AMERICAN CENTURY CAPITAL PORTFOLIOS INC (Form: 485BPOS, Received: 09/26/2007 12:52:22)

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. 41 [X]

and/or

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

File No. 811-7820

Amendment No. 41 [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

CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MO 64111
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(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: September 26, 2007

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

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

If appropriate, check the following box:

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

AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.

The following documents are hereby incorporated by reference:

* Prospectuses for the funds of the Registrant, dated August 1, 2007 filed
pursuant to Rule 485(b) on July 27, 2007 (Accession No. 0000908186-07-000070),
as supplemented August 3, 2007 (Accession No. 0000908186-07-000081).

September 26, 2007

AMERICAN CENTURY INVESTMENTS

STATEMENT OF ADDITIONAL INFORMATION

American Century Capital Portfolios, Inc.
Equity Income Fund
Equity Index Fund
Large Company Value Fund
Mid Cap Value Fund
NT Large Company Value Fund
NT Mid Cap Value Fund
Real Estate Fund
Small Cap Value Fund
Value Fund

THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUSES DATED AUGUST 1, 2007, 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
ADDRESSES OR TELEPHONE NUMBERS LISTED ON THE BACK COVER OR VISIT
AMERICANCENTURY.COM.

THIS STATEMENT OF ADDITIONAL INFORMATION INCORPORATES BY REFERENCE CERTAIN
INFORMATION THAT APPEARS IN THE FUNDS' ANNUAL AND SEMIANNUAL REPORTS, WHICH ARE
DELIVERED TO ALL INVESTORS. YOU MAY OBTAIN A FREE COPY OF THE FUNDS' ANNUAL OR
SEMIANNUAL REPORTS BY CALLING 1-800-345-2021.

American Century Investment Services, Inc., Distributor

[american century investments logo and text logo]

American Century Investment Services, Inc., Distributor

The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Proprietary Holdings, Inc.

Table of Contents

The Funds' History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Fund Investment Guidelines. . . . . . . . . . . . . . . . . . . . . . . . . 3

Fund Investments and Risks . . . . . . . . . . . . . . . . . . . . . . . . .4
Investment Strategies and Risks. . . . . . . . . . . . . . . . . . .4
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . .15
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . 19
S&P 500® Index . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Temporary Defensive Measures . . . . . . . . . . . . . . . . . . . 21

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Board of Directors . . . . . . . . . . . . . . . . . . . . . . 24
Ownership of Fund Shares . . . . . . . . . . . . . . . . . . . . . 27
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Proxy Voting Guidelines. . . . . . . . . . . . . . . . . . . . . . 28
Disclosure of Portfolio Holdings . . . . . . . . . . . . . . . . . 29

The Funds' Principal Shareholders. . . . . . . . . . . . . . . . . . . . . 33

Service Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Investment Advisor. . . . . . . . . . . . . . . . . . . . . . . . .41
Subadvisors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Portfolio Managers. . . . . . . . . . . . . . . . . . . . . . . . .46
Transfer Agent and Administrator. . . . . . . . . . . . . . . . . .54
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Custodian Banks . . . . . . . . . . . . . . . . . . . . . . . . . .54
Independent Registered Public Accounting Firm . . . . . . . . . . .54

Brokerage Allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Regular Broker-Dealers. . . . . . . . . . . . . . . . . . . . . . .56

Information About Fund Shares . . . . . . . . . . . . . . . . . . . . . . .57
Multiple Class Structure. . . . . . . . . . . . . . . . . . . . . .58
Buying and Selling Fund Shares. . . . . . . . . . . . . . . . . . .69
Valuation of a Fund's Securities. . . . . . . . . . . . . . . . . .70

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
Federal Income Taxes. . . . . . . . . . . . . . . . . . . . . . . .71
State and Local Taxes. . . . . . . . . . . . . . . . . . . . . . . 72
Taxation of Certain Mortgage REITs . . . . . . . . . . . . . . . . 72

Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . .73

Explanation of Fixed-Income Securities Ratings. . . . . . . . . . . . . . .73

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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.

For accounting and performance purposes, the Real Estate fund is the
post-reorganization successor to the RREEF Real Estate Securities Fund pursuant
to a fund reorganization completed on June 13, 1997.

