investments. BY MAIL When making subsequent investments, enclose your check with the remittance portion of the confirmation of a previous investment. If the remittance slip is not available, indicate your name, address and account number on your check or a separate piece of paper. (Please be aware that the investment minimum for subsequent purchases is higher without a remit slip.) BY TELEPHONE Once your account is open, you may make investments by telephone if you have authorized us (by choosing "Full Services" on your application) to draw on your bank account. You may call an Investor Services Representative or use our Automated Information Line. BY WIRE You may make subsequent investments by wire. Follow the wire transfer instructions on page 17 and indicate your account number. IN PERSON You may make subsequent investments in person at one of our Investors Centers. The locations of our three Investors Centers are listed on page 18. AUTOMATIC INVESTMENT PLAN You may elect on your application to make investments automatically by authorizing us to draw on your bank account regularly. Such investments must be at least the equivalent of $50 per month. You also may choose an automatic payroll or government direct deposit. If you are establishing a new account, check the appropriate box under "Automatic Investments" on your application to receive more information. If you would like to add a direct deposit to an existing account, please call one of our Investor Services Representatives. HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER As long as you meet any minimum initial investment requirements, you may exchange your fund shares to our other funds up to six times per year per account. For any single exchange, the shares of each fund being acquired must have a value of at least $100. However, we will allow investors to set up an Automatic Exchange Plan between any two funds in the amount of at least $50 per month. See our Shareholder Services Guide for further information about exchanges. If, in any 90-day period, the total of your exchanges and your redemptions from any one account exceeds the lesser of $250,000 or 1% or the fund's assets, further exchanges will be subject to special requirements to comply with our policy on large redemptions. See "Special Requirements for Large Redemptions," page 20. IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of 18 determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY MAIL You may direct us in writing to exchange your shares from one Twentieth Century or Benham account to another. For additional information, please see our Shareholder Services Guide. BY TELEPHONE You can make exchanges over the phone (either with an Investor Services Representative or using our Automated Information Line -- see page 21) if you have authorized us to accept telephone instructions. You can authorize this by selecting "Full Services" on your application or by calling us at 1-800-345-2021 to get the appropriate form. HOW TO REDEEM SHARES We will redeem or "buy back" your shares at any time. Redemptions will be made at the next net asset value determined after a complete redemption request is received. (For large redemptions, please read "Special Requirements for Large Redemptions," page 20.) Please note that a request to redeem shares in an IRA or 403(b) plan must be accompanied by an executed IRS Form W4-P and a reason for withdrawal as specified by the IRS. IN ORDER TO DISCOURAGE THE REDEMPTION OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, REDEMPTION OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES REDEEMED. This fee will be retained by the fund to help minimize the impact such redemptions have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first redeemed. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. BY TELEPHONE If you have authorized us to accept telephone instructions, you may redeem your shares by calling an Investor Services Representative. BY MAIL Your written instructions to redeem shares may be made either by a redemption form, which we will send you upon request, or by a letter to us. Certain redemptions may require a signature guarantee. Please see "Signature Guarantee," page 21. BY CHECK-A-MONTH If you have at least a $10,000 balance in your account, you may redeem shares by Check-A-Month. A Check-A-Month plan automatically redeems enough shares each month to provide you with a check for an amount you choose (minimum $50). To set up a Check-A-Month plan, please contact an Investor Services Representative or refer to the Shareholder Services Guide. OTHER AUTOMATIC REDEMPTIONS You may elect to make redemptions automatically by authorizing us to send funds directly to your account at a bank or other financial institution. To set up automatic redemptions, call one of our Investor Services Representatives. REDEMPTION PROCEEDS Please note that shortly after a purchase of shares is made by check or electronic draft (also known as an ACH draft) from your bank, we may wait up to 15 days or longer to send redemption proceeds (to allow your purchase funds to clear). No interest is paid on the redemption proceeds after the redemption is processed but before your redemption proceeds are sent. 19 Redemption proceeds may be sent to you in one of the following ways: BY CHECK Ordinarily, all redemption checks will be made payable to the registered owner of the shares and will be mailed only to the address of record. For more information, please refer to our Shareholder Services Guide. BY WIRE AND ACH You may authorize us to transmit redemption proceeds by wire or ACH. These services will be effective 15 days after we receive the authorization. Your bank will usually receive wired funds within 48 hours of transmission. Electronically transferred funds may be received up to seven days after transmission. Wired funds are subject to a $10 fee to cover bank wire charges, which is deducted from redemption proceeds. Once the funds are transmitted, the time of receipt and the funds' availability are not under our control. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS We have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund make certain redemptions in cash. This requirement to pay redemptions in cash applies to situations where one shareholder redeems, during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, we reserve the right under unusual circumstances to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided 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. Despite its right to redeem fund shares through a redemption-in-kind, we do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, we expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. AUTOMATIC REDEMPTION OF SHARES If at any time your account falls into either of the following categories: (i) you invested the required minimum investment amount for the fund, but due to exchanges or redemptions you have made, the account now has a value of less than the minimum investment amount; or (ii) you have not invested the minimum initial investment amount; a notification will be sent advising you of the need to make an investment to bring the value of the shares held in the account up to the minimum investment. If the investment is not made or the automatic investment is not established within 60 days from the date of notification, the shares held in the account will be redeemed and the proceeds from the 20 redemption will be sent by check to your address of record. The automatic redemption of shares of the funds will not apply to Individual Retirement Accounts, 403(b) accounts and other types of tax-deferred retirement plan accounts. The funds reserve the right to modify their policies regarding the automatic redemption of shares, or to waive such policies in whole or in part for certain classes of investors. SIGNATURE GUARANTEE To protect your accounts from fraud, some transactions will require a signature guarantee. Which transactions will require a signature guarantee will depend on which service options you elect when you open your account. For example, if you choose "In Writing Only," a signature guarantee would be required when: o Redeeming more than $25,000 o Establishing or increasing a Check-A-Month or automatic transfer on an existing account You can obtain a signature guarantee from a bank or trust company, credit union, broker, dealer, securities exchange or association, clearing agency or savings association, as defined by federal law. For a more in-depth explanation of our signature guarantee policy, or if you live outside the United States and would like to know how to obtain a signature guarantee, please consult our Shareholder Services Guide. We reserve the right to require a signature guarantee on any transaction, or to change this policy at any time. SPECIAL SHAREHOLDER SERVICES We offer several service options to make your account easier to manage. These are listed on the account application. Please make note of these options and elect the ones that are appropriate for you. Be aware that the Full Services option offers you the most flexibility. You will find more information about each of these service options in our Shareholder Services Guide. Our special shareholder services include: AUTOMATED INFORMATION LINE We offer an Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8765. By calling the Automated Information Line, you may listen to fund prices, yields and total return figures. You may also use the Automated Information Line to make investments into your accounts (if we have your bank information on file) and obtain your share balance, value and most recent transactions. If you have authorized us to accept telephone instructions, you also may exchange shares from one fund to another via the Automated Information Line. Redemption instructions cannot be given via the Automated Information Line. OPEN ORDER SERVICE Through our open order service, you may designate a price at which to buy shares of a variable-priced fund by exchange from one of our money market funds, or a price at which to sell shares of a variable-priced fund by exchange to one of our money market funds. The designated purchase price must be equal to or lower, or the designated sale price equal to or higher, than the 21 variable-priced fund's net asset value at the time the order is placed. If the designated price is met within 90 calendar days, we will execute your exchange order automatically at that price (or better). Open orders not executed within 90 days will be canceled. If the fund you have selected deducts a distribution from its share price, your order price will be adjusted accordingly so the distribution does not inadvertently trigger an open order transaction on your behalf. If you close or re-register the account from which the shares are to be redeemed, your open order will be canceled. Because of their time-sensitive nature, open order transactions are accepted only by telephone or in person. These transactions are subject to exchange limitations described in each fund's Prospectus, except that orders and cancellations received before 2 p.m. Central time are effective the same day, and orders or cancellations received after 2 p.m. Central time are effective the next business day. TAX-QUALIFIED RETIREMENT PLANS Each fund is available for your tax-deferred retirement plan. Call or write us and request the appropriate forms for: o Individual Retirement Accounts (IRAs) o 403(b) plans for employees of public school systems and non-profit organizations o Profit sharing plans and pension plans for corporations and other employers If your IRA and 403(b) accounts do not total $10,000, each account is subject to an annual $10 fee, up to a total of $30 per year. You can also transfer your tax-deferred plan to us from another company or custodian. Call or write us for a Request to Transfer form. IMPORTANT POLICIES REGARDING YOUR INVESTMENTS Every account is subject to policies that could affect your investment. Please refer to the Shareholder Services Guide for further information about the policies discussed below, as well as further detail about the services we offer. (1) We reserve the right for any reason to suspend the offering of shares for a period of time, or to reject any specific purchase order (including purchases by exchange). Additionally, purchases may be refused if, in the opinion of the manager, they are of a size that would disrupt the management of the fund. (2) We reserve the right to make changes to any stated investment requirements, including those that relate to purchases, transfers and redemptions. In addition, we may also alter, add to or terminate any investor services and privileges. Any changes may affect all shareholders or only certain series or classes of shareholders. (3) Shares being acquired must be qualified for sale in your state of residence. (4) Transactions requesting a specific price and date, other than open orders, will be refused. (5) If a transaction request is made by a corporation, partnership, trust, fiduciary, agent or unincorporated association, we will require evidence satisfactory to us of the authority of the individual making the request. (6) We have established procedures designed to assure the authenticity of instructions received by telephone. These procedures include requesting personal identification from callers, recording telephone calls, and providing written confirmations of telephone transactions. These procedures are designed to protect shareholders from unauthorized or fraudulent instructions. If we do not employ reasonable procedures to confirm the genuineness of instructions, then we may be liable for losses due to unauthorized or fraudulent instructions. The company, its transfer agent and investment adviser will not be responsible for any loss due to instructions they reasonably believe are genuine. (7) All signatures should be exactly as the name appears in the registration. If the owner's name appears in the registration as Mary Elizabeth Jones, she should sign that way and not as Mary E. Jones. 22 (8) Unusual stock market conditions have in the past resulted in an increase in the number of shareholder telephone calls. If you experience difficulty in reaching us during such periods, you may send your transaction instructions by mail, express mail or courier service, or you may visit one of our Investors Centers. You may also use our Automated Information Line if you have requested and received an access code and are not attempting to redeem shares. (9) If you fail to provide us with the correct certified taxpayer identification number, we may reduce any redemption proceeds by $50 to cover the penalty the IRS will impose on us for failure to report your correct taxpayer identification number on information reports. (10) We will perform special inquiries on shareholder accounts. A research fee of $15 may be applied. REPORTS TO SHAREHOLDERS At the end of each calendar quarter, we will send you a consolidated statement that summarizes all of your Twentieth Century and Benham holdings, as well as an individual statement for each fund you own that reflects all year-to-date activity in your account. You may request a statement of your account activity at any time. With the exception of most automatic transactions, each time you invest, redeem, transfer or exchange shares, we will send you a confirmation of the transaction. See the Shareholder Services Guide for more detail. Carefully review all the information relating to transactions on your statements and confirmations to ensure that your instructions were acted on properly. Please notify us immediately in writing if there is an error. If you fail to provide notification of an error with reasonable promptness, i.e., within 30 days of non-automatic transactions or within 30 days of the date of your consolidated quarterly statement, in the case of automatic transactions, we will deem you to have ratified the transaction. No later than January 31 of each year, we will send you reports that you may use in completing your U.S. income tax return. See the Shareholder Services Guide for more information. Each year, we will send you an annual and a semiannual report relating to your fund. The annual report includes audited financial statements and a list of portfolio securities as of the fiscal year end. The semiannual report includes unaudited financial statements for the first six months of the fiscal year, as well as a list of portfolio securities at the end of the period. You also will receive an updated Prospectus at least once each year. Please read these materials carefully as they will help you understand your fund. EMPLOYER-SPONSORED RETIREMENT PLANS AND INSTITUTIONAL ACCOUNTS If you own or are considering purchasing fund shares through an employer-sponsored retirement plan, your ability to purchase shares of the funds, exchange them for shares of other Twentieth Century or Benham funds, and redeem them will depend on the terms of your plan. If you own or are considering purchasing fund shares through a bank, broker-dealer, insurance company or other financial intermediary, your ability to purchase, exchange and redeem shares will depend on your agreement with, and the policies of, such financial intermediary. You may reach one of our Institutional Investor Services Representatives by calling 1-800-345-3533 to request information about the funds, to obtain a current Prospectus or to get answers to any questions about the funds that you are unable to obtain through your plan administrator or financial intermediary. 23 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on and receive the price determined, as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received only when check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. Investments by telephone pursuant to your prior authorization to us to draw on your bank account are considered received at the time of your telephone call. Investment and transaction instructions received by us on any business day by mail prior to the close of business on the Exchange, usually 3 p.m. Central time, will receive that day's price. Investments and instructions received after that time will receive the price determined on the next business day. If you invest in fund shares through an employer-sponsored retirement plan or other financial intermediary, it is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangement with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at 24 its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. The net asset value of the institutional class may be obtained by calling us. (See "Automated Information Line," page 21.) DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. 25 Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," this page.) TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the retail class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the retail class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital 26 losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 20.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, Twentieth Century is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the 27 assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity, International Small Company Fund and Emerging Markets Fund team (the "International Team") and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.70% of first $1 billion 1.05% of the next $1 billion 0.80% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.80% EMERGING MARKETS FUND 1.80% of first $500 million 1.30% of the next $500 million 1.05% over $1 billion - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on International Equity and International Small Company Fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.30% of first $1 billion 1.00% of the next $1 billion 0.90% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.55% of first $500 million 1.20% of the next $500 million 1.00% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to 28 compare the expenses of these funds to the expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected shareholders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for the funds. It provides facilities, equipment and personnel to the funds, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. DISTRIBUTION OF FUND SHARES The funds' shares are distributed by Twentieth Century Securities, Inc. (The "Distributor"), a registered broker dealer and an affiliate of the funds' investment manager. Investors Research pays all expenses for promoting sales of, and distributing the institutional class of, the fund shares offered by this Prospectus. The institutional class of shares does not pay any commissions or other fees to the Distributor or to any other broker dealers or financial intermediaries in connection with the distribution of fund shares. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that address, or by phone to 1-800-345- 29 3533. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues three series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are institutional class shares and have no up-front charges, commissions, or 12b-1 fees. The retail class is primarily made available to retail investors. The service class and distribution class are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the institutional class. Different fees and expenses will affect performance. For additional information concerning the retail class of shares, call us at 1-800-345-2021. For additional information concerning the service class and distribution class, call us at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) the institutional class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY WORLD INVESTORS INSTITUTIONAL CLASS PROSPECTUS SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419385 KANSAS CITY, MISSOURI 64141-6385 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-3533 OR 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-634-4113 OR 816-753-1865 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: HTTP://TWENTIETH-CENTURY.COM - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-5021 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS ADVISOR CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company. Three series of shares offered by Twentieth Century, Twentieth Century International Equity, Twentieth Century International Small Company Fund, and Twentieth Century Emerging Markets Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS The funds offered by this Prospectus (the advisor class shares) are "no-load" investments which means there are no sales charges or commissions. The advisor class shares are subject to a Rule 12b-1 services fee as described in this Prospectus. The advisor class shares are intended for purchase by participants in employer-sponsored retirement or savings plans and for persons purchasing shares through broker dealers, banks, insurance companies and other financial intermediaries that provide various administrative and distribution services. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-345-1833 In Missouri: 816-753-0700 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. This fund has no minimum investment requirements. However, if the value of the shares held in any one fund account is less than $2,500 ($1,000 for UGMA/UTMA accounts), you must establish an automatic investment program of $50 or more per month in each such account. TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an inter-nationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. The minimum investment amount for this fund is $10,000. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Twentieth Century Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers in emerging market countries that are considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. The minimum investment amount for this fund is $10,000. SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- TRANSACTION AND OPERATING EXPENSE TABLE ............................. 4 FINANCIAL HIGHLIGHTS ................................................ 5 INFORMATION REGARDING THE FUNDS INVESTMENT POLICIES OF THE FUNDS .................................... 7 International Equity ........................................... 7 International Small Company Fund ............................... 7 Emerging Markets Fund .......................................... 8 Policies Applicable to All Funds ............................... 9 RISK FACTORS ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund and Emerging Markets Fund .......................................... 11 Investing in Emerging Market Countries ......................... 12 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 13 OTHER INVESTMENT PRACTICES .......................................... 13 Forward Currency Exchange Contracts ............................ 13 Indirect Foreign Investment .................................... 14 Sovereign Debt Obligations ..................................... 14 Portfolio Turnover ............................................. 14 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 15 Short Sales .................................................... 15 Rule 144A Securities ........................................... 15 PERFORMANCE ADVERTISING ............................................. 16 HOW TO INVEST WITH TWENTIETH CENTURY HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER .............................. 17 HOW TO REDEEM SHARES ................................................ 17 Special Requirements for Large Redemptions ..................... 17 TELEPHONE SERVICES .................................................. 18 Investors Line ................................................. 18 Automated Information Line ..................................... 18 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ......................................................... 19 When Share Price Is Determined ................................. 19 How Share Price Is Determined .................................. 19 Where to Find Information About Share Price .................... 20 DISTRIBUTIONS ....................................................... 20 General Information About Distributions ........................ 20 TAXES ............................................................... 21 MANAGEMENT .......................................................... 22 Investment Management .......................................... 22 Code of Ethics ................................................. 24 Transfer and Administrative Services ........................... 24 DISTRIBUTION SERVICES ............................................... 24 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ......................... 25 3 TRANSACTION AND OPERATING EXPENSE TABLE - --------------------------------------------------------------------------------
International International Small Company Emerging Equity Fund Markets Fund SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases none none none Maximum Sales Load Imposed on Reinvested Dividends none none none Deferred Sales Load none none none Redemption Fee(1) none none(2) none(2) Exchange Fee none none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(5) 1.20%(3) 1.50%(3) 1.75%(4) 12b-1 Fees(6) 0.50% 0.50% 0.50% Other Expenses(7) 0.00% 0.00% 0.00% Total Fund Operating Expenses(5) 1.70%(3) 2.00%(3) 2.25% Example You would pay the following expenses on a $1,000 1 year $ 17 $ 20 $ 23 investment, assuming (1) a 5% annual return and 3 years 53 62 70 (2) redemption at the end of each time period(5): 5 years 92 107 119 10 years 199 231 256
(1) Redemption proceeds sent by wire are subject to a $10 processing fee. (2) Shares of International Small Company Fund or Emerging Markets Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange Your Investment from One Twentieth Century Account to Another," page 17 and "How to Redeem Shares," page 17.) (3) The manager has voluntarily reduced its annual management fee on International Equity to 1.25% of the first $1 billion of average net assets, 0.95% of the next $1 billion, and 0.85% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.50% of the first $500 million of average net assets, 1.15% of the next $500 million average net assets, and 0.95% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 22. (4) Emerging Markets Fund pays an annual management fee equal to 1.75% of the first $500 million of average net assets, 1.25% of the next $500 million average net assets, and 1.00% of average net assets over $1 billion. (5) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (6) The 12b-1 fee is designed to permit investors to purchase advisor class shares through broker dealers, banks, insurance companies and other financial intermediaries. A portion of the fee is used to compensate them for ongoing recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager, and a portion is used to compensate them for distribution and other shareholder services. See "Distribution Services," page 24. (7) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are advisor class shares. The funds offer three other classes of shares, one of which is primarily available to retail investors and two that are primarily available to institutional investors. The other classes have different fee structures than the advisor class, resulting in different performance for those other classes. For additional information about the various classes, see "Further Information About Twentieth Century," at page 25. 4 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) The advisor class of the funds was established September 3, 1996. The financial information in these tables regarding selected per share data for each of the funds reflects the performance of the funds' retail class of shares, which has a total expense ratio that is 0.25% lower than the advisor class. Had the advisor class been in existence for such funds for the time periods presented, the funds' performance information would be lower as a result of the additional expense. The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY
Years ended November 30, May 9, 1991 ----------------------------------------------------------------(inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD...................... $7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............... .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- (.036) (.005) -- In Excess of Net Investment Income................... -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions........................ (.372) (.402) -- -- -- ----- ----- ----- ----- ----- Total Distributions................. (.372) (.402) (.191) (.007) -- ----- ----- ----- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)...................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate............. 169% 242% 255% 180% 84% Average Commission Paid per Share Traded............... $.002 -- -- -- -- Net Assets, End of Period (in thousands)........$1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, (inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of smaller foreign issuers. Smaller foreign issuers are considered to be those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. 7 The majority of the fund's assets will be invested in the securities of smaller foreign issuers in developed markets. However, the fund may invest up to 50% of its assets in securities of issuers in emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of issuers in emerging market countries. The securities in which the fund may invest include not only the securities of issuers located or principally traded in emerging market countries, but also include the securities of issuers which derive a significant portion of their business from emerging market countries. (See "Policies Applicable to All Funds," page 9.) DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH INVESTING IN 8 EMERGING MARKETS, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. POLICIES APPLICABLE TO ALL FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities 9 holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 19.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States, derives at least 50% of its total revenue for production or sales outside the United States, and/or whose shares trade principally on an exchange or other market outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. 10 Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 21). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing primarily in the securities of companies having comparatively small market capitalizations, and Emerging Markets Fund will be investing primarily in securities of issuers in emerging market countries. Likewise, International Small Company Fund may invest up to 50% of its assets in issuers in emerging markets. (See "Investing in Emerging Market Countries" on page 12 and "Investing in Smaller Companies," on page 12.) As a result, investment in these funds should be considered to be speculative. The funds are intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that the funds will pursue. An 11 investment in the funds should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and 12 less liquidity than securities of larger companies, and this volatility andlimited liquidity may be reflected in the net asset value of the fund. INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund and Emerging Markets Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a 13 fund will enter into portfolio hedges much less frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repurchase agreement can be considered as a loan 14 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment may take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the 15 guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the advisor class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- The following section explains how purchase, exchange and redeem advisor class shares of the funds offered by this Prospectus. One or more of the funds offered by this Prospectus is available as an investment option under your employer-sponsored retirement or savings plan or through or in connection with a program, product or service offered by a financial intermediary, such as a bank, broker dealer or an insurance company. Since all records of your share ownership are maintained by your plan sponsor, plan recordkeeper, or other financial intermediary, all orders to purchase, exchange and redeem shares must be made through your employer or other financial intermediary, as applicable. If you are purchasing through a retirement or savings plan, the administrator of your plan or your employee benefits office can provide you with information on how to participate in your plan and how to select a Twentieth Century fund as an investment option. If you are purchasing through a financial intermediary, you should contact your service representative at the financial intermediary for information about how to select a Twentieth Century fund. If you have questions about a fund, see "Information About Investment Policies of the Funds," page 7, or call Twentieth Century's Investors Line at 1-800-345-3533. Orders to purchase shares are effective on the day Twentieth Century receives payment. (See "When Share Price is Determined," page 19.) Twentieth Century may discontinue offering shares generally in the funds (including any class of shares of a fund) or in any particular state without notice to shareholders. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER Your plan or program may permit you to exchange your investment in the shares of a fund for shares of another fund. See your plan administrator, employee benefits office or financial intermediary for details on the rules in your plan governing exchanges. Exchanges are made at the respective net asset values, next computed after receipt of the exchange instruction by us. If in any 90-day period, the total of the exchanges and redemptions from the account of any one plan participant or financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's assets, further exchanges may be subject to special requirements to comply with the funds' policy on large redemptions. (See "Special Requirements for Large Redemptions," page 18.) IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. HOW TO REDEEM SHARES Subject to any restrictions imposed by your employer's plan or financial intermediary's program, you can sell ("redeem") your shares through the plan or financial intermediary at their net asset value. Your plan administrator, trustee, or financial intermediary or other designated person must provide us with redemption instructions. The shares will be redeemed at the net asset value next computed after receipt of the instructions in good order. (See "When Share Price Is Determined," page 19.) If you have any questions 17 about how to redeem, contact your plan administrator, employee benefits office, or service representative at your financial intermediary, as applicable. IN ORDER TO DISCOURAGE THE REDEMPTION OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, REDEMPTION OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES REDEEMED. This fee will be retained by the fund to help minimize the impact such redemptions have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first redeemed. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS The funds have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund to redeem shares in cash, with respect to any one participant account during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, the funds reserve the right to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided to the redeeming plan participant or financial intermediary in lieu of cash without prior notice. If you expect to make a large redemption and would like to avoid any possibility of being paid in securities, you may do so by providing us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. Receipt of your instruction 15 days prior to the transaction provides the fund with sufficient time to raise the cash in an orderly manner to pay the redemption and thereby minimizes the effect of the redemption on the fund and its remaining shareholders. Despite its right to redeem fund shares through a redemption-in-kind, the funds do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, the funds expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. TELEPHONE SERVICES INVESTORS LINE You may reach an Investor Services Representative by calling our Investor Line at 1-800-345-3533. On our Investors Line you may request information about our funds and a current Prospectus, or get answers to any questions that you may have about the funds and the services we offer. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8675. By calling the Automated Information Line you may listen to fund prices, yields and total return figures. 18 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on and receive the price determined, as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received only when check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. It is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangement with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of 19 business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. Because the total expense ratio for the advisor class shares is 25% higher than the retail class, their net asset values will be lower than the retail class. The net asset value of the advisor class may be obtained by calling us. DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price 20 for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," this page.) TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the advisor class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the advisor class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 20.) 21 In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, either Twentieth Century or your financial intermediary may be required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss 22 purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment objectives. Individual portfolio managers may also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity, International Small Company Fund and Emerging Markets Fund team (the "International Team") and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.65% of first $1 billion 1.00% of the next $1 billion 0.75% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.75% EMERGING MARKETS FUND 1.75% of first $500 million 1.25% of the next $500 million 1.00% over $1 billion - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on International Equity and International Small Company Fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.25% of first $1 billion 0.95% of the next $1 billion 0.85% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.50% of first $500 million 1.15% of the next $500 million 0.95% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the expenses of other funds should be careful to 23 compare only the ratio of total expenses to average net assets contained in the Financial Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected shareholders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for the funds. It provides facilities, equipment and personnel to the funds, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. DISTRIBUTION SERVICES The funds' shares are distributed by Twentieth Century Securities, Inc. (the "Distributor"), a registered broker dealer and an affiliate of the investment manager. The Distributor enters into contracts with various banks, broker dealers, insurance companies and other financial intermediaries with respect to the sale of the funds' shares and/or the use of the funds' shares in various financial services. The Distributor pays all expenses incurred in promoting sales of, and distributing, the advisor class and in securing such services. Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under the 1940 Act permits investment companies that adopt a written plan to pay certain expenses associated with the distribution of their shares. Pursuant to that rule, the funds' Board of Directors and the initial shareholder of the funds' advisor class shares have approved and entered into a Master Distribution and Shareholder Services Plan (the "Plan") with the Distributor. Pursuant to the Plan, each fund pays the Distributor a shareholder services fee and a distribution fee, each equal to .25% (for a total of .50%) per annum of the average daily net assets of the shares of the funds' advisor class. The shareholder services fee is paid for the purpose of paying the costs of securing certain shareholder and administrative services, and the distribution fee is paid for the purpose of paying the costs of providing various distribution services. All or a portion of such fees are paid by the Distributor to the banks, 24 broker dealers, insurance companies or other financial intermediaries through which such shares are made available. The plan has been adopted and will be administered in accordance with the requirements of Rule 12b-1 under the 1940 Act. For additional information about the Plan and its terms, see "Master Distribution and Shareholder Services Plan" in the Statement of Additional Information. Fees paid pursuant to the Plan may be paid for shareholder services and the maintenance of accounts and therefore may constitute "service fees" for purposes of applicable rules of the National Association of Securities Dealers. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that address, or by phone to 1-800-345-3533. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues three series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are advisor class shares and have no up-front charges or commissions. The retail class is primarily made available to retail investors. The institutional class and service class are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the advisor class. Different fees and expenses will affect performance. For additional information concerning the retail class of shares, call a Twentieth Century retail investor services representative at 1-800-345-2021. For information concerning the institutional or service classes of shares not offered by this Prospectus, call a Twentieth Century institutional investor services representative at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) the institutional class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. 25 Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 26 (This page left blank intentionally.) 27 (This page left blank intentionally.) 28 (This page left blank intentionally.) 29 (This page left blank intentionally.) 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY WORLD INVESTORS ADVISOR CLASS PROSPECTUS SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419385 KANSAS CITY, MISSOURI 64141-6385 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-3533 OR 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-345-1833 OR 816-753-0700 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: HTTP://TWENTIETH-CENTURY.COM - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-50?? 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS SERVICE CLASS PROSPECTUS SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- TWENTIETH CENTURY Twentieth Century World Investors, Inc., a member of the Twentieth Century family of funds, is a diversified, open-end management investment company. Three series of shares offered by Twentieth Century, Twentieth Century International Equity, Twentieth Century International Small Company Fund, and Twentieth Century Emerging Markets Fund (the "funds") are described in this Prospectus. The investment objectives of the funds are listed on the inside cover of this Prospectus. RISK OF FOREIGN INVESTMENTS Investment in securities of foreign issuers typically involves a greater degree of risk than investment in domestic securities. (See "Risk Factors," page 10.) NO-LOAD MUTUAL FUNDS The funds offered by this Prospectus (the service class shares) are "no-load" investments which means there are no sales charges or commissions. The service class shares are subject to a Rule 12b-1 services fee as described in this Prospectus. The service class shares are intended for purchase by participants in employer-sponsored retirement or savings plans and for persons purchasing shares through financial intermediaries, such as banks, broker dealers and insurance companies that provide various recordkeeping and administrative services. One or more of the funds described in this Prospectus is available as an investment option in your employer's plan or under a program or service offered by a financial institution or other entity that will provide you with various recordkeeping and other administrative services. This Prospectus gives you information about the funds that you should know before investing. You should read this Prospectus carefully and retain it for future reference. Additional information is included in the Statement of Additional Information dated September 3, 1996, and filed with the Securities and Exchange Commission. It is incorporated in this Prospectus by reference. To obtain a copy without charge, call or write: Twentieth Century Mutual Funds 4500 Main Street o P.O. Box 419385 Kansas City, MO 64141-6385 1-800-345-3533 Local and international calls: 816-531-5575 Telecommunications device for the deaf: 1-800-345-1833 In Missouri: 816-753-0700 Internet address: http://twentieth-century.com - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTMENT OBJECTIVES OF THE FUNDS - -------------------------------------------------------------------------------- TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of Twentieth Century International Equity is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities, primarily from developed markets, that are considered by the investment manager to have prospects for appreciation. TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of Twentieth Century International Small Company Fund (formerly known as Twentieth Century International Emerging Growth) is capital growth. The fund will seek to achieve its investment objective by investing primarily in an inter-nationally diversified portfolio of equity securities of issuers having comparatively smaller market capitalizations (less than U.S. $1 billion in market capitalization or less than U.S. $500 million in public float). The fund may invest up to 50% of its assets in securities of issuers in emerging market countries. All such investments will be considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Twentieth Century Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers in emerging market countries that are considered by the investment manager to have prospects for appreciation. Due to the risks associated with such investments, an investment in this fund may be considered speculative. SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND EXCHANGED OR REDEEMED WITHIN 180 DAYS OF THEIR PURCHASE ARE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED OR REDEEMED. This redemption fee is retained by the fund and is intended to discourage shareholders from exchanging or redeeming their shares shortly after their purchase, as well as minimize the impact such exchanges and redemptions have on fund performance and, hence, on the other shareholders of the fund. There is no assurance that the funds will achieve their respective investment objectives. - -------------------------------------------------------------------------------- NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR REPRESENTATION. 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- TRANSACTION AND OPERATING EXPENSE TABLE ............................. 4 FINANCIAL HIGHLIGHTS ................................................ 5 INFORMATION REGARDING THE FUNDS INVESTMENT POLICIES OF THE FUNDS .................................... 7 International Equity ........................................... 7 International Small Company Fund ............................... 7 Emerging Markets Fund .......................................... 8 Policies Applicable to All Funds ............................... 9 RISK FACTORS ........................................................ 10 Investing in Foreign Securities Generally ...................... 10 Speculative Nature of International Small Company Fund and Emerging Markets Fund ....................... 11 Investing in Emerging Market Countries ......................... 12 Investing in Smaller Companies ................................. 12 Investing in Lower Quality Debt Instruments .................... 13 OTHER INVESTMENT PRACTICES .......................................... 13 Forward Currency Exchange Contracts ............................ 13 Indirect Foreign Investment .................................... 14 Sovereign Debt Obligations ..................................... 14 Portfolio Turnover ............................................. 14 Repurchase Agreements .......................................... 14 When-Issued Securities ......................................... 15 Short Sales .................................................... 15 Rule 144A Securities ........................................... 15 PERFORMANCE ADVERTISING ............................................. 16 HOW TO INVEST WITH TWENTIETH CENTURY HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER ........................................ 17 HOW TO REDEEM SHARES ................................................ 17 Special Requirements for Large Redemptions .................... 17 Telephone Services .................................................. 18 Investors Line ................................................. 18 Automated Information Line ..................................... 18 ADDITIONAL INFORMATION YOU SHOULD KNOW SHARE PRICE ......................................................... 19 When Share Price Is Determined ................................. 19 How Share Price Is Determined .................................. 19 Where to Find Information About Share Price .................... 20 DISTRIBUTIONS ....................................................... 20 General Information About Distributions ........................ 20 TAXES ............................................................... 21 MANAGEMENT .......................................................... 22 Investment Management .......................................... 22 Code of Ethics ................................................. 24 Transfer and Administrative Services ........................... 24 SERVICE FEES ........................................................ 24 DISTRIBUTION SERVICES ............................................... 25 FURTHER INFORMATION ABOUT TWENTIETH CENTURY ......................... 25 3 TRANSACTION AND OPERATING EXPENSE TABLE - --------------------------------------------------------------------------------
International International Small Company Emerging Equity Fund Markets SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases none none none Maximum Sales Load Imposed on Reinvested Dividends none none none Deferred Sales Load none none none Redemption Fee none none(1) none(1) Exchange Fee none none none ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets): Management Fees(4) 1.20%(2) 1.50%(2) 1.75%(3) 12b-1 Fees(5) 0.25% 0.25% 0.25% Other Expenses(6) 0.00% 0.00% 0.00% Total Fund Operating Expenses(4) 1.45%(2) 1.75%(2) 2.00% Example You would pay the following expenses on a $1,000 1 year $ 15 $ 18 $ 20 investment, assuming (1) a 5% annual return and 3 years 46 55 62 (2) redemption at the end of each time period(4): 5 years 79 94 107 10 years 172 205 231
(1) Shares of International Small Company Fund or Emerging Markets Fund exchanged or redeemed within 180 days of their purchase are subject to a redemption fee of 2.0% of the value of the shares exchanged or redeemed. This redemption fee is retained by the fund. (See "How to Exchange Your Investment from One Twentieth Century Account to Another," page 17 and "How to Redeem Shares," page 17.) (2) The manager has voluntarily reduced its annual management fee on International Equity to 1.25% of the first $1 billion of average net assets, 0.95% of the next $1 billion, and 0.85% of average net assets over $2 billion, and its annual management fee on International Small Company Fund to 1.50% of the first $500 million of average net assets, 1.15% of the next $500 million average net assets, and 0.95% of average net assets over $1 billion through July 31, 1997. The manager will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. For more information on the management fee structure of the funds, see "Investment Management" at page 22. (3) Emerging Markets Fund pays an annual management fee equal to 1.75% of the first $500 million of average net assets, 1.25% of the next $500 million average net assets, and 1.00% of average net assets over $1 billion. (4) Assumes, in accordance with Securities and Exchange Commission guidelines, that the assets of International Equity and International Small Company Fund remain constant at $1,210,441,553 and $114,579,142, respectively, the assets of the funds as of November 30, 1995, and that the reduced management fees for International Equity and International Small Company Fund had been in effect throughout the periods indicated. (5) The 12b-1 fee is designed to permit investors to purchase service class shares through retirement and pension plan administrators and other financial intermediaries and is used to compensate them for ongoing recordkeeping and administrative services that would otherwise be performed by an affiliate of the manager. See "Service Fees," page 24. (6) Other expenses, the fees and expenses of those directors who are not "interested persons" as defined in the Investment Company Act, were .001 of 1% of average net assets for the most recent fiscal year. The purpose of the table is to help you understand the various costs and expenses that you, as a shareholder, will bear directly or indirectly in connection with an investment in the class of shares of Twentieth Century. The example set forth above assumes reinvestment of all dividends and distributions and uses a 5% annual rate of return as required by Securities and Exchange Commission regulations. NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The shares offered by this Prospectus are service class shares. The funds offer three other classes of shares, one of which is primarily available to investors and two that are primarily available to institutional investors. The other classes have different fee structures than the advisor class, resulting in different performance for those other classes. For additional information about the various classes, see "Further Information About Twentieth Century," at page 25. 4 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (For A Share Outstanding Throughout The Period) The service class of the funds was established September 3, 1996. The financial information in these tables regarding selected per share data for each of the funds reflects the performance of the funds' retail class of shares, which has the same total expense ratio as the service class shares. The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified public accountants, whose report thereon appears in the corporation's annual report, which is incorporated by reference into the Statement of Additional Information. The annual report contains additional performance information and will be made available upon request and without charge. INTERNATIONAL EQUITY
Years ended November 30, May 9, 1991 ------------------------------------------------------------ (inception) through 1995 1994 1993 1992 Nov. 30, 1991 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD.................... $7.47 $7.34 $5.79 $5.33 $5.10 ----- ----- ----- ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................. .01 (.04) (.04) .06 .01 Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions..... .40 .57 1.78 .41 .22 ----- ----- ----- ----- ----- Total from Investment Operations............. .41 .53 1.74 .47 .23 ----- ----- ----- ----- ----- DISTRIBUTIONS From Net Investment Income................. -- -- (.036) (.005) -- In Excess of Net Investment Income................. -- -- (.155) (.002) -- From Net Realized Gains on Security Transactions...................... (.372) (.402) -- -- -- ----- ----- ----- ----- ----- Total Distributions............... (.372) (.402) (.191) (.007) -- ----- ----- ----- ----- ----- NET ASSET VALUE, END OF PERIOD.......................... $7.51 $7.47 $7.34 $5.79 $5.33 ----- ----- ----- ----- ----- TOTAL RETURN(2)................... 5.93% 7.28% 31.04% 8.77% 4.51% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets................ 1.77% 1.84% 1.90% 1.91% 1.93%(3) Ratio of Net Investment Income (Loss) to Average Net Assets........................ .25% (.53%) (.34%) 95% .26%(3) Portfolio Turnover Rate........... 169% 242% 255% 180% 84% Average Commission Paid per Share Traded............ $.002 -- -- -- -- Net Assets, End of Period (in thousands)........ $1,210,442 $1,316,642 $759,238 $215,346 $43,076 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized
5 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) INTERNATIONAL SMALL COMPANY FUND Year ended April 1, 1994 November 30, (inception) through 1995 Nov. 30, 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD...................... $5.39 $5.00 ----- ----- INCOME FROM INVESTMENT OPERATIONS Net Investment Income(1) (Loss).................... .03 (.02) Net Realized and Unrealized Gains on Investments and Foreign Currency Transactions....... .28 .41 ----- ----- Total from Investment Operations............... .31 .39 ----- ----- DISTRIBUTIONS From Net Investment Income................... -- -- In Excess of Net Investment Income................... -- -- From Net Realized Gains on Security Transactions........................ -- -- ----- ----- Total Distributions................. -- -- ----- ----- NET ASSET VALUE, END OF PERIOD............................ $5.70 $5.39 ----- ----- TOTAL RETURN(2)..................... 5.75% 7.80% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets.................. 2.00% 2.00%(3) Ratio of Net Investment Income (Loss) to Average Net Assets.......................... .27% (.48%)(3) Portfolio Turnover Rate............. 168% 56% Average Commission Paid per Share Traded............... $.004 -- Net Assets, End of Period (in thousands)............ $114,579 $111,201 - -------------------------------------------------------------------------------- (1) Computed using average shares outstanding throughout the period. (2) Total returns for periods less than one year are not annualized. Total return assumes reinvestment of dividends and capital gains distributions, if any. (3) Annualized 6 INFORMATION REGARDING THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT POLICIES OF THE FUNDS The funds have adopted certain investment restrictions that are set forth in the Statement of Additional Information. Those restrictions, as well as the investment objectives of the funds as identified on the inside front cover page, and any other investment policies designated as "fundamental" in this Prospectus or in the Statement of Additional Information, cannot be changed without shareholder approval. The funds have implemented additional investment policies and practices to guide their activities in the pursuit of their respective investment objectives. These policies and practices, which are described throughout this Prospectus, are not designated as fundamental policies and may be changed without shareholder approval. YOU SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS," PAGE 10, BEFORE MAKING AN INVESTMENT IN EITHER FUND. TWENTIETH CENTURY INTERNATIONAL EQUITY The investment objective of the International Equity fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in securities of foreign issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues) and have, in the opinion of the investment manager, potential for appreciation. The fund will invest primarily in issuers in developed markets. The fund will invest primarily in equity securities (defined to include equity equivalents) of such issuers. The fund will attempt to stay fully invested in such securities, regardless of the movement of stock prices generally. Although the primary investment of the fund will be equity securities, the fund may also invest in other types of securities consistent with the accomplishment of the fund's objectives. When the manager believes that the total return potential of other securities equals or exceeds the potential return of equity securities, the fund may invest up to 35% in such other securities. The other securities the fund may invest in are bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will limit its purchases of debt securities to investment grade obligations. For long-term debt obligations this includes securities that are rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation (S&P), or that are not rated but considered by the manager to be of equivalent quality. According to Moody's, bonds rated Baa are medium-grade and possess some speculative characteristics. A BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory degree of safety and capacity for repayment, but is more vulnerable to adverse economic conditions or changing circumstances than is the case with higher quality debt securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) TWENTIETH CENTURY INTERNATIONAL SMALL COMPANY FUND The investment objective of the International Small Company Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities of issuers that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of smaller foreign issuers. Smaller foreign issuers are considered to be those issuers having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. The "public float" of an issuer is defined as the aggregate market value of the issuer's outstanding securities held by non-affiliates of the issuer. 7 The majority of the fund's assets will be invested in the securities of smaller foreign issuers in developed markets. However, the fund may invest up to 50% of its assets in securities of issuers in emerging market countries. The investment manager will purchase securities of issuers that have, in the opinion of the investment manager, significant growth potential. The fund will seek to invest in securities of issuers with one or more identifiable catalysts that, in the opinion of the investment manager, are likely to cause the issuer to experience accelerating growth. Such catalysts may include a change in the issuer's operating environment, the development of a significant or potentially significant new product, service or technology, an improvement in business outlook for the issuer, or other similar factors. As noted, the fund may invest in smaller foreign issuers in both (i) countries characterized as having developed markets and in (ii) countries characterized as having emerging markets. DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH THE FUND'S INVESTMENT STRATEGY, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. To enhance the fund's liquidity, at least 50% of the fund's assets will be invested in developed market countries at all times. However, the percentage of the assets of the fund invested in developed and emerging markets will vary as, in the opinion of the investment manager, market conditions warrant. No more than 15% of the fund's assets may be invested in illiquid investments at any time. TWENTIETH CENTURY EMERGING MARKETS FUND The investment objective of Emerging Markets Fund is capital growth. The fund will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of equity securities that meet certain fundamental and technical standards of selection (relating primarily to acceleration of earnings and revenues). The fund will invest its assets primarily in the securities of issuers in emerging market countries. The securities in which the fund may invest include not only the securities of issuers located or principally traded in emerging market countries, but also include the securities of issuers which derive a significant portion of their business from emerging market countries. (See "Policies Applicable to All Funds," page 9.) DUE TO THE SIGNIFICANT RISKS ASSOCIATED WITH INVESTING IN 8 EMERGING MARKETS, AN INVESTMENT IN THE FUND MAY BE CONSIDERED TO BE SPECULATIVE. (See "Speculative Nature of International Small Company Fund and Emerging Markets Fund," page 11.) The fund may invest in securities of any type of issuer, including closed-end investment companies, governments and governmental entities, as well as corporations, partnerships and other business organizations. The fund's investment manager, Investors Research Corporation, believes that common stocks and other equity and equity equivalent securities ordinarily offer the greatest potential for capital appreciation and will constitute the majority of the fund's investments. The fund may invest, however, in any security the investment manager believes has the potential for capital appreciation. The other securities the fund may invest in include bonds, notes and debt securities of companies and obligations of domestic or foreign governments and their agencies. The fund will attempt to stay fully invested in appreciating securities, regardless of the movement of stock and bond prices generally. There are no credit quality or maturity restrictions with regard to the bonds, corporate debt securities, and government obligations in which the fund may invest, although less than 35% of the fund's assets will be invested in below investment grade fixed income securities. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Debt securities, especially those of issuers in emerging market countries, may be of poor quality and speculative in nature. While these securities will primarily be chosen for their appreciation potential, the fund may also take the potential for income into account when selecting investments. POLICIES APPLICABLE TO ALL FUNDS The funds may make foreign investments either directly in foreign securities, or indirectly by purchasing depositary receipts or depositary shares or similar instruments ("DRs") for foreign securities. DRs are securities that are listed on exchanges or quoted in over-the-counter markets in one country but represent shares of issuers domiciled in another country. The funds may also purchase securities of such issuers in foreign markets, either on foreign securities exchanges or in the over-the-counter markets. The funds may also invest in other equity securities and equity equivalents. Other equity securities and equity equivalents include securities that permit the funds to receive an equity interest in an issuer, the opportunity to acquire an equity interest in an issuer, or the opportunity to receive a return on its investment that permits the fund to benefit from the growth over time in the equity of an issuer. Examples of other equity securities and equity equivalents are preferred stock, convertible preferred stock and convertible debt securities. Equity equivalents may also include securities whose value or return is derived from the value or return of a different security. An example of one type of derivative security in which the funds might invest is a depositary receipt. Notwithstanding the funds' respective investment objectives of capital growth, under exceptional market or economic conditions, each fund may temporarily invest all or a substantial portion of its assets in cash or investment-grade short-term securities (denominated in U.S. dollars or foreign currencies). To the extent a fund assumes a defensive position, it will not be pursuing its investment objective of capital growth. In addition to other factors that will affect their value, the value of a fund's investments in fixed income securities will change as prevailing interest rates change. In general, the prices of such securities vary inversely with interest rates. As prevailing interest rates fall, the prices of bonds and other securities that trade on a yield basis rise. When prevailing interest rates rise, bond prices generally fall. These changes in value may, depending upon the particular amount and type of fixed income securities 9 holdings of a fund, impact the net asset value of that fund's shares. (See "How Share Price is Determined," page 19.) Under normal conditions, each fund will invest at least 65% of its assets in equity and equity equivalent securities of issuers from at least three countries outside of the United States. While securities of U.S. issuers may be included in the portfolio from time to time, it is the primary intent of the manager to diversify investments in a fund across a broad range of foreign issuers. The manager defines "foreign issuer" as an issuer of securities that is domiciled outside the United States, derives at least 50% of its total revenue for production or sales outside the United States, and/or whose shares trade principally on an exchange or other market outside the United States. In order to achieve maximum investment flexibility, the funds have not established geographic limits on asset distribution, on either a country-by-country or region-by-region basis. The investment manager expects to invest both in issuers in developed markets (such as Germany, the United Kingdom and Japan) and in issuers in emerging market countries. The funds consider "emerging market countries" to include all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (commonly referred to as the World Bank) and the International Finance Corporation (IFC), as well as countries that are classified by the United Nations as developing. Currently, the countries not included in this category are the United States, Canada, Japan, the United Kingdom, Germany, Austria, France, Italy, Ireland, Spain, Belgium, the Netherlands, Switzerland, Sweden, Finland, Norway, Denmark, Australia, and New Zealand. In addition, as used in this Prospectus, "securities of issuers in emerging market countries" means (i) securities of issuers the principal securities trading market for which is an emerging market country, (ii) securities, regardless of where traded, of issuers that derive 50% or more of their total revenue from either goods or services produced in emerging market countries or sales made in emerging market countries, or (iii) securities of issuers having their principal place of business or principal office in emerging market countries. The principal criteria for inclusion of a security in a fund's portfolio is its ability to meet the fundamental and technical standards of selection and, in the opinion of the fund's investment manager, to achieve better-than-average appreciation. If, in the opinion of the fund's investment manager, a particular security satisfies these principal criteria, the security may be included in the fund's portfolio, regardless of the location of the issuer or the percentage of the fund's investments in the issuer's country (subject to the investment policies of the particular fund) or region. At the same time, however, the investment manager recognizes that both the selection of a fund's individual securities and the allocation of the portfolio's assets across different countries and regions are important factors in managing an international portfolio. For this reason, the manager will also consider a number of other factors in making investment selections including: the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. RISK FACTORS INVESTING IN FOREIGN SECURITIES GENERALLY Investing in securities of foreign issuers generally involves greater risks than investing in the securities of domestic companies. As with any investment in securities, the value of an investment in the funds can decrease as well as increase, depending upon a variety of factors which may affect the values and income generated by the funds' portfolio securities. 