-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MujGUnGWp2MWzekMQ3HcUt+bdinVg41r9kcdnIYL9LYBWEuzLdrCCLFB+9sd9Xwy ucbC5rljck3IkDw8PJKObQ== 0000717316-99-000024.txt : 19991230 0000717316-99-000024.hdr.sgml : 19991230 ACCESSION NUMBER: 0000717316-99-000024 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19991229 EFFECTIVENESS DATE: 19991229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CENTURY CALIFORNIA TAX FREE & MUNICIPAL FUNDS CENTRAL INDEX KEY: 0000717316 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 946562826 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 002-82734 FILM NUMBER: 99782934 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-03706 FILM NUMBER: 99782935 BUSINESS ADDRESS: STREET 1: 1665 CHARLESTON RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 8003218321 MAIL ADDRESS: STREET 1: 1665 CHARLESTON RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 FORMER COMPANY: FORMER CONFORMED NAME: BENHAM CALIFORNIA TAX FREE TRUST / DATE OF NAME CHANGE: 19960815 FORMER COMPANY: FORMER CONFORMED NAME: BENHAM CALIFORNIA TAX FREE & MUNICIPAL FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BENHAM CALIFORNIA TAX FREE TRUST DATE OF NAME CHANGE: 19910218 485BPOS 1 POST-EFFECTIVE AMENDMENT

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 29 [X]

and/or

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

Amendment No. 33 [X]

(Check appropriate box or boxes.)

AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
_________________________________________________________________
(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 64141-6200
_________________________________________________________________
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Immediately, upon effectiveness

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

[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 1, 2000 pursuant to paragraph (b)
[ ] 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.

[front cover]

AMERICAN CENTURY
Prospectus

California Tax-Free Money Market Fund
California Municipal Money Market Fund
California Limited-Term Tax-Free Fund
California Intermediate-Term Tax-Free Fund
California Long-Term Tax-Free Fund
California Insured Tax-Free Fund
California High-Yield Municipal Fund

[american century logo (reg.sm)]
American
Century

[left margin]

JANUARY 1, 2000
INVESTOR CLASS

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.

Funds Distributor, Inc., Distributor

[inside front cover]

Dear Investor,

Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand prospectus can make your work a lot less daunting. We hope
you'll find this prospectus not only easy to understand, but more importantly,
that it gives you confidence in the investment decisions you have made or are
soon to make.

As you begin to read through this prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.

An Overview of the Funds - Learn about fund goals, strategies and risks and
who may or may not want to invest.

Fund Performance History - See how the fund performed from year to year.

Fees and Expenses - Find out fund management fees and other expenses
associated with investing.

Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.

As you continue to read, the Management section will acquaint you with the
fund management team and Investing with American Century gives an overview about
how to invest and how to manage your account.

Share Price and Distributions, Taxes and Financial Highlights wrap up the
prospectus with important financial information you'll need to make an informed
decision.

Naturally, you may have questions about investing after you read through the
prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, an Investor Relations Representative will be
happy to help weekdays, 7 a.m. to 7 p.m. and Saturdays, 9 a.m. to noon, Central
time. Give us a call at 1-800-345-2021.

Sincerely,

[signature of Mark Killen]
Mark Killen
Senior Vice President
American Century Investment Services, Inc.

[left margin]

[american century logo (reg.sm)]
American
Century

American Century
Investments

P.O. Box 419200
Kansas City, MO
64141-6200

TABLE OF CONTENTS

An Overview of the Funds .................................................. 2
Fund Performance History .................................................. 4
Fees and Expenses ......................................................... 8
Objectives, Strategies and Risks .......................................... 9
California Tax-Free Money Market Fund ................................ 9
California Municipal Money Market Fund
California Limited-Term Tax-Free Fund ................................ 10
California Intermediate-Term Tax-Free Fund
California Long-Term Tax-Free Fund
California Insured Tax-Free Fund ..................................... 12
California High-Yield Municipal Fund ................................. 13
Basics of Fixed-Income Investing .......................................... 14
Management ................................................................ 17
Investing with American Century ........................................... 19
Share Price and Distributions ............................................. 23
Taxes ..................................................................... 25
Financial Highlights ...................................................... 26

[left margin]

Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in GREEN ITALICS, look for its definition
in the left margin.

[graphic of pointing index finger] This symbol highlights special information
and helpful tips.

American Century Investments

AN OVERVIEW OF THE FUNDS

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These conservatively managed funds seek income that is exempt from federal and
California income tax. They also attempt to protect the value of your
investments.

WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?

The fund managers invest most of the funds' assets in DEBT SECURITIES issued by
cities, counties and other California municipalities. Each of the funds invests
in different types of these municipal debt securities and has different risks.
The following chart shows the differences among the funds primary investments
and principal risks. It is designed to help you compare these funds with each
other; it should not be used to compare these funds with other mutual funds. A
more detailed description of the funds' investment strategies and risks begins
on page 9.

Fund Primary Investments Principal Risks
--------------------------------------------------------------------------------
Lower Income California Tax-Free High-quality, very short-term California economic risk
More Liquid Money Market debt securities Lowest credit risk
Shorter Term Lowest interest rate risk
Lowest liquidity risk

California Municipal High-quality, very short-term California economic risk
Money Market debt securities, including Lowest credit risk
private activity bonds Lowest interest rate risk
Lowest liquidity risk

[graphic of California Limited- Quality debt securities that California economic risk
an arrow Term Tax-Free mature in one to five years Medium credit risk
on each end Low interest rate risk
of a vertical Medium liquidity risk
line pointing
from the above California Quality debt securities that California economic risk
"Lower Income" Intermediate- mature in four or more years Medium credit risk
to below at Term Tax-Free Medium interest rate risk
"Higher Income"] Medium liquidity risk

California Long-Term Quality debt securities that California economic risk
Tax-Free mature in seven or more years Medium credit risk
High interest rate risk
Medium liquidity risk

California Insured Quality debt securities that California economic risk
Tax-Free are covered by insurance that Low credit risk
guarantees interest and High interest rate risk
principal payments Medium liquidity risk

Higher Income California High- Debt securities that provide California economic risk
Less Liquid Yield Municipal high income, including junk Highest credit risk
Longer Term and private activity bonds High interest rate risk
Highest liquidity risk

As with all funds, your shares may be worth more or less at any given time than
the price you paid for them. If you sell your shares when the value is less than
the price you paid, you will lose money.

[left margin]

DEBT SECURITIES include fixed-income investments such as notes, bonds,
commercial paper and debentures. Very short-term debt securities (those with
maturities shorter than one year) are called money market instruments.

2 American Century Investments 1-800-345-2021

WHO MAY WANT TO INVEST IN THE FUNDS?

The funds may be a good investment if you are
* a California resident or taxpayer
* seeking current tax-free income
* comfortable with risk based on California's economy
* comfortable with the funds' other investment risks
* seeking diversification by investing in a fixed-income mutual fund

WHO MAY NOT WANT TO INVEST IN THE FUNDS?

The funds may not be a good investment if you are
* investing in an IRA or other tax-advantaged retirement plan
* investing for long-term growth
* looking for the added security of FDIC insurance

[left margin]

[graphic of pointing index finger]
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the money market funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
them.

www.americancentury.com American Century Investments 3

FUND PERFORMANCE HISTORY

CALIFORNIA TAX-FREE MONEY MARKET FUND
CALIFORNIA MUNICIPAL MONEY MARKET FUND

Annual Total Returns(1)

The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years or for each full calendar year in
the life of the fund if less than 10 years. It indicates the volatility of the
funds' historical returns from year to year.

[data from bar chart shown below]

California Tax-Free California Municipal
Money Market Money Market
1998 2.95% 3.05%
1997 3.19% 3.23%
1996 3.07% 3.10%
1995 3.41% 3.49%
1994 2.42% 2.47%
1993 2.03% 2.09%
1992 2.49% 2.95%
1991 3.81% 4.61%
1990 5.16% NA
1989 5.71% NA

(1)As of September 30, 1999, the funds' year-to-date returns were: California
Tax-Free Money Market, 1.90% and California Municipal Money Market, 2.01%

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
California Tax-Free Money Market 1.52% (2Q 1989) 0.44% (1Q 1994)
California Municipal Money Market 1.18% (3Q 1991) 0.47% (1Q 1994)

Average Annual Total Returns

The following table shows the average annual total returns of the funds'
Investor Class shares for the periods indicated. The benchmark is an index of an
independently selected universe of funds that features an investment objective
similar to the funds' and is included in the table for performance comparison.

For the calendar year ended December 31, 1998 1 year 5 years 10 years Life of Fund (1)
- ---------------------------------------------------------------------------------------------------
California Tax-Free Money Market 2.95% 3.01% 3.42% 3.79%
Lipper California Tax-Exempt Money Market Average 2.72% 2.89% 3.39% 3.91%(2)
- ---------------------------------------------------------------------------------------------------
California Municipal Money Market 3.05% 3.07% N/A 3.12%
Lipper California Tax-Exempt Money Market Average 2.72% 2.89% 3.39% 2.89%

(1)The inception dates for the funds are: California Tax-Free Money Market,
November 9, 1983, and California Municipal Money Market, December 31, 1990.

(2)Since November 30, 1983, the date nearest the fund's inception for which
data are available.

[left margin]

[graphic of pointing index finger]
The performance information on this page is designed to help you see how fund
returns can vary. Keep in mind that past performance does not predict how the
funds will perform in the future.

[graphic of pointing index finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at www.americancentury.com.

4 American Century Investments 1-800-345-2021

CALIFORNIA LIMITED-TERM TAX-FREE FUND
CALIFORNIA INTERMEDIATE-TERM TAX-FREE FUND
CALIFORNIA LONG-TERM TAX-FREE FUND

Annual Total Returns(1)

[data from bar chart is shown below]

California Limited- California Intermediate- California
Term Tax-Free Term Tax-Free Long-Term Tax-Free
1998 4.91% 5.59% 6.31%
1997 5.34% 7.45% 9.74%
1996 3.93% 4.25% 3.59%
1995 8.32% 13.52% 19.80%
1994 -0.61% -3.72% -6.51%
1993 5.92% 10.69% 13.74%
1992 NA 7.09% 8.16%
1991 NA 10.38% 11.80%
1990 NA 6.99% 6.60%
1989 NA 7.94% 9.76%

(1)As of September 30, 1999, the funds' year-to-date returns were: California
Limited-Term Tax-Free, 1.30%; California Intermediate-Term Tax-Free, -0.67%; and
California Long-Term Tax-Free, -3.60%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
California Limited-Term Tax-Free 2.99% (1Q 1995) -1.35% (1Q 1994)
California Intermediate-Term Tax-Free 5.25% (1Q 1995) -3.98% (1Q 1994)
California Long-Term Tax-Free 7.13% (1Q 1995) -5.71% (1Q 1994)

Average Annual Total Returns

The following table shows the average annual total returns of the funds'
Investor Class shares for the periods indicated. The benchmarks are unmanaged
indices that have no operating costs and are included in the table for
performance comparison.

For the calendar year ended December 31, 1998 1 year 5 years 10 years Life of Fund(1)
California Limited-Term Tax-Free 4.91% 4.34% N/A 4.83%
Lehman Brothers 3-Year Municipal Bond Index 4.70% 4.80% N/A 5.28%
- ---------------------------------------------------------------------------------------------------
California Intermediate-Term Tax-Free 5.59% 5.27% 6.92% 6.91%
Lehman Brothers 5-Year General Obligation Index 5.84% 5.35% 6.98% 7.53%
- ---------------------------------------------------------------------------------------------------
California Long-Term Tax-Free 6.31% 6.24% 8.09% 8.44%
Lehman Brothers Long-Term Municipal Bond Index 6.89% 6.84% 9.15% 10.51%(2)

(1) The inception dates for the funds are: California Limited-Term Tax-Free,
June 1, 1992; and California Intermediate-Term Tax-Free and California Long-
Term Tax-Free, November 9, 1983.

(2) Since November 30, 1983, the date nearest the fund's inception for which
data are available.

[left margin]

[graphic of pointing index finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at www.americancentury.com.

www.americancentury.com American Century Investments 5

CALIFORNIA INSURED TAX-FREE FUND

Annual Total Returns(1)

The following bar chart shows the performance of the fund's Investor Class
shares for each of the last 10 calendar years. It indicates the volatility of
the fund's historical returns from year to year.

[data from bar chart shown below]

California Insured Tax-Free
1998 6.09%
1997 9.34%
1996 3.70%
1995 19.03%
1994 -6.55%
1993 13.45%
1992 9.19%
1991 11.27%
1990 6.76%
1989 10.31%

(1) As of September 30, 1999, California Insured Tax-Free's year-to-date return
was -3.29%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
California Insured Tax-Free 7.00% (1Q 1995) -6.68% (1Q 1994)

Average Annual Total Returns

The following table shows the average annual total returns of the fund's
Investor Class shares for the periods indicated. The benchmark is an unmanaged
index that has no operating costs and is included in the table for performance
comparison.

For the calendar year ended December 31, 1998 1 year 5 years 10 years Life of Fund (1)
- ---------------------------------------------------------------------------------------------------
California Insured Tax-Free 6.09% 6.00% 8.06% 6.98%
Lehman Brothers Long-Term Municipal Bond Index 6.89% 6.84% 9.15% 8.71%

(1) The inception date for the fund is December 30, 1986.

[left margin]

[graphic of pointing index finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at www.americancentury.com.

6 American Century Investments 1-800-345-2021

CALIFORNIA HIGH-YIELD MUNICIPAL FUND

Annual Total Returns(1)

[data from bar chart shown below]

California Yigh-Yield Municipal
1998 6.73%
1997 10.50%
1996 5.89%
1995 18.29%
1994 -5.36%
1993 13.18%
1992 9.17%
1991 10.91%
1990 5.65%
1989 9.68%

(1)As of September 30, 1999, California High-Yield Municipal's year-to-date
return was -1.28%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
California High-Yield Municipal 7.18% (1Q 1995) -4.54% (1Q 1994)

Average Annual Total Returns

For the calendar year ended December 31, 1998 1 year 5 years 10 years Life of Fund(1)
- --------------------------------------------------------------------------------------------------
California High-Yield Municipal 6.73% 6.93% 8.30% 6.87%
Lehman Brothers Long-Term Municipal Bond Index 6.89% 6.84% 9.15% 8.71%

(1) The inception date for the fund is December 30, 1986.

[left margin]

[graphic of pointing index finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at www.americancentury.com.

www.americancentury.com American Century Investments 7

FEES AND EXPENSES

There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Investor Class shares of other American Century funds
* to redeem your shares

The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.

ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees Expenses(2) Operating Expenses
California Tax-Free Money Market 0.50% None 0.00% 0.50%
California Municipal Money Market 0.50% None 0.00% 0.50%
California Limited-Term Tax-Free 0.51% None 0.00% 0.51%
California Intermediate-Term Tax-Free 0.51% None 0.00% 0.51%
California Long-Term Tax-Free 0.51% None 0.00% 0.51%
California Insured Tax-Free 0.51% None 0.00% 0.51%
California High-Yield Municipal 0.54% None 0.00% 0.54%

(1) Based on expenses incurred during the funds' most recent fiscal year. The
funds have stepped fee schedules. As a result, the funds' management fee rate
generally decreases as fund assets increase.

(2) Other expenses, which include the fees and expenses of the funds'
independent trustees, their legal counsel and interest, were less than 0.005%
for the most recent fiscal year.

EXAMPLE

The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .

* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above

. . . your cost of investing in the fund would be:

1 year 3 years 5 years 10 years

California Tax-Free Money Market $51 $160 $279 $627
California Municipal Money Market $51 $160 $279 $627
California Limited-Term Tax-Free $52 $163 $285 $640
California Intermediate-Term Tax-Free $52 $163 $285 $640
California Long-Term Tax-Free $52 $163 $285 $640
California Insured Tax-Free $52 $163 $285 $640
California High-Yield Municipal $55 $173 $301 $676

[left margin]

[graphic of pointing index finger]
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.

8 American Century Investments 1-800-345-2021

OBJECTIVES, STRATEGIES AND RISKS

CALIFORNIA TAX-FREE MONEY MARKET FUND
CALIFORNIA MUNICIPAL MONEY MARKET FUND

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These money market funds seek safety of principal and high current income that
is exempt from federal and California income taxes. This is a fundamental policy
and cannot be changed without shareholder approval.

HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?

The fund managers buy HIGH-QUALITY, very short-term debt securities with
interest payments exempt from federal and California income taxes. Cities,
counties and other municipalities in California usually issue these securities
for public projects, such as schools and roads.

California Municipal Money Market also buys high-quality, very short-term debt
securities whose payments are exempt from federal and California income taxes,
but that are not necessarily exempt from the federal alternative minimum tax.
Cities, counties and other municipalities in California usually issue these
securities (called private activity bonds) to fund for-profit private projects,
such as athletic stadiums, airports and apartment buildings.

Additional information about the funds' investments is available in their annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period. You may get these
reports at no cost by calling us.

WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?

* California Tax-Free Money Market's income is exempt from all federal income
tax.

* California Municipal Money Market's income is exempt from regular federal
income tax, but is not necessarily exempt from the federal alternative
minimum tax.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?

Because cash-equivalent securities are among the safest securities available,
the interest they pay is among the lowest for income-paying securities.
Accordingly, the yield on these funds will likely be lower than funds that
invest in longer-term or lower-quality securities.

Because the funds invest primarily in California municipal securities, they will
be sensitive to events that affect California's economy. They may be riskier
than funds that invest in a larger universe of securities.

[left margin]

[graphic of pointing index finger]
Income from California Municipal Money Market may be subject to the alternative
minimum tax. For more information, see "Taxes" in this Prospectus.

A HIGH-QUALITY debt security is one that has been determined to be in the top
two credit quality categories. This can be established in a number of ways. For
example, independent rating agencies may rate the security in their higher
rating categories. The funds' advisor also can analyze an unrated security to
determine if its credit quality is high enough for investment. The details of
the funds' credit quality standards are described in the Statement of Additional
Information.

www.americancentury.com American Century Investments 9

CALIFORNIA LIMITED-TERM TAX-FREE FUND
CALIFORNIA INTERMEDIATE-TERM TAX-FREE FUND
CALIFORNIA LONG-TERM TAX-FREE FUND

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These funds seek safety of principal and high current income that is exempt from
federal and California income taxes.

HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?

The fund managers buy QUALITY DEBT SECURITIES with interest payments exempt from
federal and California income taxes. Cities, counties and other municipalities
in the 50 states and U.S. territories usually issue these securities for public
projects, such as schools and roads.

The funds may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the funds may purchase securities in advance to generate
additional income.

The funds also may use futures contracts and options as part of their investment
strategies.

In the event of exceptional market or economic conditions, the funds may, as a
temporary defensive measure, invest all or a substantial portion of their assets
in cash or cash-equivalent securities. To the extent a fund assumes a defensive
position, it will not be pursuing its investment objectives and may generate
taxable income.

WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?

The funds differ in the maturity of the debt securities they purchase. This
difference is shown in the chart below.

Typical Maturity Weighted
of Investments Average Maturity
- --------------------------------------------------------------------------------
California Limited-Term Tax-Free 1-5 years 1-5 years
California Intermediate-Term Tax-Free 4 or more years 5-10 years
California Long-Term Tax-Free 7 or more years 10 or more years

[left margin]

A QUALITY DEBT SECURITY is one that has been determined to be investment grade.
This can be established in a number of ways. For example, independent rating
agencies may rate the security in their higher rating categories. The funds'
advisor also can analyze an unrated security to determine if its credit quality
is high enough for investment. The details of the funds' credit quality
standards are described in the Statement of Additional Information.

10 American Century Investments 1-800-345-2021

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?

The funds have different WEIGHTED AVERAGE MATURITIES. Because of this, the funds
will respond differently to changes in interest rates. Funds with longer
weighted average maturities are more sensitive to interest rate changes. When
interest rates rise, the values of the funds usually fall, but the values of
funds with longer weighted average maturities generally will fall farther.

The funds' share values will fluctuate. In general, funds that have higher
potential income have a higher potential loss. If you sell your shares when
their value is less than the price you paid, you will lose money.

Potential Loss Potential Income
- --------------------------------------------------------------------------------
California Limited-Term Tax-Free Lower Lower
California Intermediate-Term Tax-Free Moderate Moderate
California Long-Term Tax-Free Higher Higher

[left margin]

WEIGHTED AVERAGE MATURITY is described in more detail under "Basics of
Fixed-Income Investing."

www.americancentury.com American Century Investments 11

CALIFORNIA INSURED TAX-FREE FUND

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The fund seeks safety of principal and high current income that is exempt from
federal and California income taxes.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?

The fund managers invest in long-term INSURED DEBT SECURITIES.

* These debt securities feature interest payments exempt from federal and
California income taxes. Cities, counties and other municipalities in
California usually issue these securities for public projects.

* A debt security's insurance cannot be cancelled and guarantees interest and
other payments will be made as scheduled.

The weighted average maturity of the fund is expected to be 10 years or longer.

The fund also may use futures contracts and options as part of its investment
strategy.

During unusual market conditions, the fund is permitted to keep a significant
amount of its assets in cash or cash equivalents. If it does, it may not achieve
its investment objective and may generate taxable income.

Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

The fund invests in long-term insured debt securities. Generally, funds with
longer weighted average maturities are more sensitive to interest rate changes.
When interest rates rise, the values of bond funds usually fall, but the values
of funds with longer weighted average maturities generally will fall farther.

Because the fund invests primarily in California tax-free securities, it will be
sensitive to events that affect California's economy. It may be riskier than
funds that invest in a larger universe of securities.

The fund's investments are insured. This is significant because

* the credit risk is less than that of funds investing in long-term debt
securities without insurance, and

* potential income is lower than that of funds investing in long-term debt
securities without insurance

The fund's share value will fluctuate. In general, funds that have higher
potential income have a higher potential loss. If you sell your shares when
their value is less than the price you paid, you will lose money.

[left margin]

An INSURED DEBT SECURITY is a debt security that

* is rated in the highest category by an independent rating agency, or

* comes with insurance that guarantees interest and other payments will be
made, or

* has interest and principal payments secured by a special account holding U.S.
government securities

The fund's primary focus on insurance features is essentially a way to pursue
very high credit-quality standards.

[graphic of pointing index finger]
The insurance feature of the fund's investments is not a guarantee; the fund
can still lose money.

12 American Century Investments 1-800-345-2021

CALIFORNIA HIGH-YIELD MUNICIPAL FUND

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The fund seeks safety of principal and high current income that is exempt from
federal and California income taxes.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVE?

The fund managers buy long- and intermediate-term debt securities with interest
payments exempt from federal and California income taxes. Cities, counties and
other municipalities in the 50 states and U.S. territories usually issue these
securities for public projects, such as schools and roads.

The fund managers also may buy long- and intermediate-term debt securities with
interest payments exempt from regular federal income tax, but not exempt from
the federal alternative minimum tax. Cities, counties and other municipalities
usually issue these securities (called private activity bonds) to fund
for-profit private projects, such as athletic stadiums, airports and apartment
buildings.

The fund managers buy securities rated below investment grade, including
so-called junk bonds and bonds that are in technical or monetary default. The
issuers of these securities often have short financial histories or questionable
credit or have had and may continue to have problems making interest and
principal payments.

In the event of exceptional market or economic conditions, the fund may, as a
temporary defensive measure, invest all or a substantial portion of its assets
in cash or cash- equivalent securities. To the extent a fund assumes a defensive
position, it will not be pursuing its investment objectives and may generate
taxable income.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

The fund's investments often have high credit risk, which helps it pursue a
higher yield than more conservatively managed bond funds. 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 and other developments may be more likely to cause an issuer of
low-quality bonds to default on its obligation to pay the interest and principal
due under its securities.

The market for lower-quality debt securities is generally less liquid than the
market for higher-quality securities. Adverse publicity and investor
perceptions, as well as new and proposed laws, also may have a greater negative
impact on the market for lower-quality securities.

Because the fund typically invests in intermediate-term and long-term bonds, the
fund's interest rate risk is higher than for funds with shorter weighted average
maturities, such as money market and short-term bond funds. See the discussion
on page 14 for more information about the effects of changing interest rates on
the fund's portfolio.

Some or all of the fund's income may be subject to the federal alternative
minimum tax.

Because the fund invests primarily in municipal securities, it will be sensitive
to events that affect California's economy. California High-Yield Municipal may
have a higher level of risk than funds that invest in a larger universe of
securities.

[left margin]

[graphic of pointing index finger]
Income from California High-Yield Municipal may be subject to the alternative
minimum tax. For more information, see "Taxes" in this Prospectus.

www.americancentury.com American Century Investments 13

BASICS OF FIXED-INCOME INVESTING

DEBT SECURITIES

When a fund buys a debt security, which is also called a fixed-income security,
it is essentially lending money to the issuer of the security. Notes, bonds,
commercial paper and Treasury bills are examples of debt securities. After the
debt security is first sold by the issuer, it may be bought and sold by other
investors. The price of the security may rise or fall based on many factors,
including changes in interest rates, liquidity and credit quality.

The fund managers decide which debt securities to buy and sell by

* determining which securities help a fund meet its maturity requirements
* identifying securities that satisfy a fund's credit quality standards
* evaluating the current economic conditions and assessing the risk of
inflation
* evaluating special features of the securities that may make them more or less
attractive

WEIGHTED AVERAGE MATURITY

Like most loans, debt securities eventually must be repaid (or refinanced) at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, generally the more sensitive it is to
changes in interest rates.

Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all the debt securities the fund owns
to evaluate the interest rate sensitivity of the entire portfolio. This average
is weighted according to the size of the fund's individual holdings and is
called WEIGHTED AVERAGE MATURITY. The following chart shows how fund managers
would calculate the weighted average maturity for a fund that owned only two
debt securities.

Amount of Percent of Remaining Weighted
Security Owned Portfolio Maturity Maturity
- --------------------------------------------------------------------------------
Debt Security A 100,000 25% 1,000 days 250 days
Debt Security B 300,000 75% 10,000 days 7,500 days
Weighted Average
Maturity 7,750 days

TYPES OF RISK

The basic types of risk that the funds face are described below.

INTEREST RATE RISK

Generally, interest rates and the prices of debt securities move in opposite
directions. When interest rates fall, the prices of most debt securities rise;
when interest rates rise, prices fall. Because the funds invest primarily in
debt securities, changes in interest rates will affect the funds' performance.
This sensitivity to interest rate changes is called interest rate risk.

The degree to which interest rate changes affect a fund's performance varies and
is related to the weighted average maturity of a particular fund. For example,
when interest rates rise, you can expect the share value of a long-term bond
fund to fall more than that of a short-term bond fund. When rates fall, the
opposite is true.

[left margin]

[graphic of pointing index finger]
The longer a fund's weighted average maturity, the more sensitive it is to
changes in interest rates.

WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.

14 American Century Investments 1-800-345-2021

When interest rates change, longer maturity bonds generally experience a greater
change in price. The following table shows the likely effect of a 1% increase in
interest rates on the price of 7% coupon bonds of differing maturities:

Remaining Maturity Current Price Price After 1% Increase Change in Price
- --------------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
3 years $100.00 $97.38 -2.62%
10 years $100.00 $93.20 -6.80%
30 years $100.00 $88.69 -11.31%

CREDIT RISK

Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial or economic conditions and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
non-payment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.

The fund managers do not invest solely on the basis of a security's credit
rating; they also consider other factors, including potential returns. Higher
credit ratings usually mean lower interest rate payments, so investors often
purchase securities that aren't the highest rated to increase return. If a fund
purchases lower-rated securities, it has assumed additional credit risk.

The following chart shows the authorized credit quality ranges for the funds
offered by this Prospectus.

[data from chart shown below]

- -------------------------QUALITY
- ----HIGH QUALITY
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
================ California Tax-Free Money Market
================ California Municipal Money Market
================================ California Limited-Term Tax-Free
================================ California Intermediate-Term Tax-Free
================================ California Long-Term Tax-Free
======== California Insured Tax-Free
============================California High-Yield Municipal=====================
INVESTMENT GRADE=========================++++++++++NON-INVESTMENT GRADE+++++++++

Securities rated in one of the highest four categories by a nationally
recognized securities rating organization are considered "investment grade."
Although they are considered investment grade, an investment in these securities
still involves some credit risk because a AAA rating is not a guarantee of
payment. For a complete description of the ratings system and an explanation of
certain exceptions to the guidelines reflected in the chart, see the Statement
of Additional Information. The funds' credit quality restrictions apply at the
time of purchase; the funds will not necessarily sell securities if they are
downgraded by a rating agency.

[left margin]

[graphic of pointing index finger]
Credit quality may be lower when the issuer has
* a high debt level
* a short operating history
* a senior level of debt
* a difficult, competitive environment
* a less stable cash flow

[graphic of pointing index finger]
The Statement of Additional Information provides a detailed description of these
securities ratings.

www.americancentury.com American Century Investments 15

LIQUIDITY RISK

Debt securities can become difficult to sell, or less liquid, for a variety of
reasons, such as lack of an active trading market. The chance that a fund will
have liquidity issues is called liquidity risk.

A COMPARISON OF BASIC RISK FACTORS

The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.

Interest
Rate Risk Credit Risk Liquidity Risk

California Tax-Free Money Market Lowest Lowest Lowest
California Municipal Money Market Lowest Lowest Lowest
California Limited-Term Tax-Free Low Medium Medium
California Intermediate-Term Tax-Free Medium Medium Medium
California Long-Term Tax-Free High Medium Medium
California Insured Tax-Free High Low Medium
California High-Yield Municipal High Highest Highest

The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics, and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.

16 American Century Investments 1-800-345-2021

MANAGEMENT

WHO MANAGES THE FUNDS?

The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.

THE BOARD OF TRUSTEES

The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than two-thirds of the trustees are independent of the funds' advisor; that
is, they are not employed by and have no financial interest in the advisor.

THE INVESTMENT ADVISOR

The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.

The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.

For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Investor Class shares of the funds. The rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (money market,
bond or equity) and the total amount of mutual fund assets the advisor manages.

The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent trustees (including legal counsel
fees), and extraordinary expenses. A portion of the management fee may be paid
by the funds' advisor to unaffiliated third parties who provide recordkeeping
and administrative services that would otherwise be performed by an affiliate of
the advisor.

Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended August 31, 1999
- --------------------------------------------------------------------------------
California Tax-Free Money Market 0.50%
California Municipal Money Market 0.50%
California Limited-Term Tax-Free 0.51%
California Intermediate-Term Tax-Free 0.51%
California Long-Term Tax-Free 0.51%
California Insured Tax-Free 0.51%
California High-Yield Municipal 0.54%

www.americancentury.com American Century Investments 17

THE FUND MANAGEMENT TEAM

The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.

The portfolio managers on the investment teams are identified below:

G. DAVID MACEWEN

Mr. MacEwen, Senior Vice President and Portfolio Manager, has been a member of
the teams that manage California Long-Term Tax-Free and California Insured
Tax-Free since May 1991. Mr. MacEwen has been a member of the team that manages
California Limited-Term Tax-Free since June 1992. He joined American Century in
May 1991 as a Municipal Portfolio Manager. He has a bachelor's degree in
economics from Boston University and an MBA in finance from the University of
Delaware.

STEVEN M. PERMUT

Mr. Permut, Vice President, Director of Municipal Research and Portfolio
Manager, has been a member of the team that manages California High-Yield
Municipal since January 1988. He joined American Century in June 1987. He has a
bachelor's degree in business and geography from State University of New York -
Oneonta and an MBA in finance from Golden Gate University - San Francisco.

COLLEEN M. DENZLER

Ms. Denzler, Vice President, Senior Portfolio Manager, Director and Fixed-Income
Investment Liaison, has been a member of the team that manages California
Intermediate-Term Tax-Free since January 1996. Prior to joining American Century
in January 1996, she was a Portfolio Manager with the Calvert Group for 10
years, specializing in state tax-exempt portfolios. She has a bachelor's degree
in finance from Radford University. She is a Chartered Financial Analyst.

TODD PARDULA

Mr. Pardula, Vice President and Portfolio Manager, has been a member of the
teams that manage California Tax-Free Money Market and California Municipal
Money Market since May 1994. Mr. Pardula has been a member of the team that
manages California Limited-Term Tax-Free since June 1999. He joined American
Century in February 1990 as an Investor Services Representative. He also was an
Associate Municipal Credit Analyst for two years. He has a bachelor's degree in
finance from Santa Clara University. He is a Chartered Financial Analyst.

BRYAN E. KARCHER

Mr. Karcher, Portfolio Manager, has been a member of the teams that manage
California Tax-Free Money Market and California Municipal Money Market since
April 1995. He joined American Century in July 1989 and has been a Portfolio
Manager since June 1995. He has a bachelor's degree in economics from the
University of California - Los Angeles. He is a Chartered Financial Analyst.

FUNDAMENTAL INVESTMENT POLICIES

Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Trustees may change any other policies
and investment strategies.

[left margin]

[graphic of pointing index finger]
CODE OF ETHICS

American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the funds to obtain approval before executing permitted personal
trades.

18 American Century Investments 1-800-345-2021

INVESTING WITH AMERICAN CENTURY

SERVICES AUTOMATICALLY AVAILABLE TO YOU

You automatically will have access to the services listed below when you open
your account. If you do not want these services, see "Conducting Business in
Writing" below.

CONDUCTING BUSINESS IN WRITING

If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.

WAYS TO MANAGE YOUR ACCOUNT

BY TELEPHONE

Investor Relations
1-800-345-2021

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

Automated Information Line
1-800-345-8765

[telephone icon]

OPEN AN ACCOUNT

If you are a current investor, you can open an account by exchanging shares from
another American Century account.

EXCHANGE SHARES

Call us or use our Automated Information Line if you have authorized us to
accept telephone instructions.

MAKE ADDITIONAL INVESTMENTS

Call us or use our Automated Information Line if you have authorized us to
invest from your bank account.

SELL SHARES

Call an Investor Relations Representative.
- --------------------------------------------------------------------------------
ONLINE

www.americancentury.com

[computer icon]

OPEN AN ACCOUNT

If you are a current investor, you can open an account by exchanging shares from
another American Century account.

EXCHANGE SHARES

Exchange shares from another American Century account.

MAKE ADDITIONAL INVESTMENTS

Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.

SELL SHARES

Not available.
- --------------------------------------------------------------------------------
BY MAIL OR FAX
P.O. Box 419200
Kansas City, MO 64141-6200

Fax
816-340-7962

[envelope icon]

OPEN AN ACCOUNT

Send a signed, completed application and check or money order payable to
American Century Investments.

EXCHANGE SHARES

Send us written instructions to exchange your shares from one American Century
account to another.

MAKE ADDITIONAL INVESTMENTS

Send us your check or money order for at least $50 with an investment slip or
$250 without an investment slip. If you don't have an investment slip, include
your name, address and account number on your check or money order.

SELL SHARES

Send us written instructions or a redemption form to sell shares. Call an
Investor Relations Representative to request a form.

www.americancentury.com American Century Investments 19

A NOTE ABOUT MAILINGS TO SHAREHOLDERS

To reduce expenses and demonstrate respect for our environment, we will deliver
a single copy of most financial reports and prospectuses to investors who share
an address, even if the accounts are registered under different names. In most
cases, we also will deliver account statements for all the investors in a
household in a single envelope. If you would like to receive separate mailings,
please call us and we will begin individual delivery within 30 days. If you'd
like to reduce mailbox clutter even more, visit www.americancentury.com and sign
up to receive these documents electronically via your computer.

YOUR GUIDE TO SERVICES AND POLICIES

When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the funds and the transfer agent.

- --------------------------------------------------------------------------------
AUTOMATICALLY

[circle of arrows icon]

OPEN AN ACCOUNT

Not available.

EXCHANGE SHARES

Send us written instructions to set up an automatic exchange of your shares from
one American Century account to another.

MAKE ADDITIONAL INVESTMENTS

With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.

SELL SHARES

If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.
- --------------------------------------------------------------------------------
BY WIRE

[graphic of pointing index finger]
Please remember that if you request redemptions by wire, $10 will be
deducted from the amount redeemed. Your bank also may charge a fee.

[wire machine icon]

OPEN AN ACCOUNT

Call us to set up your account or mail a completed application to the address
provided in the "By mail" section and give your bank the following information.

* Our bank information:
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number+
* Your name
* The contribution year (for IRAs only)

+For additional investments only

MAKE ADDITIONAL INVESTMENTS

Follow the wire instructions provided in the "Open an account" section.

SELL SHARES

You can receive redemption proceeds by wire or electronic transfer.

EXCHANGE SHARES

Not available.
- --------------------------------------------------------------------------------
IN PERSON

[person icon]

If you prefer to handle your transactions in person, visit one of our Investor
Centers and a representative can help you open an account, make additional
investments, and sell or exchange shares.

4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday
1665 Charleston Road
Mountain View, California 9445 East County Line Road, Suite A
8 a.m. to 5 p.m., Monday-Friday Englewood, Colorado
8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday

20 American Century Investments 1-800-345-2021

MINIMUM INITIAL INVESTMENT AMOUNTS(1)

To open an account, the minimum investments are as follows:
Money Markets Other Funds
- --------------------------------------------------------------------------------
Individual or Joint $2,500 $5,000
UGMA/UTMA $2,500 $5,000
Corporations/Foundations/Endowments $2,500 $5,000

(1) The funds in this Prospectus are not available for retirement accounts.

REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS

If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.

ABUSIVE TRADING PRACTICES

We do not permit market timing or other abusive trading practices in our funds.

Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.

SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS

If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities selected from the fund's portfolio
by the fund managers instead of cash. A payment in securities can help the
fund's remaining shareholders avoid tax liabilities that they might otherwise
have incurred had the fund sold securities prematurely to pay the entire
redemption amount in cash.

We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice.

Also, if payment is made in securities, a shareholder may have to pay brokerage
or other transaction costs to convert the securities to cash.

If your redemption would exceed this limit and you want to avoid being paid in
securities, please provide us with an unconditional instruction to redeem at
least 15 days prior to the date on which the redemption transaction is to occur.
The instruction must specify the dollar amount or number of shares you want to
redeem and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.

www.americancentury.com American Century Investments 21

INVESTING THROUGH FINANCIAL INTERMEDIARIES

If you do business with us through a financial intermediary, your ability to
purchase, exchange and redeem shares will depend on the policies of that entity.
Some policy differences may include

* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments

Please contact your financial intermediary for a complete description of its
policies. Copies of the funds' annual reports, semiannual reports and Statement
of Additional Information are available from your intermediary.

Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.

Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.

American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
those intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.

[left margin]

[graphic of pointing index finger]
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.

22 American Century Investments 1-800-345-2021

SHARE PRICE AND DISTRIBUTIONS

SHARE PRICE

American Century determines the NET ASSET VALUE (NAV) of each fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), we do not calculate the NAV. The NAV of a
fund share is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.

If current market prices of securities owned by non-money market funds are not
readily available, the advisor may determine their fair value in accordance with
procedures adopted by the funds' Board. The portfolio securities of the money
market funds are valued at amortized cost. This means that the securities are
initially valued at their cost when purchased. After the initial purchase, the
difference between the purchase price and the known value at maturity will be
reduced at a constant rate until maturity. This valuation will be used
regardless of the impact of interest rates on the market value of the security.
The Board has adopted procedures to ensure that this type of pricing is fair to
the funds' shareholders.

We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.

DISTRIBUTIONS

Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received by a fund, as well as CAPITAL GAINS
realized on the sale of investment securities.

Money Market Funds

Each money market fund declares distributions from net income daily. These
distributions are paid on the last Friday of each month. Distributions are
reinvested automatically in additional shares unless you choose another option.

Except as described in the next paragraph, you will begin to participate in fund
distributions the day after your purchase is effective. If you redeem shares,
you will receive the distribution declared for the day you redeem.