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
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Equity Income
Investor Class TWEIX 08/01/1994
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Institutional Class ACIIX 07/08/1998
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A Class TWEAX 03/07/1997
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B Class(1) AEKBX N/A
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C Class AEYIX 07/13/2001
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R Class AEURX 08/29/2003
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Equity Index
Investor Class ACIVX 02/26/1999
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Institutional Class ACQIX 02/26/1999
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Large Company Value
Investor Class ALVIX 07/30/1999
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Institutional Class ALVSX 08/10/2001
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A Class ALAVX 01/31/2003
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B Class ALBVX 01/31/2003
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C Class ALPCX 11/07/2001
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R Class ALVRX 08/29/2003
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Advisor Class ALPAX 10/26/2000
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Mid Cap Value
Investor Class ACMVX 03/31/2004
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Institutional Class AVUAX 08/02/2004
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R Class AMVRX 07/29/2005
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Advisor Class ACLAX 01/13/2005
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NT Large Company Value
Institutional Class ACLLX 05/12/2006
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NT Mid Cap Value
Institutional Class ACLMX 05/12/2006
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Real Estate
Investor Class REACX 09/21/1995
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Institutional Class REAIX 06/16/1997
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A Class AREEX 10/06/1998
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B Class(1) ARYBX N/A
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C Class(1) ARYCX N/A
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R Class(1) AREWX N/A
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Small Cap Value
Investor Class ASVIX 07/31/1998
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Institutional Class ACVIX 10/26/1998
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C Class ACVCX 06/01/2001
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Advisor Class ACSCX 12/31/1999
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(1) WE ANTICIPATE THAT THESE CLASSES WILL BE AVAILABLE FOR PURCHASE ON OR
AFTER SEPTEMBER 28, 2007.

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FUND/CLASS TICKER SYMBOL INCEPTION DATE
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Value
Investor Class TWVLX 09/01/1993
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Institutional Class AVLIX 07/31/1997
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A Class TWADX 10/02/1996
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B Class ACBVX 01/31/2003
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C Class ACLCX 06/04/2001
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R Class AVURX 07/29/2005
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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.

Equity Income, Large Company Value, Mid Cap Value, NT Large Company Value, NT
Mid Cap Value, Small Cap Value and Value 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 (other than the
U.S. government and securities of other investment companies).

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 (other than the U.S. government or a regulated investment
company) or it does not own more than 10% of the outstanding voting securities
of a single issuer.

In general, within the restrictions outlined here and in the funds'
prospectuses, the portfolio 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,

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the fund management teams may invest the assets of each fund in varying amounts
using other investment techniques, 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 Equity Income, Large Company
Value, Mid Cap Value, NT Large Company Value, NT Mid Cap Value, Real Estate,
Small Cap Value and Value 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
portfolio managers intend to keep the funds fully invested. However, under
exceptional conditions, each fund except Equity Index 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. 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 6, FUTURES AND OPTIONS,
page 10 and SHORT-TERM SECURITIES, page 14.

NT Large Company Value, NT Mid Cap Value and Real Estate do not invest in
securities issued by companies assigned the Global Industry Classification
Standard (GICS) for the tobacco industry. If the issuer of a security held by
one of these funds is subsequently found to be classified in the tobacco
industry (due to acquisition, merger or otherwise), the applicable fund will
sell the security as soon as reasonably possible.

FUND INVESTMENTS AND RISKS

INVESTMENT STRATEGIES AND RISKS

This section describes investment vehicles and techniques the portfolio 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.

Convertible 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

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4

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.

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

Debt Securities

Each of the funds may invest in debt securities. The primary or secondary
investment objective of Equity Income, Large Company Value, Mid Cap Value, NT
Large Company Value, NT Mid Cap Value, Real Estate, Small Cap Value and Value is
income creation. As a result, these funds may invest in debt securities when the
portfolio 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, except Equity
Index, 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.

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5

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 73.

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 portfolio managers will not purchase
additional high-yield securities until their value is less than 5% of the fund's
assets. Portfolio 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, each fund, except for Equity Index,
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.

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, the value of which is based on, or derived from, a traditional
security, asset, or market index. Certain derivative securities are described
more accurately as index/structured securities. Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as depositary receipts), currencies, interest rates, indices or
other financial indicators (reference indices).