10 Investments in the funds should not be considered a complete investment program and may not be appropriate for an individual with limited investment resources or who is unable to tolerate fluctuations in the value of the investment. Potential investors should carefully consider the following factors: 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, could also adversely affect the value of investments. Further, the funds may encounter difficulties or be unable to pursue legal remedies or obtain judgments in foreign courts. Regulatory Risk. Foreign companies are generally 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 source which would reduce dividend income payable to shareholders. (See "Taxes," page 21). Market and Trading Risk. Brokerage commission rates in foreign countries, which are generally fixed rather than subject to negotiation as in the U.S., 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 is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. SPECULATIVE NATURE OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND In addition to the risks posed by foreign investing generally, International Small Company Fund will be investing primarily in the securities of companies having comparatively small market capitalizations, and Emerging Markets Fund will be investing primarily in securities of issuers in emerging market countries. Likewise, International Small Company Fund may invest up to 50% of its assets in issuers in emerging markets. (See "Investing in Emerging Market Countries" on page 12 and "Investing in Smaller Companies," on page 12.) As a result, investment in these funds should be considered to be speculative. The funds are intended for aggressive investors seeking significant gains through investments in foreign securities. Those investors must be willing and able to accept the significantly greater risks associated with the investment strategy that the funds will pursue. An investment in the funds 11 should not be considered a complete investment program and is not appropriate for individuals with limited investment resources or who are unable to tolerate fluctuations in the value of their investment. INVESTING IN EMERGING MARKET COUNTRIES Each of the funds included in this Prospectus may invest in securities of issuers in emerging market countries. Investing in emerging market countries involves exposure to significantly higher risk than investing in countries with developed markets. Emerging market countries may have economic structures that are generally less diverse and mature and political systems that can be expected to be less stable than those of developed countries. Securities prices in emerging market countries can be significantly more volatile than in developed countries, reflecting the greater uncertainties of investing in lesser developed markets and economies. In particular, emerging market countries may have relatively unstable governments, and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies. Such countries may also have restrictions on foreign ownership or prohibitions on the repatriation of assets, and may have less protection of property rights than developed countries. The economies of emerging market countries may be predominantly based on only a few industries or dependent on revenues from particular commodities or on international aid or development assistance, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. In addition, securities markets in emerging market countries may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially resulting in a lack of liquidity and greater volatility in the price of securities traded on those markets. 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 value of the portfolio security or, if the fund has entered into a contract to sell the security, liability to the purchaser. INVESTING IN SMALLER COMPANIES International Small Company Fund will invest primarily in securities of companies having, at the time of investment, a market capitalization of less than U.S. $1 billion or a public float of less than U.S. $500 million. These smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks than large, mature issuers. Such companies may have limited product lines, markets or financial resources, and their securities may trade less frequently and in more limited volume than the securities of larger companies. In addition, available information regarding these smaller companies may be less available and, when available, may be incomplete or inaccurate. The securities of such companies may also be more likely to be delisted from trading on their primary domestic exchange. As a result, the securities of smaller companies may experience significantly more price volatility and less liquidity than securities of larger companies, 12 and this volatility and limited liquidity may be reflected in the net asset value of the fund. INVESTING IN LOWER QUALITY DEBT INSTRUMENTS There are no credit, maturity or investment amount restrictions on the bonds, corporate debt securities, and government obligations in which International Small Company Fund and Emerging Markets Fund may invest. Debt securities, especially those in emerging market countries, may be of poor quality, unrated and speculative in nature. Debt securities rated lower than Baa by Moody's or BBB by S&P or their equivalent, sometimes referred to as junk bonds, are considered by many to be predominately speculative. (See "An Explanation of Fixed Income Securities Ratings" in the Statement of Additional Information.) Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such securities than is the case with higher quality debt securities. Regardless of rating levels, all debt securities considered for purchase by the fund are analyzed by the manager to determine, to the extent reasonably possible, that the planned investment is sound given the investment objective of the fund. OTHER INVESTMENT PRACTICES For additional information, see "Investment Restrictions" in the Statement of Additional Information. FORWARD CURRENCY EXCHANGE CONTRACTS Some of the securities held by the funds will be denominated in foreign currencies. Other securities, such as DRs, may be denominated in U.S. dollars, but have a value that is dependent upon the performance of a foreign security, as valued in the currency of its home country. As a result, the value of their portfolios will be affected by changes in the exchange rates between foreign currencies and the dollar, as well as by changes in the market values of the securities themselves. The performance of foreign currencies relative to the dollar may be an important factor in the overall performance of the funds. To protect against adverse movements in exchange rates between currencies, a fund may, for hedging purposes only, enter into forward currency exchange contracts. A forward currency exchange contract obligates the fund to purchase or sell a specific currency at a future date at a specific price. A fund may elect to enter into a forward currency exchange contract with respect to a specific purchase or sale of a security, or with respect to the fund's portfolio positions generally. By entering into a forward currency exchange contract with respect to the specific purchase or sale of a security denominated in a foreign currency, a fund can "lock in" an exchange rate between the trade and settlement dates for that purchase or sale. This practice is sometimes referred to as "transaction hedging." Each fund may enter into transaction hedging contracts with respect to all or a substantial portion of its trades. When the manager believes that a particular currency may decline in value compared to the dollar, a fund may enter into a foreign currency exchange contract to sell an amount of foreign currency equal to the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, that currency. This practice is sometimes referred to as "portfolio hedging." A fund may not enter into a portfolio hedging transaction where the fund would be obligated to deliver an amount of foreign currency in excess of the aggregate value of its portfolio securities or other assets denominated in, or whose value is tied to, that currency. Each fund will make use of portfolio hedging to the extent deemed appropriate by the investment manager. However, it is anticipated that a fund will enter into portfolio hedges much less 13 frequently than transaction hedges. If a fund enters into a forward contract, the fund, when required, will instruct its custodian bank to segregate cash or liquid high-grade securities in a separate account in an amount sufficient to cover its obligation under the contract. Those assets will be valued at market daily, and if the value of the segregated securities declines, additional cash or securities will be added so that the value of the account is not less than the amount of the fund's commitment. At any given time, no more than 10% of a fund's assets will be committed to a segregated account in connection with portfolio hedging transactions. Predicting the relative future values of currencies is very difficult, and there is no assurance that any attempt to reduce the risk of adverse currency movements through the use of forward currency exchange contracts will be successful. In addition, the use of forward currency exchange contracts tends to limit the potential gains that might result from a positive change in the relationship between the foreign currency and the U.S. dollar. INDIRECT FOREIGN INVESTMENT Subject to certain restrictions contained in the Investment Company Act, each fund may invest up to 10% of its assets in certain foreign countries indirectly through investment funds and registered investment companies authorized to invest in those countries. If the funds invest in investment companies, the funds will bear their proportionate shares of the costs incurred by such companies, including investment advisory fees, if any. SOVEREIGN DEBT OBLIGATIONS The funds may purchase sovereign debt instruments issued or guaranteed by foreign governments or their agencies, including debt of emerging market countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments such as loans or loan participations. Sovereign debt of emerging market countries may involve a high degree of risk and may present a risk of default or renegotiation or rescheduling of debt payments. PORTFOLIO TURNOVER The total portfolio turnover rate of the funds is shown in the Financial Highlights Table on page 5 of this Prospectus. Investment decisions to purchase and sell securities are based on the anticipated contribution of the security in question to a fund's objectives. The rate of portfolio turnover is irrelevant when the manager believes a change is in order to achieve those objectives and accordingly, the annual portfolio turnover rate cannot be anticipated. The portfolio turnover of each fund may be higher than other mutual funds with similar investment objectives. Higher turnover would generate correspondingly greater brokerage commissions, which is a cost that each fund pays directly. It may also affect the character of capital gains, if any, realized and distributed by a fund since short-term capital gains are taxable as ordinary income. REPURCHASE AGREEMENTS Each fund may invest in repurchase agreements when such transactions present an attractive short-term return on cash that is not otherwise committed to the purchase of securities pursuant to the investment policies of that fund. A repurchase agreement occurs when, at the time the fund purchases an interest-bearing obligation, the seller (a bank or broker-dealer registered under the Securities Exchange Act of 1934) agrees to repurchase it on a specified date in the future at an agreed-upon price. The repurchase price reflects an agreed-upon interest rate during the time the fund's money is invested in the security. Since the security purchased constitutes security for the repurchase obligation, a repur- 14 chase agreement can be considered as 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, its agencies and instrumentalities, and will enter into such transactions with those commercial banks and broker-dealers who are deemed creditworthy pursuant to criteria adopted by the funds' board of directors. The funds will not invest more than 15% of their respective assets in repurchase agreements maturing in more than seven days. WHEN-ISSUED SECURITIES Each of the funds may sometimes purchase new issues of securities on a when-issued basis without limit when, in the opinion of the investment manager, such purchases will further the investment objectives of the fund. The price of when-issued securities is established at the time the commitment to purchase is made. In developed markets, delivery of and payment for these securities typically occur 15 to 45 days after the commitment to purchase. In emerging markets, delivery and payment may take significantly longer. Market rates of interest on debt securities at the time of delivery may be higher or lower than those contracted for on the when-issued security. Accordingly, the value of such security may decline prior to delivery, which could result in a loss to the fund. A separate account for each fund consisting of cash or high-quality liquid debt securities in an amount at least equal to the when-issued commitments will be established and maintained with the custodian. No income will accrue to the fund prior to delivery. SHORT SALES Each of the funds may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. These transactions allow a fund to hedge against price fluctuations by locking in a sale price for securities it does not wish to sell immediately. A fund may make a short sale when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. RULE 144A SECURITIES The funds may invest up to 15% of their respective assets in illiquid securities (securities that may not be sold within seven days at approximately the price used in determining the net asset value of fund shares), including restricted securities. Although securities which may be resold only to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933 are considered "restricted securities," each fund may purchase Rule 144A securities without regard to the percent- age limitations described above when Rule 144A securities present an attractive investment opportunity and otherwise meet the fund's criteria of selection, and also meet the liquidity guidelines established for Rule 144A securities. With respect to securities eligible for resale under Rule 144A, the staff of the Securities and Exchange Commission has taken the position that the liquidity of such securities in the portfolio of a fund offering redeemable securities is a question of fact for the board of directors to determine, such determination to be based upon a consideration of the readily available trading markets and the review of any contractual restrictions. Accordingly, the board of directors is responsible for developing and establishing the 15 guidelines and procedures for determining the liquidity of Rule 144A securities. As allowed by Rule 144A, the board of directors of the funds have delegated the day-to-day function of determining the liquidity of 144A securities to the investment manager. The board retains the responsibility to monitor the implementation of the guidelines and procedures it has adopted. Since the secondary market for such securities will be limited to certain qualified institutional investors, their liquidity may be limited accordingly and a fund may from time to time hold a Rule 144A security that is illiquid. In such an event, the fund's manager will consider appropriate remedies to minimize the effect on the fund's liquidity. PERFORMANCE ADVERTISING From time to time, the funds may advertise performance data. Fund performance may be shown by presenting one or more performance measurements, including cumulative total return or average annual total return. Performance data may be quoted separately for the service class and the other classes offered by the funds. Cumulative total return data is computed by considering all elements of return, including reinvestment of dividends and capital gains distributions, over a stated period of time. Average annual total return is determined by computing the annual compound return over a stated period of time that would have produced the fund's cumulative total return over the same period if the fund's performance had remained constant throughout. Each fund may also include in advertisements data comparing performance with the performance of non-related investment media, published editorial comments and performance rankings compiled by independent organizations (such as Lipper Analytical Services) and publications that monitor the performance of mutual funds. Performance information may be quoted numerically or may be presented in a table, graph or other illustration. Fund performance may also be compared to well-known indices of market performance, such as the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). Fund performance may also be compared to the rankings prepared by Lipper Analytical Services, Inc. In addition, fund performance may be compared to other funds in our fund family and may also be combined or blended with other funds in our fund family. Such combined or blended performance may be compared to the same indices to which individual funds may be compared. All performance information advertised by the funds is historical in nature and is not intended to represent or guarantee future results. The value of fund shares when redeemed may be more or less than their original cost. The funds may also be compared, on a relative basis, to the other funds in our fund family. This relative comparison, which may be based upon historical or expected fund performance, volatility or other fund characteristics, may be presented numerically, graphically or in text. 16 HOW TO INVEST WITH TWENTIETH CENTURY - -------------------------------------------------------------------------------- The following section explains how purchase, exchange and redeem advisor class shares of the funds offered by this Prospectus. One or more of the funds offered by this Prospectus is available as an investment option under your employer-sponsored retirement or savings plan or through or in connection with a program, product or service offered by a financial intermediary, such as a bank, broker dealer or an insurance company. Since all records of your share ownership are maintained by your plan sponsor, plan recordkeeper, or other financial intermediary, all orders to purchase, exchange and redeem shares must be made through your employer or other financial intermediary, as applicable. If you are purchasing through a retirement or savings plan, the administrator of your plan or your employee benefits office can provide you with information on how to participate in your plan and how to select a Twentieth Century fund as an investment option. If you are purchasing through a financial intermediary, you should contact your service representative at the financial intermediary for information about how to select a Twentieth Century fund. If you have questions about a fund, see "Information About Investment Policies of the Funds," page 7, or call Twentieth Century's Investors Line at 1-800-345-3533. Orders to purchase shares are effective on the day Twentieth Century receives payment. (See "When Share Price is Determined," page 19.) Twentieth Century may discontinue offering shares generally in the funds (including any class of shares of a fund) or in any particular state without notice to shareholders. HOW TO EXCHANGE YOUR INVESTMENT FROM ONE TWENTIETH CENTURY FUND TO ANOTHER Your plan or program may permit you to exchange your investment in the shares of a fund for shares of another fund. See your plan administrator, employee benefits office or financial intermediary for details on the rules in your plan governing exchanges. Exchanges are made at the respective net asset values, next computed after receipt of the exchange instruction by us. If in any 90-day period, the total of the exchanges and redemptions from the account of any one plan participant or financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's assets, further exchanges may be subject to special requirements to comply with the funds' policy on large redemptions. (See "Special Requirements for Large Redemptions," page 18.) IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. HOW TO REDEEM SHARES Subject to any restrictions imposed by your employer's plan or financial intermediary's program, you can sell ("redeem") your shares through the plan or financial intermediary at their net asset value. Your plan administrator, trustee, or financial intermediary or other designated person must provide us with redemption instructions. The shares will be redeemed at the net asset value next computed after receipt of the instructions in good order. (See "When Share Price Is Determined," page 19.) If you have any questions 17 about how to redeem, contact your plan administrator, employee benefits office, or service representative at your financial intermediary, as applicable. IN ORDER TO DISCOURAGE THE EXCHANGE OF SHARES OF INTERNATIONAL SMALL COMPANY FUND AND EMERGING MARKETS FUND SHORTLY AFTER THEIR PURCHASE, EXCHANGE OF THOSE SHARES WITHIN 180 DAYS OF THEIR PURCHASE WILL BE SUBJECT TO A REDEMPTION FEE OF 2.0% OF THE VALUE OF THE SHARES EXCHANGED. This fee will be retained by the fund to help minimize the impact such exchanges have on fund performance and, hence, on the other shareholders of the fund. For the purposes of determining the applicability of this fee, shares first purchased will be deemed to be the shares first exchanged. The funds reserve the right to modify their policy regarding this redemption fee or to waive such policy in whole or in part for certain classes of investors. SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS The funds have elected to be governed by Rule 18f-1 under the Investment Company Act, which obligates each fund to redeem shares in cash, with respect to any one participant account during any 90-day period, up to the lesser of $250,000 or 1% of the assets of the fund. Although redemptions in excess of this limitation will also normally be paid in cash, the funds reserve the right to honor these redemptions by making payment in whole or in part in readily marketable securities (a "redemption-in-kind"). If payment is made in securities, the securities will be selected by the fund, will be valued in the same manner as they are in computing the fund's net asset value and will be provided to the redeeming plan participant or financial intermediary in lieu of cash without prior notice. If you expect to make a large redemption and would like to avoid any possibility of being paid in securities, you may do so by providing us with an unconditional instruction to redeem at least 15 days prior to the date on which the redemption transaction is to occur. The instruction must specify the dollar amount or number of shares to be redeemed and the date of the transaction. Receipt of your instruction 15 days prior to the transaction provides the fund with sufficient time to raise the cash in an orderly manner to pay the redemption and thereby minimizes the effect of the redemption on the fund and its remaining shareholders. Despite its right to redeem fund shares through a redemption-in-kind, the funds do not expect to exercise this option unless a fund has an unusually low level of cash to meet redemptions and/or is experiencing unusually strong demands for its cash. Such a demand might be caused, for example, by extreme market conditions that result in an abnormally high level of redemption requests concentrated in a short period of time. Absent these or similar circumstances, the funds expect redemptions in excess of $250,000 to be paid in cash in any fund with assets of more than $50 million if total redemptions from any one account in any 90-day period do not exceed one-half of 1% of the total assets of the fund. TELEPHONE SERVICES INVESTORS LINE You may reach an Investor Services Representative by calling our Investor Line at 1-800-345-3533. On our Investors Line you may request information about our funds and a current Prospectus, or get answers to any questions that you may have about the funds and the services we offer. AUTOMATED INFORMATION LINE In addition to reaching us on our Investors Line, you may also reach us by telephone on our Automated Information Line, 24 hours a day, seven days a week, at 1-800-345-8675. By calling the Automated Information Line you may listen to fund prices, yields and total return figures. 18 ADDITIONAL INFORMATION YOU SHOULD KNOW - -------------------------------------------------------------------------------- SHARE PRICE WHEN SHARE PRICE IS DETERMINED The price of your shares is also referred to as their net asset value. Net asset value is determined by calculating the total value of the fund's assets, deducting total liabilities and dividing the result by the number of shares outstanding. Net asset value is determined at the close of regular trading on each day that the New York Stock Exchange is open. Investments and requests to redeem or exchange shares will receive the share price next determined after we receive your investment, redemption or exchange request. For example, investments and requests to redeem or exchange shares received by us or one of our authorized agents before the close of business on the New York Stock Exchange, usually 3 p.m. Central time, are effective on, and will receive the price determined, that day as of the close of the Exchange. Investment, redemption and exchange requests received thereafter are effective on and receive the price determined, as of the close of the Exchange on, the next day the Exchange is open. Investments are considered received only when check or wired funds are received by us. Wired funds are considered received on the day they are deposited in our bank account, if your phone call is received before the close of business on the Exchange, usually 3 p.m. Central time, and the money is deposited that day. It is the responsibility of your plan recordkeeper or financial intermediary to transmit your purchase, exchange and redemption requests to the funds' transfer agent prior to the applicable cut-off time for receiving orders and to make payment for any purchase transactions in accordance with the funds' procedures or any contractual arrangements with the funds or the funds' distributor in order for you to receive that day's price. HOW SHARE PRICE IS DETERMINED The valuation of assets for determining net asset value may be summarized as follows: Portfolio securities of each fund, except as otherwise noted, listed or traded on a domestic securities exchange are valued at the last sale price on that exchange. If no sale is reported, the mean of the latest bid and asked price is used. Portfolio securities primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on the exchange where primarily traded. If no sale is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices is used. Depending on local convention or regulation, securities traded over-the-counter are priced at the mean of the latest bid and asked prices, or at the last sale price. When market quotations are not readily available, securities and other assets are valued at fair value as determined in 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. Pursuant to a determination by the funds' board of directors that such value represents fair value, debt securities with maturities of 60 days or less are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The value of an exchange-traded foreign security is determined in its national currency as of the close of trading on the foreign exchange on which it is traded or as of the close of business on the New York Stock Exchange, usually 3 p.m. Central time, if that is earlier. 19 Trading in securities on European and Far Eastern securities exchanges and over- the-counter markets is normally completed at various times before the close of business on each day that the New York Stock Exchange is open. If an event were to occur after the value of a security was established but before the net asset value per share was determined which was likely to materially change the net asset value, then that security would be valued at fair value as determined in accordance with procedures adopted by the board of directors. Trading of these securities in foreign markets may not take place on every New York Stock Exchange business day. In addition, trading may take place in various foreign markets on Saturdays or on other days when the New York Stock Exchange is not open and on which a fund's net asset value is not calculated. Therefore, such calculation does not take place contemporaneously with the determination of the prices of many of the portfolio securities used in such calculation and the value of a fund's portfolio may be significantly affected on days when shares of the fund may not be purchased or redeemed. WHERE TO FIND INFORMATION ABOUT SHARE PRICE The net asset value of the retail class of each fund is published in leading newspapers daily. The net asset value of the service class may be obtained by calling us. DISTRIBUTIONS Distributions from net investment income and net realized securities gains, if any, generally are declared and paid once a year, but the funds may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Investment Company Act. THE OBJECTIVE OF EACH FUND IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE. GENERAL INFORMATION ABOUT DISTRIBUTIONS Participants in employer-sponsored retirement or savings plans must reinvest all distributions. For shareholders investing in taxable accounts, distributions will be reinvested unless you elect to receive them in cash. Distributions of less than $10 and distributions on shares purchased within the last 15 days, however, will not be paid in cash and will be reinvested. You may elect to have distributions on shares of Individual Retirement Accounts and 403(b) plans paid in cash only if you are 591/2 years old or permanently and totally disabled. Distribution checks normally are mailed within seven days after the record date. Please consult our Shareholder Services Guide for further information regarding your distribution options. The board of directors may elect not to distribute capital gains in whole or in part to take advantage of loss carryovers. A distribution on shares of a fund does not increase the value of your shares or your total return. At any given time the value of your shares includes the undistributed net gains, if any, realized by the fund on the sale of portfolio securities, and undistributed dividends and interest received, less fund expenses. Because such gains and dividends are included in the price of your shares, when they are distributed the price of your shares is reduced by the amount of the distribution. If you buy your shares through a taxable account just before the distribution, you will pay the full price for your shares, and then receive a portion of the purchase price back as a taxable distribution. (See "Taxes," page 21.) 20 TAXES The funds have elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, which means that to the extent its income is distributed to shareholders, it pays no income taxes. Tax Deferred Accounts. If the retail class shares are purchased through tax deferred accounts, such as a qualified employer-sponsored retirement or savings plan, income and capital gains distributions paid by the funds will generally not be subject to current taxation, but will accumulate in your account under the plan on a tax-deferred basis. Employer-sponsored retirement and savings plans are governed by complex tax rules. If you elect to participate in your employer's plan, consult your plan administrator, your plan's summary plan description, or a professional tax advisor regarding the tax consequences of participation in the plan, contributions to, and withdrawals or distributions from the plan. Taxable Accounts. If the retail class shares are purchased through taxable accounts, distributions of net investment income and net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable as long-term capital gains regardless of the length of time you have held the shares on which such distributions are paid. However, you should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to you with respect to such shares. Dividends and interest received by a fund on foreign securities, as well as capital gains realized upon the sale of such securities, may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. The foreign taxes paid by a fund will reduce its dividends. If more than 50% of the value of a fund's total assets at the end of each quarter of any fiscal year consists of securities of foreign corporations, the fund may qualify for and make an election with the Internal Revenue Service with respect to such fiscal year so that fund shareholders may be able to claim a foreign tax credit in lieu of a deduction for foreign income taxes paid by the fund. If such an election is made, the foreign taxes paid by the fund will be treated as income received by you. If a fund purchases the securities of certain foreign investment funds or trusts called passive foreign investment companies, capital gains on the sale of such holdings will be deemed to be ordinary income regardless of how long the fund holds its investment. The fund may also be subject to corporate income tax and an interest charge on certain dividends and capital gains earned from these investments, regardless of whether such income and gains are distributed to shareholders. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute it to shareholders. Distributions on fund shares are taxable to you regardless of whether they are taken in cash or reinvested, even if the value of your shares is below your cost. If you purchase shares shortly before a distribution, you must pay income taxes on the distribution, even though the value of your investment (plus cash received, if any) remains the same. In addition, the share price at the time you purchase shares may include unrealized gains in the securities held in the investment portfolio of a fund. If these portfolio securities are subsequently sold and the gains are realized, they will, to the extent not offset by capital losses, be paid to you as a distribution of capital gains and will be taxable to you as short-term or long-term capital gains. (See "General Information About Distributions," page 20.) In January of the year following the distribution, if you own shares in a taxable account, you will receive a Form 1099-DIV from either 21 Twentieth Century or your financial intermediary notifying you of the status of your distributions for federal income tax purposes. Distributions made to taxable accounts may also be subject to state and local taxes, even if all or a substantial part of such distributions are derived from interest on U.S. government obligations which, if you received them directly, would be exempt from state income tax. However, most but not all states allow this tax exemption to pass through to fund shareholders when a fund pays distributions to its shareholders. You should consult your tax adviser about the tax status of such distributions in your own state. If you have not complied with certain provisions of the Internal Revenue Code and Regulations, either Twentieth Century or your financial intermediary is required by federal law to withhold and remit to the IRS 31% of reportable payments (which may include dividends, capital gains distributions and redemptions). Those regulations require you to certify that the social security number or tax identification number you provide is correct and that you are not subject to 31% withholding for previous under-reporting to the IRS. You will be asked to make the appropriate certification on your application. Payments reported by Twentieth Century that omit your social security number or tax identification number will subject Twentieth Century to a penalty of $50, which will be charged against your account if you fail to provide the certification by the time the report is filed. This charge is not refundable. Redemption of shares of a fund (including redemptions made in an exchange transaction) will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. MANAGEMENT INVESTMENT MANAGEMENT Under the laws of the State of Maryland, the board of directors is responsible for managing the business and affairs of the funds. Acting pursuant to an investment advisory agreement entered into with the funds, Investors Research Corporation ("Investors Research") serves as the investment manager of the funds. Its principal place of business is Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111. Investors Research has been providing investment advisory services to investment companies and institutional clients since 1958. In June 1995, Twentieth Century Companies, Inc. ("TCC"), the parent of Investors Research, acquired Benham Management International, Inc. In the acquisition, Benham Management Corporation ("BMC"), the investment adviser to The Benham Group of mutual funds, became a wholly owned subsidiary of TCC. Certain employees of BMC will be providing investment management services to Twentieth Century funds, while certain Twentieth Century employees will be providing investment management services to Benham funds. Investors Research supervises and manages the investment portfolio of the funds and directs the purchase and sale of their investment securities. Investors Research utilizes a team of portfolio managers, assistant portfolio managers and analysts acting together to manage the assets of the funds. The team meets regularly to review portfolio holdings and to discuss purchase and sale activity. The team adjusts holdings in the funds' portfolios as they deem appropriate in pursuit of the funds' investment 22 objectives. Individual portfolio managers may also adjust portfolio holdings of the funds as necessary between meetings. The portfolio manager members of the International Equity, International Small Company Fund and Emerging Markets Fund team (the "International Team") and their principal business experience during the past five years are as follows: THEODORE J. TYSON joined Investors Research in 1988 and has been a member of the International Team since its inception in 1991. HENRIK STRABO joined Investors Research in 1993 as an investment analyst member of the International Team and has been a portfolio manager member of the team since 1994. Prior to joining Investors Research, Mr. Strabo was Vice President, International Equity Sales with Barclays de Zoete Wedd (1991 to 1993) and obtained international equity sales experience at Cresvale International (1990 to 1991). The activities of Investors Research are subject only to directions of the funds' board of directors. Investors Research pays all the expenses of the funds except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the funds, Investors Research receives a management fee calculated as a percentage of the average net assets of the fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.65% of first $1 billion 1.00% of the next $1 billion 0.75% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.75% EMERGING MARKETS FUND 1.75% of first $500 million 1.25% of the next $500 million 1.00% over $1 billion - -------------------------------------------------------------------------------- On the first business day of each month, each fund pays the management fee to the manager for the previous month at the rate specified. The fee for the previous month is calculated by multiplying the applicable fee for such series by the aggregate average daily closing value of the fund's net assets during the previous month, and further multiplying that product by a fraction, the numerator of which is the number of days in the previous month and the denominator of which is 365 (366 in leap years). Effective September 3, 1996, Investors Research has voluntarily reduced its annual management fee on International Equity and International Small Company Fund as follows: FUND Percent of Average Net Assets - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY 1.25% of first $1 billion 0.95% of the next $1 billion 0.85% over $2 billion INTERNATIONAL SMALL COMPANY FUND 1.50% of first $500 million 1.15% of the next $500 million 0.95% over $1 billion - -------------------------------------------------------------------------------- Investors Research will submit a new management agreement for shareholder approval in July 1997 that reflects the reduced fee structure. The management fees paid by the funds to Investors Research are higher than the fees paid by the various other funds in the Twentieth Century family of funds because of the higher costs and additional expenses associated with managing and operating a fund owning a portfolio consisting primarily of foreign securities. The fee may also be higher than the fee paid by many other international or foreign investment companies. Many other investment companies may refer to or publicize an "investment management fee" or "management fee" paid by the company to its manager. However, most such companies also use fund assets to pay for certain expenses of the fund in addition to the stated management fee. In contrast, the management fee paid to Investors Research includes payment for almost all fund expenses, with the exceptions noted. Therefore, potential investors who attempt to compare the expenses of these funds to the expenses of other funds should be careful to compare only the ratio of total expenses to average net assets contained in the Financial 23 Highlights Table found on page 5 of this Prospectus to the same ratio of the other funds. The management agreement also provides that the Corporation's board of directors, upon 60 days' prior written notice to all affected shareholders, may impose a servicing or administrative fee as a charge against shareholder accounts. CODE OF ETHICS The funds and Investors Research have adopted a Code of Ethics that restricts personal investing practices by employees of Investors Research and its affiliates. Among other provisions, the Code of Ethics requires that employees with access to information about the purchase or sale of securities in the funds' portfolios obtain preclearance before executing personal trades. With respect to portfolio manager and other investment personnel, the Code of Ethics prohibits acquisition of securities in an initial public offering, as well as profits derived from the purchase and sale of the same security within 60 calendar days. These provisions are designed to ensure that the interests of fund shareholders come before the interests of the people who manage those funds. TRANSFER AND ADMINISTRATIVE SERVICES Twentieth Century Services, Inc., 4500 Main Street, Kansas City, Missouri 64111 acts as transfer agent and dividend paying agent for the funds. It provides facilities, equipment and personnel to the funds, and is paid for such services by Investors Research. From time to time, special services may be offered to shareholders who maintain higher share balances in the Twentieth Century family of funds. These services may include the waiver of minimum investment requirements, expedited confirmation of shareholder transactions, newsletters, and a team of personal representatives. Any expenses associated with these special services will be paid by Investors Research. Investors Research and Twentieth Century Services, Inc. are both wholly owned by Twentieth Century Companies, Inc. James E. Stowers, chairman of the board of directors of the funds, controls Twentieth Century Companies by virtue of his ownership of a majority of its common stock. SERVICE FEES Certain recordkeeping and administrative services that are provided by the funds' transfer agent for retail class shareholders may be performed by insurance companies, retirement and pension plan administrators and recordkeepers for retirement plans using service class shares as a funding medium, by broker dealers for their customers investing in shares of the funds, by sponsors of multi mutual fund no (or low) transaction fee programs and other financial intermediaries. The funds' boards of directors have adopted a Shareholder Services Plan with respect to the service class shares of each fund. Under the Plan, each fund pays Twentieth Century Securities, Inc. (the "Distributor" a shareholder services fee of 0.25% annually of the aggregate average daily assets of the funds' service class shares for the purpose of paying the costs and expenses incurred by such financial intermediaries in providing such services. The Distributor enters into contracts with each financial intermediary to make such shares available through such plans or programs and for the provision of such services. The Shareholder Services Plan has been adopted and will be administered in accordance with the requirements of Rule 12b-1 under the 1940 Act. For additional information about the Plan and its terms, see "Shareholder Services Plan" in the Statement of Additional Information. Fees paid pursuant to the Plan may be paid for shareholder services and the maintenance of accounts and therefore may constitute "service fees" for purposes of applicable NASD rules. 24 DISTRIBUTION OF FUND SHARES The funds' shares are distributed by the Distributor, a registered broker dealer and an affiliate of the funds' investment manager. Investors Research pays all expenses for promoting sales of, and distributing the service class of, the fund shares offered by this Prospectus. The service class of shares does not pay any commissions or other fees to the distributor or to any other broker dealers or financial intermediaries in connection with the distribution of fund shares. FURTHER INFORMATION ABOUT TWENTIETH CENTURY Twentieth Century World Investors, Inc. was organized as a Maryland corporation on December 28, 1990. Twentieth Century World Investors is a diversified, open-end management investment company whose shares were first offered in May 1991. Its business and affairs are managed by its officers under the direction of its board of directors. The principal office of Twentieth Century World Investors is Twentieth Century Tower, 4500 Main Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that address, or by phone to 1-800-345-3533. (For local Kansas City area or international callers: 816-531-5575.) Twentieth Century World Investors issues three series of $0.01 par value shares. Each series is commonly referred to as a fund. Each share when issued, is fully paid and non-assessable. The assets belonging to each series of shares are held separately by the custodian. Each of the funds described in this Prospectus offers four classes of shares: a retail class, an institutional class, a service class, and an advisor class. The shares offered by this Prospectus are service class shares and have no up-front charges or commissions. The retail class is primarily made available to retail investors. The institutional class and service class are primarily offered to institutional investors or through institutional distribution channels, such as employer-sponsored retirement plans or through banks, broker dealers, insurance companies or other financial intermediaries. The other classes have different fees, expenses, and/or minimum investment requirements than the advisor class. Different fees and expenses will affect performance. For additional information concerning the retail class of shares, call a Twentieth Century retail investor services representative at 1-800-345-2021. For information concerning the institutional or service classes of shares not offered by this Prospectus, call a Twentieth Century institutional investor services representative at 1-800-345-3533 or contact a sales representative or financial intermediary who offers those classes of shares. Except as described below, all classes of shares of a fund have identical voting, dividend, liquidation and other rights, preferences, terms and conditions. The only differences among the various classes are (a) each class may be subject to different expenses specific to that class, (b) each class has a different identifying designation or name, (c) each class has exclusive voting rights with respect to matters solely affecting such class, (d) each class may have different exchange privileges, and (e) the institutional class may provide for automatic conversion from that class into shares of another class of the same fund. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value applicable to such share on all questions, except for those matters which must be voted on separately by the series or class of the shares affected. Matters affecting only one series or class are voted upon only by that series or class. Shares have non-cumulative voting rights, which means that the holders of more than 50% of the votes cast in an election of directors can elect all of the directors if they choose to do so, and in such event the holders of the remaining 25 less-than-50% of the votes will not be able to elect any person or persons to the board of directors. Unless required by the Investment Company Act, it will not be necessary for the funds to hold annual meetings of shareholders. As a result, shareholders may not vote each year on the election of directors or the appointment of auditors. However, pursuant to the funds' bylaws, the holders of shares representing at least 10% of the votes entitled to be cast may request the funds to hold a special meeting of shareholders. We will assist in the communication with other shareholders. WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED. 26 (This page left blank intentionally.) 27 (This page left blank intentionally.) 28 (This page left blank intentionally.) 29 (This page left blank intentionally.) 30 (This page left blank intentionally.) 31 TWENTIETH CENTURY WORLD INVESTORS SERVICE CLASS PROSPECTUS SEPTEMBER 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419385 KANSAS CITY, MISSOURI 64141-6385 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-3533 OR 816-531-5575 - ----------------------------------------------------- Automated information line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-345-1833 OR 816-753-0700 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: HTTP://TWENTIETH-CENTURY.COM - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- IN-BKT-5020 9609 Recycled TWENTIETH CENTURY WORLD INVESTORS Part of the Twentieth Century Family of Funds STATEMENT OF ADDITIONAL INFORMATION SEPTEMBER 3, 1996 - -------------------------------------------------------------------------------- This statement is not a prospectus but should be read in conjunction with the current prospectus of Twentieth Century World Investors, Inc., dated September 3, 1996. Please retain this document for future reference. To obtain the prospectus, call Twentieth Century toll-free at 1-800-345-2021 (816-531-5575 for local and international calls), or write to P.O. Box 419200, Kansas City, Missouri 64141-6200. TABLE OF CONTENTS Page Herein Investment Objectives of the Funds 2 Investment Restrictions 2 Forward Currency Exchange Contracts 3 An Explanation of Fixed Income Securities Ratings 4 Short Sales 6 Portfolio Turnover 7 Officers and Directors 7 Management 10 Custodians 11 Independent Accountants 11 Capital Stock 12 Multiple Class Structure 12 Taxes 15 Brokerage 16 Performance Advertising 17 Redemptions in Kind 18 Holidays 18 Financial Statements 18 ================================================================================ - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES OF THE FUNDS The investment objective of each series of shares of Twentieth Century World Investors, Inc. is described on the inside front cover page of the prospectus. In achieving its objective, a fund must conform to certain policies, some of which are designated in the prospectus or in this Statement of Additional Information as "fundamental" and cannot be changed except with the approval of the shareholders entitled to cast a majority of the outstanding votes of the fund as defined in the Investment Company Act of 1940 (the "Investment Company Act"). The following paragraph is also a statement of fundamental policy with respect to selection of investments: In general, within the restrictions outlined herein, each series has broad powers with respect to investing funds or holding them uninvested. Investments are varied according to what is judged advantageous under changing economic conditions. It will be the policy of Twentieth Century to retain maximum flexibility in management without restrictive provisions as to the proportion of one or another class of securities that may be held, subject to the investment restrictions described below. It is management's intention that each fund will generally consist of common stocks. However, the investment manager may invest the assets of a fund in varying amounts in other instruments and in senior securities, such as bonds, debentures, preferred stocks and convertible issues, when such a course is deemed appropriate in order to attempt to attain its financial objective. INVESTMENT RESTRICTIONS Additional fundamental policies that may be changed only with shareholder approval provide that, with the exception of the Emerging Markets Fund, each series of shares: (1) Shall not invest more than 15% of its assets in illiquid investments. (2) Shall not invest in the securities of companies that, including predecessors, have a record of less than three years of continuous operation. (3) Shall not lend its portfolio securities except to unaffiliated persons and subject to the rules and regulations adopted under the Investment Company Act. No such rules and regulations have been issued, but it is Twentieth Century's policy that such loans must be secured continuously by cash collateral maintained on a current basis in an amount at least equal to the market value of the securities loaned, or by irrevocable letters of credit. During the existence of the loan, the fund must continue to receive the equivalent of the interest and dividends paid by the issuer on the securities loaned and interest on the investment of the collateral; the fund must have the right to call the loan and obtain the securities loaned at any time on five days' notice, including the right to call the loan to enable the fund to vote the securities. To comply with the regulations of certain state securities administrators, such loans may not exceed one-third of the fund's net assets taken at market. (4) Shall not purchase the security of any one issuer if such purchase would cause more than 5% of the fund's assets at market to be invested in the securities of such issuer, except U.S. government securities, or if the purchase would cause more than 10% of the outstanding voting securities of any one issuer to be held in the fund's portfolio. (5) Shall not invest for control or for management, or concentrate its investment in a particular company or a particular industry. No more than 25% of the assets of the fund, exclusive of cash and U.S. government securities, will be invested in securities of any one industry. (6) Shall not buy securities on margin nor sell short (unless it owns or by virtue of its ownership of other securities has the right to obtain securities equivalent in kind and 2 amount to the securities sold); however, the fund may make margin deposits in connection with the use of any financial instrument or any transaction in securities permitted by its fundamental policies. (7) Shall not invest in the securities of other investment companies except by purchases in the open market involving only customary brokers' commissions and no sales charges. (8) Shall not issue any senior security. (9) Shall not underwrite any securities. (10) Shall not purchase or sell real estate. (In the opinion of management, this restriction will not preclude the corporation from investing in securities of corporations that deal in real estate.) (11) Shall not purchase or sell commodities or commodity contracts. (12) Shall not borrow any money, except from banks or trust companies in an amount not in excess of 5% of the total assets of the fund, and then only for emergency and extraordinary purposes. Paragraphs 3, 5, 8 and 9 shall also apply to the Emerging Markets Fund. The Investment Company Act imposes certain additional restrictions upon acquisition by the funds of securities issued by insurance companies, brokers, dealers, underwriters or investment advisers, and upon transactions with affiliated persons as therein defined. It also defines and forbids the creation of cross and circular ownership. The Investment Company Act also provides that the funds may not invest more than 25% of their assets in the securities of issuers engaged in a single industry. In determining industry groups for purposes of this standard, the Securities and Exchange Commission ordinarily uses the Standard Industry Classification codes developed by the United States Office of Management and Budget. In the interest of ensuring adequate diversification, the funds monitor industry concentration using a more restrictive list of industry groups than that recommended by the Securities and Exchange Commission. The funds believe that these classifications are reasonable and are not so broad that the primary economic characteristics of the companies in a single class are materially different. The use of these more restrictive industry classifications may, however, cause the funds to forego investment possibilities which may otherwise be available to them under the Investment Company Act. No fund will invest in oil, gas or other mineral leases, or in warrants, except that a fund may purchase securities with warrants attached. Neither the Securities and Exchange Commission nor any other agency of the federal or state government participates in or supervises the corporation's management or its investment practices or policies. FORWARD CURRENCY EXCHANGE CONTRACTS Each fund conducts its foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward currency exchange contracts to purchase or sell foreign currencies. Each fund expects to use forward contracts under two circumstances: (1) When the manager wishes to "lock in" the U.S. dollar price of a security when the fund is purchasing or selling a security denominated in a foreign currency, the fund would be able to enter into a forward contract to do so; (2) When the manager believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, the fund would be able to enter into a forward contract to sell foreign currency for a fixed U.S. dollar amount approximating the value of some or all of the fund's portfolio securities either denominated in, or whose value is tied to, such foreign currency. As to the first circumstance, when a fund enters into a trade for the purchase or sale of a 3 security denominated in a foreign currency, it may be desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering into forward contracts in U.S. dollars for the purchase or sale of a foreign currency involved in an underlying security transaction, the fund will be able to protect itself against a possible loss between trade and settlement dates resulting from the adverse change in the relationship between the U.S. dollar and the subject foreign currency. Under the second circumstance, when the manager believes that the currency of a particular country may suffer a substantial decline relative to the U.S. dollar, a fund could enter into a forward contract to sell for a fixed dollar amount the amount in foreign currencies approximating the value of some or all of its portfolio securities either denominated in, or whose value is tied to, such foreign currency. The fund will place cash or high-grade liquid securities in a separate account with its custodian in an amount sufficient to cover its obligation under the contract entered into under the second circumstance. If the value of the securities placed in the separate account declines, additional cash or securities will be placed in the account on a daily basis so that the value of the account equals the amount of the fund's commitments with respect to such contracts. The precise matching of forward contracts in the amounts and values of securities involved would not generally be possible since the future values of such foreign currencies will change as a consequence of market movements in the values of those securities between the date the forward contract is entered into and the date it matures. Predicting short-term currency market movements is extremely difficult, and the successful execution of short-term hedging strategy is highly uncertain. Normally, consideration of the prospect for currency parities will be incorporated into the long-term investment decisions made with respect to overall diversification strategies. However, the manager believes that it is important to have flexibility to enter into such forward contracts when it determines that a fund's best interests may be served. Generally, a fund will not enter into a forward contract with a term of greater than one year. At the maturity of the forward contract, the fund may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate the obligation to deliver the foreign currency by purchasing an "offsetting" forward contract with the same currency trader obligating the fund to purchase, on the same maturity date, the same amount of the foreign currency. It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for a fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency the fund is obligated to deliver. AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS As described in the prospectus, the funds may invest in fixed income securities. International Equity may invest only in investment grade obligations, while International Small Company Fund and Emerging Markets Fund may invest in bonds, corporate debt securities and governmental obligations without regard to credit quality restrictions if such obligations are determined by the investment manager to be sound investments. Fixed income securities ratings provide the investment manager with a current assessment of the credit rating of an issuer with respect to a specific fixed income security. The following is a description of the rating categories utilized by the rating services referenced in the prospectus disclosure: The following summarizes the ratings used by Standard & Poor's Corporation ("S&P") for bonds: 4 AAA -- This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay interest and repay principal. AA -- Debt rated AA is considered to have a very strong capacity to pay interest and repay principal and differs from AAA issues only to a small degree. A -- Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. BB -- Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. B -- Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. CCC -- Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. CC -- The rating CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. C -- The rating C typically is applied to debt subordinated to senior debt, which is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. CI -- The rating CI is reserved for income bonds on which no interest is being paid. D -- Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. To provide more detailed indications of credit quality, the ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within these major rating categories. The following summarizes the ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds: Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective 5 elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than the Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics, as well. Ba -- Bonds that are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies numerical modifiers 1, 2 and 3 in each generic rating category from Aa through B. The modifier 1 indicates that the bond being rated ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. SHORT SALES A fund may engage in short sales if, at the time of the short sale, the fund owns or has the right to acquire an equal amount of the security being sold short at no additional cost. In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. To make delivery to the purchaser, the executing broker borrows the securities being sold short on behalf of the seller. While the short position is maintained, the seller collateralizes its obligation to deliver the securities sold short in an amount equal to the proceeds of the short sale plus an additional margin amount established by the Board of Governors of the Federal Reserve. If a fund engages in a short sale the collateral account will be maintained by the fund's custodian. While the short sale is open the fund will maintain in a segregated custodial account an amount of 6 securities convertible into or exchangeable for such equivalent securities at no additional cost. These securities would constitute the fund's long position. A fund may make a short sale, as described above, when it wants to sell the security it owns at a current attractive price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. In such a case, any future losses in the fund's long position should be reduced by a gain in the short position. The extent to which such gains or losses are reduced would depend upon the amount of the security sold short relative to the amount the fund owns. There will be certain additional transaction costs associated with short sales, but the fund will endeavor to offset these costs with income from the investment of the cash proceeds of short sales. PORTFOLIO TURNOVER In order to achieve its investment objective, the management will purchase and sell securities without regard to the length of time the security has been held and, accordingly, it can be expected that the rate of portfolio turnover may be substantial. The corporation intends to purchase a given security whenever management believes it will contribute to the stated objective of a fund, even if the same security has only recently been sold. In selling a given security, management keeps in mind that (1) profits from sales of securities held less than three months must be limited in order to meet the requirements of Subchapter M of the Internal Revenue Code, and (2) profits from sales of securities are taxed to shareholders as ordinary income. Subject to those considerations, the corporation will sell a given security, no matter for how long or for how short a period it has been held in the portfolio, and no matter whether the sale is at a gain or at a loss, if the management believes that it is not fulfilling its purpose, either because, among other things, it did not live up to management's expectations, or because it may be replaced with another security holding greater promise, or because it has reached its optimum potential, or because of a change in the circumstances of a particular company or industry or in general economic conditions, or because of some combination of such reasons. When a general decline in security prices is anticipated, a fund may decrease or eliminate entirely its equity position and increase its cash position, and when a rise in price levels is anticipated, a fund may increase its equity position and decrease its cash position. However, it should be expected that each fund will, under most circumstances, be essentially fully invested in equity securities. Since investment decisions are based on the anticipated contribution of the security in question to a fund's objectives, the rate of portfolio turnover is irrelevant when management believes a change is in order to achieve those objectives, and a fund's annual portfolio turnover rate cannot be anticipated and may be comparatively high. This disclosure regarding portfolio turnover is a statement of fundamental policy and may be changed only by a vote of the shareholders. Since the management does not take portfolio turnover rate into account in making investment decisions, (1) the management has no intention of accomplishing any particular rate of portfolio turnover, whether high or low, and (2) the portfolio turnover rates should not be considered as a representation of the rates that will be attained in the future. OFFICERS AND DIRECTORS The principal officers and directors of the corporation, their principal business experience during the past five years, and their affiliations with Investors Research Corporation and its affiliated companies are listed below. Unless otherwise noted, the business address of each director and 7 officer is 4500 Main Street, Kansas City, Missouri 64111. Those directors that are "interested persons" as defined in the Investment Company Act of 1940 are indicated by an asterisk (*). JAMES E. STOWERS JR.,* chairman, principal executive officer and director; chairman, director and