document 2

485APOS 1 doc2.htm PEA94A document 2

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. _94_ [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. _94_ [X]

(Check appropriate box or boxes.)

AMERICAN CENTURY MUTUAL FUNDS, INC.
_________________________________________________________________
(Exact Name of Registrant as Specified in Charter)

4500 Main Street, Kansas City, MO 64141-6200
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (816) 531-5575

David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111
_________________________________________________________________
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: February 13, 2001

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

American Century
statement of
additional information

Growth Fund
Ultra(Reg.sm)Fund
Select Fund
Vista Fund
Heritage Fund
Balanced Fund
Tax-Managed Value Fund
Giftrust(Reg. sm)Fund
New Opportunities Fund
New Opportunities II Fund
High-Yield Fund
Veedot(Reg. sm) Fund

February 13, 2002
American Century Mutual Funds, Inc.

This Statement of Additional Information adds to the discussion in the
funds' Investor, Advisor, Institutional and C Class Prospectuses, dated February
13, 2002, but is not a prospectus. The Statement of Additional Information
should be read in conjunction with the funds' current Prospectuses. If you would
like a copy of a Prospectus, please contact us at one of the addresses or
telephone numbers listed on the back cover or visit American Century's Web site
at www.americancentury.com.

This Statement of Additional Information incorporates by reference certain
information that appears in the funds' annual and semiannual reports, which are
delivered to all investors. You may obtain a free copy of the funds' annual or
semiannual reports by calling 1-800-345-2021.

American Century Investment Services, Inc.

TABLE OF CONTENTS
The Funds' History............................................................2
Fund Investment Guidelines....................................................3
Growth, Ultra, Select, Vista, Heritage, Giftrust,
New Opportunities New Opportunities II and Veedot .........................4
Balanced...................................................................4
Tax-Managed Value..........................................................5
High-Yield.................................................................6
Fund Investments and Risks....................................................8
Investment Strategies and Risks............................................8
Investment Policies.......................................................21
Portfolio Turnover........................................................23
Management...................................................................24
The Board of Directors....................................................24
Code of Ethics............................................................28
The Funds' Principal Shareholders............................................29
Service Providers............................................................34
Investment Advisor........................................................34
Transfer Agent and Administrator..........................................37
Distributor...............................................................37
Other Service Providers......................................................38
Custodian Banks...........................................................38
Independent Auditors......................................................38
Brokerage Allocation.........................................................38
Growth, Ultra, Select, Vista, Heritage, Tax-Managed Value, Giftrust,
New Opportunities, New Opportunities II, Veedot and the
Equity Portion of Balanced................................................38
High-Yield and the Fixed-Income Portion of Balanced.......................39
Information about Fund Shares................................................40
Multiple Class Structure..................................................40
Buying and Selling Fund Shares............................................46
Valuation of a Fund's Securities..........................................46
Taxes 47
How Fund Performance Information Is Calculated...............................48
Performance Comparisons...................................................51
Permissible Advertising Information.......................................52
Multiple Class Performance Advertising....................................52
Financial Statements.........................................................52
Explanation of Fixed-Income Securities Ratings...............................53

THE FUNDS' HISTORY
American Century Mutual Funds, Inc. is a registered open-end management
investment company that was organized in 1957 as a Delaware corporation under
the name Twentieth Century Investors, Inc. On June 2, 1990, the company
reorganized as a Maryland corporation, and in January 1997 it changed its name
to American Century Mutual Funds, Inc. Throughout this Statement of Additional
Information we refer to American Century Mutual Funds, Inc. as the corporation.

Each fund described in this Statement of Additional Information is a separate
series of the corporation and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, and tax identification and stock registration numbers.

Investor Class Advisor Class

Fund Ticker Symbol Inception Date Ticker Symbol Inception Date
Growth TWCGX 10/31/1958 TWRAX 06/04/1997
Ultra TWCUX 11/02/1981 TWUAX 10/02/1996
Select TWCIX 10/31/1958 TWCAX 08/08/1997
Vista TWCVX 11/25/1983 TWVAX 10/02/1996
Heritage TWHIX 11/10/1987 ATHAX 07/11/1997
Balanced TWBIX 11/20/1988 TWBAX 01/06/1997
Tax-Managed Value ACTIX 03/01/1999 N/A N/A
Giftrust TWGTX 11/25/1983 N/A N/A
New Opportunities TWNOX 12/26/1996 N/A N/A
New Opportunities II N/A N/A N/A N/A
High-Yield ABHIX 09/30/1997 N/A N/A
Veedot ABVIX 11/30/1999 N/A N/A

Institutional Class C Class

Fund Ticker Symbol Inception Date Ticker Symbol Inception Date
Growth TWGIX 06/16/1997 N/A N/A
Ultra TWUIX 11/14/1996 N/A N/A
Select TWSIX 03/13/1997 N/A N/A
Vista TWVIX 11/14/1996 N/A N/A
Heritage ATHIX 06/16/1997 N/A N/A
Balanced N/A 05/01/2000 N/A N/A
Tax-Managed Value N/A N/A N/A N/A
Giftrust N/A N/A N/A N/A
New Opportunities N/A N/A N/A N/A
New Opportunities II N/A N/A N/A N/A
High-Yield N/A N/A N/A N/A
Veedot N/A 08/01/2000 N/A N/A

FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc., can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, Investment Strategies and Risks,
which begins on page 8. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussions contained in the
Prospectuses.

Each fund, other than Veedot, is diversified as defined in the Investment
Company Act of 1940 (the Investment Company Act). Diversified means that, with
respect to 75% of its total assets, each fund will not invest more than 5% of
its total assets in the securities of a single issuer or own more than 10% of
the outstanding voting securities of a single issuer. Veedot is nondiversified.

Although Veedot's managers expect that it will ordinarily satisfy the
requirements of a diversified fund, its nondiversified status gives it more
flexibility to invest heavily in the most attractive companies identified by the
fund's methodology.

To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year

(1) no more than 25% of its total assets are invested in the securities of
a single issuer (other than the U.S. government or a regulated investment
company), and

(2) with respect to at least 50% of its total assets, no more than 5% of its
total assets are invested in the securities of a single issuer.

GROWTH, ULTRA, SELECT, VISTA, HERITAGE, GIFTRUST, NEW OPPORTUNITIES, NEW
OPPORTUNITIES II AND VEEDOT

In general, within the restrictions outlined here and in the funds'
Prospectuses, the fund managers have broad powers to decide how to invest fund
assets, including the power to hold them uninvested.

Investments are varied according to what is judged advantageous under changing
economic conditions. It is the advisor's policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described on the following pages. It is the advisor's intention that each fund
will generally consist of domestic and foreign common stocks, convertible debt
securities and equity equivalent securities. However, subject to the specific
limitations applicable to a fund, the funds' management teams may invest the
assets of each fund in varying amounts in other instruments and may use other
techniques, such as those reflected in Table 1 on page 7, when such a course is
deemed appropriate in order to pursue a fund's investment objective. Senior
securities that, in the opinion of the fund managers, are high-grade issues also
may be purchased for defensive purposes.

So long as a sufficient number of acceptable securities are available, the fund
managers intend to keep the funds fully invested, regardless of the movement of
stock or bond prices, generally. However, should the funds' investment
methodology fail to identify sufficient acceptable securities, or for any other
reason including the desire to take a temporary defensive position, the funds
may invest up to 100% of their assets in U.S. government securities. In most
circumstances, each fund's actual level of cash and cash equivalents will be
less than 10%. The managers may use stock index future contracts as a way to
expose each fund's cash assets to the market while maintaining liquidity. As
mentioned in the Prospectuses, the managers may not leverage a fund's
portfolios; so there is no greater market risk to the funds than if they
purchase stocks. See Derivative Securities, page 10, Short-Term Securities, page
13 and Futures and Options, page 14.

BALANCED

In general, within the restrictions outlined here and in this fund's Prospectus,
the fund managers have broad powers to decide how to invest fund assets,
including the power to hold them uninvested. As a matter of fundamental policy,
the managers will invest approximately 60% of the fund's portfolio in equity
securities and the remainder in bonds and other fixed-income securities. The
equity portion of the fund generally will be invested in equity securities of
companies comprising the 1,500 largest publicly traded companies in the United
States. The fund's investment approach may cause its equity portion to be more
heavily invested in some industries than in others. However, it may not invest
more than 25% of its total assets in companies whose principal business
activities are in the same industry. In addition, as a diversified investment
company, its investments in a single issue are limited, as described above in
Fund Investment Guidelines. The fund managers also may purchase foreign
securities, convertible debt securities, equity-equivalent securities,
non-leveraged stock index futures contracts and similar securities, and
short-term securities. See Table 1, page 7.

The fixed-income portion of the fund generally will be invested in a diversified
portfolio of high-grade government, corporate, asset-backed and similar
securities. There are no maturity restrictions on the fixed-income securities in
which the fund invests, but under normal conditions the weighted average
maturity for the fixed-income portion of the fund will be in the 3- to 10-year
range. The managers will actively manage the portfolio, adjusting the
portfolio's weighted average maturity in response to expected changes in
interest rates. During periods of rising interest rates, a shorter weighted
average maturity may be adopted in order to reduce the effect of bond price
declines on the fund's net asset value. When interest rates are falling and bond
prices rising, a longer weighted average portfolio maturity may be adopted. The
restrictions on the quality of the fixed-income securities the fund may purchase
are described in the Prospectus. For a description of the fixed-income
securities rating system, see Explanation of Fixed-Income Securities Ratings, on
page 53.

TAX-MANAGED VALUE

The fund managers will invest primarily in stocks of medium to large companies
that the managers believe are undervalued at the time of purchase. The fund
manager will usually purchase common stocks of U.S. and foreign companies, but
they can purchase other types of securities as well, such as domestic and
foreign preferred stocks, convertible debt securities, equity-equivalent
securities, notes, bonds and other debt securities. See Table 1.

HIGH-YIELD

The fund invests primarily in lower-rated, higher-yielding corporate bonds,
debentures and notes, which are subject to greater credit risk and consequently
offer higher yield. The fund also may purchase

o government securities
o zero-coupon, step-coupon and pay-in-kind securities
o convertible securities
o loan interests
o common stock or other equity-related securities (limited to 20%
of fund assets)
o short-term securities

Up to 40% of the fund's assets may be invested in foreign securities. The
fund also may purchase and sell interest rate futures contracts and related
options. See Futures and Options, page 13.

The securities purchased by the fund generally will be rated in the lower rating
categories of recognized rating agencies, as low as Caa by Moody's or D by S&P,
or will be unrated securities that the managers deem of comparable quality. The
fund may hold securities with higher ratings when the yield differential between
low-rated and higher-rated securities narrows and the risk of loss may be
reduced substantially with only a relatively small reduction in yield. The fund
will not invest more than 10% of its total assets in securities rated lower than
B by both Moody's and S&P.

Issuers of high-yield securities are more vulnerable to real or perceived
economic changes (such as an economic downturn or a prolonged period of rising
interest rates), political changes or adverse developments specific to the
issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing. In the event of a
default, the fund would experience a reduction of its income and could expect a
decline in the market value of the defaulted securities.

The market for lower quality securities is generally less liquid than the market
for higher quality securities. Adverse publicity and investor perceptions as
well as new or proposed laws also may have a greater negative impact on the
market for lower quality securities. Sovereign debt of foreign governments is
generally rated by country. Because these ratings do not take into account
individual factors relevant to each issue and may not be updated regularly, the
managers may elect to treat such securities as unrated debt.

Table 1

New
Growth Opportunities II Tax-
Ultra Vista High New Managed
Select Heritage Yield Opportunities Giftrust Balanced Value Veedot
Foreign
Securities X X 40% X X X X X
Convertible
Debt
Securities X X X X X X X X
Short Sales X X X X X X X X
Portfolio
Lending 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
Derivative
Securities X X X X X X X X
Investments in Companies with
Limited Operating
Histories 5% 10% 15% 10% 10% 5% X 10%
Other
Investment
Companies 10% 10% 10% 10% 10% 10% 10% 10%
Repurchase
Agreement X X X X X X X X
When-Issued and Forward
Commitment
Agreements X X X X X X X X
Illiquid
Securities 15% 15% 15% 15% 15% 15% 15% 15%
Restricted
Securities X X X X X X X X
Short-Term
Securities X X X X X X X X

New
Growth - Opportunities II Tax-
Ultra Vista High New Managed
Select Heritage Yield Opportunities Giftrust Balanced Value Veedot
Futures
& Options X X X X X X X X
Forward Currency
Exchange
Contracts X X X X X X X X
Equity
Equivalents X X X X X X X X
Fixed Income Securities
Municipal
Notes X X X
Municipal
Bonds X X X
Variable- and
Floating-Rate
Obligations X X X
Obligations with Term
Puts Attached X X X
Tender Option Bonds X X
Zero-Coupon X X
Inverse Floaters X X X
Loan Interests X

FUND INVESTMENTS AND RISKS

INVESTMENT STRATEGIES AND RISKS

This section describes investment vehicles and techniques the fund managers can
use in managing a fund's assets. It also details the risks associated with each,
because each investment vehicle and technique contributes to a fund's overall
risk profile. To determine whether a fund may invest in a particular investment
vehicle, consult Table 1, page 7.

Foreign Securities

Each fund may invest in the securities of foreign issuers, including
foreign governments, when these securities meet its standards of selection.
Securities of foreign issuers may trade in the U.S. or foreign securities
markets.

An unlimited portion of each fund's total assets may be invested in the
securities of foreign issuers, except for High-Yield, which may invest up to 40%
of its assets in foreign securities.

Investments in foreign securities may present certain risks, including:

Currency Risk - The value of the foreign investments held by the funds may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign currency in which the security is denominated, and tends to
increase when the value of the dollar falls against such currency. In addition,
the value of fund assets may be affected by losses and other expenses incurred
in converting between various currencies in order to purchase and sell foreign
securities, and by currency restrictions, exchange control regulation, currency
devaluations and political developments.

Political and Economic Risk - The economies of many of the countries in which
the funds invest are not as developed as the economy of the United States and
may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, confiscatory taxation and
limitations on the removal of funds or other assets also could adversely affect
the value of investments. Further, the funds may find it difficult or be unable
to enforce ownership rights, pursue legal remedies or obtain judgments in
foreign courts.

Regulatory Risk - Foreign companies generally are not subject to the regulatory
controls imposed on U.S. issuers and, in general, there is less publicly
available information about foreign securities than is available about domestic
securities. Many foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the funds may be reduced by a withholding tax at the source,
which would reduce dividend income payable to shareholders.

Market and Trading Risk - Brokerage commission rates in foreign countries, which
generally are fixed rather than subject to negotiation as in the United States,
are likely to be higher. The securities markets in many of the countries in
which the funds invest will have substantially less trading volume than the
principal U.S. markets. As a result, the securities of some companies in these
countries may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There
generally is less government regulation and supervision of foreign stock
exchanges, brokers and issuers, which may make it difficult to enforce
contractual obligations.

Clearance and Settlement Risk - Foreign securities markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the funds are uninvested and no return is earned. The inability of the funds
to make intended security purchases due to clearance and settlement problems
could cause the funds to miss attractive investment opportunities. Inability to
dispose of portfolio securities due to clearance and settlement problems could
result either in losses to the funds due to subsequent declines in the value of
the portfolio security or, if the fund has entered into a contract to sell the
security, liability to the purchaser.

Ownership Risk - Evidence of securities ownership may be uncertain in many
foreign countries. As a result, there is a risk that a fund's trade details
could be incorrectly or fraudulently entered at the time of the transaction,
resulting in a loss to the fund.

Convertible Debt Securities

A convertible debt security is a fixed-income security that offers the potential
for capital appreciation through a conversion feature that enables the holder to
convert the fixed-income security into a stated number of shares of common
stock. As fixed-income securities, convertible debt securities provide a stable
stream of income, with generally higher yields than common stocks. Convertible
debt securities offer the potential to benefit from increases in the market
price of the underlying common stock, however, they generally offer lower yields
than non-convertible securities of similar quality. Of course, as with all
fixed-income securities, there can be no assurance of current income because the
issuers of the convertible debt securities may default on their obligations. In
addition, there can be no assurance of capital appreciation because the value of
the underlying common stock will fluctuate.