If you redeem all shares, we will include the distribution with your redemption
proceeds. You will begin to participate in fund distributions on the day your
instructions to purchase are received if you

* notify us of your purchase prior to 11 a.m. Central time AND

* pay for your purchase by bank wire transfer prior to 3 p.m. Central time on
the same day

Also, we will wire redemptions to you by the end of the business day if you
request your redemption before 11 a.m. Central time.

[left margin]

The NET ASSET VALUE of a fund is the price of the fund's shares.

CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.

www.americancentury.com American Century Investments 23

Other Funds

Each fund pays distributions from net income monthly. Each fund generally pays
capital gain distributions, if any, once a year, usually in December. A fund may
make more frequent distributions, if necessary, to comply with Internal Revenue
Code provisions. Distributions are reinvested automatically in additional shares
unless you choose another option.

You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.

Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.

24 American Century Investments 1-800-345-2021

TAXES

Tax-Exempt Income

Most of the income that the funds receive from California municipal securities
is exempt from California and regular federal income taxes. However, corporate
shareholders should be aware that distributions are subject to California's
corporate franchise tax.

Certain funds also may purchase private activity bonds. The income from these
securities is subject to the federal alternative minimum tax. If you are subject
to the alternative minimum tax, then distributions from the funds that represent
income derived from private activity bonds are taxable to you. Consult your tax
advisor to determine whether you are subject to the alternative minimum tax.

Taxable Income

The funds' investment performance also is based on sources other than income
from California municipal securities. These investment performance sources,
while not the primary source of fund distributions, will generate taxable income
to you. Some of these investment performance sources are

* Market Discount Purchases. The funds may buy a tax-exempt security for a
price less than the principal amount of the bond. If the price of the bond
increases over time, a portion of the gain may be treated as ordinary income
and taxable as ordinary income if it is distributed to shareholders.

* Capital Gains. When a fund sells a security, even a tax-exempt municipal
security, it can generate a capital gain or loss, which you must report on
your tax return.

* Temporary Investments. Some temporary investments, such as securities loans
and repurchase agreements, can generate taxable income.

Tax Rate for Tax Rate for
Type of Distribution 15% Bracket 28% Bracket or Above
- -----------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%

The tax status of any distribution of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. American Century will inform you of the
tax status of fund distributions for each calendar year in an annual tax mailing
(Form 1099-DIV).

Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.

Taxes on Transactions

Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain and disallowed to the extent of any distribution of tax-exempt income to
you with respect to those shares. If a loss is realized on the redemption of
fund shares, the reinvestment in additional fund shares within 30 days before
or after the redemption may be subject to the wash sale rules of the Internal
Revenue Code. This may result in a postponement of the recognition of such loss
for federal income tax purposes.

If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and remit 31% of dividends, capital
gains distributions and redemptions to the IRS.

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[graphic of pointing index finger]
BUYING A DIVIDEND

Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.

The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.

If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.

www.americancentury.com American Century Investments 25

FINANCIAL HIGHLIGHTS

UNDERSTANDING THE FINANCIAL HIGHLIGHTS

The tables on the next few pages itemize what contributed to the changes in
share price during the period. They also show the changes in share price for
this period in comparison to changes over the last five fiscal years.

On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to shareholders
* share price at the end of the period

Each table also includes some key statistics for the period as appropriate

* TOTAL RETURN - the overall percentage of return of the fund, assuming the
reinvestment of all distributions

* EXPENSE RATIO - operating expenses as a percentage of average net assets

* NET INCOME RATIO - net investment income as a percentage of average net
assets

* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling activity

The Financial Highlights for the fiscal years ended August 31, 1998, and 1999,
have been audited by PricewaterhouseCoopers LLP, independent accountants. Their
report is included in the funds' annual reports, which are incorporated by
reference into the Statement of Additional Information, and are available upon
request. Prior years' information was audited by other independent auditors,
whose report also is incorporated by reference into the Statement of Additional
Information.

26 American Century Investments 1-800-345-2021

CALIFORNIA TAX-FREE MONEY MARKET FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income .............. 0.03 0.03 0.03 0.03 0.03
----------- ----------- ----------- ----------- -----------

Distributions From Net
Investment Income .................. (0.03) (0.03) (0.03) (0.03) (0.03)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========

Total Return(1) .................... 2.62% 3.12% 3.17% 3.12% 3.31%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average
Net Assets ......................... 0.50% 0.50% 0.49% 0.49% 0.52%
Ratio of Net Investment Income to
Average Net Assets ................. 2.59% 3.07% 3.10% 3.12% 3.28%
Net Assets, End of Period
(in thousands) ..................... $ 558,175 $ 455,994 $ 417,784 $ 425,846 $ 414,099

(1) Total return assumes reinvestment of dividends and capital gains distributions, if any.

www.americancentury.com American Century Investments 27

CALIFORNIA MUNICIPAL MONEY MARKET FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ..$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income ............... 0.03 0.03 0.03 0.03 0.03
----------- ----------- ----------- ----------- -----------

Distributions
From Net Investment Income .......... (0.03) (0.03) (0.03) (0.03) (0.03)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period ........$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========

Total Return(1) ..................... 2.76% 3.20% 3.15% 3.23% 3.35%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets .................. 0.50% 0.50% 0.52% 0.53% 0.53%
Ratio of Net Investment Income to
Average Net Assets .................. 2.73% 3.16% 3.10% 3.20% 3.31%
Net Assets, End of Period
(in thousands) ......................$ 179,985 $ 172,592 $ 170,477 $ 196,520 $ 191,722

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

28 American Century Investments 1-800-345-2021

CALIFORNIA LIMITED-TERM TAX-FREE FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ..$ 10.43 $ 10.30 $ 10.19 $ 10.23 $ 10.12
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income ............... 0.39 0.42 0.43 0.43 0.41
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ... (0.16) 0.13 0.11 (0.04) 0.11
----------- ----------- ----------- ----------- -----------

Total From Investment Operations .... 0.23 0.55 0.54 0.39 0.52
----------- ----------- ----------- ----------- -----------

Distributions
From Net Investment Income .......... (0.39) (0.42) (0.43) (0.43) (0.41)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period ........$ 10.27 $ 10.43 $ 10.30 $ 10.19 $ 10.23
=========== =========== =========== =========== ===========

Total Return(1) ..................... 2.26% 5.40% 5.42% 3.87% 5.33%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets .................. 0.51% 0.52% 0.49% 0.49% 0.51%
Ratio of Net Investment Income to
Average Net Assets .................. 3.78% 4.02% 4.20% 4.20% 4.10%
Portfolio Turnover Rate ............... 57% 44% 47% 44% 50%
Net Assets, End of Period
(in thousands) ......................$ 141,549 $ 130,137 $ 126,631 $ 103,707 $ 104,723

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

www.americancentury.com American Century Investments 29

CALIFORNIA INTERMEDIATE-TERM TAX-FREE FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ..$ 11.37 $ 11.27 $ 11.05 $ 11.06 $ 10.86
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income ............... 0.49 0.52 0.54 0.54 0.54
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. (0.41) 0.25 0.25 (0.01) 0.20
----------- ----------- ----------- ----------- -----------

Total From Investment Operations .... 0.08 0.77 0.79 0.53 0.74
----------- ----------- ----------- ----------- -----------

Distributions
From Net Investment Income .......... (0.49) (0.52) (0.54) (0.54) (0.54)
From Net Realized Gains on
Investment Transactions ........... (0.09) (0.15) (0.03) -- --
In Excess of Net Realized Gains ..... (0.02) -- -- -- --
----------- ----------- ----------- ----------- -----------

Total Distributions ................. (0.60) (0.67) (0.57) (0.54) (0.54)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period ........$ 10.85 $ 11.37 $ 11.27 $ 11.05 $ 11.06
=========== =========== =========== =========== ===========

Total Return(1) ..................... 0.74% 7.00% 7.39% 4.79% 7.09%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets .................. 0.51% 0.51% 0.48% 0.48% 0.48%
Ratio of Net Investment Income to
Average Net Assets .................. 4.41% 4.60% 4.81% 4.87% 5.02%
Portfolio Turnover Rate ............... 54% 28% 42% 36% 25%
Net Assets, End of Period
(in thousands) ......................$ 459,859 $ 460,604 $ 435,440 $ 430,950 $ 417,550

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

30 American Century Investments 1-800-345-2021

CALIFORNIA LONG-TERM TAX-FREE FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ...$ 11.72 $ 11.48 $ 11.06 $ 10.94 $ 10.88
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income ................ 0.57 0.59 0.61 0.61 0.62
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. (0.76) 0.44 0.44 0.12 0.12
----------- ----------- ----------- ----------- -----------

Total From Investment Operations ..... (0.19) 1.03 1.05 0.73 0.74
----------- ----------- ----------- ----------- -----------

Distributions
From Net Investment Income ........... (0.57) (0.59) (0.61) (0.61) (0.62)
From Net Realized Gains on
Investment Transactions ............ (0.07) (0.20) (0.02) -- (0.06)
In Excess of Net Realized Gains ...... (0.03) -- -- -- --
----------- ----------- ----------- ----------- -----------

Total Distributions .................. (0.67) (0.79) (0.63) (0.61) (0.68)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period .........$ 10.86 $ 11.72 $ 11.48 $ 11.06 $ 10.94
=========== =========== =========== =========== ===========

Total Return(1) ...................... (1.85)% 9.25% 9.70% 6.77% 7.21%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets ................... 0.51% 0.51% 0.48% 0.48% 0.49%
Ratio of Net Investment Income to
Average Net Assets ................... 4.94% 5.07% 5.40% 5.48% 5.84%
Portfolio Turnover Rate ................ 52% 36% 50% 42% 60%
Net Assets, End of Period
(in thousands) .......................$ 332,627 $ 325,194 $ 304,671 $ 288,022 $ 276,085

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

www.americancentury.com American Century Investments 31

CALIFORNIA INSURED TAX-FREE FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ...$ 10.60 $ 10.37 $ 10.00 $ 9.89 $ 9.67
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income ................ 0.50 0.51 0.53 0.53 0.53
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. (0.66) 0.39 0.37 0.11 0.22
----------- ----------- ----------- ----------- -----------

Total From Investment Operations ..... (0.16) 0.90 0.90 0.64 0.75
----------- ----------- ----------- ----------- -----------

Distributions
From Net Investment Income ........... (0.50) (0.51) (0.53) (0.53) (0.53)
From Net Realized Gains .............. (0.04) (0.16) -- -- --
In Excess of Net Realized Gains ...... (0.02) -- -- -- --
----------- ----------- ----------- ----------- -----------

Total Distributions .................. (0.56) (0.67) (0.53) (0.53) (0.53)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period .........$ 9.88 $ 10.60 $ 10.37 $ 10.00 $ 9.89
=========== =========== =========== =========== ===========

Total Return(1) ...................... (1.71)% 8.96% 9.25% 6.60% 8.09%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets ................... 0.51% 0.51% 0.48% 0.49% 0.50%
Ratio of Net Investment Income to
Average Net Assets ................... 4.78% 4.91% 5.23% 5.30% 5.54%
Portfolio Turnover Rate ................ 32% 31% 46% 43% 40%
Net Assets, End of Period
(in thousands) .......................$ 211,937 $ 215,509 $ 189,145 $ 191,811 $ 178,913

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

32 American Century Investments 1-800-345-2021

CALIFORNIA HIGH-YIELD MUNICIPAL FUND

Investor Class

For a Share Outstanding Throughout the Years Ended August 31

Per-Share Data
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ...$ 9.93 $ 9.68 $ 9.27 $ 9.11 $ 9.06
----------- ----------- ----------- ----------- -----------

Income From Investment Operations
Net Investment Income ................ 0.49 0.51 0.55 0.56 0.56
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. (0.46) 0.37 0.41 0.16 0.05
----------- ----------- ----------- ----------- -----------

Total From Investment Operations ..... 0.03 0.88 0.96 0.72 0.61
----------- ----------- ----------- ----------- -----------

Distributions
From Net Investment Income ........... (0.49) (0.51) (0.55) (0.56) (0.56)
From Net Realized Gains .............. --(1) (0.12) -- -- --
In Excess of Net Realized Gains ...... (0.11) -- -- -- --
----------- ----------- ----------- ----------- -----------

Total Distributions .................. (0.60) (0.63) (0.55) (0.56) (0.56)
----------- ----------- ----------- ----------- -----------

Net Asset Value, End of Period .........$ 9.36 $ 9.93 $ 9.68 $ 9.27 $ 9.11
=========== =========== =========== =========== ===========

Total Return(2) ...................... 0.26% 9.35% 10.61% 8.02% 7.09%

Ratios/Supplemental Data
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets ................... 0.54% 0.54% 0.50% 0.51% 0.51%
Ratio of Net Investment Income to
Average Net Assets ................... 5.08% 5.23% 5.77% 5.99% 6.30%
Portfolio Turnover Rate ................ 59% 36% 46% 36% 40%
Net Assets, End of Period
(in thousands) .......................$ 341,968 $ 303,842 $ 192,831 $ 144,675 $ 116,166

(1) Per share amount was less than $0.005.

(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

www.americancentury.com American Century Investments 33

[back cover]

MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS

Annual and Semiannual Reports

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

Statement of Additional Information

The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.

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

You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).

* In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location
and hours.

* On the Internet www.sec.gov

* By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying
the documents.)

Investment Company Act File No. 811-0816

[american century logo (reg.sm)]
American
Century

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

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

9912
SH-PRS-17965

AMERICAN CENTURY

Statement of Additional Information

California Tax-Free Money Market Fund

California Municipal Money Market Fund

California Limited-Term Tax-Free Fund

California Intermediate-Term Tax-Free Fund

California Long-Term Tax-Free Fund

California Insured Tax-Free Fund

California High-Yield Municipal Fund

[american century logo (reg.sm)]
American
Century

[left margin]

[background artwork of tree logo]

JANUARY 1, 2000

American Century California Tax-Free and Municipal Funds

THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUS, DATED JANUARY 1, 2000, BUT IS NOT A PROSPECTUS. THE STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUNDS' CURRENT
PROSPECTUS. IF YOU WOULD LIKE A COPY OF THE 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 SHAREHOLDERS. YOU MAY OBTAIN A FREE COPY
OF THE FUNDS' ANNUAL OR SEMIANNUAL REPORT BY CALLING 1-800-345-2021.

Funds Distributor, Inc.,
Distributor

TABLE OF CONTENTS

The Funds' History ........................................................ 3

Fund Investment Guidelines ................................................ 3
California Tax-Free Money Market Fund ................................ 4
California Municipal Money Market Fund ............................... 4
California Limited-Term Tax-Free Fund ................................ 4
California Intermediate-Term Tax-Free Fund ........................... 4
California Long-Term Tax-Free Fund ................................... 4
California Insured Tax-Free Fund ..................................... 5
California High-Yield Municipal Fund ................................. 5

Fund Investments and Risks ................................................ 6
Investment Strategies and Risks ...................................... 6
Investment Policies .................................................. 17
Fundamental Investment Policies ...................................... 18
Temporary Defensive Measures ......................................... 19
Portfolio Turnover ................................................... 19

Management ................................................................ 20
The Board of Trustees ................................................ 20
Officers ............................................................. 23

The Funds' Principal Shareholders ......................................... 24

Service Providers ......................................................... 24
Investment Advisor ................................................... 24
Transfer Agent and Administrator ..................................... 27
Distributor .......................................................... 28

Other Service Providers ................................................... 28
Custodian Banks ...................................................... 28
Independent Accountants .............................................. 28

Brokerage Allocation ...................................................... 28

www.americancentury.com American Century Investments 1

Information About Fund Shares ............................................. 29
Buying and Selling Fund Shares ....................................... 29
Valuation of a Fund's Securities ..................................... 29
Money Market Funds ................................................... 30
Non-Money Market Funds ............................................... 30

Taxes ..................................................................... 31
Federal Income Tax ................................................... 31
Alternative Minimum Tax .............................................. 32
State and Local Taxes ................................................ 32

How Fund Performance Information Is Calculated ............................ 33
Performance Comparisons .............................................. 35
Permissible Advertising Information .................................. 35

Financial Statements ...................................................... 36

Explanation of Fixed-Income Securities Ratings ............................ 36

2 American Century Investments 1-800-345-2021

THE FUNDS' HISTORY

American Century California Tax-Free and Municipal Funds is a registered
open-end management investment company that was organized as a Massachusetts
business trust on February 18, 1983. From then until January 1997, it was known
as Benham California Tax-Free and Municipal Funds. Throughout this Statement of
Additional Information we refer to American Century California Tax-Free and
Municipal Funds as the Trust.

Each fund is a separate series of the Trust and operates for many purposes as if
it were an independent company. Each fund has its own tax identification and
stock registration number.

Fund-Class (Ticker Symbol) Inception Date
- -------------------------------------------------------------------------------
California Tax-Free Money Market Fund--Investor Class (BCTXX) 11/09/1983
California Municipal Money Market Fund--Investor Class (BNCXX) 12/31/1990
California Limited-Term Tax-Free Fund--Investor Class (BCSTX) 06/01/1992
California Intermediate-Term Tax-Free Fund--Investor Class (BCITX) 11/09/1983
California Long-Term Tax-Free Fund--Investor Class (BCLTX) 11/09/1983
California Insured Tax-Free Fund--Investor Class (BCINX) 12/30/1986
California High-Yield Municipal Fund--Investor Class (BCHYX) 12/30/1986

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 6. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussion contained in the
Prospectus.

Each fund is a diversified open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act), with the exception
of the California Municipal Money Market which is non-diversified. Diversified
means that, with respect to 75% of its total assets, each fund will not invest
more than 5% of its total assets in the securities of a single issuer or own
more than 10% of the outstanding voting securities of a single issuer.
California Municipal Money Market also will seek to meet this test.

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.

Each fund intends to remain fully invested in municipal obligations. As a
fundamental policy, each fund will invest at least 80% of its net assets in
California municipal obligations. A municipal obligation is a "California"
municipal obligation if its income is exempt from California state income taxes.

The remaining 20% of net assets may be invested in (1) municipal obligations
issued in other states and (2) U.S. government obligations. For temporary
defensive purposes, each fund may invest more than 20% of its net assets in
these obligations. For liquidity purposes, each non-money market fund may invest
up to 5% of its total assets in shares of money market funds, including
California Municipal Money Market and California Tax-Free Money Market.

www.americancentury.com American Century Investments 3

Each fund will invest at least 80% of its net assets in obligations with
interest exempt from regular federal income tax. California Municipal Money
Market and California High-Yield Municipal, unlike the other funds, may invest
substantially all of their assets in securities that are subject to the
alternative minimum tax. See "Alternative Minimum Tax," page 32.

For an explanation of the securities ratings referred to in the Prospectus and
this Statement of Additional Information, see "Explanation of Fixed-Income
Securities Ratings" beginning on page 36.

CALIFORNIA TAX-FREE MONEY MARKET FUND
CALIFORNIA MUNICIPAL MONEY MARKET FUND

The money market funds may be appropriate for investors seeking share price
stability who can accept the lower yields that short-term obligations typically
provide.

In selecting investments for the money market funds, the advisor adheres to
regulatory guidelines concerning the quality and maturity of money market fund
investments as well as to internal guidelines designed to minimize credit risk.
In particular, each fund:

* buys only U.S. dollar-denominated obligations with remaining maturities of 13
months or less (and variable- and floating-rate obligations with demand
features that effectively shorten their maturities to 13 months or less)

* maintains a dollar-weighted average maturity of 90 days or less

* restricts its investments to high-quality obligations determined by the
advisor, pursuant to procedures established by the Board of Trustees, to
present minimal credit risks

To be considered high-quality, an obligation must be

* a U.S. government obligation, or

* rated (or of an issuer rated with respect to a class of comparable short-term
obligations) in one of the two highest rating categories for short-term
obligations by at least two nationally recognized statistical rating agencies
("rating agencies") (or one if only one has rated the obligation), or

* an obligation judged by the advisor, pursuant to guidelines established by
the Board of Trustees, to be of quality comparable to the securities listed
above

While it adheres to the same quality and maturity criteria as California
Tax-Free Money Market, California Municipal Money Market may purchase private
activity municipal securities. The interest from these securities is treated as
a tax-preference item in calculating federal alternative minimum tax (AMT)
liability. In the past, private activity securities have provided somewhat
higher yields than comparable municipal securities whose interest is not a
tax-preference item. Therefore, the fund is designed for investors who do not
expect to pay alternative minimum taxes. See "Taxes," page 31.

CALIFORNIA LIMITED-TERM TAX-FREE FUND
CALIFORNIA INTERMEDIATE-TERM TAX-FREE FUND
CALIFORNIA LONG-TERM TAX-FREE FUND

California Limited-Term Tax-Free, California Intermediate-Term Tax-Free and
California Long-Term Tax-Free have identical policies governing the quality of
securities in which they may invest. The funds differ in their maturity criteria
as stated in the Prospectus.

In terms of credit quality, each of these funds restricts its investments to

* municipal bonds rated, when acquired, within the four highest categories
designated by a rating agency

4 American Century Investments 1-800-345-2021

* municipal notes (including variable-rate demand obligations) and tax-exempt
commercial paper that is rated, when acquired, within the two highest
categories designated by a rating agency

* unrated obligations judged by the advisor, under the direction of the Board
of Trustees, to be of quality comparable to the securities listed above

CALIFORNIA INSURED TAX-FREE FUND

California Insured Tax-Free invests primarily in long-term municipal obligations
covered by insurance that guarantees the timely payment of interest and
repayment of principal.

Under normal conditions, at least 65% of the fund's total assets are invested in
insured municipal obligations. Securities held by the fund may be (1) insured
under a new-issue insurance policy obtained by the issuer of the security, (2)
insured under a secondary market insurance policy purchased by the fund or a
previous bondholder, (3) secured by an escrow or trust account holding U.S.
government securities, or (4) rated AAA by a rating agency based upon the
issuer's credit quality.

California Insured Tax-Free also may invest in short-term securities carrying
one of the two highest ratings designated by a rating agency.

CALIFORNIA HIGH-YIELD MUNICIPAL FUND

Like California Long-Term Tax-Free, California High-Yield Municipal invests
primarily in long- and intermediate-term California municipal obligations.
Although California High-Yield Municipal typically invests a significant portion
of its assets in investment-grade bonds, the advisor does not adhere to specific
rating criteria in selecting investments for this fund. The fund invests in
securities rated or judged by the advisor to be below investment-grade quality
(e.g., bonds rated BB/Ba or lower, which are sometimes referred to as junk
bonds) or unrated bonds.

Many issuers of medium- and lower-quality bonds choose not to have their
obligations rated and a large portion of California High-Yield Municipal's
portfolio may consist of obligations that, when acquired, were not rated. There
is no limit to the percentage of assets the fund may invest in unrated
securities. The fund may invest up to 10% of its total assets in securities that
are in technical or monetary default.

California High-Yield Municipal may invest in investment-grade municipal
obligations if the advisor considers it appropriate to do so. Investments of
this nature may be made due to market considerations (e.g., a limited supply of
medium- and lower-grade municipal obligations) or to increase liquidity of the
fund. Investing in high-grade obligations may lower the fund's return.

California High-Yield Municipal may purchase private activity municipal
securities. The interest from these securities is treated as a tax-preference
item in calculating federal AMT liability. Under normal circumstances, the
advisor expects to invest between 10% and 30% of the fund's total assets in
private activity securities. Therefore, the fund is better suited for investors
who do not expect alternative minimum tax liability. See "Taxes," page 31.

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FUND INVESTMENTS AND RISKS

INVESTMENT STRATEGIES AND RISKS

This section describes the investment vehicles and strategies that the fund
managers can use in managing a fund's assets. It also details the risks
associated with each, because each technique contributes to a fund's overall
risk profile.

Concentration in Types of Municipal Activities

From time to time, a significant portion of a fund's assets may be invested in
municipal obligations that are related to the extent that economic, business or
political developments affecting one of these obligations could affect the other
obligations in a similar manner. For example, if a fund invested a significant
portion of its assets in utility bonds and a state or federal government agency
or legislative body promulgated or enacted new environmental protection
requirements for utility providers, projects financed by utility bonds could
suffer as a group. Additional financing might be required to comply with the new
environmental requirements, and outstanding debt might be downgraded in the
interim. Among other factors that could negatively affect bonds issued to
finance similar types of projects are state and federal legislation regarding
financing for municipal projects, pending court decisions relating to the
validity or means of financing municipal projects, material or manpower
shortages, and declining demand for projects or facilities financed by the
municipal bonds.

About the Risks Affecting California Municipal Securities

As noted in the Prospectus, the funds are susceptible to political, economic and
regulatory events that affect issuers of California municipal obligations. These
include possible adverse effects of California constitutional amendments,
legislative measures, voter initiatives and other matters described below.

The following information about risk factors is provided in view of the funds'
policies of concentrating their assets in California municipal securities. This
information is based on recent official statements relating to securities
offerings of California issuers, although it does not constitute a complete
description of the risk associated with investing in securities of these
issuers. While the advisor has not independently verified the information
contained in the official statements, it has no reason to believe the
information is inaccurate.

ECONOMIC OVERVIEW

California's economy is the largest among the 50 states and one of the largest
in the world. The state's 1998 population of approximately 33.5 million,
representing approximately 12% of the U.S. population, has grown by 51% since
1980. Total personal income, an estimated $904 billion in 1998, accounted for
approximately 12.7% of personal income nationwide.

From 1990 through 1993, the state suffered a severe recession, the worst since
the 1930s, heavily influenced by large cutbacks in defense/aerospace industries
and military base closures and a major drop in real estate construction.
California's economy has been recovering and growing steadily since the
beginning of 1994, to the point where the state's economic growth is outpacing
the rest of the nation. The state added more than 400,000 non-farm jobs in 1998,
while personal income grew by more than $58.4 billion. The unemployment rate,
while still higher than the national average, fell to the low 5.9% range in
mid-1998, compared to over 10% at the worst of the recession.

California's economic expansion is being fueled by strong growth in
high-technology industries, including computer software, electronics
manufacturing and motion picture/television production. Growth is also strong in
business services, export trade and manufacturing, with even the aerospace
sector showing increasing employment. Non-residential and

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residential construction have been growing moderately since the depths of the
recession, but remain much lower (as measured by annual new unit permits) than
the late 1980s.

CONSTITUTIONAL LIMITATIONS ON TAXES

Many California issuers rely on ad valorem property taxes as a source of
revenue. The taxing powers of California local governments and districts are
limited by Article XIIIA of the California Constitution, enacted by voters in
1978 and commonly known as "Proposition 13." Article XIIIA limits to 1% of full
cash value the rate of ad valorem taxes on real property and restricts the
reassessment of property to 2% per year, except where new construction or
changes of ownership have occurred (subject to a number of exemptions). Taxing
entities may, however, raise ad valorem taxes above the 1% limit to pay debt
service on voter-approved bonded indebtedness. The U.S. Supreme Court has upheld
Proposition 13 against claims that it has unlawfully resulted in widely varying
tax liability on similarly situated properties.

Article XIIIA also requires voters of any governmental unit to give two-thirds
approval to levy any special tax. Subsequent court decisions, however, have
allowed non-voter approved general taxes so long as they are not dedicated to a
specific use. In response to these decisions, voters adopted an initiative in
1986 that imposed new limits on the ability of local government entities to
raise or levy general taxes without voter approval. Based upon a 1991
intermediate appellate court decision, it was believed that significant parts of
this initiative, known as Proposition 62, were unconstitutional. On September
28, 1995, the California Supreme Court rendered a decision in the case of Santa
Clara County Local Transportation Authority vs. Guardino that rejected the prior
decision and upheld Proposition 62, while striking down a 1/2-cent sales tax for
transportation purposes that was approved by a majority, but less than
two-thirds, vote. Proposition 62 does not apply to charter cities, but other
local governments may be constrained in raising any taxes without voter
approval.

On November 5, 1996, the voters of the state approved Proposition 218. This
proposition adds Articles XIIIC and XIIID to the state Constitution, which
affect the ability of local governments, including charter cities, to levy and
collect both existing and future taxes, assessments, fees and charges.
Proposition 218 became effective on November 6, 1996, although application of
some of its provisions was deferred until July 1, 1997. This proposition could
negatively impact a local government's ability to make its debt service
payments, and thus could result in lower credit ratings.

CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS

The state and its local governments are subject to an annual appropriations
limit imposed by Article XIIIB of the California Constitution. This article was
enacted by voters in 1979 and was significantly amended by Propositions 98 and
111 in 1988 and 1990, respectively. Article XIIIB prohibits the state and
subject local governments from spending "appropriations subject to limitation"
in excess of an appropriations limit. The appropriations limit is adjusted
annually to reflect population changes and changes in the cost of living as well
as transfers of responsibility between government units. "Appropriations subject
to limitation" are authorizations to spend "proceeds of taxes" consisting of tax
revenues and certain other charges and fees to the extent that such proceeds
exceed the cost of providing the product or service. However, proceeds of taxes
exclude most state subventions to local governments.

"Excess revenues" under Article XIIIB are measured over a two-year cycle. Local
governments must return any excess revenues to taxpayers through tax rate
reductions. The state must refund 50% of any excess and pay the other 50% to
schools and community colleges. With the application of more liberal annual
adjustment factors since 1988 and depressed revenues since 1990 due to the
recession, few governments are currently operating near their spending limits,
but this condition may change over time. Local governments may, by voter
approval, exceed their spending limits for a limited time.

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Because of the complex nature of Articles XIIIA and XIIIB, the ambiguities and
possible inconsistencies in their terms and the impossibility of predicting
future appropriations, population changes, changes in the cost of living or the
probability of continuing legal challenges, it is difficult to measure the full
impact of these Articles on the California municipal market or on the ability of
California issuers to pay debt service on their obligations.

OBLIGATIONS OF THE STATE OF CALIFORNIA

As of August 1, 1999, the state had approximately $19.9 billion of general
obligation bonds outstanding, and approximately $12.7 billion remained
authorized but unissued. Of the state's outstanding general obligation debt, 18%
is presently self-liquidating (i.e., program revenues are expected to be
sufficient to reimburse the General Fund for debt service payments). In fiscal
year 1998-99, debt service on general obligation bonds and lease-purchase debt
was approximately 4.4% of general fund revenues, approximately the same as for
1997-98, down from 4.98% in fiscal year 1996-97.

The state's principal sources of General Fund revenues for fiscal year 1998-99
were the California personal income tax (52.7% of total revenues), the sales tax
(32.1%), bank and corporations taxes (9.3%) and the gross premium tax on
insurance (2.2%). Historically, the state has paid the principal of and interest
on its general obligation bonds, lease-purchase debt and short-term obligations
when due.

General. Pressures on the state's budget in the late 1980s and early 1990s were
caused by a combination of external economic conditions and growth of the
largest General Fund expenditure programs--K-12 education, health, welfare and
corrections--at rates faster than the revenue base. The largest state
expenditure program is assistance to local public school districts. In 1988,
Proposition 98 was enacted; it essentially guarantees local school districts and
community college districts a minimum share of the state's General Fund revenues
(currently 35%).

Expenditures pressures could continue as the state's overall population and
school age population continue to grow, and as the state's corrections program
responds to a "Three Strikes" law enacted in 1994 (which requires mandatory life
prison terms for certain third-time felony offenders). In addition, the
long-term impact of federal welfare reform on the state's budget is uncertain.

Recent Budgets. State finances have improved over the past four fiscal years,
due primarily to stronger than anticipated revenue and lower than anticipated
social spending. The state finished fiscal year 1998-99 with an estimated $2.4
billion fund balance. The fiscal 1999 budget contained the following features:

* Funding for higher education was increased substantially as funding for the
University of California and the California State University System is
budgeted to increase 15.6% and 14.1%, respectively.

* The budget includes increased funding for health, welfare and social services
programs based primarily on a 4.9% grant increase, the first such increase in
nine years.

* Funding for judiciary and criminal justice programs increased about 11%
reflecting increased state support for local trial courts and rising prison
population.

* The budget also includes a dedication of $376 million of General Fund moneys
for capital outlay projects, funding of a 3% State employee salary increase,
funding of 2,000 new Department of Transportation positions to accelerate
transportation construction projects, and funding of the Infrastructure and
Economic Development Bank ($50 million).

* The budget contains a tax reduction of $1.4 billion, primarily reflected in
the phased-in reduction of the Vehicle License Fee (VLF). Other tax
reductions include both a temporary and permanent increase in the personal
income tax dependent credit, a nonrefundable renters' tax credit, and various
targeted business tax credits.

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Current Budget. The Budget Act anticipates General Fund revenues and transfers
of $63.0 billion (8.7% increase from the prior fiscal year) and expenditures of
$63.7 billion (an 8.8% increase). On a budgetary basis, the General Fund balance
is projected to decrease from $2.4 billion as of June 30, 1999, to $1.7 billion
as of June 30, 2000. The following are major features of the 1999-00 Budget Act:

* Proposition 98 Funding for K-12 schools was increased by $1.6 billion over
revised fiscal year levels and $108.6 million higher than the minimum
Proposition 98 guarantee.

* Funding for higher education increased by $184 million (7.3%) for the
University of California, $126.0 million (5.9%) for the California State
University System and $324.3 million (6.6%) for community colleges.

* Funding for health and human services increased nearly $600 million.

* $800 million from the General Fund will be directed toward infrastructure,
including $425 million in additional funding for the Infrastructure Bank.

* The Legislature enacted a one-year reduction of 10% in the Vehicle License
Fee (VLF) for calendar year 2000, at a cost of about $250 million in fiscal
year 2000 and 2001. In addition, several targeted tax cuts, primarily for
business, also were approved at a cost of $54 million in fiscal year 2000.

* A one-time appropriation of $150 million, to be split between cities and
counties, was made to offset property tax shifts during the early 1990s.

Due to the improvement in the state's economy and financial condition, the State
of California was upgraded by Moody's Investors Service in October 1998 from A1
to Aa3; by Standard and Poor's in August 1999 from A+ to AA-; and by Fitch
Investors Service in September 1997 from A+ to AA-.

OBLIGATIONS OF OTHER ISSUERS IN CALIFORNIA

Property tax revenues received by local governments declined more than 50%
following the passage of Proposition 13 in 1978. Subsequently, the California
legislature enacted measures to provide for the redistribution of the state's
General Fund surplus to local agencies, the reallocation of certain state
revenues to local agencies, and the assumption of certain government functions
by the state to assist the state's municipalities. However, in response to the
fiscal crisis at the state level, the Legislature in 1992-93 and 1993-94
effectively reversed the post-Proposition 13 bailout aid and directed over $3
billion of city, county and special district property taxes to school districts,
which enabled the state to reduce its aid to schools by the same amount. Part of
this shortfall is to be covered by a 0.5% sales tax allocated to local
government public safety purposes. The 0.5% sales tax increase was imposed by
Proposition 172, which was approved by a majority of voters at the statewide
election on November 2, 1993.

Even with these cuts and property tax shifts, more than 70% of the state's
General Fund expenditures are for local government assistance. To the extent
that the state is constrained by its Article XIIIB appropriations limit, its
obligation to conform to Proposition 98 or other fiscal considerations, the
absolute level or rate of growth of state assistance to local governments may be
reduced. Any such reductions in state aid could compound the serious fiscal
constraints already experienced by many local governments, particularly
counties.

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. Tax anticipation notes usually are
general obligations of the issuer. General

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obligations are secured by the issuer's pledge of its full faith and credit
(i.e., taxing power) for the payment of principal and interest.

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.

Tax-Exempt Commercial Paper is an obligation with a stated maturity of 365 days
or less issued to finance seasonal cash flow needs or to provide short-term
financing in anticipation of longer-term financing.

Revenue Anticipation Warrants, or reimbursement warrants, are issued to meet the
cash flow needs of the State of California at the end of a fiscal year and in
the early weeks of the following fiscal year. These warrants are payable from
unapplied money in the state's General Fund, including the proceeds of revenue
anticipation notes issued following enactment of a state budget or the proceeds
of refunding warrants issued by the state.

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. General
obligation 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 user 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

The funds may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations 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

10 American Century Investments 1-800-345-2021

the interest rate. 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

Each fund may invest in fixed-rate bonds subject to third-party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
These bonds and participation interests have tender options or demand features
that permit the funds to tender (or put) their bonds to an institution at
periodic intervals and to receive the principal amount thereof.

The advisor expects that the funds will pay more for securities with puts
attached than for securities without these liquidity features. The advisor 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 fund's 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 a put will not be able to repurchase the
underlying obligation when (or if) a fund attempts to exercise the put. To
minimize such risks, the funds will purchase obligations with puts attached only
from sellers deemed creditworthy by the advisor under the direction of the Board
of Trustees.

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
the 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
guarantor'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
advisor monitors the credit quality of bonds underlying the funds' TOB holdings
and intends to sell or put back any TOB if the rating on its underlying bond
falls below the second-highest rating category designated by a rating agency.

The advisor also takes steps to minimize the risk that a fund may realize
taxable income as a result of holding TOBs. These steps may include
consideration of (1) legal opinions relating to the tax-exempt status of the
underlying municipal bonds, (2) legal opinions relating to the tax ownership of
the underlying bonds, and (3) other elements of the structure that could result
in taxable income or other adverse tax consequences. After purchase, the advisor
monitors factors related to the tax-exempt status of the fund's TOB holdings in
order to minimize the risk of generating taxable income.

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When-Issued and Forward Commitment Agreements

The funds may engage in municipal securities transactions on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. 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.

As an operating policy, no fund will commit more than 50% of its total assets to
when-issued or forward commitment agreements. If fluctuations in the value of
securities held cause more than 50% of a fund's total assets to be committed
under when-issued or forward commitment agreements, the fund managers need not
sell such agreements, but they will be restricted from entering into further
agreements on behalf of the fund until the percentage of assets committed to
such agreements is below 50% of total assets.

Municipal Lease Obligations

Each fund may invest in municipal lease obligations. These obligations, which
may take the form of a lease, an installment purchase, or a conditional sale
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities. Generally, a fund will not
hold such obligations directly as a lessor of the property but will purchase a
participation interest in a municipal lease obligation from a bank or other
third party.

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits or public sale requirements.
Leases, installment purchases or conditional sale contracts (which normally
provide for title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting constitutional and statutory requirements for the issuance of
debt.

Many leases and contracts include nonappropriation clauses, which provide that
the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
appropriate legislative body on a yearly or other periodic basis. Municipal
lease obligations also may be subject to abatement risk. For example,
construction delays or destruction of a facility as a result of an uninsurable
disaster that prevents occupancy could result in all or a portion of a lease
payment not being made.

California and its municipalities are the largest issuers of municipal lease
obligations in the United States.

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Inverse Floaters

The funds (except the money market funds) may hold inverse floaters. An inverse
floater is a type of derivative 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) by an issuer seeking to reduce interest expenses by using a
floater/inverse floater structure in lieu of fixed-rate bonds.

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

* 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.

* Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

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

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

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

The secondary market for floaters and inverse floaters may be limited. The
market value of inverse floaters tends to be significantly more volatile than
fixed-rate bonds. The interest rates on inverse floaters may be significantly
reduced, even to zero, if interest rates rise.

Lower-Quality Bonds

As indicated in the Prospectus, an investment in California High-Yield Municipal
carries greater risk than an investment in the other funds because the fund may
invest, without limitation, in lower-rated bonds and unrated bonds judged by the
advisor to be of comparable quality (collectively, lower-quality bonds).

While the market values of higher-quality bonds tend to correspond to market
interest rate changes, the market values of lower-quality bonds tend to reflect
the financial condition of their issuers.

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Projects financed through the issuance of lower-quality bonds are often highly
leveraged. The issuer's ability to service its debt obligations may be adversely
affected by an economic downturn, a period of rising interest rates, the
issuer's inability to meet projected revenue forecasts, or a lack of needed
additional financing.