controlling shareholder of Twentieth Century Companies, Inc., parent corporation of Investors Research Corporation and Twentieth Century Services, Inc.; chairman and director of Investors Research Corporation, Twentieth Century Services, Inc., Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc.; father of James E. Stowers III. JAMES E. STOWERS III,* president and director; president and director, Twentieth Century Companies, Inc., Twentieth Century Services, Inc., Investors Research Corporation, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. THOMAS A. BROWN, director; 2029 Wyandotte, Kansas City, Missouri; chief executive officer, Associated Bearing Company, a corporation officer engaged in the sale of bearings and power transmission products; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. ROBERT W. DOERING, M.D., director; 6420 Prospect, Kansas City, Missouri; general surgeon; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. LINSLEY L. LUNDGAARD, vice chairman of the board and director; 18648 White Wing Drive, Rio Verde, Arizona; retired; formerly vice president and national sales manager, Flour Milling Division, Cargill, Inc.; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. DONALD H. PRATT, director; P.O.Box 419917, Kansas City, Missouri; president, Butler Manufacturing Company; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. LLOYD T. SILVER JR., director; 2300 West 70th Terrace, Mission Hills, Kansas; president, LSC, Inc., manufacturer's representative; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. M. JEANNINE STRANDJORD, director; 908 West 121st Street, Kansas City, Missouri; Senior Vice President and Treasurer, Sprint Corporation; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. JOHN M. URIE, director; 5511 NW Flint Ridge Road, Kansas City, Missouri; consultant; formerly, director of finance, City of Kansas City, Missouri; director, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. WILLIAM M. LYONS, executive vice president, secretary and general counsel; executive vice president and general counsel, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI 8 Portfolios, Inc.; executive-vice president and general counsel, Twentieth Century Companies, Inc., Investors Research Corporation and Twentieth Century Services, Inc. ROBERT T. JACKSON, executive vice president and principal financial officer; treasurer, Twentieth Century Companies, Inc. and Investors Research Corporation; executive vice president and treasurer, Twentieth Century Services, Inc.; executive vice president-finance, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc.; formerly executive vice president, Kemper Corporation. MARYANNE ROEPKE, CPA, vice president, treasurer and principal accounting officer; vice president and treasurer, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc.; vice president, Twentieth Century Services, Inc. PATRICK A. LOOBY, vice president; vice president and secretary, Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc.; vice president, Twentieth Century Investors, Inc. and Twentieth Century Services, Inc. ROBERT J. LEACH, CPA, controller; formerly accountant, Ernst & Young, Kansas City, Missouri. The board of directors has established three standing committees: the executive committee, the audit committee and the nominating committee. Messrs. Stowers Jr., Stowers III, and Urie constitute the executive committee of the board of directors. The committee performs the functions of the board of directors between meetings of the board, subject to the limitations on its power set out in the Maryland Corporation Law, and except for matters required by the Investment Company Act to be acted upon by the whole board. Messrs. Lundgaard, (chairman); Brown, and Doering and Ms. Strandjord constitute the audit committee. The functions of the audit committee include recommending the engagement of the corporation's independent accountants, reviewing the arrangements for and scope of the annual audit, reviewing comments made by the independent accountants with respect to internal controls and the considerations given or the corrective action taken by management, and reviewing nonaudit services provided by the independent accountants. Messrs. Brown (chairman), Pratt and Silver constitute the compliance committee. The functions of the compliance committee include reviewing the results of the fund's compliance testing program, reviewing quarterly reports from the manager of the funds regarding various compliance matters and monitoring the implementation of the funds' Code of Ethics, including any violations thereof. The nominating committee has as its principal role the consideration and recommendation of individuals for nomination as directors. The names of potential director candidates are drawn from a number of sources, including recommendations from members of the board, management and shareholders. This committee also reviews and makes recommendations to the board with respect to the composition of board committees and other board-related matters, including its organization, size, composition, responsibilities, functions and compensation. The members of the nominating committee are Messrs. Urie (Chairman), Lundgaard and Stowers III. The directors of the corporation also serve as directors of Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc., each a registered investment company. Each director who is not an "interested person" as defined in the Investment 9 Company Act receives for service as a member of the board of all five of such companies an annual director's fee of $36,000, and an additional fee of $1,000 per regular board meeting attended and $500 per special board meeting and audit committee meeting attended. In addition, those directors who are not "interested persons" and serve as chairman of a committee of the board of directors receive an additional $2,000 for such services. These fees and expenses are divided among the five investment companies based upon their relative net assets. Under the terms of the management agreement with Investors Research Corporation, the funds are responsible for paying such fees and expenses. For the most recent fiscal year, International Equity's share of such fees and expenses was $12,623 and International Emerging Growth's share was $584. Set forth below is the aggregate compensation paid for the periods indicated by the funds and by the Twentieth Century family of mutual funds as a whole to each director who is not an "interested person" as defined in the Investment Company Act. Total Compensation from Aggregate Compensation the Twentieth Century DIRECTOR from the Corporation1 Family of Funds2 - -------------------------------------------------------------------------------- THOMAS A. BROWN $1,800 $44,000 ROBERT W. DOERING, M.D. 1,800 44,000 LINSLEY L. LUNDGAARD 1,725 44,000 DONALD H. PRATT 1,070 32,000 LLOYD T. SILVER JR. 1,725 44,000 M. JEANNINE STRANDJORD 1,725 44,000 JOHN M. URIE 1,725 46,000 - -------------------------------------------------------------------------------- 1 Includes compensation paid by the corporation for the fiscal year ended November 30, 1995. 2 Includes compensation paid by the six investment company members of the Twentieth Century family of funds for the calendar year ended December 31, 1995. Those directors who are "interested persons," as defined in the Investment Company Act, receive no fee as such for serving as a director. The salaries of such individuals, who are also officers of the corporation, are paid by Investors Research Corporation. MANAGEMENT A description of the responsibilities and method of compensation of Twentieth Century's investment manager, Investors Research Corporation ("Investors Research"), appears in the prospectus under the caption, "Management." During the fiscal years ended November 30, 1995, 1994 and 1993, the management fees paid by International Equity to Investors Research were $21,967,586, $22,155,449 and $8,125,737 on average net assets of $1,240,949,900, $1,205,407,244, and $432,127,344 . During the fiscal year ended November 30, 1995, and the period from April 1, 1994 (inception) through November 30, 1994, the management fees paid by International Small Company Fund to Investors Research were $2,260,979 and $957,116 on average net assets of $113,067,308 and $71,587,570. The management agreement shall continue in effect until the earlier of the expiration of two years from the date of its execution or until the first meeting of shareholders following such execution and for as long thereafter as its continuance is specifically approved at least annually by (i) the board of directors of Twentieth Century, or by the vote of a majority of the outstanding votes (as defined in the Investment Company Act), and (ii) by the vote of a majority of the directors of Twentieth Century who are not parties to the agreement or interested persons of Investors Research, cast in person at a meeting called for the purpose of voting on such approval. The management agreement provides that it may be terminated at any time without payment of any penalty by the board of directors of Twentieth Century, or by a vote of a majority of Twentieth Century's shareholders, on 60 days' written notice to Investors Research, and that it shall be automatically terminated if it is assigned. The management agreement provides that Investors Research shall not be liable to Twentieth Century or its shareholders for anything other than 10 willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties. The management agreement also provides that Investors Research and its officers, directors and employees may engage in other business, devote time and attention to any other business whether of a similar or dissimilar nature, and render services to others. Certain investments may be appropriate for the funds and also for other clients advised by Investors Research. Investment decisions for the funds and other clients are made with a view to achieving their respective investment objectives after consideration of such factors as their current holdings, availability of cash for investment, and the size of their investment generally. A particular security may be bought or sold for only one client, or in different amounts and at different times for more than one but less than all clients. In addition, purchases or sales of the same security may be made for two or more clients on the same date. Such transactions will be allocated among clients in a manner believed by Investors Research to be equitable to each. In some cases this procedure could have an adverse effect on the price or amount of the securities purchased or sold by a fund. Investors Research may aggregate purchase and sale orders of the funds with purchase and sale orders of its other clients when Investors Research believes that such aggregation provides the best execution for the funds. The board of directors of the corporation has approved the policy of Investors Research 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. Investors Research 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. Investors Research receives no additional compensation or remuneration as a result of such aggregation. In addition to managing the funds, on May 31, 1996, Investors Research was acting as an investment adviser to 13 institutional accounts and to five registered investment companies, Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Strategic Asset Allocations, Inc. and TCI Portfolios, Inc. Twentieth Century Services, Inc. provides physical facilities, including computer hardware and software and personnel, for the day-to-day administration of the corporation and of Investors Research. Investors Research pays Twentieth Century Services, Inc. for such services. As stated in the prospectus, all of the stock of Twentieth Century Services, Inc. and Investors Research is owned by Twentieth Century Companies, Inc. CUSTODIANS UMB Bank, N.A., 10th and Grand, Kansas City, Missouri 64105, and Boatmen's First National Bank of Kansas City, 10th and Baltimore, Kansas City, Missouri 64105, each serves as custodian of the assets of the funds. The custodians take no part in determining the investment policies of the funds or in deciding which securities are purchased or sold by the funds. The funds, however, may invest in certain obligations of the custodians and may purchase or sell certain securities from or to the custodians. INDEPENDENT ACCOUNTANTS At a meeting held on December 12, 1995, the board of directors of the corporation appointed Ernst & Young LLP, One Kansas City Place, 1200 Main Street, Kansas City, Missouri 64105, as the independent accountants of the funds to examine the financial statements of the funds for the fiscal year ending November 30, 1996. The appoint- 11 ment of Ernst & Young was recommended by the audit committee of the board of directors. As the independent accountants of the funds, Ernst & Young will provide services including (1) audit of the annual financial statements, (2) assistance and consultation in connection with SEC filings and (3) review of the annual federal income tax return filed for each fund by Twentieth Century. Baird, Kurtz & Dobson, City Center Square, Suite 2700, 1100 Main Street, Kansas City, Missouri 64105, served as independent accountants for the funds and examined the financial statements of the funds for all fiscal years ending prior to December 1, 1995. CAPITAL STOCK Twentieth Century's capital stock is described in the prospectus under the caption, "Further Information About Twentieth Century." The corporation currently has three series of shares outstanding. Each series of shares is further divided into four classes. Twentieth Century may in the future issue additional series or classes of shares without a vote of the shareholders. The assets belonging to each series or class of shares are held separately by the custodian and the shares of each series or class represent a beneficial interest in the principal, earnings and profits (or losses) of investment and other assets held for that series or class. Your rights as a shareholder are the same for all series or classes of securities unless otherwise stated. Within their respective series or class, all shares have equal redemption rights. Each share, when issued, is fully-paid and non-assessable. Each share, irrespective of series or class, is entitled to one vote for each dollar of net asset value represented by such share on all questions. In the event of complete liquidation or dissolution of Twentieth Century, 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. MULTIPLE CLASS STRUCTURE The funds' board of directors has adopted a multiple class plan (the "Multiclass Plan") pursuant to Rule 18f-3 adopted by the Securities and Exchange Commission ("SEC"). Pursuant to such plan, the funds may issue up to four classes of shares: a retail class, an institutional class, a service class and an advisor class. The retail class is made available to investors directly by the investment manager through its affiliated broker dealer, Twentieth Century Services, Inc., for a single unified management fee, without any load or commission. 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 manager as retail class shareholders. As a result, the manager is able to charge these classes a lower management fee. In addition to the management fee, however, service class shares are subject to a Shareholder Services Plan (described below), and the advisor class shares are subject to a Master Distribution and Shareholder Services Plan (also described below). Both plans have been adopted by the funds' board of directors and initial shareholder in accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act. RULE 12B-1 Rule 12b-1 permits an investment company to pay expenses associated with the distribution of its shares in accordance with a plan adopted by the investment company's board of directors and approved by its shareholders. Pursuant to such rule, the board of directors and initial shareholder of the funds' service class and advisor class have approved and entered into a Shareholder Services Plan, with respect to the service class, and a Master Distribution and Shareholder Services Plan, with respect to the advisor class (collectively, the "Plans"). Both Plans are described beginning on page 13. 12 In adopting the Plans, the board of directors (including a majority of directors who are not "interested persons" of the funds (as defined in the Investment Company Act), hereafter referred to as the "independent directors") determined that there was a reasonable likelihood that the Plans would benefit the funds and the shareholders of the affected classes. Pursuant to Rule 12b-1, information with respect to revenues and expenses under the Plans is presented to the board of directors quarterly for its consideration in connection with its deliberations as to the continuance of the Plans. Continuance of the Plans must be approved by the board of directors (including a majority of the independent directors) annually. The Plans may be amended by a vote of the board of directors (including a majority of the independent directors), except that the Plans may not be amended to materially increase the amount to be spent for distribution without majority approval of the shareholders of the affected class. The Plans terminate automatically in the event of an assignment and may be terminated upon a vote of a majority of the independent directors or by vote of a majority of the outstanding voting securities of the affected class. All fees paid under the plans will be made in accordance with Section 26 of the Rules of Fair Practice of the National Association of Securities Dealers. SHAREHOLDER SERVICES PLAN As described in the Prospectus, the funds' service class of shares are made available to participants in employer-sponsored retirement or savings plans and to persons purchasing through financial intermediaries, such as banks, broker dealers and insurance companies. In such circumstances, certain record keeping and administrative services that are provided by the funds' transfer agent for the retail class shareholders may be performed by a plan sponsor (or its agents) or by a financial intermediary. To enable the funds' shares to be made available through such plans and financial intermediaries, and to compensate them for such services, the funds' investment manager has reduced its management fee by 0.25% per annum with respect to the service class shares and the funds' board of directors has adopted a Shareholder Services Plan. Pursuant to the Shareholder Services Plan, the service class shares pay Twentieth Century Securities, Inc. (the "Distributor") a shareholder services fee of 0.25% annually of the aggregate average daily assets of the funds' service class shares. The Distributor enters into contracts with each financial intermediary for the provision of certain shareholder services and utilizes the shareholder services fees received under the Shareholder Services Plan to pay for such services. Payments may be made for a variety of shareholder services, including, but are not limited to, (1) receiving, aggregating and processing purchase, exchange and redemption request from beneficial owners (including contract owners of insurance products that utilize the funds as underlying investment media) of shares and placing purchase, exchange and redemption orders with the Distributor; (2) providing shareholders with a service that invests the assets of their accounts in shares pursuant to specific or pre-authorized instructions; (3) processing dividend payments from a fund on behalf of shareholders and assisting shareholders in changing dividend options, account designations and addresses; (4) providing and maintaining elective services such as check writing and wire transfer services; (5) acting as shareholder of record and nominee for beneficial owners; (6) maintaining account records for shareholders and/or other beneficial owners; (7) issuing confirmations of transactions; (8) providing subaccounting with respect to shares beneficially owned by customers of third parties or providing the information to a fund as necessary for such subaccounting; (9) preparing and forwarding shareholder communications 13 from the funds (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to shareholders and/or other beneficial owners; (10) providing other similar administrative and sub-transfer agency services; and (11) paying "service fees" for the provision of personal, continuing services to investors, as contemplated by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD") (collectively referred to as "Shareholder Services"). Shareholder Services do not include those activities and expenses that are primarily intended to result in the sale of additional shares of the funds. MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN As described in the Prospectus, the funds' advisor class of shares are also made available to participants in employer-sponsored retirement or savings plans and to persons purchasing through financial intermediaries, such as banks, broker dealers and insurance companies. The Distributor enters into contracts with various banks, broker dealers, insurance companies and other financial intermediaries with respect to the sale of the funds' shares and/or the use of the funds' shares in various investment products or in connection with various financial services. As with the service class, certain recordkeeping and administrative services that are provided by the funds' transfer agent for the retail class shareholders may be performed by a plan sponsor (or its agents) or by a financial intermediary for shareholders in the advisor class. In addition to such services, the financial intermediaries provide various distribution services. To enable the funds' shares to be made available through such plans and financial intermediaries, and to compensate them for such services, the funds' investment manager has reduced its management fee by 0.25% per annum with respect to the advisor class shares and the funds' board of directors has adopted a Master Distribution and Shareholder Services Plan (the "Distribution Plan"). Pursuant to such Plan, the advisor class shares pay the Distributor 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 above) and 0.25% of which is paid for distribution services. Distribution services include any activity undertaken or expense incurred that is primarily intended to result in the sale of advisor class shares, which services may include but are not limited to, (1) the payment of sales commission, ongoing commissions and other payments to brokers, dealers, financial institutions or others who sell advisor class shares pursuant to Selling Agreements; (2) compensation to registered representatives or other employees of Distributor who engage in or support distribution of the funds' advisor class shares; (3) compensation to, and expenses (including overhead and telephone expenses) of, Distributor; (4) the printing of prospectuses, statements of additional information and reports for other than existing shareholders; (5) the preparation, printing and distribution of sales literature and advertising materials provided to the funds' shareholders and prospective shareholders; (6) receiving and answering correspondence from prospective shareholders, including distributing prospectuses, statements of additional information, and shareholder reports; (7) the providing of facilities to answer questions from prospective investors about fund shares; (8) complying with federal and state securities laws pertaining to the sale of fund shares; (9) assisting investors in completing application forms and selecting dividend and other account options; (10) the providing of other reasonable assistance in connection with the distribution of fund shares; (11) the organizing and conducting of sales seminars and payments in the form of transactional compensation or promotional incentives; (12) profit on the foregoing; (13) the payment of "service fees" for the provision of personal, continuing services to investors, as 14 contemplated by the Rules of Fair Practice of the National Association of Securities Dealers; Inc. ("NASD") and (14) such other distribution and services activities as the manager determines may be paid for by the funds pursuant to the terms of this Agreement and in accordance with Rule 12b-1 of the Investment Company Act. TAXES The corporation elected to be taxed under subchapter M of the Internal Revenue Code (the "Code") as a regulated investment company. If it qualifies, it will not be subject to U.S. federal income tax (other than any tax resulting from investing in passive foreign investment companies, as discussed below) on net ordinary income and net capital gains, which are distributed to its shareholders within certain time periods specified in the Code. Amounts not distributed on a timely basis would be subject to federal corporate income tax and possibly to a nondeductible 4% excise tax. Each fund intends to distribute annually all of its net ordinary income and net capital gains. Distributions from net investment income and net short-term capital gains are taxable to shareholders as ordinary income. The dividend-received deduction available to corporate shareholders for dividends received from a fund will apply to ordinary income distributions only to the extent that they are attributable to the fund's dividend income from U.S. corporations. In addition, the dividends-received deduction will be limited if the shares with respect to which the dividends are received are treated as debt-financed or are deemed to have been held less than 46 days by a fund. Distributions from net long-term capital gains are taxable to a shareholder as long-term capital gains regardless of the length of time the shares on which such distributions are paid have been held by the shareholder. However, shareholders should note that any loss realized upon the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gain to the shareholder with respect to such shares. Income from foreign securities purchased by a fund may be reduced by a withholding tax at the source. If as of the end of any fiscal year more than 50% of the assets of a fund are invested in securities of foreign corporations, the fund may make an election that will result in the shareholder having the option to elect either to deduct their pro rata share of the foreign taxes paid by the fund or to use their pro rata share of the foreign taxes paid by the fund in calculating the foreign tax credit to which they are entitled. Distributions by a fund will be treated as U.S. source income for purposes other than computing the foreign tax credit limitation. If a fund invests in the securities of certain foreign investment funds or trusts called passive foreign investment companies, the fund may be subject to federal corporate income taxation on a portion of any "excess distribution" with respect to, or gain from the disposition of, such securities. The tax would be determined by allocating such distribution or gain ratability to each day of the fund's holding period for the stock. The distribution or gain so allocated to any taxable year of the fund, other than the taxable year of the excess distribution for disposition, would be taxed to the fund at the highest marginal rate in effect for such year, and the tax would be further increased by an interest charge. Any amount of distribution or gain allocated to the taxable year of the distribution or disposition would be included in the fund's taxable income. In the alternative, the fund may elect to recognize cumulative gains on such investments as of the last day of its fiscal year and distribute to shareholders. Redemption of shares of a fund will be a taxable transaction for federal income tax purposes and shareholders will generally recognize gain or loss in an amount equal to the difference between the basis of the shares and the amount received. Assuming that shareholders hold such shares as a capital asset, the gain or loss will be a 15 capital gain or loss and will generally be long term if shareholders have held such shares for a period of more than one year. If a loss is realized on the redemption of fund shares, the reinvestment in additional fund shares within 30 days before or after the redemption may be subject to the "wash sale" rules of the Code, resulting in a postponement of the recognition of such loss for federal income tax purposes. In addition to the federal income tax consequences described above relating to an investment in a fund, there may be other federal, state or local tax considerations that depend upon the circumstances of each particular investor. Prospective shareholders are therefore urged to consult their tax advisers with respect to the effect of this investment on their own specific situations. BROKERAGE Under the management agreement between Twentieth Century and Investors Research, Investors Research has the responsibility of selecting brokers to execute portfolio transactions. Twentieth Century's policy is to secure the most favorable prices and execution of orders on its portfolio transactions. So long as that policy is met, Investors Research may take into consideration the factors discussed under this caption when selecting brokers. Investors Research receives statistical and other information and services without cost from brokers and dealers. Investors Research evaluates such information and services, together with all other information that it may have, in supervising and managing the investments of Twentieth Century. Because such information and services may vary in amount, quality and reliability, their influence in selecting brokers varies from none to very substantial. Investors Research proposes to continue to place some of Twentieth Century's brokerage business with one or more brokers who provide information and services. Such information and services provided to Investors Research will be in addition to and not in lieu of services required to be performed for Twentieth Century by Investors Research. Investors Research does not utilize brokers that provide such information and services for the purpose of reducing the expense of providing required services to Twentieth Century. In the fiscal years ended November 30, 1995, 1994, and 1993, International Equity paid brokerage commissions in the amount of $12,351,904, $18,168,517, and $7,545,898. In the fiscal year ended November 30, 1995, and the period from April 1, 1994 (inception) through November 30, 1994, International Small Company Fund paid brokerage commissions in the amount of $1,434,299 and $901,470. The brokerage commissions paid by Twentieth Century may exceed those which 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 Twentieth Century effects securities transactions may be used by Investors Research in servicing all of its accounts, and not all such services may be used by Investors Research in managing the portfolio of the corporation. The staff of the Securities and Exchange Commission has expressed the view that the best price and execution of over-the-counter transactions in portfolio securities may be secured by dealing directly with principal market makers, thereby avoiding the payment of compensation to another broker. In certain situations, the officers of Twentieth Century and the manager believe that the facilities, expert personnel and technological systems of a broker enable the corporation to secure as good a net price by dealing with a broker instead of a principal market maker, even after payment of the compensation to the broker. Twentieth Century normally places its over-the-counter transactions with principal market makers, but may also deal on a brokerage basis when utilizing electronic trading networks or as circumstances warrant. 16 PERFORMANCE ADVERTISING FUND PERFORMANCE FUND PERFORMANCE Individual fund performance may be compared to various indices including the Standard & Poor's 500 Index, the Dow Jones World Index, the IFC Global Composite Index, and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE Index). The following tables set forth the average annual total return of the funds for the periods indicated. Average annual total return is calculated by determining cumulative total return for the stated period and then computing the annual compound return that would produce the cumulative total return if the funds' performance had been constant over that period. Cumulative total return includes all elements of return, including reinvestment of dividends and capital gains distributions. Annualization of the funds' return assumes that the partial year performance will be constant throughout the period. Actual returns through the period may be greater or less than the annualized data. INTERNATIONAL EQUITY - -------------------------------------------------------------------------------- Year ended November 30, 1995 5.93% May 9, 1991 (Inception) through November 30, 1995 12.23% - -------------------------------------------------------------------------------- INTERNATIONAL SMALL COMPANY FUND - -------------------------------------------------------------------------------- Year ended November 30, 1995 5.75% April 1, 1994 (Inception) through November 30, 1995 8.23% - -------------------------------------------------------------------------------- The funds may also elect to advertise cumulative total return over various time periods. The International Equity fund's cumulative total return for the period from its inception through November 30, 1995, was 69.28%. The International Small Company Fund's cumulative total return for the period from its inception through November 30, 1995, was 14.00%. ADDITIONAL PERFORMANCE COMPARISONS Investors may judge the performance of the funds by comparing their performance to the performance of other mutual funds or mutual fund portfolios with comparable investment objectives and policies through various mutual fund or market indices such as the EAFE(R) Index and those prepared by Dow Jones & Co., Inc., Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and The Russell 2000 Index, and to data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. and the Consumer Price Index. Comparisons may also be made to indices or data published in Money, Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week, Pensions and Investments, USA Today and other similar publications or services. In addition to performance information, general information about the funds that appears in a publication such as those mentioned above or in the prospectus under the heading "Performance Advertising" may be included in advertisements and in reports to shareholders. PERMISSIBLE ADVERTISING INFORMATION From time to time, the funds may, in addition to any other permissible information, include the following types of information in advertisements, supplemental sales literature and reports to shareholders: (1) discussions of general economic or financial principles (such as the effects of compounding and the benefits of dollar-cost averaging); (2) discussions of general economic trends; (3) presentations of statistical data to supplement such discussions; (4) descriptions of past or anticipated portfolio holdings for one or more of the funds; (5) descriptions of investment strategies for one or more of the funds; (6) descriptions or comparisons of various savings and investment products (including, but not limited to, qualified retirement plans and 17 individual stocks and bonds), which may or may not include the funds; (7) comparisons of investment products (including the funds) with relevant market or industry indices or other appropriate benchmarks; (8) discussions of fund rankings or ratings by recognized rating organizations; and (9) testimonials describing the experience of persons that have invested in one or more of the funds. The funds may also include calculations, such as hypothetical compounding examples, which describe hypothetical investment results in such communications. Such performance examples will be based on an express set of assumptions and are not indicative of the performance of any of the funds. REDEMPTIONS IN KIND Twentieth Century's policy with regard to large redemptions is described in the prospectus under the heading "Special Requirements for Large Redemptions." The corporation has elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which the corporation is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of a fund during any 90-day period for any one shareholder. If shares are redeemed in kind, the redeeming shareholder might incur brokerage costs in converting the assets to cash. The method of valuing portfolio securities used to make redemptions in kind will be the same as the method of valuing portfolio securities described in the prospectus under the caption "How Share Price is Determined," and such valuation will be made as of the same time the redemption price is determined. HOLIDAYS Twentieth Century does not determine the net asset value of its shares on days when the New York Stock Exchange is closed. Currently, the Exchange is closed on Saturdays and Sundays, and on holidays, namely New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. FINANCIAL STATEMENTS The financial statements of the funds' for the fiscal year ended November 30, 1995 are included in the Annual Report to shareholders for that period which is incorporated herein by reference. In addition, the funds' unaudited financial statements for the six months ended May 31, 1996, are included in the Semiannual Report to shareholders which is incorporated herein by reference. With respect to the unaudited financial statements incorporated herein, all adjustments, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods indicated. The results of operations of the funds for the respective periods indicated are not necessarily indicative of the results for the entire year. You may receive copies without charge upon request to Twentieth Century at the address and phone number shown on the cover of this statement. 