Convertible debt securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible debt
securities typically have lower ratings from ratings organizations than similar
non-convertible securities.

Unlike a convertible security that is a single security, a synthetic
convertible security is comprised of two distinct securities that together
resemble convertible securities in certain respects. Synthetic convertible
securities are created by combining non-convertible bonds or preferred stocks
with warrants or stock call options. The options that will form elements of
synthetic convertible securities will be listed on a securities exchange or
NASDAQ. The two components of a synthetic convertible security, which will be
issued with respect to the same entity, generally are not offered as a unit, and
may be purchased and sold by the fund at different times. Synthetic convertible
securities differ from convertible securities in certain respects. Each
component of a synthetic convertible security has a separate market value and
responds differently to market fluctuations. Investing in a synthetic
convertible security involves the risk normally found in holding the securities
comprising the synthetic convertible security.

Short Sales

A fund may engage in short sales for cash management purposes only if, at the
time of the short sale, the fund owns or has the right to acquire securities
equivalent in kind and amount to the securities being sold short.

In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account consisting of
cash, cash equivalents or other appropriate liquid securities in an amount
sufficient to meet the purchase price will be maintained by the fund's
custodian.

A fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. There will be
certain additional transaction costs associated with short sales, but the fund
will endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.

Portfolio Lending

In order to realize additional income, a fund may lend its portfolio securities.
Such loans may not exceed one-third of the fund's total assets valued at market
except

o through the purchase of debt securities in accordance with its
investment objectives, policies and limitations, or

o by engaging in repurchase agreements with respect to portfolio securities.

Derivative Securities

To the extent permitted by its investment objectives and policies, each of the
funds may invest in securities that are commonly referred to as derivative
securities. Generally, a derivative security is a financial arrangement the
value of which is based on, or derived from, a traditional security, asset, or
market index. Certain derivative securities are described more accurately as
index/structured securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators (reference indices).

Some derivative securities, such as mortgage-related and other asset-backed
securities, are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.

There are many different types of derivative securities and many different
ways to use them. Futures and options are commonly used for traditional hedging
purposes to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.

No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the funds may not invest in oil and gas
leases or futures.

The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.

There are risks associated with investing in derivative securities, including:

o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the fund managers anticipate;

o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;

o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and

o the risk that the counterparty will fail to perform its obligations.

The Board of Directors has approved the advisor's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities and provides that a fund
may not invest in a derivative security if it would be possible for a fund to
lose more money than it had invested. The policy also establishes a committee
that must review certain proposed purchases before the purchases can be made.
The advisor will report on fund activity in derivative securities to the Board
of Directors as necessary.

Investment in Companies with Limited Operating Histories

The funds may invest a portion of their assets in the securities of issuers with
limited operating histories. The managers consider an issuer to have a limited
operating history if that issuer has a record of less than three years of
continuous operation. The managers will consider periods of capital formation,
incubation, consolidations, and research and development in determining whether
a particular issuer has a record of three years of continuous operation.

Investments in securities of issuers with limited operating histories may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating histories and financial
information upon which the managers may base their investment decision on behalf
of the funds. In addition, financial and other information regarding such
issuers, when available, may be incomplete or inaccurate.

Repurchase Agreements

Each fund may invest in repurchase agreements when they present an attractive
short-term return on cash that is not otherwise committed to the purchase of
securities pursuant to the investment policies of that fund.

A repurchase agreement occurs when, at the time a fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to purchase it on a specified
date in the future at an agreed-upon price. The repurchase price reflects an
agreed-upon interest rate during the time the fund's money is invested in the
security.

Because the security purchased constitutes collateral for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the seller's ability to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.

The funds will limit repurchase agreement transactions to securities issued by
the U.S. government and its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy by the funds' advisor.

Repurchase agreements maturing in more than seven days would count toward a
fund's 15% limit on illiquid securities.

When-Issued and Forward Commitment Agreements

The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days, but not more than 120 days, later).

For example, a fund may sell a security and at the same time make a commitment
to purchase the same or a comparable security at a future date and specified
price. Conversely, a fund may purchase a security and at the same time make a
commitment to sell the same or a comparable security at a future date and
specified price. These types of transactions are executed simultaneously in what
are known as dollar-rolls, cash and carry, or financing transactions. For
example, a broker-dealer may seek to purchase a particular security that a fund
owns. The fund will sell that security to the broker-dealer and simultaneously
enter into a forward commitment agreement to buy it back at a future date. This
type of transaction generates income for the fund if the dealer is willing to
execute the transaction at a favorable price in order to acquire a specific
security.

When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Market rates of interest on debt securities at the time of
delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of that security may decline prior to delivery,
which could result in a loss to the fund. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, a fund
will establish and maintain until the settlement date a segregated account
consisting of cash, cash equivalents or other appropriate liquid securities in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, the fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.

Restricted and Illiquid Securities

The funds may, from time to time, purchase restricted or illiquid securities,
including Rule 144A securities, when they present attractive investment
opportunities that otherwise meet the funds' criteria for selection. Rule 144A
securities are securities that are privately placed with and traded among
qualified institutional investors rather than the general public. Although Rule
144A securities are considered restricted securities, they are not necessarily
illiquid.

With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission (SEC) has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. Accordingly, the Board
of Directors is responsible for developing and establishing the guidelines and
procedures for determining the liquidity of Rule 144A securities. As allowed by
Rule 144A, the Board of Directors has delegated the day-to-day function of
determining the liquidity of Rule 144A securities to the fund managers. The
board retains the responsibility to monitor the implementation of the guidelines
and procedures it has adopted.

Because the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A or other
security that is illiquid. In such an event, the fund managers will consider
appropriate remedies to minimize the effect on such fund's liquidity.

Short-Term Securities

In order to meet anticipated redemptions, anticipated purchases of additional
securities for a fund's portfolio, or, in some cases, for temporary defensive
purposes, these funds may invest a portion of their assets in money market and
other short-term securities.

Examples of those securities include:

o Securities issued or guaranteed by the U.S. government and its agencies and
instrumentalities

o Commercial Paper

o Certificates of Deposit and Euro Dollar Certificates of Deposit

o Bankers' Acceptances

o Short-term notes, bonds,debentures or other debt instruments

o Repurchase agreements

Under the Investment Company Act, a fund's investment in other investment
companies (including money market funds) currently is limited to (a) 3% of the
total voting stock of any one investment company; (b) 5% of the fund's total
assets with respect to any one investment company; and (c) 10% of a fund's total
assets in the aggregate. These investments may include investments in money
market funds managed by the advisor.

Other Investment Companies

Each of the funds may invest up to 10% of its total assets in other investment
companies, such as mutual funds, provided that the investment is consistent with
the fund's investment policies and restrictions. These investments may include
investments in money market funds managed by the advisor. Under the Investment
Company Act, a fund's investment in such securities, subject to certain
exceptions, currently is limited to

o 3% of the total voting stock of any one investment company;

o 5% of the fund's total assets with respect to any one investment company; and

o 10% of a fund's total assets in the aggregate.

Such purchases will be made in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the customary
brokers' commissions. As a shareholder of another investment company, a fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the management fee that each fund bears directly in connection
with its own operations.

Futures and Options

Each fund may enter into futures contracts, options or options on futures
contracts. Futures contracts provide for the sale by one party and purchase by
another party of a specific security at a specified future time and price.
Generally, futures transactions will be used to:

o protect against a decline in market value of the fund's securities
(taking a short futures position),

o protect against the risk of an increase in market value for securities in
which the fund generally invests at a time when the fund is not fully
invested (taking a long futures position), or

o provide a temporary substitute for the purchase of an individual security that
may not be purchased in an orderly fashion.

Some futures and options strategies, such as selling futures, buying puts
and writing calls, hedge a fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure.

Although other techniques may be used to control a fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.

For example, the sale of a future by a fund means the fund becomes
obligated to deliver the security (or securities, in the case of an index
future) at a specified price on a specified date. The purchase of a future means
the fund becomes obligated to buy the security (or securities) at a specified
price on a specified date. The fund managers may engage in futures and options
transactions based on securities indices, provided that the transactions are
consistent with the fund's investment objectives. Examples of indices that may
be used include the Bond Buyer Index of Municipal Bonds for fixed-income funds,
or the S&P 500 Index for equity funds. The managers also may engage in futures
and options transactions based on specific securities, such as U.S. Treasury
bonds or notes. Futures contracts are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission (CFTC), a U.S. government agency.

Index futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).

Unlike when the fund purchases or sells a bond, no price is paid or received by
the fund upon the purchase or sale of the future. Initially, the fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute a margin
transaction for purposes of the fund's investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin accounts generally is not
income-producing. However, coupon bearing securities, such as Treasury bills and
bonds, held in margin accounts generally will earn income. Subsequent payments
to and from the broker, called variation margin, will be made on a daily basis
as the price of the underlying debt securities or index fluctuates, making the
future more or less valuable, a process known as marking the contract to market.
Changes in variation margin are recorded by the fund as unrealized gains or
losses. At any time prior to expiration of the future, the fund may elect to
close the position by taking an opposite position. A final determination of
variation margin is then made; additional cash is required to be paid by or
released to the fund and the fund realizes a loss or gain.

Risks Related to Futures and Options Transactions

Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the fund managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower a fund's return.

A fund could suffer losses if it is unable to close out its position because of
an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the fund managers consider it appropriate or desirable to
do so. In the event of adverse price movements, a fund would be required to
continue making daily cash payments to maintain its required margin. If the fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the fund managers would not otherwise elect
to do so. In addition, a fund may be required to deliver or take delivery of
instruments underlying futures contracts it holds. The fund managers will seek
to minimize these risks by limiting the futures contracts entered into on behalf
of the funds to those traded on national futures exchanges and for which there
appears to be a liquid secondary market.

A fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

Options on Futures By purchasing an option on a futures contract, a fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed strike price. A fund
can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require a fund to make margin payments unless the
option is exercised. Although they do not currently intend to do so, the funds
may write (or sell) call options that obligate them to sell (or deliver) the
option's underlying instrument upon exercise of the option. While the receipt of
option premiums would mitigate the effects of price declines, the funds would
give up some ability to participate in a price increase on the underlying
security. If a fund were to engage in options transactions, it would own the
futures contract at the time a call were written and would keep the contract
open until the obligation to deliver it pursuant to the call expired.

Restrictions on the Use of Futures Contracts and Options

Each fund may enter into futures contracts, options or options on futures
contracts.

Under the Commodity Exchange Act, a fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the fund's total assets. To the extent required by law, each
fund will segregate cash or securities on its records in an amount sufficient to
cover its obligations under the futures contracts and options.

Forward Currency Exchange Contracts

Each fund may purchase and sell foreign currency on a spot (i.e., cash) basis
and may engage in forward currency contracts, currency options and futures
transactions for hedging or any other lawful purpose. See Derivative Securities,
page 10.
The funds expect to use forward currency contracts under two circumstances:

(1) When the fund managers are purchasing or selling a security denominated in
a foreign currency and wish to lock in the U.S. dollar price of that
security, the fund managers would be able to enter into a forward currency
contract to do so;
(2) When the fund managers believe that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, a fund
would be able to enter into a forward currency contract to sell foreign
currency for a fixed U.S. dollar amount approximating the value of some or
all of its portfolio securities either denominated in, or whose value is
tied to, such foreign currency.

In the first circumstance, when a fund enters into a trade for the purchase or
sale of a security denominated in a foreign currency, it may be desirable to
establish (lock in) the U.S. dollar cost or proceeds. By entering into forward
currency 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.

In the second circumstance, when the fund managers believe that the currency of
a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward currency contract to sell for a fixed
dollar amount the amount in foreign currencies approximating the value of some
or all of its portfolio securities either denominated in, or whose value is tied
to, such foreign currency. The fund will segregate on its records cash or
securities in an amount sufficient to cover its obligations under the forward
currency contract.

The precise matching of forward currency contracts in the amounts and values of
securities involved generally would not be possible because the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward currency contract is
entered into and the date it matures. Predicting short-term currency market
movements is extremely difficult, and the successful execution of short-term
hedging strategy is highly uncertain. The fund managers do not intend to enter
into such contracts on a regular basis. Normally, consideration of the prospect
for currency parities will be incorporated into the long-term investment
decisions made with respect to overall diversification strategies. However, the
fund managers believe that it is important to have flexibility to enter into
such forward currency contracts when they determine that a fund's best interests
may be served.
When the forward currency contract matures, 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 currency contract with the same currency trader
that obligates 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 currency 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 to
make delivery of the foreign currency the fund is obligated to deliver.

Equity Equivalents

In addition to investing in common stocks, the funds may invest in other equity
securities and equity equivalents, including securities that permit a fund to
receive an equity interest in an issuer, the opportunity to acquire an equity
interest in an issuer, or the opportunity to receive a return on its investment
that permits the fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity equivalents include preferred
stock, convertible preferred stock and convertible debt securities.

Each fund (except High-Yield) will limit its holdings of convertible debt
securities to those that, at the time of purchase, are rated at least B- by S&P
or B3 by Moody's, or, if not rated by S&P or Moody's, are of equivalent
investment quality as determined by the advisor. Each fund's investments (except
High-Yield) in convertible debt securities and other high-yield, non-convertible
debt securities rated below investment-grade will comprise less than 35% of the
fund's net assets. Debt securities rated below the four highest categories are
not considered "investment-grade" obligations. These securities have speculative
characteristics and present more credit risk than investment-grade obligations.
Equity equivalents also may include securities whose value or return is derived
from the value or return of a different security. Depositary receipts, which are
described in the Foreign Securities section, page 8, are an example of the type
of derivative security in which a fund might invest.

Municipal Notes

Municipal notes are issued by state and local governments or government entities
to provide short-term capital or to meet cash flow needs.

Tax Anticipation Notes (TANs) are issued in anticipation of seasonal tax
revenues, such as ad valorem property, income, sales, use and business taxes,
and are payable from these future taxes. TANs usually are general obligations of
the issuer. General obligations are backed by the issuer's full faith and credit
based on its ability to levy taxes for the timely payment of interest and
repayment of principal, although such levies may be constitutionally or
statutorily limited as to rate or amount.

Revenue Anticipation Notes (RANs) are issued with the expectation that
receipt of future revenues, such as federal revenue sharing or state aid
payments, will be used to repay the notes. Typically, these notes also
constitute general obligations of the issuer.

Bond Anticipation Notes (BANs) are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term bonds
provide the money for repayment of the notes.

Municipal Bonds

Municipal bonds, which generally have maturities of more than one year when
issued, are designed to meet longer-term capital needs. These securities have
two principal classifications: general obligation bonds and revenue bonds.

General Obligation (GO) bonds are issued by states, counties, cities, towns and
regional districts to fund a variety of public projects, including construction
of and improvements to schools, highways, and water and sewer systems. GO bonds
are backed by the issuer's full faith and credit based on its ability to levy
taxes for the timely payment of interest and repayment of principal, although
such levies may be constitutionally or statutorily limited as to rate or amount.

Revenue Bonds are not backed by an issuer's taxing authority; rather, interest
and principal are secured by the net revenues from a project or facility.
Revenue bonds are issued to finance a variety of capital projects, including
construction or refurbishment of utility and waste disposal systems, highways,
bridges, tunnels, air and sea port facilities, schools and hospitals. Many
revenue bond issuers provide additional security in the form of a debt-service
reserve fund that may be used to make payments of interest and repayments of
principal on the issuer's obligations. Some revenue bond financings are further
protected by a state's assurance (without obligation) that it will make up
deficiencies in the debt-service reserve fund.

