SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
File No. 33-64872
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 30 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
File No. 811-7820
Amendment No. 30 [X]
(Check appropriate box or boxes.)
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
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(Exact Name of Registrant as Specified in Charter)
4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 531-5575
David C. Tucker, Esq., 4500 Main Street, 9th Floor, Kansas City, MO 64111
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: March 31, 2004
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on March 31, 2004 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.
Your
American Century Investments
prospectus
INVESTOR CLASS
Mid Cap Value Fund
MARCH 31, 2004
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.
American Century
Investment Services, Inc.
[american century logo and text logo]
[american century logo and text logo]
Dear Investor,
At American Century Investments, we're committed to helping investors make the
most of their financial opportunities. That's why we focus on achieving superior
results and building long-term relationships with investors like you.
We believe our relationship with you begins with an easy-to-read prospectus that
provides you with the information you need to make informed and confident
decisions about your investments.
We understand 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 2 p.m. Central
time. Our representatives can be reached by calling 1-800-345-2021. Thank you
for considering American Century.
Sincerely,
/s/Donna Byers
Donna Byers
Senior Vice President
Direct Sales and Services
American Century Services Corporation
American Century Investments
P.O. Box 419200, Kansas City, MO 64141-6200
The American Century logo, American Century and American Century Investments are
service marks of American Century Services Corporation.
Table of Contents
AN OVERVIEW OF THE FUND................................................. 2
FUND PERFORMANCE HISTORY................................................ 3
FEES AND EXPENSES....................................................... 4
OBJECTIVES, STRATEGIES AND RISKS........................................ 5
MANAGEMENT.............................................................. 7
INVESTING WITH AMERICAN CENTURY......................................... 9
SHARE PRICE AND DISTRIBUTIONS........................................... 16
TAXES................................................................... 18
[GRAPHIC OF TRIANGLE]
THIS SYMBOL IS USED THROUGHOUT THE BOOK TO HIGHLIGHT DEFINITIONS OF
KEY INVESTMENT TERMS AND TO PROVIDE OTHER HELPFUL INFORMATION.
AN OVERVIEW OF THE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
Mid Cap Value seeks long-term capital growth. Income is a secondary objective.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
In selecting stocks for Mid Cap Value, the fund managers look for companies
whose stock price may not reflect the company's value. The managers attempt to
purchase the stocks of these undervalued companies and hold them until their
stock price has increased to, or is higher than, a level the managers believe
more accurately reflects the fair value of the company. A more detailed
description of the funds' investment strategies and risks begins on page 5.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down based on the performance of the companies that issued them, general
market and economic conditions, and investor confidence. At any given time, your
shares may be worth more or less than the price you paid for them. In other
words, it is possible to lose money by investing in the fund.
If the market does not consider the individual stocks purchased by the fund to
be undervalued, the value of the fund's shares may decline, even if stock prices
generally are rising.
WHO MAY WANT TO INVEST IN THE FUND?
The fund may be a good investment if you are
* seeking long-term capital growth and income from your investment
* comfortable with the risks associated with the fund's investment strategies
* comfortable with the fund's short-term price volatility
* investing through an IRA or other tax-advantaged retirement plan
WHO MAY NOT WANT TO INVEST IN THE FUND?
The fund may not be a good investment if you are
* investing for a short period of time
* not seeking income from an equity investment
* uncomfortable with short-term volatility in the value of your investment
* uncomfortable with the risks associated with the fund's investment strategies
[GRAPHIC OF TRIANGLE]
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT, AND IT IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR
ANY OTHER GOVERNMENT AGENCY.
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2
FUND PERFORMANCE HISTORY
Because the fund is new, its performance history is not available as of the date
of this prospectus. When the fund has investment results for a full calendar
year, this section will feature charts that show annual total returns, highest
and lowest quarterly returns and average annual returns.
For current performance information, please call us at 1-800-345-2021 or visit
us at www.americancentury.com.
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3
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 same class of shares of other American Century funds
* to redeem your shares other than a $10 fee to redeem by wire
The following tables describe the fees and expenses you may pay if you buy and
hold shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
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Investor Class
Maximum Account Maintenance Fee $25(1)
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(1) APPLIES ONLY TO INVESTORS WHOSE TOTAL INVESTMENTS WITH AMERICAN CENTURY ARE
LESS THAN $10,000. SEE Account Maintenance Fee UNDER Investing with American
Century FOR MORE DETAILS.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
MANAGEMENT DISTRIBUTION AND OTHER TOTAL ANNUAL FUND
FEE SERVICE (12B-1) FEES EXPENSES(1) OPERATING EXPENSES
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Mid Cap Value
Investor Class 1.00% None 0.00% 1.00%
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(1) OTHER EXPENSES, WHICH INCLUDE THE FEES AND EXPENSES OF THE FUND'S
INDEPENDENT DIRECTORS AND THEIR LEGAL COUNSEL, AS WELL AS INTEREST, ARE
EXPECTED TO BE LESS THAN 0.005% FOR THE CURRENT FISCAL YEAR.
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in the fund with the costs of investing in other mutual funds. Of
course, your actual costs may be higher or lower. 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
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Mid Cap Value
Investor Class $102 $318 $551 $1,219
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4
OBJECTIVES, STRATEGIES AND RISKS
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The fund seeks long-term capital growth. Income is a secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The fund managers look for stocks of companies that they believe are undervalued
at the time of purchase. The managers use a value investment strategy that looks
for companies that are temporarily out of favor in the market. The managers
attempt to purchase the stocks of these undervalued companies and hold them
until they have returned to favor in the market and their stock prices have gone
up.
Companies may be undervalued due to market declines, poor economic conditions,
actual or anticipated bad news regarding the issuer or its industry, or because
they have been overlooked by the market. To identify these companies, the fund
managers look for companies with earnings, cash flows and/or assets that may not
be reflected accurately in the companies' stock prices or may be outside the
companies' historical ranges. The managers also may consider whether the
companies' securities have a favorable dividend-paying history and whether
income payments are expected to continue or increase.
The fund will invest at least 80% of its assets in securities of companies whose
market capitalization at the time of purchase is within the capitalization range
of the Russell 3000 Index, excluding the largest 100 such companies. The fund
managers intend to manage the fund so that its weighted capitalization falls
within the capitalization range of the members of the Russell Mid Cap Index.
The fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 65% of the fund's assets
invested in U.S. equity securities at all times. When the managers believe it is
prudent, the fund may invest a portion of its assets in domestic and foreign
convertible debt securities, equity-equivalent securities, debt securities of
companies, debt obligations of governments and their agencies, nonleveraged
futures contracts and other similar securities. Futures contracts, a type of
derivative security, can help the fund's cash assets remain liquid while
performing more like stocks. The fund has a policy governing futures contracts
and similar derivative securities to help manage the risk of these types of
investments. For example, the fund managers cannot invest in a derivative
security if it would be possible for the fund to lose more money than it
invested. A complete description of the derivatives policy is included in the
Statement of Additional Information.
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 short-term debt securities. To the extent the fund assumes a
defensive position it will not be pursuing its objective of capital growth.
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5
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The value of the fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions and investor confidence.
At any given time your shares may be worth more or less than the price you paid
for them. In other words, it is possible to lose money by investing in the fund.
If the market does not consider the individual stocks purchased by the fund to
be undervalued, the value of the fund's shares may not rise as high as other
funds and may in fact decline, even if stock prices generally are increasing.
Market performance tends to be cyclical, and, in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring a
fund's style, the fund's gains may not be as big as, or its losses may be bigger
than, other equity funds using different investment styles.
Although the fund managers intend to invest the fund's assets primarily in U.S.
securities, the fund may invest in foreign securities. Foreign investment
involves additional risks, including fluctuations in currency exchange rates,
less stable political and economic structures, reduced availability of public
information, and lack of uniform financial reporting and regulatory practices
similar to those that apply in the United States. These factors make investing
in foreign securities generally riskier than investing in U.S. securities.
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6
MANAGEMENT
WHO MANAGES THE FUND?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the fund.
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the fund, it has hired an investment advisor to do so.
More than three-fourths of the directors are independent of the fund's advisor;
that is, they are not employed by and have no financial interest in the advisor.
THE INVESTMENT ADVISOR
The fund's investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the fund
and directing the purchase and sale of its investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the fund to operate.
For the services it provides to the Investor Class of the fund, the advisor
receives a unified management fee of 1.00% of the average net assets of the
Investor Class of shares of the fund. The amount of the management fee for a
fund is calculated daily and paid monthly in arrears.
Out of the fund's fee, the advisor pays all expenses of managing and operating
the fund except brokerage expenses, taxes, interest, fees and expenses of the
independent directors (including legal counsel fees), and extraordinary
expenses. A portion of the fund's management fee may be paid by the fund's
advisor to unaffiliated third parties who provide recordkeeping and
administrative services that would otherwise be performed by an affiliate of the
advisor.
THE FUND MANAGEMENT TEAM
The advisor uses a team of portfolio managers, assistant portfolio managers and
analysts to manage the fund. The team meets regularly to review portfolio
holdings and discuss purchase and sale activity. Team members buy and sell
securities for the fund as they see fit, guided by the fund's investment
objectives and strategy.
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7
The portfolio managers on the investment team are identified below.
PHILLIP N. DAVIDSON
Mr. Davidson, Chief Investment Officer -- Value, Senior Vice President and
Senior Portfolio Manager, has been a member of the team that manages Mid Cap
Value since its inception. Prior to joining American Century in 1993, he spent
11 years at Boatmen's Trust Company in St. Louis and served as Vice President
and Portfolio Manager responsible for institutional value equity clients. He has
a bachelor's degree in finance and an MBA from Illinois State University. He is
a CFA charterholder.
SCOTT A. MOORE
Mr. Moore, Vice President and Senior Portfolio Manager, has been a member of the
team that manages Mid Cap Value since its inception. He joined American Century
in August 1993 as an Investment Analyst and was promoted to Portfolio Manager in
February 1999. He has a bachelor's degree in finance from Southern Illinois
University and an MBA in finance from the University of Missouri - Columbia. He
is a CFA charterholder.
MICHAEL LISS
Mr. Liss, Portfolio Manager, has been a member of the team that manages Mid Cap
Value since the fund's inception in March 2004. He joined American Century in
June 1998 as an Investment Analyst. He was promoted to Senior Investment Analyst
in August 2003 and Portfolio Manager in February 2004. He has a bachelor's
degree in accounting and finance from Albright College and an MBA in finance
from Indiana University. He is a CFA charterholder.
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 fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. It also contains limits on short-term transactions in American
Century-managed funds. 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 fund to obtain approval before executing permitted
personal trades.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the fund may not be changed without
shareholder approval. The Board of Directors may change any other policies and
investment strategies.
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8
INVESTING WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
Most accounts automatically will have access to the services listed below when
the account is opened. If you do not want these services, see CONDUCTING
BUSINESS IN WRITING. If you have questions about the services that apply to your
account type, please call us.
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. By choosing this option, you are not eligible to enroll
for exclusive online account management to waive the account maintenance fee.
See ACCOUNT MAINTENANCE FEE in this section.
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce the amount of mail you receive from us, we may deliver a single copy
of certain investor documents (such as shareholder reports and prospectuses) to
investors who share an address, even if accounts are registered under different
names. If you prefer multiple copies of these documents individually addressed,
please call 1-800-345-2021. If you invest in American Century mutual funds
through a financial intermediary, please contact them directly. For American
Century Brokerage accounts, please call 1-888-345-2071.
YOUR RESPONSIBILITY FOR UNAUTHORIZED TRANSACTIONS
American Century and its affiliated companies use procedures reasonably designed
to confirm that telephone, electronic and other instructions are genuine. These
procedures include recording telephone calls, requesting personalized security
codes or other information, and sending confirmation of transactions. If we
follow these procedures, we are not responsible for any losses that may occur
due to unauthorized instructions. For transactions conducted over the Internet,
we recommend the use of a secure Internet browser. In addition, you should
verify the accuracy of your confirmation statements immediately after you
receive them.
WAYS TO MANAGE YOUR ACCOUNT
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ONLINE
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www.americancentury.com
OPEN AN ACCOUNT
If you are a current or new investor, you can open an account by completing and
submitting our online application. Current investors also 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*
Redeem shares and proceeds will be electronically transferred to your authorized
bank account.
* ONLINE REDEMPTIONS UP TO $25,000 PER DAY.
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9
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BY TELEPHONE
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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
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 or use our Automated Information Line if you have authorized us to accept
telephone instructions. The Automated Information Line is available only to
Investor Class shareholders.
MAKE ADDITIONAL INVESTMENTS
Call or use our Automated Information Line if you have authorized us to invest
from your bank account. The Automated Information Line is available only to
Investor Class shareholders.
SELL SHARES
Call a Service Representative.
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BY WIRE
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Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.
OPEN AN ACCOUNT
Call to set up your account or mail a completed application to the address
provided in the BY MAIL OR FAX section. Give your bank the following information
to wire money.
* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. Please call for the appropriate account number
* The fund name
* Your American Century account number, if known*
* Your name
* The contribution year (for IRAs only)
*FOR ADDITIONAL INVESTMENTS ONLY
MAKE ADDITIONAL INVESTMENTS
Follow the BY WIRE-OPEN AN ACCOUNT instructions.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES
Not available.
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10
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BY MAIL OR FAX
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P.O. Box 419200
Kansas City, MO 64141-6200
Fax
816-340-7962
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send 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 written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.
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AUTOMATICALLY
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OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send 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.
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IN PERSON
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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 Street 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 10350 Park Meadows Drive
Mountain View, California Littleton, Colorado
8 a.m. to 5 p.m., Monday - Friday 8:30 a.m. to 5:30 p.m., Monday - Friday
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11
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account, the minimum initial investments are $2,000 for a Coverdell
Education Savings Account (CESA), and $2,500 for all other accounts.
ACCOUNT MAINTENANCE FEE
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
we may charge you a $12.50 semiannual account maintenance fee if the value of
those shares is less than $10,000. We will determine the amount of your total
eligible investments twice per year, generally the last Friday in October and
April. If the value of those investments is less than $10,000 at that time, we
will redeem shares automatically in one of your accounts to pay the $12.50 fee.
Please note that you may incur a tax liability as a result of the redemption. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. We will not charge the
fee as long as you choose to manage your accounts exclusively online. You may
enroll for exclusive online account management on our Web site. To find out more
about exclusive online account management, visit
www.americancentury.com/info/demo.
[GRAPHIC OF TRIANGLE]
PERSONAL ACCOUNTS INCLUDE INDIVIDUAL ACCOUNTS, JOINT ACCOUNTS,
UGMA/UTMA ACCOUNTS, PERSONAL TRUSTS, COVERDELL EDUCATION SAVINGS
ACCOUNTS AND IRAS (INCLUDING TRADITIONAL, ROTH, ROLLOVER, SEP-,
SARSEP- AND SIMPLE-IRAS), BUT NO OTHER RETIREMENT ACCOUNTS . IF YOU
HAVE ONLY BUSINESS, BUSINESS RETIREMENT, EMPLOYER-SPONSORED OR
AMERICAN CENTURY BROKERAGE ACCOUNTS, YOU ARE CURRENTLY NOT SUBJECT TO
THIS FEE, BUT YOU MAY BE SUBJECT TO OTHER FEES.
REDEMPTIONS
Your redemption proceeds will be calculated using the NET ASSET VALUE (NAV) next
determined after we receive your transaction request in good order.
[GRAPHIC OF TRIANGLE]
A FUND'S NET ASSET VALUE, OR NAV, IS THE PRICE OF THE FUND'S SHARES.
However, we reserve the right to delay delivery of redemption proceeds up to
seven days. For example, each time you make an investment with American Century,
there is a seven-day holding period before we will release redemption proceeds
from those shares, unless you provide us with satisfactory proof that your
purchase funds have cleared. For funds with CheckWriting privileges, we will not
honor checks written against shares subject to this seven-day holding period.
Investments by wire generally require only a one-day holding period. If you
change your address, we may require that any redemption request made within 15
days be submitted in writing and be signed by all authorized signers with their
signatures guaranteed. If you change your bank information, we may impose a
15-day holding period before we will transfer or wire redemption proceeds to
your bank. In addition, we reserve the right to honor certain redemptions with
securities, rather than cash, as described in the next section.
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12
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the value of a fund's assets if that amount is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. The fund
managers would select these securities from the fund's portfolio. 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, you may have to pay
brokerage or other transaction costs to convert the securities to cash.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on a fund and its remaining investors.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your account balance falls below the minimum initial investment amount for
any reason other than as a result of market fluctuation, we will notify you and
give you 90 days to meet the minimum. If you do not meet the deadline, American
Century reserves the right to redeem the shares in the account and send the
proceeds to your address of record. Please note that you may incur tax liability
as a result of the redemption.
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. The fund reserves the right to suspend the offering of shares for a period
of time and to reject any specific investment (including a purchase by
exchange). Additionally, we may refuse a purchase if, in our judgment, it is of
a size that would disrupt the management of the fund.
SIGNATURE GUARANTEES
A signature guarantee -- which is different from a notarized signature -- is a
warranty that the signature presented is genuine. We may require a signature
guarantee for the following transactions:
* Your redemption or distribution check, Check-A-Month or automatic redemption
is made payable to someone other than the account owners
* Your redemption proceeds or distribution amount is sent by wire or EFT to a
destination other than your personal bank account
* You are transferring ownership of an account over $100,000
We reserve the right to require a signature guarantee for other transactions, at
our discretion.
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13
ABUSIVE TRADING PRACTICES
We discourage excessive, short-term trading and other abusive trading practices
that may disrupt portfolio management strategies and harm fund performance. We
take steps to reduce the frequency and effect of these activities in our funds.
These steps include monitoring trading activity, imposing trading restrictions
on certain accounts, imposing redemption fees on certain funds, and using fair
value pricing when current market prices are not available. Although these
efforts are designed to discourage abusive trading practices, these tools cannot
eliminate the possibility that such activity will occur. American Century seeks
to exercise its judgment in implementing these tools to the best of its
abilities in a manner that it believes is consistent with shareholder interests.
American Century uses a variety of techniques to monitor for and detect abusive
trading practices. These techniques may change from time to time as determined
by American Century in its sole discretion. To minimize harm to the funds and
their shareholders, we reserve the right to reject any purchase order (including
exchanges) from any shareholder we believe has a history of abusive trading or
whose trading, in our judgment, has been or may be disruptive to the funds. In
making this judgment, we may consider trading done in multiple accounts under
common ownership or control.
Currently, we may deem the sale of all or a substantial portion of a
shareholder's purchase of fund shares to be abusive if the sale is made
* within seven days of the purchase, or
* within 30 days of the purchase, if it happens more than once per year.
American Century reserves the right, in its sole discretion, to identify other
trading practices as abusive. In addition, American Century reserves the right
to accept purchases and exchanges in excess of the trading restrictions
discussed above if it believes that such transactions would not be inconsistent
with the best interests of fund shareholders or this policy.
Due to the complexity and subjectivity involved in identifying abusive trading
activity and the volume of shareholder transactions American Century handles,
there can be no assurance that American Century's efforts will identify all
trades or trading practices that may be considered abusive. In addition,
American Century's ability to monitor trades that are placed by the individual
shareholders of omnibus accounts maintained by financial intermediaries is
severely limited because American Century does not have access to the underlying
shareholder account information. However, American Century monitors aggregate
trades placed in omnibus accounts and seeks to work with financial
intermediaries to discourage shareholders from engaging in abusive trading
practices and to impose restrictions on excessive trades. There may be legal and
technological limitations on the ability of financial intermediaries to impose
restrictions on the trading practices of their clients. As a result, American
Century's ability to monitor and discourage abusive trading practices in omnibus
accounts may be limited.
-----
14
INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange, redeem and transfer shares will be
affected by the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
* trading restrictions
Please contact your FINANCIAL INTERMEDIARY or plan sponsor for a complete
description of its policies.
[GRAPHIC OF TRIANGLE]
FINANCIAL INTERMEDIARIES INCLUDE BANKS, BROKER-DEALERS, INSURANCE
COMPANIES AND INVESTMENT ADVISORS.
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, the advisor will pay such
service providers a fee for performing those services. Also, the advisor and the
fund's distributor may make payments for various additional services or other
expenses out of their past profits or other available sources. Such expenses may
include distribution services, shareholder services or marketing, promotional or
related expenses. The amount of any payments described by this paragraph is
determined by the advisor or the distributor and is not paid by you.
Although fund share transactions 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 fund.
The fund has authorized certain financial intermediaries to accept orders on its
behalf. American Century has contracts with these intermediaries requiring them
to track the time investment orders are received and to comply with procedures
relating to the transmission of orders. Orders must be received by the
intermediary on a fund's behalf before the time the net asset value is
determined in order to receive that day's share price. 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.
RIGHT TO CHANGE POLICIES
We reserve the right to change any stated investment requirement, including
those that relate to purchases, exchanges and redemptions. We also may alter,
add or discontinue any service or privilege. Changes may affect all investors or
only those in certain classes or groups.
------
15
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century determines the net asset value (NAV) of the 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 closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.
If the advisor determines that the current market price of a security owned by a
non-money market fund is not readily available, the advisor may determine its
fair value in accordance with procedures adopted by the fund's board.
Circumstances that may cause the advisor to determine the fair value of a
security held by the fund include, but are not limited to:
* an event occurs after the close of the foreign exchange on which a portfolio
security principally trades, but before the close of the Exchange, that is
likely to have changed the value of the security
* a debt security has been declared in default
* trading in a security has been halted during the trading day
* the demand for the security (as reflected by its trading volume) is
insufficient for quoted prices to be reliable
If such circumstances occur, the advisor may determine the security's fair value
if the fair value determination would materially impact the fund's net asset
value. While fair value determinations involve judgments that are inherently
subjective, these determinations are made in good faith in accordance with
procedures adopted by a fund's board.
Trading of securities in foreign markets may not take place every day the
Exchange is open. Also, trading in some foreign markets and on some electronic
trading networks may take place on weekends or holidays when a fund's NAV is not
calculated. So, the value of a fund's portfolio may be affected on days when you
can't purchase or redeem shares of the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in GOOD ORDER.
[GRAPHIC OF TRIANGLE]
GOOD ORDER MEANS THAT YOUR INSTRUCTIONS HAVE BEEN RECEIVED IN THE FORM
REQUIRED BY AMERICAN CENTURY. THIS MAY INCLUDE, FOR EXAMPLE, PROVIDING
THE FUND NAME AND ACCOUNT NUMBER, THE AMOUNT OF THE TRANSACTION AND
ALL REQUIRED SIGNATURES.
------
16
DISTRIBUTIONS
Federal tax laws require a fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means that a fund 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 by
a fund on the sale of its investment securities. The fund pays distributions of
substantially all of its income quarterly. Distributions from realized capital
gains are paid annually, usually in December. It may make more frequent
distributions if necessary to comply with Internal Revenue Code provisions.
[GRAPHIC OF TRIANGLE]
CAPITAL GAINS ARE INCREASES IN THE VALUES OF CAPITAL ASSETS, SUCH AS
STOCK, FROM THE TIME THE ASSETS ARE PURCHASED.
You will participate in fund distributions when they are declared, starting the
next business 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 tax-deferred retirement plans must reinvest all distributions.
For investors investing through taxable accounts, we will reinvest distributions
unless you elect to have dividends and/or capital gains sent to another American
Century account, to your bank electronically, or to your home address or to
another person or address by check.
------
17
TAXES
The tax consequences of owning shares of a fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by a fund of dividend and interest income it has received or
capital gains it has generated through its investment activities. Tax
consequences also may result when investors sell fund shares after the net asset
value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, you may be taxed on your
investments if the fund makes distributions or if you sell your fund shares.
Taxability of Distributions
Fund distributions may consist of income such as dividends and interest earned
by a fund from its investments, or capital gains generated by a fund from the
sale of investment securities. Distributions of income are taxed as ordinary
income, unless they are designated as QUALIFIED DIVIDEND INCOME and you meet a
minimum required holding period with respect to your shares of the fund, in
which case distributions of income are taxed as long-term capital gains.
[GRAPHIC OF TRIANGLE]
QUALIFIED DIVIDEND INCOME IS A DIVIDEND RECEIVED BY A FUND FROM THE
STOCK OF A DOMESTIC OR QUALIFYING FOREIGN CORPORATION, PROVIDED THAT
THE FUND HAS HELD THE STOCK FOR A REQUIRED HOLDING PERIOD.
For capital gains and for income distributions designated as qualified dividend
income, the following rates apply:
TAX RATE FOR 10% TAX RATE FOR
TYPE OF DISTRIBUTION AND 15% BRACKETS ALL OTHER BRACKETS
--------------------------------------------------------------------------------
Short-term capital gains Ordinary Income Ordinary Income
--------------------------------------------------------------------------------
Long-term capital gains ( 1 year)
and Qualified Dividend Income 5% 15%
--------------------------------------------------------------------------------
The tax status of any distributions of capital gains is determined by how long a
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. For taxable accounts, American Century or your
financial intermediary 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, you may want to consult your tax professional about
federal, state and local tax consequences.
------
18
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 exchange of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to 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 withholding, we
are required to withhold and pay to the IRS the applicable federal withholding
tax rate on taxable dividends, capital gains distributions and redemption
proceeds.
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 the fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes 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.
------
19
NOTES
------
20
NOTES
------
21
MORE INFORMATION ABOUT THE FUND IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the fund's
investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed, legal description of the fund's 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 fund or your accounts, by contacting American Century at the
address or telephone numbers listed below.
You also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
IN PERSON SEC Public Reference Room,
Washington, D.C.
Call 202-942-8090 for location and hours.
ON THE INTERNET * EDGAR database at www.sec.gov
* By email request at publicinfo@sec.gov
BY MAIL SEC Public Reference Section
Washington, D.C. 20549-0102
This Prospectus shall not constitute an offer to sell securities of a fund in
any state, territory, or other jurisdiction where the fund's shares have not
been registered or qualified for sale, unless such registration or qualification
is not required, or under any circumstances in which such offer or solicitation
would be unlawful.
FUND REFERENCE FUND CODE TICKER NEWSPAPER LISTING
--------------------------------------------------------------------------------
Mid Cap Value Fund
Investor Class 100 N/A N/A
--------------------------------------------------------------------------------
Investment Company Act File No. 811-7820
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
www.americancentury.com
0403
SH-PRS-37339
American Century
Investments
statement of
additional information
MARCH 31, 2004
American Century Capital Portfolios, Inc.
Large Company Value Fund
Value Fund
Small Cap Value Fund
Mid Cap Value Fund
Equity Income Fund
Equity Index Fund
Real Estate Fund
THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUSES DATED AUGUST 1, 2003, AUGUST 29, 2003, AND MARCH 31, 2004, BUT IS
NOT A PROSPECTUS. THE STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH THE FUNDS' CURRENT PROSPECTUSES. IF YOU WOULD LIKE A COPY OF A
PROSPECTUS, PLEASE CONTACT US AT THE ADDRESS OR TELEPHONE NUMBERS LISTED ON THE
BACK COVER OR VISIT WWW.AMERICANCENTURY.COM.
THIS STATEMENT OF ADDITIONAL INFORMATION INCORPORATES BY REFERENCE CERTAIN
INFORMATION THAT APPEARS IN THE FUNDS' ANNUAL AND SEMIANNUAL REPORTS, WHICH ARE
DELIVERED TO ALL SHAREHOLDERS. YOU MAY OBTAIN A FREE COPY OF THE FUNDS' ANNUAL
OR SEMIANNUAL REPORTS BY CALLING 1-800-345-2021.