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 "SPDRs", 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
depositary 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

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6

instruments. Because structured securities typically involve no credit
enhancement, their 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 portfolio 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 funds' Board of Directors has reviewed 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,
among other things, that a fund may not invest in a derivative security if it
would be possible for a fund to lose more money than the notional value of the
investment. 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.

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 common
stock, preferred stock, securities convertible into common stock, stock futures
contracts and stock index futures contracts.

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 8, are an example of the type of
derivative security in which a fund might invest.

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7

Foreign Securities

The funds may invest the following portions of their assets in the securities of
issuers located in developed foreign countries, including foreign governments
and their agencies, when these securities meet their standards of selection:
Equity Income, Mid Cap Value, NT Mid Cap Value and Value up to 35%; and Large
Company Value, NT Large Company Value and Small Cap Value up to 20%. Equity
Index and Real Estate do not have a specific percentage limitation on
investments in foreign securities. In determining where a company is located,
the portfolio 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 consider developed countries to include
Australia, Austria, Belgium, Bermuda, Canada, Denmark, Finland, France, Germany,
Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, The Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States.

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.

Investments in foreign securities generally involve greater risks than investing
in securities of domestic companies, 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

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8

trading costs and decreased liquidity due to a lack of alternative trading
partners. There generally is less government regulation and supervision of
foreign stock exchanges, brokers and issuers, which may make it difficult to
enforce contractual obligations.

CLEARANCE AND SETTLEMENT RISK - Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the funds are uninvested and no return is earned. The 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.

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 6.

The funds expect to use forward currency contracts under two circumstances:

(1) When the portfolio 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 portfolio managers would be able to enter into a
forward currency contract to do so; or

(2) When the portfolio 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 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 portfolio 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 portfolio managers do not

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9

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 portfolio 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.

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 portfolio 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.

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).

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10

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

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

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

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11

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.

Investment in Issuers with Limited Operating Histories

Each fund may invest up to 5% of its assets in the equity securities of issuers
with limited operating histories. The portfolio 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.

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 or other financial
assets would not be subject to the limitation.

Other Investment Companies

Each of the funds may invest in other investment companies, such as 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 such securities, subject to certain exceptions, currently is limited to

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

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

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

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12

A fund's investments in other investment companies may include money market
funds managed by the advisor. Investments in money market funds are not subject
to the percentage limitations set forth above.

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.

Each fund may invest in exchange traded funds (ETFs), such as Standard & Poor's
Depositary Receipts (SPDRs) and the Lehman Aggregate Bond ETF, with the same
percentage limitations as investments in registered investment companies. ETFs
are a type of fund bought and sold on a securities exchange. An ETF trades like
common stock and usually represents a fixed portfolio of securities designed to
track the performance and dividend yield of a particular domestic or foreign
market index. A fund may purchase an ETF to temporarily gain exposure to a
portion of the U.S. or a foreign market while awaiting purchase of underlying
securities. The risks of owning an ETF generally reflect the risks of owning the
underlying securities they are designed to track, although the lack of liquidity
on an ETF could result in it being more volatile. Additionally, ETFs have
management fees, which increase their cost.

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.

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.

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13

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 portfolio 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 portfolio managers will
consider appropriate remedies to minimize the effect on that fund's liquidity.

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.

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.

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14

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.

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. To the extent a
fund remains fully invested or almost fully invested at the same time it has
purchased securities on a when-issued basis, there will be greater fluctuations
in its net asset value than if it solely set aside cash to pay for when-issued
securities. 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.

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 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.

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15

SUBJECT POLICY
--------------------------------------------------------------------------------
Senior A fund may not issue senior securities, except as
Securities permitted under the Investment Company Act.
--------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except that a fund
may borrow for temporary or emergency purposes
(not for leveraging or investment) in an amount
not exceeding 33-1/3% of the fund's total assets
(including the amount borrowed) less liabilities
(other than borrowings).
--------------------------------------------------------------------------------
Lending A fund may not lend any security or make any
other loan if, as a result, more than 33-1/3% of the
fund's total assets would be lent to other parties
except, (i) through the purchase of debt securities in
accordance with its investment 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 Equity Income, Large Company Value, Mid Cap
Value, NT Large Company Value, NT Mid Cap Value,
Small Cap Value and Value 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. Real Estate may concentrate its
investments in real estate securities.
--------------------------------------------------------------------------------
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 policies 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 American Century-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 funds'
investment policy relating to borrowing, short positions held by the funds are
not considered borrowings.