Industrial Development Bonds (IDBs), a type of revenue bond, are issued by or on
behalf of public authorities to finance privately operated facilities. These
bonds are used to finance business, manufacturing, housing, athletic and
pollution control projects, as well as public facilities such as mass transit
systems, air and sea port facilities and parking garages. Payment of interest
and repayment of principal on an IDB depend solely on the ability of the
facility's operator to meet financial obligations, and on the pledge, if any, of
the real or personal property financed. The interest earned on IDBs may be
subject to the federal alternative minimum tax.

Variable- and Floating-Rate Obligations

Variable- and floating-rate demand obligations (VRDOs and FRDOs) carry rights
that permit holders to demand payment of the unpaid principal plus accrued
interest, from the issuers or from financial intermediaries. Floating-rate
securities, or floaters, have interest rates that change whenever there is a
change in a designated base rate; variable-rate instruments provide for a
specified, periodic adjustment in the interest rate, which typically is based on
an index. These rate formulas are designed to result in a market value for the
VRDO or FRDO that approximates par value.

Obligations with Term Puts Attached

The funds may invest in fixed-rate bonds subject to third-party puts and
participation interests in such bonds that are held by a bank in trust or
otherwise, which have tender options or demand features attached. These tender
options or demand features permit the funds to tender (or put) their bonds to an
institution at periodic intervals and to receive the principal amount thereof.
The fund managers expect that the funds will pay more for securities with puts
attached than for securities without these liquidity features.

Some obligations with term puts attached may be issued by municipalities.
The fund managers may buy securities with puts attached to keep a fund fully
invested in municipal securities while maintaining sufficient portfolio
liquidity to meet redemption requests or to facilitate management of the funds'
investments. To ensure that the interest on municipal securities subject to puts
is tax-exempt to the funds, the advisor limits the funds' use of puts in
accordance with applicable interpretations and rulings of the Internal Revenue
Service (IRS).

Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put, puts normally will be determined to have a value of zero,
regardless of whether any direct or indirect consideration is paid. Accordingly,
puts as separate securities are not expected to affect the funds' weighted
average maturities. When a fund has paid for a put, the cost will be reflected
as unrealized depreciation on the underlying security for the period the put is
held. Any gain on the sale of the underlying security will be reduced by the
cost of the put.

There is a risk that the seller of an obligation with a put attached will not be
able to repurchase the underlying obligation when (or if) a fund attempts to
exercise the put. To minimize such risks, the funds will purchase obligations
with puts attached only from sellers deemed creditworthy by the fund managers
under the direction of the Board of Directors.

Tender Option Bonds

Tender Option Bonds (TOBs) were created to increase the supply of high-quality,
short-term tax-exempt obligations, and thus they are of particular interest to
money market funds. However, any of the funds may purchase these instruments.

TOBs are created by municipal bond dealers who purchase long-term tax-exempt
bonds in the secondary market, place the certificates in trusts, and sell
interests in the trusts with puts or other liquidity guarantees attached. The
credit quality of the resulting synthetic short-term instrument is based on the
put provider's short-term rating and the underlying bond's long-term rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, the
fund managers monitor the credit quality of bonds underlying the funds' TOB
holdings and intend to sell or put back any TOB if the rating on the underlying
bond falls below the second-highest rating category designated by a rating
agency.

The fund managers also take steps to minimize the risk that the fund may realize
taxable income as a result of holding TOBs. These steps may include
consideration of (a) legal opinions relating to the tax-exempt status of the
underlying municipal bonds, (b) legal opinions relating to the tax ownership of
the underlying bonds, and (c) other elements of the structure that could result
in taxable income or other adverse tax consequences. After purchase, the fund
managers monitor factors related to the tax-exempt status of the fund's TOB
holdings in order to minimize the risk of generating taxable income.

Zero-Coupon, Step-Coupon and Pay-In-Kind Securities

Zero-coupon, step-coupon and pay-in-kind securities are debt securities that do
not make regular cash interest payments. Zero-coupon and step-coupon securities
are sold at a deep discount to their face value. Pay-in-kind securities pay
interest through the issuance of additional securities. Because such securities
do not pay current cash income, the price of these securities can be volatile
when interest rates fluctuate. While these securities do not pay current cash
income, federal income tax law requires the holders of zero-coupon, step-coupon
and pay-in-kind securities to include in income each year the portion of the
original issue discount and other noncash income on such securities accrued
during that year. In order to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code and avoid certain excise tax,
the funds are required to make distributions of the original issue discount and
other noncash income accrued for each year. Accordingly, the funds may be
required to dispose of other portfolio securities, which may occur in periods of
adverse market prices, in order to generate cash to meet these distribution
requirements.

Inverse Floaters

The funds may hold inverse floaters. An inverse floater is a type of derivative
security that bears an interest rate that moves inversely to market interest
rates. As market interest rates rise, the interest rate on inverse floaters goes
down, and vice versa. Generally, this is accomplished by expressing the interest
rate on the inverse floater as an above-market fixed rate of interest, reduced
by an amount determined by reference to a market-based or bond-specific floating
interest rate (as well as by any fees associated with administering the inverse
floater program).

Inverse floaters may be issued in conjunction with an equal amount of Dutch
Auction floating-rate bonds (floaters), or a market-based index may be used to
set the interest rate on these securities. A Dutch Auction is an auction system
in which the price of the security is gradually lowered until it meets a
responsive bid and is sold. Floaters and inverse floaters may be brought to
market by (1) a broker-dealer who purchases fixed-rate bonds and places them in
a trust, or (2) an issuer seeking to reduce interest expenses by using a
floater/inverse floater structure in lieu of fixed-rate bonds.

In the case of a broker-dealer structured offering (where underlying fixed-rate
bonds have been placed in a trust), distributions from the underlying bonds are
allocated to floater and inverse floater holders in the following manner:

(i) Floater holders receive interest based on rates set at a six-month interval or
at a Dutch Auction, which is typically held every
28 to 35 days. Current and prospective floater holders bid the minimum
interest rate that they are willing to accept on the floaters, and the
interest rate is set just high enough to ensure that all of the floaters
are sold.

(ii) Inverse floater holders receive all of the interest that remains, if any,
on the underlying bonds after floater interest and auction fees are paid.
The interest rates on inverse floaters may be significantly reduced, even
to zero, if interest rates rise.

Procedures for determining the interest payment on floaters and inverse floaters
brought to market directly by the issuer are comparable, although the interest
paid on the inverse floaters is based on a presumed coupon rate that would have
been required to bring fixed-rate bonds to market at the time the floaters and
inverse floaters were issued.

Where inverse floaters are issued in conjunction with floaters, inverse
floater holders may be given the right to acquire the underlying security (or to
create a fixed-rate bond) by calling an equal amount of corresponding floaters.
The underlying security may then be held or sold. However, typically, there are
time constraints and other limitations associated with any right to combine
interests and claim the underlying security.

Floater holders subject to a Dutch Auction procedure generally do not have the
right to put back their interests to the issuer or to a third party. If a Dutch
Auction fails, the floater holder may be required to hold its position until the
underlying bond matures, during which time interest on the floater is capped at
a predetermined rate.

The secondary market for floaters and inverse floaters may be limited. The
market value of inverse floaters tends to be significantly more volatile than
fixed-rate bonds.

Loan Interests

Loan interests are interests in amounts owed by a corporate, governmental or
other borrower to lenders or lending syndicates. Loan interests purchased by the
funds may have a maturity of any number of days or years, and may be acquired
from U.S. and foreign banks, insurance companies, finance companies or other
financial institutions that have made loans or are members of a lending
syndicate or from the holders of loan interests.

Loan interests involve the risk of loss in case of default or bankruptcy of the
borrower and, in the case of participation interests, involve a risk of
insolvency of the agent lending bank or other financial intermediary. Loan
interests are not rated by any nationally recognized securities rating
organization and are, at present, not readily marketable and may be subject to
contractual restrictions on resale.

INVESTMENT POLICIES

Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the policies described below apply at the time a fund enters into a
transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a fund's net assets will not be considered
in determining whether it has complied with its investment policies.

Fundamental Investment Policies

The funds' fundamental investment policies are set forth below. These investment
policies may not be changed without approval of a majority of the outstanding
votes of shareholders of a fund, as determined in accordance with the Investment
Company Act.

Subject Policy

Senior Securities A fund may not issue senior securities, except as permitted under the Investment Company Act.

Borrowing A fund may not borrow money, except for temporary or emergency purposes (not for leveraging or
investment) in an amount not exceeding 33 1/3% of the fund"s total assets.

Lending A fund may not lend any security or make any other loan if, as a result, more than 331/3% of the
fund"s total assets would be lent to other parties, except (i) through the purchase of debt
securities in accordance with its investment objective, policies and limitations or (ii) by
engaging in repurchase agreements with respect to portfolio securities.

Real Estate A fund may not purchase or sell real estate unless acquired as a result of ownership of securities
or other instruments. This policy shall not prevent a fund from investing in securities or other
instruments backed by real estate or securities of companies that deal in real estate or are
engaged in the real estate business.

Concentration A fund may not concentrate its investments in securities of issuers in a particular industry (other
than securities issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities).

Underwriting A fund may not act as an underwriter of securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the
disposition of restricted securities.

Commodities A fund may not purchase or sell physical commodities unless acquired as a result of ownership of
securities or other instruments, provided that this limitation shall not prohibit the fund from
purchasing or selling options and futures contracts or from investing in securities or other
instruments backed by physical commodities.

Control A fund may not invest for purposes of exercising control over management.

For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding an interfund
lending program. Under the terms of the exemptive order, the funds may borrow
money from or lend money to other ACIM-advised funds that permit such
transactions. All such transactions will be subject to the limits for borrowing
and lending set forth above. The funds will borrow money through the program
only when the costs are equal to or lower than the costs of short-term bank
loans. Interfund loans and borrowings normally extend only overnight, but can
have a maximum duration of seven days. The funds will lend through the program
only when the returns are higher than those available from other short-term
instruments (such as repurchase agreements). The funds may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs.

For purposes of the investmentrestriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that

(a) there is no limitation with respect to obligations issued or guaranteed
by the U.S. government, any state, territory or possession of the United States,
the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions and repurchase agreements secured by
such obligations,

(b) wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents,

(c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry, and

(d) personal credit and business credit businesses will be considered
separate industries.

Nonfundamental Investment Policies
In addition, the funds are subject to the following investment policies that are
not fundamental and may be changed by the Board of Directors.

Subject Policy

Leveraging A fund may not purchase additional investment securities
at any time during which outstanding borrowings exceed 5%
of the total assets of the fund.

Liquidity A fund may not purchase any security or enter into a
repurchase agreement if, as a result, more than 15% of its
net assets would be invested in illiquid securities.
Illiquid securities include repurchase agreements not
entitling the holder to payment of principal and interest
within seven days, and securities that are illiquid by
virtue of legal or contractual restrictions on resale or
the absence of a readily available market.

Short Sales A fund may not sell securities short, unless it owns
or has the right to obtain securities equivalent in kind
and amount to the securities sold short, and provided that
transactions in futures contracts and options are not
deemed to constitute selling securities short.

Margin A fund may not purchase securities on margin, except to
obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin
payments in connection with futures contracts and options
on futures contracts shall not constitute purchasing
securities on margin.

Futures and Options A fund may enter into futures contracts and
write and buy put and call options relating to futures
contracts. A fund may not, however, enter into leveraged
futures transactions if it would be possible for the fund
to lose more money than it invested.

Issuers with A fund may invest a portion of its assets in the
Limited Operating securities of issuers with limited operating histories.
Histories An issuer is considered to have a limited operating
history if that issuer has a record of less than three
years of continuous operation. Periods of capital
formation, incubation, consolidations, and research and
development may be considered in determining whether a
particular issuer has a record of three years of
continuous operation.

The Investment Company Act imposes certain additional restrictions upon the
funds' ability to acquire securities issued by insurance companies,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as defined by the Act. It also defines and forbids the
creation of cross and circular ownership. Neither the SEC nor any other agency
of the federal or state government participates in or supervises the management
of the funds or their investment practices or policies.

PORTFOLIO TURNOVER

The portfolio turnover rate of each fund is listed in the Financial Highlights
table in that fund's Prospectus.

Tax-Managed Value Fund

The fund managers of Tax-Managed Value seek to minimize realized capital gains
by keeping portfolio turnover low and generally holding portfolio investments
for long periods. Because a higher turnover rate may increase taxable capital
gains, the managers carefully weigh the potential benefits of short-term
investing against the tax impact such investing would have on the fund's
shareholders. However, the fund managers may sell securities to realize losses
that can be used to offset realized capital gains. They will take such actions
when they believe the tax benefits from realizing losses offset the near-term
investment potential of that security.

Other Funds

With respect to each other fund, the managers will sell securities without
regard to the length of time the security has been held. Accordingly, each
fund's portfolio turnover rate may be substantial.

The fund managers intend to purchase a given security whenever they believe
it will contribute to the stated objective of a particular fund. In order to
achieve each fund's investment objective, the managers may sell a given security
regardless of the length of time it has been held in the portfolio, and
regardless of the gain or loss realized on the sale. The managers may sell a
portfolio security if they believe that the security is not fulfilling its
purpose because, among other things, it did not live up to the managers'
expectations, because it may be replaced with another security holding greater
promise, because it has reached its optimum potential, because of a change in
the circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.

When a general decline in security prices is anticipated, the equity funds may
decrease or eliminate entirely their equity positions and increase their cash
positions, and when a general rise in price levels is anticipated, the equity
funds may increase their equity positions and decrease their cash positions.
However, it should be expected that the funds will, under most circumstances, be
essentially fully invested in equity securities.

Because investment decisions are based on a particular security's anticipated
contribution to a fund's investment objective, the managers believe that the
rate of portfolio turnover is irrelevant when they determine that a change is
required to pursue the fund's investment objective. As a result, a fund's annual
portfolio turnover rate cannot be anticipated and may be higher than that of
other mutual funds with similar investment objectives. Higher turnover would
generate correspondingly greater brokerage commissions, which is a cost the
funds pay directly. Portfolio turnover also may affect the character of capital
gains realized and distributed by the fund, if any, because short-term capital
gains are taxable as ordinary income.

Because the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of maintaining any
particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.

For Ultra, the lower portfolio turnover rate for 1999 resulted from a
determination by fund managers that the current portfolio holdings were
demonstrating a greater than average chance to increase in value over time. As a
result, a fewer number of stocks were sold and purchased during 1999 than has
been the fund's historical practice.

MANAGEMENT

The individuals listed in the table below serve as directors or officers of the
funds. Directors listed as interested persons of the funds (as defined in the
Investment Company Act) are "interested" primarily by virtue of their engagement
as officers of American Century Companies, Inc. (ACC) or its wholly-owned
subsidiaries, including the funds' investment adviser, American Century
Investment Management, Inc. (ACIM), and the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS).

The remaining directors, because they are not "interested" persons of the funds,
are viewed as independent directors under the Investment Company Act provisions
and SEC rules referencing such directors. More than two-thirds of the directors
are independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM and ACIS.

All persons named as officers of the funds also serve in similar capacities for
the investment companies advised by ACIM. Not all officers of the funds are
listed; only those officers with policy-making functions for the funds are
listed. No officer is compensated for his or her service as an officer of the
funds. The officers listed in the following table are interested persons of the
funds as described above.