American Century
Investment Services, Inc.
[american century logo and text logo)
The American Century logo, American Century and American Century Investments are
service marks of American Century Services Corporation.
Table of Contents
The Funds' History...................................................... 2
Fund Investment Guidelines.............................................. 3
Fund Investments and Risks.............................................. 4
Investment Strategies and Risks.................................... 4
Investment Policies................................................ 15
S&P 500 Index...................................................... 19
Portfolio Turnover................................................. 19
Temporary Defensive Measures....................................... 20
Management.............................................................. 20
The Board of Directors............................................. 24
Ownership of Fund Shares........................................... 27
Codes of Ethics.................................................... 27
The Funds' Principal Shareholders....................................... 29
Service Providers....................................................... 35
Investment Advisor................................................. 35
Subadvisors........................................................ 37
Transfer Agent and Administrator................................... 39
Distributor........................................................ 39
Other Service Providers................................................. 39
Custodian Banks.................................................... 39
Independent Auditors............................................... 39
Brokerage Allocation.................................................... 40
Regular Broker-Dealer.............................................. 41
Information About Fund Shares........................................... 41
Multiple Class Structure........................................... 42
Buying and Selling Fund Shares..................................... 52
Valuation of a Fund's Securities................................... 52
Taxes................................................................... 54
Federal Income Taxes............................................... 54
State and Local Taxes.............................................. 55
Taxation of Certain Mortgage REITs................................. 55
How Fund Performance Information Is Calculated.......................... 56
Performance Comparisons............................................ 60
Permissible Advertising Information................................ 61
Multiple Class Performance Advertising............................. 61
Financial Statements.................................................... 61
Explanation of Fixed-Income Securities Ratings.......................... 62
1
THE FUNDS' HISTORY
American Century Capital Portfolios, Inc. is a registered open-end management
investment company that was organized as a Maryland corporation on June 14,
1993. The corporation was known as Twentieth Century Capital Portfolios, Inc.
until January 1997. Throughout this Statement of Additional Information we refer
to American Century Capital Portfolios, Inc. as the corporation.
Each fund described in this Statement of Additional Information is a separate
series of the corporation and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, and tax identification and stock registration numbers.
FUND/CLASS TICKER SYMBOL INCEPTION DATE
---------------------------------------------------------------------------
Large Company Value
Investor Class ALVIX 07/30/1999
---------------------------------------------------------------------------
Institutional Class ALVSX 08/10/2001
---------------------------------------------------------------------------
A Class ALAVX 01/31/2003
---------------------------------------------------------------------------
B Class ALBVX 01/31/2003
---------------------------------------------------------------------------
C Class ALPCX 11/07/2001
---------------------------------------------------------------------------
R Class ALVRX 08/29/2003
---------------------------------------------------------------------------
Advisor Class ALPAX 10/26/2000
---------------------------------------------------------------------------
Value
Investor Class TWVLX 09/01/1993
---------------------------------------------------------------------------
Institutional Class AVLIX 07/31/1997
---------------------------------------------------------------------------
A Class ACAVX 01/31/2003
---------------------------------------------------------------------------
B Class ACBVX 01/31/2003
---------------------------------------------------------------------------
C Class ACLCX 06/04/2001
---------------------------------------------------------------------------
Advisor Class TWADX 10/02/1996
---------------------------------------------------------------------------
Small Cap Value
Investor Class ASVIX 07/31/1998
---------------------------------------------------------------------------
Institutional Class ACVIX 10/26/1998
---------------------------------------------------------------------------
C Class ACVCX 06/01/2001
---------------------------------------------------------------------------
Advisor Class ACSCX 12/31/1999
---------------------------------------------------------------------------
Mid Cap Value
Investor Class N/A 03/31/2004
---------------------------------------------------------------------------
Equity Income
Investor Class TWEIX 08/01/1994
---------------------------------------------------------------------------
Institutional Class ACIIX 07/08/1998
---------------------------------------------------------------------------
C Class AEYIX 07/13/2001
---------------------------------------------------------------------------
R Class AEURX 08/29/2003
---------------------------------------------------------------------------
Advisor Class TWEAX 03/07/1997
---------------------------------------------------------------------------
Equity Index
Investor Class ACIVX 02/26/1999
---------------------------------------------------------------------------
Institutional Class ACQIX 02/26/1999
---------------------------------------------------------------------------
Real Estate
Investor Class REACX 09/21/1995
---------------------------------------------------------------------------
Institutional Class REAIX 06/16/1997
---------------------------------------------------------------------------
Advisor Class AREEX 10/06/1998
---------------------------------------------------------------------------
2
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 4. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussions contained in the
Prospectuses.
Large Company Value, Value, Small Cap Value, Mid Cap Value and Equity Income are
each diversified as defined in the Investment Company Act of 1940 (the
Investment Company Act). Diversified means that, with respect to 75% of its
total assets, each fund will not invest more than 5% of its total assets in the
securities of a single issuer or own more than 10% of the outstanding voting
securities of a single issuer.
Equity Index and Real Estate are non-diversified as defined in the Investment
Company Act. Non-diversified means that the proportion of the funds' assets that
may be invested in the securities of a single issuer is not limited by the
Investment Company Act.
It is intended that Equity Index will be diversified to the extent that the S&P
500 Index is diversified. Because of the composition of the S&P 500 Index, it is
possible that a relatively high percentage of the fund's assets may be invested
in the securities of a limited number of issuers, some of which may be in the
same industry or economic sector. As a result, the fund's portfolio may be more
sensitive to changes in the market value of a single issuer or industry than
other equity funds using different investment styles.
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S. government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.
In general, within the restrictions outlined here and in the funds'
Prospectuses, the fund managers have broad powers to decide how to invest fund
assets, including the power to hold them uninvested.
Investments vary according to what is judged advantageous under changing
economic conditions. It is the advisor's policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described on the following pages. It is the advisor's intention that each fund
generally will consist of equity and equity-equivalent securities. However,
subject to the specific limitations applicable to a fund, the fund management
teams may invest the assets of each fund in varying amounts using other
investment techniques, such as those reflected in the table below, when such a
course is deemed appropriate to pursue a fund's investment objective. Senior
securities that are high-grade issues, in the opinion of the managers, also may
be purchased for defensive purposes.
Income is a primary or secondary objective of the Large Company Value, Value,
Small Cap Value, Mid Cap Value, Equity Income and Real Estate funds. As a
result, a portion of the portfolio of each of these funds may consist of debt
securities.
So long as a sufficient number of acceptable securities are available, the fund
managers intend to keep the funds fully invested. However, under exceptional
conditions, the funds may assume a defensive position, temporarily investing all
or a substantial portion of their assets in cash or short-term securities.
The managers may use futures and options as a way to expose the funds' cash
assets to the market while maintaining liquidity. As mentioned in the
Prospectuses, the managers may not leverage the funds' portfolios, so there is
no greater market risk to the funds than if they purchase stocks. See DERIVATIVE
SECURITIES, page 8, and SHORT-TERM SECURITIES, page 11 and FUTURES AND OPTIONS,
page 12.
3
FUND INVESTMENTS AND RISKS
INVESTMENT STRATEGIES AND RISKS
This section describes investment vehicles and techniques the fund managers can
use in managing a fund's assets. It also details the risks associated with each,
because each investment vehicle and technique contributes to a fund's overall
risk profile. To determine whether a fund may invest in a particular investment
vehicle, consult the table below. An "X" indicates that the fund may invest in
the security or employ the investment technique that appears in the
corresponding row.
MID CAP
LARGE VALUE
COMPANY SMALL CAP EQUITY EQUITY REAL
VALUE VALUE VALUE INCOME INDEX ESTATE
--------------------------------------------------------------------------------------------
Equity Equivalent Securities X X X X X X
--------------------------------------------------------------------------------------------
Debt Securities x x x x x x
--------------------------------------------------------------------------------------------
Foreign Securities 20% 35% 20% 35% x x
--------------------------------------------------------------------------------------------
Convertible Debt Securities x x x x x x
--------------------------------------------------------------------------------------------
Short Sales x x x x x x
--------------------------------------------------------------------------------------------
Portfolio Lending 33-1/3% 33-1/3% 33-1/3% 33-1/3% 33-1/3% 33-1/3%
--------------------------------------------------------------------------------------------
Derivative Securities x x x x x x
--------------------------------------------------------------------------------------------
Investments in Issuers with
Limited Operating Histories 5% 5% 5% 5% 5% 5%
--------------------------------------------------------------------------------------------
Repurchase Agreements x x x x x x
--------------------------------------------------------------------------------------------
When-Issued and Forward
Commitment Agreements x x x x x x
--------------------------------------------------------------------------------------------
Restricted and
Illiquid Securities 15% 15% 15% 15% 15% 15%
--------------------------------------------------------------------------------------------
Short-Term Securities x x x x x x
--------------------------------------------------------------------------------------------
Other Investment Companies 10% 10% 10% 10% 10% 10%
--------------------------------------------------------------------------------------------
Futures and Options x x x x x x
--------------------------------------------------------------------------------------------
Forward Currency
Exchange Contracts x x x x x x
--------------------------------------------------------------------------------------------
Equity Equivalent Securities
In addition to investing in common stocks, the funds may invest in other equity
securities and equity equivalents, including securities that permit a fund to
receive an equity interest in an issuer, the opportunity to acquire an equity
interest in an issuer, or the opportunity to receive a return on its investment
that permits the fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity equivalents include preferred
stock, convertible preferred stock and convertible debt securities.
Equity equivalents also may include securities whose value or return is derived
from the value or return of a different security. Depositary receipts, which are
described in FOREIGN SECURITIES, page 6, are an example of the type of
derivative security in which a fund might invest.
4
Debt Securities
Each of the funds may invest in debt securities. The primary or secondary
investment objective of Large Company Value, Value, Small Cap Value, Mid Cap
Value, Equity Income and Real Estate is income creation. As a result, these
funds may invest in debt securities when the fund managers believe such
securities represent an attractive investment for the funds. These funds may
invest in debt securities for income or as a defensive strategy when the
managers believe adverse economic or market conditions exist.
Equity Index invests in debt securities primarily for cash management. The debt
securities that Equity Index invests in are generally short-term.
The value of the debt securities in which the funds may invest will fluctuate
based upon changes in interest rates and the credit quality of the issuer. Debt
securities that are part of a fund's fixed-income portfolio will be limited
primarily to "investment-grade" obligations. However, each fund may invest up to
5% of its assets in "high-yield" securities. "Investment grade" means that at
the time of purchase, such obligations are rated within the four highest
categories by a nationally recognized statistical rating organization (for
example, at least Baa by Moody's Investors Service, Inc. or BBB by Standard
& Poor's Corporation), or, if not rated, are of equivalent investment
quality as determined by the fund's advisor. According to Moody's, bonds rated
Baa are medium-grade and possess some speculative characteristics. A BBB rating
by S&P indicates S&P's belief that a security exhibits a satisfactory
degree of safety and capacity for repayment, but is more vulnerable to adverse
economic conditions and changing circumstances.
"High-yield" securities, sometimes referred to as "junk bonds," are higher risk,
non-convertible debt obligations that are rated below investment-grade
securities, or are unrated, but with similar credit quality.
There are no credit or maturity restrictions on the fixed-income securities in
which the high-yield portion of a fund's portfolio may be invested. Debt
securities rated lower than Baa by Moody's or BBB by S&P, or their
equivalent, are considered by many to be predominantly speculative. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments on such securities than is the
case with higher quality debt securities. Regardless of rating levels, all debt
securities considered for purchase by the fund are analyzed by the investment
manager to determine, to the extent reasonably possible, that the planned
investment is sound, given the fund's investment objective. See EXPLANATION OF
FIXED-INCOME SECURITIES RATINGS, page 62.
If the aggregate value of high-yield securities exceeds 5% because of their
market appreciation or other assets' depreciation, the funds will not
necessarily sell them. Instead, the fund managers will not purchase additional
high-yield securities until their value is less than 5% of the fund's assets.
Fund managers will monitor these investments to determine whether holding them
will likely help the fund meet its investment objectives.
In addition, the value of a fund's investments in fixed-income securities will
change as prevailing interest rates change. In general, the prices of such
securities vary inversely with interest rates. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis
generally rise. When prevailing interest rates rise, bond prices generally fall.
Depending upon the particular amount and type of fixed-income securities
holdings of a fund, these changes may impact the net asset value of that fund's
shares.
Even though the funds will invest primarily in equity securities, under
exceptional market or economic conditions, the funds may temporarily invest all
or a substantial portion of their assets in cash or investment-grade short-term
securities (denominated in U.S. dollars or foreign currencies). To the extent
that a fund assumes a defensive position, it will not be investing for capital
growth.
5
Foreign Securities
Each fund may invest in the securities of foreign issuers, including foreign
governments and their agencies, when these securities meet their standards of
selection. In determining whether a company is foreign, the fund managers will
consider various factors, including where the company is headquartered, where
the company's principal operations are located, where the company's revenues are
derived, where the principal trading market is located and the country in which
the company was legally organized. The weighting given to each of these factors
will vary depending on the circumstances in a given case.
The funds may make such investments either directly in foreign securities or
indirectly by purchasing depositary receipts for foreign securities. Depositary
receipts, depositary shares or similar instruments are securities that are
listed on exchanges or quoted in the domestic over-the-counter markets in one
country, but represent shares of issuers domiciled in another country. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
The funds may invest in common stocks, convertible securities, preferred stocks,
bonds, notes and other debt securities of foreign issuers, foreign governments
and their agencies. The funds will limit their purchase of foreign securities to
those of issuers whose principal business activities are located in developed
countries. The funds consider developed countries to include Australia, Austria,
Belgium, Bermuda, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Luxembourg, The Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States.
Investments in foreign securities may present certain risks, including:
CURRENCY RISK - The value of the foreign investments held by the funds may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign currency in which the security is denominated, and tends to
increase when the value of the dollar falls against such currency. In addition,
the value of fund assets may be affected by losses and other expenses incurred
in converting between various currencies in order to purchase and sell foreign
securities, and by currency restrictions, exchange control regulation, currency
devaluations and political developments.
POLITICAL AND ECONOMIC RISK - The economies of many of the countries in which
the funds invest are not as developed as the economy of the United States and
may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, confiscatory taxation and
limitations on the removal of funds or other assets also could adversely affect
the value of investments. Further, the funds may find it difficult or be unable
to enforce ownership rights, pursue legal remedies or obtain judgments in
foreign courts.
REGULATORY RISK - Foreign companies generally are not subject to the regulatory
controls imposed on U.S. issuers and, in general, there is less publicly
available information about foreign securities than is available about domestic
securities. Many foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the funds may be reduced by a withholding tax at the source,
which would reduce dividend income payable to shareholders.
MARKET AND TRADING RISK - Brokerage commission rates in foreign countries, which
generally are fixed rather than subject to negotiation as in the United States,
are likely to be higher. The securities markets in many of the countries in
which the funds invest have substantially less trading volume than the principal
U.S. markets. As a result, the securities of some companies in these countries
may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There
generally is less government regulation and supervision of foreign stock
exchanges, brokers and issuers, which may make it difficult to enforce
contractual obligations.
6
CLEARANCE AND SETTLEMENT RISK - Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the funds are uninvested and no return is earned. The funds' inability to
make intended security purchases due to clearance and settlement problems could
cause them to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to clearance and settlement problems could result
either in losses to the funds due to subsequent declines in the value of the
portfolio security or, if the fund has entered into a contract to sell the
security, liability to the purchaser.
OWNERSHIP RISK - Evidence of securities ownership may be uncertain in many
foreign countries. As a result, there may be a risk that a fund's trade details
could be incorrectly or fraudulently entered at the time of the transaction,
resulting in a loss to the fund.
Convertible Debt Securities
A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular time period
at a specified price or formula. A convertible security entitles the holder to
receive the interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion or exchange, such securities ordinarily provide a
stream of income with generally higher yields than common stocks of the same or
similar issuers, but lower than the yield on non-convertible debt. Of course,
there can be no assurance of current income because issuers of convertible
securities may default on their obligations. In addition, there can be no
assurance of capital appreciation because the value of the underlying common
stock will fluctuate. Because of the conversion feature, the managers consider
some convertible securities to be equity equivalents.
The price of a convertible security will normally fluctuate in some proportion
to changes in the price of the underlying asset. A convertible security is
subject to risks relating to the activities of the issuer and/or general market
and economic conditions. The stream of income typically paid on a convertible
security may tend to cushion the security against declines in the price of the
underlying asset. However, the stream of income causes fluctuations based upon
changes in interest rates and the credit quality of the issuer. In general, the
value of a convertible security is a function of (1) its yield in comparison
with yields of other securities of comparable maturity and quality that do not
have a conversion privilege and (2) its worth, at market value, if converted or
exchanged into the underlying common stock. The price of a convertible security
often reflects such variations in the price of the underlying common stock in a
way that a non-convertible security does not. At any given time, investment
value generally depends upon such factors as the general level of interest
rates, the yield of similar nonconvertible securities, the financial strength of
the issuer and the seniority of the security in the issuer's capital structure.
A convertible security may be subject to redemption at the option of the issuer
at a predetermined price. If a convertible security held by a fund is called for
redemption, the fund would be required to permit the issuer to redeem the
security and convert it to underlying common stock or to cash, or would sell the
convertible security to a third party, which may have an adverse effect on the
fund. A convertible security may feature a put option that permits the holder of
the convertible security to sell that security back to the issuer at a
predetermined price. A fund generally invests in convertible securities for
their favorable price characteristics and total return potential and normally
would not exercise an option to convert unless the security is called or
conversion is forced.
7
Short Sales
A fund may engage in short sales for cash management purposes only if, at the
time of the short sale, the fund owns or has the right to acquire securities
equivalent in kind and amount to the securities being sold short.
In a short sale, the seller does not immediately deliver the securities sold and
is said to have a short position in those securities until delivery occurs. To
make delivery to the purchaser, the executing broker borrows the securities
being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the fund will segregate cash, cash
equivalents or other appropriate liquid securities on its records in an amount
sufficient to meet the purchase price. There will be additional transaction
costs associated with short sales, but the fund will endeavor to offset these
costs with income from the investment of the cash proceeds of short sales.
Portfolio Lending
In order to realize additional income, a fund may lend its portfolio securities.
Such loans may not exceed one-third of the fund's total assets valued at market
except
* through the purchase of debt securities in accordance with its investment
objectives, policies and limitations, or
* by engaging in repurchase agreements with respect to portfolio securities.
Derivative Securities
To the extent permitted by its investment objectives and policies, each fund may
invest in derivative securities. Generally, a derivative security is a financial
arrangement, having a value based on, or derived from, a traditional security,
asset, or market index. Certain derivative securities are described more
accurately as index/structured securities. Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as depositary receipts), currencies, interest rates, indices or
other financial indicators (reference indices).
A structured investment is a security whose value or performance is linked to an
underlying index or other security or asset class. Structured investments
include asset-backed securities (ABS), asset-backed commercial paper (ABCP),
commercial and residential mortgage-backed securities (MBS), collateralized debt
obligations (CDO), collateralized loan obligations (CLO), and securities backed
by other types of collateral or indices. For example, Standard & Poor's
Depositary Receipts, also known as "SPIDERs", track the price performance and
dividend yield of the S&P Index by providing a stake in the stocks that make up
that index. Structured investments involve the transfer of specified financial
assets to a special purpose entity, generally a corporation or trust, or the
deposit of financial assets with a custodian; and the issuance of securities or
depository receipts backed by, or representing interests in those assets.
Some structured investments are individually negotiated agreements or are traded
over-the-counter. Structured investments may be organized and operated to
restructure the investment characteristics of the underlying security. The cash
flow on the underlying instruments may be apportioned among the newly issued
structured securities to create securities with different investment
characteristics, such as varying maturities, payment priorities and interest
rate provisions, and the extent of such payments made with respect to structured
securities is dependent on the extent of the cash flow on the underlying
instruments. Because structured securities typically involve no credit
enhancement, their
8
credit risk generally will be equivalent to that of the underlying instruments.
Structured securities are subject to such risks as the inability or
unwillingness of the issuers of the underlying securities to repay principal and
interest, and requests by the issuers of the underlying securities to reschedule
or restructure outstanding debt and to extend additional loan amounts.
Some derivative securities, such as mortgage-related and other asset-backed
securities, are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivative securities and many different ways
to use them. Futures and options are commonly used for traditional hedging
purposes to attempt to protect a fund from exposure to changing interest rates,
securities prices or currency exchange rates, and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are risks associated with investing in derivative securities, including:
* the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the fund managers anticipate;
* the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
* the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
* the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the advisor's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities and provides that a fund
may not invest in a derivative security if it would be possible for a fund to
lose more money than it had invested. The policy also establishes a committee
that must review certain proposed purchases before the purchases can be made.
The advisor will report on fund activity in derivative securities to the Board
of Directors as necessary.
Investment in Issuers with Limited Operating Histories
The funds may invest a portion of their assets in the securities of issuers with
limited operating histories. The fund managers consider an issuer to have a
limited operating history if that issuer has a record of less than three years
of continuous operation. The managers will consider periods of capital
formation, incubation, consolidations, and research and development in
determining whether a particular issuer has a record of three years of
continuous operation.
Investments in securities of issuers with limited operating histories may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating histories and financial
information upon which the managers may base their investment decision on behalf
of the funds. In addition, financial and other information regarding these
issuers, when available, may be incomplete or inaccurate.
9
For purposes of this limitation, "issuers" refers to operating companies that
issue securities for the purposes of issuing debt or raising capital as a means
of financing their ongoing operations. It does not, however, refer to entities,
corporate or otherwise, that are created for the express purpose of securitizing
obligations or income streams. For example, a fund's investments in a trust
created for the purpose of pooling mortgage obligations would not be subject to
the limitation.
Repurchase Agreements
Each fund may invest in repurchase agreements when they present an attractive
short-term return on cash that is not otherwise committed to the purchase of
securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time a fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to purchase it on a specified
date in the future at an agreed-upon price. The repurchase price reflects an
agreed-upon interest rate during the time the fund's money is invested in the
security.
Because the security purchased constitutes collateral for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the seller's ability to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued by
the U.S. government and its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy by the funds' advisor.
Repurchase agreements maturing in more than seven days would count toward a
fund's 15% limit on illiquid securities.
When-Issued and Forward Commitment Agreements
The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date.
For example, a fund may sell a security and at the same time make a commitment
to purchase the same or a comparable security at a future date and specified
price. Conversely, a fund may purchase a security and at the same time make a
commitment to sell the same or a comparable security at a future date and
specified price. These types of transactions are executed simultaneously in what
are known as dollar-rolls, buy/sell back transactions, cash and carry, or
financing transactions. For example, a broker-dealer may seek to purchase a
particular security that a fund owns. The fund will sell that security to the
broker-dealer and simultaneously enter into a forward commitment agreement to
buy it back at a future date. This type of transaction generates income for the
fund if the dealer is willing to execute the transaction at a favorable price in
order to acquire a specific security.
When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Market rates of interest on debt securities at the time of
delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of the security may decline prior to delivery,
which could result in a loss to the fund. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.
10
In purchasing securities on a when-issued or forward commitment basis, a fund
will segregate cash, cash equivalents or other appropriate liquid securities on
its records in an amount sufficient to meet the purchase price. When the time
comes to pay for the when-issued securities, a fund will meet its obligations
with available cash, through the sale of securities, or, although it would not
normally expect to do so, by selling the when-issued securities themselves
(which may have a market value greater or less than the fund's payment
obligation). Selling securities to meet when-issued or forward commitment
obligations may generate taxable capital gains or losses.
Restricted and Illiquid Securities
The funds may 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 privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered restricted
securities, they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission (SEC) has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, based
upon a consideration of the readily available trading markets and the review of
any contractual restrictions. Accordingly, the Board of Directors is responsible
for developing and establishing the guidelines and procedures for determining
the liquidity of Rule 144A securities. As allowed by Rule 144A, the Board of
Directors has delegated the day-to-day function of determining the liquidity of
Rule 144A securities to the fund managers. The board retains the responsibility
to monitor the implementation of the guidelines and procedures it has adopted.
Because the secondary market for restricted securities is generally limited to
certain qualified institutional investors, their liquidity may be limited
accordingly and a fund may, from time to time, hold a Rule 144A or other
security that is illiquid. In such an event, the fund managers will consider
appropriate remedies to minimize the effect on that fund's liquidity.
Short-Term Securities
In order to meet anticipated redemptions, anticipated purchases of additional
securities for a fund's portfolio, or, in some cases, for temporary defensive
purposes, the 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; and
* Money market funds.
11
Under the Investment Company Act, a fund's investment in other investment
companies (including money market funds) currently is limited to (a) 3% of the
total voting stock of any one investment company; (b) 5% of the fund's total
assets with respect to any one investment company; and (c) 10% of a fund's total
assets in the aggregate. These investments may include investments in money
market funds managed by the advisor. Any investment in money market funds must
be consistent with the investment policies and restrictions of the fund making
the investment.
Other Investment Companies
Each of the funds may invest up to 10% of its total assets in other mutual funds
provided that the investment is consistent with the fund's investment policies
and restrictions. Under the Investment Company Act, a fund's investment in these
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 of any investment company; and (c) 10% of a fund's total assets in the
aggregate. Such purchases will be made in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the customary
brokers' commissions. As a shareholder of another investment company, a fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the management fee that each fund bears directly in connection
with its own operations.
Futures and Options
Each fund may enter into futures contracts, options or options on futures
contracts. Futures contracts provide for the sale by one party and purchase by
another party of a specific security at a specified future time and price.
Generally, futures transactions will be used to:
* protect against a decline in market value of the funds' securities (taking a
short futures position), or
* protect against the risk of an increase in market value for securities in
which the fund generally invests at a time when the fund is not fully
invested (taking a long futures position), or
* provide a temporary substitute for the purchase of an individual security
that may not be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and
writing calls, hedge a fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure.
Although other techniques may be used to control a fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.
For example, the sale of a future by a fund means the fund becomes obligated to
deliver the security (or securities, in the case of an index future) at a
specified price on a specified date. The fund managers may engage in futures and
options transactions based on securities indices provided that the transactions
are consistent with the fund's investment objectives. Examples of indices that
may be used include the Bond Buyer Index of Municipal Bonds for fixed-income
funds, or the S&P 500 Index for equity funds. The managers may engage in
futures and options transactions based on specific securities. 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.
12
Index futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).
Unlike when the fund purchases or sells a security, no price is paid or received
by the fund upon the purchase or sale of the future. Initially, the fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute a margin
transaction for purposes of the fund's investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin accounts generally is not
income-producing. However, coupon-bearing securities, such as Treasury bills and
bonds, held in margin accounts generally will earn income. Subsequent payments
to and from the broker, called variation margin, will be made on a daily basis
as the price of the underlying security or index fluctuates, making the future
more or less valuable, a process known as marking the contract to market.
Changes in variation margin are recorded by the fund as unrealized gains or
losses. At any time prior to expiration of the future, the fund may elect to
close the position by taking an opposite position. A final determination of
variation margin is then made; additional cash is required to be paid by or
released to the fund, and the fund realizes a loss or gain.
RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the fund managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower a fund's return.
A fund could suffer losses if it is unable to close out its position because of
an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the fund managers consider it appropriate or desirable to
do so. In the event of adverse price movements, a fund would be required to
continue making daily cash payments to maintain its required margin. If the fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the fund managers would not otherwise do so.