18 (This page left blank intentionally.) 19 (This page left blank intentionally.) 20 (This page left blank intentionally.) 21 (This page left blank intentionally.) 22 (This page left blank intentionally.) 23 TWENTIETH CENTURY World Investors Statement of Additional Information September 3, 1996 [company logo] Investments That Work(TM) - ----------------------------------------------------- P.O. BOX 419200 KANSAS CITY, MISSOURI 64141-6200 - ----------------------------------------------------- Person-to-person assistance: 1-800-345-2021 or 816-531-5575 - ----------------------------------------------------- Automated Information Line: 1-800-345-8765 - ----------------------------------------------------- Telecommunications Device for the Deaf: 1-800-634-4113 or 816-753-1865 - ----------------------------------------------------- Fax: 816-340-7962 - ----------------------------------------------------- Internet address: http://twentieth-century.com - ----------------------------------------------------- [company logo] ================================================================================ - -------------------------------------------------------------------------------- SH-BKT-5018 9609 PART C OTHER INFORMATION ITEM 24. Financial Statements and Exhibits (a) Financial Statements: (i) Financial Statements filed in Part A of Registration Statement: 1. Financial Highlights (ii) Financial Statements filed in Part B of the Registration Statement (each of the following financial statements is contained in the Registrant's Annual Report dated November 30, 1995, which is incorporated by reference in Part B of this Registration Statement): 1. Statement of Assets and Liabilities at November 30, 1995. 2. Statement of Operations for the year ended November 30, 1995. 3. Statement of Changes in Net Assets for the years ended November 30, 1995 and 1994. 4. Notes to Financial Statements as of November 30, 1995. 5. Schedule of Investments as of November 30, 1995. 6. Independent Accountants' Report dated December 30, 1995. (iii)Financial Statements filed in Part B of the Registration Statement (each of the following financial statements is contained in the Registrant's Semiannual Report dated May 31, 1996, which is incorporated by reference in Part B of this Registration Statement): 1. Statement of Assets and Liabilities at May 31, 1996 (unaudited). 2. Statement of Operations for the six months ended May 31, 1996 and 1995 (unaudited). 3. Statement of Changes in Net Assets for the six months ended May 31, 1996 (unaudited). 4. Notes to Financial Statements as of May 31, 1996 (unaudited). 5. Schedule of Investments as of May 31, 1996 (unaudited). (b) Exhibits (all footnoted exhibits being incorporated herein by reference). 1. (a) Articles of Incorporation of Twentieth Century World Investors, Inc. (filed as Exhibit 1(a) to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). (b) Articles Supplementary of Twentieth Century World Investors,Inc., dated November 8, 1993 (filed as Exhibit 1(b) to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). (c) Articles Supplementary of Twentieth Century World Investors, Inc., dated April 24, 1995 (filed as Exhibit 1(c) to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). (d) Articles Supplementary of Twentieth Century World Investors, Inc., dated March 11, 1996 (EX-99.B1d). 2. By-Laws of Twentieth Century World Investors, Inc. (filed as Exhibit 2 to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). 3. Voting Trust Agreements - None. 4. Specimen Securities (filed as Exhibit 4 to the Registration Statement, File No. 33-39242, and incorporated herein by reference). 5. (a) Investment Management Agreement between Twentieth Century World Investors, Inc. and Investors Research Corporation (filed as Exhibit 5 to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). (b) Addendum to Management Agreement between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996 (EX-99.B5b). (c) Management Agreement-Advisor Class between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996 (EX-99.B5c). (d) Management Agreement-Service Class between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996 (EX-99.B5d). (e) Management Agreement-Institutional Class between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996 (EX-99.B5e). 6. Distribution Agreement between TCI Portfolios, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Strategic Asset Allocations, Inc., Twentieth Century World Investors, Inc. and Twentieth Century Securities, Inc. dated September 3, 1996 (EX-99.B6). 7. Bonus and Profit Sharing Plan, Etc. - None. 8. (a) Custody Agreement by and between Twentieth Century World Investors, Inc. and UMB Bank, N.A. (filed as Exhibit 8(a) to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). (b) Amendment No. 1 to Custody Agreement by and between Twentieth Century World Investors, Inc. and UMB Bank, N.A., dated January 25, 1996 (filed as Exhibit 8(b) to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). (c) Custodian Agreement by and between Twentieth Century World Investors, Inc. and Boatmen's First National Bank of Kansas City (filed as Exhibit 8(c) to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). 9. Transfer Agency Agreement dated as of March 1, 1992, by and between Twentieth Century World Investors, Inc. and Twentieth Century Services, Inc. (filed as Exhibit 9 to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). 10. Opinion and consent of David H. Reinmiller, Esq. (EX-99.B10). 11. Consent of Baird, Kurtz & Dobson (EX-99.B11). 12. (a) Annual Report of the Registrant dated November 30, 1995 (filed January 24, 1996, File No. 33-39242, accession #872825-96-000001, and incorporated herein by reference). (b) Semiannual Report of the Registrant dated May 31, 1996 (to be filed on or about July 15, 1996, File No. 33-39242, and incorporated herein by reference). 13. Agreements for Initial Capital, Etc. - None. 14. Model Retirement Plans (filed as Exhibits 14a-d to Pre-Effective Amendment No. 4, File No. 33-39242, and incorporated herein by reference). 15. (a) 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 (EX-99.B15a). (b) 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 (EX-99.B15b). 16. Schedule of Computation for Performance Advertising Quotations (EX-99.B16). 17. Power of Attorney (filed as Exhibit 17 to Post-Effective Amendment No. 6 to the Registration Statement, File No. 33-39242, accession #872825-96-000004, and incorporated herein by reference). 18. 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 (EX-99.B18). 27. (a) Financial Data Schedule for Twentieth Century International Equity (EX-27.1.1). (b) Financial Data Schedule for Twentieth Century International Emerging Growth (EX-27.1.2). ITEM 25 Persons Controlled by or Under Common Control with Registrant - None. ITEM 26 Number of Holders of Securities Number of Record Holders Title of Series As of May 31, 1996 --------------- ------------------------ Twentieth Century International Equity 104,417 Twentieth Century International Small Company Fund 9,737 ITEM 27 Indemnification The Registrant is a Maryland Corporation. Section 2-418 of the Maryland General Corporation Law allows a Maryland corporation to indemnify its officers, directors, employees and agents to the extent provided in such statute. Article XIII of the Registrant's Articles of Incorporation, Exhibit 1, requires the indemnification of the Registrant's directors and officers to the extent permitted by Section 2-418 of the Maryland General Corporation Law, the Investment Company Act of 1940 and all other applicable laws. The Registrant has purchased an insurance policy insuring its officers and directors against certain liabilities which such officers and directors may incur while acting in such capacities and providing reimbursement to the Registrant for sums which it may be permitted or required to pay to its officers and directors by way of indemnification against such liabilities, subject in either case to clauses respecting deductibility and participation. ITEM 28 Business and Other Connections of Investment Advisor. Investors Research Corporation, the investment advisor, is engaged in the business of managing investments for registered investment companies, deferred compensation plans and other institutional investors. ITEM 29 Principal Underwriters - None. ITEM 30 Location of Accounts and Records All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in the possession of Registrant, Twentieth Century Services, Inc. and Investors Research Corporation, all located at 4500 Main Street, Kansas City, Missouri 64111. ITEM 31 Management Services - None. ITEM 32 Undertakings. (a) Not applicable. (b) The Registrant hereby undertakes to file a post-effective amendment to this Registration Statement, using financial statements which need not be certified, within four to six months from the effective date of this Post-Effective Amendment No. 7. (c) The Registrant hereby undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge. (d) The Registrant hereby undertakes that it will, if requested to do so by the holders of at least 10% of the Registrant's outstanding votes, call a meeting of shareholders for the purpose of voting upon the question of the removal of a director and to assist in communication with other shareholders as required by Section 16(c). SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Twentieth Century World Investors, Inc., the Registrant, certifies that it has duly caused this Post-Effective Amendment No. 7 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kansas City, State of Missouri on the 13th day of June, 1996. Twentieth Century World, Inc. (Registrant) By:/s/ James E. Stowers III James E. Stowers III, President Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 7 has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date *James E. Stowers, Jr. Chairman, Director and June 13, 1996 James E. Stowers, Jr. Principal Executive Officer /s/ James E. Stowers III President and Director June 13, 1996 James E. Stowers III *Robert T. Jackson Executive Vice President June 13, 1996 Robert T. Jackson and Principal Financial Officer *Maryanne Roepke Vice President, Treasurer and June 13, 1996 Maryanne Roepke Principal Accounting Officer *Thomas A. Brown Director June 13, 1996 Thomas A. Brown *Robert W. Doering, M.D. Director June 13, 1996 Robert W. Doering, M.D. *Linsley L. Lundgaard Director June 13, 1996 Linsley L. Lundgaard *Donald H. Pratt Director June 13, 1996 Donald H. Pratt *Lloyd T. Silver, Jr. Director June 13, 1996 Lloyd T. Silver, Jr. *M. Jeannine Strandjord Director June 13, 1996 M. Jeannine Strandjord *John M. Urie Director June 13, 1996 John M. Urie *By/s/ James E. Stowers III James E. Stowers III Attorney-in-Fact EX-99 2 EXHIBIT INDEX EXHIBIT INDEX Twentieth Century World Investors, Inc. Exhibit Description of Document Number EX-99.B1a Articles of Incorporation of Twentieth Century World Investors, Inc. (filed as Exhibit 1(a) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B1b Articles Supplementary of Twentieth Century World Investors,Inc., dated November 8, 1993. (filed as Exhibit 1(b) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B1c Articles Supplementary of Twentieth Century World Investors, Inc., dated April 24, 1995 (filed as Exhibit 1(c) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B1d Articles Supplementary of Twentieth Century World Investors, Inc., dated March 11, 1996. EX-99.B2 By-Laws of Twentieth Century World Investors, Inc. (filed as Exhibit 2 to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B4 Specimen Securities (filed as Exhibit 4 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B5a Form of Investment Management Agreement between Twentieth Century World Investors, Inc. and Investors Research Corporation. (filed as Exhibit 5 to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B5b Addendum to Management Agreement between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996. EX-99.B5c Management Agreement-Advisor Class between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996. EX-99.B5d Management Agreement-Services Class between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996. EX-99.B5e Management Agreement-Institutional Class between Twentieth Century World Investors, Inc. and Investors Research Corporation dated September 1, 1996. EX-99.B6 Distribution Agreement between TCI Portfolios, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century Strategic Asset Allocations, Inc., Twentieth Century World Investors, Inc. and Twentieth Century Securities, Inc. dated September 3, 1996. EX-99.B8a Custody Agreement by and between Twentieth Century World Investors, Inc. and UMB Bank, N.A. (filed as Exhibit 8(a) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B8b Amendment No. 1 to Custody Agreement by and between Twentieth Century World Investors, Inc. and UMB Bank, N.A., dated January 25, 1996 (filed as Exhibit 8(b) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B8c Custodian Agreement by and between Twentieth Century World Investors, Inc. and Boatmen's First National Bank of Kansas City (filed as Exhibit 8(c) to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B9 Transfer Agency Agreement dated as of March 1, 1992, by and between Twentieth Century World Investors, Inc. and Twentieth Century Services, Inc. (filed as Exhibit 9 to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B10 Opinion and consent of David H. Reinmiller, Esq. EX-99.B11 Consent of Baird, Kurtz & Dobson. EX-99.B12a Annual Report of the Registrant dated November 30, 1995 (filed January 24, 1996, File No. 33-39242, and incorporated herein by reference). EX-99.B12b Semiannual Report of the Registrant dated May 31, 1996 (to be filed on or about July 15, 1996, File No. 33-39242, and incorporated herein by reference). EX-99.B14 Model Retirement Plans (filed as Exhibits 14a-d to Pre-Effective Amendment No. 4 to the Registration Statement on Form N-1A, File No. 33-39242, and incorporated herein by reference). EX-99.B15a 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. EX-99.B15b 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. EX-99.B16 Schedule of Computation for Performance Advertising Quotations EX-99.B17 Power of Attorney (filed as Exhibit 17 to Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A of the Registrant, File No. 33-39242, and incorporated herein by reference). EX-99.B18 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. EX-27.1.1 Financial Data Schedule for Twentieth Century International Equity. EX-27.1.2 Financial Data Schedule for Twentieth Century International Small Company Fund. EX-99.B1D 3 ARTICLES SUPPLEMENTARY TWENTIETH CENTURY WORLD INVESTORS, INC. ARTICLES SUPPLEMENTARY TWENTIETH CENTURY WORLD INVESTORS, INC., a Maryland corporation whose principal Maryland office is located in Baltimore, Maryland (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by Article SEVENTH of the Charter of the Corporation, the Board of Directors of the Corporation has duly established two (2) different series for the Corporation's stock (each hereinafter referred to as a "Series") and allocated One Billion (1,000,000,000) shares of the One Billion One Hundred Million (1,100,000,000) shares of authorized capital stock of the Corporation, par value One Cent ($.01) per share for an aggregate par value of Eleven Million Dollars ($11,000,000), among such Series as follows: Number Number of Shares of Shares Aggregate Series Before Increase As Increased Par Value - ------ ---------------- ------------ --------- International Equity 300,000,000 800,000,000 $ 8,000,000 International Emerging Growth 20,000,000 200,000,000 2,000,000 The par value of each share of stock in each Series is One Cent ($0.01) per share. SECOND: Except as otherwise provided by the express provisions of these Articles Supplementary, nothing herein shall limit, by inference or otherwise, the discretionary right of the Board of Directors to serialize, classify or reclassify and issue any unissued shares of any Series or any unissued shares that have not been allocated to a Series, and to fix or alter all terms thereof, to the full extent provided by the Charter of the Corporation. THIRD: A description of the Series, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption is set forth in the Charter of the Corporation and is not changed by these Articles Supplementary, except with respect to the creation of the various Series. FOURTH: The Board of Directors of the Corporation duly adopted resolutions dividing into Series the authorized capital stock of the Corporation and allocating shares to each Series as set forth in these Articles Supplementary. IN WITNESS WHEREOF, TWENTIETH CENTURY WORLD 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 11 day of March, 1996. TWENTIETH CENTURY WORLD INVESTORS, INC. ATTEST: /s/William M. Lyons By: /s/Patrick A. Looby Name: William M. Lyons Name: Patrick A. Looby Title: Secretary Title: Vice President THE UNDERSIGNED Vice President of TWENTIETH CENTURY WORLD 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: March 11, 1996 /s/ Patrick A. Looby Patrick A. Looby, Vice President EX-99.B5B 4 ADDENDUM TO MANAGEMENT AGREEMENT ADDENDUM TO MANAGEMENT AGREEMENT THIS ADDENDUM, dated as of September 1, 1996, supplements the Management Agreement (the "Agreement") dated as of August 1, 1994, by and between Twentieth Century World Investors, Inc. (the "Corporation") and Investors Research Corporation (the "Investment Manager"). All capitalized terms used herein and not otherwise defined have the meaning given them in the Agreement. IN CONSIDERATION of the mutual promises and conditions herein contained, the parties agree as follows: 1. The Investment Manager shall manage the following series (the "New Series") to be issued by the Corporation, and for such management shall receive the Applicable Fee set forth below: Name of Series Applicable Fee Emerging Markets Fund 2.00% of first $500 million 1.50% of the next $500 million 1.25% over $1 billion 2. The Investment Manager shall manage the New Series in accordance with the terms and conditions specified in the Agreement for its existing management responsibilities. IN WITNESS WHEREOF, the parties have caused this Addendum to the Agreement to be executed by their respective duly authorized officers as of the day and year first above written. TWENTIETH CENTURY WORLD Attest: INVESTORS, INC. /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President INVESTORS RESEARCH CORPORATION Attest: /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President EX-99.B5C 5 MANAGEMENT AGREEMENT - ADVISOR CLASS MANAGEMENT AGREEMENT ADVISOR CLASS THIS AGREEMENT, made as of the 1st day of September, 1996, is by and between TWENTIETH CENTURY WORLD INVESTORS, INC., a Maryland corporation (hereinafter called the "Corporation") and Investors Research Corporation, a Delaware corporation (hereinafter called the "Investment Manager"). WHEREAS, the Corporation has adopted a Multiple Class Plan dated as of September 3, 1996 (as the same may be amended from time to time, the "Multiple Class Plan"), pursuant to Rule 18f-3 of the Investment Company Act of 1940, as amended (the "Investment Company Act"); and WHEREAS, the Multiple Class Plan establishes four classes of shares of certain series of shares of the Corporation: the Retail Class, the Institutional Class, the Service Class, and the Advisor Class; and WHEREAS, the sole class of shares issued by each series of shares of the Corporation prior to the adoption of the Multiple Class Plan has been designated as the Retail Class, the investment management services for which are provided by the Investment Manager pursuant to that certain Management Agreement dated as of August 1, 1994; and WHEREAS, the parties hereto desire to enter into this Agreement to arrange for investment management services to be provided by Investment Manager for the new Advisor Class of shares issued by the Corporation; NOW, THEREFORE, IN CONSIDERATION of the mutual promises and agreements herein contained, the parties agree as follows: 1. INVESTMENT MANAGEMENT SERVICES. The Investment Manager shall supervise the investments of the Advisor Class of each series of shares of the Corporation contemplated as of the date hereof, and the Advisor Class of such subsequent series of shares as the Corporation shall select the Investment Manager to manage. In such capacity, the Investment Manager shall maintain a continuous investment program for the Advisor Class of each such series, determine what securities shall be purchased or sold by each series, secure and evaluate such information as it deems proper and take whatever action is necessary or convenient to perform its functions, including the placing of purchase and sale orders. In performing its duties hereunder, Investment Manager will manage the portfolio of all classes of a particular series as a single portfolio. 2. COMPLIANCE WITH LAWS. All functions undertaken by the Investment Manager hereunder shall at all times conform to, and be in accordance with, any requirements imposed by: (1) the Investment Company Act, and any rules and regulations promulgated thereunder; (2) any other applicable provisions of law; (3) the Articles of Incorporation of the Corporation; (4) the By-laws of the Corporation; (5) the Multiple Class Plan; and (6) the registration statements of the Corporation, to time, filed under the Securities Act of 1933 and the Investment Company Act, each as amended from time to time. 3. BOARD SUPERVISION. All of the functions undertaken by the Investment Manager hereunder shall at all times be subject to the direction of the Board of Directors of the Corporation, its executive committee, or any committee or officers of the Corporation acting under the authority of the Board of Directors. 4. PAYMENT OF EXPENSES. The Investment Manager will pay all of the expenses of the Advisor Class of each series of the Corporation's shares that it shall manage, other than interest, taxes, brokerage commissions, extraordinary expenses, the fees and expenses of those directors who are not "interested persons" as defined in Investment Company Act (hereinafter referred to as the "Independent Directors") (including counsel fees) and expenses incurred in connection with the provision of Shareholder Services and distribution services under the Master Distribution and Shareholder Services Plan dated as of September 3, 1996. The Investment Manager will provide the Corporation with all physical facilities and personnel required to carry on the business of the Advisor Class of each series that the Investment Manager shall manage, including but not limited to office space, office furniture, fixtures and equipment, office supplies, computer hardware and software and salaried and hourly paid personnel. The Investment Manager may at its expense employ others to provide all or any part of such facilities and personnel. 5. ACCOUNT FEES. The Corporation, by resolution of the Board of Directors, including a majority of the Independent Directors, may from time to time authorize the imposition of a fee as a direct charge against shareholder accounts of the Advisor Class of one or more of the series, such fee to be retained by the Corporation or to be paid to the Investment Manager to defray expenses that would otherwise be paid by the Investment Manager in accordance with the provisions of paragraph 4 of this Agreement. At least sixty (60) days prior written notice of the intent to impose such fee must be given to the shareholders of the affected series. 6. MANAGEMENT FEES. (a) In consideration of the services provided by the Investment Manager, the Advisor Class of each series of shares of the Corporation managed by the Investment Manager shall pay to the Investment Manager a per annum management fee (hereinafter, the "Applicable Fee"), as follows: Name of Series Applicable Fee Rate International Equity 1.25% of first $1 billion 0.95% of the next $1 billion 0.85% over $2 billion International Small Company Fund 1.50% of first $500 million 1.15% of the next $500 million 0.95% over $1 billion Emerging Markets Fund 1.75% of first $500 million 1.25% of the next $500 million 1.00% over $1 billion (b) On the first business day of each month, the Advisor Class of each series of shares shall pay the Investment Manager the Applicable Fee at the rate specified by subparagraph (a) of this paragraph 6 for the previous month. The fee for the previous month shall be calculated by multiplying the Applicable Fee Rate set forth above for such series by the aggregate average daily closing value of the series' net assets during the previous month, and further multiplying that product by a fraction, the numerator of which shall be the number of days in the previous month, and the denominator of which shall be 365 (366 in leap years). (c) In the event that the Board of Directors of the Corporation shall determine to issue a Advisor Class of any additional series of shares for which it is proposed that the Investment Manager serve as investment manager, the Corporation and the Investment Manager shall enter into an Addendum to this Agreement setting forth the name of the series, the Applicable Fee and such other terms and conditions as are applicable to the management of such series of shares. 7. CONTINUATION OF AGREEMENT. This Agreement shall continue in effect, unless sooner terminated as hereinafter provided, for a period of two years from the execution hereof, and for as long thereafter as its continuance is specifically approved at least annually (i) by the Board of Directors of the Corporation or by the vote of a majority of the outstanding Advisor Class of voting securities of the Corporation, and (ii) by the vote of a majority of the directors of the Corporation, who are not parties to the agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. 8. TERMINATION. This Agreement may be terminated by the Investment Manager at any time without penalty upon giving the Corporation 60 days' written notice, and may be terminated at any time without penalty by the Board of Directors of the Corporation or by vote of a majority of the outstanding Advisor Class of voting securities of the Corporation on 60 days' written notice to the Investment Manager. 9. EFFECT OF ASSIGNMENT. This Agreement shall automatically terminate in the event of assignment by the Investment Manager, the term "assignment" for this purpose having the meaning defined in Section 2(a)(4) of the Investment Company Act. 10. OTHER ACTIVITIES. Nothing herein shall be deemed to limit or restrict the right of the Investment Manager, or the right of any of its officers, directors or employees (who may also be a director, officer or employee of the Corporation), to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, firm, individual or association. 11. STANDARD OF CARE. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties hereunder on the part of the Investment Manager, it, as an inducement to it to enter into this Agreement, shall not be subject to liability to the Corporation or to any shareholder of the Corporation for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 12. SEPARATE AGREEMENT. The parties hereto acknowledge that certain provisions of the Investment Company Act, in effect, treat each series of shares of an investment company as a separate investment company. Accordingly, the parties hereto hereby acknowledge and agree that, to the extent deemed appropriate and consistent with the Investment Company Act, this Agreement shall be deemed to constitute a separate agreement between the Investment Manager and each series of shares of the Corporation managed by the Investment Manager. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers as of the day and year first above written. Attest: TWENTIETH CENTURY WORLD INVESTORS, INC. /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President Attest: INVESTORS RESEARCH CORPORATION /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President EX-99.B5D 6 MANAGEMENT AGREEMENT - SERVICE CLASS MANAGEMENT AGREEMENT SERVICE CLASS THIS AGREEMENT, made as of the 1st day of September, 1996, is by and between TWENTIETH CENTURY WORLD INVESTORS, INC., a Maryland corporation (hereinafter called the "Corporation") and Investors Research Corporation, a Delaware corporation (hereinafter called the "Investment Manager"). WHEREAS, the Corporation has adopted a Multiple Class Plan dated as of September 3, 1996 (as the same may be amended from time to time, the "Multiple Class Plan"), pursuant to Rule 18f-3 of the Investment Company Act of 1940, as amended (the "Investment Company Act"); and WHEREAS, the Multiple Class Plan establishes four classes of shares of certain series of shares of the Corporation: the Retail Class, the Institutional Class, the Service Class, and the Advisor Class; and WHEREAS, the sole class of shares issued by each series of shares of the Corporation prior to the adoption of the Multiple Class Plan has been designated as the Retail Class, the investment management services for which are provided by the Investment Manager pursuant to that certain Management Agreement dated as of August 1, 1994; and WHEREAS, the parties hereto desire to enter into this Agreement to arrange for investment management services to be provided by Investment Manager for the new Service Class of shares issued by the Corporation; NOW, THEREFORE, IN CONSIDERATION of the mutual promises and agreements herein contained, the parties agree as follows: 1. INVESTMENT MANAGEMENT SERVICES. The Investment Manager shall supervise the investments of the Service Class of each series of shares of the Corporation contemplated as of the date hereof, and the Service Class of such subsequent series of shares as the Corporation shall select the Investment Manager to manage. In such capacity, the Investment Manager shall maintain a continuous investment program for the Service Class of each such series, determine what securities shall be purchased or sold by each series, secure and evaluate such information as it deems proper and take whatever action is necessary or convenient to perform its functions, including the placing of purchase and sale orders. In performing its duties hereunder, Investment Manager will manage the portfolio of all classes of a particular series as a single portfolio. 2. COMPLIANCE WITH LAWS. All functions undertaken by the Investment Manager hereunder shall at all times conform to, and be in accordance with, any requirements imposed by: (1) the Investment Company Act, and any rules and regulations promulgated thereunder; (2) any other applicable provisions of law; (3) the Articles of Incorporation of the Corporation; (4) the By-laws of the Corporation; (5) the Multiple Class Plan; and (6) the registration statements of the Corporation, to time, filed under the Securities Act of 1933 and the Investment Company Act, each as amended from time to time. 3. BOARD SUPERVISION. All of the functions undertaken by the Investment Manager hereunder shall at all times be subject to the direction of the Board of Directors of the Corporation, its executive committee, or any committee or officers of the Corporation acting under the authority of the Board of Directors. 4. PAYMENT OF EXPENSES. The Investment Manager will pay all of the expenses of the Service Class of each series of the Corporation's shares that it shall manage, other than interest, taxes, brokerage commissions, extraordinary expenses, the fees and expenses of those directors who are not "interested persons" as defined in Investment Company Act (hereinafter referred to as the "Independent Directors") (including counsel fees) and expenses incurred in connection with the provision of Shareholder Services under the Shareholder Services Plan dated as of September 3, 1996. The Investment Manager will provide the Corporation with all physical facilities and personnel required to carry on the business of the Service Class of each series that the Investment Manager shall manage, including but not limited to office space, office furniture, fixtures and equipment, office supplies, computer hardware and software and salaried and hourly paid personnel. The Investment Manager may at its expense employ others to provide all or any part of such facilities and personnel. 5. ACCOUNT FEES. The Corporation, by resolution of the Board of Directors, including a majority of the Independent Directors, may from time to time authorize the imposition of a fee as a direct charge against shareholder accounts of the Service Class of one or more of the series, such fee to be retained by the Corporation or to be paid to the Investment Manager to defray expenses that would otherwise be paid by the Investment Manager in accordance with the provisions of paragraph 4 of this Agreement. At least sixty (60) days prior written notice of the intent to impose such fee must be given to the shareholders of the affected series. 