Number of
Portfolios
in Fund
Position(s) Length Complex Other
Held of Time Overseen Directorships
with Served Principal Occupation(s) by Held by
Name, Address (Age) Fund (years) During Past 5 Years Director Director

Interested Directors

James E. Stowers, Jr.* Director, 43 Chairman, Director and 38 Director, ACC
4500 Main Street Chairman controlling shareholder, ACC
Kansas City, MO 64111 of the Chairman , ACIM, ACSC and
(77) Board other ACC subsidiaries
Director, ACIM, ACSC and
other ACC subsidiaries(1)

James E. Stowers III* Trustee, 11 Co-Chairman, ACC 76
4500 Main Street Chairman (September 2000 to present)
Kansas City, MO 64111 of the Chief Executive Officer, ACC
(42) Board (June 1996 to September 2000)
Chief Executive
Officer, ACIM, ACSC
and other ACC
subsidiaries Director,
ACC, ACIM, ACSC and
other ACC subsidiaries
President, ACC
(January 1995 to June
1997) President, ACIM
and ACSC (April 1993
to August 1997)

Independent Directors

Thomas A. Brown Director 21 Strategic Account 38
4500 Main Street Implementation Manager,
Kansas City, MO 64111 Applied Industrial
(61) Technologies, Inc.,
a corporation engaged in
the sale of bearings and
power transmission products

Robert W. Doering, M.D. Director less Retired, formerly a 38
4500 Main Street Emeritus (1) than general surgeon
Kansas City, MO 64111 1 year
(68)

Andrea C. Hall, Ph.D. Director 4 Senior Vice President, 38 Director, Midwest
4500 Main Street Midwest Research Institute Research Institute
Kansas City, MO 64111
(56)

D.D. (Del) Hock Director 5 Retired, formerly Chairman, 38 Director, RMI.NET
4500 Main Street Public Service Company Inc., Hathaway
Kansas City, MO 64111 of Colorado Corporation and J.D.
(66) Edwards & Company

Donald H. Pratt Director, 6 Chairman of the Board, 38 Director, Butler
4500 Main Street Vice Butler Manufacturing Company Manufacturing
Kansas City, MO 64111 Chairman Company
(63) of the Director, Atlas-.
Board Copco, North
America Inc
Gale E. Sayers Director 1 President, Chief Executive 38
4500 Main Street Officer and Founder,
Kansas City, MO 64111 Sayers Computer Source
(58)

M. Jeannine Strandjord Director 7 Senior Vice President, 38 Director, DST
4500 Main Street Long Distance Finance, Systems, Inc.
Kansas City, MO 64111 Sprint Corporation
(55)

Timothy S. Webster Director less President and Chief 38
4500 Main Street than Executive Officer,
Kansas City, MO 64111 1 year American Italian Pasta
(xx) Company

Officers
William M. Lyons President 1 Chief Executive Officer, ACC See listing See listing
4500 Main St. and other ACC subsidiaries above. above.
Kansas City, MO 64111 (September 2000 to present)
(45) President, ACC (June
1997 to present) Chief
Operating Officer, ACC
(June 1996 to
September 2000)
General Counsel, ACC,
ACIM, ACIS, ACSC and
other ACC subsidiaries
(June 1989 to June
1998) Executive Vice
President, ACC,
(January 1995 to June
1997) Also serves as:
Executive Vice
President and Chief
Operating Officer,
ACIM, ACIS, ACSC and
other ACC
subsidiaries, and
Executive Vice
President of other ACC
subsidiaries

Robert T. Jackson Executive 6 Chief Administrative Officer, Not applicable Not applicable
4500 Main St. Vice ACC (August 1997 to present)
Kansas City, MO 64111 President Chief Financial Officer, ACC
(55) and (May 1995 to present)
Chief President, ACSC
Financial (January 1999 to present)
Officer Executive Vice President,
ACC (May 1995 to
present) Also serves
as: Executive Vice
President and Chief
Financial Officer,
ACIM, ACIS and other
ACC subsidiaries, and
Treasurer of ACC and
other ACC subsidiaries

Maryanne Roepke, CPA Senior 1 Senior Vice President and Not applicable Not applicable
4500 Main St. Vice Assistant Treasurer, ACSC
Kansas City, MO 64111 President,
(45) Treasurer
and Chief
Accounting
Officer

David C. Tucker Senior 1 Senior Vice President, ACIM, Not applicable Not applicable
4500 Main St. Vice ACIS, ACSC and other ACC
Kansas City, MO 64111 President subsidiaries
(43) and (June 1998 to present)
General General Counsel, ACC, ACIM,
Counsel ACIS, ACSC and other
ACC subsidiaries
(June 1998 to present)
Consultant to mutual
fund industry
(May 1997 to April 1998)
Vice President and General
Counsel, Janus Companies
(1990 to 1997)

Robert Leach Controller 4 Vice President, ACSC Not applicable Not applicable
4500 Main St. February 2000 to present)
Kansas City, MO 64111 Controller-Fund Accounting,
(35) ACSC

C. Jean Wade Controller 8 Vice President, ACSC Not applicable Not applicable
4500 Main St. (February 2000 to present)
Kansas City, MO 64111 Controller-Fund Accounting,
(37) ACSC

Jon Zindel Tax Officer 4 Vice President, Corporate Tax, Not applicable Not applicable
4500 Main St. ACSC (April 1998 to present)
Kansas City, MO 64111 Vice President, ACIM, ACIS and
(34) other ACC subsidiaries
(April 1999 to present)
President, American Century
Employee Benefit Services, Inc.
(January 2000 to December 2000)
Treasurer, American Century
Employee Benefit Services, Inc.
(December 2000 to present)
Treasurer, American Century
Ventures, Inc.
(December 1999 to present)
Controller, ACSC
(July 1996 to April 1998)

1 Dr. Robert Doering resigned as full-time director, effective November 5,
2001, after serving in such capacity for 33 years. Dr. Doering continues to
serve the board in an advisory capacity. Dr. Doering's position as Director
Emeritus is an advisory position and involves attendance at one board meeting
per year to review prior year-end results for the funds. He receives all regular
board communications, including monthly mailings, industry newsletters, email
communications, and company information, but not quarterly board and committee
materials relating to meetings that he does not attend. Dr. Doering is not a
director or a member of the board, has no voting power relating to any matters
relating to the operation of the funds. He is not an interested person of the
funds or ACIM. Dr. Doering receives an annual stipend of $2,500 for his
services.

On December 23, 1999, American Century Services Corporation (ACSC) entered into
an agreement with DST Systems, Inc. (DST) under which DST would provide back
office support for transfer agency services provided by ACSC (the Agreement).
For its services, ACSC pays to DST fees based on a schedule fixed annual fee and
per account service charges. Through October 31, 2001, DST received $20,745,257
in fees from ACSC. DST's revenue for the calendar year ended December 31, 2000
was approximately $1.36 billion.

Ms. Strandjord is a director of DST and a holder of 53,000 shares of DST common
stock, which is less than one percent (1%) of the shares outstanding. Because of
her official duties as a director, she may be deemed to have an "indirect
interest" in the Agreement. However, the board of directors of the funds was not
required to nor did it approve or disapprove the transaction, since the
provision of such services is within the discretion of ACSC. DST was chosen by
ACSC for its industry-leading role in providing cost-effective back office
support for mutual fund service providers such as ACSC. DST is the largest
mutual fund transfer agent, servicing more than 75 million mutual fund accounts
on its shareholder recordkeeping system. Ms. Strandjord's role as a director to
DST was not considered by ACSC; she was not involved in any way with the
negotiations between ACSC and DST; and her status as a director of either DST or
the funds was not a factor in the negotiations. The board of directors of the
funds and Bryan Cave LLP, counsel to the independent directors of the funds,
have concluded that the existence of this Agreement does not impair Ms.
Strandjord's ability to serve as a disinterested director under the Investment
Company Act.

THE BOARD OF DIRECTORS

The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired the advisor to do so. The
directors, in carrying out their fiduciary duty under the Investment Company Act
of 1940, are responsible for approving new and existing management contracts
with the funds' advisor. In carrying out these responsibilities, the board
reviews material factors to evaluate such contracts, including (but not limited
to) assessment of information related to the advisor's performance and expense
ratios, estimates of income and indirect benefits (if any) accruing to the
advisor, the advisor's overall management and projected profitability, and
services provided to the funds and their investors.

The board has the authority to manage the business of the funds on behalf of
their investors, and it has all powers necessary or convenient to carry out that
responsibility. Consequently, the directors may adopt Bylaws providing for the
regulation and management of the affairs of the funds and may amend and repeal
them to the extent that such Bylaws do not reserve that right to the funds'
investors. They may fill vacancies in or reduce the number of board members, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate. They may appoint from their own number and establish and
terminate one or more committees consisting of two or more directors who may
exercise the powers and authority of the board to the extent that the directors
determine. They may, in general, delegate such authority as they consider
desirable to any officer of the funds, to any committee of the board and to any
agent or employee of the funds or to any custodian, transfer or investor
servicing agent, or principal underwriter. Any determination as to what is in
the interests of the funds made by the directors in good faith shall be
conclusive.

Committees

The board has four standing committees to oversee specific functions of the
funds' operations. Information about these committees appears in the table
below. The director first named serves as chairman of the committee.

Committees

The board has four standing committees to oversee specific functions of the
Trust's operations. Information about these committees appears below. The
trustee first named serves as chairman of the committee.

Number of
Meetings Held
During Last
Committee Members Function Fiscal Year
Executive James E. Stowers, Jr. The Executive Committee performs the functions 0
James E. Stowers III of the Board of Directors between Board meetings,
Donald H. Pratt subject to the limitations on its power set out in
the Maryland General Corporation Law, and except
for matters required by the Investment Company Act to be
acted upon by the whole Board.

Compliance Andrea C. Hall, PhD The Compliance and Shareholder Communications 4
and Shareholder Thomas A. Brown Committee reviews the results of the funds'
Communications Gale E. Sayers compliance testing program, reviews quarterly
Timothy S. Webster reports from the Communications advisor
to the Board regarding various compliance matters
and monitors the implementation of the funds'
Code of Ethics, including any violations.

Audit D.D. (Del) Hock The Audit Committee recommends the engagement 4
Donald H. Pratt of the funds' independent auditors and oversees its
Jeannine Strandjord activities. The Committee receives reports from the
advisor's Internal Audit Department, which is
accountable to the Committee. The Committee also receives
reporting about compliance matters affecting the funds.

Board Governance Donald H. Pratt The Board Governance Committee primarily considers and
Jeannine Strandjord recommends individuals for nomination as directors.
Thomas A. Brown 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.

Compensation of Directors

The directors serve as directors for seven American Century investment
companies. Each director who is not an interested person as defined in the
Investment Company Act receives compensation for service as a member of the
board of all seven such companies based on a schedule that takes into account
the number of meetings attended and the assets of the funds for which the
meetings are held. These fees and expenses are divided among the seven
investment companies based, in part, upon their relative net assets. Under the
terms of the management agreement with the advisor, the funds are responsible
for paying such fees and expenses.

The following table shows the aggregate compensation paid by the funds for the
periods indicated and by the seven investment companies served by the board to
each director who is not an interested person as defined in the Investment
Company Act.

Aggregate Director Compensation for Fiscal Year Ended October 31, 2001
--------------------------------------------------------------------------------
Total Total Compensation
Compensation from the
from the American Century
Name of Director Funds (1) Family of Funds(2)
Thomas A. Brown $x $x
Robert W. Doering, M.D. x x
Andrea C. Hall, Ph.D. x x
D.D. (Del) Hock x x
Donald H. Pratt x x
Gale E. Sayers x x
Lloyd T. Silver, Jr. (4) x x
M. Jeannine Strandjord x x
Timothy S. Webster (3) 0 0
--------------------------------------------------------------------------------

1Includes compensation paid to the directors during the fiscal year ended
October 31, 2001, and also includes amounts deferred at the election of the
directors under the Amended and Restated American Century Mutual Funds Deferred
Compensation Plan for Non-Interested Directors. The total amount of deferred
compensation included in the preceding table is as follows: Mr. Brown, $x; Dr.
Hall, $x; Mr. Hock, $x; Mr. Pratt, $x; Mr. Silver, $x and Ms. Strandjord, $x.

2Includes compensation paid by the seven investment company members of the
American Century family of funds served by this Board.

3Mr. Sayers joined the board on November 18, 2000.

4Mr. Silver retired from the board on March 4, 2000. During the fiscal year
ended October 31, 2000, he received $258,495 in deferred compensation under the
Amended and Restated American Century Mutual Funds Deferred Compensation Plan.

The funds have adopted the Amended and Restated American Century Deferred
Compensation Plan for Non-Interested Directors. Under the plan, the independent
directors may defer receipt of all or any part of the fees to be paid to them
for serving as directors of the funds.

All deferred fees are credited to an account established in the name of the
directors. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the director. The account balance continues
to fluctuate in accordance with the performance of the selected fund or funds
until final payment of all amounts credited to the account. Directors are
allowed to change their designation of mutual funds from time to time.

No deferred fees are payable until such time as a director resigns, retires or
otherwise ceases to be a member of the Board of Directors. Directors may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a director, all remaining deferred fee account balances are paid to
the director's beneficiary or, if none, to the director's estate.

The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of directors to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.

No deferred fees were paid to any trustee under the plan during the fiscal year
ended October 31, 2001.

Ownership of Fund Shares

The directors owned shares in the funds as of December 31, 2001, as shown in the
table below:

Name of Directors

James E. James E. Thomas A. Robert W. Andrea C
Stowers, Jr. Stowers III Brown Doering Hall, Ph.D.
Dollar Range of Equity Securities in the Funds:
Growth A A A
Ultra A A A
Select A E D
Vista A E D
Heritage A E D
Giftrust E E D
Balanced E E D
New Opportunities
New Opportunities II
Tax-Managed Value
Veedot
Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies E E C

Name of Directors

D.D. (Del) Donald Gale E. M. Jeannine
Hock H. Pratt Sayers Strandjord
---------------------------------------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:
Growth C A A C
Ultra A C A B
Select C A B A
Vista A A A A
Heritage A A C A
Giftrust C A A C
Balanced C A A C
New Opportunities
New Opportunities II
Tax-Managed Value
Veedot
Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies E E C D

Code of Ethics

The funds, their investment advisor and principal underwriter have adopted a
code of ethics under Rule 17j-1 of the Investment Company Act and the code of
ethics permits personnel subject to the code to invest in securities, including
securities that may be purchased or held by the funds, provided that they first
obtain approval from the compliance department before making such investments.