In addition, a fund may be required to deliver or take delivery of instruments
underlying futures contracts it holds. The fund managers will seek to minimize
these risks by limiting the contracts entered into on behalf of the funds to
those traded on national futures exchanges and for which there appears to be a
liquid secondary market.
A fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.
13
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
OPTIONS ON FUTURES
By purchasing an option on a futures contract, a fund obtains the right, but not
the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the funds may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the funds would give up some
ability to participate in a price increase on the underlying security. If a fund
were to engage in options transactions, it would own the futures contract at the
time a call was written and would keep the contract open until the obligation to
deliver it expired.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS
Under the Commodity Exchange Act, a fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the fund's total assets. To the extent required by law, each
fund will segregate cash, cash equivalents or other appropriate liquid
securities on its records in an amount sufficient to cover its obligations under
the futures contracts and options.
Forward Currency Exchange Contracts
Each fund may purchase and sell foreign currency on a spot (i.e., cash) basis
and may engage in forward currency contracts, currency options and futures
transactions for hedging or any other lawful purpose. See DERIVATIVE SECURITIES,
page 8.
The funds expect to use forward currency contracts under two circumstances:
(1) When the fund managers are purchasing or selling a security denominated in a
foreign currency and wish to lock in the U.S. dollar price of that security,
the fund managers would be able to enter into a forward currency contract to
do so; or
(2) When the fund managers believe the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar, a fund would be
able to enter into a forward currency contract to sell foreign currency for
a fixed U.S. dollar amount approximating the value of some or all of its
portfolio securities either denominated in, or whose value is tied to, such
foreign currency.
In the first circumstance, when a fund enters into a trade for the purchase or
sale of a security denominated in a foreign currency, it may be desirable to
establish (lock in) the U.S. dollar cost or proceeds. By entering into forward
currency contracts in U.S. dollars for
14
the purchase or sale of a foreign currency involved in an underlying security
transaction, the fund will be able to protect itself against a possible loss
between trade and settlement dates resulting from the adverse change in the
relationship between the U.S. dollar and the subject foreign currency.
In the second circumstance, when the fund managers believe that the currency of
a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward currency contract to sell for a fixed
dollar amount the amount in foreign currencies approximating the value of some
or all of its portfolio securities either denominated in, or whose value is tied
to, such foreign currency. A fund will cover outstanding forward contracts by
maintaining liquid portfolio securities denominated in, or whose value is tied
to, the currency underlying the forward contract or the currency being hedged.
To the extent that a fund is not able to cover its forward currency positions
with underlying portfolio securities, the fund will segregate on its records
cash or other liquid assets having a value equal to the aggregate amount of the
fund's commitments under the forward currency contract.
The precise matching of forward currency contracts in the amounts and values of
securities involved generally would not be possible because the future values of
foreign currencies will change due to market movements in the values of those
securities between the date the forward currency contract is entered into and
the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The fund managers do not intend to enter into such
contracts on a regular basis. Normally, consideration of the prospect for
currency parities will be incorporated into the long-term investment decisions
made with respect to overall diversification strategies. However, the fund
managers believe that it is important to have flexibility to enter into such
forward currency contracts when they determine that a fund's best interests may
be served.
When the forward currency contract matures, the fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate the obligation to deliver the foreign currency by
purchasing an offsetting forward currency contract with the same currency trader
that obligates the fund to purchase, on the same maturity date, the same amount
of the foreign currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward currency contract.
Accordingly, it may be necessary for a fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency that the fund is obligated to deliver.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the following policies apply at the time a fund enters into a
transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a fund's net assets will not be considered
in determining whether it has complied with its investment policies.
Fundamental Investment Policies
The funds' fundamental investment policies are set forth below. These investment
policies and the funds' investment objectives set forth in their prospectuses
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.
15
SUBJECT POLICY
--------------------------------------------------------------------------------
Senior A fund may not issue senior securities, except as permitted
Securities 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
exceeding 33-1/3% of the fund's total assets.
--------------------------------------------------------------------------------
Lending A fund may not lend any security or make any other loan if, as a
result, more than 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 objectives,
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 Large Company Value, Value, Mid Cap Value, Small Cap Value and
Equity Income may not concentrate their 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). Equity Index may be
concentrated to the extent that the S&P 500 is concentrated.
--------------------------------------------------------------------------------
Underwriting A fund may not act as an underwriter of securities issued by
others, except to the extent that the fund may be considered an
underwriter within the meaning of the Securities Act of 1933 in
the disposition of restricted securities.
--------------------------------------------------------------------------------
Commodities A fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other
instruments, provided that this limitation shall not prohibit
the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments
backed by physical commodities.
--------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising control over
management.
--------------------------------------------------------------------------------
For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding an interfund
lending program. Under the terms of the exemptive order, the funds may borrow
money from or lend money to other ACIM-advised funds that permit these
transactions. All such transactions will be subject to the limits for borrowing
and lending set forth above. The funds will borrow money through the program
only when the costs are equal to or lower than the costs of short-term bank
loans. Interfund loans and borrowings normally extend only overnight, but can
have a maximum duration of seven days. The funds will lend through the program
only when the returns are higher than those available from other short-term
instruments (such as repurchase agreements). The funds may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs.
For purposes of the investment restriction relating to concentration, Large
Company Value, Value, Small Cap Value, Mid Cap Value and Equity Income shall not
purchase any securities that would cause 25% or more of the value of the fund's
total assets at the time of purchase to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry, provided that
(a) there is no limitation with respect to obligations issued or guaranteed by
the U.S. government; any state, territory or possession of the United
States; the District of Columbia; or any of their authorities, agencies,
instrumentalities or political subdivisions and repurchase agreements
secured by such obligations;
(b) wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents;
(c) utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry; and
(d) personal credit and business credit businesses will be considered separate
industries.
16
Nonfundamental Investment Policies
In addition, the funds are subject to the following investment policies that are
not fundamental and may be changed by the Board of Directors.
SUBJECT POLICY
------------------------------------------------------------------------------
Leveraging A fund may not purchase additional investment securities at
any time when outstanding borrowings exceed 5% of the total
assets of the fund.
------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a
repurchase agreement if, as a result, more than 15% of its
net assets would be invested in illiquid securities.
Illiquid securities include repurchase agreements not
entitling the holder to payment of principal and interest
within seven days, and securities that are illiquid by
virtue of legal or contractual restrictions on resale or the
absence of a readily available market.
------------------------------------------------------------------------------
Short Sales A fund may not sell securities short unless it owns or has
the right to obtain securities equivalent in kind and amount
to the securities sold short, and provided that transactions
in futures contracts and options are not deemed to
constitute selling securities short.
------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except to
obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on
margin.
------------------------------------------------------------------------------
Futures A fund may enter into futures contracts and write and buy
and put and call options relating to futures contracts. A fund
Options may not, however, enter into leveraged futures transactions
if it would be possible for the fund to lose more money than
it invested.
------------------------------------------------------------------------------
Issuers A fund may invest a portion of its assets in the securities
with Limited of issuers with limited operating histories. An issuer is
Operating considered to have a limited operating history if that
Histories issuer has a record of less than three years of continuous
operation. Periods of capital formation, incubation,
consolidations, and research and development may be considered
in determining whether a particular issuer has a record
of three years of continuous operation. For purposes of this
limitation, "issuers" refers to operating companies that
issue securities for the purpose of issuing debt or raising
capital as a means of financing their ongoing operations.
------------------------------------------------------------------------------
The Investment Company Act imposes certain additional restrictions upon the
funds' ability to acquire securities issued by insurance companies,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as defined by the Act. It also defines and forbids the
creation of cross and circular ownership. Neither the SEC nor any other agency
of the federal or state government participates in or supervises the management
of the funds or their investment practices or policies.
Transactions with Subadvisor Affiliates
As described in further detail under the section titled INVESTMENT ADVISOR, J.P.
Morgan Investment Management Inc. (JPMIM) is subadvisor to the Real Estate Fund
pursuant to an agreement with American Century Investment Management, Inc.
The subadvisor, a wholly owned, indirect subsidiary of J.P. Morgan Chase &
Co. (J.P. Morgan Chase) and a corporation organized under the laws of the State
of Delaware, is a registered investment adviser under the Investment Advisers
Act of 1940, as amended. The subadvisor is located at 522 Fifth Avenue, New
York, New York 10036.
17
J.P. Morgan Chase, a bank holding company organized under the laws of the State
of Delaware, was formed from the merger of J.P. Morgan & Co. Incorporated
with and into The Chase Manhattan Corporation. J.P. Morgan Chase, together with
its predecessors, has been in the banking and investment advisory business for
over 100 years and today, through JPMIM and its other subsidiaries (such as,
Morgan Guaranty Trust Company of New York [Morgan Guaranty], J.P. Morgan
Securities Inc., and J.P. Morgan Securities Ltd.), offers a wide range of
banking and investment management services to governmental, institutional,
corporate and individual clients. These subsidiaries are hereafter referred to
as Morgan affiliates.
J.P. Morgan Securities Inc. is a broker-dealer registered with the SEC and is a
member of the National Association of Securities Dealers. It is active as a
dealer in U.S. government securities and an underwriter of and dealer in U.S.
government agency securities and money market instruments.
J.P. Morgan Securities Ltd. underwrites, distributes, and trades international
securities, including Eurobonds, commercial paper, and foreign government bonds.
J. P. Morgan Chase issues commercial paper and long-term debt securities. Morgan
Guaranty and some of its affiliates issue certificates of deposit and create
bankers' acceptances.
The Real Estate Fund will not invest in securities issued or created by a Morgan
affiliate.
Certain activities of Morgan affiliates may affect the Real Estate Fund's
portfolio or the markets for securities in which the fund invests. In
particular, activities of Morgan affiliates may affect the prices of securities
held by the fund and the supply of issues available for purchase by the fund.
Where a Morgan affiliate holds a large portion of a given issue, the price at
which that issue is traded may influence the price of similar securities the
fund holds or is considering purchasing.
The Real Estate Fund will not purchase securities directly from Morgan
affiliates, and the size of Morgan affiliates' holdings may limit the selection
of available securities in a particular maturity, yield, or price range. The
fund will not execute any transactions with Morgan affiliates and will use only
unaffiliated broker-dealers. In addition, the fund will not purchase any
securities of U.S. government agencies during the existence of an underwriting
or selling group of which a Morgan affiliate is a member, except to the extent
permitted by law.
The Real Estate Fund's ability to engage in transactions with Morgan affiliates
is restricted by the SEC and the Federal Reserve Board. In JPMIM's opinion,
these limitations should not significantly impair the fund's ability to pursue
its investment objectives. However, there may be circumstances in which the fund
is disadvantaged by these limitations compared to other funds with similar
investment objectives that are not subject to these limitations.
In acting for its fiduciary accounts, including the Real Estate Fund, JPMIM will
not discuss its investment decisions or positions with the personnel of any
Morgan affiliate. JPMIM has informed the fund that, in making investment
decisions, it will not obtain or use material, non-public information in the
possession of any division or department of JPMIM or other Morgan affiliates.
The commercial banking divisions of Morgan Guaranty and its affiliates may have
deposit, loan, and other commercial banking relationships with issuers of
securities the Real Estate Fund purchases, including loans that may be repaid in
whole or in part with the proceeds of securities purchased by the fund. Except
as may be permitted by applicable law, the fund will not purchase securities in
any primary public offering when the prospectus discloses that the proceeds will
be used to repay a loan from Morgan Guaranty. JPMIM will not cause the fund to
make investments for the direct purpose of benefiting other commercial interests
of Morgan affiliates at the fund's expense.
18
PORTFOLIO TURNOVER
The portfolio turnover rate of each fund is shown in the Financial Highlights
tables in that fund's Prospectus.
LARGE COMPANY VALUE
The fund managers of Large Company Value purchase portfolio securities with a
view to the long-term investment merits of each security and, consequently, the
fund may hold its investment securities for several years. However, the
decision to purchase or sell any security is ultimately based upon the
anticipated contribution of the security to the stated objective of the fund. In
order to achieve the fund's objective, the fund managers may sell a given
security regardless of the time it has been held in the portfolio. Portfolio
turnover may affect the character of capital gains realized and distributed by
the fund, if any, because short-term capital gains are taxable as ordinary
income. In addition, the fund managers may sell some securities to realize
losses that can be used to offset realized capital gains. They will take such
actions when they believe the tax benefits from realizing losses offset the
near-term investment potential of the security. Higher turnover would also
generate correspondingly higher brokerage commissions, which is a cost the fund
pays directly.
OTHER FUNDS
The fund managers will purchase and sell securities regardless of the length of
time the security has been held. Accordingly, the funds' portfolio turnover
rates may be substantial.
The fund managers intend to purchase a given security whenever they believe it
will contribute to the stated objective of a particular fund. In order to
achieve each fund's investment objectives, the fund managers may sell a given
security regardless of the length of time it has been held in the portfolio, and
regardless of the gain or loss realized on the sale. The managers may sell a
portfolio security if they believe that the security is not fulfilling its
purpose because, among other things, it did not live up to the managers'
expectations, because it may be replaced with another security holding greater
promise, because it has reached its optimum potential, because of a change in
the circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
Because investment decisions are based on a particular security's anticipated
contribution to a fund's investment objective, the managers believe that the
rate of portfolio turnover is irrelevant when they determine that a change is in
order to pursue the fund's investment objective. As a result, a fund's annual
portfolio turnover rate cannot be anticipated and may be higher than that of
other mutual funds with similar investment objectives. Higher turnover would
generate correspondingly greater brokerage commissions, which is a cost the
funds pay directly. Portfolio turnover also may affect the character of capital
gains realized and distributed by the fund, if any, because short-term capital
gains are taxable as ordinary income.
Because the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of maintaining any
particular rate of portfolio turnover, whether high or low; and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.
S&P 500 INDEX
The Equity Index fund seeks to achieve a 95% or better correlation between its
total return and the total return of the S&P 500 Index. Correlation is
measured by comparing the fund's monthly total returns to those of the S&P
500 over the most recent 36-month period.
The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
(S&P), a division of The McGraw-Hill Companies, Inc. S&P makes no
representation or warranty, express or implied, to the owners of the fund or any
member of the public regarding the
19
advisability of investing in securities generally or in the fund particularly or
the ability of the S&P 500 Index to track general stock market performance.
S& P's only relationship to American Century is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the fund.
S&P has no obligation to take the needs of American Century or the owners of
the fund into consideration in determining, composing or calculating the S&P
500 Index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the fund or the timing of the issuance
or sale of the fund or in the determination or calculation of the equation by
which the fund is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data it includes and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express
or implied, as to the results to be obtained by the fund, owners of the fund, or
any other person or entity from the use of the S&P 500 Index or any data
included therein. S&P makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the S&P 500 Index or any data included therein.
Without limiting any of the foregoing, in no event shall S&P have any
liability for any special, punitive, indirect or consequential damages
(including lost profits), even if notified of the possibility of such damages.
In the future, the fund may select a different index if such a standard of
comparison is deemed to be more representative of the performance of the
securities the fund seeks to match.
TEMPORARY DEFENSIVE MEASURES
For temporary defensive purposes, each fund may invest in securities that may
not fit its investment objective or its stated market. During a temporary
defensive period, the fund may direct its assets to the following investment
vehicles:
* interest-bearing bank accounts or certificates of deposit
* U.S. government securities and repurchase agreements collateralized by U.S.
government securities
* other money market funds
To the extent a fund assumes a defensive position, it will not be pursuing its
investment objective.
MANAGEMENT
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
75; the remaining independent directors may waive this requirement on a
case-by-case basis. Those listed as interested directors are "interested"
primarily by virtue of their engagement as officers of American Century
Companies, Inc. (ACC) or its wholly-owned subsidiaries, including the funds'
investment adviser, American Century Investment Management, Inc. (ACIM); the
funds' principal underwriter, American Century Investment Services, Inc. (ACIS);
and the funds' transfer agent, American Century Services Corporation (ACSC).
The other directors, (more than three-fourths of the total number) are
independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM, ACIS and ACSC. The directors serve in this capacity for five registered
investment companies in the American Century family of funds.
20
All persons named as officers of the funds also serve in similar capacities for
the other 12 investment companies advised by ACIM, except as noted. Only
officers with policy-making functions are listed. No officer is compensated for
his or her service as an officer of the funds. The listed officers are
interested persons of the funds and are appointed or re-appointed on an annual
basis.
NUMBER OF
PORTFOLIOS
IN FUND
POSITION(S) LENGTH COMPLEX OTHER
HELD OF TIME OVERSEEN DIRECTORSHIPS
WITH SERVED PRINCIPAL OCCUPATION(S) BY HELD BY
NAME, ADDRESS (AGE) FUND (YEARS) DURING PAST 5 YEARS DIRECTOR DIRECTOR
----------------------------------------------------------------------------------------------------------------
Interested Directors
----------------------------------------------------------------------------------------------------------------
James E. Stowers, Jr.(1) Director, 45 Chairman, Director and 41 None
4500 Main Street Chairman controlling shareholder, ACC
Kansas City, MO 64111 of the Chairman, ACSC and
(80) Board other ACC subsidiaries
Director, ACIM, ACSC and
other ACC subsidiaries
----------------------------------------------------------------------------------------------------------------
James E. Stowers III(1) Director, 13 Co-Chairman, ACC 41 None
4500 Main Street Chairman (September 2000 to present)
Kansas City, MO 64111 of the Chief Executive Officer, ACC
(45) Board (June 1996 to September 2000)
Director, ACC, ACIM, ACSC
and other ACC subsidiaries
----------------------------------------------------------------------------------------------------------------
Independent Directors
----------------------------------------------------------------------------------------------------------------
Thomas A. Brown Director 23 Strategic Account 41 None
4500 Main Street Implementation Manager,
Kansas City, MO 64111 APPLIED INDUSTRIAL
(64) TECHNOLOGIES, INC.,
a corporation engaged in
the sale of bearings and
power transmission products
----------------------------------------------------------------------------------------------------------------
Robert W. Doering, M.D. Director 2 Retired, formerly a 41 None
4500 Main Street Emeritus(2) general surgeon
Kansas City, MO 64111
(71)
----------------------------------------------------------------------------------------------------------------
Andrea C. Hall, Ph.D. Director 6 Senior Vice President, 41 Director, MIDWEST
4500 Main Street MIDWEST RESEARCH INSTITUTE RESEARCH INSTITUTE
Kansas City, MO 64111
(59)
----------------------------------------------------------------------------------------------------------------
D.D. (Del) Hock Director 7 Retired, formerly Chairman, 41 Director, ALLIED
4500 Main Street Public Service Company MOTION
Kansas City, MO 64111 of Colorado TECHNOLOGIES, INC.
(69) and J.D.
EDWARDS & COMPANY
----------------------------------------------------------------------------------------------------------------
Donald H. Pratt Director, 8 Chairman, 41 Director, BUTLER
4500 Main Street Vice WESTERN INVESTMENTS, INC. MANUFACTURING
Kansas City, MO 64111 Chairman Retired Chairman of the Board, COMPANY
(66) of the BUTLER MANUFACTURING COMPANY Director,
Board ATLAS-COPCO,
NORTH AMERICA INC.
----------------------------------------------------------------------------------------------------------------
(1) JAMES E. STOWERS, JR. IS THE FATHER OF JAMES E. STOWERS III.
(2) DR. ROBERT DOERING RESIGNED AS A FULL-TIME DIRECTOR, EFFECTIVE
NOVEMBER 5, 2001, AFTER SERVING IN SUCH CAPACITY FOR 33 YEARS. DR. DOERING
CONTINUES TO SERVE THE BOARD IN AN ADVISORY CAPACITY. HIS POSITION AS
DIRECTOR EMERITUS IS AN ADVISORY POSITION AND INVOLVES ATTENDANCE AT ONE
BOARD MEETING PER YEAR TO REVIEW PRIOR YEAR-END RESULTS FOR THE FUNDS. HE
RECEIVES ALL REGULAR BOARD COMMUNICATIONS, INCLUDING MONTHLY MAILINGS,
INDUSTRY NEWSLETTERS, EMAIL COMMUNICATIONS, AND COMPANY INFORMATION, BUT
NOT QUARTERLY BOARD AND COMMITTEE MATERIALS RELATING TO MEETINGS THAT HE
DOES NOT ATTEND. DR. DOERING IS NOT A DIRECTOR OR A MEMBER OF THE BOARD,
AND HAS NO VOTING POWER RELATING TO FUND OPERATIONS. HE IS NOT AN
INTERESTED PERSON OF THE FUNDS OR ACIM. HE RECEIVES AN ANNUAL STIPEND OF
$2,500 FOR HIS SERVICES.
21
NUMBER OF
PORTFOLIOS
IN FUND
POSITION(S) LENGTH COMPLEX OTHER
HELD OF TIME OVERSEEN DIRECTORSHIPS
WITH SERVED PRINCIPAL OCCUPATION(S) BY HELD BY
NAME, ADDRESS (AGE) FUND (YEARS) DURING PAST 5 YEARS DIRECTOR DIRECTOR
--------------------------------------------------------------------------------------------------------------
Gale E. Sayers Director 3 President, Chief Executive 41 None
4500 Main Street Officer and Founder,
Kansas City, MO 64111 SAYERS COMPUTER SOURCE
(60)
--------------------------------------------------------------------------------------------------------------
M. Jeannine Strandjord Director 9 Senior Vice President, Chief 41 Director, DST
4500 Main Street Integration Officer, SYSTEMS, INC.
Kansas City, MO 64111 SPRINT CORPORATION Director,
(58) (September 2003 to present) EURONET
Senior Vice President- WORLDWIDE
Financial Services
SPRINT CORPORATION
(January 2003 to September 2003)
Senior Vice President-Finance,
Global Markets Group
SPRINT CORPORATION
(November 1998 to January 2003)
--------------------------------------------------------------------------------------------------------------
Timothy S. Webster Director 2 President and Chief 41 None
4500 Main Street Executive Officer,
Kansas City, MO 64111 AMERICAN ITALIAN PASTA
(42) COMPANY
--------------------------------------------------------------------------------------------------------------
Officers
--------------------------------------------------------------------------------------------------------------
William M. Lyons President 3 Chief Executive Officer, ACC Not Not
4500 Main St. and other ACC subsidiaries applicable applicable
Kansas City, MO 64111 (September 2000 to present)
(48) President, ACC
(June 1997 to present)
President, ACIM
(SEPTEMBER 2002 TO PRESENT)
President, ACIS
(JULY 2003 TO PRESENT)
Chief Operating Officer, ACC
(June 1996 to September 2000)
Also serves as: Executive Vice
President, ACSC
and other ACC subsidiaries
--------------------------------------------------------------------------------------------------------------
Robert T. Jackson Executive 8 Chief Administrative Officer, Not Not
4500 Main St. Vice ACC (August 1997 to present) applicable applicable
Kansas City, MO 64111 President Chief Financial Officer, ACC
(58) (May 1995 to October 2002)
President, ACSC
(January 1999 to present)
Executive Vice President,
ACC (May 1995 to present)
Also serves as: Executive
Vice President and Chief
Financial Officer, ACIM, ACIS
and other ACC subsidiaries
--------------------------------------------------------------------------------------------------------------
22
NUMBER OF
PORTFOLIOS
IN FUND
POSITION(S) LENGTH COMPLEX OTHER
HELD OF TIME OVERSEEN DIRECTORSHIPS
WITH SERVED PRINCIPAL OCCUPATION(S) BY HELD BY
NAME, ADDRESS (AGE) FUND (YEARS) DURING PAST 5 YEARS DIRECTOR DIRECTOR
----------------------------------------------------------------------------------------------------------------
Maryanne Roepke, CPA Senior 3 Senior Vice President (April Not Not
4500 Main St. Vice 1998 to present) and applicable applicable
Kansas City, MO 64111 President, Assistant Treasurer (September
(48) Treasurer 1985 to present), ACSC
and Chief
Accounting
Officer
----------------------------------------------------------------------------------------------------------------
David C. Tucker Senior 3 Senior Vice President, ACIM, Not Not
4500 Main St. Vice ACIS, ACSC and other ACC applicable applicable
Kansas City, MO 64111 President subsidiaries
(45) and (June 1998 to present)
General General Counsel, ACC, ACIM,
Counsel ACIS, ACSC and other
ACC subsidiaries
(June 1998 to present)
----------------------------------------------------------------------------------------------------------------
Robert Leach Controller 6 Vice President, ACSC Not Not
4500 Main St. (February 2000 to present) applicable applicable
Kansas City, MO 64111 Controller-Fund Accounting,
(37) ACSC (June 1997 to present)
----------------------------------------------------------------------------------------------------------------
Jon Zindel Tax Officer 6 Vice President, Corporate Tax, Not Not
4500 Main St. ACSC (April 1998 to present) applicable applicable
Kansas City, MO 64111 Vice President, ACIM, ACIS and
(36) other ACC subsidiaries
(April 1999 to present)
President, AMERICAN CENTURY
EMPLOYEE BENEFIT SERVICES, INC.
(January 2000 to December 2000)
Treasurer, AMERICAN CENTURY
EMPLOYEE BENEFIT SERVICES, INC.
(December 2000 to present)
Treasurer, AMERICAN CENTURY
VENTURES, INC.
(December 1999 to present)
----------------------------------------------------------------------------------------------------------------
On December 23, 1999, American Century Services Corporation (ACSC) entered into
an agreement with DST Systems, Inc. (DST) under which DST would provide back
office software for transfer agency services provided by ACSC (the Agreement).
For its software, ACSC pays DST fees based in part on the number of accounts and
the number and type of transactions processed for those accounts. Through
December 31, 2003, DST received $23,732,445 in fees from ACSC. DST's revenue for
the calendar year ended December 31, 2003, was approximately $2.42 billion.
Ms. Strandjord is a director of DST and a holder of 26,491 shares and possesses
options to acquire an additional 55,890 shares of DST common stock, the sum of
which is less than one percent (1%) of the shares outstanding. Because of her
official duties as a director of DST, she may be deemed to have an "indirect
interest" in the Agreement. However, the Board of Directors of the funds was not
required to nor did it approve or disapprove the Agreement, since the provision
of the services covered by the Agreement is within the discretion of ACSC. DST
was chosen by ACSC for its industry-leading role in providing cost-effective
back office support for mutual fund service providers such as ACSC. DST is the
largest mutual fund transfer agent, servicing more than 75 million mutual fund
accounts on its shareholder recordkeeping system. Ms. Strandjord's role as a
director of DST was not considered by ACSC; she was not involved in any way with
the negotiations between ACSC and DST; and her status as a director of either
DST or the funds was not a factor in the negotiations. The Board of Directors of
the funds and Bryan Cave LLP, counsel to the independent directors of the funds,
have concluded that the existence of this Agreement does not impair Ms.
Strandjord's ability to serve as an independent director under the Investment
Company Act.
23
THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. The board has the authority
to manage the business of the funds on behalf of their investors, and it has all
powers necessary or convenient to carry out that responsibility. Consequently,
the directors may adopt bylaws providing for the regulation and management of
the affairs of the funds and may amend and repeal them to the extent that such
bylaws do not reserve that right to the funds' investors. They may fill
vacancies in or reduce the number of board members, and may elect and remove
such officers and appoint and terminate such agents as they consider
appropriate. They may appoint from their own number and establish and terminate
one or more committees consisting of two or more directors who may exercise the
powers and authority of the board to the extent that the directors determine.