6. MANAGEMENT FEES. (a) In consideration of the services provided by the Investment Manager, the Service Class of each series of shares of the Corporation managed by the Investment Manager shall pay to the Investment Manager a per annum management fee (hereinafter, the "Applicable Fee"), as follows: Name of Series Applicable Fee Rate International Equity 1.25% of first $1 billion 0.95% of the next $1 billion 0.85% over $2 billion International Small Company Fund 1.50% of first $500 million 1.15% of the next $500 million 0.95% over $1 billion Emerging Markets Fund 1.75% of first $500 million 1.25% of the next $500 million 1.00% over $1 billion (b) On the first business day of each month, the Service Class of each series of shares shall pay the Investment Manager the Applicable Fee at the rate specified by subparagraph (a) of this paragraph 6 for the previous month. The fee for the previous month shall be calculated by multiplying the Applicable Fee Rate set forth above for such series by the aggregate average daily closing value of the series' net assets during the previous month, and further multiplying that product by a fraction, the numerator of which shall be the number of days in the previous month, and the denominator of which shall be 365 (366 in leap years). (c) In the event that the Board of Directors of the Corporation shall determine to issue a Service Class of any additional series of shares for which it is proposed that the Investment Manager serve as investment manager, the Corporation and the Investment Manager shall enter into an Addendum to this Agreement setting forth the name of the series, the Applicable Fee and such other terms and conditions as are applicable to the management of such series of shares. 7. CONTINUATION OF AGREEMENT. This Agreement shall continue in effect, unless sooner terminated as hereinafter provided, for a period of two years from the execution hereof, and for as long thereafter as its continuance is specifically approved at least annually (i) by the Board of Directors of the Corporation or by the vote of a majority of the outstanding Service Class of voting securities of the Corporation, and (ii) by the vote of a majority of the directors of the Corporation, who are not parties to the agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. 8. TERMINATION. This Agreement may be terminated by the Investment Manager at any time without penalty upon giving the Corporation 60 days' written notice, and may be terminated at any time without penalty by the Board of Directors of the Corporation or by vote of a majority of the outstanding Service Class of voting securities of the Corporation on 60 days' written notice to the Investment Manager. 9. EFFECT OF ASSIGNMENT. This Agreement shall automatically terminate in the event of assignment by the Investment Manager, the term "assignment" for this purpose having the meaning defined in Section 2(a)(4) of the Investment Company Act. 10. OTHER ACTIVITIES. Nothing herein shall be deemed to limit or restrict the right of the Investment Manager, or the right of any of its officers, directors or employees (who may also be a director, officer or employee of the Corporation), to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, firm, individual or association. 11. STANDARD OF CARE. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties hereunder on the part of the Investment Manager, it, as an inducement to it to enter into this Agreement, shall not be subject to liability to the Corporation or to any shareholder of the Corporation for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 12. SEPARATE AGREEMENT. The parties hereto acknowledge that certain provisions of the Investment Company Act, in effect, treat each series of shares of an investment company as a separate investment company. Accordingly, the parties hereto hereby acknowledge and agree that, to the extent deemed appropriate and consistent with the Investment Company Act, this Agreement shall be deemed to constitute a separate agreement between the Investment Manager and each series of shares of the Corporation managed by the Investment Manager. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers as of the day and year first above written. Attest: TWENTIETH CENTURY WORLD INVESTORS, INC. /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President Attest: INVESTORS RESEARCH CORPORATION /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President EX-99.B5E 7 MANAGEMENT AGREEMENT - INSTITUTIONAL CLASS MANAGEMENT AGREEMENT INSTITUTIONAL CLASS THIS AGREEMENT, made as of the 1st day of September, 1996, is by and between TWENTIETH CENTURY WORLD INVESTORS, INC., a Maryland corporation (hereinafter called the "Corporation") and Investors Research Corporation, a Delaware corporation (hereinafter called the "Investment Manager"). WHEREAS, the Corporation has adopted a Multiple Class Plan dated as of September 3, 1996 (as the same may be amended from time to time, the "Multiple Class Plan"), pursuant to Rule 18f-3 of the Investment Company Act of 1940, as amended (the "Investment Company Act"); and WHEREAS, the Multiple Class Plan establishes four classes of shares of certain series of shares of the Corporation: the Retail Class, the Institutional Class, the Service Class, and the Advisor Class; and WHEREAS, the sole class of shares issued by each series of shares of the Corporation prior to the adoption of the Multiple Class Plan has been designated as the Retail Class, the investment management services for which are provided by the Investment Manager pursuant to that certain Management Agreement dated as of August 1, 1994; and WHEREAS, the parties hereto desire to enter into this Agreement to arrange for investment management services to be provided by Investment Manager for the new Institutional Class of shares issued by the Corporation; NOW, THEREFORE, IN CONSIDERATION of the mutual promises and agreements herein contained, the parties agree as follows: 1. INVESTMENT MANAGEMENT SERVICES. The Investment Manager shall supervise the investments of the Institutional Class of each series of shares of the Corporation contemplated as of the date hereof, and the Institutional Class of such subsequent series of shares as the Corporation shall select the Investment Manager to manage. In such capacity, the Investment Manager shall maintain a continuous investment program for the Institutional Class of each such series, determine what securities shall be purchased or sold by each series, secure and evaluate such information as it deems proper and take whatever action is necessary or convenient to perform its functions, including the placing of purchase and sale orders. In performing its duties hereunder, Investment Manager will manage the portfolio of all classes of a particular series as a single portfolio. 2. COMPLIANCE WITH LAWS. All functions undertaken by the Investment Manager hereunder shall at all times conform to, and be in accordance with, any requirements imposed by: (1) the Investment Company Act, and any rules and regulations promulgated thereunder; (2) any other applicable provisions of law; (3) the Articles of Incorporation of the Corporation; (4) the By-laws of the Corporation; (5) the Multiple Class Plan; and (6) the registration statements of the Corporation, to time, filed under the Securities Act of 1933 and the Investment Company Act, each as amended from time to time. 3. BOARD SUPERVISION. All of the functions undertaken by the Investment Manager hereunder shall at all times be subject to the direction of the Board of Directors of the Corporation, its executive committee, or any committee or officers of the Corporation acting under the authority of the Board of Directors. 4. PAYMENT OF EXPENSES. The Investment Manager will pay all of the expenses of the Institutional Class of each series of the Corporation's shares that it shall manage, other than interest, taxes, brokerage commissions, extraordinary expenses and the fees and expenses of those directors who are not "interested persons" as defined in Investment Company Act (hereinafter referred to as the "Independent Directors") (including counsel fees). The Investment Manager will provide the Corporation with all physical facilities and personnel required to carry on the business of the Institutional Class of each series that the Investment Manager shall manage, including but not limited to office space, office furniture, fixtures and equipment, office supplies, computer hardware and software and salaried and hourly paid personnel. The Investment Manager may at its expense employ others to provide all or any part of such facilities and personnel. 5. ACCOUNT FEES. The Corporation, by resolution of the Board of Directors, including a majority of the Independent Directors, may from time to time authorize the imposition of a fee as a direct charge against shareholder accounts of the Institutional Class of one or more of the series, such fee to be retained by the Corporation or to be paid to the Investment Manager to defray expenses that would otherwise be paid by the Investment Manager in accordance with the provisions of paragraph 4 of this Agreement. At least sixty (60) days prior written notice of the intent to impose such fee must be given to the shareholders of the affected series. 6. MANAGEMENT FEES. (a) In consideration of the services provided by the Investment Manager, the Institutional Class of each series of shares of the Corporation managed by the Investment Manager shall pay to the Investment Manager a per annum management fee (hereinafter, the "Applicable Fee"), as follows: Name of Series Applicable Fee Rate International Equity 1.30% of first $1 billion 1.00% of the next $1 billion 0.90% over $2 billion International Small Company Fund 1.55% of first $500 million 1.20% of the next $500 million 1.00% over $1 billion Emerging Markets Fund 1.80% of first $500 million 1.30% of the next $500 million 1.05% over $1 billion (b) On the first business day of each month, the Institutional Class of each series of shares shall pay the Investment Manager the Applicable Fee at the rate specified by subparagraph (a) of this paragraph 6 for the previous month. The fee for the previous month shall be calculated by multiplying the Applicable Fee Rate set forth above for such series by the aggregate average daily closing value of the series' net assets during the previous month, and further multiplying that product by a fraction, the numerator of which shall be the number of days in the previous month, and the denominator of which shall be 365 (366 in leap years). (c) In the event that the Board of Directors of the Corporation shall determine to issue a Institutional Class of any additional series of shares for which it is proposed that the Investment Manager serve as investment manager, the Corporation and the Investment Manager shall enter into an Addendum to this Agreement setting forth the name of the series, the Applicable Fee and such other terms and conditions as are applicable to the management of such series of shares. 7. CONTINUATION OF AGREEMENT. This Agreement shall continue in effect, unless sooner terminated as hereinafter provided, for a period of two years from the execution hereof, and for as long thereafter as its continuance is specifically approved at least annually (i) by the Board of Directors of the Corporation or by the vote of a majority of the outstanding Institutional Class of voting securities of the Corporation, and (ii) by the vote of a majority of the directors of the Corporation, who are not parties to the agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. 8. TERMINATION. This Agreement may be terminated by the Investment Manager at any time without penalty upon giving the Corporation 60 days' written notice, and may be terminated at any time without penalty by the Board of Directors of the Corporation or by vote of a majority of the outstanding Institutional Class of voting securities of the Corporation on 60 days' written notice to the Investment Manager. 9. EFFECT OF ASSIGNMENT. This Agreement shall automatically terminate in the event of assignment by the Investment Manager, the term "assignment" for this purpose having the meaning defined in Section 2(a)(4) of the Investment Company Act. 10. OTHER ACTIVITIES. Nothing herein shall be deemed to limit or restrict the right of the Investment Manager, or the right of any of its officers, directors or employees (who may also be a director, officer or employee of the Corporation), to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, firm, individual or association. 11. STANDARD OF CARE. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties hereunder on the part of the Investment Manager, it, as an inducement to it to enter into this Agreement, shall not be subject to liability to the Corporation or to any shareholder of the Corporation for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 12. SEPARATE AGREEMENT. The parties hereto acknowledge that certain provisions of the Investment Company Act, in effect, treat each series of shares of an investment company as a separate investment company. Accordingly, the parties hereto hereby acknowledge and agree that, to the extent deemed appropriate and consistent with the Investment Company Act, this Agreement shall be deemed to constitute a separate agreement between the Investment Manager and each series of shares of the Corporation managed by the Investment Manager. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers as of the day and year first above written. Attest: TWENTIETH CENTURY WORLD INVESTORS, INC. /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President Attest: INVESTORS RESEARCH CORPORATION /s/William M. Lyons By: /s/James E. Stowers III William M. Lyons James E. Stowers III Secretary President EX-99.B6 8 DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT TWENTIETH CENTURY MUTUAL FUNDS THIS DISTRIBUTION AGREEMENT is made and entered into by and between each of the open-end management investment companies listed on SCHEDULE A, attached hereto, as of the dates noted on such SCHEDULE A, together with all other open end management investment companies subsequently established and made subject to this Agreement in accordance with SECTION 11 (the "Issuers") and TWENTIETH CENTURY SECURITIES, INC. ("Distributor"), a Delaware corporation. WHEREAS, the common stock of each of the Issuers is currently divided into a number of separate series of shares, or funds, each corresponding to a distinct portfolio of securities, and many of which are also divided into multiple classes of shares; and WHEREAS, Distributor is a registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc.; and WHEREAS, the Boards of Directors of the Funds (the "Board") wish to engage the Distributor to act as the distributor of the Funds; NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties agree as follows: SECTION 1. GENERAL RESPONSIBILITIES Each Issuer hereby engages Distributor to act as exclusive distributor of the shares of each class of its separate series, and any other series and classes as may be designated from time to time hereafter (the "Funds"). The Funds subject to this Distribution Agreement are identified on SCHEDULE A, as the same may be amended from time to time. Sales of a Fund's shares shall be made only to investors residing in those states in which such Fund is registered. After effectiveness of each Fund's registration statement, Distributor will hold itself available to receive, and will receive, by mail, telex, telephone, and/or such other method as may be agreed upon between Distributor and Issuers, orders for the purchase of Fund shares, and will accept or reject such orders on behalf of the Funds in accordance with the provisions of the applicable Fund's prospectus. Distributor will be available to transmit such orders as are so accepted to the Fund's transfer agent as promptly as possible for processing at the shares' net asset value next determined in accordance with the prospectuses. a. Offering Price. All shares sold by Distributor under this Agreement shall be sold at the net asset value per share ("Net Asset Value") determined in the manner described in each Fund's prospectus, as it may be amended from time to time, next computed after the order is accepted by Distributor or its agents or affiliates. Each Fund shall determine and promptly furnish to Distributor a statement of the Net Asset Value of shares of said Fund's series at least once on each day on which the Fund is open for business, as described in its current prospectus. b. Promotion Support. Each Fund shall furnish to Distributor for use in connection with the sale of its shares such written information with respect to said Fund as Distributor may reasonably request. Each Fund represents and warrants that such information, when authenticated by the signature of one of its officers, shall be true and correct. Each Fund shall also furnish to Distributor copies of its reports to its shareholders and such additional information regarding said Fund's financial condition as Distributor may reasonably request. Any and all representations, statements and solicitations respecting a Fund's shares made in advertisements, sales literature and in any other manner whatsoever shall be limited to and conform in all respects to the information provided hereunder. c. Regulatory Compliance. Each Fund shall furnish to Distributor copies of its current form of prospectus, as filed with the SEC, in such quantity as Distributor may reasonably request from time to time, and authorizes Distributor to use the prospectus in connection with the sale of such Fund's shares. All such sales shall be initiated by offer of, and conducted in accordance with, such prospectus and all of the provisions of the Securities Act of 1933, the Investment Company Act of 1940 ("1940 Act") and all the rules and regulations thereunder. Distributor shall furnish applicable federal and state regulatory authorities with any information or reports related to its services under this Agreement which such authorities may lawfully request in order to ascertain whether the Funds' operations are being conducted in a manner consistent with any applicable law or regulations. d. Acceptance. All orders for the purchase of its shares are subject to acceptance by each Fund. SECTION 2. COMPENSATION a. Retail Class and Institutional Class Shares. Except for the promises of the Funds contained in this Agreement and their performance thereof, Distributor shall not be entitled to compensation for its services hereunder with respect to the Retail Class or the Services Class of shares. b. Distribution Class and Service Class Shares. For the services provided and expenses incurred by Distributor as described in SECTION 2 AND SECTION 3 of the Master Distribution and Shareholder Services Plan adopted by the Board with respect to the Distribution Class of such Funds, Distributor shall receive the compensation described in SECTION 1 of such Plan. For the services provided and expenses incurred by Distributor as described in SECTION 2 of the Shareholder Services Plan adopted by the Board with respect to the Service Class of such Funds, Distributor shall receive the compensation described in SECTION 1 of such Plan. SECTION 3. EXPENSES a. Distributor shall pay all expenses incurred by it in connection with the performance of its distribution duties hereunder and under the Master Distribution and Shareholder Services Plan, dated as of September 3, 1996, with respect to the Advisor Class of the Funds' shares, including, but not limited to (A) payment of sales commission, ongoing commissions and other payments to brokers, dealers, financial institutions or others who sell Advisor Class shares pursuant to Selling Agreements; (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 compensation or promotional incentives; (L) profit on the foregoing; (M) the payment of "service fees", as contemplated by the Rules of Fair Practice of the National Association of Securities Dealers , Inc.; and (N) such other distribution and services activities as the Issuers determine may be paid for by the Issuers pursuant to the terms of this Agreement and in accordance with Rule 12b-1 of the 1940 Act. b. Distributor shall pay all expenses incurred by it in connection with the performance of its shareholder and administrative services duties under the Shareholder Services Plan, dated as of September 3, 1996, with respect to the Service Class of the Funds' shares and under the Master Distribution and Shareholder Services Plan, dated as of September 3, 1996, with respect to the Distribution Class, including, but not limited to, (A) receiving, aggregating and processing purchase, exchange and redemption request from beneficial owners of Service Class shares (including contract owners of insurance products that utilize the Funds as underlying investment media) and placing purchase, exchange and redemption orders with the 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 semi-annual financial statements and dividend, distribution and tax notices) to shareholders and/or other beneficial owners; (J) providing other similar administrative and sub-transfer agency services; and (K) paying "service fees," as contemplated by the Rules of Fair Practice of the NASD. Shareholder Services do not include those activities and expenses that are primarily intended to result in the sale of additional shares of the Service Class of the Funds. c. In addition to paying the above expenses with respect to the Advisor Class and the Service Class, Distributor shall pay all expenses incurred with respect to the Funds' other classes in connection with their registration under the Securities Act of 1933 and the 1940 Act, the qualification of such shares for sale in each jurisdiction designated by the Funds' investment adviser, the issue and transfer of such shares (including the expenses of confirming purchase and redemption orders and of supplying the information, prices and other data to be furnished by the Funds under this Agreement), the registration of Distributor as a broker, and the registration and qualification of its officers, directors and representatives under applicable federal and state laws. SECTION 4. INDEPENDENT CONTRACTOR Distributor shall be an independent contractor. Neither Distributor nor any of its officers, trustees, employees or representatives is or shall be an employee of a Fund in connection with the performance of Distributor's duties hereunder. Distributor shall be responsible for its own conduct and the employment, control, compensation and conduct of its agents and employees, and for any injury to such agents or employees or to others through its agents and employees. SECTION 5. AFFILIATION WITH THE FUNDS Subject to and in accordance with each Fund's formative documents, Section 10 of the 1940 Act, it is understood: that the directors, officers, agents and shareholders of the Funds are or may be interested in Distributor as directors, officers, or shareholders of Distributor; that directors, officers, agents or shareholders of Distributor are or may be interested in the Funds as directors, officers, shareholders (directly or indirectly) or otherwise; and that the affect of any such interest shall be governed by the 1940 Act and SECTION 4. SECTION 6. BOOKS AND RECORDS It is expressly understood and agreed that all documents, reports, records, books, files and other materials ("Fund Records") relating to this Agreement and the services to be performed hereunder shall be the sole property of the Funds and that such property, to the extent held by Distributor, shall be held by Distributor as agent during the effective term of this Agreement. All Fund Records shall be delivered to the applicable Fund upon the termination of this Agreement, free from any claim or retention of rights by Distributor. SECTION 7. SERVICES NOT EXCLUSIVE The services of Distributor to the Funds hereunder are not to be deemed exclusive, and Distributor shall be free to render similar services to others. SECTION 8. RENEWAL AND TERMINATION a. Term and Annual Renewal. The term of this Agreement shall be from the date of its approval by the vote of a majority of the Board of each Issuer, and it shall continue in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of its Board, and the vote of a majority of said directors who are neither parties to the Agreement nor interested persons of any such party, cast at a meeting called for the purpose of voting on such approval. "Approved at least annually" shall mean approval occurring, with respect to the first continuance of the Agreement, during the 90 days prior to and including the date of its termination in the absence of such approval, and with respect to any subsequent continuance, during the 90 days prior to and including the first anniversary of the date upon which the most recent previous annual continuance of the Agreement became effective. The effective date of the Agreement with respect to each Fund is identified in the Schedules attached to this Agreement. b. Termination. This Agreement may be terminated at any time, without payment of any penalty, by a Fund's Board, upon 60 days' written notice to Distributor, and by Distributor upon 60 days' written notice to the Fund. This Agreement shall terminate automatically in the event of its assignment. The term "assignment" shall have the meaning set forth for such term in Section 2(a)(4) of the 1940 Act. SECTION 9. SEVERABILITY If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or similar authority, the remainder of this Agreement shall not be affected thereby. SECTION 10. APPLICABLE LAW This Agreement shall be construed in accordance with the laws of the State of Missouri. SECTION 11. AMENDMENT This Agreement and the Schedules forming a part hereof may be amended at any time by a writing signed by each of the parties hereto. In the event that the Board or trustees of any additional funds indicate by resolution that such funds are to be made parties to this Agreement, whether such funds were in existence at the time of the effective date of this Agreement or subsequently formed, SCHEDULE A hereto shall be amended to reflect the addition of such new funds and such new funds shall thereafter become parties hereto. In the event that such new funds issue multiple classes of shares, SCHEDULES B, C, D, AND E, as appropriate, shall be amended to reflect the addition of such new funds' classes. In the event that any of the Funds listed on SCHEDULE A terminates its registration as a management investment company, or otherwise ceases operations, SCHEDULE A (and, as appropriate, SCHEDULES B, C, D, AND E) shall be amended to reflect the deletion of such Fund and its various classes. TWENTIETH CENTURY SECURITIES, INC. By: /s/James E. Stowers III James E. Stowers III President TCI PORTFOLIOS, INC. TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. TWENTIETH CENTURY INVESTORS, INC. TWENTIETH CENTURY PREMIUM RESERVES, INC. TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. TWENTIETH CENTURY WORLD INVESTORS, INC. By: /s/William M. Lyons William M. Lyons Executive Vice President of each of the Issuers TWENTIETH CENTURY SECURITIES, INC. DISTRIBUTION AGREEMENT SCHEDULE A COMPANIES AND FUNDS COVERED BY THIS DISTRIBUTION AGREEMENT FUND DATE OF AGREEMENT - ---- ----------------- TCI PORTFOLIOS, INC. TCI Advantage September 3, 1996 TCI Balanced September 3, 1996 TCI Growth September 3, 1996 TCI International September 3, 1996 TCI Value September 3, 1996 TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Cash Reserve September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Intermediate-Term Bond September 3, 1996 Limited-Term Bond September 3, 1996 Long-Term Bond September 3, 1996 Select Investors September 3, 1996 U.S. Governments Intermediate-Term September 3, 1996 U.S. Governments Short-Term September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 Giftrust Investors September 3, 1996 Tax Exempt Short-Term September 3, 1996 Tax Exempt Intermediate-Term September 3, 1996 Tax Exempt Long-Term September 3, 1996 TWENTIETH CENTURY PREMIUM RESERVES, INC. Twentieth Century Premium Government Reserve September 3, 1996 Twentieth Century Premium Capital Reserve September 3, 1996 Twentieth Century Premium Managed Bond September 3, 1996 TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive September 3, 1996 Strategic Allocation: Conservative September 3, 1996 Strategic Allocation: Moderate September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 SCHEDULE B RETAIL CLASS FUNDS FUND DATE OF AGREEMENT - ---- ----------------- TCI PORTFOLIOS, INC. TCI Advantage September 3, 1996 TCI Balanced September 3, 1996 TCI Growth September 3, 1996 TCI International September 3, 1996 TCI Value September 3, 1996 TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Cash Reserve September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Intermediate-Term Bond September 3, 1996 Limited-Term Bond September 3, 1996 Long-Term Bond September 3, 1996 Select Investors September 3, 1996 U.S. Governments Intermediate-Term September 3, 1996 U.S. Governments Short-Term September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 Giftrust Investors September 3, 1996 Tax Exempt Short-Term September 3, 1996 Tax Exempt Intermediate-Term September 3, 1996 Tax Exempt Long-Term September 3, 1996 TWENTIETH CENTURY PREMIUM RESERVES, INC. Twentieth Century Premium Government Reserve September 3, 1996 Twentieth Century Premium Capital Reserve September 3, 1996 Twentieth Century Premium Managed Bond September 3, 1996 TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive September 3, 1996 Strategic Allocation: Conservative September 3, 1996 Strategic Allocation: Moderate September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 SCHEDULE C INSTITUTIONAL CLASS FUNDS FUND DATE OF AGREEMENT - ---- ----------------- TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Select Investors September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 SCHEDULE D SERVICE CLASS FUNDS FUND DATE OF AGREEMENT - ---- ----------------- TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Cash Reserve September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Intermediate-Term Bond September 3, 1996 Limited-Term Bond September 3, 1996 Long-Term Bond September 3, 1996 Select Investors September 3, 1996 U.S. Governments Intermediate-Term September 3, 1996 U.S. Governments Short-Term September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive September 3, 1996 Strategic Allocation: Conservative September 3, 1996 Strategic Allocation: Moderate September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 SCHEDULE E DISTRIBUTION CLASS FUNDS FUND DATE OF AGREEMENT - ---- ----------------- TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Cash Reserve September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Intermediate-Term Bond September 3, 1996 Limited-Term Bond September 3, 1996 Long-Term Bond September 3, 1996 Select Investors September 3, 1996 U.S. Governments Intermediate-Term September 3, 1996 U.S. Governments Short-Term September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive September 3, 1996 Strategic Allocation: Conservative September 3, 1996 Strategic Allocation: Moderate September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 EX-99.B10 9 OPINION AND CONSENT OF COUNSEL DAVID H. REINMILLER ATTORNEY AT LAW 4500 MAIN STREET * P.O. BOX 418210 KANSAS CITY, MISSOURI 64141-9210 TELEPHONE (816)340-4046 TELECOPIER (816)340-4964 June 13, 1996 VIA EDGAR Twentieth Century World Investors, Inc. Twentieth Century Tower 4500 Main Street Kansas City, Missouri 64111 Ladies and Gentlemen: As counsel to Twentieth Century World Investors, Inc. (the "Corporation"), I am generally familiar with its affairs. Based upon this familiarity, and upon the examination of such documents as I deemed relevant, it is my opinion that the shares of the Corporation described in Post-Effective Amendment No. 7 to its Registration Statement on Form N-1A, to be filed with the Securities and Exchange Commission on June 13, 1996, will, when issued, be validly issued, fully paid and nonassessable. For the record, it should be stated that I am an officer of the Corporation and an officer of Twentieth Century Services, Inc. an affiliated corporation of Investors Research Corporation, the investment adviser of the Corporation. I hereby consent to the use of this opinion as an exhibit to Post-Effective Amendment No. 7. Very truly yours, /s/David H. Reinmiller David H. Reinmiller EX-99.B11 10 CONSENT OF INDEPENDENT ACCOUNTANT BAIRD, KURTZ & DOBSON Certified Public Accountants City Center Square * Suite 2700 1100 Main Street Kansas City, Missouri 64105 Telephone (816) 221-6300 Fax (816)221-6380 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT Twentieth Century World Investors, Inc. Twentieth Century Tower 4500 Main Street Kansas City, Missouri 64111 We hereby consent to the use in this Post-Effective Amendment No. 7 to the Registration Statement under the Securities Act of 1933 and this Amendment No. 7 to the Registration Statement under the Investment Company Act of 1940, both on Form N-1A, of our report dated December 29, 1995, accompanying and pertaining to the financial statements of Twentieth Century World Investors, Inc., as of November 30, 1995, which are included in such Post-Effective Amendments. /s/Baird, Kurtz & Dobson BAIRD, KURTZ & DOBSON Kansas City, Missouri June 12, 1996 EX-99.B15A 11 MASTER DISTRIBUTION AND SHAREHOLDER SVCS. PLAN MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN OF TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. TWENTIETH CENTURY INVESTORS, INC. TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. TWENTIETH CENTURY WORLD INVESTORS, INC. Advisor Class WHEREAS, each of the above named corporations (the "Issuers") is an open-ended, management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the common stock of each Issuer is currently divided into a number of separate series of shares, or funds, each corresponding to a distinct portfolio of securities; and WHEREAS, pursuant to Rule 18f-3 of the 1940 Act, the Issuers' Boards of Directors (the "Board") have established multiple classes of shares of the various funds of the Issuers, including an Advisor Class of shares; and WHEREAS, the Board desires to authorize the funds identified in SCHEDULE A (the "Funds") to bear expenses of distribution of certain of their shares by adopting this Master Distribution and Shareholder Services Plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Advisor Class shares of each of the Funds; and WHEREAS, INVESTORS RESEARCH CORPORATION ("IRC") is the registered investment adviser to the Issuers; and WHEREAS, the Issuers have entered into a Distribution Agreement (the "Distribution Agreement") with TWENTIETH CENTURY SECURITIES, INC. (the "Distributor") pursuant to which Distributor serves as distributor of the various classes of the Funds, including the Advisor Class. NOW, THEREFORE, the Issuers hereby adopt, on behalf of the Funds, this Plan, in accordance with Rule 12b-1 under the 1940 Act on the following terms and conditions: SECTION 1. DISTRIBUTION FEES a. Distribution Fee. For purposes of paying costs and expenses incurred by Distributor in providing the distribution services set forth in SECTION 2 below, the Funds shall pay Distributor a fee equal to 25 basis points (0.25%) per annum of the average daily net assets of the shares of the Funds' Advisor Class of shares (the "Distribution Fee"). b. Shareholder Services Fee. For purposes of paying costs and expenses incurred by Distributor in providing the shareholder and administrative services set forth in SECTION 3 below, the Funds shall pay Distributor a fee equal to 25 basis points (0.25%) per annum of the average daily net assets of the shares of the Funds' Advisor Class of shares (the "Shareholder Services Fee"). c. Calculation and Assessment. Distribution Fees and Shareholder Services Fees under this Plan will be calculated and accrued daily by each Fund and paid monthly to the Distributor or at such other intervals as the Issuers and the Distributor may agree. SECTION 2. DISTRIBUTION SERVICES a. The amount set forth in SECTION 1 of this Plan shall be paid for Distributor's services in connection with any activities undertaken or expenses incurred primarily intended