THE FUNDS' PRINCIPAL SHAREHOLDERS

As of February 2, 2002, the following companies were the record owners of more
than 5% of the outstanding shares of any class of the fund:

Percentage of
Outstanding Shares
Fund Shareholder Owned
Growth
Investor State Street Bank and Trust Co. Trustee
Martin Marietta Profit Sharing Plan and Trust
Boston, Massachusetts x%

Advisor FNB Nominee Co.
c/o First Commonwealth Trust Co.
Indiana, Pennsylvania x%
Charles Schwab & Co. Inc.
San Francisco, California x%
UMBSC & Co.
FBO Diamant Boart
Kansas City, Missouri x%
Firnbank Co.
Omaha, Nebraska x%
Penfirn Co. Trust Department
Omaha, Nebraska x%
Nationwide Trust Company
Columbus, Ohio x%

Institutional The Chase Manhattan Bank NA TR
Norwest Financial Thrift & PSP Trust
New York, New York x%
American Century Profit Sharing and 401K
Savings Plan and Trust
Kansas City, Missouri x%
Charles Schwab & Co. Inc.
San Francisco, California x%
Select
Advisor Principal Life Insurance
Des Moines, Iowa x%
Orchard Trust Company Custodian
RHD Investors Choice 403B
Englewood, Colorado x%
Saxon & Co.
Philadelphia, Pennsylvania x%
Charles Schwab & Co. Inc.
San Francisco, California x%
United Missouri Bank Trustee
Carolina First Bancshares Profit Sharing Plan
Kansas City, Missouri x%

Institutional The Chase Manhattan Bank NA Trustee
Robert Bosch Corporation New Star
Plan and Trust
New York, New York x%
The Chase Manhattan Bank NA TR
Winnebago Industries Inc. Profit Sharing
& Deferred Savings Investment Paln
New York, New York x%

Percentage of
Outstanding Shares
Fund Shareholder Owned

Institutional The Chase Manhattan Bank NA TR
Huntsman Corp. Salary Deferral Plan
New York, New York x%
Morgan Guaranty Trust Company of New York TR
Champion International Corporation Plan for
Salaried Employees
New York, New York x%
UMB NA Trustee
Buckeye Pipe Line Services Company
Retirement and Savings Plan
Kansas City, Missouri x%
The Chase Manhattan Bank NA TR
Hunstman Corp MPP Plan & Trust
New York, New York x%
Heritage
Investor Bankers Trust Company Trustee
Kraft General Foods Inc. Master Savings
Plan and Trust
Jersey City, New Jersey x%
Bankers Trust Company Trustee
Philip Morris Deferred Profit Sharing
Plan and Trust
Jersey City, New Jersey x%

Advisor Charles Schwab & Co. Inc.
San Francisco, California x%
Centura Bank
Rocky Mount, North Carolina x%

Institutional American Century Profit Sharing and
401K Savings Plan and Trust
Kansas City, Missouri x%
The Chase Manhattan Bank NA TR
Norwest Financial Thrift & PSP & Trust
New York, New York x%
American Century Money Purchase Plan & Trust
Kansas City, Missouri x%
Ultra
Investor Charles Schwab & Co. Inc.
San Francisco, California x%

Advisor Principal Life Insurance
Des Moines, Iowa x%
Charles Schwab & Co. Inc.
San Francisco, California x%
Invesco Trust Co. TTEE
Magellan Health Services Retirement Savings Plan
Concord, California x%

Percentage of
Outstanding Shares
Fund Shareholder Owned

Ultra
Institutional The Chase Manhattan Bank NA Trustee
Robert Bosch Corporation New Star Plan and Trust
New York, New York x%

Nationwide Insurance Company
QPVA
Columbus, Ohio x%

Morgan Guaranty Trust Co TR Deferred
PS Plan of NY and Affiliated Companies for
US Employees
New York, New York x%

The Chase Manhattan Bank NA TR
Norwest Financial Thrift & PSP & Trust
New York, New York x%

UMB Bank TR BAE Employees Savings Investment
PlanTrust Kansas City, Missouri x%

The Chase Manhattan
Bank NA TR Huntsman Corp Salary Deferral Plan
New York, New York x%

The Chase Manhattan Bank NA TR Winnebago
Industries Inc. P/S & Deferred Savings
Investment Plan
New York, New York x%

The Chase Manhattan Bank TR Hayes
Lemmerz International Inc. Retirement Savings Plan
Trust New York, New York x%
Vista
Advisor American Chamber of Commerce Executives
Amended & Restated 401k Plan & Trust
Springfield, Missouri x%
Charles Schwab & Co. Inc.
San Francisco, California x%
American Chamber of Commerce Executives
Amended & Restated MPP Plan and Trust
Springfield, Missouri x%
Orchard Trust Company Custodian
RHD Investors Choice 403B
Englewood, Colorado x%

Institutional American Century Profit Sharing and 401K
Savings Plan and Trust
Kansas City, Missouri x%
UMB Bank TR
BAE Employees Savings Investment Plan Trust
Kansas City, Missouri x%
The Chase Manhattan Bank NA TR
Huntsman Corp Salary Deferral Plan & Trust
New York, New York x%
The Chase Manhattan Bank NA TR
Huntsman Corp MPP Plan & Trust
New York, New York x%

Percentage of
Outstanding Shares
Fund Shareholder Owned

Balanced
Advisor Fulvest & Co
Lancaster, Pennsylvania x%
UMBSC & Co
FBO The Medical Center
Kansas City, Missouri x%
UMBSC & Co
FBO Bud Brown Chrysler
Kansas City, Missouri x%
UMBSC & Co
FBO Parmelee Industries Inc. 401k
Kansas City, Missouri x%
UMBSC & Co
FBO Toledo Clinic Inc.
Kansas City, Missouri x%
Nationwide Trust Company
Columbus, Ohio x%
UMBSC & Co
FBO Kendall State Bank
Kansas City, Missouri x%

Institutional The Chase Manhattan Bank NA TR
Huntsman Corp Salary Deferral Plan
New York, New York x%
The Chase Manhattan Bank NA TR
Huntsman Corp MPP Plan & Trust
New York, New York x%

Percentage of
Outstanding Shares
Fund Shareholder Owned

New Opportunities
American Century Profit Sharing and 401k
Savings & Trust
Kansas City, Missouri x%
High-Yield
Investor American Century Investment Management Inc.
Kansas City, Missouri x%
Morgan Guaranty Trust of NY
Newark, Delaware x%

Percentage of
Outstanding Shares
Fund Shareholder Owned

Veedot
Institutional American Century Profit Sharing & 401k
Savings Plan & Trust
Kansas City, Missouri x%
American Century Investment Management Inc.
Kansas City, Missouri x%
UMB TR
American Century Services Corp.
Stock Option Surrender Plan
Kansas City, Missouri x%
UMB TR
American Century Executive
Defferred Comp Plan Trust
Kansas City, Missouri x%
American Century Money Purchase
Plan & Trust
Kansas City, Missouri x%

Tax-Managed Value None

The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of any class of a fund's outstanding shares. As of February 2,
2002, the officers and directors of the funds, as a group, owned less than 1% of
any class of a fund's outstanding shares.

SERVICE PROVIDERS

The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds that is described below. ACIM,
ACSC and ACIS are wholly owned by ACC. James E. Stowers Jr., Chairman of ACC,
controls ACC by virtue of his ownership of a majority of its voting stock.

INVESTMENT ADVISOR

American Century Investment Management, Inc. (ACIM) serves as the investment
advisor for each of the funds. A description of the responsibilities of the
advisor appears in each Prospectus under the heading Management.

For services provided to the fund, the advisor receives a monthly fee based
on a percentage of the average net assets of the fund. Ultra, Balanced,
Tax-Managed Value and Veedot have a stepped fee structure, as follows:

Fund Class Percentage of Net Assets

Ultra Investor and C 1.00% of first $20 billion
0.95% over $20 billion
Institutional 0.80% of first $20 billion
0.75% over $20 billion
Advisor 0.75% of first $20 billion
0.70% over $20 billion

Balanced Investor 0.90% of first $1 billion
0.80% over $1 billion
Institutional 0.70% of first $1 billion
0.60% over $1 billion
Advisor 0.65% of first $1 billion
0.55% over $1 billion

Tax-Managed Value Investor 1.10% of first $500 million
1.00% of next $500 million
0.90% of over $1 billion
Institutional 0.90% of first $500 million
0.80% of next $500 million
0.70% over $1 billion
Advisor 0.85% of first $500 million
0.75% of next $500 million
0.65% over $1 billion

Veedot Investor 1.50% of first $500 million
1.45% of next $500 million
1.40% of over $1 billion
Institutional 1.30% of first $500 million
1.25% of next $500 million
1.20% over $1 billion
Advisor 1.25% of first $500 million
1.20% of next $500 million
1.15% over $1 billion

The other funds do not have a stepped fee. Their management fee is described in
their respective Prospectuses.

On the first business day of each month, the funds pay a management fee to the
advisor for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the fund by the
aggregate average daily closing value of a fund's net assets during the previous
month. This number is then multiplied by a fraction, the numerator of which is
the number of days in the previous month and the denominator of which is 365
(366 in leap years).

The management agreement between the corporation and the advisor 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 fund shareholders following
such execution and for as long thereafter as its continuance is specifically
approved at least annually by

(1) the funds' Board of Directors, or a majority of outstanding shareholder
votes (as defined in the Investment Company Act) and

(2) the vote of a majority of the directors of the funds who are not
parties to the agreement or interested persons of the advisor, cast in person at
a meeting called for the purpose of voting on such approval.

The management agreement states that the funds' Board of Directors or a majority
of outstanding shareholder votes may terminate the management agreement at any
time without payment of any penalty on 60 days' written notice to the advisor.
The management agreement shall be automatically terminated if it is assigned.

The management agreement states the advisor shall not be liable to the funds or
their shareholders for anything other than willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.

The management agreement also provides that the advisor and its officers,
directors and employees may engage in other business, render services to others,
and devote time and attention to any other business whether of a similar or
dissimilar nature.

Certain investments may be appropriate for the funds and also for other clients
advised by the advisor. Investment decisions for the funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or funds. In
addition, purchases or sales of the same security may be made for two or more
clients or funds on the same date. Such transactions will be allocated among
clients in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.

The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Directors
has approved the policy of the advisor with respect to the aggregation of
portfolio transactions. Where portfolio transactions have been aggregated, the
funds participate at the average share price for all transactions in that
security on a given day and allocate transaction costs on a pro rata basis. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.

Unified management fees incurred by each fund by class for the fiscal periods
ended October 31, 2001, 2000and 1999, are indicated in the following tables. As
a new class, information regarding the C Class was not available as of the end
of the fiscal year.

Unified Management Fees (Investor Class)

Fund 2001 2000 1999

Growth $x $100,365,047 $75,334,938
Ultra x 411,243,949 323,012,542
Select x 74,410,279 68,649,039
Vista x 21,675,209 9,522,370
Heritage x 16,346,863 9,817,953
Balanced x 8,703,277 9,452,864
Tax-Managed Value x 445,431 276,382
Giftrust x 19,959,904 9,559,715
New Opportunities x 12,892,612 4,174,987
New Opportunities II x N/A N/A
Veedot x 4,117,607 N/A
Limited-Term Bond x(1) 78,284 130,779
Intermediate-Term Bond x(2) 218,626 215,378
Bond x(2) 884,934 1,084,745
High-Yield x 302,034 360,784

1 The fund's assets were transferred to the American Century Short-Term
Government fund on December 3, 2001.

2 The fund's assets were transferred to the American Century Diversified
Bond fund on December 3, 2001.

Unified Management Fees (Advisor Class and Institutional Class)

Fund 2001 2000 1999

Growth
Advisor x $149,577 $70,294
Institutional x 212,927 8,214

Ultra
Advisor x 3,157,451 1,351,217
Institutional x 3,661,448 423,827

Select
Advisor x 111,586 37,600
Institutional x 1,578,151 137,485

Vista
Advisor x 128,782 41,307
Institutional x 246,228 1,048

Heritage
Advisor x 12,566 8,268
Institutional x 46,536 660

Balanced
Advisor x 93,449 67,602
Institutional x 76,113 N/A

Veedot
Institutional x 36,251 N/A

Limited-Term Bond
Advisor x 13,788 5,538

Intermediate-Term Bond
Advisor x 16,915 21,941

Bond
Advisor x 20,068 10,937

TRANSFER AGENT AND ADMINISTRATOR

American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, serves as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software and personnel for
the day-to-day administration of the funds and the advisor. The advisor pays
ACSC for these services.

From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the advisor.

DISTRIBUTOR

The funds' shares are distributed by American Century Investment Services, Inc.,
a registered broker-dealer. The distributor is a wholly owned subsidiary of ACC
and its principal business address is 4500 Main Street, Kansas City, Missouri
64111.

The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best-efforts underwriting of the funds' shares.
This means the distributor has no liability for unsold shares.

OTHER SERVICE PROVIDERS

CUSTODIAN BANKS

J.P. Morgan Chase and Co., 770 Broadway, 10th Floor, New York, New York
10003-9598, and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105,
each serves as custodian of the funds' assets. The custodians take no part in
determining the investment policies of the funds or in deciding which securities
are purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.

INDEPENDENT AUDITORS

Deloitte & Touche LLP is the independent auditor of the funds. The address of
Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri 64106. As
the independent auditor of the funds, Deloitte & Touche LLP provides services
including

(1) auditing of the annual financial statements for each fund,

(2) assisting and consulting in connection with SEC filings and

(3) reviewing of the annual federal income tax return filed for each fund.

BROKERAGE ALLOCATION

GROWTH, ULTRA, SELECT, VISTA, HERITAGE,TAX-MANAGED VALUE, GIFTRUST, NEW
OPPORTUNITIES, NEW OPPORTUNITIES II, VEEDOT AND THE EQUITY PORTION OF BALANCED

Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. The funds' policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. So long as that policy is
met, the advisor may take into consideration the factors discussed below when
selecting brokers.

The advisor receives statistical and other information and services, including
research, without cost from brokers and dealers. The advisor evaluates such
information and services, together with all other information that it may have,
in supervising and managing the investments of the funds. Because such
information and services may vary in amount, quality and reliability, their
influence in selecting brokers varies from none to very substantial. The advisor
intends to continue to place some of the funds' brokerage business with one or
more brokers who provide information and services. Such information and services
will be in addition to and not in lieu of services required to be performed by
the advisor. The advisor does not utilize brokers that provide such information
and services for the purpose of reducing the expense of providing required
services to the funds.

In the years ended October 31, 2001, 2000 and 1999, the brokerage
commissions of each fund were:

Fund 2201 2000 1999

Growth x $9,949,477 $6,844,600
Ultra x $22,096,395 $13,462,555(1)
Select x $6,782,094 $10,047,034
Vista x $4,205,307 $2,964,425
Heritage x $2,949,237 $2,371,345
Balanced x $493,080 $1,352,613
Tax-Managed Value x $39,005 $32,592
Giftrust x $1,087,217 $1,495,040
New Opportunities x $464,626 $513,503
New Opportunities II x N/A N/A
Veedot x $1,095,419 N/A

1 The decrease in brokerage commissions paid by the fund in 1999 was a result of
lower portfolio turnover during that same period. Also, the average commission
rate paid by American Century declined during this same period.

The brokerage commissions paid by the funds may exceed those that another broker
might have charged for effecting the same transactions, because of the value of
the brokerage and research services provided by the broker. Research services
furnished by brokers through whom the funds effect securities transactions may
be used by the advisor in servicing all of its accounts, and not all such
services may be used by the advisor in managing the portfolios of the funds.

The staff of the SEC has expressed the view that the best price and execution of
over-the-counter transactions in portfolio securities may be secured by dealing
directly with principal market makers, thereby avoiding the payment of
compensation to another broker. In certain situations, the officers of the funds
and the advisor believe that the facilities, expert personnel and technological
systems of a broker often enable the funds to secure as good a net price by
dealing with a broker instead of a principal market maker, even after payment of
the compensation to the broker. The funds regularly place their over-the-counter
transactions with principal market makers, but also may deal on a brokerage
basis when utilizing electronic trading networks or as circumstances warrant.

HIGH-YIELD AND THE FIXED-INCOME PORTION OF BALANCED

Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. In many transactions, the selection of the broker or dealer is
determined by the availability of the desired security and its offering price.
In other transactions, the selection of the broker or dealer is a function of
market selection and price negotiation, as well as the broker's general
execution and operational and financial capabilities in the type of transaction
involved. The advisor will seek to obtain prompt execution of orders at the most
favorable prices or yields. The advisor may choose to purchase and sell
portfolio securities from and to dealers who provide services or research,
statistical and other information to the funds and to the advisor. Such
information or services will be in addition to, and not in lieu of, the services
required to be performed by the advisor, and the expenses of the advisor will
not necessarily be reduced as a result of the receipt of such supplemental
information.

The funds generally purchase and sell debt securities through principal
transactions, meaning the funds normally purchase securities on a net basis
directly from the issuer or a primary market-maker acting as principal for the
securities. The funds do not pay brokerage commissions on these transactions,
although the purchase price for debt securities usually includes an undisclosed
compensation. Purchases of securities from underwriters typically include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market-makers typically include a dealer's mark-up
(i.e., a spread between the bid and asked prices). During the fiscal years ended
October 31, 2001, 2000, and 1999, the funds did not pay any brokerage
commissions.

INFORMATION ABOUT FUND SHARES

Each of the funds named on the front of this Statement of Additional
Information is a series of shares issued by the corporation, and shares of each
fund have equal voting rights. In addition, each series (or fund) may be divided
into separate classes. See Multiple Class Structure, which follows. Additional
funds and classes may be added without a shareholder vote. Each fund votes
separately on matters affecting that fund exclusively. Voting rights are not
cumulative, so investors holding more than 50% of the corporation's (all funds')
outstanding shares may be able to elect a Board of Directors. The corporation
undertakes dollar-based voting, meaning that the number of votes a shareholder
is entitled to is based upon the dollar amount of the shareholder's investment.
The election of directors is determined by the votes received from all the
corporation's shareholders without regard to whether a majority of shares of any
one fund voted in favor of a particular nominee or all nominees as a group.