They may, in general, delegate such authority as they consider desirable to any
officer of the funds, to any committee of the board and to any agent or employee
of the funds or to any custodian, transfer or investor servicing agent, or
principal underwriter. Any determination as to what is in the interests of the
funds made by the directors in good faith shall be conclusive.
Although the Board of Directors does not manage the funds, it has hired the
advisor to do so. The directors, in carrying out their fiduciary duty under the
Investment Company Act of 1940, are responsible for approving new and existing
management contracts with the funds' advisor.
Board Review of Investment Management Contracts
The Board of Directors oversees each fund's management and performance on a
continuous basis, and the board determines annually whether to approve and renew
the fund's investment management agreement. ACIM provides the board with
monthly, quarterly, and annual analyses of ACIM's performance in the following
areas:
* Investment performance of the funds (short-, medium- and long-term);
* Management of brokerage commission and trading costs (equity funds only);
* Shareholder services provided;
* Compliance with investment restrictions; and
* Fund accounting services provided (including the valuation of portfolio
securities);
* Leaders of each fund's portfolio management team meet with the board
periodically to discuss the management and performance of the fund.
When considering whether to renew an investment advisory contract, the board
examines several factors, but does not identify any particular factor as
controlling their decision. Some of the factors considered by the board include:
the nature, extent, and quality of the advisory services provided as well as
other material facts, such as the investment performance of the fund's assets
managed by the adviser and the fair market value of the services provided. To
assess these factors, the board reviews both ACIM's performance and that of its
peers, as reported by independent gathering services such as Lipper Analytical
Services (for fund performance and expenses) and National Quality Review (for
shareholder services).
Additional information is provided to the board detailing other sources of
revenue to ACIM or its affiliates from its relationship with the fund and
intangible or "fall-out" benefits that accrue to the adviser and its affiliates,
if relevant, and the adviser's control of the investment expenses of the fund,
such as transaction costs, including ways in which portfolio transactions for
the fund are conducted and brokers are selected.
The board also reviews the investment performance of each fund compared with a
peer group of funds and an appropriate index or combination of indexes, in
addition to a comparative analysis of the total expense ratios of, and advisory
fees paid by, similar funds.
The board considered the level of ACIM's profits in respect to the management of
the American Century family of funds, including the profitability of managing
each fund. The
24
board conducted an extensive review of ACIM's methodology in allocating costs
to the management of each fund. The board concluded that the cost allocation
methodology employed by ACIM has a reasonable basis and is appropriate in light
of all of the circumstances. They considered the profits realized by ACIM in
connection with the operation of each fund and whether the amount of profit is a
fair entrepreneurial profit for the management of each fund. The board also
considered ACIM's profit margins in comparison with available industry data,
both accounting for and excluding marketing expenses.
Based on their evaluation of all material factors assisted by the advice of
independent legal counsel, the board, including the independent directors,
concluded that the existing management fee structures are fair and reasonable
and that the existing investment management contracts should be continued.
Committees
The board has five standing committees to oversee specific functions of the
funds' operations. Information about these committees appears in the table
below. The director first named serves as chairman of the committee.
NUMBER OF
MEETINGS HELD
DURING LAST
COMMITTEE MEMBERS FUNCTION FISCAL YEAR
--------------------------------------------------------------------------------------------------------------
Executive James E. Stowers, Jr. The Executive Committee performs the functions 0
James E. Stowers III of the Board of Directors between Board meetings,
Donald H. Pratt subject to the limitations on its power set out in
the Maryland General Corporation Law, and except
for matters required by the Investment Company
Act to be acted upon by the whole Board.
--------------------------------------------------------------------------------------------------------------
Compliance Andrea C. Hall, PhD The Compliance and Shareholder Communications 4
and Shareholder Thomas A. Brown Committee reviews the results of the funds'
Communications Gale E. Sayers compliance testing program, reviews quarterly
Timothy S. Webster reports from the Communications advisor
to the Board regarding various compliance
matters and monitors the implementation of the
funds' Code of Ethics, including any violations.
--------------------------------------------------------------------------------------------------------------
Audit D.D. (Del) Hock The Audit Committee recommends the engagement 4
Donald H. Pratt of the funds' independent auditors and oversees
M. Jeannine Strandjord its activities. The Committee receives reports
from the advisor's Internal Audit Department,
which is accountable to the Committee. The
Committee also receives reporting about
compliance matters affecting the funds.
--------------------------------------------------------------------------------------------------------------
Governance Donald H. Pratt The Board Governance Committee primarily 0
M. Jeannine Strandjord considers and recommends individuals for
Thomas A. Brown nomination as directors. The names of potential
director candidates are drawn from a number
of sources, including recommendations from
members of the Board, management and
shareholders. This committee also reviews
and makes recommendations to the Board
with respect to the composition of Board
committees and other Board-related matters,
including its organization, size, composition,
responsibilities, functions and compensation.
The Governance Committee does not currently
have a policy regarding whether it will consider
nominees recommended by shareholders.
--------------------------------------------------------------------------------------------------------------
Fund Donald H. Pratt The Fund Performance Review Committee 0
Performance D.D. (Del) Hock reviews quarterly the investment activities
Review Thomas A. Brown and strategies used to manage fund assets.
Andrea C. Hall, PhD The committee regularly receives reports from
M. Jeannine Strandjord portfolio managers and other investment personnel
Timothy S. Webster concerning the funds' investments.
Gale E. Sayers
--------------------------------------------------------------------------------------------------------------
25
Compensation of Directors
The directors serve as directors for five American Century investment companies.
Each director who is not an interested person as defined in the Investment
Company Act receives compensation for service as a member of the board of all
five 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 five investment companies based,
in part, upon their relative net assets. Under the terms of the management
agreement with the advisor, the funds are responsible for paying such fees and
expenses.
The following table shows the aggregate compensation paid by the funds for the
periods indicated and by the five investment companies served by the board to
each director who is not an interested person as defined in the Investment
Company Act.
Aggregate Director Compensation for Fiscal Year Ended March 31, 2003
--------------------------------------------------------------------------------
TOTAL TOTAL COMPENSATION
COMPENSATION FROM THE
FROM THE AMERICAN CENTURY
NAME OF DIRECTOR FUNDS(1) FAMILY OF FUNDS(2)
--------------------------------------------------------------------------------
Thomas A. Brown $8,631 $73,250
--------------------------------------------------------------------------------
Robert W. Doering, M.D. $253 $2,500
--------------------------------------------------------------------------------
Andrea C. Hall, Ph.D. $8,888 $75,500
--------------------------------------------------------------------------------
D.D. (Del) Hock $8,701 $74,000
--------------------------------------------------------------------------------
Donald H. Pratt $8,888 $75,500
--------------------------------------------------------------------------------
Gale E. Sayers $8,474 $72,000
--------------------------------------------------------------------------------
M. Jeannine Strandjord $8,474 $72,000
--------------------------------------------------------------------------------
Timothy S. Webster $8,444 $71,750
--------------------------------------------------------------------------------
(1) INCLUDES COMPENSATION PAID TO THE DIRECTORS DURING THE FISCAL YEAR ENDED
MARCH 31, 2003, AND ALSO INCLUDES AMOUNTS DEFERRED AT THE ELECTION OF THE
DIRECTORS UNDER THE AMERICAN CENTURY MUTUAL FUNDS' INDEPENDENT DIRECTORS'
DEFERRED COMPENSATION PLAN.
(2) INCLUDES COMPENSATION PAID BY THE FIVE INVESTMENT COMPANY MEMBERS OF THE
AMERICAN CENTURY FAMILY OF FUNDS SERVED BY THIS BOARD. THE TOTAL AMOUNT OF
DEFERRED COMPENSATION INCLUDED IN THE PRECEDING TABLE IS AS FOLLOWS: MR.
BROWN, $17,317; DR. HALL, $67,000; MR. HOCK, $67,000; AND MR. WEBSTER,
$34,917.
The funds have adopted the American Century Mutual Funds' Independent Directors'
Deferred Compensation Plan. Under the plan, the independent directors may defer
receipt of all or any part of the fees to be paid to them for serving as
directors of the funds.
All deferred fees are credited to an account established in the name of the
directors. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the director. The account balance continues
to fluctuate in accordance with the performance of the selected fund or funds
until final payment of all amounts credited to the account. Directors are
allowed to change their designation of mutual funds from time to time.
No deferred fees are payable until such time as a director resigns, retires or
otherwise ceases to be a member of the Board of Directors. Directors may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a director, all remaining deferred fee account balances are paid to
the director's beneficiary or, if none, to the director's estate.
26
The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of directors to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.
No deferred fees were paid to any director under the plan during the fiscal year
ended March 31, 2003.
OWNERSHIP OF FUND SHARES
The directors owned shares in the funds as of December 31, 2003, as shown in the
table below. Because Mid Cap Value was not in operation as of the calendar year
end, it is not included in the table below.
Name of Directors
----------------------------------------------------------------------------------------------------------------
JAMES E. JAMES E. THOMAS A. ROBERT W. ANDREA C.
STOWERS, JR. STOWERS III BROWN DOERING HALL, PH.D.
----------------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:
Large Company Value Fund A A A A A
----------------------------------------------------------------------------------------------------------------
Value Fund A A C E C
----------------------------------------------------------------------------------------------------------------
Small Cap Value Fund A A B A A
----------------------------------------------------------------------------------------------------------------
Equity Income Fund A A C A D
----------------------------------------------------------------------------------------------------------------
Equity Index Fund A A A A A
----------------------------------------------------------------------------------------------------------------
Real Estate Fund A A B A A
----------------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies E E E E E
----------------------------------------------------------------------------------------------------------------
RANGES: A--NONE, B--$1-$10,000, C--$10,001-$50,000, D--$50,001-$100,000, E--MORE
THAN $100,000
Name of Directors
----------------------------------------------------------------------------------------------------------
D.D. (DEL) DONALD GALE E. M. JEANNINE TIMOTHY
HOCK H. PRATT SAYERS STRANDJORD WEBSTER
----------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:
Large Company Value Fund A A A A A
----------------------------------------------------------------------------------------------------------
Value Fund C C A E B
----------------------------------------------------------------------------------------------------------
Small Cap Value Fund A A A A B
----------------------------------------------------------------------------------------------------------
Equity Income Fund E C A A C
----------------------------------------------------------------------------------------------------------
Equity Index Fund A A A A A
----------------------------------------------------------------------------------------------------------
Real Estate Fund D D A A A
----------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies E E C E E
----------------------------------------------------------------------------------------------------------
RANGES: A--NONE, B--$1-$10,000, C--$10,001-$50,000, D--$50,001-$100,000, E--MORE
THAN $100,000
CODES OF ETHICS
The funds, their investment advisor, principal underwriter and subadvisor have
adopted codes of ethics under Rule 17j-1 of the Investment Company Act and these
codes of ethics permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the funds, provided that
they first obtain approval from the appropriate compliance department before
making such investments.
27
Proxy Voting Guidelines
The Advisor is responsible for exercising the voting rights associated with the
securities purchased and/or held by the funds. In exercising its voting
obligations, the Advisor is guided by general fiduciary principles. It must act
prudently, solely in the interest of the funds, and for the exclusive purpose of
providing benefits to them. The Advisor attempts to consider all factors of its
vote that could affect the value of the investment. The funds' Board of
Directors has approved the Advisor's Proxy Voting Guidelines to govern the
Advisor's proxy voting activities.
The Advisor and the board have agreed on certain significant contributors to
shareholder value with respect to a number of matters that are often the subject
of proxy solicitations for shareholder meetings. The Proxy Voting Guidelines
specifically address these considerations and establish a framework for the
Advisor's consideration of the vote that would be appropriate for the funds. In
particular, the Proxy Voting Guidelines outline principles and factors to be
considered in the exercise of voting authority for proposals addressing:
* Election of Directors
* Ratification of Selection of Auditors
* Equity-Based Compensation Plans
* Anti-Takeover Proposals
* Cumulative Voting
* Staggered Boards
* "Blank Check" Preferred Stock
* Elimination of Preemptive Rights
* Non-targeted Share Repurchase
* Increase in Authorized Common Stock
* "Supermajority" Voting Provisions or Super Voting Share Classes
* "Fair Price" Amendments
* Limiting the Right to Call Special Shareholder Meetings
* Poison Pills or Shareholder Rights Plans
* Golden Parachutes
* Reincorporation
* Confidential Voting
* Opting In or Out of State Takeover Laws
* Shareholder Proposals Involving Social, Moral or Ethical Matters
* Anti-Greenmail Proposals
* Changes to Indemnification Provisions
* Non-Stock Incentive Plans
* Director Tenure
* Directors' Stock Options Plans
* Director Share Ownership
Finally, the Proxy Voting Guidelines establish procedures for voting of proxies
in cases in which the Advisor may have a potential conflict of interest.
Companies with which the Advisor has direct business relationships could
theoretically use these relationships to attempt to unduly influence the manner
in which American Century votes on matters for the funds. To ensure that such a
conflict of interest does not affect proxy votes cast for the funds, all
discretionary (including case-by-case) voting for these companies will be voted
in direct consultation with a committee of the independent directors of the
funds.
A copy of the Advisor's Proxy Voting Guidelines are available on the funds'
website at www.americancentury.com.
THE FUNDS' PRINCIPAL SHAREHOLDERS
As of March 3, 2004, the following shareholders, beneficial or of record, owned
more than 5% of the outstanding shares of any class of the funds.
PERCENTAGE OF PERCENTAGE OF
FUND/ OUTSTANDING SHARES OUTSTANDING SHARES
CLASS SHAREHOLDER OWNED OF RECORD OWNED BENEFICIALLY(1)
--------------------------------------------------------------------------------
Large Company Value
--------------------------------------------------------------------------------
Investor
Saxon & Co 33% 0%
Philadelphia, Pennsylvania
Schwab 529 College Savings Plan 22% 0%
Kansas City, Missouri
State Street Bank Trustee 7% 0%
Con Agra 401(k) Plan
Kansas City, Missouri
--------------------------------------------------------------------------------
Institutional
Saxon & Co. 32% 0%
Philadelphia, Pennsylvania
JPMorgan Chase Bank 25% 0%
Trustee Collins & Aikman
Pension Trust Salaried
Brooklyn, New York
JPMorgan Chase Bank 21% 0%
F/B/O InterPublic 401K 0% 12%
Moderate Smart Mix Portfolio
Brooklyn, New York
F/B/O Interpublic 401K 0% 7%
Aggressive Smart Mix Portfolio
Brooklyn, New York
--------------------------------------------------------------------------------
Advisor
Schwab 529 College Savings Plan 46% 0%
Kansas City, Missouri
National Financial Services LLC 11% 0%
New York, New York
Charles Schwab & Co., Inc. 8% 0%
San Francisco, California
Nationwide Insurance Co. Trust 8% 0%
Columbus, Ohio
--------------------------------------------------------------------------------
A
Charles Schwab & Co., Inc. 85% 0%
San Francisco, California
American Enterprise 5% 0%
Investment Services
Minneapolis, Minnesota
--------------------------------------------------------------------------------
B
American Enterprise 55% 0%
Investment Services
Minneapolis, Minnesota
Citigroup Global Markets Inc. 16% 0%
New York, New York
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED PARTY,
WE REPORT THOSE SHARES AS BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN
CENTURY HAS NO INFORMATION CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
29
PERCENTAGE OF PERCENTAGE OF
FUND/ OUTSTANDING SHARES OUTSTANDING SHARES
CLASS SHAREHOLDER OWNED OF RECORD OWNED BENEFICIALLY(1)
--------------------------------------------------------------------------------
Large Company Value
--------------------------------------------------------------------------------
C
MLPF&S, Inc. 28% 0%
Jacksonville, Florida
Citigroup Global Markets Inc. 21% 0%
New York, New York
Pershing LLC 16% 0%
Jersey City, New Jersey
American Enterprise 10% 0%
Investment Services
Minneapolis, Minnesota
--------------------------------------------------------------------------------
R
ING Life Insurance and Annuity Co. 95% 0%
Hartford, Connecticut
--------------------------------------------------------------------------------
Value
--------------------------------------------------------------------------------
Investor
Nationwide Insurance Company 6% 0%
Columbus, Ohio
The Guardian Insurance & Annuity Co. 5% 0%
Bethlehem, Pennsylvania
--------------------------------------------------------------------------------
Institutional
JPMorgan Chase Bank 34% 0%
Robert Bosch Corporation
Star Plan & Trust
Kansas City, Missouri
Wells Fargo Bank MN NA 19% 0%
FBO WF Financial 0% 18%
Thrift & Profit Sharing Plan
Minneapolis, Minnesota
Nationwide Insurance Company QPVA 14% 0%
Columbus, Ohio
Trustees of American Century P/S & 7% 7%
401(k) Savings Plan & Trust
Kansas City, Missouri
The Chase Manhattan Bank NA TR 7% 0%
Winnebago Industries, Inc. P/S
Deferred Savings Invest Plan
New York, New York
--------------------------------------------------------------------------------
Advisor
Principal Life Insurance Co. 60% 0%
Des Moines, Iowa
James B. Anderson TR 6% 0%
for Various Accounts
Springfield, Missouri
--------------------------------------------------------------------------------
A
Charles Schwab & Co., Inc. 63% 0%
San Francisco, California
American Enterprise 15% 0%
Investment Services
Minneapolis, Minnesota
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED PARTY, WE REPORT THOSE SHARES AS
BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
30
PERCENTAGE OF PERCENTAGE OF
FUND/ OUTSTANDING SHARES OUTSTANDING SHARES
CLASS SHAREHOLDER OWNED OF RECORD OWNED BENEFICIALLY(1)
--------------------------------------------------------------------------------
Value
--------------------------------------------------------------------------------
B
American Enterprises 54% 0%
Investment Services
Minneapolis, Minnesota
--------------------------------------------------------------------------------
C
American Enterprise 32% 0%
Investment Services
Minneapolis, Minnesota
AG Edwards & Sons Inc. 18% 0%
St. Louis, Missouri
Legg Mason Wood Walker 14% 0%
Baltimore, Maryland
LPL Financial Services 9% 0%
San Diego, California
--------------------------------------------------------------------------------
Small Cap Value
--------------------------------------------------------------------------------
Investor
Charles Schwab & Co., Inc. 13% 0%
San Francisco, California
Delaware Charter Guarantee 7% 0%
& Trust Co. Cust
FBO Principal Financial Group 0% 7%
Des Moines, Iowa
National Financial Services, Corp. 6% 0%
New York, New York
AUL American Unit Trust 5% 0%
Separate Account
Indianapolis, Indiana
--------------------------------------------------------------------------------
Institutional
Fidelity FIIOC TR 32% 0%
Covington, Kentucky
JPMorgan Chase & Co. TR 14% 0%
Marconi USA Wealth Accumulation
Plan Trust
New York, New York
Charles Schwab & Co., Inc. 10% 0%
San Francisco, California
Chase Manhattan Bank Trustee 9% 0%
The BOC Group Inc. Savings
Investment Plan Trust
New York, New York
Trustees of American Century 5% 5%
P/S and 401(k) Savings Plan & Trust
Kansas City, Missouri
Chase Manhattan Bank NA TTEE 5% 0%
The Reynolds & Reynolds Co.
401k Savings Plan Trust
New York, New York
USAA Federal Savings Bank 5% 0%
San Antonio, Texas
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED PARTY, WE REPORT THOSE SHARES AS
BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
31
PERCENTAGE OF PERCENTAGE OF
FUND/ OUTSTANDING SHARES OUTSTANDING SHARES
CLASS SHAREHOLDER OWNED OF RECORD OWNED BENEFICIALLY(1)
--------------------------------------------------------------------------------
Small Cap Value
--------------------------------------------------------------------------------
Advisor
Principal Life Insurance Co. 52% 0%
Des Moines, Iowa
Nationwide Trust Co. FSB 11% 0%
Columbus, Ohio
M L P F & S 9% 0%
Jacksonville, Florida
Trustar for the Benefit of 7% 0%
Various Clients
Wilmington, Delaware
Saxon & Co 6% 0%
Philadelphia, Pennsylvania
--------------------------------------------------------------------------------
C
American Enterprise 36% 0%
Investment Services
Minneapolis, Minnesota
Pershing LLC 29% 0%
Jersey City, New Jersey
--------------------------------------------------------------------------------
Mid Cap Value
--------------------------------------------------------------------------------
Investor
None
--------------------------------------------------------------------------------
Equity Income
--------------------------------------------------------------------------------
Investor
Charles Schwab & Co., Inc. 17% 0%
San Francisco, California
National Financial Services Corp. 6% 0%
New York, New York
--------------------------------------------------------------------------------
Institutional
Fidelity FIIOC TR 17% 0%
Covington, Kentucky
JPMorgan Chase & Co. TR 11% 0%
Marconi USA Wealth
Accumulation Plan Trust
New York, New York
Krauss & Co. 10% 0%
Buffalo, New York
UBATCO & Co 9% 0%
FBO College Savings 0% 9%
Plan of Nebraska
Lincoln, Nebraska
Chase Manhattan Bank Trustee 8% 0%
Hayes Lemmerz International Inc.
Retirement Savings Plan
Brooklyn, New York
Trustees of American Century 6% 0%
P/S & 401k Savings Plan & Trust
Kansas City, Missouri
NABANK & Co 6% 0%
Tulsa, Oklahoma
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED PARTY, WE REPORT THOSE SHARES AS
BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
32
PERCENTAGE OF PERCENTAGE OF
FUND/ OUTSTANDING SHARES OUTSTANDING SHARES
CLASS SHAREHOLDER OWNED OF RECORD OWNED BENEFICIALLY(1)
--------------------------------------------------------------------------------
Equity Income
--------------------------------------------------------------------------------
Advisor
Charles Schwab & Co., Inc. 29% 0%
San Francisco, California
Delaware Charter Guarantee & Trust 12% 0%
FBO Principal Financial Group 0% 12%
Des Moines, Iowa
M L P F & S 8% 0%
Jacksonville, Florida
Saxon & Co. 6% 0%
Philadelphia, Pennsylvania
National Financial Services, LLC 6% 0%
New York, New York
--------------------------------------------------------------------------------
C
American Enterprise Investment Services 18% 0%
Minneapolis, Minnesota
NFSC for the Beneift of 16% 0%
Various Clients
Boston, Massachusetts
Pershing LLC 15% 0%
Jersey City, New Jersey
Legg Mason Wood Walker Inc. 6% 0%
Baltimore, Maryland
--------------------------------------------------------------------------------
R
ING Life Insurance and Annuity Co 87% 0%
Hartford, Connecticut
Fehr & Peers Associates Inc. 7% 0%
401K Profit Sharing Plan
Lafayette, California
--------------------------------------------------------------------------------
Equity Index
--------------------------------------------------------------------------------
Investor
JPMorgan Chase Bank 6% 0%
Trustee Magnetek Flexcare Plus
Retirement Savings Plan
New York, New York
--------------------------------------------------------------------------------
Institutional
Procter & Gamble Trustee 24% 0%
Procter & Gamble PS and Empl Stock
Ownership Plan Core Fund
Cincinnati, Ohio
The Chase Manhattan Bank Trustee 9% 0%
The Procter & Gamble Subsidiaries
Savings Plan Core Fund
New York, New York
JPMorgan Chase Bank TR 6% 0%
Newell Rubbermaid 401K
Savings Plan and Trust
Kansas City, Missouri
JPMorgan Chase Bank Trustee 5% 0%
Robert Bosch Corporation
Star Plan & Trust
Kansas City, Missouri
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED PARTY, WE REPORT THOSE SHARES AS
BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
33
PERCENTAGE OF PERCENTAGE OF
FUND/ OUTSTANDING SHARES OUTSTANDING SHARES
CLASS SHAREHOLDER OWNED OF RECORD OWNED BENEFICIALLY(1)
--------------------------------------------------------------------------------
Real Estate
--------------------------------------------------------------------------------
Investor
Charles Schwab & Co., Inc. 27% 0%
San Francisco, California
--------------------------------------------------------------------------------
Institutional
Fidelity FIIOC TR 51% 0%
Covington, Kentucky
State Street Bank & Trust Co TTEE 13% 0%
FBO Towers Perrin Deferred PSP 0% 13%
Westwood, Massachusetts
Charles Schwab & Co., Inc. 12% 0%
San Francisco, California
Trustees of American Century 6% 6%
Profit Sharing and 401(k)
Savings Plan and Trust
Kansas City, Missouri
The Chase Manhattan Bank NA TR 5% 0%
Huntsman Corp Salary
Deferral Plan & Trust
New York, New York
--------------------------------------------------------------------------------
Advisor
Charles Schwab & Co., Inc. 31% 0%
San Francisco, California
Nationwide Trust Co. FSB 12% 0%
Columbus, Ohio
Orchard Trust Company Custodian 10% 0%
FBO TTEE/CUST Clients 0% 10%
Englewood, Colorado
The Guardian Insurance 8% 0%
& Annuity Co. Inc.
Bethlehem, Pennsylvania
Great West Life & Annuity 6% 0%
Insurance Co.
Englewood, Colorado
National Financial Services LLC 5% 0%
New York, New York
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED PARTY, WE REPORT THOSE SHARES
AS BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of a fund's outstanding shares. The funds are unaware of any
other shareholders, beneficial or of record, who own more than 25% of the voting
securities of American Century Capital Portfolios, Inc. A shareholder owning of
record or beneficially more than 25% of a fund's outstanding shares may be
considered a controlling person. The vote of any such person could have a more
significant effect on matters presented at a shareholder's meeting than votes of
other shareholders. As of March 3, 2004, the officers and directors of the
funds, as a group, own less than 1% of any fund's outstanding shares.
34
SERVICE PROVIDERS
The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds that is described below.
ACIM, ACSC and ACIS are wholly owned by ACC. James E. Stowers, Jr., Chairman of
ACC, controls ACC by virtue of his ownership of a majority of its voting stock.
INVESTMENT ADVISOR
American Century Investment Management, Inc. (ACIM) serves as the investment
advisor for each of the funds. A description of the responsibilities of the
advisor appears in each Prospectus under the heading MANAGEMENT.
For the services provided to each fund, the advisor receives a monthly fee based
on a percentage of the average net assets of the funds as follows:
FUND CLASS PERCENTAGE OF NET ASSETS
-------------------------------------------------------------------------------
Large Company Value Investor, A, B, C and R 0.90% of first $1 billion
0.80% of the next $4 billion
0.70% over $5 billion
-----------------------------------------------------------
Institutional 0.70% of first $1 billion
0.60% of the next $4 billion
0.50% over $5 billion
-----------------------------------------------------------
Advisor 0.65% of first $1 billion
0.55% of the next $4 billion
0.45% over $5 billion
-------------------------------------------------------------------------------
Value Investor, A, B and C 1.00% of the first $6 billion
0.95% over $6 billion
-----------------------------------------------------------
Institutional 0.80% of the first $6 billion
0.75% over $6 billion
-----------------------------------------------------------
Advisor 0.75% of the first $6 billion
0.70% over $6 billion
-------------------------------------------------------------------------------
Small Cap Value Investor and C 1.25%
-----------------------------------------------------------
Institutional 1.05%
-----------------------------------------------------------
Advisor 1.00%
-------------------------------------------------------------------------------
Mid Cap Value Investor 1.00%
-------------------------------------------------------------------------------
Equity Income Investor, C and R 1.00%
-----------------------------------------------------------
Institutional 0.80%
-----------------------------------------------------------
Advisor 0.75%
-------------------------------------------------------------------------------
Equity Index Investor 0.49%
-----------------------------------------------------------
Institutional 0.29%
-------------------------------------------------------------------------------
Real Estate Investor 1.20% of first $100 million
1.15% over $100 million
-----------------------------------------------------------
Institutional 1.00% of first $100 million
0.95% over $100 million
-----------------------------------------------------------
Advisor 0.95% of first $100 million
0.90% over $100 million
-------------------------------------------------------------------------------
35
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 being the
number of days in the previous month and the denominator being 365 (366 in leap
years).