Lower-quality bonds generally are unsecured and often are subordinated to other
obligations of the issuer. These bonds frequently have call or buy-back features
that permit the issuer to call or repurchase the bond from the holder. Premature
disposition of a lower-quality bond due to a call or buy-back feature,
deterioration of the issuer's creditworthiness, or a default may make it
difficult for the advisor to manage the flow of income to the fund, which may
have negative tax implications for shareholders.

The market for lower-quality bonds tends to be concentrated among a smaller
number of dealers than the market for higher-quality bonds. This market is
dominated by dealers and institutions (including mutual funds), rather than by
individuals. To the extent that a secondary trading market for lower-quality
bonds exists, it may not be as liquid as the secondary market for higher-quality
bonds. Limited liquidity in the secondary market may adversely affect market
prices and hinder the advisor's ability to dispose of particular bonds when it
determines that it is in the best interest of the fund to do so. Reduced
liquidity also may hinder the advisor's ability to obtain market quotations for
purposes of valuing the fund's portfolio and determining its net asset value.

The advisor continually monitors securities to determine their relative
liquidity.

A fund may incur expenses in excess of its ordinary operating expenses if it
becomes necessary to seek recovery on a defaulted bond, particularly a
lower-quality bond.

Short-Term Securities

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

Examples of those securities include:

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

* Commercial Paper

* Certificates of Deposit and Euro Dollar Certificates of Deposit

* Bankers' Acceptances

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

* Repurchase agreements

In addition, each fund may invest part of its assets in other investment
companies, including money market funds. Under the Investment Company Act, a
fund's investment in such securities, subject to certain exceptions, currently
is limited to (a) 3% of the total voting stock of any one investment company;
(b) 5% of the fund's total assets with respect to any one investment company;
and (c) 10% of a fund's total assets in the aggregate. For the non-money market
funds, these investments may include investments in money market funds managed
by the advisor. Any investments in money market funds must be consistent with
the investment policies and restrictions of the fund making the investment.

If a fund invests in U.S. government securities, a portion of dividends paid to
shareholders will be taxable at the federal level, and may be taxable at the
state level, as ordinary income. However, the advisor intends to minimize such
investments and, when suitable short-term municipal securities are unavailable,
may allow the funds to hold cash to avoid generating taxable dividends.

14 American Century Investments 1-800-345-2021

Futures and Options

Each non-money market fund may enter into futures contracts, options or options
on futures contracts. 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. The funds do not use futures and
options transactions for speculative purposes.

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.

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. 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. The funds may engage in
futures and options transactions based on securities indices such as the Bond
Buyer Municipal Bond Index that are consistent with the funds' investment
objectives. The funds also may engage in futures and options transactions based
on specific securities such as U.S. Treasury bonds or notes.

Bond Buyer Municipal Bond Index futures contracts differ from traditional
futures contracts in that when delivery takes place, no bonds change hands.
Instead, these contracts settle in cash at the spot market value of the Bond
Buyer Municipal Bond 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).

To initiate and maintain open positions in a futures contract, a fund would be
required to make a good faith margin deposit in cash or government securities
with a futures broker or custodian. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. 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.

Once a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, the contract holder is
required to pay additional variation margin. Conversely, changes in the contract
value may reduce the required margin, resulting in a repayment of excess margin
to the contract holder. Variation margin payments are made to or from the
futures broker for as long as the contract remains open and do not constitute
margin transactions for purposes of the funds' investment restrictions.

RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS

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

A fund could suffer losses if it were 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 advisor considers it appropriate or desirable to do
so. In the event of adverse price movements, a fund would be required

www.americancentury.com American Century Investments 15

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 advisor 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 advisor will seek to
minimize these risks by limiting the contracts entered into on behalf of the
funds to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.

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

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

OPTIONS ON FUTURES

By purchasing an option on a futures contract, a fund obtains the right, but not
the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.

Although they do not currently intend to do so, the funds may write (or sell)
call options that obligate it 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 non-money market 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 other-than-hedging
purposes, 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 set aside cash and appropriate liquid assets in a segregated account
to cover its obligations related to futures contracts and options.

16 American Century Investments 1-800-345-2021

Municipal Bond Insurers

Securities held by California Insured Tax-Free may be (a) insured under a
new-issue insurance policy obtained by the issuer of the security or (b) insured
under a secondary market insurance policy purchased by the fund or a previous
bond holder. The following paragraphs provide some background on the bond
insurance organizations most frequently relied upon for municipal bond insurance
in the United States.

AMBAC Indemnity Corporation (AMBAC Indemnity) is a Wisconsin-domiciled stock
insurance corporation. AMBAC Indemnity is a wholly owned subsidiary of AMBAC
Inc., a publicly held company. Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) have rated AMBAC Indemnity's claims-paying
ability Aaa and AAA, respectively.

Financial Guaranty Insurance Company (FGIC) is a wholly owned subsidiary of FGIC
Corporation, a Delaware corporation. FGIC's claims-paying ability was rated
Aaa/AAA/AAA by Moody's, S&P and Fitch, respectively.

Municipal Bond Investors Assurance (MBIA) Corporation is a monoline insurance
company organized as a New York corporation. All bond issues insured by MBIA are
rated "Aaa" by Moody's and all short-term loans insured by MBIA are rated
"MIG-1." All bond issues insured by MBIA are rated "AAA" by S&P.

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
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 Trustees 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 Trustees 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
Trustees of the funds has delegated the day-to-day function of determining the
liquidity of Rule 144A securities to the advisor. 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 advisor will consider
appropriate remedies to minimize the effect on such fund's liquidity.

INVESTMENT POLICIES

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

For purposes of the funds' investment restrictions, the party identified as the
"issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision and the security is
backed only by the assets and revenues of the

www.americancentury.com American Century Investments 17

subdivision, the subdivision is deemed the sole issuer. Similarly, in the case
of an Industrial Development Bond, if the bond were backed only by the assets
and revenues of a non-governmental user, the non-governmental user would be
deemed the sole issuer. If, in either case, the creating government or some
other entity were to guarantee the security, the guarantee would be considered a
separate security and treated as an issue of the guaranteeing entity.

FUNDAMENTAL INVESTMENT POLICIES

The funds are subject to the following restrictions that are fundamental and may
not be changed without approval of a majority of the outstanding votes of
shareholders of a fund, as determined in accordance with the Investment Company
Act.

For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of its
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric, and gas, electric, and telephone will each be considered
a separate industry, and (d) personal credit and business credit businesses will
be considered separate industries.

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

Borrowing A fund may not borrow money, except for temporary or
emergency purposes (not for leveraging or investment) in
an amount not exceeding 33 1/3% of the fund's total assets
(including the amount borrowed) less liabilities (other
than borrowings).

Lending A fund may not lend any security or make any other loan
if, as a result, more than 33 1/3% of the fund's total
assets would be lent to other parties, except (i) through
the purchase of debt securities in accordance with its
investment objective, policies and limitations or (ii) by
engaging in repurchase agreements with respect to
portfolio securities.

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

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

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

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

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

18 American Century Investments 1-800-345-2021

For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding interfund
lending. Under the terms of the exemptive order, the funds may borrow money from
or lend money to other funds, advised by ACIM, that permit such transactions.
All such transactions will be subject to the limits set above for borrowing and
lending. The funds will borrow money through the program only when the costs are
equal to or lower than the cost of short-term bank loans. Interfund loans and
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.

Nonfundamental Investment Policies

In addition, the funds are subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Trustees.

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.

Futures and options The money market funds may not purchase or sell futures
[Money market funds contracts or call options. This limitation does not apply
only] to options attached to, or acquired or traded together
with, their underlying securities, and does not apply to
securities that incorporate features similar to options or
futures contracts.

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 (10% for the money market funds) would be
invested in repurchase agreements not entitling the holder
to payment of principal and interest within seven days and
in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a
readily available market.

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

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

TEMPORARY DEFENSIVE MEASURES

For temporary defensive purposes, a fund may invest in securities that may not
fit its investment objective or its stated market. During a temporary defensive
period, a fund may direct its assets to the following investment vehicles: (1)
interest-bearing bank accounts or Certificates of Deposit; (2) U.S. government
securities and repurchase agreements collateralized by U.S. government
securities; and (3) other money market funds.

PORTFOLIO TURNOVER

Under normal conditions, the funds' annual portfolio turnover rates are not
expected to exceed 100%. Because a higher turnover rate increases transaction
costs and may increase taxable capital gains, the funds' managers carefully
weigh the potential benefits of short-term investing against these
considerations.

www.americancentury.com American Century Investments 19

The funds' portfolio turnover rates (except those of the money market funds) are
listed in the Financial Highlights table in the Prospectus. Because of the
short-term nature of the money market funds' investments, portfolio turnover
rates are not generally used to evaluate their trading activities.

MANAGEMENT

THE BOARD OF TRUSTEES

The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired the advisor to do so.
Two-thirds of the trustees are independent of the funds' advisor; that is, they
are not employed by and have no financial interest in the advisor.

The individuals listed in the table below whose names are marked by an asterisk
(*) are interested persons of the funds (as defined in the Investment Company
Act) by virtue of, among other considerations, their affiliation with either the
funds; the advisor, American Century Investment Management, Inc. (ACIM); the
funds' agent for transfer and administrative services, American Century Services
Corporation (ACSC); the parent corporation, American Century Companies, Inc.
(ACC) or ACC's subsidiaries (including ACIM and ACSC); the funds' distribution
agent and co-administrator, Funds Distributor, Inc. (FDI); or other funds
advised by the advisor. Each trustee listed below serves as a trustee or
director of seven registered investment companies in the American Century family
of funds, which also are advised by the advisor.

Name (Age) Position(s) Held Principal Occupation(s)
Address With Fund During Past Five Years
- -------------------------------------------------------------------------------
Albert A. Eisenstat (69) Trustee Independent Director, Commercial Metals Co.
1665 Charleston Road (1982 to present)
Mountain View, CA 94043 Independent Director, Sungard Data Systems
(1991 to present)
General Partner, Discovery Ventures (venture
capital firm, 1996 to 1998)
Independent Director, Business Objects S/A
(software & programming, 1994 to present)

Ronald J. Gilson (52) Trustee Charles J. Meyers Professor of Law and Business,
1665 Charleston Road Stanford Law School (1979 to present)
Mountain View, CA 94043 Mark and Eva Stern Professor of Law and Business,
Columbia University School of Law (1992 to present)
Counsel, Marron, Reid & Sheehy (a San Francisco law firm,
1984 to present)

William M. Lyons* (43) Trustee President, Chief Operating Officer and Assistant Secretary,
4500 Main Street ACC
Kansas City, MO 64111 Executive Vice President, Chief Operating Officer,
ACIM, ACSC and 11 other ACC subsidiaries;
Director of ACIM, ACSC and 15 other ACC subsidiaries;
Secretary, ACIM, ACSC and six other ACC subsidiaries

Myron S. Scholes (58) Trustee Limited Partner, Long-Term Capital Management
1665 Charleston Road (investment advisor, February 1999 to present)
Mountain View, CA 94043 Principal, Long-Term Capital Management (investment
advisor, 1993 to January 1999)
Frank E. Buck Professor of Finance, Stanford Graduate
School of Business (1981 to present)
Director, Dimensional Fund Advisors (investment advisor,
1982 to present)
Director, Smith Breeden Family of Funds (1992 to present)

20 American Century Investments 1-800-345-2021

Name (Age) Position(s) Held Principal Occupation(s)
Address With Fund During Past Five Years
- -------------------------------------------------------------------------------
Kenneth E. Scott (70) Trustee Ralph M. Parsons Professor of Law and Business,
1665 Charleston Road Stanford Law School (1972 to present)
Mountain View, CA 94043 Director, RCM Capital Funds, Inc. (1994 to present)

Isaac Stein (52) Trustee Director, Raychem Corporation (electrical equipment,
1665 Charleston Road 1993 to present)
Mountain View, CA 94043 President, Waverley Associates, Inc. (private investment firm,
1983 to present)
Director, ALZA Corporation (pharmaceuticals, 1987 to present)
Trustee, Stanford University (1994 to present)
Chairman, Stanford Health Services (1994 to present)

James E. Stowers III* (40) Trustee, Chief Executive Officer and Director, ACC
4500 Main Street Chairman of Chief Executive Officer, ACIM, ACSC and seven other
Kansas City, MO 64111 the Board ACC subsidiaries
Director, ACIM, ACSC and 12 other ACC subsidiaries

Jeanne D. Wohlers (54) Trustee Director, Indus International (software solutions, January
1665 Charleston Road 1999 to present)
Mountain View, CA 94043 Director and Partner, Windy Hill Productions, LP (educational
software, 1994 to 1998)
Director, Quintus Corporation (automation solutions,
1995 to present)

Committees

The Board has four committees to oversee specific functions of the funds'
operations. Information about these committees appears in the table below. The
trustee first named acts as chairman of the committee:

Committee Members Function of Committee
- -------------------------------------------------------------------------------
Audit Kenneth E. Scott The Audit Committee selects and oversees the activities of the Trust's
Albert A. Eisenstat independent auditor. The committee receives reports from the
Jeanne D. Wohlers advisor's Internal Audit Department, which is accountable solely to the
committee. The committee also receives reporting about compliance matters
affecting the Trust.

Nominating Kenneth E. Scott The Nominating Committee primarily considers and recommends
Myron S. Scholes individuals for nomination as trustees. The names of potential
Albert A. Eisenstat trustee candidates are drawn from a number of sources, including
Ronald J. Gilson recommendations from members of the Board, management and
Isaac Stein shareholders. This committee also reviews and makes
Jeanne D. Wohlers 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.

Portfolio Myron S. Scholes The Portfolio Committee reviews quarterly the investment activities
Ronald J. Gilson and strategies used to manage fund assets. The committee regularly
Isaac Stein receives reports from portfolio managers, credit analysts and other
investment personnel concerning the funds' investments.

Quality Isaac Stein The Quality of Service Committee reviews the level and quality of
of Service William M. Lyons transfer agent and administrative services provided to the funds and
Ronald J. Gilson their shareholders. It receives and reviews reports comparing those
Myron S. Scholes services to those of fund competitors and seeks to improve such services
where feasible and appropriate.

www.americancentury.com American Century Investments 21

Compensation of Trustees

The trustees also serve as trustees for six American Century investment
companies other than American Century California Tax-Free and Municipal Funds.
Each trustee 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 Trust for the
periods indicated and by the seven investment companies served by this Board to
each trustee who is not an interested person as defined in the Investment
Company Act.

AGGREGATE TRUSTEE COMPENSATION FOR FISCAL YEAR ENDED AUGUST 31, 1999
- -------------------------------------------------------------------------------
Total Compensation Total Compensation from the
Name of Trustee from the Funds(1) American Century Family of Funds(2)
- -------------------------------------------------------------------------------
Albert A. Eisenstat $73,750 $1,245
Ronald J. Gilson 83,250 2,111
Myron S. Scholes 69,500 739
Kenneth E. Scott 83,250 2,108
Isaac Stein 79,500 1,736
Jeanne D. Wohlers 79,750 1,765

(1) Includes compensation paid to the trustees during the fiscal year ended
August 31, 1999, and also includes amounts deferred at the election of the
trustees under the American Century Mutual Funds Deferred Compensation Plan
for Non-Interested Directors and Trustees. The total amount of deferred
compensation included in the preceding table is as follows: Mr. Eisenstat,
$1,245; Mr. Gilson, $2,111; Mr. Scholes, $739; and Mr. Scott, $1,054.

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

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

All deferred fees are credited to an account established in the name of the
trustees. 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 trustee. 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. Trustees are allowed to
change their designation of mutual funds from time to time.

No deferred fees are payable until such time as a trustee resigns, retires or
otherwise ceases to be a member of the Board of Trustees. Trustees 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 trustee, all remaining deferred fee account balances are paid to
the trustee's beneficiary or, if none, to the trustee's estate.

The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. The rights of trustees 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 August 31, 1999.

22 American Century Investments 1-800-345-2021

OFFICERS

Background information for the officers of the funds is provided below. All
persons named as officers of the funds also serve in similar capacities for the
12 other investment companies advised by ACIM. Not all officers of the funds are
listed; only those officers with policy-making functions for the funds are
listed. No officer is compensated for his or her service as an officer of the
funds. The individuals listed in the table are interested persons of the funds
(as defined in the Investment Company Act) by virtue of, among other
considerations, their affiliation with either the funds; ACC; ACC's subsidiaries
(including ACIM and ACSC); or the funds' distributor (FDI), as specified in the
following table.

Name (Age) Position(s) Held Principal Occupation(s)
Address With Fund During Past Five Years
- -------------------------------------------------------------------------------
George A. Rio (44) President Executive Vice President and Director of Client
60 State St. Services, FDI (March 1998 to present)
Boston, MA 02109 Senior Vice President and Senior Key Account Manager,
Putnam Mutual Funds (June 1995 to March 1998)
Director Business Development, First Data Corporation
(May 1994 to June 1995)

Christopher J. Kelley (34) Vice President Vice President and Associate General Counsel, FDI
60 State St. (July 1996 to present)
Boston, MA 02109 Assistant Counsel, Forum Financial Group
(April 1994 to July 1996)
Compliance Officer, Putnam Investments
(1992 to April 1994)

Mary A. Nelson (35) Vice President Vice President and Manager of Treasury Services
60 State St. and Administration, FDI (1994 to present)
Boston, MA 02109 Assistant Vice President and Client Manager, The Boston
Company, Inc. (1989 to 1994)

Maryanne Roepke, CPA (43) Vice President Senior Vice President, Treasurer and Principal
4500 Main St. and Treasurer Accounting Officer, ACSC
Kansas City, MO 64111

David C. Tucker (41) Vice President Senior Vice President, ACSC, ACIM and four other
4500 Main St. ACC subsidiaries (June 1998 to present)
Kansas City, MO 64111 General Counsel, ACC and nine ACC subsidiaries
(June 1998 to present)
Vice President and Secretary, American Century Ventures,
Inc. (December 1999)
Consultant to mutual fund industry (May 1997 to April 1998)
Vice President and General Counsel, Janus Companies
(1990 to 1997)

Douglas A. Paul (52) Secretary and Vice President and Associate General Counsel,
1665 Charleston Road Vice President ACSC
Mountain View, CA 94043

C. Jean Wade (35) Controller Controller-Fund Accounting, ACSC
4500 Main St.
Kansas City, MO 64111

Jon Zindel (32) Tax Officer Vice President and Director of Taxation, ACSC
4500 Main St. (1996 to present)
Kansas City, MO 64111 Vice President of ACIM and of 15 other ACC subsidiaries
(April 1999 to present)
Treasurer, American Century Ventures, Inc. (December 1999)
Tax Manager, Price Waterhouse LLP (1989 to 1996)

www.americancentury.com American Century Investments 23

THE FUNDS' PRINCIPAL SHAREHOLDERS

As of December 3, 1999, the following companies were the record owners of more
than 5% of a fund's outstanding shares:

Fund Shareholder and Percentage of Shares Outstanding
- -------------------------------------------------------------------------------------
California Tax-Free Money Market Morgan Guaranty Trust of NY 22.2%
Newark, DE

California Municipal Money Market Morgan Guaranty Trust of NY 13.2%
Newark, DE

California Limited-Term Tax-Free Bank of America NA 13.4%
Dallas, TX

California High-Yield Municipal Morgan Guaranty Trust of NY 7.5%
Newark, DE

The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of a fund's outstanding shares. As of December 3, 1999, the
officers and trustees of the funds, as a group, own less than 1% of any fund's
outstanding shares.

SERVICE PROVIDERS

The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds and is described below.

ACIM and ACSC are both wholly owned by ACC. James E. Stowers, Jr., Chairman of
ACC, controls ACC by virtue of his ownership of a majority of its voting stock.

INVESTMENT ADVISOR

A description of the responsibilities of the advisor appears in the Prospectus
under the heading "Management."

For the services provided to the funds, the advisor receives a monthly fee based
on a percentage of the average net assets of a fund. The annual rate at which
this fee is assessed is determined monthly in a two-step process. First, a fee
rate schedule is applied to the assets of all the funds of its investment
category managed by the advisor (the Investment Category Fee). For example, when
calculating the fee for a money market fund, all the assets of the money market
funds managed by the advisor are aggregated. The three investment categories are
money market funds, bond funds and equity funds. Second, a separate fee rate
schedule is applied to the assets of all the funds managed by the advisor (the
Complex Fee). The Investment Category Fee and the Complex Fee are then added to
determine the unified management fee payable by a fund to the advisor.

24 American Century Investments 1-800-345-2021

The schedules by which the Investment Category Fees are determined are as
follows:

INVESTMENT CATEGORY FEE SCHEDULE FOR
CALIFORNIA TAX-FREE MONEY MARKET AND CALIFORNIA MUNICIPAL MONEY MARKET
- -----------------------------------------------------------------------
Category Assets Fee Rate
- -----------------------------------------------------------------------
First $1 billion 0.2700%
Next $1 billion 0.2270%
Next $3 billion 0.1860%
Next $5 billion 0.1690%
Next $15 billion 0.1580%
Next $25 billion 0.1575%
Thereafter 0.1570%

INVESTMENT CATEGORY FEE SCHEDULE FOR CALIFORNIA LIMITED-TERM TAX-FREE,
CALIFORNIA INTERMEDIATE-TERM TAX-FREE, CALIFORNIA LONG-TERM TAX-FREE AND
CALIFORNIA INSURED TAX-FREE
- -------------------------------------------------------------------------
Category Assets Fee Rate
- -------------------------------------------------------------------------
First $1 billion 0.2800%
Next $1 billion 0.2280%
Next $3 billion 0.1980%
Next $5 billion 0.1780%
Next $15 billion 0.1650%
Next $25 billion 0.1630%
Thereafter 0.1625%

INVESTMENT CATEGORY FEE SCHEDULE FOR CALIFORNIA HIGH-YIELD MUNICIPAL
- -------------------------------------------------------------------------
Category Assets Fee Rate
- -------------------------------------------------------------------------
First $1 billion 0.3100%
Next $1 billion 0.2580%
Next $3 billion 0.2280%
Next $5 billion 0.2080%
Next $15 billion 0.1950%
Next $25 billion 0.1930%
Thereafter 0.1925%

www.americancentury.com American Century Investments 25

The Complex Fee is determined according to the schedule below.

COMPLEX FEE SCHEDULE
- -------------------------------------------------------------------------
Complex Assets Fee Rate
- -------------------------------------------------------------------------
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15.0 billion 0.2985%
Next $25.0 billion 0.2970%
Next $50.0 billion 0.2960%
Next $100.0 billion 0.2950%
Next $100.0 billion 0.2940%
Next $200.0 billion 0.2930%
Next $250.0 billion 0.2920%
Next $500.0 billion 0.2910%
Thereafter 0.2900%

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

The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually, by (1) the funds'
Board of Trustees, or by the vote of a majority of outstanding votes (as defined
in the Investment Company Act) and (2) by the vote of a majority of the trustees
of the funds who are not parties to the agreement or interested persons of the
advisor, cast in person at a meeting called for the purpose of voting on such
approval.

The management agreement provides that it may be terminated at any time without
payment of any penalty by the funds' Board of Trustees, or by a vote of a
majority of outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.

The management agreement provides that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties. The
management agreement also provides that the advisor and its officers, trustees
and employees may engage in other business, devote time and attention to any
other business whether of a similar or dissimilar nature, and render services to
others.

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

26 American Century Investments 1-800-345-2021

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

Prior to August 1, 1997, Benham Management Corporation served as the investment
advisor to the funds. Benham Management Corporation was merged into the advisor
in late 1997.

Unified management fees incurred by each fund for the fiscal periods ended
August 31, 1999, 1998 and 1997, are indicated in the following table. Fee
amounts are net of amounts reimbursed or recouped under the funds' previous
investment advisory agreement with Benham Management Corporation.

UNIFIED MANAGEMENT FEES(1)
- -------------------------------------------------------------------------------
Fund 1999 1998 1997
- -------------------------------------------------------------------------------
California Tax-Free Money Market $2,514,416 $2,159,236 $1,309,574
California Municipal Money Market 873,026 845,834 564,212
California Limited-Term Tax-Free 744,334 656,701 346,562
California Intermediate-Term Tax-Free 2,402,570 2,264,194 1,304,435
California Long-Term Tax-Free 1,729,194 1,599,824 920,960
California Insured Tax-Free 1,118,237 1,031,569 584,652
California High-Yield Municipal 1,778,084 1,311,664 527,834

(1) Net of Reimbursements

TRANSFER AGENT AND ADMINISTRATOR

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

Prior to August 1, 1997, the funds paid ACSC directly for its services as
transfer agent and administrative services agent.

Administrative and transfer agent fees paid by each fund for the fiscal period
ended August 31, 1997, are indicated in the table below. Fee amounts are net of
expense limitations. Administrative and transfer agent fees are included in the
unified management fees effective August 1, 1997.

ADMINISTRATIVE FEES
- ----------------------------------------------------
Fund 1997
- ----------------------------------------------------
California Tax-Free Money Market $368,680
California Municipal Money Market 160,175
California Limited-Term Tax-Free 94,859
California Intermediate-Term Tax-Free 373,977
California Long-Term Tax-Free 256,250
California Insured Tax-Free 63,254
California High-Yield Municipal 142,879

www.americancentury.com American Century Investments 27

TRANSFER AGENT FEES
- ----------------------------------------------------
Fund 1997
- ----------------------------------------------------
California Tax-Free Money Market $190,056
California Municipal Money Market 112,925
California Limited-Term Tax-Free 39,157
California Intermediate-Term Tax-Free 164,081
California Long-Term Tax-Free 108,533
California Insured Tax-Free 78,485
California High-Yield Municipal 70,935

DISTRIBUTOR

The funds' shares are distributed by FDI, a registered broker-dealer. The
distributor is a wholly owned, indirect subsidiary of Boston Institutional
Group, Inc. The distributor's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.

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

OTHER SERVICE PROVIDERS

CUSTODIAN BANKS

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

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP are the independent accountants of the funds. The
address of PricewaterhouseCoopers LLP is 1055 Broadway, 10th floor, Kansas City,
Missouri 64105. As the independent accountants of the funds,
PricewaterhouseCoopers provides services including (1) audit of the annual
financial statements for each fund, (2) assistance and consultation in
connection with SEC filings, and (3) review of the annual federal income tax
return filed for each fund.

BROKERAGE ALLOCATION

The funds generally purchase and sell debt securities through principal
transactions, meaning that the funds normally purchase securities directly from
the issuer or a primary market-maker acting as principal for the securities on a
net basis. The funds do not pay brokerage commissions on these transactions,
although the purchase price for debt securities usually includes an undisclosed
compensation. Purchases of securities from underwriters typically include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market-makers typically include a dealer's mark-up
(i.e., a spread between the bid and asked prices). During the fiscal years ended
August 31, 1997, 1998, and 1999, the funds did not pay any brokerage
commissions.

28 American Century Investments 1-800-345-2021

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 Trust, and shares of each fund have equal
voting rights.

Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all funds') outstanding shares may be able to elect a Board of
Trustees. The Trust 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 trustees is determined by the votes
received from all Trust 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.

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.

Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss as a result of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust is unable to meet its obligations.

BUYING AND SELLING FUND SHARES

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

VALUATION OF A FUND'S SECURITIES

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

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.

MONEY MARKET FUNDS

Securities held by the money market funds are valued at amortized cost. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium paid at the time of
purchase. Although this method provides certainty in valuation, it generally
disregards the effect of fluctuating interest rates on an instrument's market
value. Consequently, the instrument's amortized

www.americancentury.com American Century Investments 29

cost value may be higher or lower than its market value, and this discrepancy
may be reflected in the funds' yields. During periods of declining interest
rates, for example, the daily yield on fund shares computed as described above
may be higher than that of a fund with identical investments priced at market
value. The converse would apply in a period of rising interest rates.

The money market funds operate pursuant to Investment Company Act Rule 2a-7,
which permits valuation of portfolio securities on the basis of amortized cost.
As required by the rule, the Board of Trustees has adopted procedures designed
to stabilize, to the extent reasonably possible, a money market fund's price per
share as computed for the purposes of sales and redemptions at $1.00. While the
day-to-day operation of the money market funds has been delegated to the fund
managers, the quality requirements established by the procedures limit
investments to certain instruments that the Board of Trustees has determined
present minimal credit risks and that have been rated in one of the two highest
rating categories as determined by a rating agency or, in the case of unrated
securities, of comparable quality. The procedures require review of the money
market funds' portfolio holdings at such intervals as are reasonable in light of
current market conditions to determine whether the money market funds' net asset
values calculated by using available market quotations deviate from the
per-share value based on amortized cost. The procedures also prescribe the
action to be taken if such deviation should occur.

The Board of Trustees monitors the levels of illiquid securities; however, if
the levels are exceeded, the Board will take action to rectify these levels.

Actions the Board of Trustees may consider under these circumstances include (i)
selling portfolio securities prior to maturity, (ii) withholding dividends or
distributions from capital, (iii) authorizing a one-time dividend adjustment,
(iv) discounting share purchases and initiating redemptions in kind, or (v)
valuing portfolio securities at market price for purposes of calculating NAV.

NON-MONEY MARKET FUNDS

Securities held by the non-money market funds normally are priced by an
independent pricing service, provided that such prices are believed by the
advisor to reflect the fair market value of portfolio securities.

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 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 Trustees. 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 not priced by a pricing service are valued at the mean between the
most recently quoted bid and ask prices provided by broker-dealers. The
municipal bond market is typically a "dealer market"; that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference, between bid and asked prices for certain municipal bonds
may differ substantially among dealers.

Debt 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
Trustees.

30 American Century Investments 1-800-345-2021

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 and state income taxes to the
extent that it distributes substantially all of its net investment income and
net realized capital gains (if any) to shareholders. If a fund fails to qualify
as a regulated investment company, it will be liable for taxes, significantly
reducing its distributions to shareholders and eliminating shareholders' ability
to treat distributions of the funds in the manner they were realized by the
funds.

Certain bonds purchased by the funds may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and can generally be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Original issue discount, although no cash is actually received by a
fund until the maturity of the bond, is treated for federal income tax purposes
as income earned by a fund over the term of the bond, and therefore is subject
to the distribution requirements of the Code. The annual amount of income earned
on such a bond by a fund generally is determined on the basis of a constant
yield to maturity that takes into account the semiannual compounding of accrued
interest. Original issue discount on an obligation with interest exempt from
federal income tax will constitute tax-exempt interest income to the fund.

In addition, some of the bonds may be purchased by a fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless a fund elects to include market discount in
income in tax years to which it is attributable). Generally, market discount
accrues on a daily basis for each day the bond is held by a fund on a straight
line basis over the time remaining to the bond's maturity. In the case of any
debt security having a fixed maturity date of not more than one year from date
of issue, the gain realized on disposition generally will be treated as a
short-term capital gain. In general, gain realized on disposition of a security
held less than one year is treated as a short-term capital gain.

As of August 31, 1999, the funds on 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
- -------------------------------------------------------------------------------
California Tax-Free Money Market $274,509 (expiring in 2004 through 2007
California Municipal Money Market $159,057 (expiring in 2003 through 2006
California Limited-Term Tax-Free $445,336 (expiring in 2004)

Interest on certain types of industrial development bonds (small issues and
obligations issued to finance certain exempt facilities that may be leased to or
used by persons other than the issuer) is not exempt from federal income tax
when received by "substantial users" or persons related to substantial users as
defined in the Code. The term "substantial user" includes any "non-exempt
person" who regularly uses in trade or business part of a facility financed from
the proceeds of industrial development bonds. The funds may invest periodically
in industrial development bonds and, therefore, may not be appropriate
investments for entities that are substantial users of facilities financed by
industrial development bonds or "related persons" of substantial users.
Generally, an individual will

www.americancentury.com American Century Investments 31

not be a related person of a substantial user under the Code unless he or his
immediate family (spouse, brothers, sisters, ancestors and lineal descendants)
owns directly or indirectly in aggregate more than 50% in the equity value of
the substantial user.

Under the Code, any distribution of a fund's net realized long-term capital
gains that is designated by the fund as a capital gains dividend is taxable to
shareholders as long-term capital gains, regardless of the length of time shares
are held. If a capital gains dividend is paid with respect to any shares of a
fund sold at a loss after being held for six months or less, the loss will be
treated as a long-term capital loss for tax purposes.

ALTERNATIVE MINIMUM TAX

While the interest on bonds issued to finance essential state and local
government operations is generally exempt from regular federal income tax,
interest on certain "private activity" bonds issued after August 7, 1986, while
exempt from regular federal income tax, constitutes a tax-preference item for
taxpayers in determining alternative minimum tax liability under the Code and
income tax provisions of several states.

California Municipal Money Market and California High-Yield Municipal may each
invest in private activity bonds. The interest on private activity bonds could
subject a shareholder to, or increase liability under, the federal alternative
minimum tax, depending on the shareholder's tax situation. The interest on
California private activity securities is not subject to the California
alternative minimum tax when it is earned (either directly or through investment
in a mutual fund) by a California taxpayer. However, if either fund were to
invest in private activity securities of non-California issuers (due to a
limited supply of appropriate California municipal obligations, for example),
the interest on those securities would be included in California alternative
minimum taxable income.

All distributions derived from interest exempt from regular federal income tax
may subject corporate shareholders to, or increase their liability under, the
alternative minimum tax because these distributions are included in the
corporation's "adjusted current earnings."

In addition, a deductible environmental tax of 0.12% is imposed on a
corporation's modified alternative minimum taxable income in excess of $2
million. The environmental tax will be imposed even if the corporation is not
required to pay an alternative minimum tax. To the extent that exempt-interest
dividends paid by a fund are included in alternative minimum taxable income,
corporate shareholders may be subject to the environmental tax.

The Trust will inform California Municipal Money Market and California
High-Yield Municipal fund shareholders annually of the amount of distributions
derived from interest payments on private activity bonds.

STATE AND LOCAL TAXES

California law concerning the payment of exempt-interest dividends is similar to
federal law. Assuming each fund qualifies to pay exempt-interest dividends under
federal and California law, and to the extent that dividends are derived from
interest on tax-exempt bonds of California state or local governments, such
dividends also will be exempt from California personal income tax. The Trust
will inform shareholders annually as to the amount of distributions from each
fund that constitutes exempt-interest dividends and dividends exempt from
California personal income tax. The funds' dividends are not exempt from
California state franchise or corporate income taxes.

The funds' dividends may not qualify for exemption under income or other tax
laws of state or local taxing authorities outside California. Shareholders
should consult their tax advisors or state or local tax authorities about the
status of distributions from the funds in this regard.

32 American Century Investments 1-800-345-2021

The information above is only a summary of some of the tax considerations
affecting the funds and their shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisors or state or local tax authorities to determine whether the
funds are suitable investments.

HOW FUND PERFORMANCE INFORMATION IS CALCULATED

The funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.

For the money market funds, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used to
calculate yield, but the return is then annualized to reflect weekly compounding
according to the following formula:
365/7
Effective Yield = [(Base-Period Return + 1) ] - 1

For the non-money market funds, yield quotations are based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing the
fund's net investment income by its share price on the last day of the period
according to the following formula:
6
YIELD = 2 [(a - b + 1) - 1]
-----
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.

The tax-equivalent yield is based on the current double-tax-exempt yield and
your combined federal and state marginal tax rate. Assuming all the funds'
dividends are tax-exempt in California (which may not always be the case) and
that your California taxes are fully deductible for federal income tax purposes,
you can calculate your tax equivalent yield for the funds using the following
equation:

Fund's Double Tax-Free Yield = Your Tax-Equivalent Yield
- -----------------------------------------------------
(100% - Federal Tax Rate)(100% - California Tax Rate)

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

www.americancentury.com American Century Investments 33

is not constant over time, but changes from year to year, and that average
annual total returns represent averaged figures as opposed to actual
year-to-year performance.

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

MONEY MARKET FUND TAX-EQUIVALENT YIELDS (seven-day period ended August 31, 1999
- ---------------------------------------------------------------------------------------------------------
Tax-Equivalent Tax-Equivalent Tax-Equivalent Tax-Equivalent
7-Day Yield 34.70% Yield 37.42% Yield 41.95% Yield 45.22%
Fund Current Yield Tax Bracket Tax Bracket Tax Bracket Tax Bracket
- ---------------------------------------------------------------------------------------------------------
California Tax-Free
Money Market 2.54% 3.89% 4.06% 4.37% 4.64%

California Municipal
Money Market 2.67% 4.09% 4.27% 4.60% 4.87%

MONEY MARKET FUND TAX-EQUIVALENT YIELDS (seven-day period ended August 31, 1999
- ---------------------------------------------------------------------------------------------------------
Tax-Equivalent Tax-Equivalent Tax-Equivalent Tax-Equivalent
7-Day Yield 34.70% Yield 37.42% Yield 41.95% Yield 45.22%
Fund Effective Yield Tax Bracket Tax Bracket Tax Bracket Tax Bracket
- ---------------------------------------------------------------------------------------------------------
California Tax-Free
Money Market 2.57% 3.94% 4.11% 4.43% 4.69%

California Municipal
Money Market 2.70% 4.13% 4.31% 4.65% 4.93%

NON-MONEY MARKET FUND TAX-EQUIVALENT YIELDS (30-day period ended August 31, 1999)
- ---------------------------------------------------------------------------------------------------------
Tax-Equivalent Tax-Equivalent Tax-Equivalent Tax-Equivalent
30-Day Yield 34.70% Yield 37.42% Yield 41.95% Yield 45.22%
Fund SEC Yield Tax Bracket Tax Bracket Tax Bracket Tax Bracket
- ---------------------------------------------------------------------------------------------------------
California
Limited-Term
Tax-Free 3.72% 5.70% 5.94% 6.41% 6.79%

California
Intermediate-Term
Tax-Free 4.20% 6.43% 6.71% 7.24% 7.67%

California
Long-Term
Tax-Free 4.95% 7.58% 7.91% 8.53% 9.04%

California Insured
Tax-Free 4.73% 7.24% 7.56% 8.15% 8.63%

California
High-Yield
Municipal 5.12% 7.84% 8.18% 8.82% 9.35%

34 American Century Investments 1-800-345-2021

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED AUGUST 31
- ---------------------------------------------------------------------------------------------------------
Fund 1 year 5 years 10 years Life of Fund Inception Date
- ---------------------------------------------------------------------------------------------------------
California Tax-Free
Money Market 2.62% 3.07% 3.20% 3.74% 11/09/1983

California Municipal
Money Market 2.76% 3.14% N/A 3.09% 12/31/1990

California Limited-Term
Tax-Free 2.26% 4.45% N/A 4.49% 06/01/1992

California Intermediate-Term
Tax-Free 0.74% 5.37% 6.32% 6.55% 11/09/1983

California Long-Term Tax-Free -1.85% 6.13% 7.07% 7.84% 11/09/1983

California Insured Tax-Free -1.71% 6.16% 6.95% 6.33% 12/30/1986

California High-Yield Municipal 0.26% 7.00% 7.47% 6.38% 12/30/1986

PERFORMANCE COMPARISONS

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

PERMISSIBLE ADVERTISING INFORMATION

From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (6) descriptions or comparisons of various savings and investment
products (including,

www.americancentury.com American Century Investments 35

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.

FINANCIAL STATEMENTS

The financial statements of the funds are included in the Annual Reports to
shareholders for the fiscal year ended August 31, 1999. The annual reports are
incorporated herein by reference. You may receive copies of the reports without
charge upon request to American Century at the address and telephone number
shown on the back cover of this Statement of Additional Information.