The assets belonging to each series or class of shares are held separately
by the custodian and the shares of each series or class represent a beneficial
interest in the principal, earnings and profit (or losses) of investments and
other assets held for each series or class. Within their respective series or
class, all shares have equal redemption rights. Each share, when issued, is
fully paid and non-assessable.

In the event of complete liquidation or dissolution of the funds, shareholders
of each series or class of shares will be entitled to receive, pro rata, all of
the assets less the liabilities of that series or class.

Each shareholder has rights to dividends and distributions declared by the
fund he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.

MULTIPLE CLASS STRUCTURE

The corporation's Board of Directors has adopted a multiple class plan (the
Multiclass Plan) pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the funds may issue up to four classes of shares: an Investor Class, an
Institutional Class, an Advisor Class and a C Class. Not all funds offer all
four classes.

The Investor Class is made available to investors directly without any load or
commission, for a single unified management fee. The Institutional and Advisor
Classes are made available to institutional shareholders or through financial
intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower total management
fee. In addition to the management fee, however the Advisor Class shares are
subject to a Master Distribution and Shareholder Services Plan (the Advisor
Class Plan). The C Class also is made available through financial
intermediaries, for purchase by individual investors using "wrap account" style
advisory and personal services from the intermediary. The total management fee
is the same as for Investor Class, but the C Class shares also are subject to a
Master Distribution and Individual Shareholder Services Plan (the C Class Plan)
described below. The Advisor Class Plan and the C Class Plan 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 its Board of
Directors and approved by its shareholders. Pursuant to such rule, the Board of
Directors and initial shareholder of the funds' Advisor and C Classes have
approved and entered into the Advisor Class Plan and the C Class Plan. The Plans
are described below.

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 Plan would benefit the funds and
the shareholders of the affected class. Pursuant to Rule 12b-1, information with
respect to revenues and expenses under the 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
outstanding shareholder votes 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 (NASD).

Master Distribution and Shareholder Services Plan (Advisor Class Plan)

As described in the Prospectuses, the funds' Advisor Class shares are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries such as banks,
broker-dealers and insurance companies. The funds' distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the funds' shares and/or
the use of the funds' shares in various investment products or in connection
with various financial services.

Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for Advisor Class
investors. In addition to such services, the financial intermediaries provide
various distribution services.

To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
advisor has reduced its management fee by 0.25% per annum with respect to the
Advisor Class shares, and the funds' Board of Directors has adopted the Advisor
Class Plan. Pursuant to the Advisor Class Plan, the Advisor Class pays the
distributor a fee of 0.50% annually of the aggregate average daily asset value
of the funds' Advisor Class shares, 0.25% of which is paid for shareholder
services (as described below) and 0.25% of which is paid for distribution
services. During the fiscal year ended October 31, 2001, the aggregate amount of
fees paid under the Advisor Class Plan were:

Growth $x
Ultra $x
Select $x
Vista $85,823
Heritage $x
Balanced $x
Limited-Term Bond $x
Intermediate-Term Bond $x
Bond $x

Payments may be made for a variety of shareholder services, including, but not
limited to:

(a) receiving, aggregating and processing purchase, exchange and redemption
requests from beneficial owners (including contract owners of insurance
products that utilize the funds as underlying investment media) of shares
and placing purchase, exchange and redemption orders with the funds'
distributor;
(b) providing shareholders with a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized instructions;
(c) processing dividend payments from a fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations
and addresses;
(d) providing and maintaining elective services such as check writing and wire
transfer services;
(e) acting as shareholder of record and nominee for
beneficial owners;
(f) maintaining account records for shareholders and/or other
beneficial owners;
(g) issuing confirmations of transactions;
(h) providing subaccounting with respect to shares beneficially owned by
customers of third parties or providing the information to a fund as
necessary for such subaccounting;
(i) preparing and forwarding investor 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 for the provision of personal, continuing services to
the shareholders 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 funds.
During the fiscal year ended October 31, 2001, the amount of fees paid under the
Advisor Class Plan for shareholder services were:

Growth $x
Ultra $x
Select $x
Vista $x
Heritage $x
Balanced $x
Limited-Term Bond $x
Intermediate-Term Bond $x
Bond $x

Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to:

(a) the payment of sales commissions, on-going commissions and other payments
to brokers, dealers, financial institutions or others
who sell Advisor Class shares pursuant to selling agreements;

(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' Advisor
Class shares;

(d) printing prospectuses, statements of additional information and reports for
other-than-existing shareholders;

(e) preparing, printing and distributing 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) providing facilities to answer questions from prospective shareholders about
fund shares;

(h) complying with federal and state securities laws pertaining to
the sale of fund shares;

(i) assisting shareholders in completing application forms and selecting
dividend and other account options;

(j) providing other reasonable assistance in connection with the distribution
of fund shares;

(k) organizing and conducting of sales seminars and payments in the form of
transactional and compensation or promotional incentives;

(l) profit on the foregoing;

(m) paying service fees for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD; and

(n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of the agreement between
the corporation and the fund's distributor and in accordance with Rule
12b-1 of the Investment Company Act.

During the fiscal year ended October 31, 2001, the amount of fees paid
under the Advisor Class Plan for distribution services were:

Growth $x
Ultra $x
Select $x
Vista $x
Heritage $x
Balanced $x
Limited-Term Bond $x
Intermediate-Term Bond $x
Bond $x

Master Distribution and Individual Shareholder Services Plan (C Class Plan)

As described in the Prospectuses, the C Class shares of the funds are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through broker-dealers, banks, insurance companies and
other financial intermediaries that provide various administrative, shareholder
and distribution services. The funds' distributor enters into contracts with
various banks, broker-dealers, insurance companies and other financial
intermediaries, with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.

Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for C Class
investors. In addition to such services, the financial intermediaries provide
various individual shareholder and 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' Board of
Directors has adopted the C Class Plan. Pursuant to the C Class Plan, the C
Class pays the Advisor, as paying agent for the fund, a fee equal to .75%
annually of the average daily net asset value of the C Class shares of
High-Yield, .25% of which is paid for individual shareholder services as
described below and .50% of which is paid for distribution services as described
below, and 1.00% annually of the average daily net asset value of the C Class
shares of Ultra, Vista, Growth and Heritage, .25% of which is paid for
shareholder services as described below and .75% of which is paid for
distribution services as described below. Because this is a new class, no fees
were paid under the C Class Plan for the most recent fiscal year.

Payments may be made for a variety of individual shareholder services,
including, but not limited to:

(a) providing individualized and customized investment advisory services,
including the consideration of shareholder profiles and specific goals;

(b) creating investment models and asset allocation models for use by
shareholders in selecting appropriate funds;

(d) periodic rebalancing of shareholder accounts to ensure compliance with the
selected asset allocation;

(e) consolidating shareholder accounts in one place; and

(f) other individual services.

Individual shareholder services do not include those activities and expenses
that are primarily intended to result in the sale of additional shares of the
funds.

Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of C Class shares, which
services may include but are not limited to:

(a) the payment of sales commissions, on-going commissions and other payments to
brokers, dealers, financial institutions or others who sell C Class shares
pursuant to selling agreements;

(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' C Class
shares;

(d) printing prospectuses, statements of additional information and reports for
other-than-existing shareholders;

(e) preparing, printing and distributing 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) providing facilities to answer questions from prospective shareholders about
fund shares;

(h) complying with federal and state securities laws pertaining to the sale of
fund shares;

(i) assisting shareholders in completing application forms and selecting
dividend and other account options;

(j) providing other reasonable assistance in connection with the distribution of
fund shares;

(k) organizing and conducting of sales seminars and payments in the form of
transactional and compensation or promotional incentives;

(l) profit on theforegoing;

(m) paying service fees for providing personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD; and

(n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of the agreement between
the corporation and the funds' distributor and in accordance with Rule 12b-1
of the Investment Company Act.

Dealer Concessions
The fund's distributor expects to pay sales commissions to certain financial
intermediaries who sell C Class shares of the fund at the time of such sales.
Payments will equal .75% of the purchase price of the C Class shares of
High-Yield and 1.00% of the purchase price of the C Class shares of Ultra,
Vista, Growth and Heritage sold by the intermediary. The distributor will retain
the distribution fee paid by the funds for the first 13 months after the shares
are purchased by any financial intermediary that received the concession. This
fee is intended in part to permit the distributor to recoup a portion of
on-going sales commissions to dealers plus financing costs, if any. After the
first 13 months, the distributor will make the distribution and individual
shareholder services fee payments described above to the financial
intermediaries involved on a monthly basis.

BUYING AND SELLING FUND SHARES

Information about buying, selling and exchanging fund shares is contained in the
funds' Prospectuses and in Your Guide to American Century Services. The
Prospectuses and guide are available to investors without charge and may be
obtained by calling us.

VALUATION OF A FUND'S SECURITIES

Each fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange) each day the Exchange is
open for business. The Exchange usually closes at 4 p.m. Eastern time. The
Exchange typically observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect
the same holidays to be observed in the future, the Exchange may modify its
holiday schedule at any time.

Each fund's NAV is calculated by adding the value of all portfolio securities
and other assets, deducting liabilities and dividing the result by the number of
shares outstanding. Expenses and interest earned on portfolio securities are
accrued daily.

The portfolio securities of each fund that are listed or traded on a
domestic securities exchange are valued at the last sale price on that exchange,
except as otherwise noted. Portfolio securities primarily traded on foreign
securities exchanges generally are valued at the preceding closing values of
such securities on the exchange where primarily traded. If no sale is reported,
or if local convention or regulation so provides, the mean of the latest bid and
asked prices is used. Depending on local convention or regulation, securities
traded over-the-counter are priced at the mean of the latest bid and asked
prices, or at the last sale price. When market quotations are not readily
available, securities and other assets are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.

Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.

Because there are hundreds of thousands of municipal issues outstanding, and the
majority of them do not trade daily, the prices provided by pricing services for
these types of securities are generally determined without regard to bid or last
sale prices. In valuing securities, the pricing services generally take into
account institutional trading activity, trading in similar groups of securities,
and any developments related to specific securities. The methods used by the
pricing service and the valuations so established are reviewed by the advisor
under the general supervision of the Board of Directors. There are a number of
pricing services available, and the advisor, on the basis of ongoing evaluation
of these services, may use other pricing services or discontinue the use of any
pricing service in whole or in part.

Securities maturing within 60 days of the valuation date may be valued at cost,
plus or minus any amortized discount or premium, unless the directors determine
that this would not result in fair valuation of a given security. Other assets
and securities for which quotations are not readily available are valued in good
faith at their fair value using methods approved by the Board of Directors.

The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then translated to dollars at the prevailing foreign
exchange rate.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established, but before the net
asset value per share was determined, that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.

Trading of these securities in foreign markets may not take place on every day
that the Exchange is open. In addition, trading may take place in various
foreign markets and on some electronic trading networks on Saturdays or on other
days when the Exchange is not open and on which the funds' net asset values are
not calculated. Therefore, such calculations do not take place contemporaneously
with the determination of the prices of many of the portfolio securities used in
such calculation, and the value of the funds' portfolios may be affected on days
when shares of the funds may not be purchased or redeemed.

TAXES

Federal Income Tax

Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal income taxes to the extent that
it distributes substantially all of its net investment income and net realized
capital gains (if any) to investors. If a fund fails to qualify as a regulated
investment company, it will be liable for taxes, significantly reducing its
distributions to investors and eliminating investors' ability to treat
distributions received from the funds in the same manner in which they were
realized by the funds.

If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Dividends received by the funds on shares of stock of domestic
corporations may qualify for the 70% dividends-received deduction to the extent
that the fund held those shares for more than 45 days. Distributions from gains
on assets held by the funds longer than 12 months are taxable as long-term gains
regardless of the length of time you have held your shares in the fund. If you
purchase shares in the fund and sell them at a loss within six months, your loss
on the sale of those shares will be treated as a long-term capital loss to the
extent of any long-term capital gains dividend you received on those shares.

Dividends and interest received by a fund on foreign securities may give rise to
withholding and other taxes imposed by foreign countries. However, tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries generally do not impose taxes on capital
gains with respect to investments by non-resident investors. Any foreign taxes
paid by a fund will reduce its dividend distributions to investors.

If more than 50% of the value of a fund's total assets at the end of its fiscal
year consists of securities of foreign corporations, the fund may qualify for
and make an election with the Internal Revenue Service with respect to such
fiscal year so that fund shareholders may be able to claim a foreign tax credit
in lieu of a deduction for foreign income taxes paid by the fund. If such an
election is made, the foreign taxes paid by the fund will be treated as income
received by you. In order for you to utilize the foreign tax credit, you must
have held your shares for 16 days or more during the 30-day period, beginning 15
days prior to the ex-dividend date for the mutual fund shares. The mutual fund
must meet a similar holding period requirement with respect to foreign
securities to which a dividend is attributable. Any portion of the foreign tax
credit that is ineligible as a result of the fund not meeting the holding period
requirement will be deducted in computing net investment income.

If a fund purchases the securities of certain foreign investment funds or trusts
called passive foreign investment companies (PFIC), capital gains on the sale of
such holdings will be deemed ordinary income regardless of how long the fund
holds the investment.

The fund also may be subject to corporate income tax and an interest charge
on certain dividends and capital gains earned from these investments, regardless
of whether such income and gains are distributed to shareholders. In the
alternative, the fund may elect to recognize cumulative gains on such
investments as of the last day of its fiscal year and distribute them to
shareholders. Any distribution attributable to a PFIC is characterized as
ordinary income.

As of October 31, 2001, the funds in the table below had the following capital
loss carryovers. When a fund has a capital loss carryover, it does not make
capital gains distributions until the loss has been offset or expired.

Fund Capital Loss Carryover
Tax-Managed Value $x (expiring in 2007 through 2008)
Veedot $x (expiring in 2008)
Limited-Term Bond $x (expiring in 2007 through 2008)
Intermediate-Term Bond $x (expiring in 2007 through 2008)
Bond $x (expiring in 2007 through 2008)
High-Yield $x (expiring in 2007 through 2008)

If you have not complied with certain provisions of the Internal Revenue Code and
Regulations, either American Century or your financial intermediary is required
by federal law to withhold and remit the applicable federal withholding rate of
reportable payments (which may include dividends, capital gains distributions
and redemption proceeds) to the IRS. Those regulations require you to certify
that the Social Security number or tax identification number you provide is
correct and that you are not subject to withholding for previous under-reporting
to the IRS. You will be asked to make the appropriate certification on your
account application. Payments reported by us to the IRS that omit your Social
Security number or tax identification number will subject us to a non-refundable
penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed.

A redemption of shares of a fund (including a redemption made in an
exchange transaction) will be a taxable transaction for federal income tax
purposes and you generally will recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. If a loss is
realized on the redemption of fund shares, the reinvestment in additional fund
shares within 30 days before or after the redemption may be subject to the "wash
sale" rules of the Code, resulting in a postponement of the recognition of such
loss for federal income tax purposes.

State and Local Taxes

Distributions by the funds also may be subject to state and local taxes, even if
all or a substantial part of such distributions are derived from interest on
U.S. government obligations which, if you received such interest directly, would
be exempt from state income tax. However, most but not all states allow this tax
exemption to pass through to fund shareholders when a fund pays distributions to
its shareholders. You should consult your tax advisor about the tax status of
such distributions in your state.

HOW FUND PERFORMANCE INFORMATION IS CALCULATED

The funds may quote performance in various ways. Fund performance may be shown
by presenting one or more performance measurements, including cumulative total
return, average annual total return or yield. All performance information
advertised by the funds is historical in nature and is not intended to represent
or guarantee future results. The value of fund shares when redeemed may be more
or less than their original cost.

Equity Funds

Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gains
distributions (if any) and any change in the fund's NAV during the period.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

The tables on page 45 set forth the average annual total returns
for the various classes of the equity funds and the equity portion of Balanced
for the one-, five- and 10-year periods (or the period since inception) ended
October 31, 2001, the last day of the funds' fiscal year.