The management agreement between the corporation and the advisor shall continue
in effect until the earlier of the expiration of two years from the date of its
execution or until the first meeting of fund shareholders following its
execution, whichever comes first. The agreement will be in effect after that as
long as it is specifically approved, at least annually, by
(1) the funds' Board of Directors, or a majority of outstanding shareholder
votes (as defined in the Investment Company Act) and
(2) the vote of a majority of the directors of the funds who are not parties to
the agreement or interested persons of the advisor, cast in person at a
meeting called for the purpose of voting on this approval.
The management agreement states that the funds' Board of Directors or a majority
of outstanding votes may terminate the management agreement at any time without
payment of any penalty on 60 days' written notice to the advisor. The management
agreement shall be automatically terminated if it is assigned.
The management agreement states that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the advisor and its officers,
directors and employees may engage in other business, render services to others,
and devote time and attention to any other business, whether of a similar or
dissimilar nature.
Certain investments may be appropriate for the funds and also for other clients
advised by the advisor. Investment decisions for the funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or funds. In
addition, purchases or sales of the same security may be made for two or more
clients or funds on the same date. Such transactions will be allocated among
clients in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.
The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Directors
has approved the policy of the advisor with respect to the aggregation of
portfolio transactions. Where portfolio transactions have been aggregated, the
funds participate at the average share price for all transactions in that
security on a given day and allocate transaction costs on a pro rata basis. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
36
Unified management fees incurred by each fund by class for the fiscal periods
ended March 31, 2003, 2002 and 2001 are indicated in the following table.
Because Mid Cap Value and the R Class were not in operation as of the fiscal
year end, they are not included in the table below.
Unified Management Fees
-------------------------------------------------------------------------------
FUND/CLASS 2003 2002 2001
-------------------------------------------------------------------------------
Large Company Value
Investor $875,313 $401,940 $131,814
-------------------------------------------------------------------------------
Institutional $48,499 $3,574(1) N/A
-------------------------------------------------------------------------------
Advisor $1,584 $775 $331
-------------------------------------------------------------------------------
A $3,066(2) N/A N/A
-------------------------------------------------------------------------------
B $42(2) N/A N/A
-------------------------------------------------------------------------------
C $4,990 $534(3) N/A
-------------------------------------------------------------------------------
Value
Investor $17,744,450 $17,814,976 $14,229,365
-------------------------------------------------------------------------------
Institutional $1,545,683 $1,714,283 $1,058,450
-------------------------------------------------------------------------------
Advisor $1,556,034 $1,099,846 $567,910
-------------------------------------------------------------------------------
A $237(2) N/A N/A
-------------------------------------------------------------------------------
B $64(2) N/A N/A
-------------------------------------------------------------------------------
C $22,215 $5,187(4) N/A
-------------------------------------------------------------------------------
Small Cap Value
Investor $11,942,134 $9,971,554 $952,726
-------------------------------------------------------------------------------
Institutional $1,007,291 $350,372 $46,754
-------------------------------------------------------------------------------
Advisor $1,870,244 $774,361 $64,875
-------------------------------------------------------------------------------
C $37,978 $24,220(5) N/A
-------------------------------------------------------------------------------
Equity Income
Investor $11,280,725 $7,027,325 $3,400,449
-------------------------------------------------------------------------------
Institutional $610,275 $387,425 $121,901
-------------------------------------------------------------------------------
Advisor $773,714 $343,148 $169,409
-------------------------------------------------------------------------------
C $81,280 $7,343(6) N/A
-------------------------------------------------------------------------------
Equity Index
Investor $448,210 $437,170 $350,809
-------------------------------------------------------------------------------
Institutional $1,005,052 $1,308,235 $1,326,994
-------------------------------------------------------------------------------
Real Estate
Investor $1,491,938 $1,040,597 $1,019,524
-------------------------------------------------------------------------------
Institutional $198,341 $135,140 $144,714
-------------------------------------------------------------------------------
Advisor $189,009 $116,872 $67,831
-------------------------------------------------------------------------------
(1) AUGUST 10, 2001 (INCEPTION) THROUGH MARCH 31, 2002.
(2) JANUARY 31, 2003 (INCEPTION) THROUGH MARCH 31, 2003.
(3) NOVEMBER 7, 2001 (INCEPTION) THROUGH MARCH 31, 2002.
(4) JUNE 4, 2001 (INCEPTION) THROUGH MARCH 31, 2002.
(5) JUNE 1, 2001 (INCEPTION) THROUGH MARCH 31, 2002.
(6) JULY 13, 2001 (INCEPTION) THROUGH MARCH 31, 2002.
SUBADVISORS
Equity Index Fund
The investment management agreement provides that the manager may delegate
certain responsibilities under the agreement to a subadvisor. Currently,
Barclays Global Fund Advisors ("Barclays") serves as subadvisor to the Equity
Index Fund under a subadvisory agreement between the manager and Barclays dated
January 29, 1999. The subadvisory agreement continues for an initial period of
one year and thereafter so long as continuance
37
is specifically approved by vote of a majority of the fund's outstanding voting
securities or by vote of a majority of the fund's directors, including a
majority of those directors who are neither parties to the agreement nor
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The subadvisory agreement is subject to
termination without penalty on 60 days' written notice by Barclays, the manager,
the Board of Directors, or a majority of the fund's outstanding votes and will
terminate automatically in the event of (i) its assignment or (ii) termination
of the investment advisory agreement between the fund and the manager.
The subadvisory agreement provides that Barclays will make investment decisions
for the Equity Index Fund in accordance with the fund's investment objective,
policies, and restrictions, and whatever additional written guidelines it may
receive from the manager from time to time. For these services, the manager pays
Barclays a monthly fee at an annual rate of 0.05% of the fund's average daily
net assets up to $200 million, 0.02% of the average daily net assets of the next
$300 million, and 0.01% of average daily net assets over $500 million.
For the fiscal years ended March 31, 2003, 2002 and 2001, the advisor paid
Barclays Global Fund Advisors subadvisory fees as listed in the following table:
BARCLAYS GLOBAL FUND ADVISORS SUBADVISORY FEES
--------------------------------------------------------------------------------
2003 $148,801
--------------------------------------------------------------------------------
2002 $151,032
--------------------------------------------------------------------------------
2001 $186,111
--------------------------------------------------------------------------------
Real Estate Fund
The investment management agreement provides that the manager may delegate
certain responsibilities under the agreement to a subadvisor. Currently, JPMIM
serves as subadvisor to the Real Estate Fund under a subadvisory agreement
between the manager and JPMIM dated January 1, 2000, that was approved by
shareholders on December 17, 1999. The subadvisory agreement continues for an
initial period of two years and thereafter so long as continuance is
specifically approved by vote of a majority of the fund's outstanding voting
securities or by vote of a majority of the fund's trustees, including a majority
of those trustees who are neither parties to the agreement nor interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The subadvisory agreement is subject to termination
without penalty on 60 days' written notice by the manager, the Board of
Directors, a majority of the fund's outstanding shares, or JPMIM, and will
terminate automatically in the event of (i) its assignment or (ii) termination
of the investment advisory agreement between the fund and the manager.
The subadvisory agreement provides that JPMIM will make investment decisions for
the Real Estate Fund in accordance with the fund's investment objective,
policies, and restrictions, and whatever additional written guidelines it may
receive from the manager from time to time. For these services, the manager pays
JPMIM a monthly fee at an annual rate of 0.425% of the fund's average daily net
assets.
For the fiscal years ended March 31, 2003, 2002 and 2001 the manager paid JPMIM
subadvisory fees as listed in the following table:
JPMIM SUBADVISORY FEES
--------------------------------------------------------------------------------
2003 $695,981
--------------------------------------------------------------------------------
2002 $466,608
--------------------------------------------------------------------------------
2001 $491,848
--------------------------------------------------------------------------------
38
TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, serves as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software, and personnel for
the day-to-day administration of the funds and the advisor. The advisor pays
ACSC's costs for serving as transfer agent and dividend-paying agent for the
funds out of the advisor's unified management fee. For a description of this fee
and the terms of its payment, see the above discussion under the caption
INVESTMENT ADVISOR on page 35.
Special services may be offered to shareholders who maintain higher share
balances in our family of funds. These services may include the waiver of
minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the advisor.
DISTRIBUTOR
The funds' shares are distributed by ACIS, a registered broker-dealer. The
distributor is a wholly owned subsidiary of ACC and its principal business
address is 4500 Main Street, Kansas City, Missouri 64111.
The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best-efforts underwriting of the funds' shares.
This means the distributor has no liability for unsold shares. The advisor pays
ACIS's costs for serving as principal underwriter of the funds' shares out of
the advisor's unified management fee. For a description of this fee and the
terms of its payment, see the above discussion under the caption INVESTMENT
ADVISOR on page 35.
Certain financial intermediaries unaffiliated with the distributor or the funds
may perform various administrative and shareholder services for their clients
who are invested in the funds. These services may include assisting with fund
purchases, redemptions and exchanges, distributing information about the funds
and their performance, preparing and distributing client account statements, and
other administrative and shareholder services, and would otherwise be provided
by the distributor or its affiliates. The distributor may pay fees out of its
own resources to such financial intermediaries for providing these services.
OTHER SERVICE PROVIDERS
CUSTODIAN BANKS
J.P. Morgan Chase and Co., 770 Broadway, 10th Floor, New York, New York
10003-9598, and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105,
each serves as custodian of the assets of the funds. The custodians take no part
in determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds, however, may invest in
certain obligations of the custodians and may purchase or sell certain
securities from or to the custodians.
INDEPENDENT AUDITORS
Deloitte & Touche LLP are the independent auditors of the funds. The address of
Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri 64106. As
the independent auditors of the funds, Deloitte & Touche provide services
including
(1) auditing the annual financial statements for each fund,
(2) assisting and consulting in connection with SEC filings, and
(3) reviewing the annual federal income tax return filed for each fund.
39
BROKERAGE ALLOCATION
Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. The funds' policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. So long as that policy is
met, the advisor may take into consideration the factors discussed below when
selecting brokers. For Equity Index and the Real Estate Fund, the advisor has
delegated responsibility for selecting brokers to execute portfolio transactions
to the subadvisor under the terms of the applicable investment subadvisory
agreement.
The advisor, or the subadvisor, as the case may be, receives statistical and
other information and services, including research, without cost from brokers
and dealers. The advisor or the subadvisor evaluates such information and
services, together with all other information that it may have, in supervising
and managing the investments of the funds. Because the information and services
may vary in amount, quality and reliability, its influence in selecting brokers
varies from none to very substantial. The advisor or the subadvisor intends to
continue to place some of the funds' brokerage business with one or more brokers
who provide information and services. The information and services will be in
addition to and not in lieu of services to be performed by the advisor. The
advisor does not use brokers that provide such information and services to
reduce the expense of providing required services to the funds.
In the fiscal periods March 31, 2003, 2002, and 2001, the brokerage commissions
of each fund were as follows. Because Mid Cap Value was not in operation as of
the fiscal year end, it is not included in the table below.
FUND 2003 2002 2001
---------------------------------------------------------------------------
Large Company Value $107,019 $37,880 $10,955
---------------------------------------------------------------------------
Value $4,224,298 $6,250,574 $5,842,784
---------------------------------------------------------------------------
Small Cap Value $3,516,917 $3,059,659 $536,404
---------------------------------------------------------------------------
Equity Income $2,902,522 $1,803,207 $1,329,918
---------------------------------------------------------------------------
Equity Index $118,027 $57,745 $133,371
---------------------------------------------------------------------------
Real Estate $996,265 $726,115 $924,761
---------------------------------------------------------------------------
The brokerage commissions paid by the funds may exceed those that another broker
might have charged for the same transactions because of the value of the
brokerage and research services provided. Research services furnished by brokers
through whom the funds make securities transactions may be used by the advisor
in servicing all of its accounts, and not all such services may be used by the
advisor in managing the funds' portfolios.
The staff of the SEC has expressed the view that the best price and execution of
over-the-counter transactions in portfolio securities may be secured by dealing
directly with principal market makers, thereby avoiding the payment of
compensation to another broker. In certain situations, the officers of the funds
and the advisor believe that the facilities, expert personnel and technological
systems of a broker often enable the funds to secure as good a net price by
dealing with a broker instead of a principal market maker, even after payment of
the compensation to the broker. The funds regularly place their over-the-counter
transactions with principal market makers, but also may deal on a brokerage
basis when utilizing electronic trading networks or as circumstances warrant.
40
REGULAR BROKER-DEALERS
During its most recently completed fiscal year, each of the funds listed below
purchased securities of its regular brokers or dealers (as defined by Rule 10b-1
under the Investment Company Act of 1940) or of their parents:
VALUE OF SECURITIES
OWNED AS OF
FUND BROKER, DEALER OR PARENT MARCH 31, 2003
--------------------------------------------------------------------------------
Large Company Value Bank of America $4,297,812
--------------------------------------------------------
Wachovia Corp. $2,473,488
--------------------------------------------------------
Morgan Stanley $2,465,905
--------------------------------------------------------
Merrill Lynch & Co., Inc. $2,417,820
--------------------------------------------------------------------------------
Value Merrill Lynch & Co., Inc. $29,948,400
--------------------------------------------------------------------------------
Small Cap Value Raymond James Financial Inc. $3,233,750
--------------------------------------------------------------------------------
Equity Income Goldman Sachs Corp. $26,098,804
--------------------------------------------------------
Morgan Stanley $7,861,750
--------------------------------------------------------------------------------
Equity Index Bank of America $5,134,782
--------------------------------------------------------
Wachovia Corp. $2,370,250
--------------------------------------------------------
Morgan Stanley $2,124,667
--------------------------------------------------------
Lehman Brothers $715,811
--------------------------------------------------------
Goldman Sachs Corp. $1,643,315
--------------------------------------------------------
Merrill Lynch & Company Inc. $1,565,140
--------------------------------------------------------
Charles Schwab & Co. Inc. $496,339
--------------------------------------------------------
Bear Stearns Companies Inc. $332,526
--------------------------------------------------------------------------------
Real Estate None
--------------------------------------------------------------------------------
INFORMATION ABOUT FUND SHARES
Each of the funds named on the front of this Statement of Additional Information
is a series of shares issued by the corporation, and shares of each fund have
equal voting rights. In addition, each series (or fund) may be divided into
separate classes. See MULTIPLE CLASS STRUCTURE, which follows. Additional funds
and classes may be added without a shareholder vote.
Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
corporation's (all funds') outstanding shares may be able to elect a Board of
Directors. The corporation undertakes dollar-based voting, meaning that the
number of votes a shareholder is entitled to is based upon the dollar amount of
the shareholder's investment. The election of directors is determined by the
votes received from all the corporation's shareholders without regard to whether
a majority of shares of any one fund voted in favor of a particular nominee or
all nominees as a group.
41
The assets belonging to each series are held separately by the custodian, and
the shares of each series represent a beneficial interest in the principal,
earnings and profit (or losses) of investments and other assets held for each
series. Your rights as a shareholder are the same for all series of securities
unless otherwise stated. Within their respective series, all shares have equal
redemption rights. Each share, when issued, is fully paid and non-assessable.
Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
MULTIPLE CLASS STRUCTURE
The corporation's Board of Directors has adopted a multiple class plan (the
Multiclass Plan) pursuant to Rule 18f-3 adopted by the SEC. The plan is
described in the prospectus of any fund that offers more than one class.
Pursuant to such plan, the funds may issue up to seven classes of shares:
Investor Class, Institutional Class, A Class, B Class, C Class, R Class and
Advisor Class. Not all funds offer all seven classes.
The Investor Class of most funds is made available to investors directly without
any load or commission, for a single unified management fee. It is also
available through some financial intermediaries. The Investor Class of those
funds which have A and B Classes is not available directly at no load. The
Institutional and Advisor Classes are made available to institutional
shareholders or through financial intermediaries that do not require the same
level of shareholder and administrative services from the advisor as Investor
Class shareholders. As a result, the advisor is able to charge these classes a
lower total management fee. In addition to the management fee, however, the
Advisor Class shares are subject to a Master Distribution and Shareholder
Services Plan (the Advisor Class Plan). The A, B and C Classes also are made
available through financial intermediaries, for purchase by individual investors
who receive advisory and personal services from the intermediary. The R Class is
made available through financial intermediaries and is generally used in 401(k)
and other retirement plans. The unified management fee for the A, B, C and R
Classes is the same as for Investor Class, but the A, B, C and R Class shares
each are subject to a separate Master Distribution and Individual Shareholder
Services Plan (the A Class Plan, B Class Plan, C Class Plan and R Class Plan,
respectively and collectively with the Advisor Class Plan, the Plans) described
below. The Plans have been adopted by the funds' Board of Directors in
accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act.
Rule 12b-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by its Board of
Directors and approved by its shareholders. Pursuant to such rule, the Board of
Directors and initial shareholder of the funds' A, B, C, R and Advisor Classes
have approved and entered into the A Class Plan, B Class Plan, C Class Plan, R
Class Plan and Advisor Class Plan, respectively. The Plans are described below.
In adopting the Plans, the Board of Directors [including a majority of directors
who are not interested persons of the funds (as defined in the Investment
Company Act), hereafter referred to as the independent directors] determined
that there was a reasonable likelihood that the Plans would benefit the funds
and the shareholders of the affected class. Some of the anticipated benefits
include improved name recognition of the funds generally; and growing assets in
existing funds, which helps retain and attract investment management talent,
provides a better environment for improving fund performance, and can lower the
total expense ration for funds with stepped-fee schedules. Pursuant to Rule
12b-1, information about revenues and expenses under the Plans is presented to
the Board of Directors
42
quarterly for its consideration in continuing the Plans. Continuance of the
Plans must be approved by the Board of Directors, including a majority of the
independent directors, annually. The Plans may be amended by a vote of the Board
of Directors, including a majority of the independent directors, except that the
Plans may not be amended to materially increase the amount spent for
distribution without majority approval of the shareholders of the affected
class. The Plans terminate automatically in the event of an assignment and may
be terminated upon a vote of a majority of the independent directors or by a
majority of the outstanding shareholder votes of the affected class.
All fees paid under the Plans will be made in accordance with Section 26 of the
Conduct Rules of the National Association of Securities Dealers (NASD).
A Class Plan
As described in the Prospectuses, the A Class shares of the funds are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through broker-dealers, banks, insurance companies and
other financial intermediaries that provide various administrative, shareholder
and distribution services. The funds' distributor enters into contracts with
various banks, broker-dealers, insurance companies and other financial
intermediaries, with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for A Class
investors. In addition to such services, the financial intermediaries provide
various individual shareholder and distribution services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
Board of Directors has adopted the A Class Plan. Pursuant to the A Class Plan,
the A Class pays the funds' distributor 0.25% annually of the average daily net
asset value of the A Class shares. This payment is fixed at 0.25% and is not
based on expenses incurred by the distributor. During the fiscal year ended
March 31, 2003, the aggregate amount of fees paid under the A Class Plan was:
Large Company Value, $852; Value, $59.
The distributor then makes these payments to the financial intermediaries who
offer the A Class shares for past individual shareholder and distribution
services, as described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest expenses.
Payments may be made for a variety of individual shareholder services,
including, but not limited to:
(a) providing individualized and customized investment advisory services,
including the consideration of shareholder profiles and specific goals;
(b) creating investment models and asset allocation models for use by
shareholders in selecting appropriate funds;
(c) conducting proprietary research about investment choices and the market in
general;
(d) periodic rebalancing of shareholder accounts to ensure compliance with the
selected asset allocation;
(e) consolidating shareholder accounts in one place; and
(f) other individual services.
Individual shareholder services do not include those activities and expenses
that are primarily intended to result in the sale of additional shares of the
funds.
43
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of A Class shares, which services
may include but are not limited to:
(a) the payment of sales commissions, on-going commissions and other payments to
brokers, dealers, financial institutions or others who sell A Class shares
pursuant to selling agreements;
(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' A Class
shares;
(c) compensation to, and expenses (including overhead and telephone expenses)
of, the distributor;
(d) printing prospectuses, statements of additional information and reports for
other-than-existing shareholders;
(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' shareholders and prospective shareholders;
(f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;
(g) providing facilities to answer questions from prospective shareholders about
fund shares;
(h) complying with federal and state securities laws pertaining to the sale of
fund shares;
(i) assisting shareholders in completing application forms and selecting
dividend and other account options;
(j) providing other reasonable assistance in connection with the distribution of
fund shares;
(k) organizing and conducting sales seminars and payments in the form of
transactional and compensation or promotional incentives;
(l) profit on the foregoing;
(m) paying service fees for providing personal, continuing services to
investors, as contemplated by the Conduct Rules of the NASD; and
(n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of the agreement between
the corporation and the funds' distributor and in accordance with Rule 12b-1
of the Investment Company Act.
B Class Plan
As described in the Prospectuses, the B Class shares of the funds are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through broker-dealers, banks, insurance companies and
other financial intermediaries that provide various administrative, shareholder
and distribution services. The funds' distributor enters into contracts with
various banks, broker-dealers, insurance companies and other financial
intermediaries, with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for B Class
investors. In addition to such services, the financial intermediaries provide
various individual shareholder and distribution services.
44
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
Board of Directors has adopted the B Class Plan. Pursuant to the B Class Plan,
the B Class pays the funds' distributor 1.00% annually of the average daily net
asset value of the funds' B Class shares, 0.25% of which is paid for individual
shareholder services (as described below) and 0.75% of which is paid for
distribution services (as described below). This payment is fixed at 1.00% and
is not based on expenses incurred by the distributor. During the fiscal year
ended March 31, 2003, the aggregate amount of fees paid under the B Class Plan
was: Large Company Value, $47; Value, $64.
The distributor then makes these payments to the financial intermediaries who
offer the B Class shares for past individual shareholder and distribution
services, as described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest expenses.
Payments may be made for a variety of individual shareholder services,
including, but not limited to:
(a) providing individualized and customized investment advisory services,
including the consideration of shareholder profiles and specific goals;
(b) creating investment models and asset allocation models for use by
shareholders in selecting appropriate funds;
(c) conducting proprietary research about investment choices and the market in
general;
(d) periodic rebalancing of shareholder accounts to ensure compliance with the
selected asset allocation;
(e) consolidating shareholder accounts in one place; and
(f) other individual services.
Individual shareholder services do not include those activities and expenses
that are primarily intended to result in the sale of additional shares of the
funds.
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of B Class shares, which services
may include but are not limited to:
(a) the payment of sales commissions, on-going commissions and other payments to
brokers, dealers, financial institutions or others who sell B Class shares
pursuant to selling agreements;
(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' B Class
shares;
(c) compensation to, and expenses (including overhead and telephone expenses)
of, the distributor;
(d) printing prospectuses, statements of additional information and reports for
other-than-existing shareholders;
(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' shareholders and prospective shareholders;
(f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;
(g) providing facilities to answer questions from prospective shareholders about
fund shares;
(h) complying with federal and state securities laws pertaining to the sale of
fund shares;
(i) assisting shareholders in completing application forms and selecting
dividend and other account options;
45
(j) providing other reasonable assistance in connection with the distribution of
fund shares;
(k) organizing and conducting sales seminars and payments in the form of
transactional and compensation or promotional incentives;
(l) profit on the foregoing;
(m) paying service fees for providing personal, continuing services to
investors, as contemplated by the Conduct Rules of the NASD; and
(n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of the agreement between
the corporation and the funds' distributor and in accordance with Rule 12b-1
of the Investment Company Act.
C Class Plan
As described in the Prospectuses, the C Class shares of the funds are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through broker-dealers, banks, insurance companies and
other financial intermediaries that provide various administrative, shareholder
and distribution services. The funds' distributor enters into contracts with
various banks, broker-dealers, insurance companies and other financial
intermediaries, with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for C Class
investors. In addition to such services, the financial intermediaries provide
various individual shareholder and distribution services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
Board of Directors has adopted the C Class Plan. Pursuant to the C Class Plan,
the C Class pays the funds' distributor 1.00% annually of the average daily net
asset value of the funds' C Class shares, 0.25% of which is paid for individual
shareholder services (as described below) and 0.75% of which is paid for
distribution services (as described below). This payment is fixed at 1.00% and
is not based on expenses incurred by the distributor. During the fiscal year
ended March 31, 2003, the aggregate amount of fees paid under the C Class Plan
was:
Large Company Value $5,543
Value $22,203
Small Cap Value $30,368
Equity Income $81,229
The distributor then makes these payments to the financial intermediaries who
offer the C Class shares for past individual shareholder and distribution
services, as described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest expenses.
46
Payments may be made for a variety of individual shareholder services,
including, but not limited to:
(a) providing individualized and customized investment advisory services,
including the consideration of shareholder profiles and specific goals;
(b) creating investment models and asset allocation models for use by
shareholders in selecting appropriate funds;
(c) conducting proprietary research about investment choices and the market in
general;
(d) periodic rebalancing of shareholder accounts to ensure compliance with the
selected asset allocation;
(e) consolidating shareholder accounts in one place; and
(f) other individual services.
Individual shareholder services do not include those activities and expenses
that are primarily intended to result in the sale of additional shares of the
funds.
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of C Class shares, which services
may include but are not limited to:
(a) the payment of sales commissions, on-going commissions and other payments to
brokers, dealers, financial institutions or others who sell C Class shares
pursuant to selling agreements;
(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' C Class
shares;
(c) compensation to, and expenses (including overhead and telephone expenses)
of, the distributor;
(d) printing prospectuses, statements of additional information and reports for
other-than-existing shareholders;
(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' shareholders and prospective shareholders;
(f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;
(g) providing facilities to answer questions from prospective shareholders about
fund shares;
(h) complying with federal and state securities laws pertaining to the sale of
fund shares;
(i) assisting shareholders in completing application forms and selecting
dividend and other account options;
(j) providing other reasonable assistance in connection with the distribution of
fund shares;
(k) organizing and conducting of sales seminars and payments in the form of
transactional and compensation or promotional incentives;
(l) profit on the foregoing;
(m) paying service fees for providing personal, continuing services to
investors, as contemplated by the Conduct Rules of the NASD; and
(n) such other distribution and services activities as the advisor determines
may be paid for by the fund pursuant to the terms of the agreement between
the corporation and the fund's distributor and in accordance with Rule 12b-1
of the Investment Company Act.
47
R Class Plan
As described in the Prospectuses, the R Class shares of the funds are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through broker-dealers, banks, insurance companies and
other financial intermediaries that provide various administrative, shareholder
and distribution services. The funds' distributor enters into contracts with
various banks, broker-dealers, insurance companies and other financial
intermediaries, with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for R Class
investors. In addition to such services, the financial intermediaries provide
various individual shareholder and distribution services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
Board of Directors has adopted the R Class Plan. Pursuant to the R Class Plan,
the R Class pays the funds' distributor 0.50% annually of the average daily net
asset value of the R Class shares. This payment is fixed at 0.50% and is not
based on expenses incurred by the distributor. The R Class had not been offered
as of March 31, 2003, and therefore no fees were paid.