EXPLANATION OF FIXED-INCOME SECURITIES RATINGS

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

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

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

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

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

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

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

36 American Century Investments 1-800-345-2021

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

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

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

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

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

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

COMMERCIAL PAPER RATINGS
- --------------------------------------------------------------------------------
S&P Moody's Description
- --------------------------------------------------------------------------------
A-1 Prime-1 This indicates that the degree of safety regarding timely
(P-1) 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 paper is satisfactory,
(P-2) 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. Issues that carry
(P-3) this rating are somewhat more vulnerable to the adverse changes
in circumstances than obligations carrying the higher
designations.

www.americancentury.com American Century Investments 37

NOTE RATINGS
- --------------------------------------------------------------------------------
S&P Moody's Description
- --------------------------------------------------------------------------------
SP-1 MIG-1; Notes are of the highest quality enjoying strong protection from
VMIG-1 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; Notes are of high quality, with margins of protection ample,
VMIG-2 although not so large as in the preceding group.

SP-3 MIG-3; Notes are of favorable quality, with all security elements
VMIG-3 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; Notes are of adequate quality, carrying specific risk but having
VMIG-4 protection and not distinctly or predominantly speculative.

38 American Century Investments 1-800-345-2021

[blank page]

www.americancentury.com American Century Investments 39

MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS

Annual and Semiannual Reports

These contain more information about the funds' investments and the market
conditions and investment strategies that significantly affected the funds'
performance during the most recent fiscal period. The annual and semiannual
reports are incorporated by reference into this Statement of Additional
Information (SAI). This means that they are legally part of this SAI.

You can receive a free copy of the annual and semiannual reports, and ask any
questions about the funds, by contacting us at the address or one of the
telephone numbers listed below.

If you own or are considering purchasing fund shares through

* a bank
* a broker-dealer
* an insurance company
* 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).

* In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for
location and hours.

* On the Internet www.sec.gov

* By mail SEC Public Reference Section
Washington, D.C. 20549-6009.
(The SEC will charge a fee
for copying the documents.)

(Investment Company Act File No. 811-3706)

- --------------------------------------------------------------------------------
[american century logo (reg.sm)]
American
Century

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 DEAF
1-800-634-4113 or 816-444-3485

BUSINESS, NOT-FOR-PROFIT AND
EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-353

SH-SAI-17968 9912

AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS

1933 Act Post-Effective Amendment No. 29
1940 Act Amendment No. 33
- --------------------------------------------------------------------------------

PART C OTHER INFORMATION

ITEM 23 EXHIBITS (All exhibits not filed herewith are being incorporated herein
by reference.)

(a) (1) Amended and Restated Agreement and Declaration of Trust
dated March 9, 1998 and amended March 1, 1999, is included
herewith.

(b) Amended and Restated Bylaws dated March 9, 1998 (filed
electronically as an Exhibit to Post-Effective Amendment No. 7
to the Registration Statement of American Century Investment
Trust, File No. 33-65170, on May 13, 1998).

(c) Registrant hereby incorporates by reference, as though set
forth fully herein, Article III, Article VII and Article VIII
of Registrant's Amended and Restated Agreement and Declaration
of Trust, as amended, appearing as Exhibit (a) to the
Registration Statement of the Registrant; and Article II,
Article VII and Article VIII of Registrant's Amended and
Restated Bylaws, appearing as Exhibit (b) to the Registration
Statement of the Registrant.

(d) (1) Investor Class Management Agreement between American
Century California Tax-Free and Municipal Funds and American
Century Investment Management, Inc., dated August 1, 1997
(filed electronically as an Exhibit to Post-Effective
Amendment No. 33 to the Registration Statement of the American
Century Government Income Trust, File No. 2-99222, on July 31,
1997).

(2) Amendment No. 1 to the Investor Class Management Agreement
between American Century California Tax-Free and Municipal
Funds and American Century Investment Management, Inc., dated
March 31, 1998 (filed electronically as an Exhibit to
Post-Effective Amendment No. 23 to the Registration Statement
of American Century Municipal Trust on March 26, 1998, File
No. 2-91229).

(3) Amendment No. 2 to the Investor Class Management Agreement
between American Century California Tax-Free and Municipal
Funds and American Century Investment Management, Inc., dated
July 1, 1998 (filed electronically as an Exhibit to
Post-Effective Amendment No. 39 to the Registration Statement
of American Century Government Income Trust, File No.
2-99222, on July 28, 1999).

(e) (1) Distribution Agreement between American Century California
Tax-Free and Municipal Funds and Funds Distributor, Inc. dated
January 15, 1998 (filed electronically as an Exhibit to
Post-Effective Amendment No. 28 to the Registration Statement
of American Century Target Maturities Trust, File No. 2-94608,
on January 30, 1998).

(2) Amendment No. 1 to the Distribution Agreement between
American Century California Tax-Free and Municipal Funds and
Funds Distributor, Inc. dated June 1, 1998 (filed
electronically as an Exhibit to Post-Effective Amendment No.
11 to the Registration Statement of American Century Capital
Portfolios, Inc., File No. 33-64872, on June 26, 1998).

(3) Amendment No. 2 to the Distribution Agreement between
American Century California Tax-Free and Municipal Funds and
Funds Distributor, Inc., dated December 1, 1998 (filed
electronically as an Exhibit to Post-Effective Amendment No.
12 to the Registration Statement of American Century World
Mutual Funds, Inc., File No. 33-39242, on November 13, 1998).

(4) Amendment No. 3 to the Distribution Agreement between
American Century California Tax-Free and Municipal Funds and
Funds Distributor, Inc., dated January 29, 1999 (filed
electronically as an Exhibit to Post-Effective Amendment No.
24 to the Registration Statement of American Century Variable
Portfolios, Inc., File No. 33-14567, on January 15, 1999).

(5) Amendment No. 4 to the Distribution Agreement between
American Century California Tax-Free and Municipal Funds and
Funds Distributor, Inc., dated July 30, 1999 (filed
electronically as an Exhibit to Post-Effective Amendment No.
16 to the Registration Statement of American Century Capital
Portfolios, Inc., File No. 33-64872, on July 29, 1999).

(6) Amendment No. 5 to the Distribution Agreement between
American Century California Tax-Free and Municipal Funds and
Funds Distributor, Inc., dated November 19, 1999 (filed
electronically as an Exhibit to Post-Effective Amendment No.
87 to the Registration Statement of American Century Mutual
Funds, Inc., File No. 811-0816 on November 29, 1999).

(f) Not applicable.

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

(h) (1) Transfer Agency Agreement between American Century
California Tax-Free and Municipal Funds and American Century
Services Corporation, dated August 1, 1997 (filed
electronically as an Exhibit to Post-Effective Amendment No.
33 to the Registration Statement of the American Century
Government Income Trust, File No. 2-99222, on July 31, 1997).

(2) Amendment to Transfer Agency Agreement between American
Century California Tax-Free and Municipal Funds and American
Century Services Corporation, dated June 29, 1998 (filed
electronically as an Exhibit to Post-Effective Amendment No.
23 to the Registration Statement of American Century
Quantitative Equity Funds, File No. 33-19589, on June 29,
1998).

(3) Credit Agreement between American Century Funds and The
Chase Manhattan Bank, as Administrative Agent dated as of
December 21, 1999, is included herewith.

(i) Opinion and consent of counsel (filed electronically as an
Exhibit to Post-Effective Amendment No. 28 to the Registration
Statement of the Registrant on December 28, 1998).

(j) (1) Consent of PricewaterhouseCoopers LLP, independent
accountants is included herewith.

(2) Consent of KPMG Peat Marwick, LLP, independent auditors
(filed electronically as an Exhibit to Post-Effective
Amendment No. 28 to the Registration Statement of the
Registrant on December 28, 1998).

(3) Power of Attorney dated December 18, 1998, (filed
electronically as an Exhibit to Post-Effective Amendment No.
28 to the Registration Statement of the Registrant on December
28, 1998).

(k) Not applicable.

(l) Not applicable.

(m) Not applicable.

(n) Not applicable.

(o) Not applicable.

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

None.

Item 25. Indemnification.

As stated in Article VII, Section 3 of the Amended and Restated
Agreement and Declaration of Trust, incorporated herein by reference to
Exhibit (a) to the Registration Statement, Indemnification "The
Trustees shall be entitled and empowered to the fullest extent
permitted by law to purchase insurance for and to provide by resolution
or in the Bylaws for indemnification out of Trust assets for liability
and for all expenses reasonably incurred or paid or expected to be paid
by a Trustee or officer in connection with any claim, action, suit or
proceeding in which he becomes involved by virtue of his capacity or
former capacity with the Trust. The provisions, including any
exceptions and limitations concerning indemnification, may be set forth
in detail in the Bylaws or in a resolution of the Trustees."

Registrant hereby incorporates by reference, as though set forth fully
herein, Article VI of the Registrant's Bylaws, amended on March 9,
1998, appearing as Exhibit (b)(2) to Post-Effective Amendment No. 28.

Item 26. Business and Other Connections of Investment Advisor.

None.

Item 27. Principal Underwriters.

(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Investment Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
SoGen Funds, Inc.
SoGen Variable Funds, Inc.
St. Clair Funds, Inc.
TD Waterhouse Trust
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.

The Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. The Distributor is located at 60
State Street, Suite 1300, Boston, Massachusetts 02109. The Distributor
is an indirect wholly-owned subsidiary of Boston Institutional Group,
Inc., a holding company all of whose outstanding shares are owned by
key employees.

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

Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant

Marie E. Connolly Director, President and Chief none
Executive Officer

George A. Rio Executive Vice President President, Principal Executive
and Principal Financial Officer

Donald R. Roberson Executive Vice President none

William S. Nichols Executive Vice President none

Margaret W. Chambers Senior Vice President, none
General Counsel, Chief
Compliance Officer,
Secretary and Clerk

Joseph F. Tower, III Director, Senior Vice President, none
Treasurer and Chief Financial
Officer

Paula R. David Senior Vice President none

Gary S. MacDonald Senior Vice President none

Judith K. Benson Senior Vice President none

William J. Nutt Chairman and Director none
- --------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109

Item 28. Location of Accounts and Records.

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

Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this 1933 Post-Effective Amendment No. 29 and 1940 Act
Amendment No. 33 to its Registration Statement pursuant to Rule 485(b)
promogulated under the Securities Act of 1933, as amended, and has duly caused
this Post-Effective Amendment No. 29/Amendment No. 33 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Kansas City, and
State of Missouri, on the 29th day of December, 1999.

AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS

By: /*/George A. Rio
George A. Rio
President and Principal Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 28/Amendment No. 32 has been signed below by the following persons
in the capacities and on the dates indicated.

Date

* President, Principal Executive and December 29, 1999
- --------------------------------- Principal Financial Officer
George A. Rio

* Vice President and Treasurer December 29, 1999
- ---------------------------------
Maryanne Roepke

* Chairman of the Board and Trustee December 29, 1999
- ---------------------------------
James E. Stowers III

* Trustee December 29, 1999
- ---------------------------------
William M. Lyons

* Trustee December 29, 1999
- ---------------------------------
Albert A. Eisenstat

* Trustee December 29, 1999
- ---------------------------------
Ronald J. Gilson

* Trustee December 29, 1999
- ---------------------------------
Myron S. Scholes

* Trustee December 29, 1999
- ---------------------------------
Kenneth E. Scott

* Trustee December 29, 1999
- ---------------------------------
Isaac Stein

* Trustee December 29, 1999
- ---------------------------------
Jeanne D. Wohlers

/s/Charles A. Etherington
*by Charles A. Etherington, Attorney in Fact (pursuant to a Power of Attorney
dated December 18, 1998).

EX-99 2 EXHIBIT INDEX

EXHIBIT     DESCRIPTION

EX-99.a     Amended and Restated Agreement and Declaration of Trust dated March
            9, 1998 and amended March 1, 1999, is included herein.

EX-99.b     Amended and Restated Bylaws dated March 9, 1998 (filed as a part of
            Post-Effective Amendment No. 7 to the Registration Statement of
            American Century Investment Trust on May 13, 1998).

EX-99.d1    Investor Class Management Agreement between American Century
            California Tax-Free and Municipal Funds and American Century
            Investment Management, Inc., dated August 1, 1997 (filed as a part
            of Post-Effective Amendment No. 33 to the Registration Statement of
            American Century Government Income Trust on July 31, 1997).

EX-99.d2    Amendment No. 1 to the Investor Class Management Agreement between
            American Century California Tax-Free and Municipal Funds and
            American Century Investment Management, Inc., dated March 31, 1998
            (filed as a part of Post-Effective Amendment No. 23 to the
            Registration Statement of American Century Municipal Trust on March
            26, 1998).

EX-99.d3    Amendment No. 2 to the Investor Class Management Agreement between
            American Century California Tax-Free and Municipal Funds and
            American Century Investment Management, Inc., dated July 1, 1998
            (filed as a part of Post-Effective Amendment No. 39 to the
            Registration Statement of American Century Government Income Trust
            on July 28, 1999).

EX-99.e1    Distribution Agreement between American Century California Tax-Free
            and Municipal Funds and Funds Distributor, Inc. dated as of January
            15, 1998 (filed as a part of Post-Effective Amendment No. 33 to the
            Registration Statement of the American Century Target Maturities
            Trust filed on January 30, 1998).

EX-99.e2    Amendment No. 1 to the Distribution Agreement between American
            Century California Tax-Free and Municipal Funds and Funds
            Distributor, Inc. dated June 1, 1998 (filed as a part of
            Post-Effective Amendment No. 11 to the Registration Statement of
            American Century Capital Portfolios, Inc. filed on June 26, 1998).

EX-99.e3    Amendment No. 2 to the Distribution Agreement between American
            Century California Tax-Free and Municipal Funds and Funds
            Distributor, Inc. dated December 1, 1998 (filed as a part of
            Post-Effective Amendment No. 12 to the Registration Statement of
            American Century World Mutual Funds, Inc., File No. 33-39242, filed
            on November 13, 1998).

EX-99.e4    Amendment No. 3 to the Distribution Agreement between American
            Century California Tax-Free and Municipal Funds and Funds
            Distributor, Inc. dated January 29, 1999 (filed as a part of
            Post-Effective Amendment No. 24 to the Registration Statement of
            American Century Variable Portfolios, Inc., filed on January 15,
            1999).

EX-99.e5    Amendment No. 4 to the Distribution Agreement between American
            Century California Tax-Free and Municipal Funds and Funds
            Distributor, Inc. dated July 30, 1999 (filed as a part of
            Post-Effective Amendment No. 16 to the Registration Statement of
            American Century Capital Portfolios, Inc. on July 29, 1999).

EX-99.e6    Amendment No. 5 to the Distribution Agreement between American
            Century California Tax-Free and Municipal Funds and Funds
            Distributor, Inc. dated November 19, 1999 (filed as a part of
            Post-Effective Amendment No. 87 to the Registration Statement of
            American Century Mutual Funds, Inc. on November 29, 1999).

EX-99.g     Custodian Agreement between American Century California Tax-Free and
            Municipal Funds and The Chase Manhattan Bank, dated August 9, 1996,
            (filed as a part of Post-Effective Amendment No. 31 to the
            Registration Statement of American Century Government Income Trust
            filed on February 7, 1997).

EX-99.h1    Transfer Agency Agreement between American Century California
            Tax-Free and Municipal Funds and American Century Services
            Corporation, dated August 1, 1997, (filed as a part of
            Post-Effective Amendment No. 33 to the Registration Statement of
            American Century Government Income Trust on July 31, 1997).

EX-99.h2    Amendment to Transfer Agency Agreement between American Century
            California Tax-Free and Municipal Funds and American Century
            Services Corporation dated June 29, 1998 (filed as a part of
            Post-Effective Amendment No. 23 to the Registration Statement of
            American Century Quantitative Equity Funds on June 29, 1998).

EX-99.h3    Credit Agreement between American Century Funds and The Chase
            Manhattan Bank, as Administrative Agent, dated as of December 21,
            1999 is included herein.

EX-99.i     Opinion and consent of counsel (filed as a part of Post-Effective
            Amendment No. 28 of the Registration Statement of the Registrant on
            December 28, 1998).

EX-99.j1    Consent of PricewaterhouseCoopers LLP, independent accountants is
            included herein.

EX-99.j2    Consent of KPMG Peat Marwick, LLP, independent auditors (filed as a
            part of Post-Effective Amendment No. 28 of the Registration
            Statement of the Registrant on December 28, 1998).

EX-99.j3    Power of Attorney dated December 18, 1998 (filed as a part of
            Post-Effective Amendment No. 28 of the Registration Statement of the
            Registrant on December 28, 1998).

EX-99.A 3 AMENDED & RESTATED AGREEMENT/DECLARATION OF TRUST

                                      Amended and Restated Agreement and Declaration of Trust
                                                 as restated through March 9, 1998

                                                         Table of Contents

ARTICLE I Name and Definitions....................................................................................1
     Section 1.  Name.............................................................................................1
     Section 2.  Definitions......................................................................................1

ARTICLE II Purpose of Trust.......................................................................................2

ARTICLE III Shares................................................................................................2
     Section 1.  Division of Beneficial Interest..................................................................2
     Section 2.  Ownership of Shares..............................................................................2
     Section 3.  Investments in the Trust.........................................................................3
     Section 4.  Status of Shares and Limitation of Personal Liability............................................3
     Section 5.  Power of Trustees to Change Provisions Relating to Shares........................................3
     Section 6.  Establishment and Designation of Series..........................................................4
     Section 7.  Indemnification of Shareholders..................................................................6

ARTICLE IV The Trustees...........................................................................................6
     Section 1.  Number, Election and Tenure......................................................................6
     Section 2.  Effect of Death, Resignation, etc. of a Trustee..................................................7
     Section 3.  Powers...........................................................................................7
     Section 4.  Payment of Expenses by the Trust.................................................................9
     Section 5.  Payment of Expenses by Shareholders..............................................................9
     Section 6.  Ownership of Assets of the Trust................................................................10
     Section 7.  Service Contracts...............................................................................10

ARTICLE V Shareholders' Voting Powers and Meetings...............................................................11
     Section 1.  Voting Powers...................................................................................11
     Section 2.  Voting Power and Meetings.......................................................................11
     Section 3.  Quorum and Required Vote........................................................................12
     Section 4.  Action by Written Consent.......................................................................12
     Section 5.  Record Dates....................................................................................12
     Section 6.  Additional Provisions...........................................................................13

ARTICLE VI Net Asset Value, Distributions, and Redemptions.......................................................13
     Section 1.  Determination of Net Asset Value, Net Income, and Distributions.................................13
     Section 2.  Redemptions and Repurchases.....................................................................13
     Section 3.  Redemptions at the Option of the Trust..........................................................13

ARTICLE VII Compensation and Limitation of Liability of Trustees.................................................14
     Section 1.  Compensation....................................................................................14
     Section 2.  Limitation of Liability.........................................................................14
     Section 3.  Indemnification.................................................................................14

ARTICLE VIII Miscellaneous.......................................................................................14
     Section 1.  Trustees, Shareholders, etc. Not Personally Liable; Notice......................................14
     Section 2.  Trustee's Good Faith Action, Expert Advice, No Bond or Surety...................................15
     Section 3.  Liability of Third Persons Dealing with Trustees................................................15
     Section 4.  Termination of Trust or Series..................................................................15
     Section 5.  Merger and Consolidation........................................................................16
     Section 6.  Filing of Copies, References, Headings..........................................................16
     Section 7.  Applicable Law..................................................................................16
     Section 8.  Amendments......................................................................................16
     Section 9.  Trust Only......................................................................................16
     Section 10.  Use of the Name "Benham" and "American Century"................................................17

             Amended and Restated Agreement and Declaration of Trust
                       (as restated through March 9, 1998)

         AGREEMENT AND DECLARATION OF TRUST made at Palo Alto, California on the
18th day of February, 1993 and amended by the Trustees hereunder.

         WHEREAS the Trustees desire and have agreed to manage all property
coming into their hands as trustees of a Massachusetts business trust in
accordance with the provisions hereinafter set forth.

         NOW, THEREFORE, the Trustees hereby direct that this Agreement and
Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and do hereby declare that they will hold all cash, securities and
other assets, which they may form time to time acquire in any manner as Trustees
hereunder, IN TRUST, and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares in this Trust.


                                    ARTICLE I
                              Name and Definitions

Section 1.  Name
This Trust shall be known as the "American Century California Tax-Free and
Municipal Funds" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.


Section 2.  Definitions
Whenever used herein, unless otherwise required by the context or specifically
provided:

(a)      The "Trust" refers to the Massachusetts business trust established by
         this Agreement and Declaration of Trust, as amended from time to time;

(b)      "Trustees" refers to the Trustees of the Trust named in Article IV
         hereof or elected or appointed in accordance with such Article;

(c)      "Shares" means the equal proportionate units of interest into which the
         beneficial interest in the Trust property belonging to any Series of
         the Trust (as the context may require) shall be divided from time to
         time;

(d)      "Shareholder" means a record owner of Shares;

(e)      The "1940 Act" refers to the Investment Company Act of 1940 Act" refers
         to the Investment Company Act of 1940 and the Rules and Regulations
         thereunder, all as amended from time to time;

(f)      The term "Commission" shall mean the United States Securities and
         Exchange Commission;

(g)      "Declaration of Trust" shall mean this Agreement and Declaration of
         Trust, as amended or restated from time to time;

(h)      "Bylaws" shall mean the Bylaws of the Trust as amended from time to
         time;

(i)      "Series Company" refers to the form of registered open-end investment
         company described in Section 18(f)(2) of the 1940 Act or in any
         successor statutory provision; and

(j)      "Series" refers to each Series of Shares established and designated
         under or in accordance with the provisions of Article III. Present and
         future separate "Series" in the Trust may be referred to as
         "Portfolios" and these terms may be used alternatively in future
         publications and communications sent to investors.

(k)      "Class" shall have the meaning prescribed in the Multiple Class Plan
         dated August 1, 1997 as amended from time to time (the "Multiple Class
         Plan").


                                   ARTICLE II
                                Purpose of Trust
The purpose of the Trust is to provide investors a managed investment company
registered under the 1940 Act and investing one or more portfolios primarily in
securities and debt instruments.


                                   ARTICLE III
                                     Shares

Section 1.  Division of Beneficial Interest
The beneficial interest in the Trust shall at all times be divided into an
unlimited number of Shares, without par value. Subject to the provisions of
Section 6 of this Article III, each Share shall have voting rights as provided
in Article V hereof, and holders of the Shares of any Series shall be entitled
to receive dividends, when and as declared with respect thereto in the manner
provided in Article VI, Section 1 hereof. No Shares shall have any priority or
preference over any other Share of the same Series with respect to dividends or
distributions upon termination of the Trust or of such Series made pursuant to
Article VIII, Section 4 hereof. All dividends and distributions shall be made
ratably among all Shareholders of a particular Series from the assets belonging
to such Series according to the number of Shares of such Series held of record
by each Shareholder on the record date for any dividend or on the date of
termination, as the case my be. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust or any Series. The Trustees may from time to time divide or combine the
Shares of any particular Series into a greater or lesser number of Shares of
that Series without thereby changing the proportionate beneficial interest of
the Shares of that Series in the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.


Section 2.  Ownership of Shares
The ownership of Shares shall be recorded on the books of the Trust or a
transfer or similar agent for the Trust, which books shall be maintained
separately for the Shares of each Series. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the transfer of Shares of each Series and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar agent,
as the case may be, shall be conclusive as to who are the Shareholders of each
Series and as to the number of Shares of each Series held from time to time by
each.


Section 3.  Investments in the Trust
The Trustees may accept investments in the Trust from such persons, at such
times, and on such terms and for such consideration as they from time to time
authorize.


Section 4.  Status of Shares and Limitation of Personal Liability
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the existence of
the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but entitles
such representative only to the right of said deceased Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust property or right to call for a partition
or division of the same or for an accounting , nor shall the ownership of Shares
constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholders, nor, except as specifically provided herein, to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.


Section 5.  Power of Trustees to Change Provisions Relating to Shares
Notwithstanding any other provision of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to time, in such manner as the Trustees may
determine in their sole discretion, without the need for Shareholder action, so
as to add to, delete, replace or otherwise modify any provisions relating to the
Shares contained in this Declaration of Trust, provided that before adopting any
such amendment without Shareholder approval the Trustees shall determine that it
is consistent with the fair and equitable treatment of all Shareholders or that
Shareholder approval is not otherwise required by the 1940 Act or other
applicable law.

Without limiting the generality of the foregoing, the Trustees may, for the
above-stated purposes, amend the Declaration of Trust to:

(a)      create one or more Series of Shares (in addition to any Series already
         existing or otherwise) with such rights and preferences and such
         eligibility requirements for investment therein as the Trustees shall
         determine and reclassify any or all outstanding Shares as shares of
         particular Series in accordance with such eligibility requirements;

(b)      amend any of the provisions set forth in paragraphs (a) through (i) of
         Section 6 of this Article III;

(c)      combine one or more Series of Shares into a single Series on such terms
         and conditions as the Trustees shall determine;

(d)      change or eliminate any eligibility requirements for investment in
         Shares of any Series, including without limitation, to provide for the
         issue of Shares of any Series in connection with any merger or
         consolidation of the Trust with another trust or company or any
         acquisition by the Trust of part or all of the assets of another trust
         or investment company;

(e)      change the designation of any Series of Shares;

(f)      change the method of allocating dividends among the various Series of
         Shares;

(g)      allocate any specific assets or liabilities of the Trust or any
         specific items of income or expense of the Trust to one or more Series
         of Shares; and

(h)      specifically allocate assets to any or all Series of Shares or create
         one or more additional Series of Shares which are preferred over all
         other Series of Shares in respect of assets specifically allocated
         thereto or any dividends paid by the Trust with respect to any net
         income, however determined, earned from the investment and reinvestment
         of any assets so allocated or otherwise and provide for any special
         voting or other rights with respect to such Series.


Section 6.  Establishment and Designation of Series
The establishment and designation of any Series of Shares shall be effective
upon resolution by a majority of the then Trustees, setting forth such
establishment and designation and the relative rights and preferences of such
Series, or as otherwise provided in such resolution. Such establishment and
designation shall be set forth in an amendment to this Declaration of Trust by
execution of a new Schedule A to this Declaration of Trust.

Shares of each Series established pursuant to this Section 6, unless otherwise
provided in the resolution establishing such Series or as modified by the
Multiple Class Plan, shall have the following rights and preferences:

(a)      Assets Belonging to Series. All consideration received by the Trust for
         the issue or sale of Shares of a particular Series, together with all
         assets in which such consideration is invested or reinvested, all
         income, earnings, profits, and proceeds thereof from whatever source
         derived, including, without limitation, any proceeds derived from the
         sale, exchange or liquidation of such assets, and any funds or payments
         derived from any reinvestment of such proceeds in whatever form the
         same may be, shall irrevocably belong to that Series for all purposes,
         subject only to the rights of creditors, shall be so recorded upon the
         books of account of the Trust, and are herein referred to as "assets
         belonging to" that Series. In the event that there are any assets,
         income, earnings, profits and proceeds thereof, funds or payments which
         are not readily identifiable as belonging to any particular Series
         (collectively "General Assets"), the Trustees shall allocate such
         General Assets to, between or among any one or more of the Series in
         such manner and on such basis as they, in their sole discretion, deem
         fair and equitable, and any General Assets to, between or among any one
         or more of the Series in such manner and on such basis as they, in
         their sole discretion, deem fair and equitable, and any General Asset
         so allocated to a particular Series shall belong to that Series. Each
         such allocation by the Trustees shall be conclusive and binding upon
         the Shareholders of all Series for all purposes.

(b)      Liabilities Belonging to Series. The assets belonging to each
         particular Series shall be charged with the liabilities of the Trust in
         respect to that Series and all expenses, costs, charges and reserves
         attributable to that Series, and any general liabilities of the Trust
         which are not readily identifiable as belonging to any particular
         Series shall be allocated and charged by the Trustees to and among any
         one or more of the Series in such manner and on such basis as the
         Trustees in their sole discretion deem fair and equitable. The
         liabilities, expenses, costs, charges, and reserves so charged to a
         Series are herein referred to as "liabilities belonging to" that
         Series. Each allocation of liabilities, expenses, costs, charges and
         reserves by the Trustee shall be conclusive and binding upon the
         holders of all Series for all purposes. Under no circumstances shall
         the assets allocated or belonging to any particular Series be charged
         with liabilities attributable to any other Series. All persons who have
         extended credit which has been allocated to particular Series, or who
         have a claim or contract which has been allocated to any particular
         Series, shall look only to the assets of that particular Series for
         payment of such credit, claim, or contract.

(c)      Income, Distributions, and Redemptions. The Trustees shall have full
         discretion, to the extent not inconsistent with the 1940 Act, to
         determine which items shall be treated as income and which items as
         capital; and each such determination and allocation shall be conclusive
         and binding upon the Shareholders. Notwithstanding any other provision
         of this Declaration, including, without limitation, Article VI, no
         dividend or distribution (including, without limitation, Article VI,
         any distribution paid upon termination of the Trust or of any Series)
         with respect to, nor any redemption or repurchase of, the Shares of any
         Series shall be effected by the Trust other than from the assets
         belonging to such Series, nor, except as specifically provided in
         Section 7 of this Article III, shall any Shareholder of any particular
         Series otherwise have any right or claim against the assets belonging
         to any other Series except to the extent that such Shareholder has such
         a right or claim hereunder as a Shareholder of such other Series.

(d)      Voting. All Shares of the Trust entitled to vote on a matter shall vote
         separately by Series. That is, the Shareholders of each Series shall
         have the right to approve or disapprove matters affecting the Trust and
         each respective Series as if the Series were separate companies. There
         are, however, two exceptions to voting by separate Series. First, if
         the 1940 Act requires all Shares of the Trust to be voted in the
         aggregate without differentiation between the separate Series, then all
         Series shall vote together. Second, if any matter affects only the
         interests of some but not all Series, then only such affected Series
         shall be entitled to vote on the matter.

(e)      Equality. All the Shares of each particular Series shall represent an
         equal proportionate interest in the assets belonging to that Series
         (subject to the liabilities belonging to that Series), and each Share
         of any particular Series shall be equal to each other Share of that
         Series.

(f)      Fractions. Any fractional Share of a Series shall carry proportionately
         all the rights and obligations of a whole share of that Series,
         including rights with respect to voting, receipt of dividends and
         distributions, redemption of Shares and termination of the Trust.

(g)      Exchange Privilege. The Trustees shall have the authority to provide
         that the holders of Shares of any Series shall have the right to
         exchange said Shares for Shares of one or more other Series of Shares
         in accordance with such requirements and procedures as may be
         established by the Trustees.

(h)      Combination of Series. The Trustees shall have the authority, without
         the approval of the Shareholders of any Series unless otherwise
         required by applicable law, to combine the assets and liabilities
         belonging to any two or more Series into assets and liabilities
         belonging to a single Series.

(i)      Elimination of Series. At any time that there are no Shares outstanding
         of any particular Series previously established and designated, the
         Trustees may amend this Declaration of Trust to abolish that Series and
         to rescind the establishment and designation thereof, such amendment to
         be effected in the manner provided pursuant to Section 5 of this
         Article III.


Section 7.  Indemnification of Shareholders
In case any Shareholder or former Shareholder shall be held to be personally
liable solely by reason of his or her being or having been a Shareholder and not
because of his or her acts or omissions or for some other reasons, the
Shareholder or former Shareholder (or his or her heirs, executors,
administrators, or other legal representatives or in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets of the Trust to be held harmless from and indemnified against all
loss and expense arising from such liability.


                                   ARTICLE IV
                                  The Trustees

Section 1.  Number, Election and Tenure
The number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by a majority of the Trustees, provided, however,
that the number of Trustees shall in no event be less than three nor more than
15. The Trustees may by vote of a majority of the remaining Trustees fill
vacancies in the Trustees or remove Trustees with or without cause by vote of a
majority of the Trustees who are "non-interested" persons (as defined in the
1940 Act) if the Trustee to be removed is a "non-interested" Trustee, or by vote
of the Trustees who are "interested persons" if the Trustee to be removed is an
"interested" Trustee. Each Trustee shall serve during the continued lifetime of
the Trust until he dies, resigns or is removed, or, if sooner, until the next
meeting of Shareholders called for the purpose of electing Trustees and until
the election and qualification of his successor, except, that Trustees who are
not "interested persons" or employees of American Century Companies, Inc. and
its affiliates shall retire at the end of the calendar year in which they shall
have reached the age of seventy-five (75) years. Any Trustee may resign at any
time by written instrument signed by him and delivered to any officer of the
Trust or to a meeting of the Trustees. Such resignation shall be effective upon
receipt unless specified to be effective at some other time. Except to the
extent expressly provided in a written agreement with the Trust, no Trustee
resigning and no Trustee removed shall have any right to any compensation for
any period following his resignation or removal, or any right to damages on
account of such removal. The Shareholders may fix the number of Trustees and
elect Trustees at any meeting of Shareholders called by the Trustees for that
purpose.


Section 2.  Effect of Death, Resignation, etc. of a Trustee
The death, declination, resignation, retirement, removal, or incapacity of the
Trustees, or any of them, shall not operate to annual the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided in Article IV, Section 1 the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of such vacancy. In the
event of the death, declination, resignation, retirement, removal, or incapacity
of all the then Trustees within a short period of time and without the
opportunity for at least one disinterested Trustee being able to appoint
additional Trustees to fill vacancies, the Trust's investment advisor or
investment advisors jointly, if there is more than one, are empowered to appoint
new Trustees.


Section 3.  Powers
Subject to the provisions of this Declaration of Trust, the business of the
Trust shall be managed by the Trustees, and they shall have all powers necessary
or convenient to carry out that responsibility including the power to engage in
securities transactions of all kinds on behalf of the Trust. Without limiting
the foregoing, the Trustees may adopt Bylaws not inconsistent with this
Declaration of Trust providing for the regulation and management of the affairs
of the Trust any may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders; they may fill vacancies in or reduce the
number of Trustees, 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 Trustees which may exercise the powers and authority of the Trustees to
the extent that the Trustees determine; they may employ one or more custodians
of the assets of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a system or
systems for the central handling of securities or with a Federal Reserve Bank,
retain a transfer agent or a shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian, transfer or Shareholder servicing agent, or principal
underwriter. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration of Trust, the presumption shall be in favor of a grant of
power to the Trustees.

Without limiting the foregoing, the Trustees shall have power and authority:

(a)      to invest and reinvest cash, to hold cast uninvested, and to subscribe
         for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
         pledge, sell, assign, transfer, exchange, distribute, lend or otherwise
         deal in or dispose of contracts for the future acquisition or delivery
         of fixed income or other securities, and securities of every nature and
         kind, including without limitation, all types of bonds, debentures,
         stocks, negotiable or non-negotiable instruments, obligations,
         evidences of indebtedness, certificates of deposit or indebtedness,
         commercial paper, repurchase agreements, bankers acceptances, and other
         securities of any kind, issued, created, guaranteed, or sponsored by
         any and all persons, including, without limitation, states,
         territories, and possessions of the United States and the District of
         Columbia and any political subdivision, agency, or instrumentality of
         the U.S. Government, any foreign government or any political
         subdivision of the U.S. Government or any foreign government, or any
         international instrumentality, or by any bank or savings institution,
         or by any corporation or organization organized under the laws of the
         United States or of any state, territory, or possession thereof, or by
         any corporation or organization organized under any foreign law, or in
         "when issued" contracts for any such securities, to change the
         investments of the assets of the Trust; and to exercise any and all
         rights, powers and privileges of ownership or interest in respect of
         any and all such investments of every kind and description, including,
         without limitation, the right to consent and otherwise act with respect
         thereto, with power to designate one or more persons, firms,
         associations, or corporations to exercise any of said rights, powers,
         and privileges in respect of any of said instruments;

(b)      to sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write
         options with respect to or otherwise deal in any property rights
         relating to any or all of the assets of the Trust;

(c)      to vote or give assent, or exercise any rights of ownership, with
         respect to stock or other securities or property; and to execute and
         deliver proxies or powers of attorney to such person or persons as the
         Trustees shall deem proper, granting to such person or persons such
         power and discretion with relation to securities or property as the
         Trustees shall deem proper;

(d)      to exercise powers and rights of subscription or otherwise which in any
         manner arise out of ownership of securities;

(e)      to hold any security or property in a form not indicating any trust,
         whether in bearer, unregistered or other negotiable form, or in its own
         name or in the name of a custodian or subcustodian or a nominee or
         nominees or otherwise;

(f)      to consent to or participate in any plan for the reorganization,
         consolidation or merger of any corporation or issuer of any security
         which is held in the Trust; to consent to any contract, lease,
         mortgage, purchase or sale of property by such corporation or issuer;
         and to pay calls or subscriptions with respect to any security held in
         the Trust;

(g)      to join with other security holders in acting through a committee,
         depositary, voting trustee or otherwise, and in that connection to
         deposit any security with, or transfer any security to, any such
         committee, depositary or trustee, and to delegate to them such power
         and authority with relation to any security (whether or not so
         deposited or transferred) as the Trustees shall deem proper, and to
         agree to pay, and to pay, such portion of the expenses and compensation
         of such committee, depositary or trustee as the Trustees shall deem
         proper;

(h)      to compromise, arbitrate or otherwise adjust claims in favor of or
         against the Trust or any matter in controversy, including but not
         limited to claims for taxes;

(i)      to enter into joint ventures, general or limited partnerships and any
         other combinations or associations;

(j)      to borrow funds or other property;

(k)      to endorse or guarantee the payment of any notes or other obligations
         of any person; to make contracts of guaranty or suretyship, or
         otherwise assume liability for payment thereof;

(l)      to purchase and pay for entirely out of Trust property such insurance
         as they may deem necessary or appropriate for the conduct of the
         business, including, without limitation, insurance policies insuring
         the assets of the Trust or payment of distributions and principal on
         its portfolio investments, and insurance policies insuring the
         Shareholders, Trustees, officers, employees, agents, investment
         advisors, principal underwriters, or independent contractors of the
         Trust, individually against all claims and liabilities of every nature
         arising by reason of holding, being or having held any such office or
         position, or by reason of any action alleged to have been taken or
         omitted by any such person as Trustee, officer, employee, agent,
         investment advisor, principal underwriter, or independent contractor,
         including any action taken or omitted that may be determined to
         constitute negligence, whether or not the Trust would have the power to
         indemnify such person against liability; and

(m)      to pay pensions as deemed appropriate by the Trustees and to adopt,
         establish and carry out pension, profit-sharing, share bonus, share
         purchase, savings, thrift and other retirement, incentive and benefit
         plans, trusts and provisions, including the purchasing of life
         insurance and annuity contracts as a means of providing such retirement
         and other benefits, for any or all of the Trustees, officers, employees
         and agents of the Trust.

The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust. The Trustees shall not in any way be
bound or limited by any present or future law or custom in regard to investment
by fiduciaries. The Trustees shall not be required to obtain any court order to
deal with any assets of the Trust or take any other action hereunder.


Section 4.  Payment of Expenses by the Trust
The Trustees are authorized to pay or cause to be paid out of the principal or
income of the Trust, or partly out of the principal and partly out of income, as
they deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment advisor or manager, principal underwriter, auditors, counsel,
custodian, transfer agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.


Section 5.  Payment of Expenses by Shareholders
The Trustees shall have the power, as frequently as they may determine, to cause
each Shareholder, or each Shareholder of any particular Series, to pay directly,
in advance or arrears, for charges of the Trust's custodian or transfer,
Shareholder servicing or similar agent, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.


Section 6.  Ownership of Assets of the Trust
Title to all of the assets of the Trust shall at all times be considered as
vested in the Trustees.