In addition to average annual total returns, each fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period, including periods other than one, five and 10 years.
Average annual and cumulative total returns may be quoted as percentages or as
dollar amounts and may be calculated for a single investment, a series of
investments, or a series of redemptions over any time period. Total returns may
be broken down into components of income and capital (including capital gains
and changes in share price) to illustrate the relationship of these factors and
their contributions to total return.

As a new fund, performance information for the C Class is not available as of
the date of this Statement of Additional Information.

Average Annual Total Returns - Investor Class

Fund 1 year 5 years 10 years From Inception Inception Date
----------------------------------------------------------------------------------------
Growth x% x% x% x% June 30, 1971(1)
Ultra x% x% x% x% November 2, 1981
Select x% x% x% x% June 30, 1971(1)
Vista x% x% x% x% November 25, 1983
Heritage x% x% x% x% November 10, 1987
Balanced x% x% x% x% October 20, 1988
Giftrust x% x% x% x% November 25, 1983
New Opportunities x% N/A N/A x% December 26, 1996
Tax-Managed Value x% N/A N/A x% March 31, 1999
Veedot N/A N/A N/A x% November 30, 1999

1 Commenced operations on June 30, 1971. This inception date corresponds with
the management company's implementation of its current investment philosophy
and practices, although the fund's actual inception date was October 31, 1958.

Average Annual Total Returns - Advisor Class

Fund 1 year From Inception Inception Date
--------------------------------------------------------------------------------
Growth x% x% June 4, 1997
Ultra x% x% October 2, 1996
Select x% x% August 8, 1997
Vista x% x% October 2, 1996
Heritage x% x% July 11, 1997
Balanced x% x% January 6, 1997
Tax-Managed Value N/A N/A N/A
Veedot N/A N/A N/A

Average Annual Total Returns - Institutional Class

Fund 1 year From Inception Inception Date
--------------------------------------------------------------------------------
Growth x% x% June 16, 1997
Ultra x% x% November 14, 1996
Select x% x% March 13, 1997
Vista x% x% November 14, 1996
Heritage x% x% June 16, 1997
Balanced x% N/A May 1, 2000
Tax-Managed Value N/A N/A N/A
Veedot N/A x% August 1, 2000

Fixed Income Funds and Balanced

Yield is calculated by adding over a 30-day (or one-month) period all interest
and dividend income (net of fund expenses) calculated on each day's market
values, dividing this sum by the average number of fund shares outstanding
during the period, and expressing the result as a percentage of the fund's share
price on the last day of the 30-day (or one-month) period. The percentage is
then annualized. Capital gains and losses are not included in the calculation.

The following table sets forth yield quotations pursuant to computation methods
prescribed by the SEC for the various classes of the fixed-income funds and the
fixed-income portion of Balanced for the 30-day period ended October 31, 2001,
the last day of the fiscal year.

Fund Investor Class Advisor Class Institutional Class
-----------------------------------------------------------------------------------------
Balanced x% x% x%
High-Yield x% N/A N/A

The fixed-income funds may also elect to advertise cumulative total returns and
average annual total returns, computed as described under the heading Equity
Funds above.

The following table shows the cumulative total returns and the average annual
total returns of the Investor Class of the fixed-income funds since their
respective dates of inception (as noted) through October 31, 2000.

Cumulative
Total Return Average
Since Annual Date of
Fund Inception Total Return Inception
-------------------------------------------------------------------------------------------
Balanced x% x% October 20, 1988
High-Yield x% x% September 30, 1997

PERFORMANCE COMPARISONS

The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that are sold with a sales
charge or deferred sales charge. Sources of economic data that may be used for
such comparisons may include, but are not limited to: U.S. Treasury bill, note
and bond yields, money market fund yields, U.S. government debt and percentage
held by foreigners, the U.S. money supply, net free reserves, and yields on
current-coupon GNMAs (source: Board of Governors of the Federal Reserve System);
the federal funds and discount rates (source: Federal Reserve Bank of New York);
yield curves for U.S. Treasury securities and AA/AAA-rated corporate securities
(source: Bloomberg Financial Markets); yield curves for AAA-rated, tax-free
municipal securities (source: Telerate); yield curves for foreign government
securities (sources: Bloomberg Financial Markets and Data Resources, Inc.);
total returns on foreign bonds (source: J.P. Morgan Securities Inc.); various
U.S. and foreign government reports; the junk bond market (source: Data
Resources, Inc.); the CRB Futures Index (source: Commodity Index Report); the
price of gold (sources: London a.m./p.m. fixing and New York Comex Spot Price);
rankings of any mutual fund or mutual fund category tracked by Lipper, Inc. or
Morningstar, Inc.; mutual fund rankings published in major, nationally
distributed periodicals; data provided by the Investment Company Institute;
Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indices of stock
market performance; and indices and historical data supplied by major securities
brokerage or investment advisory firms. The funds also may utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance or to provide general information about the funds.

PERMISSIBLE ADVERTISING INFORMATION

From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders:

(1) discussions of general economic or financial principles (such as the effects
of compounding and the benefits of dollar-cost averaging);
(2) discussions of general economic trends;
(3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of the
funds;
(5) descriptions of investment strategies for one or more of the funds;
(6) descriptions or comparisons of various savings and investment products
(including, but not limited to, qualified retirement plans and individual
stocks and bonds), which may or may not include the funds;
(7) comparisons of investment products (including the funds) with relevant
market or industry indices or other appropriate benchmarks;
(8) discussions of fund rankings or ratings by recognized rating organizations;
and
(9) testimonials describing the experience of persons who have invested in
one or more of the funds.

The funds also may include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the funds.

MULTIPLE CLASS PERFORMANCE ADVERTISING

Pursuant to the Multiple Class Plan, the corporation may issue additional
classes of existing funds or introduce new funds with multiple classes available
for purchase. To the extent a new class is added to an existing fund, the
advisor may, in compliance with SEC and NASD rules, regulations and guidelines,
market the new class of shares using the historical performance information of
the original class of shares. When quoting performance information for a new
class of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class and for periods after the first full quarter after inception, actual
performance of the new class will be used.

FINANCIAL STATEMENTS

The financial statements for the funds have been audited by Deloitte & Touche
LLP, independent auditors. Their Independent Auditors' Reports and the financial
statements included in the funds' Annual Reports for the fiscal year ended
October 31, 2001 are incorporated herein by reference.

EXPLANATION OF FIXED-INCOME SECURITIES RATINGS

As described in the Prospectuses, some of the funds will invest in fixed-income
securities. Those investments, however, are subject to certain credit quality
restrictions, as noted in the Prospectuses. The following is a summary of the
rating categories referenced in the prospectus.

Bond Ratings

S&P Moody's Description
---------------------------------------------------------------------------------------------------------------------------------------

AAA Aaa These are the highest ratings assigned by S&P and Moody's to a debt obligation. They
indicate an extremely strong capacity to pay interest and repay principal.

AA Aa Debt rated in this category is considered to have a very strong capacity to pay interest and
repay principal and differs from AAA/Aaa issues only in a small degree.

A A Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat
more susceptible to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.

BBB Baa Debt rated BBB/Baa is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated categories. Debt
rated below BBB/Baa is regarded as having significant speculative characteristics.

BB Ba Debt rated BB/Ba has less near-term vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business, financial or
economic conditions that could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category also is used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B B Debt rated B has a greater vulnerability to default but currently has the capacity to meet
interest payments and principal repayments. Adverse business, financial or economic conditions
will likely impair capacity or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is assigned an actual or implied
BB/Ba or BB-/Ba3 rating.

CCC Caa Debt rated CCC/Caa has a currently identifiable vulnerability to default and is dependent upon
favorable business, financial and economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay principal. The CCC/Caa rating
category is also used for debt subordinated to senior debt that is assigned an actual or implied
B or B-/B3 rating.

CC Ca The rating CC/Ca typically is applied to debt subordinated to senior debt that is assigned an
actual or implied CCC/Caa rating.

---------------------------------------------------------------------------------------------------------------------------------------

S&P Moody's Description
C C The rating C typically is applied to debt subordinated to senior debt, which is assigned an
actual or implied CCC-/Caa3 debt rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being paid.

D D Debt rated D is in payment default. The D rating category is used when interest payments or
principal payments are not made on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

To provide more detailed indications of credit quality, the Standard & Poor's
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1,2,3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.

Commercial Paper Ratings

S&P Moody's Description
--------------------------------------------------------------------------------
A-1 Prime-1 This indicates that the degree of safety
(P-1) regarding timely payment is strong. Standard
& Poor's rates those issues determined
to possess extremely strong safety
characteristics as A-1+.

A-2 Prime-2 Capacity for timely payment on commercial
(P-2) paper is satisfactory, but the relative
degree of safety is not as high as for
issues designated A-1. Earnings trends and
coverage ratios, while sound, will be more
subject to variation. Capitalization
characteristics, while still appropriated,
may be more affected by external conditions.
Ample alternate liquidity is maintained.

A-3 Prime-3 Satisfactory capacity for timely repayment.
(P-3) Issues that carry this rating are somewhat
more vulnerable to the adverse changes in
circumstances than obligations carrying the
higher designations.

Note Ratings

S&P Moody's Description
--------------------------------------------------------------------------------
SP-1 MIG-1; VMIG-1 Notes are of the highest
quality enjoying strong protection from
established cash flows of funds for their
servicing or from established and broad-based
access to the market for refinancing, or
both.

SP-2 MIG-2; VMIG-2 Notes are of high quality, with
margins of protection ample, although not so
large as in the preceding group.

SP-3 MIG-3; VMIG-3 Notes are of favorable quality,
with all security elements accounted for, but
lacking the undeniable strength of the
preceding grades. Market access for
refinancing, in particular, is likely to be
less well established.

SP-4 MIG-4; VMIG-4 Notes are of adequate quality,
carrying specific risk but having protection
and not distinctly or predominantly
speculative.

More information about the funds is contained in these documents

Annual and Semiannual Reports

Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.

You can receive a free copy of the annual and semiannual reports, and
ask questions about the funds and your accounts, by contacting American Century
at the address or telephone numbers listed below.

If you own or are considering purchasing fund shares through

o an employer-sponsored retirement plan

o a bank

o a broker-dealer

o an insurance company

o another financial intermediary

you can receive the annual and semiannual reports directly from them.

You also can get information about the funds from the Securities and
Exchange Commission (SEC). The SEC charges a duplicating fee to provide copies
of this information.

In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for
location and hours.

On the Internet o EDGAR database at www.sec.gov
o By email request at publicinfo@sec.gov

By mail SEC Public Reference Section
Washington, D.C. 20549-0102

Investment Company Act File No. 811-0816

American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200

Investor Relations
1-800-345-2021 or 816-531-5575

Automated Information Line
1-800-345-8765

www.americancentury.com

Fax
816-340-7962

Telecommunications Device for the Deaf
1-800-634-4113 or 816-444-3485

Business; Not-For-Profit and
Employer-Sponsored Retirement Plans
1-800-345-3533

SH-SAI-xxxxx 0203

PART C. OTHER INFORMATION.

ITEM 23. Exhibits (all exhibits not filed herewith are being incorporated
herein by reference)

(a) (1) Articles of Incorporation of Twentieth Century Investors, Inc., dated
June 26, 1990 (filed electronically as Exhibit b1a to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(2) Articles of Amendment of Twentieth Century Investors, Inc., dated
November 19, 1990 (filed electronically as Exhibit b1b to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(3) Articles of Merger of Twentieth Century Investors, Inc., a Maryland
corporation and Twentieth Century Investors, Inc., a Delaware corporation,
dated February 22, 1991 (filed electronically as Exhibit b1c to
Post-Effective Amendment No. 73 to the Registration Statement of the
Registrant on February 29, 1996, File No. 2-14213).

(4) Articles of Amendment of Twentieth Century Investors, Inc., dated
August 10, 1993 (filed electronically as Exhibit b1d to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(5) Articles Supplementary of Twentieth Century Investors, Inc., dated
September 3, 1993 (filed electronically as Exhibit b1e to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(6) Articles Supplementary of Twentieth Century Investors, Inc., dated
April 24, 1995 (filed electronically as Exhibit b1f to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(7) Articles Supplementary of Twentieth Century Investors, Inc., dated
October 11, 1995 (filed electronically as Exhibit b1g to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(8) Articles Supplementary of Twentieth Century Investors, Inc., dated
January 22, 1996 (filed electronically as Exhibit b1h to Post-Effective
Amendment No. 73 to the Registration Statement of the Registrant on
February 29, 1996, File No. 2-14213).

(9) Articles Supplementary of Twentieth Century Investors, Inc., dated
March 11, 1996 (filed electronically as Exhibit b1i to Post-Effective
Amendment No. 75 to the Registration Statement of the Registrant on June
14, 1996, File No. 2-14213).

(10) Articles Supplementary of Twentieth Century Investors, Inc., dated
September 9, 1996 (filed electronically as Exhibit a10 to Post-Effective
Amendment No. 85 to the Registration Statement of the Registrant on
September 1, 1999, File No. 2-14213).

(11) Articles of Amendment of Twentieth Century Investors, Inc., dated
December 2, 1996 (filed electronically as Exhibit b1j to Post-Effective
Amendment No. 76 to the Registration Statement of the Registrant on
February 28, 1997, File No. 2-14213).

(12) Articles Supplementary of American Century Mutual Funds, Inc., dated
December 2, 1996 (filed electronically as Exhibit b1k to Post-Effective
Amendment No. 76 to the Registration Statement of the Registrant on
February 28, 1997, File No. 2-14213).

(13) Articles Supplementary of American Century Mutual Funds, Inc., dated
July 28, 1997 (filed electronically as Exhibit b1l to Post-Effective
Amendment No. 78 to the Registration Statement of the Registrant on
February 26, 1998, File No. 2-14213).

(14) Articles Supplementary of American Century Mutual Funds, Inc., dated
November 28, 1997 (filed electronically as Exhibit a13 to Post-Effective
Amendment No. 83 to the Registration Statement of the Registrant on
February 26, 1999, File No. 2-14213).

(15) Certificate of Correction to Articles Supplementary of American
Century Mutual Funds, Inc., dated December 18, 1997 (filed electronically
as Exhibit a14 to Post-Effective Amendment No. 83 to the Registration
Statement of the Registrant on February 26, 1999, File No. 2-14213).

(16) Articles Supplementary of American Century Mutual Funds, Inc., dated
December 18, 1997 (filed electronically as Exhibit b1m to Post-Effective
Amendment No. 78 to the Registration Statement of the Registrant on
February 26, 1998, File No. 2-14213).

(17) Articles Supplementary of American Century Mutual Funds, Inc., dated
January 25, 1999 (filed electronically as Exhibit a16 to Post-Effective
Amendment No. 83 to the Registration Statement of the Registrant on
February 26, 1999, File No. 2-14213).

(18) Articles Supplementary of American Century Mutual Funds, Inc., dated
February 16, 1999 (filed electronically as Exhibit a17 to Post-Effective
Amendment No. 83 to the Registration Statement of the Registrant on
February 26, 1999, File No. 2-14213).

(19) Articles Supplementary of American Century Mutual Funds, Inc., dated
August 2, 1999 (filed electronically as Exhibit a19 to Post-Effective
Amendment No. 89 to the Registration Statement of the Registrant on
December 1, 2000, File No. 2-14213).

(20) Articles Supplementary of American Century Mutual Funds, Inc., dated
November 19, 1999 (filed electronically as Exhibit a19 to Post-Effective
Amendment No. 87 to the Registration Statement of the Registrant on
November 29, 1999, File No. 2-14213).

(21) Articles Supplementary of American Century Mutual Funds, Inc., dated
March 5, 2001 (filed electronically as Exhibit a21 to Post-Effective
Amendment No. 93 to the Registration Statement of the Registrant on April
20, 2001, File No. 2-14213).

(22) Certificate of Correction to Articles Supplementary, dated April 3,
2001 (filed electronically as Exhibit a22 to Post-Effective Amendment No.
93 to the Registration Statement of the Registrant on April 20, 2001, File
No. 2-14213).