The distributor then makes these payments to the financial intermediaries who
offer the R Class shares for past individual shareholder and distribution
services, as described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest expenses.
Payments may be made for a variety of individual shareholder services,
including, but not limited to:
(a) providing individualized and customized investment advisory services,
including the consideration of shareholder profiles and specific goals;
(b) creating investment models and asset allocation models for use by
shareholders in selecting appropriate funds;
(c) conducting proprietary research about investment choices and the market in
general;
(d) periodic rebalancing of shareholder accounts to ensure compliance with the
selected asset allocation;
(e) consolidating shareholder accounts in one place; and
(f) other individual services.
Individual shareholder services do not include those activities and expenses
that are primarily intended to result in the sale of additional shares of the
funds.
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of R Class shares, which services
may include but are not limited to:
(a) the payment of sales commissions, on-going commissions and other payments to
brokers, dealers, financial institutions or others who sell R Class shares
pursuant to selling agreements;
(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' R Class
shares;
(c) compensation to, and expenses (including overhead and telephone expenses)
of, the distributor;
(d) printing prospectuses, statements of additional information and reports for
other-than-existing shareholders;
(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' shareholders and prospective shareholders;
48
(f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;
(g) providing facilities to answer questions from prospective shareholders about
fund shares;
(h) complying with federal and state securities laws pertaining to the sale of
fund shares;
(i) assisting shareholders in completing application forms and selecting
dividend and other account options;
(j) providing other reasonable assistance in connection with the distribution of
fund shares;
(k) organizing and conducting of sales seminars and payments in the form of
transactional and compensation or promotional incentives;
(l) profit on the foregoing;
(m) paying service fees for providing personal, continuing services to
investors, as contemplated by the Conduct Rules of the NASD; and
(n) such other distribution and services activities as the advisor determines
may be paid for by the fund pursuant to the terms of the agreement between
the corporation and the fund's distributor and in accordance with Rule 12b-1
of the Investment Company Act.
Advisor Class Plan
As described in the Prospectuses, the funds' Advisor Class shares are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries such as banks,
broker-dealers and insurance companies. The funds' distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the funds' shares and/or
the use of the funds' shares in various investment products or in connection
with various financial services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for shareholders in
the Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.
To make the funds' shares available through such plans and financial
intermediaries, and to compensate them for these services, the funds' advisor
has reduced its management fee by 0.25% per annum for the Advisor Class shares
and the funds' Board of Directors has adopted the Advisor Class Plan. Following
the Advisor Class Plan, the Advisor Class pays the funds' distributor 0.50%
annually of the aggregate average daily net assets of the funds' Advisor Class
shares, 0.25% of which is paid for shareholder services (as described below) and
0.25% of which is paid for distribution services. This payment is fixed at 0.50%
and is not based on expenses incurred by the distributor. During the fiscal year
ended March 31, 2003, the aggregate amount of fees paid under the Advisor Class
Plan was:
Large Company Value $1,218
Value $1,036,542
Small Cap Value $934,568
Equity Income $515,378
Real Estate $101,558
The distributor then makes these payments to the financial intermediaries who
offer the Advisor Class shares for past individual shareholder and distribution
services, as described below. No portion of these payments is used by the
distributor to pay for advertising, printing costs or interest expenses.
49
Payments may be made for a variety of shareholder services, including, but not
limited to,
(a) receiving, aggregating and processing purchase, exchange and redemption
requests from beneficial owners (including contract owners of insurance
products that use the funds as underlying investment media) of shares and
placing purchase, exchange and redemption orders with the funds'
distributor;
(b) providing shareholders with a service that invests the assets of their
accounts in shares according to specific or preauthorized instructions;
(c) processing dividend payments from a fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations
and addresses;
(d) providing and maintaining elective services such as check writing and wire
transfer services;
(e) acting as shareholder of record and nominee for beneficial owners;
(f) maintaining account records for shareholders and/or other beneficial owners;
(g) issuing confirmations of transactions;
(h) providing subaccounting for shares beneficially owned by customers of third
parties or providing the information to a fund as necessary for such
subaccounting;
(i) preparing and forwarding shareholder communications from the funds (such as
proxies, shareholder reports, annual and semiannual financial statements,
and dividend, distribution and tax notices) to shareholders and/or other
beneficial owners;
(j) providing other similar administrative and sub-transfer agency services; and
Shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the funds.
During the fiscal year ended March 31, 2003, the aggregate amount of fees paid
under the Advisor Class Plan by the funds for shareholder services was:
Large Company Value $609
Value $518,271
Small Cap Value $467,284
Equity Income $257,689
Real Estate $50,779
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to,
(a) the payment of sales commissions, ongoing commissions and other payments to
brokers, dealers, financial institutions or others who sell Advisor Class
shares pursuant to selling agreements;
(b) compensation to registered representatives or other employees of the
distributor who engage in or support distribution of the funds' Advisor
Class shares;
(c) compensation to, and expenses (including overhead and telephone expenses) of
the distributor;
(d) printing prospectuses, statements of additional information and reports for
other-than-existing investors;
(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' investors and prospective investors;
(f) receiving and answering correspondence from prospective investors, including
distributing prospectuses, statements of additional information and
shareholder reports;
(g) providing facilities to answer questions from prospective investors about
fund shares;
50
(h) complying with federal and state securities laws pertaining to the sale of
fund shares;
(i) assisting investors in completing application forms and selecting dividend
and other account options;
(j) providing other reasonable assistance in connection with the distribution of
fund shares;
(k) organizing and conducting sales seminars and payments in the form of
transactional compensation or promotional incentives;
(l) profit on the foregoing;
(m) the payment of "service fees" for the provision of personal, continuing
services to investors, as contemplated by the Conduct Rules of the NASD; and
(n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of this Agreement and in
accordance with Rule 12b-1 of the Investment Company Act.
During the fiscal year ended March 31, 2003, the aggregate amount of fees paid
under the Advisor Class Plan by the funds for distribution services was:
Large Company Value $609
Value $518,271
Small Cap Value $467,284
Equity Income $257,689
Real Estate $50,779
Sales Charges
The sales charges applicable to the A, B and C Classes of the funds are
described in the prospectuses for those classes in the section titled CHOOSING A
SHARE CLASS. Shares of the A Class are subject to an initial sales charge, which
declines as the amount of the purchase increases pursuant to the schedule set
forth in the prospectus. This charge may be waived in the following situations:
* Qualified retirement plan purchases
* Certain individual retirement account rollovers
* Purchases by registered representatives and other employees of certain
financial intermediaries (and their immediate family members) having sales
agreements with the advisor or the distributor
* Wrap accounts maintained for clients of certain financial intermediaries who
have entered into agreements with American Century
* Purchases by current and retired employees of American Century and their
immediate family members (spouses and children under age 21) and trusts or
qualified retirement plans established by those persons
* Purchases by certain other investors that American Century deems appropriate,
including but not limited to current or retired directors, trustees and
officers of funds managed by the advisor and trusts and qualified retirement
plans established by those persons
There are several ways to reduce the sales charges applicable to a purchase of A
Class shares. These methods are described in the relevant prospectuses. You or
your financial advisor must indicate at the time of purchase that you intend to
take advantage of one of these reductions.
Shares of the A, B and C Classes are subject to a contingent deferred sales
charge upon redemption of the shares in certain circumstances. The specific
charges and when they apply are described in the relevant prospectuses. The
contingent deferred sales charge may be waived for certain redemptions by some
shareholders, as described in the prospectuses.
51
The aggregate contingent deferred sales charges paid to the Distributor for the
C Class shares in the fiscal year ended March 31, 2003, were Value, $640; Large
Company Value, $98; and Small Cap Value, $1,331.
Dealer Concessions
The funds' distributor expects to pay sales commissions to the financial
intermediaries who sell A, B and/or C Class shares of the fund at the time of
such sales. Payments for A Class shares are as follows:
PURCHASE AMOUNT DEALER CONCESSION
--------------------------------------------------------------------------------
LESS THAN $50,000 5.00%
--------------------------------------------------------------------------------
$50,000 - $99,999 4.00%
--------------------------------------------------------------------------------
$100,000 - $249,999 3.25%
--------------------------------------------------------------------------------
$250,000 - $499,999 2.00%
--------------------------------------------------------------------------------
$500,000 - $999,999 1.75%
--------------------------------------------------------------------------------
$1,000,000 - $3,999,999 1.00%
--------------------------------------------------------------------------------
$4,000,000 - $9,999,999 0.50%
--------------------------------------------------------------------------------
$10,000,000 0.25%
--------------------------------------------------------------------------------
No concession will be paid on purchases by qualified retirement plans. Payments
will equal 4.00% of the purchase price of B Class shares and 1.00% of the
purchase price of the C Class shares sold by the intermediary. The distributor
will retain the 12b-1 fee paid by the C Class of funds for the first 12 months
after the shares are purchased. This fee is intended in part to permit the
distributor to recoup a portion of on-going sales commissions to dealers plus
financing costs, if any. Beginning with the first day of the 13(th) month, the
distributor will make the C Class distribution and individual shareholder
services fee payments described above to the financial intermediaries involved
on a quarterly basis. In addition, B and C Class purchases and A Class purchases
greater than $1,000,000 are subject to a contingent deferred sales charge as
described in the prospectuses.
From time to time, the distributor may provide additional concessions to
dealers, including but not limited to payment assistance for conferences and
seminars, provision of sales or training programs for dealer employees and/or
the public (including, in some cases, payment for travel expenses for registered
representatives and other dealer employees who participate), advertising and
sales campaigns about a fund or funds, and assistance in financing
dealer-sponsored events. Other concessions may be offered as well, and all such
concessions will be consistent with applicable law, including the then-current
rules of the National Association of Securities Dealers, Inc. Such concessions
will not change the price paid by investors for shares of the funds.
BUYING AND SELLING FUND SHARES
Information about buying, selling, exchanging and converting fund shares is
contained in the funds' Prospectuses. The Prospectuses are available to
investors without charge and may be obtained by calling us.
VALUATION OF A FUND'S SECURITIES
All classes of the funds except the A Class are offered at their net asset
value, as described below. The A Class of the funds are offered at their public
offering price, which is the net asset value plus the appropriate sales charge.
This calculation may be expressed as a formula:
52
Offering Price = Net Asset Value/(1 - Sales Charge as a % of Offering Price)
For example, if the net asset value of a fund's A Class shares is $5.00, the
public offering price would be $5.00/(1-5.75%) = $5.31.
Each fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange), each day the Exchange is
open for business. The Exchange usually closes at 4 p.m. Eastern time. The
Exchange typically observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect
the same holidays to be observed in the future, the Exchange may modify its
holiday schedule at any time.
Each fund's NAV is calculated by adding the value of all portfolio securities
and other assets, deducting liabilities and dividing the result by the number of
shares outstanding. Expenses and interest earned on portfolio securities are
accrued daily.
The portfolio securities of each fund that are listed or traded on a domestic
securities exchange, are valued at the last sale price on that exchange, except
as otherwise noted. Portfolio securities primarily traded on foreign securities
exchanges generally are valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, the
last sale price or the official closing price. When market quotations are not
readily available, securities and other assets are valued at fair value as
determined according to procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers according to
procedures established by the Board of Directors.
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
Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then translated to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established, but before the net
asset value per share was determined, that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
according to procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every day
that the Exchange is open. In addition, trading may take place in various
foreign markets and on some electronic trading networks on Saturdays or on other
days when the Exchange is not open and on which the funds' net asset values are
not calculated. Therefore, these calculations do not take place
contemporaneously with the determination of the prices of many of the portfolio
securities used in such calculation, and the value of the funds' portfolios may
be affected on days when shares of the funds may not be purchased or redeemed.
53
TAXES
FEDERAL INCOME TAXES
Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal income taxes to the extent that
it distributes substantially all of its net investment income and net realized
capital gains (if any) to investors. If a fund fails to qualify as a regulated
investment company, it will be liable for taxes, significantly reducing its
distributions to investors and eliminating investors' ability to treat
distributions received from the fund in the manner in which they were realized
by the fund.
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, unless they are designated as qualified dividend income and you
meet a minimum required holding period with respect to your shares of a fund, in
which case such distributions are taxed as long-term capital gains. Qualified
dividend income is a dividend received by a fund from the stock of a domestic or
qualifying foreign corporation, provided that the fund has held the stock for a
required holding period. The required holding period for qualified dividend
income is met if the underlying shares are held more than 60 days in the 121-day
period beginning 60 days prior to the ex-dividend date. Dividends received by
the funds on shares of stock of domestic corporations may qualify for the 70%
dividends received deduction to the extent that the fund held those shares for
more than 45 days.
Distributions from gains on assets held by a fund longer than 12 months are
taxable as long-term gains regardless of the length of time you have held your
shares in the fund. If you purchase shares in the fund and sell them at a loss
within six months, your loss on the sale of those shares will be treated as a
long-term capital loss to the extent of any long-term capital gains dividend you
received on those shares.
Dividends and interest received by a fund on foreign securities may give rise to
withholding and other taxes imposed by foreign countries. However, tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries generally do not impose taxes on capital
gains with respect to investments by non-resident investors. Any foreign taxes
paid by a fund will reduce its dividend distributions to investors.
If a fund purchases the securities of certain foreign investment funds or trusts
called passive foreign investment companies (PFIC), capital gains on the sale of
those holdings will be deemed ordinary income regardless of how long the fund
holds the investment. The fund also may be subject to corporate income tax and
an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. Alternatively, the fund may elect to recognize cumulative gains on
such investments and distribute them to shareholders. Any distribution
attributable to a PFIC is characterized as ordinary income.
As of March 31, 2003, the funds in the table below had the following capital
loss carryovers. When a fund has a capital loss carryover, it does not make
capital gains distributions until the loss has been offset or expired. Because
Mid Cap Value was not in operation as of the fiscal year end, it is not included
in the table below.
54
FUND CAPITAL LOSS CARRYOVER
-----------------------------------------------------------------------------
Large Company Value $420,720 (expiring in 2008 through 2011)
-----------------------------------------------------------------------------
Value $92,229,547 (expiring in 2011)
-----------------------------------------------------------------------------
Small Cap Value $29,073,102 (expiring in 2011)
-----------------------------------------------------------------------------
Equity Income $45,509,616 (expiring in 2011)
-----------------------------------------------------------------------------
Equity Index $62,638,656 (expiring in 2009 through 2011)
-----------------------------------------------------------------------------
Real Estate $19,321,016 (expiring in 2007 through 2009)
-----------------------------------------------------------------------------
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, either American Century or your financial intermediary is
required by federal law to withhold and remit to the IRS the applicable federal
withholding rate on reportable payments (which may include dividends, capital
gains distributions and redemption proceeds). Those regulations require you to
certify that the Social Security number or tax identification number you provide
is correct and that you are not subject to withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your account application. Payments reported by us to the IRS
that omit your Social Security number or tax identification number will subject
us to a non-refundable penalty of $50, which will be charged against your
account if you fail to provide the certification by the time the report is
filed.
A redemption of shares of a fund (including a redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes, and
you generally will recognize gain or loss in an amount equal to the difference
between the basis of the shares and the amount received. If a loss is realized
on the redemption of fund shares, the reinvestment in additional fund shares
within 30 days before or after the redemption may be subject to the "wash sale"
rules of the Code, postponing the recognition of such loss for federal income
tax purposes.
STATE AND LOCAL TAXES
Distributions by the funds also may be subject to state and local taxes, even if
all or a substantial part of those distributions are derived from interest on
U.S. government obligations which, if you received such interest directly, would
be exempt from state income tax. However, most, but not all, states allow this
tax exemption to pass through to fund shareholders when a fund pays
distributions to its shareholders. You should consult your tax advisor about the
tax status of these distributions in your own state.
TAXATION OF CERTAIN MORTGAGE REITS
The funds may invest in real estate investment trusts (REITs) that hold residual
interests in real estate mortgage investment conduits. Under Treasury
regulations, a portion of a fund's income from a REIT that is attributable to
the REIT's residual interest in a real estate mortgage investment conduit
(REMIC)(referred to in the Code as an "excess inclusion") will be subject to
federal income tax in all events. These regulations provide that excess
inclusion income of a regulated investment company, such as a fund, will be
allocated to shareholders of the regulated investment company in proportion to
the dividends received by them with the same consequences as if these
shareholders held the related REMIC residual interest directly. In general,
excess inclusion income allocated to shareholders (i) cannot be offset by net
operating losses (subject to a limited exception for certain thrift
institutions) and (ii) will constitute unrelated business taxable income to
entities (including a qualified pension plan, an individual retirement account,
a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on
unrelated business inclusion income, thus requiring the entity to pay tax on
some income. In addition, if at any time
55
during any taxable year a "disqualified organization" (as defined in the Code)
is a record holder of a share in a regulated investment company, then the
regulated investment company will be subject to a tax equal to that portion of
its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations.
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. Fund performance may be shown
by presenting one or more performance measurements, including cumulative total
return, average annual total return or yield.
All performance information advertised by the funds is historical and is not
intended to represent or guarantee future results. The value of fund shares when
redeemed may be more or less than their original cost.
Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gain
distributions (if any) and any change in the fund's NAV during the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
In addition to average annual total returns, each fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period, including periods other than one, five and 10 years.
Average annual and cumulative total returns may be quoted as percentages or as
dollar amounts and may be calculated for a single investment, a series of
investments, or a series of redemptions over any time period. Total returns may
be broken down into 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.
The following table shows the average annual total returns for the various
classes calculated three different ways. Because Mid Cap Value is a new fund,
performance information was not available as of the fiscal year end.
Return Before Taxes shows the actual change in the value of the fund shares over
the time periods shown, but does not reflect the impact of taxes on fund
distributions or the sale of fund shares. The two after-tax returns take into
account taxes that may be associated with owning the fund shares. Return After
Taxes on Distributions is a fund's actual performance, adjusted by the effect of
taxes on distributions made by the fund during the periods shown. Return After
Taxes on Distributions and the Sale of Fund Shares is further adjusted to
reflect the tax impact on any change in the value of fund shares as if they had
been sold on the last day of the period.
56
After-tax returns are calculated using the historical highest federal marginal
income tax rates and do not reflect the impact of state and local taxes. Actual
after-tax returns depend on an investor's tax situation and may differ from
those shown. After-tax returns shown are not relevant to investors who hold fund
shares through tax-deferred arrangements such as 401(k) plans or IRAs.
Average Annual Total Returns-- Investor Class
Fiscal year ended March 31, 2003
-----------------------------------------------------------------------------------------------
FROM INCEPTION
FUND 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-----------------------------------------------------------------------------------------------
Large Company Value 07/30/1999
Return Before Taxes -21.19% N/A N/A -2.67%
Return After Taxes on Distributions -21.66% N/A N/A -3.22%
Return After Taxes on Distributions
and Sale of Fund Shares -13.79% N/A N/A -2.37%
-----------------------------------------------------------------------------------------------
Value 09/01/1993
Return Before Taxes -19.85% 0.60% N/A 10.30%
Return After Taxes on Distributions -20.71% -1.85% N/A 6.91%
Return After Taxes on Distributions
and Sale of Fund Shares -12.94% -0.65% N/A 6.85%
-----------------------------------------------------------------------------------------------
Small Cap Value 07/31/1998
Return Before Taxes -21.55% N/A N/A 10.17%
Return After Taxes on Distributions -22.95% N/A N/A 8.41%
Return After Taxes on Distributions
and Sale of Fund Shares -14.05% N/A N/A 7.43%
-----------------------------------------------------------------------------------------------
Equity Income 08/01/1994
Return Before Taxes -12.09% 5.22% N/A 12.95%
Return After Taxes on Distributions -13.39% 2.22% N/A 8.99%
Return After Taxes on Distributions
and Sale of Fund Shares -7.93% 2.69% N/A 8.69%
-----------------------------------------------------------------------------------------------
Equity Index 02/26/1999
Return Before Taxes -25.02% N/A N/A -7.99%
Return After Taxes on Distributions -25.39% N/A N/A -8.40%
Return After Taxes on Distributions
and Sale of Fund Shares -16.28% N/A N/A -6.35%
-----------------------------------------------------------------------------------------------
Real Estate 09/21/1995
Return Before Taxes 0.93% 4.19% N/A 11.43%
Return After Taxes on Distributions -0.35% 2.39% N/A 9.40%
Return After Taxes on Distributions
and Sale of Fund Shares 0.50% 2.38% N/A 8.43%
-----------------------------------------------------------------------------------------------
57
Average Annual Total Returns --Institutional Class
Fiscal year ended March 31, 2003
------------------------------------------------------------------------------------------------
FROM INCEPTION
FUND 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------------------------------------------------------------------
Large Company Value 08/10/2001
Return Before Taxes -21.03% N/A N/A -12.01%
Return After Taxes on Distributions -21.56% N/A N/A -12.59%
Return After Taxes on Distributions
and Sale of Fund Shares -13.69% N/A N/A -9.78%
------------------------------------------------------------------------------------------------
Value 07/31/1997
Return Before Taxes -19.70% 0.80% N/A 3.56%
Return After Taxes on Distributions -20.61% -1.73% N/A 0.20%
Return After Taxes on Distributions
and Sale of Fund Shares -12.85% -0.53% N/A 1.28%
------------------------------------------------------------------------------------------------
Small Cap Value 10/26/1998
Return Before Taxes -21.38% N/A N/A 11.86%
Return After Taxes on Distributions -22.83% N/A N/A 9.90%
Return After Taxes on Distributions
and Sale of Fund Shares -13.94% N/A N/A 8.74%
------------------------------------------------------------------------------------------------
Equity Income 07/08/1998
Return Before Taxes -11.77% N/A N/A 6.19%
Return After Taxes on Distributions -13.15% N/A N/A 2.99%
Return After Taxes on Distributions
and Sale of Fund Shares -7.73% N/A N/A 3.37%
------------------------------------------------------------------------------------------------
Equity Index 02/26/1999
Return Before Taxes -24.87% N/A N/A -7.81%
Return After Taxes on Distributions -25.29% N/A N/A -8.28%
Return After Taxes on Distributions
and Sale of Fund Shares -16.19% N/A N/A -6.23%
------------------------------------------------------------------------------------------------
Real Estate 06/16/1997
Return Before Taxes 1.19% 4.46% N/A 6.72%
Return After Taxes on Distributions -0.17% 2.56% N/A 4.81%
Return After Taxes on Distributions
and Sale of Fund Shares 0.66% 2.54% N/A 4.42%
------------------------------------------------------------------------------------------------
58
Average Annual Total Returns --Advisor Class
Fiscal year ended March 31, 2003
------------------------------------------------------------------------------------------------
FROM INCEPTION
FUND 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------------------------------------------------------------------
Large Company Value 10/26/2000
Return Before Taxes -21.38% N/A N/A -2.45%
Return After Taxes on Distributions -21.78% N/A N/A -2.90%
Return After Taxes on Distributions
and Sale of Fund Shares -13.91% N/A N/A -2.15%
------------------------------------------------------------------------------------------------
Value 10/02/1996
Return Before Taxes -20.07% 0.32% N/A 6.80%
Return After Taxes on Distributions -20.86% -2.03% N/A 3.33%
Return After Taxes on Distributions
and Sale of Fund Shares -13.08% -0.82% N/A 3.86%
------------------------------------------------------------------------------------------------
Small Cap Value 12/31/1999
Return Before Taxes -21.85% N/A N/A 13.79%
Return After Taxes on Distributions -23.19% N/A N/A 12.33%
Return After Taxes on Distributions
and Sale of Fund Shares -14.25% N/A N/A 10.61%
------------------------------------------------------------------------------------------------
Equity Income 03/07/1997
Return Before Taxes -12.30% 4.94% N/A 9.16%
Return After Taxes on Distributions -13.52% 2.05% N/A 5.39%
Return After Taxes on Distributions
and Sale of Fund Shares -8.07% 2.52% N/A 5.54%
------------------------------------------------------------------------------------------------
Real Estate 10/06/1998
Return Before Taxes 0.69% N/A N/A 10.66%
Return After Taxes on Distributions -0.50% N/A N/A 8.80%
Return After Taxes on Distributions
and Sale of Fund Shares 0.34% N/A N/A 7.72%
------------------------------------------------------------------------------------------------
Average Annual Total Returns-- A Class
Fiscal year ended March 31, 2003
--------------------------------------------------------------------------------------
FUND FROM INCEPTION INCEPTION DATE
--------------------------------------------------------------------------------------
Large Company Value(1) 01/31/2003
Return Before Taxes -9.00%
Return After Taxes on Distributions -9.10%
Return After Taxes on Distributions
and Sale of Fund Shares -5.85%
--------------------------------------------------------------------------------------
Value(1) 01/31/2003
Return Before Taxes -8.23%
Return After Taxes on Distributions -8.33%
Return After Taxes on Distributions
and Sale of Fund Shares -5.35%
--------------------------------------------------------------------------------------
(1) RETURNS REFLECT DEDUCTION OF MAXIMUM INITIAL SALES CHARGE.
59
Average Annual Total Returns-- B Class
Fiscal year ended March 31, 2003
--------------------------------------------------------------------------------
FUND FROM INCEPTION INCEPTION DATE
--------------------------------------------------------------------------------
Large Company Value(1) 01/31/2003
Return Before Taxes -8.58%
Return After Taxes on Distributions -8.66%
Return After Taxes on Distributions
and Sale of Fund Shares -5.58%
--------------------------------------------------------------------------------
Value(1) 01/31/2003
Return Before Taxes -7.59%
Return After Taxes on Distributions -7.65%
Return After Taxes on Distributions
and Sale of Fund Shares -4.93%
--------------------------------------------------------------------------------
(1) RETURNS REFLECT DEDUCTION OF THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE
APPLICABLE ONLY IF SHARES ARE SOLD.
Real Estate
Real Estate may elect to advertise an annualized distribution rate, computed by
multiplying the ordinary dividends earned by a fund over a 30-day period
(excluding capital gains) by 12, dividing that number by the fund's share price
(net asset value or maximum offering price) at the end of the period, and then
multiplying that amount by 100:
(Dividends Earned Over Last 30 Days X 12)
------------------------------------------ X 100 = Annualized Distribution Rate
Current Share Price
This figure represents the amount paid to shareholders over the applicable
one-year period. The annual distribution rate for a fund may differ from the
fund's 30-day yield computation because it is calculated over a different time
period.
PERFORMANCE COMPARISONS
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that are sold with a sales
charge or deferred sales charge. Sources of economic data that may be used for
such comparisons may include, but are not limited to: U.S. Treasury bill, note
and bond yields, money market fund yields, U.S. government debt and percentage
held by foreigners, the U.S. money supply, net free reserves, and yields on
current-coupon GNMAs (source: Board of Governors of the Federal Reserve System);
the federal funds and discount rates (source: Federal Reserve Bank of New York);
yield curves for U.S. Treasury securities and AA/AAA-rated corporate securities
(source: Bloomberg Financial Markets); yield curves for AAA-rated, tax-free
municipal securities (source: Telerate); yield curves for foreign government
securities (sources: Bloomberg Financial Markets and Data Resources, Inc.);
total returns on foreign bonds (source: J.P. Morgan Securities Inc.); various
U.S. and foreign government reports; the junk bond market (source: Data
Resources, Inc.); the CRB Futures Index (source: Commodity Index Report); the
price of gold (sources: London a.m./p.m. fixing and New York Comex Spot Price);
rankings of any mutual fund or mutual fund category tracked by Lipper, Inc. or
Morningstar, Inc.; mutual fund rankings published in major, nationally
distributed periodicals; data provided by the Investment Company Institute;
Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indices of stock
market performance; and indices and historical data supplied by major securities
brokerage or investment advisory firms. The funds also may use reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance or to provide general information about the funds.