Section 7.  Service Contracts
(a)      Subject to such requirements and restrictions as may be set forth in
         the Bylaws, the Trustees may, at any time and from time to time,
         contract for exclusive or nonexclusive advisory and/or management
         services for the Trust or for any Series with American Century
         Investment Management, Inc. or any other corporation, trust,
         association or other organization (the "Advisor"); and any such
         contract may contain such other terms as the Trustees may determine,
         including without limitation, authority for the Advisor to determine
         from time to time without prior consultation with the Trustees what
         investments shall be purchased, held, sold or exchanged and what
         portion, if any, of the assets of the Trust shall be held uninvested
         and to make changes in the Trust's investments.

(b)      The Trustees may also, at any time and from time to time, contract with
         any corporation, trust, association, or other organization, appointing
         it exclusive or nonexclusive distributor or principal underwriter for
         the Shares of any, some, or all of the Series. Every such contract
         shall comply with such requirements and restrictions as may be set
         forth in the Bylaws; and any such contract may contain such other terms
         as the Trustees may determine.

(c)      The Trustees are also empowered, at any time and from time to time, to
         contract with any corporations, trust, associations, or other
         organizations, appointing it or them the transfer agent(s) and/or
         shareholders servicing agent(s) for the Trust or one or more of the
         Series. Specifically, the Trustees are empowered to contract or join
         with other investment companies managed by the Trust's investment
         advisor to have transfer agency and/or shareholder servicing activities
         performed jointly by such investment companies and their employees with
         an appropriate allocation between the investment companies of the costs
         and expenses of providing such services. Every such contract shall
         comply with such requirements and restrictions as may be set forth in
         the Bylaws or stipulated by resolution of the Trustees.

(d)      The fact that:

         (i)      any of the Shareholders, Trustees, or officers of the Trust is
                  a shareholder, director, officer, partner, trustee, employee,
                  manager, advisor, principal underwriter, distributor or
                  affiliate or agent of or for any corporation, trust,
                  association, or other organization, or for any parent or
                  affiliate of any organization with which an advisory or
                  management contract, or principal underwriter's or
                  distributor's contract, or transfer, Shareholder servicing or
                  other agency contract may have been or may hereafter be made,
                  or that any such organization, or any parent or affiliate
                  thereof, is a Shareholder or has an interest in the Trust, or
                  that

         (ii)     any corporation, trust, association or other organization with
                  which an advisory or management contract or principal
                  underwriter's or distributor's contract, or transfer,
                  Shareholder servicing or other agency contract may have been
                  or may hereafter be made also has an advisory or management
                  contract, or principal underwriter's or distributor's
                  contract, or transfer, shareholder servicing or other agency
                  contract with one or more other corporations, trusts,
                  associations, or other organizations, or has other business or
                  interests, shall not affect the validity of any such contract
                  or disqualify any Shareholder, Trustee or officer of the Trust
                  from voting upon or executing the same or create any liability
                  or accountability to the Trust or its Shareholders.


                                    ARTICLE V
                    Shareholders' Voting Powers and Meetings

Section 1.  Voting Powers
Subject to the provisions of Article III, Section 6(d), the Shareholders shall
have power to vote only (i) for the election of Trustees as provided in Article
IV, Section 1, (ii) to the same extent as the stockholders of a California
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders, (iii) with respect to the
termination of the Trust or any Series to the extent and as provided in Article
VIII, Section 4, and (iv) with respect to such additional matters relating to
the Trust as may be required by this Declaration of Trust, the Bylaws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. A Shareholder of
each Series shall be entitled to one vote for each dollar of net asset value per
Share of such Series, on any matter on which such Shareholder is entitled to
vote and each fractional dollar amount shall be entitled to a proportionate
fractional vote. All references in this Declaration of Trust or the Bylaws to a
vote of, or the holders of, a percentage of Shares shall mean a vote of or the
holders of that percentage of total votes representing dollars of net asset
value of a Series or of the Trust, as the case may be. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. At any time when no
Shares of a Series are outstanding, the Trustees may exercise all rights of
Shareholders of that Series with respect to matters affecting that Series, take
any action required by law, this Declaration of Trust or the Bylaws to be taken
by the Shareholders.


Section 2.  Voting Power and Meetings
Meetings of the Shareholders may be called by the Trustees for the purpose of
electing Trustees as provided in Article IV, Section 1 and for such other
purposes as may be prescribed by law, by this Declaration of Trust or by the
Bylaws. Meetings of the Shareholders may also be called by the Trustees from
time to time for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of Shareholders may be held
at any place designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days before such meeting, postage prepaid, stating
the time and place of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. Whenever notice of a meeting
is required to be given to a Shareholder under this Declaration of Trust or the
Bylaws, a written waiver thereof, executed before or after the meeting by such
Shareholder or his attorney thereunto authorized and filed with the records of
the meeting, shall be deemed equivalent to such notice.


Section 3.  Quorum and Required Vote
Except when a larger quorum is required by applicable law, by the Bylaws or by
this Declaration of Trust, forty percent (40%) of the Shares entitled to vote
shall constitute a quorum at a Shareholders' meeting. When any one or more
Series is to vote as a single class separate from any other Shares which are to
vote on the same matters as a separate class or classes, forty percent (40%) of
the Shares of each such Series entitled to vote shall constitute a quorum at a
Shareholders' meeting of that Series. Any meeting of Shareholders may be
adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original meeting
without further notice. Subject to the provisions of Article III, Section 6(d),
when a quorum is present at any meeting, a majority of the Shares voted shall
decide any questions and a plurality shall elect a Trustee, except when a larger
vote is required by any provision of this Declaration of Trust or the Bylaws or
by applicable law.


Section 4.  Action by Written Consent
Any action taken by Shareholders may be taken without a meeting if Shareholders
holding a majority of the Shares entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or by the Bylaws) and holding a majority (or such larger
proportion as aforesaid) of the Shares of any Series entitled to vote separately
on the matter consent to the action in writing and such written consents are
filed with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.


Section 5.  Record Dates
For the purpose of determining the Shareholders of any Series who are entitled
to vote or act at any meeting or any adjournment thereof, the Trustees may from
time to time fix a time, which shall be not more than 75 days before the date of
any meeting of Shareholders, as the record date for determining the Shareholders
of such Series having the right to notice of and to vote at such meeting and any
adjournment thereof, and in such case only Shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date. For the purpose of determining the
Shareholders of any Series who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time fix a date,
which shall be before the date for the payment of such dividend or such other
payment, as the record date for determining the Shareholders of such Series
having the right to receive such dividend or distribution. Without fixing a
record date the Trustees may for voting and/or distribution purposes close the
register or transfer books for one or more Series for all or any part of the
period between a record date and a meeting of Shareholders or the payment of a
distribution. Nothing in this section shall be construed as precluding the
Trustees from setting different record dates for different Series.


Section 6.  Additional Provisions
The Bylaws may include further provisions for Shareholders' votes and meetings
and related matters.


                                   ARTICLE VI
                 Net Asset Value, Distributions, and Redemptions

Section 1.  Determination of Net Asset Value, Net Income, and Distributions
Subject to Article III, Section 6 hereof, the Trustees, in their absolute
discretion, may prescribe and shall set forth in the Bylaws or in a duly adopted
resolution of the Shares of any Series or net income attributable to the Shares
of any Series, or the declaration and payment of dividends and distributions on
the Shares of any Series, as they may deem necessary or desirable.


Section 2.  Redemptions and Repurchases
The Trust shall purchase such Shares as are offered by any Shareholder for
redemption, upon the presentation of a proper instrument of transfer together
with a request directed to the Trust or a person designated by the Trust that
the Trust purchase such Shares or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and the Trust will
pay therefor the net asset value thereof, as determined in accordance with the
Bylaws and applicable law, next determined under the 1940 Act. Payment for said
Shares shall be made by the Trust to the Shareholder within seven days after the
date on which the request is made in proper form. The obligation set forth in
this Section 2 is subject to the provision that in the event that any time the
New York Stock Exchange is closed for other than weekends or holidays, or if
permitted by the rules of the Commission, during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets belonging to such Series or during any other
period permitted by order of the Commission for the protection of investors,
such obligation may be suspended or postponed by the Trustees.


Section 3.  Redemptions at the Option of the Trust
The Trust shall have the right at its option and at any time to redeem Shares of
any Shareholder at the net asset value thereof as described in Section 1 of this
Article VI: (i) if at such time such Shareholder owns Shares of any Series
having an aggregate net asset value of less than an amount, not to exceed
$1,000, determined from time to time by the Trustees; or (ii) to the extent that
such Shareholder owns Shares equal to or in excess of a percentage determined
from time to time by the Trustees of the outstanding Shares of the Trust or of
any Series.


                                   ARTICLE VII
              Compensation and Limitation of Liability of Trustees

Section 1.  Compensation
The non-interested Trustees as such shall be entitled to reasonable compensation
from the Trust, and they may fix the amount of such compensation. Nothing herein
shall in any way prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and payment for the same
by the Trust.


Section 2.  Limitation of Liability
The Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, manager or Principal Underwriter of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee, but nothing herein contained shall protect any Trustee against
any liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

Every note, bond, contract, instrument, certificate or undertaking and every
other act or thing whatsoever issued, executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.


Section 3.  Indemnification
The Trustees shall be entitled and empowered to the fullest extent permitted by
law to purchase insurance for and to provide by resolution or in the Bylaws for
indemnification out of Trust assets for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in which he becomes
involved by virtue of his capacity or former capacity with the Trust. The
provisions, including any exceptions and limitations concerning indemnification,
may be set forth in detail in the Bylaws or in a resolution of the Trustees.


                                  ARTICLE VIII
                                  Miscellaneous

Section 1.  Trustees, Shareholders, etc. Not Personally Liable; Notice
All persons extending credit to, contracting with or having any claim against
the Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason or
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.

Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Trustees, by an officer or officers or
otherwise may include a notice that this Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts and may recite that the note,
bond, contract, instrument, certificate, or undertaking was executed or made by
or on behalf of the Trust or by them as Trustee or Trustees or as officer or
officers or otherwise and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust or upon the assets
belonging to the Series for the benefit of which the Trustees have caused the
note, bond, contract instrument, certificate or undertaking to be made or
issued, and may contain such further recital as he or they may deem appropriate,
but the omission of any such recital shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholders or any other person
individually.


Section 2.  Trustee's Good Faith Action, Expert Advice, No Bond or Surety
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.


Section 3.  Liability of Third Persons Dealing with Trustees
No person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees or
to see to the application of any payments made or property transferred to the
Trust or upon its order.


Section 4.  Termination of Trust or Series
Unless terminated as provided herein, the Trust shall continue without
limitation of time. The Trust may be terminated at any time by vote of at least
two-thirds (66-2/3%) of the Shares of each Series entitled to vote, voting
separately by Series, or by the Trustees by written notice to the Shareholders.
Any Series may be terminated at any time by vote of at least two-thirds
(66-2/3%) of the Shares of that Series or by the Trustees by written notice to
the Shareholders of that Series.

Upon termination of the Trust (or any Series, as the case may be), after paying
or otherwise providing for all charges, taxes, expenses and liabilities
belonging, severally, to each Series (or the applicable Series, as the case may
be), whether due or accrued or anticipated as may be determined by the Trustees,
the Trust shall, in accordance with such procedures as the Trustees consider
appropriate, reduce the remaining assets belonging, severally, to each Series
(or the applicable Series, as the case may be), to distributable form in cash or
shares or other securities, or any combination thereof, and distribute the
proceeds belonging to each Series or the applicable Series, as the case may be),
to the Shareholders of that Series, as a Series, ratably according to the number
of Shares of that Series held by the several Shareholders on the date of
termination.


Section 5.  Merger and Consolidation
The Trustees may cause the Trust or one or more of its Series to be merged into
or consolidated with another Trust or company or the Shares exchanged under or
pursuant to any state or Federal statute, if any, or otherwise to the extent
permitted by law. Such merger or consolidation or share exchange must be
authorized by vote of a majority of the outstanding Shares of the Trust as a
whole or any affected Series, as may be applicable; provided that in all
respects not governed by statute or applicable law, the Trustees shall have
power to prescribe the procedure necessary or appropriate to accomplish a sale
of assets, merger or consolidation.


Section 6.  Filing of Copies, References, Headings
The original or a copy of this instrument and of each amendment hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be filed by the Trust
with the Secretary of the Commonwealth of Massachusetts and with any other
governmental office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may relay on a copy certified by an officer of the Trust to be a copy
of this instrument, or of any such amendments. In this instrument and in any
such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.


Section 7.  Applicable Law
This Agreement and Declaration of Trust is created under and is to be governed
by and construed and administered according to the laws of the Commonwealth of
Massachusetts. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.


Section 8.  Amendments
This Declaration of Trust may be amended at any time by an instrument in writing
signed by a majority of the then Trustees.


Section 9.  Trust Only
It is the intention of the Trustees to create only the relationship of Trustee
and beneficiary between the Trustees and each Shareholder from time to time. It
is not the intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, or any form of
legal relationship other than a trust. Nothing in this Agreement and Declaration
of Trust shall be construed to make the Shareholders, either by themselves or
with the Trustees, partners or members of a joint stock association.


Section 10.  Use of the Name "Benham" and "American Century"
American Century Services Corporation ("ACSC") has consented to the use by the
Trust of the identifying words or names "Benham" and "American Century" in the
names of the Trust and/or its various Series. Such consent is conditioned upon
the employment of ACSC, its successors or any affiliate thereof, as the
Advisor/Investment Manager of the Trust. As between the Trust and itself, ACSC
controls the use of the name of the Trust insofar as such name contains "Benham"
and/or "American Century". The name or identifying words "Benham" and/or
"American Century" may be used from time to time in other connections and for
other purposes by ACSC or its affiliated entities. ACSC may require the Trust to
cease using "Benham" or "American Century" in the name of the Trust if the Trust
ceases to employ, for any reason, ACSC, an affiliate, or any successor as
Advisor/Investment Manager of the Trust.


         IN WITNESS WHEREOF, a majority of the Trustees as aforesaid do hereto
set their hands this 9th day of March, 1998, as an amendment and restatement of
that Agreement and Declaration of Trust originally executed on the 18th day of
February, 1993.


Trustees of the American Century California Tax-Free and Municipal Funds



                                          3/9/98                                                       3/9/98
Albert A. Eisenstat                       Date               Kenneth E. Scott                          Date



                                          3/9/98                                                       3/9/98
Ronald J. Gilson                          Date               Isaac Stein                               Date



                                          3/9/98                                                       3/9/98
William M. Lyons                          Date               James E. Stowers III                      Date



                                          3/9/98                                                       3/9/98
Myron S. Scholes                          Date               Jeanne D. Wohlers                         Date

             Amended and Restated Agreement and Declaration of Trust
                         (restated as of March 9, 1998)

                                   Schedule A

Pursuant to Article III, Section 6, the Trustees hereby establish and designate
the following Series as Series of the Trust (and the Classes thereof) with the
relative rights and preferences as described in Section 6:

- -------------------------------------------------- ------------ ----------------
                                                                     Date of
Series                                             Class          Establishment
- -------------------------------------------------- ------------ ----------------
- -------------------------------------------------- ------------ ----------------
California Tax-Free Money Market Fund              Investor         11/9/1983
- -------------------------------------------------- ------------ ----------------
California Municipal Money Market Fund             Investor         12/31/1990
- -------------------------------------------------- ------------ ----------------
California Limited-Term Tax-Free Fund              Investor          6/1/1992
- -------------------------------------------------- ------------ ----------------
California Intermediate-Term Tax-Free Fund         Investor         11/9/1983
- -------------------------------------------------- ------------ ----------------
California Long-Term Tax-Free Fund                 Investor         11/9/1983
- -------------------------------------------------- ------------ ----------------
California Insured Tax-Free Fund                   Investor         12/30/1986
- -------------------------------------------------- ------------ ----------------
California High-Yield Municipal Fund               Investor         12/30/1986
- -------------------------------------------------- ------------ ----------------

This Schedule A shall supersede any previously adopted Schedule A to the
Declaration of Trust.


Trustees of the American Century California Tax-Free and Municipal Funds



                                          3/1/99                                                 3/1/99
Albert A. Eisenstat                       Date         Kenneth E. Scott                          Date



                                          3/1/99                                                 3/1/99
Ronald J. Gilson                          Date         Isaac Stein                               Date



                                          3/1/99                                                 3/1/99
William M. Lyons                          Date         James E. Stowers III                      Date



                                          3/1/99                                                 3/1/99
Myron S. Scholes                          Date         Jeanne D. Wohlers                         Date



*By                                       Date: March 1, 1999
    Charles C.S. Park, Esq.
    Pursuant to Power of Attorney dated December 18, 1998

EX-99.H3 4 CREDIT AGREEMENT

 ******************************************************************************

                                CREDIT AGREEMENT


                          Dated as of December 21, 1999


                                      among


                             AMERICAN CENTURY FUNDS,


                            The Lenders Party Hereto


                                       and


                            THE CHASE MANHATTAN BANK,
                             as Administrative Agent





                             CHASE SECURITIES, INC.,
                        as Lead Arranger and Book Manager




 ******************************************************************************

                                TABLE OF CONTENTS

                                                                                                               Page


Section 1. Definitions and Accounting Matters.....................................................................1

         Section 1.1  Certain Defined Terms.......................................................................1
         Section 1.2  Accounting Terms and Determinations.........................................................7

Section 2. Commitments, Loans, Notes and Prepayments..............................................................7

         Section 2.1  Loans.......................................................................................7
         Section 2.2  Procedure for Borrowings....................................................................7
         Section 2.3  Changes of Commitments......................................................................7
         Section 2.4  Commitment Fee..............................................................................8
         Section 2.5  Lending Offices.............................................................................8
         Section 2.6  Several Obligations; Remedies Independent...................................................8
         Section 2.7  Notes.......................................................................................8
         Section 2.8  Optional Prepayments........................................................................9
         Section 2.9  Mandatory Prepayments.......................................................................9
         Section 2.10 Extension of Commitment Termination Date....................................................9
         Section 2.11 Designation of Additional Borrower; Amendments to Schedule I...............................10
         Section 2.12 Swing Line Commitment......................................................................11
         Section 2.13 Procedure for Swing Line Borrowing.........................................................11
         Section 2.14 Refunding of Swing Line Loans..............................................................12

Section 3. Payments of Principal and Interest....................................................................13

         Section 3.1  Repayment of Loans.........................................................................13
         Section 3.2  Interest...................................................................................13

Section 4. Payments; Pro Rata Treatment; Computations; Etc.......................................................14

         Section 4.1  Payments...................................................................................14
         Section 4.2  Pro Rata Treatment.........................................................................15
         Section 4.3  Computations...............................................................................15
         Section 4.4  Minimum Amounts............................................................................15
         Section 4.5  Certain Notices............................................................................16
         Section 4.6  Non-Receipt of Funds by the Administrative Agent...........................................16
         Section 4.7  Sharing of Payments, Etc...................................................................17
         Section 4.8  Requirements of Law........................................................................18

Section 5. U.S. Taxes............................................................................................19


Section 6. Conditions Precedent..................................................................................21

         Section 6.1  Initial Loan...............................................................................21
         Section 6.2  Initial and Subsequent Loans...............................................................22

Section 7. Representations and Warranties........................................................................22

         Section 7.1  Corporate Existence; Compliance with Law...................................................23
         Section 7.2  Investment Company.........................................................................23
         Section 7.3  Permission to Borrow.......................................................................23
         Section 7.4  Financial Condition........................................................................23
         Section 7.5  Litigation.................................................................................24
         Section 7.6  No Default.................................................................................24
         Section 7.7  No Breach..................................................................................24
         Section 7.8  Action.....................................................................................24
         Section 7.9  Approvals..................................................................................24
         Section 7.10 Use of Credit..............................................................................24
         Section 7.11 ERISA......................................................................................24
         Section 7.12 Taxes......................................................................................25
         Section 7.13 True and Complete Disclosure...............................................................25
         Section 7.14 Accuracy of Information....................................................................25
         Section 7.15 Indebtedness...............................................................................25
         Section 7.16 Property and Liens.........................................................................25
         Section 7.17 Blue Sky Registrations.....................................................................25
         Section 7.18 Federal Regulations........................................................................26
         Section 7.19 Apportionment Among Funds..................................................................26
         Section 7.20 No Material Adverse Change.................................................................26
         Section 7.21 Year 2000..................................................................................26

Section 8. Covenants of the Funds................................................................................26

         Section 8.1  Financial Statements.......................................................................27
         Section 8.2  Certificates; Other Information............................................................27
         Section 8.3  Notices....................................................................................28
         Section 8.4  Existence, Etc.............................................................................29
         Section 8.5  Use of Proceeds............................................................................30
         Section 8.6  Insurance..................................................................................30
         Section 8.7  Prohibition of Fundamental Changes.........................................................30
         Section 8.8  Limitations on Liens.......................................................................31
         Section 8.9  Indebtedness...............................................................................32
         Section 8.10 Dividend Payments..........................................................................32
         Section 8.11 Asset Coverage; Borrowing Limits...........................................................32
         Section 8.12 Lines of Business..........................................................................32
         Section 8.13 Modifications of Certain Documents.........................................................32

Section 9. Events of Default.....................................................................................32


Section 10. The Administrative Agent.............................................................................35

         Section 10.1 Appointment, Powers and Immunities.........................................................35
         Section 10.2 Reliance by Administrative Agent...........................................................36
         Section 10.3 Defaults...................................................................................36
         Section 10.4 Rights as a Bank...........................................................................37
         Section 10.5 Indemnification............................................................................37
         Section 10.6 Non-Reliance on Administrative Agents and Other Banks......................................37
         Section 10.7 Failure to Act.............................................................................38
         Section 10.8 Resignation or Removal of Administrative Agent.............................................38

Section 11. Miscellaneous........................................................................................38

         Section 11.1 Waiver.....................................................................................38
         Section 11.2 Notices....................................................................................38
         Section 11.3 Expenses, Etc..............................................................................39
         Section 11.4 Amendments, Etc............................................................................40
         Section 11.5 Successors and Assigns.....................................................................40
         Section 11.6 Assignments and Participations.............................................................40
         Section 11.7 Survival...................................................................................42
         Section 11.8 Caption....................................................................................42
         Section 11.9 Counterparts...............................................................................42
         Section 11.10 Governing Law; Submission to Jurisdiction.................................................42
         Section 11.11 Waiver of Jury Trial......................................................................43
         Section 11.12 Treatment of Certain Information; Confidentiality.........................................43
         Section 11.13 Limited Recourse..........................................................................44


SCHEDULE I                          -   Borrowers & Allocations

SCHEDULE II                         -   Commitments

SCHEDULE III                        -   Custody Agreements

SCHEDULE IV                         -   Distribution Agreements

SCHEDULE V                          -   Investment Management Agreements

SCHEDULE VI                         -   Shareholder Services Agreements

SCHEDULE VII                        -   Specified Existing Affiliates



EXHIBIT 2.7(a)                      -   Form of Note

EXHIBIT 2.11(a)                     -   Form of Designation of New Borrowers

EXHIBIT 6.1(b)                      -   Form of Opinion

EXHIBIT 11.6(b)                     -   Form of Assignment and Acceptance

EXHIBIT 11.12(c)                    -   Form of Confidentiality Agreement







         CREDIT AGREEMENT, dated as of December 21, 1999 (this "Agreement")
among (i) each fund signatory hereto (each a "Fund" and, collectively, the
"Funds") on behalf of itself or on behalf of the series or portfolios of a Fund,
which series and portfolios are listed on Schedule I beside the name of the Fund
of which each series or portfolio is a series or portfolio (each such Fund
acting on behalf of itself and each such series or portfolio, a "Borrower" and,
collectively, the "Borrowers"); (ii) each of the lenders that is a signatory
hereto identified under the caption "BANKS" on the signature pages hereto and
each other lender that becomes a "Bank" after the date hereof pursuant to
Section 11.6(b) hereof (individually a "Bank" and, collectively, the "Banks");
and (iii) THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for
the Banks (in such capacity, together with its successors in such capacity, the
"Administrative Agent").

         WHEREAS, each Fund is an open-end registered investment company under
the Investment Company Act of 1940 for which the Investment Adviser (as defined
below) acts as an investment manager;

         WHEREAS, each Borrower has requested the Banks to make Loans (as
defined below) severally and not jointly to each Borrower and to make available
to it a credit facility for the purposes and on the terms and conditions set
forth herein;

         WHEREAS, each Bank acknowledges that each Borrower shall be liable
hereunder only for the Loans made to such Borrower hereunder and interest
thereon and for the fees and expenses associated therewith and as otherwise set
forth herein, and that, notwithstanding anything to the contrary herein, each
Borrower's obligations hereunder are several and not joint;

         NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

Section 1.        Definitions and Accounting Matters.

Section 1.1 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):

                  "Advisers Act" shall mean the Investment Advisers Act of 1940,
as amended.

                  "Applicable Lending Office" shall mean, for each Bank, the
"Lending Office" of such Bank (or of an affiliate of such Bank) on the signature
pages hereof or such other office of such Bank (or of an affiliate of such Bank)
as such Bank may from time to time specify to the Administrative Agent and the
Borrowers as the office by which its Loans are to be made and maintained.

                  "Applicable Margin" shall mean 0.50% per annum.

                  "Asset Coverage" shall mean, with respect to any Borrower, the
ratio that the value of the Total Assets of such Borrower bears to the aggregate
amount of Indebtedness of such Borrower.

                  "Bankruptcy Code" shall mean the Federal Bankruptcy Code of
1978, as amended from time to time.

                  "Business Day" shall mean any day on which commercial banks
are not authorized or required to close in New York ------------ City.

                  "Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

                  "Chase" shall mean The Chase Manhattan Bank, together with its
successors.

                  "Closing Date" shall mean the first date upon which each of
the conditions precedent set forth in Section 6.1 hereof are satisfied.

                  "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

                  "Commission" shall mean the Securities and Exchange Commission
and any other similar or successor agency of the United States government
administering the Investment Company Act.

                  "Commitment" shall mean, as to each Bank, the obligation of
such Bank to make Loans in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set opposite the name of such
Bank on Schedule II or, in the case of a Person that becomes a Bank pursuant to
an assignment permitted under Section 11.6(b) hereof, as specified in the
respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced at any time or from time to time pursuant
to Section 2.3 hereof).

                  "Commitment Termination Date" shall mean the date which is 364
days following the date hereof or such earlier date on which the Commitments
shall terminate as provided herein, subject to extension as provided in Section
2.10 hereof.

                  "Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its property is bound.

                  "Custody Agreement" shall mean, as to any Fund or each
Borrower, as applicable, the Custody Agreement(s) set forth in Schedule III.

                  "Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.

                  "Distribution Agreement" shall mean, as to any Fund or each
Borrower, as applicable, the Distribution Agreements set forth on Schedule IV
hereto.

                  "Dividend Payment" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of a Borrower or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Borrower), but excluding dividends payable solely
in shares of such Borrower.

                  "Dollars" and "$" shall mean lawful money of the United States
of America.

                  "Eligible Lender" shall mean an entity that is a "bank" (as
defined in the Investment Company Act) but not an "affiliated person" or a
"principal underwriter" (each as defined in the Investment Company Act) of any
Borrower or any "affiliated person" of any such Person, including, without
limitation, the Investment Adviser.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.

                  "ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which a Fund is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which a Fund is a member.

                  "Event of Default" shall have the meaning assigned to such
term in Section 9 hereof.

                  "Federal Funds Rate" shall mean, for any day, the "offered
rate," as determined by Chase, for overnight federal funds, which rate is
determined from day to day and will be reasonably representative of the market
conditions at the time set.

                  "Financial Contracts" shall mean option contracts, options on
futures contracts, futures contracts, forward foreign currency exchange
contracts, options on foreign currencies, repurchase agreements, reverse
repurchase agreements, securities lending agreements, when-issued securities,
interest rate swap, cap, or collar agreements or similar arrangements between a
Fund for account of any Borrower and one or more financial institutions
providing for the transfer or mitigation of interest risks either generally or
under specific contingencies, and other similar arrangements entered into by a
Fund for account of any Borrower in the ordinary course of its business in
accordance with the investment objectives, policies, restrictions and
limitations of such Borrower then in effect.

                  "Fund Affiliate" shall mean an "affiliated person" of a Fund
as that term is used in the Investment Company Act. Notwithstanding the
foregoing, (a) no individual shall be a Fund Affiliate solely by reason of his
or her being a director, officer or employee of the Fund and (b) neither the
Administrative Agent nor any Bank shall be a Fund Affiliate.

                  "GAAP" shall mean generally accepted accounting principles, as
in effect from time to time.

                  "Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, or administrative functions of or
pertaining to government.

                  "Guarantee" shall mean a guarantee, an endorsement, a
contingent agreement to purchase or to furnish funds for the payment or
maintenance of, or otherwise to be or become contingently liable under or with
respect to, the Indebtedness, other obligations, net worth, working capital or
earnings of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an agreement
to purchase, sell or lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of such debtor's obligations or an agreement to assure a creditor
against loss, and including, without limitation, causing a bank or other
financial institution to issue a letter of credit or other similar instrument
for the benefit of another Person, but excluding endorsements for collection or
deposit in the ordinary course of business. The terms "Guarantee" and
"Guaranteed" used as a verb shall have a correlative meaning.

                  "Indebtedness" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.

                  "Investment Adviser" shall mean American Century Investment
Management, Inc.

                  "Investment Adviser Affiliate" shall mean an "affiliated
person" of the Investment Adviser as that term is used in the Investment Company
Act. Notwithstanding the foregoing, (a) no individual shall be an Investment
Adviser Affiliate solely by reason of his or her being a director, officer or
employee of the Investment Adviser and (b) neither the Administrative Agent nor
any Bank shall be an Investment Adviser Affiliate.

                  "Investment Company Act" shall mean the Investment Company Act
of 1940, as amended.

                  "Investment Management Agreement" shall mean, as to each Fund
and each Borrower, the Investment Management Agreements set forth on Schedule V
hereto.

                  "Lien" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.

                  "Loans" shall mean the loans provided for in Section 2.1 hereof.

                  "Majority Banks" shall mean Banks having more than 51% of the
aggregate amount of the Commitments or, if the Commitments shall have
terminated, Banks holding more than 51% of the aggregate unpaid principal amount
of the Loans.

                  "Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of a Fund or any Borrower, (b) the ability of a
Fund or any Borrower to perform its obligations hereunder and under the Notes,
(c) the validity or enforceability of this Agreement or of the Notes or (d) the
rights and remedies of the Banks and the Administrative Agent hereunder and
under the Notes.

                  "Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been made by a
Fund or any Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA.

                  "Net Asset Value" shall mean, with respect to any Borrower,
the total assets of such Borrower less the total liabilities of such Borrower,
all as determined in accordance with the methods used by such Borrower in
determining the net asset value of its shares and described in the Prospectus.

                  "Notes" shall have the meaning assigned to such term in
Section 2.7(a).

                  "PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.

                  "Person" shall mean any Borrower, any individual, corporation,
company, voluntary association, partnership, limited liability company, joint
venture, trust, unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).

                  "Plan" shall mean an employee benefit or other plan
established or maintained by a Fund or any ERISA Affiliate and that is covered
by Title IV of ERISA, other than a Multiemployer Plan.

                  "Post-Default Rate" shall mean a rate per annum equal to, in
the case of a Borrower, 2% plus the aggregate of the Federal Funds Rate and the
Applicable Margin as in effect from time to time, and, in the case of a Bank, 1%
plus the Federal Funds Rate.

                  "Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
                  "Prospectus" shall mean each Borrower's Prospectus and
Statement of Additional Information, as amended or supplemented from time to
time, filed with the Commission pursuant to Rule 497 under the Securities Act of
1933, as amended.

                  "Regulations A, T, U and X" shall mean, respectively,
Regulations A, T, U and X of the Board of Governors of the Federal Reserve
System (or any successor), as the same may be modified and supplemented and in
effect from time to time.

                  "Responsible Officer" shall mean the chairman, vice chairman,
president, vice president, treasurer, secretary, or assistant secretary of each
Fund, or, with respect to financial matters, the treasurer or assistant
treasurer of such Fund.

                  "Shareholder Services Agreement" shall mean, as to each Fund
or each Borrower, as applicable, the Shareholder Services Agreements set forth
on Schedule VI hereto.

                  "Specified Existing Fund Affiliate" shall mean each Person
that is a Fund Affiliate on the date hereof and is listed on Schedule VII hereto
under the caption "Specified Existing Fund Affiliates."

                  "Specified Existing Investment Adviser Affiliate" shall mean
each Person that is an Investment Adviser Affiliate on the date hereof and is
listed on Schedule VII hereto under the caption "Specified Existing Investment
Adviser Affiliates."

                  "Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.

                  "Swing Line Commitment" shall mean the obligation of the Swing
Line Lender to make Swing Line Loans pursuant to Section 2.12 hereof in the
aggregate principal amount at any one time outstanding not to exceed $5,000,000.

                  "Swing Line Lender" shall have the meaning assigned to such
term in Section 2.12 hereof.

                  "Swing Line Loans" shall have the meaning assigned to such
term in Section 2.12 hereof.

                  "Swing Line Participation Amount" shall have the meaning
assigned to such term in Section 2.14(c) hereof.

                  "Total Assets" shall mean, at any time and with respect to any
Fund, all assets of such Borrower at such time that, in accordance with GAAP,
would be classified as assets on a balance sheet of such Borrower.

Section 1.2 Accounting Terms and Determinations. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Bank hereunder shall be prepared, in accordance
with GAAP and the Investment Company Act.

Section 2.        Commitments, Loans, Notes and Prepayments.

                  Section 2.1 Loans. Each Bank severally agrees, on the terms
and conditions of this Agreement, to make loans to the Funds in Dollars on
behalf of any Borrower (as designated in the applicable notice of borrowing by a
Fund) during the period from and including the Closing Date to but not including
the Commitment Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount of the Commitment of such Bank as
in effect from time to time. Subject to the terms and conditions of this
Agreement, during such period a Fund may, on behalf of a Borrower, borrow, repay
and reborrow the amount of the Commitments by means of Loans.

                  Section 2.2 Procedure for Borrowings. A Fund on behalf of a
Borrower may borrow under the Commitments on any Business Day provided that such
Fund shall give the Administrative Agent notice of each borrowing hereunder as
provided in Section 4.5(a) hereof. Each borrowing must be in an amount as set
forth in Section 4.4 hereof. Not later than 3:00 p.m. New York time on the date
specified for each borrowing hereunder, each Bank shall make available the
amount of the Loan or Loans to be made by it on such date to the Administrative
Agent, at any account designated by the Administrative Agent, in immediately
available funds, for account of the relevant Fund. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the relevant Fund for the benefit of such
Borrower by depositing the same, in immediately available funds, in an account
of the relevant Fund designated by the relevant Fund and maintained with Chase
at its principal office.

                  Section 2.3 Changes of Commitments.

                  (a) The aggregate amount of the Commitments shall be
automatically reduced to zero on the Commitment Termination Date.

                  (b) The Funds shall have the right at any time or from time to
time upon three Business Days' notice (i) so long as no Loans are outstanding,
to terminate the Commitments and (ii) to reduce the aggregate unused amount of
the Commitments; provided that (x) the Funds shall give notice of each such
termination or reduction as provided in Section 4.5(b) hereof and (y) each
partial reduction shall be in an aggregate amount at least equal to $5,000,000
(or a larger integral multiple of $1,000,000).

                  (c) The Commitments once terminated or reduced may not be
reinstated.

                  Section 2.4 Commitment Fee. The Funds shall pay to the
Administrative Agent for account of each Bank a commitment fee on the daily
average unused amount of such Bank's Commitment, for the period from and
including the date hereof to but not including the earlier of the date such
Commitment is terminated and the Commitment Termination Date, at a rate per
annum equal to 0.10%. Solely for the purpose of calculating the commitment fee,
Swing Line Loans will not be deemed a utilization of the aggregate Commitments
of all Banks. Accrued commitment fee shall be payable on each March 31, June 30,
September 30 and December 31 (beginning on the first of such dates to occur
after the date hereof) and on the earlier of the date the Commitments are
terminated and the Commitment Termination Date. The Funds shall allocate such
commitment fee among the Borrowers pro rata based on their respective Net Asset
Values as at the respective dates on which such commitment fee is due or
otherwise not in violation of applicable law.

                  Section 2.5 Lending Offices. The Loans made by each Bank shall
be made and maintained at such Bank's Applicable Lending Office.

                  Section 2.6 Several Obligations; Remedies Independent. The
failure of any Bank to make any Loan to be made by it on the date specified
therefor shall not relieve any other Bank of its obligation to make its Loan on
such date, but neither any Bank nor the Administrative Agent shall be
responsible for the failure of any other Bank to make a Loan to be made by such
other Bank, and (except as otherwise provided in Section 4.6 hereof) no Bank
shall have any obligation to the Administrative Agent or any other Bank for the
failure by such Bank to make any Loan required to be made by such Bank. The
amounts payable by the Borrowers at any time hereunder and under the Notes to
each Bank shall be a separate and independent debt and each Bank shall be
entitled to protect and enforce its rights arising out of this Agreement and the
Notes (subject, in the case of the right to accelerate, to Section 9 hereof),
and it shall not be necessary for any other Bank, or the Administrative Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.

                  Section 2.7 Notes.

                  (a) Each Fund agrees that, upon the request of any Bank to the
Administrative Agent, each Fund will, at such Fund's expense, execute and
deliver to such Bank a promissory note of each Borrower evidencing the Loans of
such Bank to such Borrower, substantially in the form if Exhibit 2.7(a) with
appropriate insertions as to date and principal amount (a "Note").

                  (b) The date and amount of each Loan made by each Bank to a
Borrower, and each payment made on account of the principal thereof, shall be
recorded by such Bank on its books and, prior to any transfer of the applicable
Note, endorsed by such Bank on the schedule attached to such Note or any
continuation thereof; provided that the failure of such Bank to make any such
recordation (or any error in making any such recordation) or endorsement shall
not affect the obligations of a Borrower to make a payment when due of any
amount owing hereunder or under such Note in respect of the Loans evidenced
thereby.

                  (c) No Bank shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Bank's Commitment, Loans and Notes pursuant to Section 11.6
hereof (and, if requested by any Bank, the Funds agree to so exchange any
Notes).

                  Section 2.8 Optional Prepayments. Subject to Section 4.4
hereof, a Borrower shall have the right to prepay Loans at any time or from time
to time, provided that such Borrower shall give the Administrative Agent notice
of each such prepayment as provided in Section 4.5(a) hereof (and, upon the date
specified in any such notice of prepayment, the amount to be prepaid shall
become due and payable hereunder).

                  Section 2.9 Mandatory Prepayments. If, at any time, (i) the
Asset Coverage of any Borrower shall fall below 300% or (ii) the aggregate
amount of Loans made to a Borrower exceed the limits provided in such Borrower's
Prospectus, then, within three Business Days thereafter, such Borrower shall
prepay Loans made to such Borrower to the extent necessary to ensure that (x)
the Asset Coverage is equal to or greater than 300% or (y) the aggregate amount
of Loans made to such Borrower then outstanding does not after such payments
exceed such limits as set forth in such Borrower's Prospectus or the Investment
Company Act, as the case may be.

                  Section 2.10 Extension of Commitment Termination Date.

                  (a) The Funds may, by notice to the Administrative Agent
(which shall promptly notify the Banks) given not less than 60 days and not more
the 90 days prior to the Commitment Termination Date then in effect (the
"Existing Commitment Termination Date"), request that the Banks extend the
Commitment Termination Date for an additional 364 days from the Existing
Commitment Termination Date. Each Bank, acting in its sole discretion, shall, by
notice (which shall be irrevocable) to the Funds and the Administrative Agent
given no earlier than the date that is 30 days prior to the Existing Commitment
Termination Date (herein, the "Consent Date") and no later than the date that is
three Business Days after the Consent Date, advise the Funds whether or not such
Bank agrees to such extension; provided that each Bank that determines not to
extend the Commitment Termination Date (a "Non-Extending Bank") shall notify the
Administrative Agent (which shall notify the Banks) of such fact promptly after
such determination (but in any event no later than the date three Business Days
after the Consent Date) and any Bank that does not advise the Funds on or prior
to the date three Business Days after the Consent Date that such Bank agrees to
such extension shall be deemed to be a Non-Extending Bank. The election of any
Bank to agree to such extension shall not obligate any other Bank to so agree.