to result in the sale of Advisor Class shares of the Funds, which services may include, but are not limited to, (A) the payment of sales commission, ongoing commissions and other payments to brokers, dealers, financial institutions or others who sell Advisor Class shares pursuant to Selling Agreements; (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 compensation or promotional incentives; (L) profit on the foregoing; (M) the payment of "service fees", as contemplated by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"); and (N) such other distribution and services activities as the Issuers determine may be paid for by the Issuers pursuant to the terms of this Agreement and in accordance with Rule 12b-1 of the 1940 Act. b. For purposes of the Plan, "service fees" shall mean payments in connection with the provision of personal, continuing services to investors in each Fund and/or the maintenance of shareholder accounts, excluding (i) transfer agent and subtransfer agent services for beneficial owners of a Fund's Advisor Class shares, (ii) aggregating and processing purchase and redemption orders, (iii) providing beneficial owners with account statements, processing dividend payments, (iv) providing subaccounting services for Advisor Class shares held beneficially, (v) forwarding shareholder communications to beneficial owners, and (vi) receiving, tabulating and transmitting proxies executed by beneficial owners; provided, however, that if the NASD adopts a definition of "service fees" for purposes of Section 26(d) of the Rules of Fair Practice of the NASD that differs from the definition of "service activities" hereunder, or if the NASD adopts a related definition intended to define the same concept, the definition of "service fees" in this Section shall be automatically amended, without further action of the parties, to conform to such NASD definition. Overhead and other expenses of Distributor related to its service activities, including telephone and other communications expenses, may be included in the information regarding amounts expended for such activities. SECTION 3. SHAREHOLDER SERVICES DEFINED. As manager of the Funds' Advisor Class of shares, IRC may cause one of its affiliates to provide shareholder and administrative services to the shareholders of the Advisor Class shares of the Funds ("Shareholder Services") or it may engage third parties to do so. The payments authorized by this Plan are intended to reimburse IRC for expenses incurred as a result of these arrangements. Such Shareholder Services and related expenses may include, but are not limited to, (A) receiving, aggregating and processing purchase, exchange and redemption request from beneficial owners of Advisor Class shares (including contract owners of insurance products that utilize the Funds as underlying investment media) and placing purchase, exchange and redemption orders with the 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 semi-annual financial statements and dividend, distribution and tax notices) to shareholders and/or other beneficial owners; (J) providing other similar administrative and sub-transfer agency services; and (K) paying "service fees," as contemplated by the Rules of Fair Practice of the NASD. Shareholder Services do not include those activities and expenses that are primarily intended to result in the sale of additional shares of the Advisor Class of the Funds. SECTION 4. EFFECTIVENESS This Plan shall become effective as of September 3, 1996. SECTION 5. TERM AND RENEWAL This Plan will continue in effect until September 3, 1997, and will continue thereafter in full force and effect for successive periods of up to one year, provided that each such continuance is approved by the Board to the extent and in the manner required by the 1940 Act. SECTION 6. REPORTING REQUIREMENTS IRC shall administer this Plan in accordance with Rule 12b-1 of the 1940 Act. Distributor will provide to each Issuer's Board, and the Independent Directors will review and approve, in exercise of their fiduciary duties, at least quarterly, a written report of the amounts expended with respect to the Advisor Class shares of each Fund by Distributor under this Plan and such other information as may be required by the 1940 Act and Rule 12b-1 thereunder. SECTION 7. TERMINATION This Plan may be terminated at any time with respect to the Advisor Class shares of any Fund by vote of the Board of the Issuer of which the Fund is a series, by votes of a majority of the Independent Directors, or by vote of a majority of the outstanding voting Advisor Class shares of that Fund. Termination of the Plan with respect to the Advisor Class shares of one Fund will not affect the continued effectiveness of this Plan with respect to the Advisor Class shares of any other Fund. SECTION 8. AMENDMENTS TO THIS PLAN This Plan may not be amended to increase materially the amount of compensation a Fund is authorized to pay under SECTION 1 hereof unless such amendment is approved by the Board, as required by the 1940 Act, and such amendment is further approved by a majority of the outstanding voting securities of the Advisor Class shares of the Fund. No other material amendment to the Plan shall be made unless approved by the Board in the manner provided for annual renewal of the Plan in SECTION 5 hereof. This Agreement may be amended to include additional series of shares of the Issuers, whether or not such series were in existence at the time of original adoption of this Agreement or subsequently established, and series of additional Issuers, by adoption of this Plan in the manner required by the 1940 Act and the rules and regulations thereunder. Such new funds will become subject to this Plan and will commence paying the Distribution Fee set forth in SECTION 1(A) and the Shareholder Services Fee set forth in SECTION 1(B) on the date of the adoption of this Plan by the Board, unless the Board specifies otherwise. After the effective date of adoption of this Plan by the Board with respect to the Advisor Class of shares of such new funds, the term "Funds" under this Plan shall thereafter be deemed to include the new funds. SECTION 9. RECORDKEEPING The Issuers will preserve copies of this Plan (including any amendments thereto) and any related agreements and all reports made pursuant to SECTION 6 hereof for a period of not less than six years from the date of this Plan, the first two years in an easily accessible place. IN WITNESS WHEREOF, the Issuers have executed this Distribution Plan as of September 3, 1996. TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. TWENTIETH CENTURY INVESTORS, INC. TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Attest: TWENTIETH CENTURY WORLD INVESTORS, INC. By: /s/Patrick A. Looby By: /s/James E. Stowers III PATRICK A. LOOBY JAMES E. STOWERS III Assistant Secretary President SCHEDULE A SERIES OFFERING ADVISOR CLASS SHARES SERIES DATE PLAN ADOPTED - ------ ----------------- TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Cash Reserve September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Intermediate-Term Bond September 3, 1996 Limited-Term Bond September 3, 1996 Long-Term Bond September 3, 1996 Select Investors September 3, 1996 U.S. Governments Intermediate-Term September 3, 1996 U.S. Governments Short-Term September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive September 3, 1996 Strategic Allocation: Conservative September 3, 1996 Strategic Allocation: Moderate September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 EX-99.B15B 12 SHAREHOLDER SERVICES PLAN SHAREHOLDER SERVICES PLAN OF TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. TWENTIETH CENTURY INVESTORS, INC. TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. TWENTIETH CENTURY WORLD INVESTORS, INC. Service Class WHEREAS, each of the above named corporations (the "Issuers") is an open-ended, management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the common stock of each Issuer is currently divided into a number of separate series of shares, or funds, each corresponding to a distinct portfolio of securities; and WHEREAS, pursuant to Rule 18f-3 of the 1940 Act, the Boards of Directors of the Issuers (the "Board of Directors") have established multiple classes of shares of the various funds of the Issuers, including a Service Class of shares; and WHEREAS, the Board of Directors desires to authorize the funds identified in SCHEDULE A (the "Funds") to authorize the Service Class of shares of such Funds to bear the expenses for Shareholder Services (as defined herein) provided to the Service Class shareholders by IRC or its affiliates, or by independent third parties by adopting this Shareholder Services Plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Service Class shares of each of the Funds; and WHEREAS, INVESTORS RESEARCH CORPORATION ("IRC") is the registered investment adviser to the Issuers; and NOW, THEREFORE, the Issuers hereby adopt, on behalf of the Funds, this Plan, in accordance with Rule 12b-1 under the 1940 Act on the following terms and conditions: SECTION 1. SHAREHOLDER SERVICE FEES a. Amount of Fee. For purposes of paying costs and expenses incurred in providing shareholder and administrative services to each Fund's Service Class of shares as set forth in SECTION 2 below, the Funds' shall pay the Distributor a fee equal to 25 basis points (0.25%) per annum of the average daily net assets of the Funds' Service Class of shares (the "Shareholder Services Fee"). b. Calculation and Assessment. Shareholder Service Fees under this Plan shall be calculated and accrued daily by each Fund and paid monthly to the Distributor or at such other intervals as the Issuers and the Distributor shall agree. SECTION 2. SHAREHOLDER SERVICES DEFINED As manager of the Funds' Service Class of shares, IRC may cause one of its affiliates to provide shareholder and administrative services to the shareholders of the Service Class shares of the Funds ("Shareholder Services") or it may engage third parties to do so. The payments authorized by this Plan are intended to reimburse IRC for expenses incurred as a result of these arrangements. Such Shareholder Services and related expenses may include, but are not limited to, (A) receiving, aggregating and processing purchase, exchange and redemption request from beneficial owners of Service Class shares (including contract owners of insurance products that utilize the Funds as underlying investment media) and placing purchase, exchange and redemption orders with the 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 semi-annual financial statements and dividend, distribution and tax notices) to shareholders and/or other beneficial owners; (J) providing other similar administrative and sub-transfer agency services; and (K) paying "service fees," as contemplated by the Rules of Fair Practice of the NASD. Shareholder Services do not include those activities and expenses that are primarily intended to result in the sale of additional shares of the Service Class of the Funds. SECTION 3. EFFECTIVENESS This Plan shall become effective September 3, 1996. SECTION 4. TERM AND RENEWAL This Plan will continue in effect until September 3, 1997, and will continue thereafter in full force and effect for successive periods of up to one year, provided that each such continuance is approved by the Board to the extent and in the manner required by the 1940 Act. SECTION 5. REPORTING REQUIREMENTS IRC shall administer this Plan in accordance with Rule 12b-1 of the 1940 Act. Distributor will provide to each Issuer's Board and the Independent Directors will review and approve, in exercise of their fiduciary duties, at least quarterly, a written report of the amounts expended with respect to the Service Class shares of each Fund by the Distributor under this Plan and such other information as may be required by the 1940 Act and Rule 12b-1 thereunder. SECTION 6. TERMINATION This Plan may be terminated at any time with respect to the Service Class shares of any Fund by vote of the Board of Directors of the Issuer of which the Fund is a series or by vote of a majority of the Independent Directors. Termination of the Plan with respect to the Service Class shares of one Fund shall not affect the continued effectiveness of this Plan with respect to the Service Class shares of any other Fund. SECTION 7. AMENDMENTS TO THIS PLAN This Plan may not be amended to increase materially the amount of compensation a Fund is authorized to pay under SECTION 1 hereof unless such amendment is approved by the Board, as required by the 1940 Act, and such amendment is further approved by a majority of the outstanding voting securities of the Service Class shares of the Fund. No other material amendment to the Plan shall be made unless approved by the Board in the manner provided for annual renewal of the Plan in SECTION 4 hereof. This Agreement may be amended to include additional series of shares of the Issuers, whether or not such series were in existence at the time of original adoption of this Agreement or subsequently established, and series of additional Issuers, by adoption of this Plan in the manner required by the 1940 Act and the rules and regulations thereunder. Such new funds will become subject to this Plan and will commence paying the Shareholder Services Fee set forth in SECTION 1(A) on the date of the adoption of this Plan by the Board, unless the Board specifies otherwise. After the effective date of adoption of this Plan by the Board with respect to the Service Class of shares of such new funds, the term "Funds" under this Plan shall thereafter be deemed to include the existing or new funds. SECTION 8. RECORDKEEPING The Issuers shall preserve copies of this Plan (including any amendments thereto) and any related agreements and all reports made pursuant to SECTION 5 hereof for a period of not less than six years from the date of this Plan, the first two years in an easily accessible place. IN WITNESS WHEREOF, the Issuers have executed this Shareholder Services Plan as of September 3, 1996. TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. TWENTIETH CENTURY INVESTORS, INC. TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Attest: TWENTIETH CENTURY WORLD INVESTORS, INC. /s/Patrick A. Looby /s/James E. Stowers III PATRICK A. LOOBY JAMES E. STOWERS III Assistant Secretary President SCHEDULE A SERIES OFFERING SERVICE CLASS SHARES SERIES DATE PLAN ADOPTED - ------ ----------------- TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income September 3, 1996 Twentieth Century Value September 3, 1996 TWENTIETH CENTURY INVESTORS, INC. Balanced Investors September 3, 1996 Cash Reserve September 3, 1996 Growth Investors September 3, 1996 Heritage Investors September 3, 1996 Intermediate-Term Bond September 3, 1996 Limited-Term Bond September 3, 1996 Long-Term Bond September 3, 1996 Select Investors September 3, 1996 U.S. Governments Intermediate-Term September 3, 1996 U.S. Governments Short-Term September 3, 1996 Ultra Investors September 3, 1996 Vista Investors September 3, 1996 TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive September 3, 1996 Strategic Allocation: Conservative September 3, 1996 Strategic Allocation: Moderate September 3, 1996 TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth September 3, 1996 Twentieth Century International Equity September 3, 1996 EX-99.B16 13 SCHEDULE OF COMPUTATION SCHEDULE OF COMPUTATION OF PERFORMANCE ADVERTISING QUOTATIONS Set forth below are representative calculations of each type of total return performance quotation included in the Statement of Additional Information of Twentieth Century World Investors, Inc. 1. AVERAGE ANNUAL TOTAL RETURN. The average one-year annual total return of International Equity as quoted in the Statement of Additional Information, was 5.93%. This return was calculated as follows: n P(1+T) =ERV where, P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of the hypothetical $1,000 payment at the end of the period. Applying the actual return figures of the fund for the one year period ended November 30, 1995: 1 1,000(1+T) = $1,059.30 1 (1,059.30) T = ---------- - 1 (1,000) T = 5.93 2. CUMULATIVE TOTAL RETURN. The cumulative total return of International Equity from May 9, 1991 (inception) to November 30, 1995 as quoted in the Statement of Additional Information, was 69.28% This return was calculated as follows: (ERV-P) C = ------- P where, C = cumulative total return P = a hypothetical initial payment of $1,000 ERV = ending redeemable value of the hypothetical $1,000 payment at the end of the period. Applying the actual return figures of the fund for the period May 9, 1991 through November 30, 1994. (1,692.80-1,000) C = ---------------- 1,000 C = 69.28 EX-99.B18 14 MULTIPLE CLASS PLAN MULTIPLE CLASS PLAN OF TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. TWENTIETH CENTURY INVESTORS, INC. TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. TWENTIETH CENTURY WORLD INVESTORS, INC. WHEREAS, each of the above-named corporations (the "Issuers") is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the common stock of the Issuers are currently divided into a number of separate series of shares; and WHEREAS, the Issuers desire to offer multiple classes of certain of such series of shares pursuant to Rule 18f-3 under the 1940 Act; and WHEREAS, Rule 18f-3 requires that the Board of Directors of the Issuers adopt a written plan setting forth (1) the specific arrangement for shareholder services and the distribution of securities for each class, (2) the allocation of expenses for each class and (3) any related conversion features or exchange privileges; and WHEREAS, the Board of Directors of the Issuers, including a majority of the Independent Directors, as defined in SECTION 3D below, have determined that the following plan (the "Plan"), adopted pursuant to Rule 18f-3 under the 1940 Act, is in the best interests of each class individually and the Issuers as a whole; NOW, THEREFORE, the Issuers hereby adopt, on behalf of the Funds (as defined in SECTION 2A below), this Plan, in accordance with Rule 18f-3 under the 1940 Act on the following terms and conditions: SECTION 1. ESTABLISHMENT OF PLAN As required by Rule 18f-3 under the 1940 Act, this Plan describes the multiple class system for certain series of shares of the Issuers, including the separate class arrangements for shareholder services and/or distribution of shares, the method for allocating expenses to classes and any related conversion features or exchange privileges applicable to the classes. Upon the effective date of this Plan, the Issuers elect to offer multiple classes of their shares, as described herein, pursuant to Rule 18f-3 and this Plan. SECTION 2. FEATURES OF THE CLASSES a. Division into Classes. Each series of shares of the Issuers identified in SCHEDULE A attached hereto, and each series of shares of any Issuer subsequently added to this Plan (collectively, the "Funds"), may offer two or more classes of shares: the Retail Class, the Institutional Class, the Service Class, and the Advisor Class. The classes that each Fund is authorized to issue pursuant to this Plan are set forth in SCHEDULE A. Shares of each class of a Fund shall represent an equal pro rata interest in such Fund, and generally, shall have identical voting, dividend, liquidation and other rights, preferences, powers, restrictions, limitations, qualifications, and terms and conditions, except that: (A) each class shall have a different designation; (B) each class of shares shall bear any Class Expenses, as defined in SECTION 3D(3) below; (C) each class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its service arrangement; and (D) each class shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. b. Management Fees. (1) Retail Class Unified Fee. The Issuers of the Funds listed on SCHEDULE A are each party to a Management Agreement with Investors Research Corporation ("IRC"), the Funds' investment adviser, for the provision of investment advisory and management services in exchange for a single, unified fee. Such Management Agreement and such unified fee applies to each Fund's Retail Class of shares. Shares issued and outstanding prior to the effective date of this Plan shall become Retail Class shares following the effective date. (2) Institutional Class Unified Fee. The Issuers of the Funds listed on SCHEDULE A as being authorized to issue Institutional Class shares shall enter into a Management Agreement with IRC providing for a unified fee of 20 basis points less than the existing unified fee in place for the corresponding Retail Class of such Funds, as described in each Fund's current prospectus or prospectus supplement. Institutional Class shares will be made available to large institutional shareholders, such as corporations and retirement plans that are not participant directed, and to other pooled accounts that meet certain investment minimums established from time to time by IRC. Institutional Class shares are not eligible for purchase by insurance companies, except in connection with a product for defined benefit plans not involving a group annuity contract. (3) Service Class and Advisor Class Unified Fee. The Issuers of the Funds listed on SCHEDULE A as being authorized to issue Service Class or Advisor Class shares shall enter into a Management Agreement with IRC providing for a unified fee of 25 basis points less than the existing unified fee in place for the corresponding Retail Class of such Funds, as described in each Fund's current prospectus or prospectus supplement. The Service Class and Advisor Class are intended to be sold to employer-sponsored retirement plans (including participant directed plans), insurance companies, broker dealers, banks and other financial intermediaries. c. Shareholder Services and Distribution Services. (1) Shareholder Services Plan. Shares of the Service Class of each Fund are offered subject to a Shareholder Services Plan (the "Shareholder Services Plan") between the Issuers and Twentieth Century Securities, Inc., the Funds' distributor (the "Distributor"). Shareholders of the Service Class of each Fund typically receive most or all shareholder services from independent third parties rather than from Twentieth Century Services, Inc., the Funds' transfer agent. The cost of some or all of such services is borne by the shareholders of the Services Class through the payment of the Shareholder Services Fee under the Shareholder Services Plan. Under the Shareholder Services Plan, each Fund is authorized to pay to the Distributor, as compensation for shareholder service activities rendered by IRC, its affiliates, or independent third party service providers, to holders of shares of the Service Class of a Fund, a shareholder service fee at the rate of 0.25% on an annualized basis of the average net asset value of each such class of shares of the Fund (the "Shareholder Services Fee"). Under the Shareholder Services Plan, shareholder and administrative service activities may include: (A) receiving, aggregating and processing purchase, exchange and redemption request from beneficial owners of Service Class shares (including contract owners of insurance products that utilize the Funds as underlying investment media) and placing purchase, exchange and redemption orders with the 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 sole shareholder of record and nominee for beneficial owners; (F) maintaining account records for shareholders; (G) issuing confirmations of transactions; (H) providing subaccounting with respect to shares beneficially owned by customers or providing the information to a Fund as necessary for such subaccounting; (I) creating and forwarding shareholder communications from the Funds (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to shareholders; and (J) providing other similar administrative and sub-transfer agency services. (2) Distribution Plan. Shares of the Advisor Class of each Fund are offered subject to a Master Distribution and Shareholder Services Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan") between the Issuers and the Distributor. Advisor Class shares of each Fund shall pay the Distributor for "distribution expenses" incurred in connection with providing distribution services for shares of the Funds, as provided in the 12b-1 Plan, at an annual rate of .25% of the average daily net assets of such class. Under the Distribution Agreement, "distribution expenses" include, but are not limited to, expenses incurred in connection with (A) payment of sales commission, ongoing commissions and other payments to brokers, dealers, financial institutions or others who sell Advisor Class shares pursuant to Selling Agreements; (B) compensation to employees of Distributor who engage in or support distribution of the Fund's 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 compensation or promotional incentives; (L) profit on the foregoing; (M) the payment of "service fees", as contemplated by the Rules of Fair Practice of the National Association of Securities Dealers; and (N) such other distribution and services activities as the Issuers determine may be paid for by the Issuers pursuant to the terms of this Agreement and in accordance with Rule 12b-1 of the 1940 Act. SECTION 3. ALLOCATION OF INCOME AND EXPENSES a. Daily Dividend Funds. Funds that declare distributions of net investment income daily to maintain the same net asset value per share in each class ("Daily Dividend Funds") will allocate gross income and expenses (other than Class Expenses, as defined below) to each class on the basis of "relative net assets (settled shares)". Realized and unrealized capital gains and losses will be allocated to each class on the basis of relative net assets. "Relative net assets (settled shares)," for this purpose, are net assets valued in accordance with generally accepted accounting principles but excluding the value of subscriptions receivable, in relation to the net assets of the particular Daily Dividend Fund. Expenses to be so allocated include Issuer Expenses and Fund Expenses, each as defined below. b. Non-Daily Dividend Funds. The gross income, realized and unrealized capital gains and losses and expenses (other than Class Expenses) of each Fund, other than the Daily Dividend Funds, shall be allocated to each class on the basis of its net asset value relative to the net asset value of the Fund. Expenses to be so allocated also include Issuer Expenses and Fund Expenses. c. Apportionment of Certain Expenses. Expenses of a Fund shall be apportioned to each class of shares depending on the nature of the expense item. Issuer Expenses and Fund Expenses will be allocated among the classes of shares pro rata based on their relative net asset values in relation to the net asset value of all outstanding shares in the Fund. Approved Class Expenses shall be allocated to the particular class to which they are attributable. In addition, certain expenses may be allocated differently if their method of imposition changes. Thus, if a Class Expense can no longer be attributed to a class, it shall be charged to a Fund for allocation among classes, as determined by IRC. d. Definitions. (1) Issuer Expenses. "Issuer Expenses" include expenses of an Issuer that are not attributable to a particular Fund or class of a Fund. Issuer Expenses include fees and expenses of those Directors who are not "interested persons" as defined in the 1940 Act ("Independent Directors"), including counsel fees for the Independent Directors, and certain extraordinary expenses of the Issuer that are not attributable to a particular Fund or class of a Fund. (2) Fund Expenses. "Fund Expenses" include expenses of an Issuer that are attributable to a particular fund but are not attributable to a particular class of the Fund. Fund Expenses include (i) interest expenses, (ii) taxes, (iii) brokerage expenses, and (iv) certain extraordinary expenses of a Fund that are not attributable to a particular class of a Fund. (3) Class Expenses. "Class Expenses" are expenses that are attributable to a particular class of a Fund and shall be limited to: (i) applicable unified fee; (ii) payments made pursuant to a Rule 12b-1 Plan ("12b-1 Plan Fee"); (iii) payments made pursuant to the shareholder Services Plan; and (iv) certain extraordinary expenses of an Issuer or Fund that are attributable to a particular class of a Fund. (4) Extraordinary Expenses. "Extraordinary expenses" shall be allocated as an Issuer Expense, a Fund Expense or a Class Expense in such manner and utilizing such methodology as IRC shall reasonably determine, which determination shall be subject to ratification or approval of the Board of Directors and shall be consistent with applicable legal principles and requirements under the 1940 Act and the Internal Revenue Code, as amended. IRC shall report to the Board of Directors quarterly regarding those extraordinary expenses that have been allocated as Class Expenses. Any such allocations shall be reviewed by, and subject to the approval of, the Board of Directors. SECTION 4. EXCHANGE PRIVILEGES Subject to the restrictions and conditions set forth in the Funds' prospectuses, shareholders may (i) exchange shares of one class of a Fund for shares of the same class of another Fund, (ii) exchange Retail Class shares for shares of any fund within the Twentieth Century family of funds that only offers a single class of shares (a "Single Class Fund"), and (iii) exchange shares of any Single Class Fund for Retail Class shares of another Fund, provided that the amount to be exchanged meets the applicable minimum investment requirements and the shares to be acquired in the exchange are qualified for sale in the stockholder's state of residence. SECTION 5. CONVERSION FEATURES Conversions from one class of shares into another class of shares are not permitted; provided, however, that if a shareholder of a particular class is no longer eligible to own shares of that class, such shareholders' shares will be converted to shares of the same Fund but of another class in which such shareholder is eligible to invest. Similarly, if a shareholder becomes eligible to invest in shares of another class that has lower expenses than the class in which such shareholder is invested, such shareholder may be eligible to convert into shares of the same Fund but of the class with the lower expenses. To the extent a Fund and IRC are parties to any agreement whereby IRC is obligated to reimburse a portion of its unified fee to a financial intermediary or other third party for recordkeeping or other administrative services, on the effective date all such shares held in accounts subject to any such agreements shall be automatically converted, and all Fund shares subsequently purchased pursuant to any such agreements shall be, Service Class shares. SECTION 6. QUARTERLY AND ANNUAL REPORTS The Board of Directors shall receive quarterly and annual reports concerning all allocated Class Expenses and distribution and servicing expenditures complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may be amended from time to time. In the reports, only expenditures properly attributable to the sale or servicing of a particular class of shares will be used to justify any distribution or servicing fee or other expenses charged to that class. Expenditures not related to the sale or servicing of a particular class shall not be presented to the Board of Directors to justify any fee attributable to that class. The reports, including the allocations upon which they are based, shall be subject to the review and approval of the Independent Directors of the Issuers who have no direct or indirect financial interest in the operation of this Plan in the exercise of their fiduciary duties. SECTION 7. WAIVER OR REIMBURSEMENT OF EXPENSES Expenses may be waived or reimbursed by any adviser to the Issuers, by the Issuers' underwriter or by any other provider of services to the Issuers without the prior approval of the Issuers' Board of Directors, provided that the fee is waived or reimbursed to all shares of a particular Fund in proportion to their relative average daily net asset values. SECTION 8. EFFECTIVENESS OF PLAN Upon receipt of approval by votes of a majority of both (a) the Board of Directors of the Issuers and (b) the Independent Directors, this Plan shall become effective September 3, 1996. SECTION 9. MATERIAL MODIFICATIONS This Plan may not be amended to modify materially its terms unless such amendment is approved in the manner provided for initial approval in SECTION 8 herein. IN WITNESS WHEREOF, the Issuers have adopted this Multiple Class Plan as of the 31st day of May, 1996, to be effective September 3, 1996. TWENTIETH CENTURY INVESTORS, TWENTIETH CENTURY WORLD INVESTORS INC. INC. By: By: TWENTIETH CENTURY CAPITAL TWENTIETH CENTURY STRATEGIC ASSET PORTFOLIOS, INC. ALLOCATIONS, INC. By: By: SCHEDULE A
COMPANIES AND FUNDS COVERED BY THIS MULTICLASS PLAN - --------------------------------------------------------------------------------------------------------------------------- RETAIL INSTITUTIONAL SERVICES ADVISOR FUND CLASS CLASS CLASS CLASS - --------------------------------------------------------------------------------------------------------------------------- TWENTIETH CENTURY CAPITAL PORTFOLIOS, INC. Twentieth Century Equity Income Yes Yes Yes Yes Twentieth Century Value Yes Yes Yes Yes - --------------------------------------------------------------------------------------------------------------------------- TWENTIETH CENTURY INVESTORS, INC. Balanced Investors Yes Yes Yes Yes Cash Reserve Yes No Yes Yes Growth Investors Yes Yes Yes Yes Heritage Investors Yes Yes Yes Yes Intermediate-Term Bond Yes No Yes Yes Limited-Term Bond Yes No Yes Yes Long-Term Bond Yes No Yes Yes Select Investors Yes Yes Yes Yes U.S. Governments Intermediate-Term Yes No Yes Yes U.S. Governments Short-Term Yes No Yes Yes Ultra Investors Yes Yes Yes Yes Vista Investors Yes Yes Yes Yes Giftrust Investors Yes No No No Tax Exempt Short-Term Yes No No No Tax Exempt Intermediate-Term Yes No No No Tax Exempt Long-Term Yes No No No - --------------------------------------------------------------------------------------------------------------------------- TWENTIETH CENTURY STRATEGIC ASSET ALLOCATIONS, INC. Strategic Allocation: Aggressive Yes No Yes Yes Strategic Allocation: Conservative Yes No Yes Yes Strategic Allocation: Moderate Yes No Yes Yes - --------------------------------------------------------------------------------------------------------------------------- TWENTIETH CENTURY WORLD INVESTORS, INC. Twentieth Century International Emerging Growth Yes Yes Yes Yes Twentieth Century International Equity Yes Yes Yes Yes - ---------------------------------------------------------------------------------------------------------------------------
EX-27.1.1 15 FDS FOR INTERNATIONAL EQUITY
6 1 INTERNATIONAL EQUITY - 1995 PORTFOLIO YEAR NOV-30-1995 NOV-30-1995 1117878236 1220410163 8785692 5416008 0 1234611863 19918971 0 4251339 24170310 1611076 1110500544 161107645 176227043 1143362 0 (8835079) 0 106021650 1210441553 21363527 3748709 0 21981773 3130463 (9429329) 75548366 69249500 0 0 64609265 0 55937551 80255938 9198989 (106200424) 0 69720504 0 0 21967586 0 21981773 1240949900 7.47 0.01 0.40 0.00 0.37 0.00 7.51 1.77 0 0.00
EX-27.1.2 16 FDS FOR INTERNATIONAL EMERGING GROWTH
6 2 INTERNATIONAL EMERGING - 1995 PORTFOLIO YEAR NOV-30-1995 NOV-30-1995 102963888 114122473 3970268 47454 0 118140195 2769103 0 791950 3561053 200876 110043229 20087565 20622853 537032 0 (7456885) 0 11254890 114579142 2143739 423255 0 2262274 304720 (6179550) 12189016 6314186 0 0 0 0 7866729 8402017 0 3377675 0 (1057889) 0 0 2260979 0 2262274 113067308 5.39 0.03 0.28 0.00 0.00 0.00 5.70 2.00 0 0.00
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