(b) (1) By-laws of Twentieth Century Investors, Inc., (filed electronically as
Exhibit b2 to Post-Effective Amendment No. 73 to the Registration Statement
of the Registrant on February 29, 1996, File No. 2-14213).

(2) Amendment to By-laws of American Century Mutual Funds, Inc., (filed
electronically as Exhibit b2b to Post-Effective Amendment No. 9 to the
Registration Statement of American Century Capital Portfolios, Inc. on
February 17, 1998, File No. 33-64872).

(c) Registrant hereby incorporates by reference, as though set forth fully
herein, Article Fifth, Article Seventh, and Article Eighth, of Registrant's
Articles of Incorporation, appearing as Exhibit (a)(1) to Post-Effective
Amendment No. 76 on Form N-1A of the Registrant, and Article Fifth of
Registrant's Articles of Amendment, appearing as Exhibit (a)(4) to
Post-Effective Amendment No. 76 to the Registration Statement on February
28, 1997; and Sections 3, 4, 5, 6, 7, 8, 9, 10, 11, 22, 24, 25, 30, 31, 33,
39, 45 and 46 of Registrant's By-Laws appearing as Exhibit (b)(2) to
Post-Effective Amendment No. 73 on Form N-1A, and Sections 25, 30 & 31 of
Registrant's By-Laws appearing as Exhibit (b)(2) to Post-Effective
Amendment No. 9 on Form N-1A of American Century Capital Portfolios, Inc.,
File No. 33-64872.

(d) (1) Management Agreement between American Century Mutual Funds, Inc. and
American Century Investment Management, Inc., dated August 1, 1997 (filed
electronically as Exhibit b5 to Post-Effective Amendment No. 78 to the
Registration Statement of the Registrant on February 26, 1998, File No.
2-14213).

(2) Addendum to the Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc., dated
September 15, 1997 (filed electronically as Exhibit d2 to Post-Effective
Amendment No. 89 to the Registration Statement of the Registrant on
December 1, 2000, File No. 2-14213) .

(3) Addendum to the Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc., dated
February 16, 1999 (filed electronically as Exhibit d2 to Post-Effective
Amendment No. 83 to the Registration Statement of the Registrant on
February 26, 1999, File No. 2-14213).

(4) Addendum to the Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc., dated
November 30, 1999 (filed electronically as Exhibit d3 to Post-Effective
Amendment No. 87 to the Registration Statement of the Registrant on
November 29, 1999, File No. 2-14213).

(5) Amendment No. 1 to the Management Agreement between American Century
Mutual Funds, Inc. and American Century Investment Management, Inc., dated
August 1, 2000 (filed electronically as Exhibit d5 to Post-Effective
Amendment No. 89 to the Registration Statement of the Registrant on
December 1, 2000, File No. 2-14213).

(6) Addendum to the Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc., dated May 1,
2001 (filed electronically as Exhibit d6 to Post-Effective Amendment No. 93
to the Registration Statement of the Registrant on April 20, 2001, File No.
2-14213).

(e) (1) Distribution Agreement between American Century Mutual Funds, Inc. and
American Century Investment Services, Inc., dated March 13, 2000 (filed
electronically as Exhibit e7 to Post-Effective Amendment No. 17 to the
Registration Statement of American Century World Mutual Funds, Inc. on
March 30, 2000, File No 33-39242).

(2) Amendment No. 1 to the Distribution Agreement between American Century
Mutual Funds, Inc. and American Century Investment Services, Inc., dated
June 1, 2000 (filed electronically as Exhibit e9 to Post-Effective
Amendment No. 19 to the Registration Statement of American Century World
Mutual Funds, Inc. on May 24, 2000, File No. 33-39242).

(3) Amendment No. 2 to the Distribution Agreement between American Century
Mutual Funds, Inc. and American Century Investment Services, Inc., dated
November 20, 2000 (filed electronically as Exhibit e10 to Post-Effective
Amendment No. 29 to the Registration Statement of American Century Variable
Portfolios, Inc. on December 1, 2000, File No. 33-14567).

(4) Amendment No. 3 to the Distribution Agreement between American Century
Mutual Funds, Inc. and American Century Investment Services, Inc., dated
March 1, 2001 (filed electronically as Exhibit e4 to Post-Effective
Amendment No. 35 to the Registration Statement of American Century Target
Maturities Trust on April 17, 2001, File No. 2-94608).

(5) Amendment No. 4 to the Distribution Agreement between American Century
Mutual Funds, Inc. and American Century Investment Services, Inc. dated
April 30, 2001 (filed electronically as Exhibit e5 to Post-Effective
Amendment No. 35 to the Registration Statement of American Century Target
Maturities Trust on April 17, 2001, File No. 2-94608).

(6) Amendment No. 5 to the Distribution Agreement between American Century
Investment Trust and American Century Investment Services, Inc., dated
August 1, 2001 (filed as Exhibit e6 to Post-Effective Amendment No. 21 to
the Registration Statement of American Century Capital Portfolios, Inc., on
July 30, 2001, File No. 33-64872).

(7) Amendment No. 6 to the Distribution Agreement between American Century
Investment Trust and American Century Investment Services, Inc., dated
August 1, 2001 (filed as Exhibit e7 to Post-Effective Amendment No. 21 to
the Registration Statement of American Century Capital Portfolios, Inc., on
July 30, 2001, File No. 33-64872).

(8) Amendment No. 7 to the Distribution Agreement between American Century
Investment Trust and American Century Investment Services, Inc., dated
August 1, 2001 (filed as Exhibit e8 to Post-Effective Amendment No. 16 to
the Registration Statement of American Century Investment Trust, on
November 30, 2001, File No. 33-65170).

(f) Not Applicable.

(g) (1) Master Agreement by and between Commerce Bank, N.A. and Twentieth
Century Services, Inc., dated January 22, 1997 (filed electronically as
Exhibit 8e to Post-Effective Amendment No. 76 to the Registration Statement
of the Registrant on February 28, 1997, File No. 2-14213).

(2) Global Custody Agreement between American Century Investments and The
Chase Manhattan Bank, dated August 9, 1996 (filed electronically as Exhibit
8 to Post-Effective Amendment No. 31 to the Registration Statement of
American Century Government Income Trust on February 7, 1997, File No.
2-99222).

(3) Amendment to the Global Custody Agreement between American Century
Investments and The Chase Manhattan Bank, dated December 9, 2000 (filed
electronically as Exhibit g2 to Pre-Effective Amendment No. 2 to the
Registration Statement of American Century Variable Portfolios II, Inc. on
January 9, 2001, File No. 333-46922).

(h) (1) Transfer Agency Agreement by and between Twentieth Century Investors,
Inc. and Twentieth Century Services, Inc., dated as of March 1, 1991 (filed
electronically as Exhibit 9 to Post-Effective Amendment No. 76 to the
Registration Statement of the Registrant on February 28, 1997, File No.
2-14213).

(2) Credit Agreement between American Century Funds and The Chase Manhattan
Bank, as Administrative Agent, dated as of December 19, 2000 (filed
electronically as Exhibit h5 to Post-Effective Amendment No. 33 to the
Registration Statement of American Century Target Maturities Trust on
January 31, 2001, File No. 2-94608).

(i) Opinion and Consent of Counsel (filed electronically as Exhibit i to
Post-Effective Amendment No. 89 to the Registration Statement of the
Registrant on December 1, 2000, File No. 2-14213).

(j) (1) Consent of Deloitte & Touche, independent auditors to be filed by
amendment.

(2) Power of Attorney, dated November 18, 2000 (filed electronically as
Exhibit j2 to Post-Effective Amendment No. 89 to the Registration Statement
of the Registrant on December 1, 2000, File No. 2-14213).

(3) Power of Attorney, dated November 30, 2001 is included herein.

(k) Not applicable.

(l) Not applicable.

(m) (1) Master Distribution and Shareholder Services Plan of Twentieth Century
Capital Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth
Century Strategic Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. (Advisor Class), dated September 3, 1996 (filed
electronically as Exhibit b15a to Post-Effective Amendment No. 9 to the
Registration Statement of American Century Capital Portfolios, Inc. on
February 17, 1998, File No. 33-64872).

(2) Amendment No. 1 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated June 13,
1997 (filed electronically as Exhibit b15d to Post-Effective Amendment No.
77 to the Registration Statement of the Registrant on July 17, 1997, File
No. 2-14213).

(3) Amendment No. 2 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated September
30, 1997 (filed electronically as Exhibit b15c to Post-Effective Amendment
No. 78 to the Registration Statement of the Registrant on February 26,
1998, File No. 2-14213).

(4) Amendment No. 3 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated June 30,
1998 (filed electronically as Exhibit b15e to Post-Effective Amendment No.
11 to the Registration Statement of American Century Capital Portfolios,
Inc. on June 26, 1998, File No. 33-39242).

(5) Amendment No. 4 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated November
13, 1998 (filed electronically as Exhibit b15e to Post-Effective Amendment
No. 12 to the Registration Statement of American Century World Mutual
Funds, Inc. on November 13, 1998, File No. 33-39242).

(6) Amendment No. 5 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated February
16, 1999 (filed electronically as Exhibit m6 to Post-Effective Amendment
No. 83 to the Registration Statement of the Registrant on February 26,
1999, File No. 2-14213).

(7) Amendment No. 6 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated July 30,
1999 (filed electronically as Exhibit m7 to Post-Effective Amendment No. 16
to the Registration Statement of American Century Capital Portfolios, Inc.
on July 29, 1999, File No. 33-64872).

(8) Amendment No. 7 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated November
19, 1999 (filed electronically as Exhibit m8 to Post-Effective Amendment
No. 87 to the Registration Statement of the Registrant on November 29,
1999, File No. 2-14213)

(9) Amendment No. 8 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc., and
American Century World Mutual Funds, Inc. (Advisor Class), dated June 1,
2000 (filed electronically as Exhibit m9 to Post-Effective Amendment No. 19
to the Registration Statement of American Century World Mutual Funds, Inc.
on May 24, 2000, File No. 33-39242).

(10) Amendment No. 9 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated April 30,
2001 (filed electronically as Exhibit m10 to Post-Effective Amendment No.
24 to the Registration Statement of American Century World Mutual Funds,
Inc. on April 19, 2001, File No. 33-39242).

(11) Amendment No. 10 to the Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century Mutual
Funds, Inc., American Century Strategic Asset Allocations, Inc. and
American Century World Mutual Funds, Inc. (Advisor Class), dated December
3, 2001 is included herein.

(12) Master Distribution and Individual Shareholder Services Plan of
American Century Capital Portfolios, Inc., American Century Mutual Funds,
Inc., American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (C Class), dated March 1, 2001 (filed
electronically as Exhibit m11 to Post-Effective Amendment No. 24 to the
Registration Statement of American Century World Mutual Funds, Inc. on
April 19, 2001, File No. 33-39242).

(13) Amendment No. 1 to Master Distribution and Individual Shareholder
Services Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (C Class), dated April
30, 2001 (filed electronically as Exhibit m12 to Post-Effective Amendment
No. 24 to the Registration Statement of American Century World Mutual
Funds, Inc. on April 19, 2001, File No. 33-39242).

(14) Shareholder Services Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century Strategic Asset
Allocations, Inc. and Twentieth Century World Investors, Inc. (Service
Class), dated September 3, 1996 (filed electronically as Exhibit b15b to
Post-Effective Amendment No. 9 to the Registration Statement of American
Century Capital Portfolios, Inc. on February 17, 1998, File No. 33-64872).

(n) (1) Multiple Class Plan of American Century Capital Portfolios, Inc.,
American Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc., dated
March 1, 2001 (filed electronically as Exhibit n1 to Post-Effective
Amendment No. 24 to the Registration Statement of American Century World
Mutual Funds, Inc. on April 19, 2001, File No. 33-39242).

(2) Amendment No. 1 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American Century
Strategic Asset Allocations, Inc. and American Century World Mutual Funds,
Inc., dated April 30, 2001 (filed electronically as Exhibit n2 to
Post-Effective Amendment No. 24 to the Registration Statement of American
Century World Mutual Funds, Inc. on April 19, 2001, File No. 33-39242).

(3) Amendment No. 2 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American Century
Strategic Asset Allocations, Inc. and American Century World Mutual Funds,
Inc., dated December 3, 2001, is included herein.

(o) Not applicable.

(p) American Century Investments Code of Ethics (filed electronically as
Exhibit p to Post-Effective Amendment No. 30 to the Registration Statement
of American Century California Tax-Free and Municipal Funds on December 29,
2000, File No. 2-82734).

ITEM 24. Persons Controlled by or Under Common Control with Registrant.

Not Applicable.

ITEM 25. Indemnification.

The Corporation is a Maryland corporation. Section 2-418 of the General
Corporation Law of Maryland allows a Maryland corporation to indemnify its
directors, officers, employees and agents to the extent provided in such
statute.

Article Eighth of the Articles of Incorporation requires the
indemnification of the corporation's directors and officers to the extent
permitted by the General Corporation Law of Maryland, the Investment
Company Act and all other applicable laws.

The registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
registrant for sums which it may be permitted or required to pay to its
officers and directors by way of indemnification against such liabilities,
subject in either case to clauses respecting deductibility and
participation.

ITEM 26. Business and Other Connections of Investment Advisor.

None.

ITEM 27. Principal Underwriter.

I. (a) American Century Investment Services, Inc. (ACIS) acts as principal
underwriter for the following investment companies:

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century Variable Portfolios II, Inc.
American Century World Mutual Funds, Inc.

ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly-owned subsidiary of American Century Companies, Inc.

(b) The following is a list of the directors, executive officers and
partners of ACIS:

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
--------------------------------------------------------------------------------
James E. Stowers, Jr. Chairman and Director Chairman and
Director

James E. Stowers III Co-Chairman and Director Director

W. Gordon Snyder President none

William M. Lyons Chief Executive Officer, President
Executive Vice President and Director

Robert T. Jackson Executive Vice President, Executive Vice
Chief Financial Officer President and
and Chief Accounting Officer Chief Financial
Officer

Kevin Cuccias Senior Vice President none

Joseph Greene Senior Vice President none

Brian Jeter Senior Vice President none

Mark Killen Senior Vice President none

Tom Kmak Senior Vice President none

David C. Tucker Senior Vice President Senior Vice President
and General Counsel

* All addresses are 4500 Main Street, Kansas City, Missouri 64111

ITEM 28. Location of Accounts and Records.

All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in
the possession of American Century Mutual Funds, Inc., American Century
Services Corporation and American Century Investment Management, Inc., all
located at American Century Tower, 4500 Main Street, Kansas City, Missouri
64111.

ITEM 29. Management Services

Not Applicable.

ITEM 30. Undertakings.

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 94 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 December, 2001.

American Century Mutual Funds, Inc.
(Registrant)

By: /*/William M. Lyons
President and Principal Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 94 has been signed below by the following persons
in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

*William M. Lyons President and December 13, 2001
William M. Lyons Principal Executive Officer

*Maryanne Roepke Senior Vice President, December 13, 2001
Maryanne Roepke Treasurer and
Chief Accounting Officer

*James E. Stowers, Jr. Chairman of the Board and December 13, 2001
James E. Stowers, Jr. Director

*James E. Stowers III Director December 13, 2001
James E. Stowers III

*Thomas A. Brown Director December 13, 2001
Thomas A. Brown

*Robert W. Doering, M.D. Director December 13, 2001
Robert W. Doering, M.D.

*Andrea C. Hall, Ph.D. Director December 13, 2001
Andrea C. Hall, Ph.D.

*D. D. (Del) Hock Director December 13, 2001
D. D. (Del) Hock

*Donald H. Pratt Director December 13, 2001
Donald H. Pratt

*Gale E. Sayers Director December 13, 2001
Gale E. Sayers

*M. Jeannine Strandjord Director December 13, 2001
M. Jeannine Strandjord

*Timothy S. Webster Director December 13, 2001
Timothy S. Webster

*By /s/Janet A. Nash
Janet A. Nash
Attorney-in-Fact