                  (b) The Funds shall have the right on or before the Existing
Commitment Termination Date to request that the Administrative Agent and/or
Chase, in good faith, seek to replace each Non-Extending Bank with, and
otherwise add to this Agreement, one or more other banks (which may include any
Bank, each prior to the Existing Commitment Termination Date, an "Additional
Commitment Bank"), each of which Additional Commitment Banks shall have entered
into an agreement in form and substance satisfactory to the Funds and the
Administrative Agent pursuant to which such Additional Commitment Bank shall,
effective as of the Existing Commitment Termination Date, undertake a Commitment
specified therein and otherwise become obligated as a Bank hereunder (and, if
any such Additional Commitment Bank is already a Bank, its Commitment shall be
in addition to such Bank's Commitment hereunder on such date). The Funds shall
also have the right to replace each Non-Extending Bank in the same manner
described herein, except that any bank selected by the Funds must be approved by
the Administrative Agent (which approval shall not be unreasonably withheld).

                  (c) If (and only if) the total of the Commitments of the Banks
that have agreed so to extend the Commitment Termination Date and the additional
Commitments of the Additional Commitment Banks shall be at least 100% of the
aggregate amount of the Commitments in effect immediately prior to the date that
is three Business Days after the Consent Date, then, effective as of the
Existing Commitment Termination Date, (i) the Existing Commitment Termination
Date shall be extended to the date falling 364 days after the Existing
Commitment Termination Date (except that, if such date is not a Business Day,
such Commitment Termination Date as so extended shall be the next preceding
Business Day), (ii) each Additional Commitment Bank shall thereupon become a
"Bank" for all purposes of this Agreement and (iii) the Commitment of each
Non-Extending Bank shall terminate.

                  (d) Notwithstanding the foregoing clauses (a) through (c), the
extension of the Existing Commitment Termination Date shall not be effective
with respect to any Bank unless:

                  (i)      no Default shall have occurred and be continuing on
                           each of the date of the notice requesting such
                           extension, on the Consent Date and on the Existing
                           Commitment Termination Date;

                  (ii)     each of the representations and warranties made by
                           the Funds and Borrowers in Section 7 hereof shall be
                           true and complete on and as of each of the date of
                           the notice requesting such extension, the Consent
                           Date and the Existing Commitment Termination Date
                           with the same force and effect as if made on and as
                           of such date (or, if any such representation or
                           warranty is expressly stated to have been made as of
                           a specific date, as of such specific date); and

                  (iii)    each Non-Extending Bank shall have been paid in full
                           by the Funds all amounts due to such Bank hereunder
                           on or before the Existing Termination Date.

                  Section 2.11 Designation of Additional Borrower; Amendments to
         Schedule I.

                  (a) Other series of each Fund and other investment companies
         registered under the Investment Company Act, in either case (a) which
         have at least $2,000,000 in Total Assets, (b) are (I) equity funds,
         (II) fixed income funds, or (III) any combination thereof, in each case
         whether investing in domestic or foreign securities or any combination
         thereof, and (c) for which the Investment Adviser or an Investment
         Adviser Affiliate acts as the investment manager, may, with the prior
         written consent of the Administrative Agent and each Bank, become
         parties to this agreement in addition to those Borrowers listed in
         Schedule I, and be deemed Borrowers for all purposes of this Agreement
         by executing an instrument substantially in the form of Exhibit 2.11(a)
         (with such changes therein as may be approved by the Administrative
         Agent and the Banks), which instrument shall (x) have attached to it a
         copy of this Agreement (as the same may have been amended) with a
         revised Schedule I reflecting the participation of such additional
         series or investment company and any prior revisions to Schedule I
         effected in accordance with the terms hereof and (y) be accompanied by
         the documents and instruments required to be delivered by the Borrowers
         pursuant to Section 6 hereof, including, without limitation, an opinion
         of counsel for the Funds substantially in the form of Exhibit 6.1(b).

                  (b) No series of any Fund or investment company shall be
         admitted as a party to this Agreement as a Borrower unless at the time
         of such admission and after giving effect thereto: (i) the
         representations and warranties set forth in Section 7 hereof shall be
         true and correct with respect to such Borrower; (ii) such Borrower
         shall be in compliance in all material respects with all of the terms
         and provisions set forth herein on its part to be observed or performed
         at the time of the admission and after giving effect thereto; and (iii)
         no Default or Event of Default with respect to such Borrower, nor any
         event which with the giving of notice or expiration of any applicable
         grace period or both would constitute such a Default or Event of
         Default with respect to such Borrower, shall have occurred and be
         continuing.

                  Section 2.12 Swing Line Commitment. Subject to the terms and
         conditions hereof, Chase (in such capacity, the "Swing Line Lender")
         agrees to make available to the Borrowers a portion of the credit
         otherwise available under the Commitments from time to time by making
         swing line loans ("Swing Line Loans") to the Borrowers in an aggregate
         principal amount not to exceed at any one time outstanding the Swing
         Line Commitment (notwithstanding that the Swing Line Loans outstanding
         at any time, when aggregated with the Swing Line Lender's other
         outstanding Loans hereunder, may exceed the Swing Line Lender's
         Commitment then in effect); provided, however, that on the date of the
         making of any Swing Line Loan and while any such Swing Line Loans are
         outstanding, the sum of the aggregate principal amount of all
         outstanding Loans and Swing Line Loans shall not exceed the total
         Commitments. During the Commitment Period applicable to the Borrower,
         the Borrower may use the Swing Line Commitment by borrowing, repaying
         and reborrowing, all in accordance with the terms and conditions
         hereof.

                  Section 2.13 Procedure for Swing Line Borrowing. Whenever a
         Borrower desires that the Swing Line Lender make Swing Line Loans under
         Section 2.12 hereof, the Borrower shall give the Swing Line Lender
         irrevocable telephonic notice confirmed promptly in writing (which
         telephonic notice must be received by the Swing Line Lender not later
         than 3:00 P.M., New York City time, on the proposed date specified for
         such borrowing), specifying the amount of each requested Swing Line
         Loan. Each borrowing under the Swing Line Commitment shall be in an
         amount equal to $50,000 or an integral multiple of $50,000 in excess
         thereof. Not later than 5:00 P.M., New York City time, on the date
         specified in a notice by the Borrower in respect of Swing Line Loans,
         the Swing Line Lender shall make available to the Administrative Agent
         for the account of the Borrower at the office of the Administrative
         Agent specified in Section 11.2 hereof an amount in immediately
         available funds equal to the amount of the Swing Line Loan to be made
         by the Swing Line Lender. The proceeds of such Swing Line Loan will
         then be made available to the Borrower on such date specified for such
         borrowing by the Administrative Agent transferring by wire to the
         custodian of and for the account of the Borrower the aggregate of the
         amounts made available to the Administrative Agent by the Swing Line
         Lender in immediately available funds.

                  Section 2.14 Refunding of Swing Line Loans.

                  (a) The Swing Line Lender, at any time in its sole and
         absolute discretion may, and on the seventh day (or if such day is not
         a Business Day, the next Business Day) after the date of such borrowing
         with respect to any Swing Line Loans to the Borrower shall, on behalf
         of the Borrower (and the Borrower hereby irrevocably directs the Swing
         Line Lender to so act on its behalf), upon notice given by the Swing
         Line Lender no later than 10:00 A.M., New York City time, on the
         relevant refunding date, request each Bank to make, and each Bank
         hereby agrees to make, a Loan to the Borrower, at the rate set forth in
         Section 3.2 hereof, in the pro rata amount determined pursuant to
         Section 4.2. hereof equal to the amount of such Swing Line Loans of the
         Borrower (the "Refunded Swing Line Loans") outstanding on the date of
         such notice, to repay the Swing Line Lender. Each Bank shall make the
         amount of such Loan available to the administrative Agent at its office
         set forth in Section 11.2 hereof in immediately available funds, no
         later than 1:00 P.M., New York City time, on the date of such notice.
         The proceeds of such Loans shall be distributed by the Administrative
         Agent to the Swing Line Lender and immediately applied by the Swing
         Line Lender to repay the Refunded Swing Line Loans. Effective on the
         date such Loans are made, the portion of the Swing Line Loans so paid
         shall no longer be outstanding as Swing Line Loans.

                  (b) The making of any Swing Line Loan hereunder shall be
         subject to the satisfaction of the applicable conditions precedent
         thereto set forth in Section 6 hereof (unless otherwise waived in
         accordance with Section 11.4 hereof).

                  (c) If prior to the making of a Loan to the Borrower pursuant
         to Section 2.14(a) hereof one of the events described in Sections 9(f)
         or 9(g) hereof shall have occurred with respect to the Borrower, each
         Bank severally, unconditionally and irrevocably agrees that it shall
         purchase a participating interest in the applicable Swing Line Loans
         ("Unrefunded Swing Line Loans") in an amount equal to the amount of
         Loans which would otherwise have been made by such Bank pursuant to
         Section 2.14(a) hereof. Each Bank will immediately transfer to the
         Administrative Agent, in immediately available funds, the amount of its
         participation (the "Swing Line Participation Amount"), and the proceeds
         of such participation shall be distributed by the Administrative Agent
         to the Swing Line Lender in such amount as will reduce the amount of
         the participating interest retained by the Swing Line in its Swing Line
         Loans to the amount of the Loans which were to have been made by it
         pursuant to Section 2.14(a) hereof.

                  (d) Whenever, at any time after the Swing Line Lender has
         received from any Bank such Lender's Swing Line Participation amount,
         the Swing Line Lender receives any payment on account of the Swing Line
         Loans, the Swing Line Lender will distribute to such Bank its Swing
         Line Participation Amount (appropriately adjusted, in the case of
         interest payments, to reflect the period of time during which such
         participating interest was outstanding and funded and, in the case of
         principal and interest payments, to reflect such Bank's pro rata
         portion of such payment if such payment is not sufficient to pay the
         principal of and interest on all Swing Line Loans then due); provided,
         however, that in the event that such payment received by the Swing Line
         Lender is required to be returned, such Bank will return to the Swing
         Line Lender any portion thereof previously distributed to it by the
         Swing Line Lender.

                  (e) Each Bank's obligation to make the Loans referred to in
         Section 2.14(a) hereof and to purchase participating interests pursuant
         to Section 2.14(c) hereof shall be absolute and unconditional and shall
         not be affected by any circumstance, including, without limitation, (i)
         any setoff, counterclaim, recoupment, defense or other right which such
         Bank may have against the Swing Line Lender or any other Person for any
         reason whatsoever; (ii) the occurrence or continuance of a Default or
         an Event of Default or the failure to satisfy any of the other
         conditions specified in Section 6 hereof, (iii) any adverse change in
         the condition (financial or otherwise) of the Borrower; (iv) any breach
         of this Agreement or any Note by the Borrower or the Bank, or (v) any
         other circumstance, happening or event whatsoever, whether or not
         similar to any of the foregoing.

Section 3.        Payments of Principal and Interest.

                  Section 3.1 Repayment of Loans. Each Borrower hereby severally
         and unconditionally, but neither jointly nor jointly and severally
         promises to pay to the Administrative Agent for account of each Bank
         the principal of each Loan made by such Bank to such Borrower, and each
         Loan shall mature, on the earlier of (a) the date that is 30 calendar
         days after the date such Loan was made and (b) the Commitment
         Termination Date.

                  Section 3.2 Interest.

                  (a) Each Borrower hereby promises severally and
         unconditionally, but neither jointly nor jointly and severally, to pay
         to the Administrative Agent for account of each Bank interest on the
         unpaid principal amount of each Loan (which, for purposes of this
         Section 3.2, shall include each Swing Line Loan) made by such Bank to
         such Borrower, for the period from and including the date of such Loan
         to but excluding the date such Loan shall be paid in full, at a rate
         equal to the Federal Funds Rate (as in effect from time to time) plus
         the Applicable Margin.

                  (b) Notwithstanding the foregoing, each Borrower hereby
         promises to pay to the Administrative Agent for the account of each
         Bank interest at the Post-Default Rate on any principal of any Loan
         made by such Bank to such Borrower and on any other amount payable by
         such Borrower in respect of such Loan hereunder or under the applicable
         Note held by such Bank to or for account of such Bank, that shall not
         be paid to the Administrative Agent for the benefit of the Banks in
         full when due (whether at stated maturity, by acceleration, by
         mandatory prepayment or otherwise), for the period from and including
         the due date thereof to but excluding the date the same is paid in
         full.

                  (c) Accrued interest on each Loan shall be payable in arrears
         upon the payment or prepayment thereof (but only on the principal
         amount so paid or prepaid); except that interest payable at the
         Post-Default Rate pursuant to Section 3.2(b) hereof shall be payable
         from time to time on demand. Promptly after the determination of any
         interest rate provided for herein or any change therein, the
         Administrative Agent shall give notice thereof to the Banks.

Section 4.        Payments; Pro Rata Treatment; Computations; Etc.

                  Section 4.1 Payments.

                  (a) Except to the extent otherwise provided herein, all
         payments of principal, interest and other amounts to be made by a
         Borrower under this Agreement and the Notes, shall be made in Dollars,
         in immediately available funds, without deduction, set-off or
         counterclaim, to the Administrative Agent (Account No. 323-525369, or
         any other account designated by the Administrative Agent), not later
         than 2:00 p.m. New York time on the date on which such payment shall
         become due (each such payment made after such time on such due date to
         be deemed to have been made on the next succeeding Business Day),
         provided that if a new Loan to a Borrower is to be made by any Bank on
         a date such Borrower is to repay any principal of an outstanding Loan
         made by such Bank to such Borrower, such Bank shall apply the proceeds
         of such new Loan to the payment of the principal to be repaid and only
         an amount equal to the difference between the principal to be borrowed
         and the principal to be repaid shall be made available by such Bank to
         the Administrative Agent as provided in Section 2.2 hereof or paid by
         such Borrower to the Administrative Agent pursuant to this Section 4.1,
         as the case may be.

                  (b) Each Borrower shall, at the time of making each payment
         under this Agreement or any Note for the account of any Bank, specify
         to the Administrative Agent (which shall so notify the intended
         recipient(s) thereof) the identity of such Borrower, the Loans or other
         amounts payable by such Borrower hereunder to which such payment is to
         be applied (and in the event that such Borrower fails to so specify, or
         if an Event of Default has occurred and is continuing, the
         Administrative Agent may distribute such payment for account of such
         Borrower to the Banks for application in such manner as it or the
         Majority Banks, subject to Section 4.2 hereof, may determine to be
         appropriate).

                  (c) Each payment received by the Administrative Agent under
         this Agreement or any Note for account of any Bank shall be paid by the
         Administrative Agent promptly to such Bank, in immediately available
         funds, for account of such Bank's Applicable Lending Office for the
         Loan or other obligation in respect of which such payment is made.

                  (d) If the due date of any payment under this Agreement or any
         Note would otherwise fall on a day that is not a Business Day, such
         date shall be extended to the next succeeding Business Day, and
         interest shall be payable for any principal so extended for the period
         of such extension.

                  Section 4.2 Pro Rata Treatment. Except to the extent otherwise
         provided herein:

                  (a) each borrowing from the Banks under Section 2.1 hereof
         shall be made from the Banks, each payment of commitment fee under
         Section 2.4 hereof shall be made for account of the Banks, and each
         termination or reduction of the amount of the Commitments under Section
         2.3 hereof shall be applied to the respective Commitments of the Banks,
         pro rata according to the amounts of their respective Commitments;

                  (b) each payment or prepayment of principal of Loans by a
         Borrower shall be made for account of the Banks pro rata in accordance
         with the respective unpaid principal amounts of the Loans held by them;
         and

                  (c) each payment of interest on Loans by a Borrower shall be
         made for account of the Banks pro rata in accordance with the amounts
         of interest on such Loans then due and payable to the respective Banks.

                  Section 4.3 Computations.

                  (a) Interest on Loans and commitment fees shall be computed on
         the basis of a 360-day year for the actual days elapsed.

                  (b) Each determination of an interest rate by the
         Administrative Agent pursuant to any provision of this Agreement shall
         be conclusive and binding on each Borrower and the Banks in the absence
         of manifest error. The Administrative Agent shall, at the request of a
         Borrower, deliver to such Borrower a statement showing the quotations
         used by the Administrative Agent in determining any interest rate
         pursuant to Section 3.2 hereof.

                  (c) During the period commencing on the effectiveness of this
         Agreement and ending on January 31, 2000, inclusive, if a Lender's cost
         of funds exceeds the Federal Funds Rate, then the Federal Funds Rate
         shall be adjusted upwards in an amount, not to exceed 1.5% per annum,
         equal to the excess of such Lender's cost of funding over the Federal
         Funds Rate. If any Lender becomes entitled to claim any such additional
         amounts, it shall promptly notify the Borrowers (with a copy to the
         Administrative Agent) of the event by reason of which it has become so
         entitled by providing a certificate (which shall be conclusive absent
         manifest error) setting forth in reasonable detail the basis for the
         claim for additional amounts, the amounts required to be paid by the
         Borrowers to such Lender, and the computations made by such Lender to
         determine the amounts; provided that such Lender shall not be required
         to disclose any confidential information. Failure or delay on the part
         of any Lender to demand compensation pursuant hereto shall not
         constitute a waiver of such Lender's right to demand such compensation;
         provided that a Lender claiming such compensation pursuant to this
         Section 4.3(c) must have made its demand for such compensation on or
         before March 31, 2000.

                  Section 4.4 Minimum Amounts. Each borrowing shall be in an
         aggregate amount at least equal to $500,000 or a larger integral
         multiple of $100,000. Each partial prepayment of principal of Loans
         shall be in an aggregate amount at least equal to $100,000 or a larger
         integral multiple of $100,000.

                  Section 4.5 Certain Notices.

                  (a) Notices by a Borrower to the Administrative Agent of
         borrowings and optional prepayments of Loans shall be irrevocable and
         shall be effective only if received by the Administrative Agent not
         later than 12:00 noon New York time on the date of the relevant
         borrowing or prepayment. Each such notice of borrowing or optional
         prepayment shall specify the Borrower for whose benefit such borrowing
         or prepayment, or on whose behalf such borrowing or prepayment is to be
         made, the Loans to be borrowed or prepaid and the amount (subject to
         Section 4.4 hereof) of each Loan to be borrowed or prepaid and the date
         of borrowing or optional prepayment (which shall be a Business Day).

                  (b) Notices by a Borrower to the Administrative Agent of
         terminations or reductions of the Commitments shall be irrevocable and
         shall be effective only if received in a timely manner, as set forth in
         Section 2.3(b) hereof, by the Administrative Agent. Each such notice of
         termination or reduction shall specify the amount of the Commitments to
         be terminated or reduced.

                  (c) The Administrative Agent shall promptly notify the Banks
         of the contents of each such notice.

                  Section 4.6 Non-Receipt of Funds by the Administrative Agent.
         Unless the Administrative Agent shall have been notified by a Bank or a
         Borrower (the "Payor") prior to the date on which the Payor is to make
         payment to the Administrative Agent of (in the case of a Bank) the
         proceeds of a Loan to be made by such Bank hereunder or (in the case of
         a Borrower) a payment to the Administrative Agent for account of one or
         more of the Banks hereunder (such payment being herein called the
         "Required Payment"), which notice shall be effective upon receipt, that
         the Payor does not intend to make the Required Payment to the
         Administrative Agent, the Administrative Agent may assume that the
         Required Payment has been made and may, in reliance upon such
         assumption (but shall not be required to), make the amount thereof
         available to the intended recipient(s) on such date; and, if the Payor
         has not in fact made the Required Payment to the Administrative Agent,
         the recipient(s) of such payment shall, on demand, repay to the
         Administrative Agent the amount so made available together with
         interest thereon (such interest to be, in the case of a Bank, the
         Federal Funds Rate and, in the case of a Borrower, as set forth in
         Section 3.2(a) hereof) in respect of each day during the period
         commencing on the date (the "Advance Date") such amount was so made
         available by the Administrative Agent until the date the Administrative
         Agent recovers such amount and, if such recipient(s) shall fail
         promptly to make such payment, the Administrative Agent shall be
         entitled to recover such amount, on demand, from the Payor, together
         with interest as aforesaid, provided that if neither the recipient(s)
         nor the Payor shall return the Required Payment to the Administrative
         Agent within three Business Days of the Advance Date, then,
         retroactively to the Advance Date, the Payor and the recipient(s) shall
         each be obligated to pay interest on the Required Payment as follows:

                  (a) if the Required Payment shall represent a payment to be
         made by a Borrower to the Banks, such Borrower and the recipient(s)
         shall each be obligated retroactively to the Advance Date to pay
         interest in respect of the Required Payment at the Post-Default Rate
         (without duplication of the obligation of such Borrower under Section
         3.2 hereof to pay interest on the Required Payment at the Post-Default
         Rate), it being understood that the return by the recipient(s) of the
         Required Payment to the Administrative Agent shall not limit such
         obligation of such Borrower under said Section 3.2 to pay interest at
         the Post-Default Rate in respect of the Required Payment; and

                  (b) if the Required Payment shall represent proceeds of a Loan
         to be made by the Banks to a Borrower, such Borrower and the Payor
         shall each be obligated retroactively to the Advance Date to pay
         interest in respect of the Required Payment pursuant to the rate
         specified in Section 3.2 hereof (without duplication of the obligation
         of such Borrower under Section 3.2 hereof to pay interest on the
         Required Payment), it being understood that the return by such Borrower
         of the Required Payment to the Administrative Agent shall not limit any
         claim such Borrower may have against the Payor in respect of such
         Required Payment.

Section 4.7       Sharing of Payments, Etc.

                  (a) Each Fund agrees that, in addition to (and without
         limitation of) any right of set-off, banker's lien or counterclaim a
         Bank may otherwise have, each Bank shall be entitled, at its option (to
         the fullest extent permitted by law), to set off and apply any deposit
         (general or special, time or demand, provisional or final), or other
         indebtedness, held by it for the credit or account of a Borrower at any
         of its offices, in Dollars or in any other currency, against any
         principal of or interest on any of such Bank's Loans to such Borrower
         or any other amount payable by such Borrower to such Bank hereunder,
         that is not paid when due (regardless of whether such deposit or other
         indebtedness are then due to such Borrower), in which case it shall
         promptly notify such Borrower and the Administrative Agent thereof,
         provided that such Bank's failure to give such notice shall not affect
         the validity thereof.

                  (b) If any Bank shall obtain from a Borrower payment of any
         principal of or interest on any Loan owing to it or payment of any
         other amount under this Agreement through the exercise of any right of
         set-off, banker's lien or counterclaim or similar right or otherwise
         (other than from the Administrative Agent as provided herein), and, as
         a result of such payment, such Bank shall have received a greater
         percentage of the principal of or Interest on the Loans made to such
         Borrower or such other amounts then due to such Bank hereunder by such
         Borrower than the percentage received by any other Bank, it shall
         promptly purchase from such other Banks participations in (or, if and
         to the extent specified by such Bank, direct interests in) such Loans
         or such other amounts, respectively, owing to such other Banks (or in
         interest due thereon, as the case may be) in such amounts, and make
         such other adjustments from time to time as shall be equitable, to the
         end that all the Banks shall share the benefit of such excess payment
         (net of any expenses that may be incurred by such Bank in obtaining or
         preserving such excess payment) pro rata in accordance with the unpaid
         principal of and/or interest on such Loans or such other amounts,
         respectively, owing to each of the Banks. To such end all the Banks
         shall make appropriate adjustments among themselves (by the resale of
         participations sold or otherwise) if such payment is rescinded or must
         otherwise be restored.

                  (c) Each Fund agrees that any Bank so purchasing such a
         participation (or direct interest) may exercise all rights of set-off,
         banker's lien, counterclaim or similar rights with respect to such
         participation as fully as if such Bank were a direct holder of Loans or
         other amounts (as the case may be) owing to such Bank in the amount of
         such participation (or direct interest).

                  (d) Nothing contained herein shall require any Bank to
         exercise any such right or shall affect the right of any Bank to
         exercise, and retain the benefits of exercising, any such right with
         respect to any other indebtedness or obligation of a Borrower. If,
         under any applicable bankruptcy, insolvency or other similar law, any
         Bank receives a secured claim in lieu of a set-off to which this
         Section 4.7 applies, such Bank shall, to the extent practicable,
         exercise its rights in respect of such secured claim in a manner
         consistent with the rights of the Banks entitled under this Section 4.7
         to share in the benefits of any recovery on such secured claim.

                  Section 4.8 Requirements of Law.

                  (a) If any Bank shall have determined that the adoption of or
         any change in any applicable law, rule, or regulation, or any change in
         any applicable law, rule or regulation, or any change in the
         interpretation or administration thereof by any governmental authority,
         central bank, or comparable agency charged with the interpretation or
         administration thereof, or compliance by such Bank or any corporation
         controlling such Bank with any request or directive regarding capital
         adequacy (whether or not having the force of law) from any such
         authority, central bank, or comparable authority made subsequent to the
         date hereof shall have the effect of reducing the rate of return on
         such Bank's or such corporation's capital as a consequence of its
         obligations hereunder to a level below that which such Bank or such
         corporation could have achieved but for such adoption, change, or
         compliance (taking into consideration such Bank's or such corporation's
         policies with respect to capital adequacy) by an amount determined by
         such Bank, in its reasonable discretion, to be material, then from time
         to time, each Borrower shall promptly pay to such Bank such additional
         amount or amounts as will compensate such Bank for such reduction.

                  (b) If any Bank becomes entitled to claim any additional
         amounts pursuant to this Section 4.8, it shall promptly notify the
         Borrowers (with a copy to the Administrative Agent) of the event by
         reason of which it has become so entitled by providing a certificate
         setting forth in reasonable detail the basis for the claim for
         additional amounts, the amounts required to be paid by the Borrowers to
         such Bank, and the computations made by such Bank to determine the
         amounts; provided that such Bank shall not be required to disclose any
         confidential information. Such certificate as to any additional amounts
         payable pursuant to this Section 4.8(b) submitted by such Bank to the
         Borrowers (with a copy to the Administrative Agent) shall be conclusive
         in the absence of manifest error. The agreements in this Section 4.8
         shall survive the termination of this Agreement and the payment of the
         Loans and all other amounts payable hereunder. No Borrower shall be
         responsible to compensate such Bank for additional amounts attributable
         to another Borrower's Loans.

                  (c) Failure or delay on the part of any Bank to demand
         compensation pursuant to this Section 4.8 shall not constitute a waiver
         of such Bank's right to demand such compensation; provided that the
         Borrowers shall not be required to compensate a Bank pursuant to this
         Section 4.8 for any increased costs or reductions incurred more than
         270 days prior to the date that such Bank notifies the Borrower of the
         change in the applicable law, rule, or regulation giving rise to such
         increased costs or reductions and of such Bank's intention to claim
         compensation therefore; provided further that, if the change in the
         applicable law, rule, or regulation giving rise to such increased costs
         or reductions is retroactive, then the 270-day period referred to above
         shall be extended to include the period of retroactive effect thereof.

Section 5.        U.S. Taxes.

                  (a) All payments made by any Borrower under this Agreement or
         any Note shall be made free and clear of, and without deduction or
         withholding for or on account of, any present or future income, stamp
         or other taxes, levies, imposts, duties, charges, fees, deductions or
         withholdings, now or hereafter imposed, levied, collected, withheld or
         assessed by any Governmental Authority, excluding all present and
         future income taxes and franchise taxes (imposed in lieu of net income
         taxes) imposed on the Administrative Agent or any Bank as a result of a
         present or former connection between the Administrative Agent or such
         Bank and the jurisdiction of the Governmental Authority imposing such
         tax or any political subdivision or taxing authority thereof or therein
         (other than any such connection arising solely from the Administrative
         Agent or such Bank having executed, delivered or performed its
         obligations or received a payment under, or enforced, this Agreement or
         any Note). If any such non-excluded taxes, levies, imposts, duties,
         charges, fees, deductions or withholdings ("Non-Excluded Taxes") are
         required to be withheld from any amounts payable to the Administrative
         Agent or any Bank hereunder or under any Note, the amounts so payable
         to the Administrative Agent or such Bank shall be increased to the
         extent necessary to yield to the Administrative Agent or such Bank
         (after payment of all Non-Excluded Taxes) interest or any such other
         amounts payable hereunder at the rates or in the amounts specified on
         this Agreement, provided, however, that a Borrower shall not be
         required to increase any such amounts payable to any Bank that is not
         organized under the laws of the U.S. or a state thereof if such Bank
         fails to comply with the requirements of paragraph (b) of this Section.
         Whenever any Non-Excluded Taxes are payable by a Borrower, as promptly
         as possible thereafter, such Borrower shall send to the Administrative
         Agent for its own account or for the account of such Bank, as the case
         may be, a certified copy of an original official receipt received by
         such Borrower showing payment thereof. If a Borrower fails to pay any
         Non-Excluded Taxes when due to the appropriate taxing authority or
         fails to remit to the Administrative agent the required receipts or
         other required documentary evidence, such Borrower shall indemnify the
         Administrative Agent and the Banks for any incremental taxes, interest
         or penalties that may become payable by the Administrative Agent or any
         Bank as a result of any such failure. The agreements in this Section
         shall survive the termination of this Agreement and the payment of the
         Loans and all other amounts payable hereunder.

                  (b) Each Bank that is not incorporated under the laws of the
         U.S. or a state thereof shall:

                  (i)      deliver to the Investment Adviser and the
                           Administrative Agent (A) two duly completed copies of
                           U.S. Internal Revenue Service Form 1001 or 4224, or
                           successor applicable form, as the case may be, and
                           (B) and Internal Revenue Service From W-8 or W-9, or
                           successor applicable form, as the case may be;

                  (ii)     deliver to the Investment Adviser and the
                           Administrative Agent two further copies of any such
                           form or certification on or before the date that any
                           such form or certification expires or becomes
                           obsolete and after the occurrence of any event
                           requiring a change in the most recent form previously
                           delivered by it to the Investment Adviser; and

                  (iii)    obtain such extensions of time for filing and
                           complete such forms or certifications as may
                           reasonably be requested by the Investment Adviser or
                           the Administrative Agent;

         unless in any such case an event (including, without limitation, any
         change in treaty, law or regulation) has occurred prior to the date on
         which any such delivery would otherwise be required which renders all
         such forms inapplicable or which would prevent such Bank from duly
         completing and delivering any such form with respect to it and such
         Bank so advises the Investment Adviser and the Administrative Agent.
         Such Bank shall certify (A) in the case of a Form 1001 or 4224, that it
         is entitled to receive payments under this Agreement without deduction
         or withholding of any U.S. federal income taxes and (B) in the case of
         a Form W-8 or W-9, that it is entitled to an exemption from U.S. backup
         withholding tax. Each Person that shall be subject to an assignment or
         participation pursuant to Section 11.6 hereof shall, upon the
         effectiveness of the related transfer, be required to provide all of
         the forms and statements required pursuant to this Section 5, provided
         that in the case of a Person subject to a participation, such Person
         shall furnish all required forms and statements to the Bank from which
         the related participation shall have been purchased.

                  (c) If any Bank shall receive a credit or refund from a taxing
         authority with respect to, and actually resulting from, an amount of
         Non-Excluded Taxes actually paid to or on behalf of such Bank by a
         Borrower (a "Tax Credit"), such Bank shall promptly pay to such
         Borrower the amount so received with respect to the Tax Credit. If such
         Tax Credit is not received by such Bank in the form of cash, such Bank
         shall pay the amount of such Tax Credit not later than the time
         prescribed by applicable law for filing the return (including
         extensions of time) for such Bank's taxable period which includes the
         period in which such Bank receives the economic benefit of such Tax
         Credit. In any event, the amount of any Tax Credit payable by a Bank to
         a Borrower pursuant to this clause (c) shall not exceed the actual
         amount of cash refunded to, or credits received and usable (in
         accordance with the actual practices then in use by such Bank) by, such
         Bank from a taxing authority. In determining the amount of any Tax
         Credit, a Bank may use such apportionments and attribution rules as
         such bank customarily employs in allocating taxes among its various
         operations and income sources and such determination shall be
         conclusive absent manifest error. Each Borrower further agrees promptly
         to return to a Bank the amount paid to such Borrower with respect to a
         Tax Credit by such Bank if such Bank is caused to repay, or is
         determined to be ineligible for, a Tax Credit for such amount.
         Notwithstanding anything to the contrary contained herein, each
         Borrower hereby acknowledges and agrees that (i) neither the
         Administrative Agent nor any Bank shall be obligated to provide such
         Borrower with details of the tax position of the Administrative Agent
         or such Bank (as the case may be) and (ii) such Borrower shall have no
         right to inspect any records (including tax returns) of the
         Administrative Agent or such Bank (as the case may be).

Section 6.        Conditions Precedent.

                  Section 6.1 Initial Loan. The obligation of any Bank to make
         its initial Loan hereunder is subject to the conditions precedent
         (which conditions precedent apply to and shall be satisfied by the
         Borrowers severally) that the Administrative Agent shall have received
         the following documents (with, in the case of clauses (a), (b), (c),
         (d), and (e) below, sufficient counterparts or copies, as the case may
         be, for each Bank), each of which shall be satisfactory to the
         Administrative Agent (and to the extent specified below, to each Bank)
         in form and substance:

                  (a) Related Agreements. (i) True and correct copies, certified
         as to authenticity by each Fund, of the most recent Prospectus for each
         Borrower, the current registration statement for each Borrower, the
         most recent annual and semi-annual financial reports for each Borrower,
         (ii) with respect to the Shareholder Services Agreement for each
         Borrower, the Custody Agreement for each Borrower, the Distribution
         Agreement for each Borrower, and the Investment Management Agreement of
         each Fund in which the assets of each Borrower are invested, certified
         copies of any amendments thereto that have an effective date subsequent
         to December 18, 1998 or, alternatively, a certificate on behalf of each
         Borrower that no such amendments exist and that such documents, as in
         effect as of December 18, 1998, are still in full force and effect, and
         (iii) such other documents or instruments as may be reasonably
         requested by the Administrative Agent, including, without limitation, a
         copy of any debt instrument, security agreement or other material
         contract to which any Borrower may be a party.

                  (b) Corporate Documents. Certified copies of the charter and
         by-laws (or equivalent documents) of each Fund and of all corporate
         authority for each Fund (including, without limitation, board of
         director resolutions) with respect to the execution, delivery and
         performance of this Agreement and the Notes and each other document to
         be delivered by each Fund from time to time in connection herewith and
         the Loans hereunder (and the Administrative Agent and each Bank may
         conclusively rely on such certificate until it receives notice in
         writing from each Fund to the contrary).

                  (c) Incumbency Certificate. A certificate of each Fund, dated
         the Closing Date, as to the incumbency and signature of the officers of
         such Fund executing this Agreement or any Notes executed by the
         Secretary or any Assistant Secretary of such Fund, satisfactory in form
         and substance to the Administrative Agent.

                  (d) Opinion of Counsel to the Funds. An opinion, dated the
         date hereof, of Charles C.S. Park, Assistant General Counsel of
         American Century Investment Management, Inc., counsel to the Funds and
         each Borrower, substantially in the form of Exhibit 6.1(b) (and the
         Funds and each Borrower hereby instruct such counsel to deliver such
         opinion to the Banks and the Administrative Agent).

                  (e) Credit Agreement. Executed copies of this Agreement and
         all related documents in form and substance reasonably satisfactory to
         each Bank.

                  (f) Notes. If requested pursuant to Section 2.7(a) hereof, the
         Notes, duly completed and executed for each Bank.

                  (g) Other Documents. Such other documents as the
         Administrative Agent or any Bank or special New York counsel to Chase
         may reasonably request.

         The obligation of any Bank to make its initial Loan hereunder is also
         subject to the payment by the Funds of such fees as the Funds shall
         have agreed to pay or deliver to any Bank or the Administrative Agent
         in connection herewith, including, without limitation, the reasonable
         fees and expenses of Dechert Price & Rhoads, special New York counsel
         to Chase, in connection with the negotiation, preparation, execution
         and delivery of this Agreement and the Notes and the making of the
         Loans hereunder (to the extent that statements for such fees and
         expenses have been delivered to the Funds). The Funds shall allocate
         such fees and expenses among the Borrowers pro rata according to their
         respective Net Asset Values as at the date on which such fees and
         expenses are paid or otherwise in compliance with law.

                  Section 6.2 Initial and Subsequent Loans. The obligation of
         the Banks to make any Loan to a Borrower upon the occasion of each
         borrowing hereunder (including the initial borrowing) is subject to the
         further conditions precedent that both immediately prior to the making
         of such Loan and also after giving effect thereto and to the intended
         use thereof:

                  (a) no Default shall have occurred and be continuing;

                  (b) the representations and warranties made by each Fund on
         behalf of itself and each Borrower in Section 7 hereof shall be true
         and complete on and as of the date of the making of such Loan with the
         same force and effect as if made on and as of such date (or, if any
         such representation or warranty is expressly stated to have been made
         as of a specific date as of such specific date);

                  (c) the Banks shall be satisfied that the Loans and the use of
         proceeds thereof in respect of each Borrower comply in all respects
         with Regulation U. To the extent required by Regulation U, the
         Administrative Agent shall have received a copy of either (i) FR Form
         U-1, duly executed and delivered by each Fund on behalf of each
         Borrower and completed for delivery to each Bank, in form acceptable to
         the Administrative Agent, or (ii) a current list of "margin stock" (as
         defined in Regulation U) from each Borrower, in form acceptable to the
         Administrative Agent and in compliance with Section 221.3(c)(2) of
         Regulation U; and

                  (d) (i) Asset Coverage of at least 300% of any Borrower as
         provided by and in accordance with the Investment Company Act (provided
         that "total assets," as used in the Investment Company Act, shall not
         include any encumbered assets of a Borrower) and (ii) borrowing limits
         in such Borrower's Prospectus are not exceeded.

         Each notice of borrowing by a Fund on behalf of itself or a Borrower
         hereunder shall constitute a certification by such Fund to the effect
         set forth in the preceding sentence (both as of the date of such notice
         and, unless such Fund otherwise notifies the Administrative Agent prior
         to the date of such borrowing, as of the date of such borrowing).

Section 7.        Representations and Warranties.

                  Each Fund, on behalf of itself and each Borrower, hereby
         represents and warrants to the Administrative Agent and the Banks that
         (it being agreed that each Fund represents and warrants only to matters
         with respect to itself and each Borrower that is a part of such Fund,
         and each Borrower represents only to matters with respect to itself):

                  Section 7.1 Corporate Existence; Compliance with Law. Each
         Fund: (a) is a corporation duly organized, validly existing and in good
         standing under the laws of the jurisdiction of its organization; (b)
         has all requisite corporate or other power, and has all material
         governmental licenses, authorizations, consents and approvals necessary
         to own its assets and carry on its business as now being or as proposed
         to be conducted; (c) is qualified to do business and is in good
         standing in all jurisdictions where failure so to qualify could (either
         individually or in the aggregate) have a Material Adverse Effect; (d)
         has no Subsidiaries; and (e) is in compliance of all laws, including,
         but not limited to, the Investment Company Act and the Securities Act
         of 1933, as amended.

                  Section 7.2 Investment Company.

                  (a) Each Fund is registered with the Commission under the
         Investment Company Act as an open-end management investment company,
         and no order of suspension or revocation of such registration has been
         issued or proceedings therefor initiated or threatened by the
         Commission.

                  (b) Each Borrower is in substantial compliance with all
         investment objectives, policies, restrictions and limitations set forth
         or incorporated by reference in the Prospectus and applicable to such
         Borrower.