60
PERMISSIBLE ADVERTISING INFORMATION
In addition to any other permissible information, the funds may 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 these discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds;
(5) descriptions of investment strategies for one or more of the funds;
(6) descriptions or comparisons of various savings and investment products
(including, but not limited to, qualified retirement plans and individual
stocks and bonds), which may or may not include the funds;
(7) comparisons of investment products (including the funds) with relevant
market or industry indices or other appropriate benchmarks;
(8) discussions of fund rankings or ratings by recognized rating organizations;
and
(9) testimonials describing the experience of persons who have invested in one
or more of the funds.
The funds also may include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the funds.
MULTIPLE CLASS PERFORMANCE ADVERTISING
Pursuant to the Multiple Class Plans, the funds may issue additional classes of
existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the advisor
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class, and for periods after the first full quarter after inception, actual
performance of the new class will be used.
FINANCIAL STATEMENTS
The financial statements for the funds have been audited by Deloitte & Touche
LLP, independent auditors. Their Independent Auditors' Reports and the financial
statements included in the funds' Annual Reports for the fiscal year ended March
31, 2003, are incorporated herein by reference.
61
EXPLANATION OF FIXED-INCOME SECURITIES RATINGS
As described in the Prospectus, the funds invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the Prospectus and in this Statement of Additional Information. The
following is a summary of the rating categories referenced in the prospectus
disclosure.
RATINGS OF CORPORATE DEBT SECURITIES
--------------------------------------------------------------------------------
STANDARD & POOR'S
--------------------------------------------------------------------------------
AAA This is the highest rating assigned by S&P to a debt obligation. It
indicates an extremely strong capacity to pay interest and repay
principal.
--------------------------------------------------------------------------------
AA Debt rated in this category is considered to have a very strong capacity
to pay interest and repay principal. It differs from the highest-rated
obligations only in small degree.
--------------------------------------------------------------------------------
A Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
--------------------------------------------------------------------------------
BBB Debt rated in this category is regarded as having an adequate capacity
to pay interest and repay principal. While it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories. Debt rated below BBB is regarded as having
significant speculative characteristics.
--------------------------------------------------------------------------------
BB Debt rated in this category 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 also is used for debt
subordinated to senior debt that is assigned an actual or implied BBB
rating.
--------------------------------------------------------------------------------
B Debt rated in this category is more vulnerable to nonpayment than
obligations rated 'BB', but currently has the capacity to pay interest
and repay principal. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to pay interest
and repay principal.
--------------------------------------------------------------------------------
CCC Debt rated in this category is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.
--------------------------------------------------------------------------------
CC Debt rated in this category is currently highly vulnerable to
nonpayment. This rating category is also applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
--------------------------------------------------------------------------------
C The rating C typically is applied to debt subordinated to senior debt,
and is currently highly vulnerable to nonpayment of interest and
principal. This rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action taken, but debt
service payments are being continued.
--------------------------------------------------------------------------------
D Debt rated in this category is in default. This rating is used when
interest payments or principal repayments 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. It
also will be used upon the filing of a bankruptcy petition for the
taking of a similar action if debt service payments are jeopardized.
--------------------------------------------------------------------------------
62
MOODY'S INVESTORS SERVICE, INC.
--------------------------------------------------------------------------------
Aaa This is the highest rating assigned by Moody's to a debt obligation.
It indicates an extremely strong capacity to pay interest and repay
principal.
--------------------------------------------------------------------------------
Aa Debt rated in this category is considered to have a very strong
capacity to pay interest and repay principal and differs from Aaa
issues only in a small degree. Together with Aaa debt, it comprises
what are generally known as high-grade bonds.
--------------------------------------------------------------------------------
A Debt rated in this category possesses many favorable investment
attributes and is to be considered as upper-medium-grade debt.
Although capacity to pay interest and repay principal are considered
adequate, it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
--------------------------------------------------------------------------------
Baa Debt rated in this category is considered as medium-grade debt having
an adequate capacity to pay interest and repay principal. While it
normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than in higher-rated categories. Debt rated below Baa
is regarded as having significant speculative characteristics.
--------------------------------------------------------------------------------
Ba Debt rated 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. Often the protection of interest and principal
payments may be very moderate.
--------------------------------------------------------------------------------
B Debt rated B has a greater vulnerability to default, but currently
has the capacity to meet financial commitments. Assurance of interest
and principal payments or of maintenance of other terms of the
contract over any long period of time may be small. The B rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied Ba or Ba3 rating.
--------------------------------------------------------------------------------
Caa Debt rated Caa is of poor standing, 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. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. The Caa rating is also used for debt
subordinated to senior debt that is assigned an actual or implies B
or B3 rating.
--------------------------------------------------------------------------------
Ca Debt rated in this category represent obligations that are
speculative in a high degree. Such debt is often in default or has
other marked shortcomings.
--------------------------------------------------------------------------------
C This is the lowest rating assigned by Moody's, and debt rated C can
be regarded as having extremely poor prospects of attaining
investment standing.
--------------------------------------------------------------------------------
FITCH, INC.
--------------------------------------------------------------------------------
AAA Debt rated in this category has the lowest expectation of credit
risk. Capacity for timely payment of financial commitments is
exceptionally strong and highly unlikely to be adversely affected by
foreseeable events.
--------------------------------------------------------------------------------
AA Debt rated in this category has a very low expectation of credit
risk. Capacity for timely payment of financial commitments is very
strong and not significantly vulnerable to foreseeable events.
--------------------------------------------------------------------------------
A Debt rated in this category has a low expectation of credit risk.
Capacity for timely payment of financial commitments is strong, but
may be more vulnerable to changes in circumstances or in economic
conditions than debt rated in higher categories.
--------------------------------------------------------------------------------
BBB Debt rated in this category currently has a low expectation of credit
risk and an adequate capacity for timely payment of financial
commitments. However, adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is
the lowest investment grade category.
--------------------------------------------------------------------------------
63
FITCH, INC.
--------------------------------------------------------------------------------
BB Debt rated in this category has a possibility of developing
credit risk, particularly as the result of adverse economic
change over time. However, business or financial alternatives
may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
--------------------------------------------------------------------------------
B Debt rated in this category has significant credit risk, but a
limited margin of safety remains. Financial commitments
currently are being met, but capacity for continued debt service
payments is contingent upon a sustained, favorable business and
economic environment.
--------------------------------------------------------------------------------
CCC, CC, C Debt rated in these categories has a real possibility for
default. Capacity for meeting financial commitments depends
solely upon sustained, favorable business or economic
developments. A CC rating indicates that default of some kind
appears probable; a C rating signals imminent default.
--------------------------------------------------------------------------------
DDD, DD, D The ratings of obligations in this category are based on
their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated
with any precision, the following serve as general guidelines.
'DDD' obligations have the highest potential for recovery,
around 90%- 100% of outstanding amounts and accrued interest.
'DD' indicates potential recoveries in the range of 50%-90% and
'D' the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or
all of their obligations. Entities rated 'DDD' have the highest
prospect for resumption of performance or continued operation
with or without a formal reorganization process. Entities rated
'DD' and 'D' are generally undergoing a formal reorganization or
liquidation process; those rated 'DD' are likely to satisfy a
higher portion of their outstanding obligations, while entities
rated 'D' have a poor prospect of repaying all obligations.
--------------------------------------------------------------------------------
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
(P-2) satisfactory, but the relative degree of safety is not as
high as for issues designated A-1. Earnings trends and
coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
-------------------------------------------------------------------------------
A-3 Prime-3 Satisfactory capacity for timely repayment. Issues that
(P-3) carry this rating are somewhat more vulnerable to the
adverse changes in circumstances than obligations carrying
the higher designations.
-------------------------------------------------------------------------------
64
Note Ratings
--------------------------------------------------------------------------------
S&P MOODY'S DESCRIPTION
--------------------------------------------------------------------------------
SP-1 MIG-1; VMIG-1 Notes are of the highest quality enjoying strong
protection from established cash flows of funds for
their servicing or from established and broad-based
access to the market for refinancing, or both.
--------------------------------------------------------------------------------
SP-2 MIG-2; VMIG-2 Notes are of high quality with ample margins of
protection, although not so large as in the preceding
group.
--------------------------------------------------------------------------------
SP-3 MIG-3; VMIG-3 Notes are of favorable quality with all security
elements accounted for, but lacking the undeniable
strength of the preceding grades. Market access for
refinancing, in particular, is less likely to be
well-established.
--------------------------------------------------------------------------------
SP-4 MIG-4; VMIG-4 Notes are of adequate quality, carrying specific risk
but having protection and not distinctly or
predominantly speculative.
--------------------------------------------------------------------------------
65
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
You can receive a free copy of the annual and semiannual reports, and ask any
questions about the funds and your accounts, by contacting American Century at
the address or telephone numbers listed below.
If you own or are considering purchasing fund shares through
* an employer-sponsored retirement plan
* 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). The SEC charges a duplicating fee to provide copies of this
information.
IN PERSON SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for location and hours.
ON THE INTERNET * EDGAR database at www.sec.gov
* By email request at publicinfo@sec.gov
BY MAIL SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-7820
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
INVESTOR RELATIONS
1-800-345-2021 or 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
WWW.AMERICANCENTURY.COM
FAX
816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 or 816-444-3485
BUSINESS; NOT-FOR-PROFIT AND
EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
SH-SAI-37340 04303
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
PART C OTHER INFORMATION
Item 23. Exhibits (all exhibits not filed herewith are being incorporated
herein by reference).
(a)(1) Articles of Incorporation of Twentieth Century Capital Portfolios,
Inc., dated June 11, 1993 (filed electronically as Exhibit 1a to Post-Effective
Amendment No. 5 to the Registration Statement of the Registrant on July 31,
1996, File No. 33-64872).
(2) Articles Supplementary of Twentieth Century Capital Portfolios,
Inc., dated April 24, 1995 (filed electronically as Exhibit a2 to Post-Effective
Amendment No. 24 to the Registration Statement of the Registrant on October 10,
2002, File No. 33-64872).
(3) Articles Supplementary of Twentieth Century Capital Portfolios,
Inc., dated March 11, 1996 (filed electronically as Exhibit 1b to Post-Effective
Amendment No. 5 to the Registration Statement of the Registrant on July 31,
1996, File No. 33-64872).
(4) Articles Supplementary of Twentieth Century Capital Portfolios,
Inc., dated September 9, 1996 (filed electronically as Exhibit a3 to
Post-Effective Amendment No. 15 to the Registration Statement of the Registrant
on May 14, 1999, File No. 33-64872).
(5) Articles of Amendment of Twentieth Century Capital Portfolios, Inc.,
dated December 2, 1996 (filed electronically as Exhibit b1c to Post-Effective
Amendment No. 7 to the Registration Statement of the Registrant on March 3,
1997, File No. 33-64872).
(6) Articles Supplementary of American Century Capital Portfolios, Inc.,
dated December 2, 1996 (filed electronically as Exhibit b1d to Post-Effective
Amendment No. 7 to the Registration Statement of the Registrant on March 3,
1997, File No. 33-64872).
(7) Articles Supplementary of American Century Capital Portfolios, Inc.,
dated April 30, 1997 (filed electronically as Exhibit b1e to Post-Effective
Amendment No. 8 to the Registration Statement of the Registrant on May 21, 1997,
File No. 33-64872).
(8) Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc., dated May 15, 1997 (filed electronically as
Exhibit b1f to Post-Effective Amendment No. 8 to the Registration Statement of
the Registrant on May 21, 1997, File No. 33-64872).
(9) Articles of Merger merging RREEF Securities Fund, Inc. with and into
American Century Capital Portfolios, Inc., dated June 13, 1997 (filed
electronically as Exhibit a8 to Post-Effective Amendment No. 15 to the
Registration Statement of the Registrant on May 14, 1999, File No. 33-64872).
(10) Articles Supplementary of American Century Capital Portfolios,
Inc., dated December 18, 1997 (filed electronically as Exhibit b1g to
Post-Effective Amendment No. 9 to the Registration Statement of the Registrant
on February 17, 1998, File No. 33-64872).
(11) Articles Supplementary of American Century Capital Portfolios,
Inc., dated June 1, 1998 (filed electronically as Exhibit b1h to Post-Effective
Amendment No. 11 to the Registration Statement of the Registrant on June 26,
1998, File No. 33-64872).
(12) Articles Supplementary of American Century Capital Portfolios,
Inc., dated January 29, 1999 (filed electronically as Exhibit b1i to
Post-Effective Amendment No. 14 to the Registration Statement of the Registrant
on December 29, 1998, File No. 33-64872).
(13) Articles Supplementary of American Century Capital Portfolios,
Inc., dated February 16, 1999 (filed electronically as Exhibit a12 to
Post-Effective Amendment No. 15 to the Registration Statement of the Registrant
on May 14, 1999, File No. 33-64872).
(14) Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc., dated May 12, 1999 (filed electronically as
Exhibit a15 to Post-Effective Amendment No. 24 to the Registration Statement of
the Registrant on October 10, 2002, File No. 33-64872).
(15) Articles Supplementary of American Century Capital Portfolios,
Inc., dated June 2, 1999 (filed electronically as Exhibit a13 to Post-Effective
Amendment No. 16 to the Registration Statement of the Registrant on July 29,
1999, File No. 33-64872).
(16) Articles Supplementary of American Century Capital Portfolios,
Inc., dated June 8, 2000 (filed electronically as Exhibit a14 to Post-Effective
Amendment No. 17 to the Registration Statement of the Registrant on July 28,
2000, File No. 33-64872).
(17) Articles Supplementary of American Century Capital Portfolios,
Inc., dated March 5, 2001 (filed electronically as Exhibit a15 to Post-Effective
Amendment No. 20 to the Registration Statement of the Registrant on April 20,
2001, File No. 33-64872).
(18) Articles Supplementary of American Century Capital Portfolios,
Inc., dated April 4, 2001 (filed electronically as Exhibit a16 to Post-Effective
Amendment No. 20 to the Registration Statement of the Registrant on April 20,
2001, File No. 33-64872).
(19) Articles Supplementary of American Century Capital Portfolios,
Inc., dated May 21, 2001 (filed electronically as Exhibit a17 to Post-Effective
Amendment No. 21 to the Registration Statement of the Registrant on July 30,
2001, File No. 33-64872).
(20) Articles Supplementary of American Century Capital Portfolios,
Inc., dated August 23, 2001 (filed electronically as Exhibit a18 to
Post-Effective Amendment No. 22 to the Registration Statement of the Registrant
on July 30, 2002, File No. 33-64872).
(21) Articles Supplementary of American Century Capital Portfolios,
Inc., dated March 6, 2002 (filed electronically as Exhibit a19 to Post-Effective
Amendment No. 22 to the Registration Statement of the Registrant on July 30,
2002, File No. 33-64872).
(22) Articles Supplementary of American Century Capital Portfolios,
Inc., dated April 4, 2002 (filed electronically as Exhibit a20 to Post-Effective
Amendment No. 22 to the Registration Statement of the Registrant on July 30,
2002, File No. 33-64872).
(23) Articles Supplementary of American Century Capital Portfolios,
Inc., dated June 14, 2002 (filed electronically as Exhibit a21 to Post-Effective
Amendment No. 22 to the Registration Statement of the Registrant on July 30,
2002, File No. 33-64872).
(24) Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc., dated June 17, 2002 (filed electronically as
Exhibit a22 to Post-Effective Amendment No. 22 to the Registration Statement of
the Registrant on July 30, 2002, File No. 33-64872).
(25) Articles Supplementary of American Century Capital Portfolios,
Inc., dated July 12, 2002 (filed electronically as Exhibit a23 to Post-Effective
Amendment No. 22 to the Registration Statement of the Registrant on July 30,
2002, File No. 33-64872).
(26) Articles Supplementary of American Century Capital Portfolios,
Inc., dated August 6, 2003 (filed electronically as Exhibit a26 to
Post-Effective Amendment No. 28 to the Registration Statement of the Registrant
on August 28, 2003, File No. 33-64872).
(27) Articles Supplementary of American Century Capital Portfolios,
Inc., dated November 5, 2003, is included herein.
(28) Articles Supplementary of American Century Capital Portfolios,
Inc., dated January 12, 2004, is included herein.
(b) (1) By-Laws (filed electronically as Exhibit 2 to Post-Effective
Amendment No. 5 to the Registration Statement of the Registrant on July 31,
1996, File No. 33-64872).
(2) Amendment to the By-Laws (filed electronically as Exhibit b2b to
Post-Effective Amendment No. 9 to the Registration Statement of the Registrant
on February 17, 1998, File No. 33-64872).
(c) Registrant hereby incorporates by reference, as though set forth fully
herein, Article Fifth, Article Seventh, Article Eighth and Article Ninth of
Registrant's Articles of Incorporation, appearing as Exhibit 1a to
Post-Effective Amendment No. 5 on Form N-1A of the Registrant; and Sections 3,
4, 5, 6, 7, 8, 9, 10, 11, 22, 24, 25, 30, 31, 33, 39, 40, 45 and 46 of
Registrant's By-Laws appearing as Exhibit b2 to Post-Effective Amendment No. 5
on Form N-1A of the Registrant, and Sections 25, 30, and 31 of Registrant's
Amendment to By-Laws appearing as Exhibit 2b to Post-Effective Amendment No. 9
on Form N-1A of the Registrant.
(d) (1) Management Agreement with American Century Investment Management,
Inc., dated August 1, 1997 (filed electronically as Exhibit b5a to
Post-Effective Amendment No. 9 to the Registration Statement of the Registrant
on February 17, 1998, File No. 33-64872).
(2) Addendum to the Management Agreement with American Century
Investment Management, Inc., dated July 30, 1998 (filed electronically as
Exhibit b5c to Post-Effective Amendment No. 11 to the Registration Statement of
the Registrant on June 26, 1998, File No. 33-64872).
(3) Subadvisory Agreement between Barclays Global Fund Advisers and
American Century Investment Management, Inc., dated January 29, 1999 (filed
electronically as Exhibit b5d to Post-Effective Amendment No. 14 to the
Registration Statement of the Registrant on December 29, 1998, File No.
33-64872).
(4) Addendum to the Management Agreement with American Century
Investment Management, Inc., dated January 29, 1999 (filed electronically as
Exhibit b5e to Post-Effective Amendment No. 14 to the Registration Statement of
the Registrant on December 29, 1998, File No. 33-64872).
(5) Amendment to the Management Agreement with American Century
Investment Management, Inc., dated July 30, 1999 (filed electronically as
Exhibit d6 to Post-Effective Amendment No. 16 to the Registration Statement of
the Registrant on July 29, 1999, File No. 33-64872).
(6) Amendment No. 1 to the Management Agreement with American Century
Investment Management, Inc., dated January 1, 2000 (filed electronically as
Exhibit d7 to Post-Effective Amendment No. 17 to the Registration Statement of
the Registrant on July 28, 2000, File No. 33-64872).
(7) Subadvisory Agreement by and between American Century Capital
Portfolios, Inc., American Century Investment Management, Inc. and J.P. Morgan
Investment Management Inc., dated January 1, 2000 (filed electronically as
Exhibit d2 to Post-Effective Amendment No. 17 to the Registration Statement of
the Registrant on July 28, 2000, File No. 33-64872).
(8) Addendum to the Management Agreement with American Century
Investment Management, Inc., dated May 1, 2001 (filed electronically as Exhibit
d8 to Post-Effective Amendment No. 20 to the Registration Statement of the
Registrant on April 20, 2001, File No. 33-64872).
(9) Addendum to the Management Agreement with American Century
Investment Management, Inc., dated September 3, 2002 (filed electronically as
Exhibit d9 to Post-Effective Amendment No. 24 to the Registration Statement of
the Registrant on October 10, 2002, File No. 33-64872).
(10) Addendum to the Management Agreement with American Century
Investment Management, Inc., dated August 29, 2003 (filed electronically as
Exhibit d10 to Post-Effective Amendment No. 28 to the Registration Statement of
the Registrant on August 28, 2003, File No. 33-64872).
(11) Amendment No. 2 to the Management Agreement with American Century
Investment Management, Inc., dated August 1, 2003 (filed electronically as
Exhibit d11 to Post-Effective Amendment No. 29 to the Registration Statement of
the Registrant on January 5, 2004, File No. 33-64872).
(12) Addendum to the Management Agreement with American Century
Investment Management, Inc., dated February 27, 2004, is included herein.
(e) (1) Amended and Restated Distribution Agreement with American Century
Investment Services, Inc., dated September 3, 2002 (filed electronically as
Exhibit e1 to Post-Effective Amendment No. 35 to the Registration Statement of
American Century Municipal Trust on September 30, 2002, File No. 2-91229).
(2) Amendment No. 1 to the Amended and Restated Distribution Agreement
with American Century Investment Services, Inc., dated December 31, 2002 (filed
electronically as Exhibit e2 to Post-Effective Amendment No. 4 to the
Registration Statement of American Century Variable Portfolios II, Inc. on
December 20, 2002, File No. 333-46922).
(3) Amendment No. 2 to the Amended and Restated Distribution Agreement
with American Century Investment Services, Inc., dated August 29, 2003 (filed
electronically as Exhibit e3 to Post-Effective Amendment No. 17 to the
Registration Statement of American Century Strategic Asset Allocations, Inc. on
August 28, 2003, File No. 33-79482).
(4) Amendment No. 3 to the Amended and Restated Distribution Agreement
with American Century Investment Services, Inc., dated February 27, 2004 (filed
electronically as Exhibit e4 to Post-Effective Amendment No. 104 to the
Registration Statement of American Century Mutual Funds, Inc. on February 26,
2004, File No. 2-14213).
(f) Not applicable.
(g) (1) Master Agreement with Commerce Bank, N.A., dated January 22, 1997
(filed electronically as Exhibit b8e to Post-Effective Amendment No. 76 to the
Registration Statement of American Century Mutual Funds, Inc. on February 28,
1997, File No. 2-14213).
(2) Global Custody Agreement with The Chase Manhattan Bank, dated August
9, 1996 (filed electronically as Exhibit b8 to Post-Effective Amendment No. 31
to the Registration Statement of American Century Government Income Trust on
February 7, 1997, File No. 2-99222).
(3) Amendment to Global Custody Agreement with The Chase Manhattan Bank,
dated December 9, 2000 (filed electronically as Exhibit g2 to Pre-Effective
Amendment No. 2 to the Registration Statement of American Century Variable
Portfolios II, Inc. on January 9, 2001, File No. 333-46922).
(h) (1) Transfer Agency Agreement with Twentieth Century Services, Inc.,
dated as of August 1, 1993 (filed electronically as Exhibit 9 to Post-Effective
Amendment No. 5 to the Registration Statement of the Registrant on July 31,
1996, File No. 33-64872).
(2) Credit Agreement with JPMorgan Chase, as Administrative Agent, dated
as of December 17, 2003 (filed electronically as Exhibit h9 to Post-Effective
Amendment No. 39 to the Registration Statement of American Century Target
Maturities Trust, on January 30, 2004, File No. 2-94608).
(3) Customer Identification Program Reliance Agreement, dated October 1,
2003 (filed electronically as Exhibit h10 to Post-Effective Amendment No. 40 to
the Registration Statement of American Century Municipal Trust on September 30,
2003, File No. 2-91229).
(i) Opinion and Consent of Counsel is included herein.
(j) (1) Consent of Deloitte & Touche LLP is included herein.
(2) Power of Attorney, dated November 15, 2002 (filed electronically as
Exhibit j2 to Post-Effective Amendment No. 99 to the Registration Statement of
American Century Mutual Funds, Inc. on December 17, 2002, File No. 2-14213).
(3) Power of Attorney, dated November 15, 2002 (filed electronically as
Exhibit j3 to Post-Effective Amendment No. 103 to the Registration Statement of
American Century Mutual Funds, Inc. on December 1, 2003, File No. 2-14213).
(4) Secretary's Certificate, dated November 25, 2002 (filed
electronically as Exhibit j3 to Post-Effective Amendment No. 99 to the
Registration Statement of American Century Mutual Funds, Inc. on December 17,
2002, File No. 2-14213).
(k) Not applicable.
(l) Not applicable.
(m) (1) Master Distribution and Shareholder Services Plan (Advisor Class),
dated September 3, 1996 (filed electronically as Exhibit b15a to Post-Effective
Amendment No. 9 to the Registration Statement of the Registrant on February 17,
1998, File No. 33-64872).
(2) Amendment No. 1 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated June 13, 1997 (filed electronically as Exhibit b15b
to Post-Effective Amendment No. 77 to the Registration Statement of American
Century Mutual Funds, Inc. on July 17, 1997, File No. 2-14213).
(3) Amendment No. 2 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated September 30, 1997 (filed electronically as Exhibit
b15c to Post-Effective Amendment No. 78 to the Registration Statement of
American Century Mutual Funds, Inc. on February 26, 1998, File No. 2-14213).
(4) Amendment No. 3 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated June 30, 1998 (filed electronically as Exhibit b15e
to Post-Effective Amendment No. 11 to the Registration Statement of the
Registrant on June 26, 1998, File No. 33-64872).
(5) Amendment No. 4 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated November 13, 1998 (filed electronically as Exhibit
b15e to Post-Effective Amendment No. 12 to the Registration Statement of
American Century World Mutual Funds, Inc. on November 13, 1998, File No.
33-39242).
(6) Amendment No. 5 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated February 16, 1999 (filed electronically as Exhibit
m6 to Post-Effective Amendment No. 83 to the Registration Statement of American
Century Mutual Funds, Inc. on February 26, 1999, File No. 2-14213).
(7) Amendment No. 6 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated July 30, 1999 (filed electronically as Exhibit m7 to
Post-Effective Amendment No. 16 to the Registration Statement of the Registrant
on July 29, 1999, File No. 33-64872).
(8) Amendment No. 7 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated November 19, 1999 (filed electronically as Exhibit
m8 to Post-Effective Amendment No. 87 to the Registration Statement of American
Century Mutual Funds, Inc. on November 29, 1999, File No. 2-14213).
(9) Amendment No. 8 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated June 1, 2000 (filed electronically as Exhibit m9 to
Post-Effective Amendment No. 19 to the Registration Statement of American
Century World Mutual Funds, Inc. on May 24, 2000, File No. 33-39242).
(10) Amendment No. 9 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated April 30, 2001 (filed electronically as Exhibit m10
to Post-Effective Amendment No. 24 to the Registration Statement of American
Century World Mutual Funds, Inc. on April 19, 2001, File No. 33-39242).
(11) Amendment No. 10 to the Master Distribution and Shareholder
Services Plan (Advisor Class), dated December 3, 2001 (filed electronically as
Exhibit m11 to Post-Effective Amendment No. 94 to the Registration Statement of
American Century Mutual Funds, Inc. on December 13, 2001, File No. 2-14213).
(12) Amendment No. 11 to the Master Distribution and Shareholder
Services Plan (Advisor Class), dated September 3, 2002 (filed electronically as
Exhibit m12 to Post-Effective Amendment No. 26 to the Registration Statement of
American Century World Mutual Funds, Inc. on October 1, 2002, File No.
33-39242).
(13) Master Distribution and Individual Shareholder Services Plan (C
Class), dated March 1, 2001 (filed electronically as Exhibit m11 to
Post-Effective Amendment No. 24 to the Registration Statement of American
Century World Mutual Funds, Inc. on April 19, 2001, File No. 33-39242).
(14) Amendment No. 1 to Master Distribution and Individual Shareholder
Services Plan (C Class), dated April 30, 2001 (filed electronically as Exhibit
m12 to Post-Effective Amendment No. 24 to the Registration Statement of American
Century World Mutual Funds, Inc. on April 19, 2001, File No. 33-39242).
(15) Amendment No. 2 to Master Distribution and Individual Shareholder
Services Plan (C Class), dated September 3, 2002 (filed electronically as
Exhibit m15 to Post-Effective Amendment No. 26 to the Registration Statement of
American Century World Mutual Funds, Inc. on October 1, 2002, File No.
33-39242).
(16) Amendment No. 3 to the Master Distribution and Individual
Shareholder Services Plan (C Class), dated February 27, 2004 (filed
electronically as Exhibit m16 to Post-Effective Amendment No. 104 to the
Registration Statement of American Century Mutual Funds, Inc. on February 26,
2004, File No. 2-14213).
(17) Master Distribution and Individual Shareholder Services Plan (A
Class), dated September 3, 2002 (filed electronically as Exhibit m6 to
Post-Effective Amendment No. 34 to the Registration Statement of American
Century California Tax-Free and Municipal Funds on October 1, 2002, File No.
2-82734).
(18) Amendment No. 1 to the Master Distribution and Individual
Shareholder Services Plan (A Class), dated as of February 27, 2004 (filed
electronically as Exhibit m18 to Post-Effective Amendment No. 104 to the
Registration Statement of American Century Mutual Funds, Inc. on February 26,
2004, File No. 2-14213).
(19) Master Distribution and Individual Shareholder Services Plan (B
Class), dated September 3, 2002 (filed electronically as Exhibit m7 to
Post-Effective Amendment No. 34 to the Registration Statement of American
Century California Tax-Free and Municipal Funds on October 1, 2002, File No.
2-82734).
(20) Amendment No. 1 to the Master Distribution and Individual
Shareholder Services Plan (B Class) dated as of February 27, 2004 (filed
electronically as Exhibit m20 to Post-Effective Amendment No. 104 to the
Registration Statement of American Century Mutual Funds, Inc. on February 26,
2004, File No. 2-14213).
(21) Master Distribution and Individual Shareholder Services Plan (R
Class), dated August 29, 2003 (filed electronically as Exhibit m16 to
Post-Effective Amendment No. 17 to the Registration Statement of American
Century Strategic Asset Allocations, Inc. on August 28, 2003, File No.
33-79482).
(n) (1) Amended and Restated Multiple Class Plan, dated September 3, 2002
(filed electronically as Exhibit n to Post-Effective Amendment No. 35 to the
Registration Statement of American Century California Tax-Free and Municipal
Funds on December 17, 2002, File No.2-82734).
(2) Amendment No. 1 to the Amended and Restated Multiple Class Plan,
dated December 31, 2002 (filed electronically as Exhibit n2 to Post-Effective
Amendment No. 39 to the Registration Statement of American Century Municipal
Trust on December 23, 2002, File No. 2-91229).
(3) Amendment No. 2 to the Amended and Restated Multiple Class Plan,
dated August 29, 2003 (filed electronically as Exhibit n3 to Post-Effective
Amendment No. 17 to the Registration Statement of American Century Strategic
Asset Allocations, Inc. on August 28, 2003, File No. 33-79482).
(4) Amendment No. 3 to the Amended and Restated Multiple Class Plan,
dated as of February 27, 2004 (filed electronically as Exhibit n4 to
Post-Effective Amendment No. 104 to the Registration Statement of American
Century Mutual Funds, Inc. on February 26, 2004, File No. 2-14213).
(o) Reserved.
(p) (1) American Century Investments Code of Ethics (filed electronically
as Exhibit p to Post-Effective Amendment No. 35 to the Registration Statement of
American Century California Tax-Free and Municipal Funds on December 17, 2002,
File No. 2-82734).
(2) Barclays Code of Ethics (filed electronically as Exhibit p2 to
Post-Effective Amendment No. 30 to the Registration Statement of American
Century Variable Portfolios, Inc. on April 12, 2001, File No. 33-14567).
(3) J.P. Morgan Investment Management, Inc. Code of Ethics (filed
electronically as Exhibit p3 to Post-Effective Amendment No. 20 to the
Registration Statement of the Registrant on April 20, 2001, File No. 33-64872).
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. Indemnification.
The Registrant is a Maryland corporation. Section 2-418 of the Maryland
General Corporation Law allows a Maryland corporation to indemnify its officers,
directors, employees and agents to the extent provided in such statute.
Article Eighth of the Registrant's Articles of Incorporation requires the
indemnification of the Registrant's directors and officers to the extent
permitted by Section 2-418 of the Maryland General Corporation Law, the
Investment Company Act of 1940 and all other applicable laws.
The Registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
Registrant for sums which it may be permitted or required to pay to its officers
and directors by way of indemnification against such liabilities, subject in
either case to clauses respecting deductibility and participation.
Item 26. None
Item 27. Principal Underwriter.
I. (a) American Century Investment Services, Inc. (ACIS) acts as principal
underwriter for the following investment companies:
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century Variable Portfolios II, Inc.
American Century World Mutual Funds, Inc.
ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly-owned subsidiary of American Century Companies, Inc.
(b) The following is a list of the directors, executive officers and
partners of ACIS:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
--------------------------------------------------------------------------------
James E. Stowers, Jr. Chairman and Director Chairman and
Director
James E. Stowers III Co-Chairman and Director Director
William M. Lyons President, Chief Executive President
Officer and Director
Robert T. Jackson Executive Vice President, Executive Vice
Chief Financial Officer President
and Chief Accounting Officer
Brian Jeter Senior Vice President none
Mark Killen Senior Vice President none
Dave Larrabee Senior Vice President none
Barry Mayhew Senior Vice President none
David C. Tucker Senior Vice President Senior Vice
and General Counsel President
and General
Counsel
* All addresses are 4500 Main Street, Kansas City, Missouri 64111
(c) Not applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in the
possession of 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 of
the requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act and has duly caused this Amendment No. 30 to
this Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of Kansas City, State of Missouri on the 30th day of
March, 2004.
American Century Capital Portfolios, Inc.
(Registrant)
By: /*/ William M. Lyons
-----------------------------------------
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 30 has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
*William M. Lyons President and March 30, 2004
William M. Lyons Principal Executive Officer
*Maryanne Roepke Senior Vice President, March 30, 2004
Maryanne Roepke Treasurer and Chief Accounting
Officer
*James E. Stowers, Jr. Chairman of the Board and March 30, 2004
James E. Stowers, Jr. Director
*James E. Stowers III Director March 30, 2004
James E. Stowers III
*Thomas A. Brown Director March 30, 2004
Thomas A. Brown
*Andrea C. Hall, Ph.D. Director March 30, 2004
Andrea C. Hall, Ph.D.
*D. D. (Del) Hock Director March 30, 2004
D. D. (Del) Hock
*Donald H. Pratt Director March 30, 2004
Donald H. Pratt
*Gale E. Sayers Director March 30, 2004
Gale E. Sayers
*M. Jeannine Strandjord Director March 30, 2004
M. Jeannine Strandjord
*Timothy S. Webster Director March 30, 2004
Timothy S. Webster
*By /s/ Charles A. Etherington
-----------------------------------------
Charles A. Etherington
Attorney-in-Fact
EXHIBIT 99
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER
EX-99.a1 Articles of Incorporation of Twentieth Century Capital Portfolios,
Inc., dated June 11, 1993 (filed as Exhibit 1a to Post-Effective Amendment No. 5
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 31, 1996, and incorporated herein by reference).
EX-99.a2 Articles Supplementary of Twentieth Century Capital Portfolios,
Inc., dated April 24, 1995 (filed as Exhibit a2 to Post-Effective Amendment No.
24 to the Registration Statement on Form N-1A of the Registrant, File No.
33-64872, filed on October 10, 2002, and incorporated herein by reference).
EX-99.a3 Articles Supplementary of Twentieth Century Capital Portfolios,
Inc., dated March 11, 1996 (filed as Exhibit 1b to Post-Effective Amendment No.
5 to the Registration Statement on Form N-1A of the Registrant, File No.
33-64872, filed on July 31, 1996, and incorporated herein by reference).
EX-99.a4 Articles Supplementary of Twentieth Century Capital Portfolios,
Inc., dated September 9, 1996 (filed as Exhibit a3 to Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A of the Registrant, File No.
33-64872, filed on May 14, 1999, and incorporated herein by reference).
EX-99.a5 Articles of Amendment of Twentieth Century Capital Portfolios, Inc.,
dated December 2, 1996 (filed as Exhibit b1c to Post-Effective Amendment No. 7
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on March 3, 1997, and incorporated herein by reference).
EX-99.a6 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated December 2, 1996 (filed as Exhibit b1d to Post-Effective Amendment No. 7
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on March 3, 1997, and incorporated herein by reference).
EX-99.a7 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated April 30, 1997 (filed as Exhibit b1e to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on May 21, 1997, and incorporated herein by reference).
EX-99.a8 Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc., dated May 15, 1997 (filed as Exhibit b1f to
Post-Effective Amendment No. 8 to the Registration Statement on Form N-1A of the
Registrant, File No. 33-64872, filed on May 21, 1997, and incorporated herein by
reference).
EX-99.a9 Articles of Merger merging RREEF Securities Fund, Inc. with and into
American Century Capital Portfolios, Inc., dated June 13, 1997 (filed as Exhibit
a8 to Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A
of the Registrant, File No. 33-64872, filed on May 14, 1999, and incorporated
herein by reference).
EX-99.a10 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated December 18, 1997 (filed as Exhibit b1g to Post-Effective Amendment No. 9
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on February 17, 1998, and incorporated herein by reference).
EX-99.a11 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated June 1, 1998 (filed as Exhibit b1h to Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on June 26, 1998, and incorporated herein by reference).
EX-99.a12 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated January 29, 1999 (filed as Exhibit b1i to Post-Effective Amendment No. 14
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on December 29, 1998, and incorporated herein by reference).
EX-99.a13 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated February 16, 1999 (filed as Exhibit a12 to Post-Effective Amendment No. 15
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on May 14, 1999, and incorporated herein by reference).
EX-99.a14 Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc., dated May 12, 1999 (filed as Exhibit a15 to
Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on October 10, 2002, and incorporated
herein by reference).
EX-99.a15 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated June 2, 1999 (filed as Exhibit a13 to Post-Effective Amendment No. 16 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 29, 1999, and incorporated herein by reference).
EX-99.a16 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated June 8, 2000 (filed as Exhibit a14 to Post-Effective Amendment No. 17 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 28, 2000, and incorporated herein by reference).
EX-99.a17 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated March 5, 2001 (filed as Exhibit a15 to Post-Effective Amendment No. 20 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on April 20, 2001, and incorporated herein by reference).
EX-99.a18 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated April 4, 2001 (filed as Exhibit a16 to Post-Effective Amendment No. 20 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on April 20, 2001, and incorporated herein by reference).
EX-99.a19 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated May 21, 2001 (filed as Exhibit a17 to Post-Effective Amendment No.21 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 30, 2001, and incorporated herein by reference).
EX-99.a20 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated August 23, 2001 (filed as Exhibit a18 to Post-Effective Amendment No. 22
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 30, 2002, and incorporated herein by reference).
EX-99.a21 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated March 6, 2002 (filed as Exhibit a19 to Post-Effective Amendment No. 22 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 30, 2002, and incorporated herein by reference).
EX-99.a22 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated April 4, 2002 (filed as Exhibit a20 to Post-Effective Amendment No. 22 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 30, 2002, and incorporated herein by reference).
EX-99.a23 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated June 14, 2002 (filed as Exhibit a21 to Post-Effective Amendment No. 22 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 30, 2002, and incorporated herein by reference).
EX-99.a24 Certificate of Correction to Articles Supplementary of American
Century Capital Portfolios, Inc., dated June 17, 2002 (filed as Exhibit a22 to
Post-Effective Amendment No. 22 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on July 30, 2002, and incorporated
herein by reference).
EX-99.a25 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated July 12, 2002 (filed as Exhibit a23 to Post-Effective Amendment No. 22 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 30, 2002, and incorporated herein by reference).
EX-99.a26 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated August 6, 2003 (filed as Exhibit a26 to Post-Effective Amendment No. 28 to
the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on August 28, 2003, and incorporated herein by reference).
EX-99.a27 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated November 5, 2003.
EX-99.a28 Articles Supplementary of American Century Capital Portfolios, Inc.,
dated January 12, 2004.
EX-99.b1 By-Laws (filed as Exhibit 2 to Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A of the Registrant, File No. 33-64872, filed
on July 31, 1996, and incorporated herein by reference).
EX-99.b2 Amendment to the By-Laws (filed as Exhibit b2b to Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A of the Registrant,
File No. 33-64872, filed on February 17, 1998, and incorporated herein by
reference).
EX-99.d1 Management Agreement with American Century Investment Management,
Inc., dated August 1, 1997 (filed as Exhibit b5a to Post-Effective Amendment No.
9 to the Registration Statement on Form N-1A of the Registrant, File No.
33-64872, filed on February 17, 1998, and incorporated herein by reference).
EX-99.d2 Addendum to the Management Agreement with American Century
Investment Management, Inc., dated July 30, 1998 (filed as Exhibit b5c to
Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on June 26, 1998, and incorporated
herein by reference).
EX-99.d3 Subadvisory Agreement between Barclays Global Fund Advisers and
American Century Investment Management, Inc., dated January 29, 1999 (filed as
Exhibit b5d to Post-Effective Amendment No. 14 to the Registration Statement on
Form N-1A of the Registrant, File No. 33-64872, filed on December 29, 1998, and
incorporated herein by reference).
EX-99.d4 Addendum to the Management Agreement with American Century
Investment Management, Inc., dated January 29, 1999 (filed as Exhibit b5e to
Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on December 29, 1998, and incorporated
herein by reference).
EX-99.d5 Amendment to the Management Agreement with American Century
Investment Management, Inc., dated July 30, 1999 (filed as Exhibit d6 to
Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on July 29, 1999, and incorporated
herein by reference).
EX-99.d6 Amendment No. 1 to the Management Agreement with American Century
Investment Management, Inc., dated January 1, 2000 (filed as Exhibit d7 to
Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on July 28, 2000, and incorporated
herein by reference).
EX-99.d7 Subadvisory Agreement by and between American Century Capital
Portfolios, Inc., American Century Investment Management, Inc. and J.P. Morgan
Investment Management Inc., dated January 1, 2000 (filed as Exhibit d2 to
Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on July 28, 2000, and incorporated
herein by reference).
EX-99.d8 Addendum to the Management Agreement with American Century
Investment Management, Inc., dated May 1, 2001 (filed as Exhibit d8 to
Post-Effective Amendment No. 20 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on April 20, 2001, and incorporated
herein by reference).
EX-99.d9 Addendum to the Management Agreement with American Century
Investment Management, Inc., dated September 3, 2002 (filed as Exhibit d9 to
Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on October 10, 2002, and incorporated
herein by reference).
EX-99.d10 Addendum to the Management Agreement with American Century
Investment Management, Inc., dated August 29, 2003(filed as Exhibit d10 to
Post-Effective Amendment No. 28 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on August 28, 2003, and incorporated
herein by reference).
EX-99.d11 Amendment No. 2 to the Management Agreement with American Century
Investment Management, Inc., dated August 1, 2003 (filed as Exhibit d11 to
Post-Effective Amendment No. 29 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on January 5, 2004, and incorporated
herein by reference).
EX-99.d12 Addendum to the Management Agreement with American Century
Investment Management, Inc., dated February 27, 2004.
EX-99.e1 Amended and Restated Distribution Agreement with American Century
Investment Services, Inc., dated September 3, 2002 (filed as Exhibit e1 to
Post-Effective Amendment No. 35 to the Registration Statement on Form N-1A of
American Century Municipal Trust, File No. 2-91229, filed on September 30, 2002,
and incorporated herein by reference).
EX-99.e2 Amendment No. 1 to the Amended and Restated Distribution Agreement
with American Century Investment Services, Inc., dated December 31, 2002 (filed
as Exhibit e2 to Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A of American Century Variable Portfolios II, Inc., File No. 333-46922,
filed on December 20, 2002, and incorporated herein by reference).
EX-99.e3 Amendment No. 2 to the Amended and Restated Distribution Agreement
with American Century Investment Services, Inc., dated August 29, 2003 (filed as
Exhibit e3 to Post-Effective Amendment No. 17 to the Registration Statement on
Form N-1A of American Century Strategic Asset Allocations, Inc., File No.
33-79482, filed on August 28, 2003, and incorporated herein by reference).
EX-99.e4 Amendment No. 3 to the Amended and Restated Distribution Agreement
with American Century Investment Services, Inc., dated February 27, 2004 (filed
as Exhibit e4 to Post-Effective Amendment No. 104 to the Registration Statement
on Form N-1A of American Century Mutual Funds, Inc., File No. 2-14213, filed on
February 26, 2004, and incorporated herein by reference).
EX-99.g1 Master Agreement with Commerce Bank, N.A., dated January 22, 1997
(filed as Exhibit b8e to Post-Effective Amendment No. 76 to the Registration
Statement on Form N-1A of American Century Mutual Funds, Inc., File No. 2-14213,
filed on February 28, 1997, and incorporated herein by reference).
EX-99.g2 Global Custody Agreement with The Chase Manhattan Bank, dated August
9, 1996 (filed as Exhibit b8 to Post-Effective Amendment No. 31 to the
Registration Statement on Form N-1A of American Century Government Income Trust,
File No. 2-99222, filed on February 7, 1997, and incorporated herein by
reference).
EX-99.g3 Amendment to Global Custody Agreement with The Chase Manhattan Bank,
dated December 9, 2000 (filed as Exhibit g2 to Pre-Effective Amendment No. 2 to
the Registration Statement on Form N-1A of American Century Variable Portfolios
II, Inc., File No. 333-46922, filed on January 9, 2001, and incorporated herein
by reference).
EX-99.h1 Transfer Agency Agreement with Twentieth Century Services, Inc.,
dated as of August 1, 1993 (filed as Exhibit 9 to Post-Effective Amendment No. 5
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on July 31, 1996, and incorporated herein by reference).
EX-99.h2 Credit Agreement with JPMorgan Chase, as Administrative Agent, dated
as of December 17, 2003 (filed as Exhibit h9 to Post-Effective Amendment No. 39
to the Registration Statement on Form N-1A of American Century Target Maturities
Trust, File No. 2-94608, filed on January 30, 2004, and incorporated herein by
reference).
EX-99.h3 Customer Identification Program Reliance Agreement, dated October 1,
2003 (filed as Exhibit h10 to Post-Effective Amendment No. 40 to the
Registration Statement on Form N-1A of American Century Municipal Trust, File
No. 2-91229, filed on September 30, 2003, and incorporated herein by reference).
EX-99.i Opinion and Consent of Counsel.
EX-99.j1 Consent of Deloitte & Touche LLP.
EX-99.j2 Power of Attorney, dated November 15, 2002 (filed as Exhibit j2 to
Post-Effective Amendment No. 99 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on December 17,
2002, and incorporated herein by reference).
EX-99.j3 Power of Attorney, dated November 15, 2002 (filed as Exhibit j3 to
Post-Effective Amendment No. 103 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on December 1,
2003, and incorporated herein by reference).
EX-99.j4 Secretary's Certificate, dated November 25, 2002 (filed as Exhibit
j3 to Post-Effective Amendment No. 99 to the Registration Statement on Form N-1A
of American Century Mutual Funds, Inc., File No. 2-14213, filed on December 17,
2002, and incorporated herein by reference).
EX-99.m1 Master Distribution and Shareholder Services Plan (Advisor Class),
dated September 3, 1996 (filed as Exhibit b15a to Post-Effective Amendment No. 9
to the Registration Statement on Form N-1A of the Registrant, File No. 33-64872,
filed on February 17, 1998, and incorporated herein by reference).
EX-99.m2 Amendment No. 1 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated June 13, 1997 (filed as Exhibit b15b to
Post-Effective Amendment No. 77 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on July 17, 1997,
and incorporated herein by reference).
EX-99.m3 Amendment No. 2 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated September 30, 1997 (filed as Exhibit b15c to
Post-Effective Amendment No. 78 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on February 26,
1998, and incorporated herein by reference).
EX-99.m4 Amendment No. 3 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated June 30, 1998 (filed as Exhibit b15e to
Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-64872, filed on June 26, 1998, and incorporated
herein by reference).
EX-99.m5 Amendment No. 4 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated November 13, 1998 (filed as Exhibit b15e to
Post-Effective Amendment No. 12 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed on November
13, 1998, and incorporated herein by reference).
EX-99.m6 Amendment No. 5 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated February 16, 1999 (filed as Exhibit m6 to
Post-Effective Amendment No. 83 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on February 26,
1999, and incorporated herein by reference).
EX-99.m7 Amendment No. 6 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated July 30, 1999 (filed as Exhibit m7 to Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A of the Registrant,
File No. 33-64872, filed on July 29, 1999, and incorporated herein by
reference).
EX-99.m8 Amendment No. 7 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated November 19, 1999 (filed as Exhibit m8 to
Post-Effective Amendment No. 87 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on November 29,
1999, and incorporated herein by reference).
EX-99.m9 Amendment No. 8 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated June 1, 2000 (filed as Exhibit m9 to Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A of American Century
World Mutual Funds, Inc., File No. 33-39242, filed on May 24, 2000, and
incorporated herein by reference).
EX-99.m10 Amendment No. 9 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated April 30, 2001 (filed as Exhibit m10 to
Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed on April 19,
2001, and incorporated herein by reference).
EX-99.m11 Amendment No. 10 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated December 3, 2001 (filed as Exhibit m11 to
Post-Effective Amendment No. 94 to the Registration Statement on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, filed on December 13,
2001, and incorporated herein by reference).
EX-99.m12 Amendment No. 11 to the Master Distribution and Shareholder Services
Plan (Advisor Class), dated September 3, 2002 (filed as Exhibit m12 to
Post-Effective Amendment No. 26 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed on October
1, 2002, and incorporated herein by reference).
EX-99.m13 Master Distribution and Individual Shareholder Services Plan (C
Class), dated March 1, 2001 (filed as Exhibit m11 to Post-Effective Amendment
No. 24 to the Registration Statement on Form N-1A of American Century World
Mutual Funds, Inc., File No. 33-39242, filed on April 19, 2001, and incorporated
herein by reference).
EX-99.m14 Amendment No. 1 to Master Distribution and Individual Shareholder
Services Plan (C Class), dated April 30, 2001 (filed as Exhibit m12 to
Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed on April 19,
2001, and incorporated herein by reference).
EX-99.m15 Amendment No. 2 to Master Distribution and Individual Shareholder
Services Plan (C Class), dated September 3, 2002 (filed as Exhibit m15 to
Post-Effective Amendment No. 26 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed on October
1, 2002, and incorporated herein by reference).
EX-99.m16 Amendment No. 3 to the Master Distribution and Individual
Shareholder Services Plan (C Class), dated February 27, 2004 (filed as Exhibit
m16 to Post-Effective Amendment No. 104 to the Registration Statement on Form
N-1A of American Century Mutual Funds, Inc., File No. 2-14213, filed on February
26, 2004, and incorporated herein by reference).
EX-99.m17 Master Distribution and Individual Shareholder Services Plan (A
Class), dated September 3, 2002 (filed as Exhibit m6 to Post-Effective Amendment
No. 34 to the Registration Statement on Form N-1A of American Century California
Tax-Free and Municipal Funds, File No. 2-82734, filed on October 1, 2002, and
incorporated herein by reference).
EX-99.m18 Amendment No. 1 to the Master Distribution and Individual
Shareholder Services Plan (A Class), dated as of February 27, 2004 (filed as
Exhibit m18 to Post-Effective Amendment No. 104 to the Registration Statement on
Form N-1A of American Century Mutual Funds, Inc., File No. 2-14213, filed on
February 26, 2004, and incorporated herein by reference).
EX-99.m19 Master Distribution and Individual Shareholder Services Plan (B
Class), dated September 3, 2002 (filed as Exhibit m7 to Post-Effective Amendment
No. 34 to the Registration Statement on Form N-1A of American Century California
Tax-Free and Municipal Funds, File No. 2-82734, filed on October 1, 2002, and
incorporated herein by reference).
EX-99.m20 Amendment No. 1 to the Master Distribution and Individual
Shareholder Services Plan (B Class), dated as of February 27, 2004 (filed as
Exhibit m20 to Post-Effective Amendment No. 104 to the Registration Statement on
Form N-1A of American Century Mutual Funds, Inc., File No. 2-14213, filed on
February 26, 2004, and incorporated herein by reference).
EX-99.m21 Master Distribution and Individual Shareholder Services Plan (R
Class), dated August 29, 2003 (filed as Exhibit m16 to Post-Effective Amendment
No. 17 to the Registration Statement on Form N-1A of American Century Strategic
Asset Allocations, Inc., File No. 33-79482, filed on August 28, 2003, and
incorporated herein by reference).
EX-99.n1 Amended and Restated Multiple Class Plan, dated September 3, 2002
(filed as Exhibit n to Post-Effective Amendment No. 35 to the Registration
Statement on Form N-1A of American Century California Tax-Free and Municipal
Funds, File No. 2-82734, filed on December 17, 2002, and incorporated herein by
reference).
EX-99.n2 Amendment No. 1 to the Amended and Restated Multiple Class Plan,
dated December 31, 2002 (filed as Exhibit n2 to Post-Effective Amendment No. 39
to the Registration Statement on Form N-1A of American Century Municipal Trust,
File No. 2-91229, filed on December 23, 2002, and incorporated herein by
reference).
EX-99.n3 Amendment No. 2 to the Amended and Restated Multiple Class Plan,
dated August 29, 2003 (filed as Exhibit n3 to Post-Effective Amendment No. 17 to
the Registration Statement on Form N-1A of American Century Strategic Asset
Allocations, Inc., File No. 33-79482, filed on August 28, 2003, and incorporated
herein by reference).
EX-99.n4 Amendment No. 3 to the Amended and Restated Multiple Class Plan,
dated as of February 27, 2004 (filed as Exhibit n4 to Post-Effective Amendment
No. 104 to the Registration Statement on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213, filed on February 26, 2004, and incorporated
herein by reference).
EX-99.p1 American Century Investments Code of Ethics (filed as Exhibit p to
Post-Effective Amendment No. 35 to the Registration Statement on Form N-1A of
American Century California Tax-Free and Municipal Funds, File No. 2-82734,
filed on December 17, 2002, and incorporated herein by reference).
EX-99.p2 Barclays Code of Ethics (filed as Exhibit p2 to Post-Effective
Amendment No. 30 to the Registration Statement on Form N-1A of American Century
Variable Portfolios, Inc., File No. 33-14567, filed on April 12, 2001, and
incorporated herein by reference).
EX-99.p3 J.P. Morgan Investment Management, Inc. Code of Ethics (filed as
Exhibit p3 to Post-Effective Amendment No. 20 to the Registration Statement on
Form N-1A of the Registrant, File No. 33-64872, filed on April 20, 2001, and
incorporated herein by reference).