                  (c) The Investment Adviser is the primary investment adviser
         to each Borrower and Fund and, to the best knowledge of each Fund, the
         Investment Adviser is duly registered as an investment adviser under
         the Advisers Act.

                  Section 7.3 Permission to Borrow. Each Borrower is permitted
         to borrow hereunder pursuant to the limits and restrictions set forth
         in its Prospectus.

                  Section 7.4 Financial Condition. For each Borrower, the
         statement of assets and liabilities as of such Borrower's most recently
         ended fiscal year for which annual reports have been prepared and the
         related statements of operations and of changes in net assets for the
         fiscal year ended on such date, copies of which financial statements,
         certified by the independent public accountants for each Borrower, or
         the Fund acting on behalf of each such Borrower, as the case may be,
         have heretofore been delivered to each Bank, fairly present, in all
         material respects, the financial position of such Borrower as of such
         date and the results of its operations for such period, in conformity
         with GAAP (as consistently applied).

                  Section 7.5 Litigation. There are no legal or arbitral
         proceedings, or any proceedings by or before any governmental or
         regulatory authority or agency, now pending or (to the knowledge of any
         Fund or any Borrower) threatened against that Fund or Borrower (a) with
         respect to this Agreement and each of the Notes or any of the
         transactions contemplated hereby or thereby, or (b) that, if adversely
         determined could (either individually or in the aggregate) have a
         Material Adverse Effect.

                  Section 7.6 No Default. No Default or Event of Default has
         occurred and is continuing.

                  Section 7.7 No Breach. None of the execution and delivery of
         this Agreement and the Notes, the consummation of the transactions
         herein contemplated or compliance with the terms and provisions hereof
         will conflict with or result in a breach of, or require any consent
         under, the charter or by-laws of any Fund, or any applicable law or
         regulation, or any order, writ, injunction or decree of any court or
         governmental authority or agency, or any material agreement or
         instrument to which any Fund is a party or by which it or any of its or
         any Borrower's Property is bound or to which it is subject, or
         constitute a default under any such agreement or instrument.

                  Section 7.8 Action. Each Fund has all necessary corporate
         power, authority and legal right to execute, deliver and perform its
         obligations under this Agreement and the Notes and to borrow hereunder;
         the execution, delivery and performance by each Fund of this Agreement
         and the Notes and the ability to borrow hereunder have been duly
         authorized by all necessary corporate action on its part (including,
         without limitation, any required shareholder approvals); and this
         Agreement has been duly and validly executed and delivered by each Fund
         and constitutes, and each of the Notes when executed and delivered for
         value will constitute, its legal, valid and binding obligation,
         enforceable against each Fund in accordance with its terms, except as
         such enforceability may be limited by (a) bankruptcy, insolvency,
         reorganization, moratorium or similar laws of general applicability
         affecting the enforcement of creditors' rights and (b) the application
         of general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law).

                  Section 7.9 Approvals. No authorizations, approvals or
         consents of, and no filings or registrations with, any governmental or
         regulatory authority or agency, or any securities exchange, are
         necessary for the execution, delivery or performance by each Fund of
         this Agreement or the Notes or for the legality, validity or
         enforceability hereof or thereof.

                  Section 7.10 Use of Credit. No part of the proceeds of any
         Loan hereunder will be used in a manner that violates Regulation U.

                  Section 7.11 ERISA. No Fund has any ERISA Affiliates or has
         had any ERISA Affiliates at any time. No Fund maintains, contributes to
         or participates in, nor at any time has any Fund maintained,
         contributed to or participated in, any Plan or Multiemployer Plan.

                  Section 7.12 Taxes. Each Fund and each Borrower have filed all
         Federal income tax returns and all other material tax returns that are
         required to be filed by them and have paid all taxes due pursuant to
         such returns or pursuant to any assessment received by a Fund or any
         such Borrower. The charges, accruals and reserves on the books of each
         Fund in respect of taxes and other governmental charges are, in the
         opinion of each Fund, adequate. No Fund has given or been requested to
         give a waiver of the statute of limitations relating to the payment of
         any Federal, state, local and foreign taxes or other impositions.

                  Section 7.13 True and Complete Disclosure. No Prospectus, as
         of the date thereof, contains any untrue statement of material fact or
         omits to state any material fact necessary to make the statements
         therein, in light of the circumstances under which they were made, not
         misleading. Since the date of each such Prospectus, there has not been
         any change that would require a Fund to supplement or amend its
         Prospectus.

                  Section 7.14 Accuracy of Information. All factual information
         heretofore or contemporaneously furnished by or on behalf of each Fund
         and each Borrower in writing to the Administrative Agent or any Bank
         for purposes of or in connection with this Agreement or any transaction
         contemplated hereby (in each case, as amended, superseded, supplemented
         or otherwise modified with the knowledge of the Administrative Agent or
         such Bank) is, and all other such factual information hereafter
         furnished by or on behalf of each Fund and each Borrower to the
         Administrative Agent or any Bank (in each case, as amended, superseded,
         supplemented or otherwise modified with the knowledge of the
         Administrative Agent or such Bank) will be, true and accurate in every
         material respect on the date as of which such information is dated or
         certified, and to the extent such information was furnished to the
         Administrative Agent or such Bank heretofore or contemporaneously, as
         of the date of execution and delivery of this Agreement by the
         Administrative Agent or such Bank, and such information is not, or
         shall not be, as the case may be, incomplete by omitting to state any
         material fact necessary to make such information not misleading.

                  Section 7.15 Indebtedness. As of the date hereof, neither any
         Fund nor any Borrower has any Indebtedness other than (a) current
         liabilities consisting of expenses payable and payables for securities
         purchased and (b) obligations under Financial Contracts.

                  Section 7.16 Property and Liens. No Lien exists upon any
         Property of any Fund except for Liens permitted by Section 8.6 hereof.

                  Section 7.17 Blue Sky Registrations. There are in full force
         and effect orders of effective securities registration for the
         securities of each Borrower in each state in which such securities are
         sold or are offered for sale and required to be so registered.

                  Section 7.18 Federal Regulations. If requested by any Bank or
         the Administrative Agent from time to time, each of the Funds and each
         Borrower will furnish to the Administrative Agent and each Bank a
         statement and current list of the assets of each Borrower in conformity
         with the requirements of FR Form U-1 referred to in said Regulation U.
         Other than the furnishing of such statement and such list, no filing or
         other action is required under the provision of Regulations T, U or X
         in connection with the execution and delivery of the Agreement and the
         making of the Loans hereunder.

                  Section 7.19 Apportionment Among Funds. Borrowings of Loans by
         a Fund for the benefit of any Borrower will be allocated by such Fund
         among the Borrowers on a fair and equitable basis not in violation of
         applicable law and in accordance with the procedures established prior
         to the date of this Agreement by the board of directors of the Fund, as
         such procedures may be amended from time to time.

                  Section 7.20 No Material Adverse Change. For each Borrower,
         since the date of the statement of assets and liabilities for the most
         recently ended fiscal year for which annual reports have been prepared
         for such Borrower, there has been no development or event which has had
         or could reasonably be expected to have a Material Adverse Effect with
         respect to such Borrower.

                  Section 7.21 Year 2000. Each Fund (i) has to the best of its
         knowledge completed (x) any reprogramming required to permit the proper
         functioning, in and following the year 2000, of critical computer
         systems and equipment containing imbedded microchips that such Fund
         uses in connection with its operations, and if applicable the
         operations of each investment series or portfolio thereof that is a
         Borrower (the "Systems"), and (y) the testing of the Systems, as so
         reprogrammed, and (ii) has obtained assurances from its material
         service providers and those of any portfolio or series of such Fund
         that is a Borrower (in each case, excluding the Administrative Agent
         and the Banks) that any programming required to permit the proper
         functioning in and following the year 2000 of the critical computer
         systems of such material service provider, and the testing of such
         systems, as reprogrammed, has been completed. The cost to each Fund,
         and each investment series or portfolio thereof that is a Borrower, of
         such reprogramming and testing will not result in an Event of Default
         or a Material Adverse Effect.

Section 8.        Covenants of the Funds.

                  Each Fund for itself and each Borrower for itself hereby
         covenants and agrees with the Banks and the Administrative Agent that,
         so long as any Commitment or Loan is outstanding to it or (in the case
         of any Fund) any Borrower that is a part of such Fund and until payment
         in full of all amounts payable by it or (in the case of any Fund) any
         Borrower that is a part of such Fund hereunder (it being agreed that
         each Fund covenants only to matters with respect to itself and each
         Borrower that is a part of such Fund, and each Borrower covenants only
         to matters with respect to itself):

                  Section 8.1 Financial Statements. Each Fund or Borrower, as
         applicable, shall deliver to the Administrative Agent (with copies for
         each Bank):

                  (a) as soon as available and in any event within 75 days after
         the end of each fiscal year of such Borrower, a statement of assets and
         liabilities of that Borrower as of the end of such fiscal year, a
         statement of operations for such fiscal year, a statement of changes in
         net assets for such fiscal year and the preceding fiscal year, a
         portfolio of investments as of the end of such fiscal year and the per
         share and other data for such fiscal year prepared in accordance with
         GAAP (as consistently applied) and all regulatory requirements, and all
         presented in a manner acceptable to the Securities and Exchange
         Commission or any successor or analogous Governmental Authority and
         acceptable to PricewaterhouseCoopers LLP, Deloitte & Touche LLP, or any
         other independent certified public accountants of recognized standing;

                  (b) as soon as available and in any event within 60 days after
         the close of the first six-month period of each fiscal year of such
         Borrower, a statement of assets and liabilities as of the end of such
         six-month period, a statement of operations for such six-month period,
         a statement of changes in net assets for such six-month period and a
         portfolio of investments as of the end of such six-month period, all
         prepared in accordance with regulatory requirements and all certified
         (subject to normal year-end adjustments) as to fairness of
         presentation, GAAP (as consistently applied) and consistency by a
         Responsible Officer; and

                  (c) as soon as available, but in any event not later than 10
         days after the end of each fiscal quarter of each Borrower, the net
         asset value sheet of such Borrower as of the end of such quarter, in
         the form and detail similar to those customarily prepared by each of
         the Fund's management for internal use and reasonably satisfactory to
         the Administrative Agent, certified by a Responsible Officer as being
         fairly stated in all material respects; provided, however, that if any
         Borrower has Loans outstanding, such Borrower shall provide each Bank
         with (i) such net asset value sheet described above in this Section 8.1
         and (ii) a certificate of a Responsible Officer showing in reasonable
         detail the calculations supporting such Borrower's compliance with
         Section 6.2(d) hereof, within three Business Days after the end of each
         calendar week so long as any Loans to such Borrower remain outstanding;

         all such financial statements shall be complete and correct in all
         material respects and shall be prepared in reasonable detail and in
         accordance with GAAP applied consistently throughout the periods
         reflected therein and with prior periods (except as approved by such
         accountants or officer, as the case may be, and disclosed therein).

                  Section 8.2 Certificates; Other Information. Each Fund or
         Borrower, as applicable, shall deliver to the Administrative Agent
         (with copies for each Bank):

                  (a) concurrently with the delivery of the financial statements
         referred to in Sections 8.1(a), (b), and (c) hereto and the quarterly
         report in Section 8.2(c) hereof, a certificate of a Responsible Officer
         stating that (i) to the best of such Responsible Officer's knowledge,
         such Borrower during such period has observed or performed all of its
         covenants and other agreements, and satisfied every condition,
         contained in this Agreement and the Notes to be observed, performed or
         satisfied by it, and (ii) no Default or Event of Default has occurred
         and is continuing except as specified in such certificate;

                  (b) within five days after the same are sent, copies of all
         financial statements and reports which each Borrower generally sends to
         its investors, and within five Business Days after the same are filed,
         copies of all financial statements and material reports which each
         Borrower may make to, or file with, the Securities and Exchange
         Commission or any successor or analogous Governmental Authority;

                  (c) as soon as available, but in any event not later than 10
         days after the end of each fiscal quarter, a certificate of a
         Responsible Officer (i) stating that the list of each Borrower's
         portfolio securities attached to such certificate is true and correct
         and (ii) showing in reasonable detail the calculations supporting such
         Borrower's compliance with Section 6.2(d) hereof; and

                  (d) promptly, such additional financial and other information
         as any Bank may from time to time reasonably request, including, but
         not limited to, copies of all changes to the Prospectus and
         registration statement.

                  Section 8.3 Notices. Each Fund or Borrower, as the case may
         be, shall promptly give notice to the Administrative Agent and each
         Bank of

                  (a) the occurrence of any Default or Event of Default with
         respect to such Borrower;

                  (b) any (i) default or event of default under any Contractual
         Obligation of such Borrower or such Fund or (ii) litigation,
         investigation or proceeding which may exist at any time between any
         Fund and/or any Borrower and any Governmental Authority, which in
         either case, if not cured or if adversely determined, as the case may
         be, could reasonably be expected to have a Material Adverse Effect;

                  (c) any litigation or proceeding affecting such Borrower in
         which the amount reasonably determined to be at risk is $1,000,000 or
         more and not covered by insurance or in which injunctive or similar
         relief is sought;

                  (d) any change in any of the parties to any Custody Agreement
         relating to any Fund;

                  (e) any material change in such Borrower's Prospectus or
         registration statement; and

                  (f) any development or event which could reasonably be
         expected to have a Material Adverse Effect on any such Borrower.

         Each notice pursuant to this subsection shall be accompanied by a
         statement of a Responsible Officer setting forth details of the
         occurrence referred to therein and stating what action such Fund or
         such Borrower proposes to take with respect thereto.

                  Section 8.4 Existence, Etc. Each Fund will:

                  (a) preserve and maintain its legal existence and all of its
         (and each Borrower's) material rights, privileges, licenses and
         franchises;

                  (b) comply with the requirements of all applicable laws,
         rules, regulations and orders of governmental or regulatory authorities
         (including, without limitation, the Investment Company Act and all
         rules and regulations promulgated thereunder, and Regulations U and X
         and other applicable regulations of the Board of Governors of the
         Federal Reserve System) if failure to comply with such requirements
         could reasonably be expected to have a Material Adverse Effect;

                  (c) pay and discharge, on its own behalf and on behalf of each
         Borrower, all material taxes, assessments and governmental charges or
         levies imposed on the income, profits or Property of it or of such
         Borrower prior to the date on which penalties attach thereto, except
         for any such tax, assessment, charge or levy the payment of which is
         being contested in good faith and by proper proceedings and against
         which adequate reserves are being maintained;

                  (d) pay and discharge, on its own behalf and on the behalf of
         each Borrower, at or before maturity or before they become delinquent,
         as the case may be, all its obligations of whatever nature, except
         where (i) the amount or validity thereof is currently being contested
         in good faith by appropriate proceedings and reserves in conformity
         with GAAP with respect thereto have been provided on the books of such
         Borrower, as the case may be, or (ii) the lack of timely payment
         thereof could not reasonably be expected to have a Material Adverse
         Effect;

                  (e) preserve and maintain its status as a registered, open-end
         management investment company under the Investment Company Act;

                  (f) maintain at all times its current primary custodians
         responsible for the safekeeping of portfolio securities, unless the
         prior written consent of the Banks has been obtained, provided, that
         such consent is not required (i) of any Bank which is also such primary
         custodian, or (ii) for a Borrower to change its primary custodian to a
         bank or trust company organized under the laws of the United States or
         a political subdivision thereof having assets of at least
         $10,000,000,000 and a long-term debt or deposit rating of at least A
         from Standard & Poor's Ratings Group or A2 from Moody's Investor
         Services, Inc.;

                  (g) keep, and cause each of the Borrowers to keep, adequate
         records and books of account, in which complete entries will be made in
         accordance with GAAP and the Investment Company Act and regulations
         promulgated thereunder reflecting all financial transactions of each
         Fund and each Borrower;

                  (h) cause each Borrower to comply in all material respects
         with all investment objectives, policies, restrictions and limitations
         set forth or incorporated by reference in the Prospectus and applicable
         to such Borrower; and

                  (i) permit representatives of (i) the Administrative Agent,
         upon its own discretion or at the reasonable request of any Bank, and
         (ii) upon the occurrence and during the continuance of an Event of
         Default, any Bank to visit and inspect any of such Borrower's
         properties and examine and make abstracts from any of its books and
         records during normal business hours and to discuss the business,
         operations, properties, and financial and other condition of such
         Borrower with officers and employees of such Borrower and with its
         independent certified public accountants; provided, that, unless a
         Default or an Event of Default shall have occurred and be continuing,
         the Administrative Agent shall provide the Borrowers with five Business
         Days' prior notice of such visit and shall only conduct such visit once
         a year.

                  Section 8.5 Use of Proceeds. A Fund will use the proceeds of
         the Loans made hereunder for the benefit of any Borrower solely to
         finance temporarily the repurchase or redemption of shares of such
         Borrower at the request of the holders of such shares, pending the
         orderly sale of portfolio securities held by such Borrower, in
         compliance with all applicable legal and regulatory requirements,
         including, without limitation, Regulations U and X, the Securities Act
         of 1933, as amended, and the Securities Exchange Act of 1934, as
         amended, and the respective rules and regulations promulgated
         thereunder; provided that neither the Administrative Agent nor any Bank
         shall have any responsibility as to the use of any of such proceeds.

                  Section 8.6 Insurance. Each Fund will keep insured by
         financially sound and reputable insurers all Property of a character
         usually insured by investment companies engaged in the same or similar
         business against loss or damage of the kinds and in the amounts
         required to be maintained by the Funds pursuant to Section 17(g) of the
         Investment Company Act and Rule 17g-1 promulgated thereunder.

                  Section 8.7 Prohibition of Fundamental Changes. Each Fund will
         not and will not permit any Borrower to:

                  (a) enter into any transaction of merger or consolidation or
         amalgamation, or liquidate, wind up or dissolve itself (or suffer any
         liquidation or dissolution) (a "Merger");

                  (b) acquire any business or Property from, or capital stock
         of, or be a party to any acquisition of, any Person (an "Acquisition")
         except for purchases of Property in the ordinary course of business and
         securities purchased for account of the Borrowers and not in violation
         of the terms and conditions of this Agreement (including, without
         limitation, Section 8.4(f) hereof);

                  (c) convey, sell, lease, transfer or otherwise dispose of, in
         one transaction or a series of transactions (a "Transfer"), all or a
         substantial part of its business or Property, whether now owned or
         hereafter acquired except for assets and securities sold or disposed of
         in the ordinary course of business, including purchase and sale
         transactions performed under rule 17a-7 of the Investment Company Act;

                  (d) have any Subsidiaries;

                  (e) maintain, contribute to or participate in any Plan or
         Multiemployer Plan; or

                  (f) change or modify in any material respect any fundamental
         investment objective, policy or investment restriction or limitation of
         such Borrower described in its Prospectus.

         Notwithstanding the foregoing clauses (a), (b) and (c) of this Section
         8.7, a Fund may consummate a Merger, an Acquisition or a Transfer with
         a Specified Existing Fund Affiliate provided that:

                  (i) no Default shall have occurred and be continuing at the
         time of such Merger, Acquisition or Transfer or would result therefrom,

                  (ii) in connection with such Merger, Acquisition or Transfer,
         such Fund shall deliver to the Administrative Agent a certificate of a
         senior officer of such Fund stating that the Asset Coverage of each
         Borrower shall not be reduced as a result thereof,

                  (iii) the Merger, Acquisition or Transfer is with another
         Borrower and the Investment Adviser is the investment manager to the
         entity surviving such Merger, Acquisition or Transfer, and

                  (iv) the Administrative Agent shall have received an opinion
         of counsel for such Fund, satisfactory to the Administrative Agent in
         form and substance, as to such Merger, Acquisition or Transfer being in
         compliance with the terms of this Agreement.

                  Section 8.8 Limitations on Liens. No Fund will, nor will a
         Fund permit any Borrower to, create, incur, assume or suffer to exist
         any Lien upon any of its Property, whether now owned or hereafter
         acquired, except:

                  (a) Liens imposed by any governmental authority for taxes,
         assessments or charges not yet due or that are being contested in good
         faith and by appropriate proceedings if adequate reserves with respect
         thereto are maintained on the books of such Borrower in accordance with
         GAAP;

                  (b) Liens created pursuant to a Custody Agreement; and

                  (c) Liens securing indebtedness permitted under Section 8.9
         hereof and any other Liens created, incurred, assumed or suffered to
         exist in compliance with the Prospectus of such Borrower which are not
         otherwise prohibited, and for which the Administrative Agent has been
         given prior written notice.

                  Section 8.9 Indebtedness. A Fund will not, nor will it permit
         any Borrower to, create, incur or suffer to exist any Indebtedness
         except (a) Indebtedness to the Banks hereunder and (b) obligations
         under Financial Contracts.

                  Section 8.10 Dividend Payments. A Fund will not, and will not
         permit any Borrower to, declare or make any Dividend Payment at any
         time if, either before or after giving effect thereto, (a) a Default
         shall have occurred and be continuing (provided that, unless any
         amounts payable hereunder have been declared due and payable pursuant
         to Section 9 hereof, nothing contained in this clause (a) shall limit
         the ability of any Borrower to distribute each year all of its net
         investment income (including net realized capital gains) so that it
         will not be subject to tax (including corporate and/or excise taxes)
         under the Code) or (b) such Dividend Payment would be in violation of
         the Investment Company Act.

                  Section 8.11 Asset Coverage; Borrowing Limits. A Fund will not
         permit (i) the Asset Coverage for any Borrower to be less than 300% at
         any time, provided, that "total assets," as used in the definition of
         "asset coverage" in the Investment Company Act, shall not include any
         encumbered assets of such Borrower, or (ii) any Borrower to violate the
         limits on borrowing as set forth in such Borrower's Prospectus.

                  Section 8.12 Lines of Business. No Fund will engage in any
         line or lines of business activity other than that of an open-end
         management investment company.

                  Section 8.13 Modifications of Certain Documents. Unless as
         otherwise required by law, without the prior consent of the
         Administrative Agent (with the approval of the Majority Banks), such
         consent and approval not to be unreasonably withheld, no Borrower will
         consent to any modification, supplement or waiver of any of the
         provisions of (a) its Articles of Incorporation, (b) its By-Laws or (c)
         its Custody Agreement.

Section 9.        Events of Default.

                  If one or more of the following events (herein called "Events
         of Default") shall occur and be continuing:

                  (a) A Fund or Borrower shall (i) default in the payment when
         due (whether at stated maturity or upon mandatory or optional
         prepayment) of any principal of any Loan or (b) default in the payment
         when due of any interest on any Loan, any fee or any other amount
         payable by it hereunder and such default shall have continued
         unremedied for three or more days; or

                  (b) A Fund or Borrower shall default in the payment when due
         (after any applicable grace period) of any amount aggregating
         $1,000,000 or more under any Financial Contract; or any event specified
         in any Financial Contract shall occur if the effect of such event is to
         cause, or (with the giving of any notice or the lapse of time or both)
         to permit, termination or liquidation payment or payments aggregating
         $1,000,000 or more to become due; or

                  (c) Any representation, warranty or certification made or
         deemed made herein (or in any modification or supplement hereto) by a
         Borrower, or any certificate furnished to any Bank or the
         Administrative Agent pursuant to the provisions hereof, shall prove to
         have been false or misleading as of the time made or furnished in any
         material respect; or

                  (d) A Fund or Borrower shall default in the performance of any
         of its obligations under any of Sections 8.3(a) and 8.7 through 8.13
         hereof; or such Fund or Borrower shall default in the performance of
         any of its other obligations in this Agreement and such default shall
         continue unremedied for a period of thirty or more days after notice
         thereof to such Fund or Borrower by the Administrative Agent or any
         Bank (through the Administrative Agent); or

                  (e) A Fund or a Borrower shall admit in writing its inability
         to, or be generally unable to, pay its debts as such debts become due;
         or

                  (f) A Fund or a Borrower shall (i) apply for or consent to the
         appointment of, or the taking of possession by, a receiver, custodian,
         trustee, examiner or liquidator of itself or of all or a substantial
         part of its Property, (ii) make a general assignment for the benefit of
         its creditors, (iii) commence a voluntary case under the Bankruptcy
         Code, (iv) file a petition seeking to take advantage of any other law
         relating to bankruptcy, insolvency, reorganization, liquidation,
         dissolution, arrangement or winding-up, or composition or readjustment
         of debts, (v) fail to controvert in a timely and appropriate manner, or
         acquiesce in writing to, any petition filed against it in an
         involuntary case under the Bankruptcy Code or (vi) take any corporate
         action for the purpose of effecting any of the foregoing; or

                  (g) A proceeding of law shall be commenced, without the
         application or consent of a Fund or a Borrower, in any court of
         competent jurisdiction, seeking (i) its reorganization, liquidation,
         dissolution, arrangement or winding-up, or the composition or
         readjustment of its debts, (ii) the appointment of a receiver,
         custodian, trustee, examiner, liquidator or the like of such Borrower
         or of all or any substantial part of its Property or (iii) similar
         relief in respect of such Fund or Borrower under any law relating to
         bankruptcy, insolvency, reorganization, winding up, or composition or
         adjustment of debts, and such proceeding or case shall continue
         undismissed, or an order, judgment or decree approving or ordering any
         of the foregoing shall be entered and continue unstayed and in effect,
         for a period of 60 or more days; or an order for relief against such
         Fund or Borrower shall be entered in an involuntary case under the
         Bankruptcy Code; or

                  (h) A final judgment or judgments for the payment of money of
         $250,000 or more in the aggregate shall be rendered by one or more
         courts, administrative tribunals or other bodies having jurisdiction
         against a Borrower and the same shall not be discharged (or provision
         shall not be made for such discharge), or a stay of execution thereof
         shall not be procured within 60 days from the date of entry thereof and
         such Borrower shall not, within said period of 60 days, or such longer
         period during which execution of the same shall have been stayed,
         appeal therefrom and cause the execution thereof to be stayed during
         such appeal; or

                  (i) Except as expressly permitted by Section 8.7 hereof, any
         Person, or related Persons constituting a "group" for purposes of
         Section 13(d) of the Securities Exchange Act of 1934, as amended,
         (other than a Specified Existing Fund Affiliate) shall have acquired
         beneficial ownership, directly or indirectly, of more than 33% of the
         outstanding voting stock of a Fund or a Borrower; or

                  (j) Any Person, or related Persons constituting a "group" for
         purposes of Section 13(d) of the Securities Exchange Act of 1934, as
         amended, (other than a Specified Existing Investment Adviser Affiliate)
         shall have acquired beneficial ownership, directly or indirectly, of
         more than 33% of the outstanding voting stock or other ownership
         interests of the Investment Adviser; or

                  (k) A Fund or a Borrower's registration under the Investment
         Company Act shall lapse or be suspended (or proceedings for such
         purpose shall have been instituted); or

                  (l) A Fund or a Borrower shall fail to comply with the
         Investment Company Act in a manner which could be reasonably expected
         to have a Material Adverse Effect; or

                  (m) A Borrower shall fail to comply with its investment
         policies and restrictions as set forth in its Prospectus in a manner
         which could be reasonably expected to have a Material Adverse Effect;
         or

                  (n) unless consented to by the Banks, the Investment Adviser
         or an Investment Adviser Affiliate shall cease to act as the sole
         investment adviser to a Fund or a Borrower, or the Investment Adviser
         shall cease to be registered as an investment adviser under the
         Advisers Act; or

                  (o) since the date of the statement of assets and liabilities
         for the most recently ended fiscal year for which such annual reports
         have been prepared for a Borrower, there has been a development or
         event which has had or could reasonably be expected to have a Material
         Adverse Effect with respect to such Borrower;

         THEREUPON: (i) in the case of an Event of Default other than one
         referred to in clause (f) or (g) of this Section 9 with respect to a
         Borrower, the Administrative Agent may and, upon request of the
         Majority Banks, will, by notice to such Borrower, terminate the
         Commitments and/or declare the principal amount then outstanding of,
         and the accrued interest on, the Loans and all other amounts payable by
         such Borrower hereunder and under the Notes to be forthwith due and
         payable, whereupon such amounts shall be immediately due and payable
         without presentment, demand, protest or other formalities of any kind,
         all of which are hereby expressly waived by such Borrower; and (ii) in
         the case of the occurrence of an Event of Default referred to in clause
         (f) or (g) of this Section 9 with respect to a Borrower, the
         Commitments shall automatically be terminated and the principal amount
         then outstanding of, and the accrued interest on, the Loans and all
         other amounts payable by such Borrower hereunder and under the Notes
         shall automatically become immediately due and payable without
         presentment demand, protest or other formalities of any kind, all of
         which are hereby expressly waived by such Borrower.

         Notwithstanding any other provision herein to the contrary, Defaults
         and Events of Default shall have the following results:

                  (i)      a Default or Event of Default with respect to one
                           Borrower shall not constitute a Default or Event of
                           Default to any other Borrower;

                  (ii)     except as set forth in clause (iii) below, a Default
                           or Event of Default with respect to a Fund acting on
                           behalf of one or more Borrowers shall constitute a
                           Default or Event of Default, as the case may be, only
                           to the Borrower or Borrowers implicated in, or
                           affected by, the act or omission causing such Default
                           or Event of Default;

                  (iii)    a Fund Default or Fund Event of Default with respect
                           to a Fund acting on behalf of one or more Borrowers
                           shall constitute a Default or Event of Default, as
                           the case may be, to each Borrower issued by such Fund
                           for which such Fund Default or Fund Event of Default
                           may in the reasonable discretion of the
                           Administrative Agreement be reasonably expected to
                           have a Material Adverse Effect on each such
                           Borrower's ability to perform its obligations under
                           this Agreement and the Notes; and

                  (iv)     an Event of Default of the type described in
                           paragraph (n) of this Section 9 shall constitute an
                           Event of Default to all Borrowers.

         "Fund Event of Default" shall mean an Event of Default with respect to
         a Fund (A) of any of the types described in paragraphs (b), (f), (g),
         (h) or (k) of this Section 9, or (B) arising from such Fund's failure
         to comply with the covenants set forth in Sections 8.3, 8.4 and 8.5
         hereof. "Fund Default" shall mean any of the covenants giving rise to
         Fund Events of Default, whether or not any requirement for the giving
         of notice, the lapse of time, or both, or any other condition, has been
         satisfied.

Section 10.       The Administrative Agent

                  Section 10.1 Appointment, Powers and Immunities. Each Bank
         hereby appoints and authorizes the Administrative Agent to act as its
         agent hereunder with such powers as are specifically delegated to the
         Administrative Agent by the terms of this Agreement, together with such
         other powers as are reasonably incidental thereto. The Administrative
         Agent (which term as used in this sentence and in Section 10.5 and the
         first sentence of Section 10.6 hereof shall include reference to its
         affiliates and its own and its affiliates' officers, directors,
         employees and agents):

                  (a) shall have no duties or responsibilities except those
         expressly set forth in this Agreement, and shall not by reason of this
         Agreement be a trustee for any Bank;

                  (b) shall not be responsible to the Banks for any recitals,
         statements, representations or warranties contained in this Agreement,
         or in any certificate or other document referred to or provided for in,
         or received by any of them under, this Agreement, or for the value,
         validity, effectiveness, genuineness, enforceability or sufficiency of
         this Agreement, any Note or any other document referred to or provided
         for herein or for any failure by a Borrower or any other Person to
         perform any of its obligations hereunder or thereunder;

                  (c) shall not be required to initiate or conduct any
         litigation or collection proceedings hereunder;

                  (d) shall not be responsible for any action taken or omitted
         to be taken by it hereunder or under any other document or instrument
         referred to or provided for herein or in connection herewith, except
         for its own gross negligence or willful misconduct; and

                  (e) shall not be under any obligation to any Bank to ascertain
         or to inquire as to the observance or performance of any of the
         agreements contained in, or conditions of, this Agreement or any other
         documents related to this Agreement, or to inspect the properties,
         books or records of any Fund or any Borrower.

         The Administrative Agent may employ agents and attorneys-in-fact and
         shall not be responsible for the negligence or misconduct of any such
         agents or attorneys-in-fact selected by it in good faith. The
         Administrative Agent may deem and treat the payee of a Note as the
         holder thereof for all purposes hereof unless and until a notice of the
         assignment or transfer thereof shall have been filed with the
         Administrative Agent, together with the consent of the Funds to such
         assignment or transfer (to the extent required by Section 11.6(b)
         hereof).

                  Section 10.2 Reliance by Administrative Agent. The
         Administrative Agent shall be entitled to rely upon any certification,
         notice or other communication (including, without limitation, any
         thereof by telephone, telecopy, telegram or cable) reasonably believed
         by it to be genuine and correct and to have been signed or sent by or
         on behalf of the proper Person or Persons, and upon advice and
         statements of legal counsel, independent accountants and other experts
         selected by the Administrative Agent. As to any matters not expressly
         provided for by this Agreement, the Administrative Agent shall in all
         cases be fully protected in acting, or in refraining from acting,
         hereunder in accordance with instructions given by the Majority Banks,
         and such instructions of the Majority Banks and any action taken or
         failure to act pursuant thereto shall be binding on all of the Banks.

                  Section 10.3 Defaults. The Administrative Agent shall not be
         deemed to have knowledge or notice of the occurrence of a Default
         unless the Administrative Agent has received notice from a Bank or a
         Borrower specifying such Default and stating that such notice is a
         "Notice of Default". In the event that the Administrative Agent
         receives such a notice of the occurrence of a Default, the
         Administrative Agent shall give prompt notice thereof to the Banks. The
         Administrative Agent shall (subject to Section 10.7 hereof) take such
         action with respect to such Default as shall be directed by the
         Majority Banks, provided that, unless and until the Administrative
         Agent shall have received such directions, the Administrative Agent may
         (but shall not be obligated to) take such action, or refrain from
         taking such action, with respect to such Default as it shall deem
         advisable in the best interest of the Banks except to the extent that
         this Agreement expressly requires that such action be taken, or not be
         taken, only with the consent or upon the authorization of the Majority
         Banks or all of the Banks.

                  Section 10.4 Rights as a Bank. With respect to its Commitment
         and the Loans made by it, Chase (and any successor acting as
         Administrative Agent) in its capacity as a Bank hereunder shall have
         the same rights and powers hereunder as any other Bank and may exercise
         the same as though it were not acting as the Administrative Agent, and
         the term "Bank" or "Banks" shall, unless the context otherwise
         indicates, include the Administrative Agent in its individual capacity.
         Chase (and any successor acting as Administrative Agent) and its
         affiliates may (without having to account therefor to any Bank) accept
         deposits from, lend money to, make investments in and generally engage
         in any kind of banking, trust or other business with the Funds (and any
         of their affiliates) as if it were not acting as the Administrative
         Agent, and Chase (and any such successor) and its affiliates may accept
         fees and other consideration from the Funds for services in connection
         with this Agreement or otherwise without having to account for the same
         to the Banks.

                  Section 10.5 Indemnification. The Banks agree to indemnify the
         Administrative Agent (to the extent not reimbursed under Section 11.3
         hereof, but without limiting the obligations of the Funds under said
         Section 11.3) ratably in accordance with the aggregate principal amount
         of the Loans held by the Banks (or, if no Loans are at the time
         outstanding, ratably in accordance with their respective Commitments),
         for any and all liabilities, obligations, losses, damages, penalties,
         actions, judgments, suits, costs, expenses or disbursements of any kind
         and nature whatsoever that may be imposed on, incurred by or asserted
         against the Administrative Agent arising out of or by reason of any
         investigation in or in any way relating to or arising out of this
         Agreement or any other documents contemplated by or referred to herein
         or the transactions contemplated hereby or the enforcement of any of
         the terms hereof or of any such other documents, provided that no Bank
         shall be liable for any of the foregoing to the extent they arise from
         the gross negligence or willful misconduct of the party to be
         indemnified.

                  Section 10.6 Non-Reliance on Administrative Agents and Other
         Banks. Each Bank expressly acknowledges that neither the Administrative
         Agent nor any of its officers, directors, employees, agents,
         attorneys-in-fact or affiliates has made any representations or
         warranties to it and that no act by the Administrative Agent
         hereinafter taken, including any review of the affairs of the Funds or
         Borrowers, shall be deemed to constitute any representation or warranty
         by the Administrative Agent to any Bank. Each Bank agrees that it has,
         independently and without reliance on the Administrative Agent or any
         other Bank, and based on such documents and information as it has
         deemed appropriate, made its own credit analysis of the Borrowers and
         decision to enter into this Agreement and that it will, independently
         and without reliance upon the Administrative Agent or any other Bank,
         and based on such documents and information as it shall deem
         appropriate at the time, continue to make its own analysis and
         decisions in taking or not taking action under this Agreement. The
         Administrative Agent shall not be required to keep itself informed as
         to the performance or observance by the Borrowers of this Agreement or
         any other document referred to or provided for herein or to inspect the
         Properties or books of the Borrowers. Except for notices, reports and
         other documents and information expressly required to be furnished to
         the Banks by the Administrative Agent hereunder, the Administrative
         Agent shall not have any duty or responsibility to provide any Bank
         with any credit or other information concerning the affairs, financial
         condition or business of the Borrowers (or any of their affiliates)
         that may come into the possession of the Administrative Agent or any of
         its affiliates.

                  Section 10.7 Failure to Act. Except for action expressly
         required of the Administrative Agent hereunder, the Administrative
         Agent shall in all cases be fully justified in failing or refusing to
         act hereunder unless it shall receive further assurances to its
         satisfaction from the Banks of their indemnification obligations under
         Section 10.5 hereof against any and all liability and expense that may
         be incurred by it by reason of taking or continuing to take any such
         action.

                  Section 10.8 Resignation or Removal of Administrative Agent.
         Subject to the appointment and acceptance of a successor Administrative
         Agent as provided below, the Administrative Agent may resign at any
         time by giving notice thereof to the Banks and the Funds, and the
         Administrative Agent may be removed at any time with or without cause
         by the Majority Banks. Upon any such resignation or removal, the
         Majority Banks shall have the right to appoint a successor
         Administrative Agent with the consent of the Funds, which consent shall
         not be unreasonably withheld or delayed. If no successor Administrative
         Agent shall have been so appointed by the Majority Banks and shall have
         accepted such appointment within 30 days after the retiring
         Administrative Agent's giving of notice of resignation or the Majority
         Banks' removal of the retiring Administrative Agent, then the retiring
         Administrative Agent may, on behalf of the Banks and with the consent
         of the Funds, which consent shall not be unreasonably withheld or
         delayed, appoint a successor Administrative Agent, that shall be a bank
         that has an office in New York, New York with a combined capital and
         surplus of at least $500,000,000. Upon the acceptance of any
         appointment as Administrative Agent hereunder by a successor
         Administrative Agent, such successor Administrative Agent shall
         thereupon succeed to and become vested with all the rights, powers,
         privileges and duties of the retiring Administrative Agent, and the
         retiring Administrative Agent shall be discharged from its duties and
         obligations hereunder. After any retiring Administrative Agent's
         resignation or removal hereunder as Administrative Agent, the
         provisions of this Section 10 shall continue in effect for its benefit
         in respect of any actions taken or omitted to be taken by it while it
         was acting as the Administrative Agent.

Section 11.       Miscellaneous.

                  Section 11.1 Waiver. No failure on the part of the
         Administrative Agent or any Bank to exercise and no delay in
         exercising, and no course of dealing with respect to, any right, power
         or privilege under this Agreement or any Note shall operate as a waiver
         thereof, nor shall any single or partial exercise of any right, power
         or privilege under this Agreement or any Note preclude any other or
         further exercise thereof or the exercise of any other right, power or
         privilege. The remedies provided herein are cumulative and not
         exclusive of any remedies provided by law.

                  Section 11.2 Notices. All notices, requests and other
         communications provided for herein (including, without limitation, any
         modifications of, or waivers, requests or consents under, this
         Agreement) shall be given or made in writing (including, without
         limitation, by telecopy) delivered to the intended recipient at the
         "Address for Notices" specified below its name on the signature pages
         hereof; or, as to any party, at such other address as shall be
         designated by such party in a notice to each other party. Except as
         otherwise provided in this Agreement, all such communication shall be
         deemed to have been duly given when transmitted by telecopier or
         personally delivered or, in the case of a mailed notice, upon receipt,
         in each case given or addressed as aforesaid.

                  Section 11.3 Expenses, Etc.

                  (a) Each Borrower agrees severally (pro rata based on their
         respective Net Asset Values) (i) to reimburse the Administrative Agent
         for its reasonable out-of-pocket costs and expenses incurred in
         connection with the development, preparation and execution of, and any
         amendment, supplement or modification to, this Agreement and any Notes
         and any other documents prepared in connection herewith or therewith,
         and the consummation and administration of the transactions
         contemplated hereby and thereby, including, without limitation, the
         reasonable fees and disbursements of counsel to the Administrative
         Agent, (ii) to reimburse each Bank and the Administrative Agent for all
         its costs and expenses incurred in connection with the enforcement or
         preservation of any rights under this Agreement with respect to such
         Borrower, the Notes, and any such other documents, including, without
         limitation, the fees and disbursements of counsel to each Bank and of
         counsel to the Administrative Agent, (iii) to indemnify and hold each
         Bank and the Administrative Agent harmless from any and all recording
         and filing fees and any and all liabilities with respect to, or
         resulting from any delay in paying, stamp, excise and other taxes, if
         any, which may be payable or determined to be payable in connection
         with the execution and delivery of, or consummation or administration
         of any of the transactions contemplated by, or any amendment,
         supplement or modification of, or any waiver or consent under or in
         respect of, this Agreement, any Notes, and any such other documents
         with respect to such Borrower, and (iv) to indemnify and hold each Bank
         and the Administrative Agent (and their respective affiliates,
         directors, officers, agents and employees (collectively with the
         Administrative Agent and the Banks, the "Indemnified Parties"))
         harmless from and against any and all other liabilities, obligations,
         losses, damages, penalties, actions, judgments, suits, costs,
         out-of-pocket expenses or disbursements of any kind or nature
         whatsoever arising from or in connection with the execution, delivery,
         enforcement, performance and administration of this Agreement, any
         Notes, and any such other documents (all the foregoing in this clause
         (iv), collectively, the "indemnified liabilities"), provided, that each
         Borrower shall have no obligation hereunder to the Administrative Agent
         or any Bank with respect to the indemnified liabilities arising from
         (A) the gross negligence or willful misconduct of the Administrative
         Agent or any such Bank, as the case may be, (B) disputes arising solely
         between or among the Banks or solely between any Bank and the
         Administrative Agent, (C) the Administrative Agent or any Bank's
         failure to comply with any requirement imposed by applicable law,
         unless such failure is attributable to a breach by a Borrower of any
         representation, warranty, or covenant under this Agreement, or (D) any
         such indemnified liabilities that relate to or arise from litigation
         commenced by any Borrower against the Banks or the Administrative Agent
         which seeks enforcement of any of the rights of any Borrower hereunder
         or under any Note and is determined adversely to the Banks or the
         Administrative Agent in a final, non-appealable judgment. (b)
         Notwithstanding any other provision in this Agreement to the contrary,
         to the extent any obligation to reimburse or indemnify any Indemnified
         Party that arises pursuant to Section 11.3(a) hereto is not
         attributable to any particular Borrower, then such reimbursement or
         indemnification shall be made by each Borrower (pro rata based on their
         respective Net Asset Values). To the extent any such obligation to
         reimburse or indemnify any Indemnified Party is attributable to one or
         more Borrowers, then such reimbursement or indemnification shall be
         made ratably by each such Borrower.

                  Section 11.4 Amendments, Etc. Except as otherwise expressly
         provided in this Agreement, any provision of this Agreement may be
         modified or supplemented only by an instrument in writing signed by the
         Funds and the Majority Banks, or by the Funds and the Administrative
         Agent acting with the consent of the Majority Banks, and any provision
         of this Agreement may be waived by the Majority Banks or by the
         Administrative Agent acting with the consent of the Majority Banks;
         provided, that: (a) no modification, supplement or waiver shall, unless
         by an instrument signed by all of the Banks or by the Administrative
         Agent acting with the consent of all of the Banks: (i) increase, or
         extend the term of the Commitments, or extend the time or waive any
         requirement for the reduction or termination of the Commitments, (ii)
         extend the date fixed for the payment of principal of or interest on
         any Loan or any fee hereunder, (iii) reduce the amount of any such
         payment of principal, (iv) reduce the rate at which interest is payable
         thereon or any fee is payable hereunder, (v) alter the rights or
         obligations of a Borrower to prepay Loans, (vi) alter the manner in
         which payments or prepayments of principal interest or other amounts
         hereunder shall be applied as between the Banks, (vii) alter the
         required Asset Coverage as set forth in Section 6.2(d) hereof, (viii)
         alter the terms of this Section 11.4, (ix) amend Schedule I pursuant to
         Section 2.11(a) hereof, or (x) modify the definition of the term
         "Majority Banks" or modify in any other manner the number or percentage
         of the Banks required to make any determinations or waive any rights
         hereunder or to modify any provision hereof, and (b) any modification
         or supplement of Section 10 hereof, or of any of the rights or duties
         of the Administrative Agent hereunder, shall require the consent of the
         Administrative Agent.

                  Section 11.5 Successors and Assigns. This Agreement shall be
         binding upon and inure to the benefit of the parties hereto and their
         respective successors and permitted assigns.

                  Section 11.6 Assignments and Participations.

                  (a) The Funds may not assign any of their rights or
         obligations hereunder or under the Notes without the prior consent of
         all of the Banks and the Administrative Agent.

                  (b) Each Bank may assign any of its Loans, its Notes, and its
         Commitment (but only with the consent of the Administrative Agent and,
         if no Default exists and is continuing, the Funds) to an Eligible
         Lender; provided that

                  (i)      no such consent by the Funds or the Administrative
                           Agent shall be required in the case of any assignment
                           to another Bank;

                  (ii)     except to the extent the Funds and the Administrative
                           Agent shall otherwise consent, any such partial
                           assignment (other than to another Bank) shall be in
                           an amount at least equal to $2,000,000,

                  (iii)    each such assignment by a Bank of its Loans, Notes or
                           Commitment shall be made in such manner so that the
                           same portion of its Loans, Notes and Commitment is
                           assigned to the respective assignee; and

                  (iv)     each such assignment shall be effected pursuant to an
                           Assignment and Acceptance in substantially the form
                           of Exhibit 11.6(b) hereto and the assignor and
                           assignee shall deliver to the Funds and the
                           Administrative Agent a fully executed copy thereof.

         Upon execution and delivery by the assignor and the assignee to the
         Funds and the Administrative Agent of such Assignment and Acceptance,
         and upon consent thereto by the Funds and the Administrative Agent to
         the extent required above and acceptance thereof by the Administrative
         Agent, the assignee shall have, to the extent of such assignment
         (unless otherwise consented to by the Funds and the Administrative
         Agent), the obligations, rights and benefits of a Bank hereunder
         holding the Commitment and Loans (or portions thereof) assigned to it
         and specified in such Assignment and Acceptance (in addition to the
         Commitment and Loans, if any, theretofore held by such assignee) and
         the assigning Bank shall, to the extent of such assignment, be released
         from the Commitment (or portion thereof) so assigned. Upon each such
         assignment the assigning or assignee Bank shall pay the Administrative
         Agent an assignment fee of $3,000.

                  (c) A Bank may sell or agree to sell to one or more other
         Eligible Lenders (each a "Participant") a participation in all or any
         part of any Loans held by it, or in its Commitment, provided that such
         Participant shall not have any rights or obligations under this
         Agreement or any Note (the Participant's rights against such Bank in
         respect of such participation to be solely those set forth in the
         agreements executed by such Bank in favor of the Participant). All
         amounts payable by the Funds to any Bank under Section 5 hereof in
         respect of Loans held by it, and its Commitment, shall be determined as
         if such Bank had not sold or agreed to sell any participations in such
         Loans and Commitment, and as if such Bank were funding each of such
         Loan and Commitment in the same way that it is funding the portion of
         such Loan and Commitment in which no participations have been sold. In
         no event shall a Bank that sells a participation agree with the
         Participant to take or refrain from taking any action hereunder except
         that such Bank may agree with the Participant that it will not, without
         the consent of the Participant, agree to (i) increase or extend the
         term of such Bank's Commitment, (ii) extend the date fixed for the
         payment of principal of or interest on the related Loan or Loans or any
         portion of any fee hereunder payable to the Participant, (iii) reduce
         the amount of any such payment of principal, (iv) reduce the rate at
         which interest is payable thereon, or any fee hereunder payable to the
         Participant, to a level below the rate at which the Participant is
         entitled to receive such interest or fee or (v) consent to any
         modification, supplement or waiver hereof to the extent that the same,
         under Section 11.4 hereof, requires the consent of each Bank.

                  (d) In addition to the assignments and participations
         permitted under the foregoing provisions of this Section 11.6, any Bank
         may (without notice to the Funds, the Administrative Agent or any other
         Bank and without payment of any fee) (i) assign and pledge all or any
         portion of its Loans and its Note to any Federal Reserve Bank as
         collateral security pursuant to Regulation A and any Operating Circular
         issued by such Federal Reserve Bank and (ii) assign all or any portion
         of its rights under this Agreement and its Loans and its Note to an
         affiliate. No such assignment shall release the assigning Bank from its
         obligations hereunder.

                  (e) A Bank may furnish any information concerning any Borrower
         in the possession of such Bank from time to time to assignees and
         participants (including prospective assignees and participants),
         subject however, to the provisions of Section 11.12(b) hereof.

                  Section 11.7 Survival. The obligations of the Funds under
         Section 11.3 hereof, and the obligations of the Banks under Section
         10.5 hereof, shall survive the repayment of the Loans and the
         termination of the Commitments (including, with respect to any Bank
         that does not agree to the extension of the Commitment Termination Date
         in accordance with Section 2.10 hereof, the repayment of the Loans made
         by such Bank and the termination of the Commitment of such Bank on the
         Commitment Termination in effect before giving effect to such
         extension) and, in the case of any Bank that may assign any interest in
         its Commitment or Loans hereunder, shall survive the making of such
         assignment, notwithstanding that such assigning Bank may cease to be a
         "Bank" hereunder. In addition, each representation and warranty made,
         or deemed to be made by a notice of any Loan, herein or pursuant
         hereto, shall survive the making of such representation and warranty,
         and no Bank shall be deemed to have waived, by reason of making any
         Loan, any Default that may arise by reason of such representation or
         warranty proving to have been false or misleading, notwithstanding that
         such Bank or the Administrative Agent may have had notice or knowledge
         or reason to believe that such representation or warranty was false or
         misleading at the time such Loan was made.

                  Section 11.8 Caption. The table of contents and captions and
         section headings appearing herein are included solely for convenience
         of reference and are not intended to affect the interpretation of any
         provision of this Agreement.

                  Section 11.9 Counterparts. This Agreement may be executed in
         any number of counterparts, all of which taken together shall
         constitute one and the same instrument and any of the parties hereto
         may execute this Agreement by signing any such counterpart.

                  Section 11.10 Governing Law; Submission to Jurisdiction. This
         Agreement and the Notes shall be governed by, and construed in
         accordance with, the law of the State of New York. Each Fund hereby
         submits to the nonexclusive jurisdiction of the United States District
         Court for the Southern District of New York and of the Supreme Court of
         the State of New York sitting in New York County (including its
         Appellate Division), and of any other appellate court in the State of
         New York, for the purposes of all legal proceedings arising out of or
         relating to this Agreement or the transactions contemplated hereby.
         Each Fund hereby irrevocably waives, to the fullest extent permitted by
         applicable law, any objection that it may now or hereafter have to the
         laying of the venue of any such proceeding brought in such a court and
         any claim that any such proceeding brought in such a court has been
         brought in an inconvenient forum. Further, each Fund hereby agrees that
         service of process in any such legal proceeding may be effected by
         mailing a copy thereof by registered or certified mail (or any
         substantially similar form of mail), postage prepaid, to such Fund or
         such Borrower at its address set forth on the signature page hereto or
         at such other address of which the Administrative Agent shall have been
         notified pursuant hereto.

                  Section 11.11 Waiver of Jury Trial. EACH OF THE FUNDS, THE
         ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE
         FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL
         BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
         AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                  Section 11.12 Treatment of Certain Information;
         Confidentiality.

                  (a) Each Fund and each Borrower acknowledge that each of the
         Administrative Agent and each Bank and their respective affiliates
         (collectively, the "Bank Parties") may be providing debt financing,
         equity capital or other services (including financial advisory
         services) to other companies in respect of which the Funds and/or
         Borrowers may have conflicting interests regarding the transactions
         described herein and otherwise. The Bank Parties will not use
         confidential information obtained from the Funds and/or Borrowers by
         virtue of the transactions contemplated by this Agreement or their
         other relationships with such Funds and/or Borrowers in connection with
         the performance by each of the Bank Parties of services for other
         companies, and none of the Bank Parties will furnish any such
         confidential information to other companies. Each Fund and each
         Borrower also acknowledge that no Bank Party has any obligation to use
         in connection with the transactions contemplated by this Agreement, or
         to furnish to any fund or any Borrower, confidential information
         obtained from other companies.

                  (b) Each Fund and each Borrower further acknowledges that from
         time to time financial advisory, investment banking and other services
         may be offered or provided to the Funds (in connection with this
         Agreement or otherwise) by any Bank Parties and each Borrower and Fund
         hereby authorizes such Bank Parties to share any information delivered
         to such Bank Parties by the Borrowers of the Funds pursuant to this
         Agreement, it being understood that such Bank Party receiving such
         information shall be bound by the provisions of paragraph (c) below as
         if it were a Bank hereunder. Such authorization shall survive the
         repayment of the Loans and the termination of the Commitments.

                  (c) Each Bank and the Administrative Agent agrees (on behalf
         of itself and each of its affiliates, directors, officers, members,
         employees and representatives) to use reasonable precautions to keep
         confidential in accordance with its customary procedures for handling
         confidential information of the same nature and in accordance with safe
         and sound banking practices, any non-public information supplied to it
         by the Funds pursuant to this Agreement that is identified by the Funds
         as being confidential at the time the same is delivered to the Banks
         and the Administrative Agent, provided that nothing herein shall limit
         the disclosure of any such information (i) if such information is when
         so supplied, or thereafter shall have become, public (other than
         through a violation of this Section 11.12, (ii) to the extent required
         by statute, rule, regulation or judicial process, (iii) to counsel for
         any of the Banks or the Administrative Agent, (iv) to bank examiners
         (or any other regulatory authority having jurisdiction over any Bank or
         the Administrative Agent), or to auditors or accountants, (v) to the
         Administrative Agent or any other Bank (or to Chase Securities Inc.),
         (vi) in connection with any litigation to which any one or more of the
         Banks or the Administrative Agent is a party, or in connection with the
         enforcement of rights or remedies hereunder, (vii) to a subsidiary or
         affiliate of such Bank as provided in paragraph (a) above or (viii) to
         any assignee or participant (or prospective assignee or participant) so
         long as such assignee or participant (or prospective assignee or
         participant) first executes and delivers to the respective Bank a
         Confidentiality Agreement substantially in the form of Exhibit 11.12(c)
         hereto (or executes and delivers to such Bank an acknowledgment to the
         effect that it is bound by the provisions of this Section 11.12(c),
         which acknowledgment may be included as part of the respective
         assignment or participation agreement pursuant to which such assignee
         or participant acquires an interest in the Loans hereunder); provided
         further, that (x) unless specifically prohibited by applicable law or
         court order, each Bank and the Administrative Agent shall, prior to the
         disclosure thereof, notify the Funds of any request for disclosure of
         any such information (A) by any governmental agency or representative
         thereof (other than any such request in connection with an examination
         of the financial condition of such Bank by such governmental agency) or
         (B) pursuant to legal process and (y) in no event shall any Bank or the
         Administrative Agent be obligated or required to return any materials
         furnished by the Funds. The obligations of each Bank under this Section
         11.12 shall supersede and replace the obligations of such Bank under
         any confidentiality letter in respect of this financing signed and
         delivered by such Bank to the Funds prior to the date hereof; in
         addition, the obligations of any assignee that has executed a
         Confidentiality Agreement in the form of Exhibit 11.12(c) hereto shall
         be superseded by this Section 11.12 upon the date upon which such
         assignee becomes a Bank hereunder pursuant to Section 11.6(b) hereof.

                  Section 11.13 Limited Recourse. Anything in this Agreement to
         the contrary notwithstanding, it is understood and agreed that the sole
         recourse of the Administrative Agent or any Bank in respect of the
         obligations of any Borrower with respect to (a) any Loan made to such
         Borrower (including, without limitation, the obligations of such
         Borrower to pay the principal of, interest on and other amounts in
         respect of, such Loan) and (b) the portion of the commitment fee and
         any amount payable pursuant to Sections 7 and 11.3 hereof allocated to
         such Borrower shall be limited to the assets of such Borrower and that
         neither the Administrative Agent nor any Bank shall have any right to
         look to any other Borrower or the assets thereof for the satisfaction
         of such obligations.




                  IN WITNESS WHEREOF, the parties hereto have caused this
         Agreement to be duly executed and delivered as of the day and year
         first above written.

                           AMERICAN CENTURY FUNDS

                           On behalf of each Fund listed on Schedule I hereto


                           By: Charles C.S. Park
                           Title: Assistant Secretary to each Fund listed on
                           Schedule I hereto


                           Address for Notices:

                           4500 Main Street
                           Kansas City, MO 64111

                           Attention:        Maryanne Roepke
                                             Senior Vice President
                                             Fund Accounting

                           Telecopier No. 816-340-4042

                           Telephone No. 816-340-4221


                                Credit Agreement
                                 Signature Page

                           THE CHASE MANHATTAN BANK, as Administrative Agent
                           and as a Bank
                           ------------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           The Chase Manhattan Bank
                           Loan and Agency Services Group
                           Eighth Floor
                           One Chase Manhattan Plaza
                           New York, New York  10081

                           Address for Notices:
                           The Chase Manhattan Bank
                           270 Park Avenue
                           Twentieth Floor
                           New York, New York  10017

                           Attention:  Gail Weiss
                           Telecopier No.: 212-270-0670
                           With a Copy to:
                           The Chase Manhattan Bank
                           Loan and Agency Services Group
                           Eighth Floor
                           One Chase Manhattan Plaza
                           New York, New York  10081

                           Attention:  Laura Rebecca
                           Telecopier No.: 212-552-7490


                                Credit Agreement
                                 Signature Page

                           CREDIT LYONNAIS NEW YORK BRANCH
                           -----------------------------------------------------
                           By:
                           Title:
                           Lending Office for all Loans:
                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York  10019

                           Address for Notices:
                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York  10019

                           Attention:  Kathleen Bowers
                           Telecopier No.: 212-261-7367

                                Credit Agreement
                                 Signature Page

                           COMMERZBANK AG, NEW YORK BRANCH
                           -----------------------------------------------------
                           By:
                           Title:


                           -----------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           Commerzbank AG, New York Branch
                           2 World Financial Center
                           New York, New York  10281

                           Address for Notices:
                           Commerzbank AG, New York Branch
                           2 World Financial Center
                           New York, New York  10281

                           Attention:  Joseph Hayes
                           Telecopier No.: 212-266-7524




                                Credit Agreement
                                 Signature Page

                           THE BANK OF NEW YORK
                           -----------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           The Bank of New York
                           One Wall Street
                           New York, New York  10286

                           Address for Notices:
                           The Bank of New York
                           One Wall Street
                           New York, New York  10286

                           Attention:  Scott Buitekant
                           Telecopier No.: 212-635-6348

                                Credit Agreement
                                 Signature Page

                           BANQUE NATIONALE DE PARIS
                           -----------------------------------------------------
                           By:
                           Title:


                           -----------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           Banque Nationale de Paris
                           499 Park Avenue, 3rd Floor
                           New York, New York  10022

                           Address for Notices:
                           Banque Nationale de Paris
                           499 Park Avenue, 3rd Floor
                           New York, New York  10022

                           Attention:  Laurent Vanderzyppe
                           Telecopier No.: 212-415-9707

                                Credit Agreement
                                 Signature Page

                           DEN DANSKE BANK AKTIESELSKAB
                           -----------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           Den Danske Bank Aktieselskab
                           280 Park Avenue, 4th Floor East
                           New York, New York 10017

                           Address for Notices:
                           Den Danske Bank Aktieselskab
                           280 Park Avenue, 4th Floor East
                           New York, New York 10017

                           Attention:  Sonia Kataria
                           Telecopier No.: 212-984-8473

                                Credit Agreement
                                 Signature Page

                           STATE STREET BANK AND TRUST COMPANY
                           -----------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           State Street Bank & Trust Company
                           225 Franklin Street
                           Boston, Massachusetts  02110

                           Address for Notices:
                           State Street Bank & Trust Company
                           Lafayette Corporate Center
                           2 Avenue de Lafayette
                           Boston, Massachusetts  02111

                           Attention:  Vincent Starck
                           Telecopier No.: 617-662-2325

                                Credit Agreement
                                 Signature Page

                           WESTLB NIEDERLASSUNGEN
                           -----------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           WestLB Niederlassungen
                           1211 Avenue of the Americas
                           25th Floor
                           New York, New York 10036

                           Address for Notices:
                           WestLB Niederlassungen
                           1211 Avenue of the Americas
                           25th Floor
                           New York, New York 10036

                           Attention:  Jay White
                           Telecopier No.: 212-852-6156

                                Credit Agreement
                                 Signature Page

                           UMB BANK, N.A.
                           ------------------------------------------------------
                           By:
                           Title:

                           Lending Office for all Loans:
                           UMB Bank, N.A.
                           1010 Grand Boulevard
                           Kansas City, Missouri  64106

                           Address for Notices:
                           UMB Bank, N.A.
                           1010 Grand Boulevard
                           Kansas City, Missouri  64106

                           Attention:  David Proffitt
                           Telecopier No.: 816-860-7935

                                   SCHEDULE I
                            BORROWERS AND ALLOCATIONS


                                                                       Pro Rata
           American Century Fund                                      Allocation
           ......................................................... ...........
           ......................................................... ...........
           American Century Arizona Intermediate-Term Municipal
           Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Balanced Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Bond Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century California High-Yield Municipal Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century California Insured Tax-Free Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century California Intermediate-Term Tax-Free
           Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century California Limited-Term Tax-Free Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century California Long-Term Tax-Free Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Emerging Markets Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Equity Growth Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Equity Income Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Equity Index Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Florida Intermediate-Term Municipal
           Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Giftrust Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Global Gold Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Global Growth Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Global Natural Resource Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century GNMA Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Growth Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Heritage Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century High-Yield Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century High-Yield Municipal Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Income & Growth Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Inflation-Adjusted Treasury Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Intermediate-Term Bond Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Intermediate-Term Tax-Free Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Intermediate-Term Treasury Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century International Bond Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century International Discovery Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century International Growth Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Largecap Value Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Limited-Term Bond Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Limited-Term Tax-Free Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Long-Term Tax-Free Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Long-Term Treasury Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century New Opportunities Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Premium Bond Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Real Estate Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Select Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Short-Term Government Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Short-Term Treasury Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Small Cap Quantitative Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Small Cap Value Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Strategic Allocation Fund - Aggressive
           ......................................................... ...........
           ......................................................... ...........
           American Century Strategic Allocation Fund - Conservative
           ......................................................... ...........
           ......................................................... ...........
           American Century Strategic Allocation Fund - Moderate
           ......................................................... ...........
           ......................................................... ...........
           American Century Target 2000 Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Target 2005 Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Target 2010 Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Target 2015 Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Target 2020 Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Target 2025 Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Tax Managed Value Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Ultra Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Utilities Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Value Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century Vista Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century VP Advantage Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century VP Balanced Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century VP Capital Appreciation Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century VP Income & Growth Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century VP International Fund
           ......................................................... ...........
           ......................................................... ...........
           American Century VP Value Fund
           ......................................................... ...........
           --------------------------------------------------------- -----------
                                  Total for American Century Funds:    100.0000%
           --------------------------------------------------------- -----------

                                   Commitments
                                   SCHEDULE II
                                   COMMITMENTS

                                                              Amount of
Name and Address of Bank            Title                     Commitment

THE CHASE MANHATTAN BANK            Administrative            $100,000,000
270 Park Avenue, 36th Floor         Agent
New York, New York  10017
Attention:      Gail Weiss
Telephone:      (212) 270-5049
Facsimile:      (212) 270-1789

CREDIT LYONNAIS NEW YORK BRANCH     Syndication               $100,000,000
1301 Avenue of the Americas         Agent
New York, New York  10019
Attention:      Kathleen Bowers
Telephone:      (212) 261-7367
Facsimile:      (212) 261-3401

COMMERZBANK AG, NEW YORK BRANCH     Documentation             $100,000,000
2 World Financial Center            Agent
New York, New York  10281
Attention:      Joseph Hayes
Telephone:      (212) 266-7518
Facsimile:      (212) 266-7524

THE BANK OF NEW YORK                Participant               $100,000,000
One Wall Street
New York, New York  10286
Attention:      Scott Buitekant
Telephone:      (212) 635-6958
Facsimile:      (212) 635-6348

BANQUE NATIONALE DE PARIS           Participant                $50,000,000
499 Park Avenue, 3rd Floor
New York, New York  10022
Attention:      Laurent Vanderzyppe
Telephone:      (212) 415-9406
Facsimile:      (212) 415-9707

DEN DANSKE BANK AKTIESELSKAB        Participant                $50,000,000
280 Park Avenue, 4th Floor East
New York, New York  10017
Attention:      Sonia Kataria
Telephone:      (212) 984-8473
Facsimile:      (212) 370-1682

STATE STREET BANK & TRUST COMPANY   Participant                $50,000,000
1776 Heritage Drive
North Quincy, Massachusetts  02171
Attention:      Omar Hazoury
Telephone:      (617) 985-0629
Facsimile:      (617) 537-5194

WESTLB NIEDERLASSUNGEN              Participant                $50,000,000
1211 Sixth Avenue
25th Floor
New York, New York  10036
Attention:      Jay White
Telephone:      (212) 852-6315
Facsimile:      (212) 852-6156

UMB BANK, N.A.                      Participant                $20,000,000
1010 Grand Boulevard
Kansas City, Missouri  64106
Attention:      David Proffitt
Telephone:      (816) 860-7935
Facsimile:      (816) 860-7143


                                            TOTAL:            $620,000,000

                                  SCHEDULE III
                               CUSTODY AGREEMENTS

                                   SCHEDULE IV
                             DISTRIBUTION AGREEMENTS

                                   SCHEDULE V
                        INVESTMENT MANAGEMENT AGREEMENTS

                                   SCHEDULE VI
                         SHAREHOLDER SERVICES AGREEMENTS

                                  SCHEDULE VII
                          SPECIFIED EXISTING AFFILIATES

                                 EXHIBIT 2.7(a)
                                  FORM OF NOTE


                                 PROMISSORY NOTE


$_________________                                           [DATE]
                                                             New, York, New York

                  FOR VALUE RECEIVED, [Name of Fund], a ___________ corporation
(the "Fund"), on behalf of [Borrower], hereby promises to pay to
_________________ (the "Bank"), for account of its respective Applicable Lending
Offices provided for by the Credit Agreement referred to below, at the principal
office of The Chase Manhattan Bank at 270 Park Avenue, New York, New York 10017,
the principal sum of _____________ Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Bank to the Fund
for the benefit of [Borrower] under the Credit Agreement), in lawful money of
the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
but excluding the date such Loan shall be paid in full, at the rates per annum
and on the dates provided in the Credit Agreement. The sole recourse of the Bank
in respect of the obligations of the Fund on behalf of [Borrower] evidenced by
this Note shall be limited to the assets held in such Fund and nothing contained
herein or in the Credit Agreement shall create any right of the Bank to look to
the assets held in any other Fund for the satisfaction of such obligations.

                  The date, amount, and interest rate of each Loan made by the
Bank to the Fund for the benefit of [Borrower], and each payment made on account
of the principal thereof, shall be recorded by the bank on its books and, prior
to any transfer of this Note, endorsed by the Bank on the schedule attached.
hereto or any continuation thereof, provided that the failure of the Bank to
make any such recordation (or any error in making any such recordation) or
endorsement shall not affect the obligations of the Fund to make a payment when
due of any amount owing under the Credit Agreement or hereunder in respect of
the Loans made by the Bank to the Fund for the benefit of [Borrower].

                  This Note is one of the [Borrower] Notes referred to in the
Credit Agreement dated as of December 21, 1999 (as modified and supplemented and
in effect from time to time, the "Credit Agreement") between each Fund signatory
thereto, the lenders party thereto (including the Bank) and The Chase Manhattan
Bank, as Administrative Agent, and evidences Loans made thereunder by the Bank
to the Fund for the benefit of [Borrower]. Terms used but not defined in this
Note have the respective meanings assigned to them in the Credit Agreement.

                  The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.

                  Except as permitted by Section 11.6 of the Credit Agreement,
this Note may not be assigned by the Bank to any other Person.

                  This Note shall be governed by, and construed in accordance
with, the law of the State of New York.

                                     [Fund]


                                     By
                                         Name:
                                         Title:

                                SCHEDULE OF LOANS

         This Note evidences Loans made under the within-described Credit
Agreement to the fund for the benefit of [Borrower], on the dates, in the
principal amounts and bearing interest at the rates set forth below, subject to
the payments and prepayments of principal set forth below.

Date              Principal                          Maturity          Amount           Unpaid
 of               Amount            Interest          Date of          Paid or          Principal         Notation
Loan              of Loan             Rate             Loan            Prepaid          Amount            Made by
- ----              -------             ----             ----            -------          ------            -------

                                 EXHIBIT 2.11(a)
                      FORM OF DESIGNATION OF NEW BORROWERS

                                                            [Date]

The Chase Manhattan Bank, as Administrative Agent

[List of Lenders]

Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of December
21, 1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") between and among each of (i) the Funds that is a signatory
thereto, on behalf of itself and each series of portfolio of the Fund named
therein (each, a "Borrower" and collectively, the "Borrowers"), (ii) the several
Banks from time to time party thereto, and (iii) The Chase Manhattan Bank, as
Administrative Agent. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Credit Agreement.

         [NAME OF FUND] (the "Fund") on behalf of itself and [NAME OF BORROWER]
(the "Series") hereby requests pursuant to Section 2.11 of the Credit Agreement
that the Series be admitted as an additional Borrower under the Credit
Agreement. Furthermore, the Fund requests that Schedule I of the Credit
Agreement be replace with the form of Schedule I attached hereto.

         The Fund, on behalf of itself and the Series, hereby represents and
warrants to the Administrative Agent and each Bank that as of the date hereof
and after giving effect to the admission of the Series as an additional Borrower
under the Credit Agreement: (i) the representations and warranties set forth in
Section 7 of the Credit Agreement are true and correct with respect to the
Series; (ii) the Series is in compliance in all material respects with all the
terms and provisions set forth in the Credit Agreement on its part to be
observed or performed as of the date hereof and after giving effect to the
admission; and (iii) no Default or Event of Default with respect to the Series,
nor any event which with the giving of notice or the expiration of any
applicable grace period or both would constitute such a Default or Event of
Default with respect to the Series has occurred and is continuing.

         The Series agrees to be bound by the terms and conditions of the Credit
Agreement in all respects as a Borrower thereunder and hereby assumes all of the
obligations of a Borrower thereunder.

         Please indicate your assent to the admission of each Series as an
additional Borrower under the Credit Agreement and the replacement of Schedule I
to the Credit Agreement by signing below where indicated.

                                     [FUND, for itself and on behalf of each
                                     Borrower related to a series issued by it]

                                     By: _______________________________
                                           Name:
                                           Title:

AGREED AND ACCEPTED:

THE CHASE MANHATTAN BANK
as Administrative Agent and as a Bank

By: ___________________________
      Name:
      Title:

[SIGNATURE LINE FOR OTHER LENDERS]

                                 EXHIBIT 6.1(b)
                                 FORM OF OPINION

                                [To be supplied]

                                 EXHIBIT 11.6(b)
                        FORM OF ASSIGNMENT AND ACCEPTANCE

                            ASSIGNMENT AND ACCEPTANCE

                  Reference is made to the Credit Agreement, dated as of
December 21, 1999 (as modified and supplemented and in effect from time to time,
the "Credit Agreement"), between each Fund signatory thereto, the Banks named
therein, and The Chase Manhattan Bank, as administrative agent for such Banks.
Terms defined in the Credit Agreement are used herein as defined therein.

                  _______________ (the "Assignor") and _____________ (the
"Assignee") agree as follows:

                  1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date as set forth in Schedule I hereto (the "Effective Date"), an
interest (the "Assigned Interest") in and to the Assignor's rights and
obligations under the Credit Agreement with respect to the Commitment and the
Loans, in a principal amount and percentage for each Assigned Interest as set
forth on Schedule 1.

                  2. The Assignor (i) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or any other
instrument or document furnished pursuant thereto, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any Note or any other instrument or document furnished pursuant
thereto, other than that it has not created any adverse claim upon the interest
being assigned by it hereunder and that such interest is free and clear of any
such adverse claim; (ii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Fund, any Borrower
or any other obligation or the performance or observance by any Fund (whether on
its own behalf or on behalf of any Borrower) of any of its obligations under the
Credit Agreement or any Note or any other instrument or document furnished
pursuant hereto or thereto; and (iii) attaches the Note(s), if any, held by it
evidencing the Assigned Interests and requests that the Administrative Agent
exchange such Note(s), if any, for a new Note or Notes payable to the Assignor
(if the Assignor has retained any interest in the Commitment) and a new Note or
Notes payable to the Assignee in the respective amounts which reflect the
assignment being made hereby (and after giving effect to any other assignments
which have become effective on the Effective Date).

                  3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to Section 8.1 thereof, if any, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (iii)
agrees that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
Notes or any other instrument or document furnished pursuant hereto or thereto;
and (iv) appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers and discretion
under the Credit Agreement, the Notes or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are incidental thereto.

                  4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Administrative Agent for acceptance by the
Administrative Agent pursuant to Section 11.6 of the Credit Agreement, effective
as of the Effective Date (which date shall not, unless otherwise agreed to by
the Administrative Agent, be earlier than five Business Days after the date of
such acceptance by the Administrative Agent).

                  5. Upon such acceptance, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee which accrue subsequent to the Effective Date.

                  6. From and after the Effective Date, (i) the Assignee shall
be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Bank thereunder
and under the Notes and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement except as provided in Section 11.7 of the Credit Agreement.

                  7. This Assignment and Acceptance shall be governed by and
construed in accordance with the law of the State of New York.

                  8. This Assignment and Acceptance may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Assignment and
Acceptance by signing any such counterpart.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first above written by
their respective duly authorized officers on Schedule I hereto.

                                  Schedule I to
                            Assignment and Acceptance
                        relating to the Credit Agreement,
                         dated as of December 21, 1999,
                      between each Fund signatory thereto,
                           the Banks named therein and
         The Chase Manhattan Bank, as administrative agent for the Banks
                 (in such capacity, the "Administrative Agent")


Name of Assignor:

Name of Assignee:

Effective Date of Assignment:

       Principal                         Percentage
       Amount Assigned                   Assigned






[ASSIGNEE]                                [ASSIGNOR]


By:_______________________                By:_______________________
     Title:                                    Title:


                                                   Consented to and Accepted:

                                                   THE CHASE MANHATTAN BANK, as
                                                   Administrative Agent

                                                   By:_______________________
                                                       Title:

                                                   [Funds]

                                                   By: _______________________
                                                         Title:

                                EXHIBIT 11.12(c)
                        FORM OF CONFIDENTIALITY AGREEMENT

                            CONFIDENTIALITY AGREEMENT


                                                        [Date]

   [Insert Name and
   Address of Prospective
   Participant or Assignee]



                  Re:      Credit Agreement dated as of December 21, 1999 (as
                           modified and supplemented and in effect from time to
                           time, the "Credit Agreement"), between each Fund
                           signatory thereto, the Banks party thereto, and The
                           Chase Manhattan Bank, as Administrative Agent.

Dear Ladies and Gentlemen:

                  As a Bank party to the Credit Agreement, we have agreed with
the Funds pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all
non-public information identified by the Funds as being confidential at the time
the same is delivered to us pursuant to the Credit Agreement.

                  As provided in said Section 11.12, we are permitted to provide
you, as a prospective [holder of a participation in the Loans (as defined in the
Credit Agreement)] [assignee Bank], with certain non-public information subject
to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.

                  Accordingly, in consideration of the foregoing, you agree (on
behalf of yourself and each of your affiliates, directors, officers, members,
employees and representatives and for the benefit of us and the Funds) that (A)
such information will not be used by you except in connection with the proposed
[participation][assignment] mentioned above and (B) you shall use reasonable
precautions, in accordance with your customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to keep such information confidential,, provided that nothing herein
shall limit the disclosure of any such information (i) if such information is or
hereafter shall have become public (other than through a violation of Section
11.12 of the Credit Agreement), (ii) to the extent required by statute, rule,
regulation or judicial process, (iii) to your counsel or to counsel for any of
the Banks or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Bank or the Administrative
Agent), or to auditors or accountants, (v) to the Administrative Agent or any
other Bank (or to Chase Securities Inc.), (vi) in connection with any litigation
to which you or any one or more of the Banks or the Administrative Agent are a
party, or in connection with the enforcement of rights or remedies under the
Credit Agreement, (vii) to a subsidiary or affiliate of any Bank as provided in
Section 11.12(a) of the Credit Agreement or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to you a Confidentiality Agreement substantially in the form hereof; provided,
further, that (x) unless specifically prohibited by applicable law or court
order, you agree, prior to the disclosure thereof, to notify the Company of any
request for disclosure of any such information (A) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of your financial condition by such governmental agency) or (B)
pursuant to legal process and (y) that in no event shall you be obligated to
return any materials furnished to you pursuant to this Confidentiality
Agreement.

                  If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 11.12 of the Credit
Agreement on the date upon which you become a Bank under the Credit Agreement
pursuant to Section 11.6(b) thereof.

                  Please indicate your agreement to the foregoing by signing as
provided below the enclosed copy of this Confidentiality Agreement and returning
the same to us.

                                                     Very truly yours,


                                                     [INSERT NAME OF BANK]


                                                     By_________________________


The foregoing is agreed to as of the date of this letter.


[INSERT NAME OF PROSPECTIVE
 PARTICIPANT OR ASSIGNEE]


By_________________________

EX-99.J1 5 CONSENT OF INDEPENDENT ACCOUNTANTS

                       Consent of Independent Accountants


We consent to the incorporation by reference in Post-Effective Amendment No. 29
to the Registration Statement of the California Tax-Free Money Market Fund,
California Municipal Money Market Fund, California Limited-Term Tax-Free Fund,
California Intermediate-Term Tax-Free Fund, California Long-Term Tax-Free Fund,
California High-Yield Municipal Fund, California Insured Tax-Free Fund (all of
the funds comprising the American Century California Tax-Free and Municipal
Funds) on Form N-1A of our report dated October 13, 1999 on our audits of the
financial statements and financial highlights of the California Tax-Free Money
Market Fund, California Municipal Money Market Fund, California Limited-Term
Tax-Free Fund, California Intermediate-Term Tax-Free Fund, California Long-Term
Tax-Free Fund, California High-Yield Municipal Fund, California Insured Tax-Free
Fund, which report is included in the Annual Report to Shareholders for the year
ended August 31, 1999, which is incorporated by reference in Post-Effective
Amendment No. 29 to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
"Independent Accountants."





PricewaterhouseCoopers LLP

Kansas City, Missouri
December 27, 1999

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