For purposes of the investment policy relating to concentration, Equity Income,
Large Company Value, Mid Cap Value, NT Large Company Value, NT Mid Cap Value,
Small Cap Value and Value 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

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16

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

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

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

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

Nonfundamental Investment Policies

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

SUBJECT POLICY
--------------------------------------------------------------------------------
Leveraging A fund may not purchase additional investment
securities at any time 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 and A fund may enter into futures contracts and write and
Options buy put and call options relating to futures contracts.
A fund may not, however, enter into leveraged futures
transactions if it would be possible for the fund to lose
more than the notional value of the investment.
--------------------------------------------------------------------------------
Issuers with A fund may invest a portion of its assets in the equity
Limited securities of issuers with limited operating histories.
Operating An issuer is considered to have a limited operating
Histories history if that issuer has a record of less than three
years of continuous operation. Periods of capital
formation, incubation, consolidations, and research
and development may be considered in determining
whether a particular issuer has a record of three years of
continuous operation.
--------------------------------------------------------------------------------

For purposes of the funds' investment policy relating to leveraging, short
positions held by the funds are not considered borrowings.

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.

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17

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 is a wholly owned subsidiary of J.P. Morgan Fleming Asset
Management Holdings, Inc. which is a wholly owned subsidiary of J.P. Morgan
Chase & Co. (JPMorgan Chase). The subadvisor is a corporation organized under
the laws of the State of Delaware and 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.

JPMorgan 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. JPMorgan 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.
JPMorgan 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.

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18

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.

PORTFOLIO TURNOVER

The portfolio turnover rate of each fund is shown in the Financial Highlights
tables in that fund's prospectus.

Equity Index

Although Equity Index may sell securities regardless of how long they have been
held, the fund generally sells securities only to respond to redemption requests
or to adjust the number of shares held to reflect a change in the S&P 500 Index,
the fund's target index. The Financial Highlights section of the prospectus
shows historical turnover rates for the fund.

Large Company Value and NT Large Company Value

The portfolio managers of Large Company Value and NT 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 portfolio
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 characterized as ordinary income. Higher turnover would generate
correspondingly higher brokerage commissions, which is a cost the fund pays
directly.

Other Funds

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

The portfolio 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 portfolio 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.

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19

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

Because investment decisions are based on a particular security's anticipated
contribution to a fund's investment objective, the managers believe that the
rate of portfolio turnover is irrelevant when they determine that a change is 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 characterized 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.

Variations in a fund's portfolio turnover rate from year to year may be due to a
fluctuating volume of shareholder purchase and redemption activity, varying
market conditions, and/or changes in the managers' investment outlook.

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 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.

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20

TEMPORARY DEFENSIVE MEASURES

For temporary defensive purposes, each fund except Equity Index 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; and

* 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
72. Those listed as interested directors are "interested" primarily by virtue of
their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or indirect,
subsidiaries, including the funds' investment advisor, American Century
Investment Management, Inc. (ACIM); the funds' principal underwriter, American
Century Investment Services, Inc. (ACIS); and the funds' transfer agent,
American Century Services, LLC (ACS).

The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers of,
and have no financial interest in, ACC or any of its wholly owned, direct or
indirect, subsidiaries, including ACIM, ACIS and ACS. The directors serve in
this capacity for seven registered investment companies in the American Century
family of funds.

All persons named as officers of the funds also serve in similar capacities for
the other 14 investment companies in the American Century family of funds
advised by ACIM or American Century Global Investment Management, Inc. (ACGIM),
a wholly owned subsidiary of ACIM, unless otherwise 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.

Interested Directors
--------------------------------------------------------------------------------
JAMES E. STOWERS, JR., 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1924

POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since
2007)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director and
Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to February
2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM,
ACS, ACIS and other ACC subsidiaries

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1963

POSITION(S) HELD WITH FUNDS: Director (since 2007) and President (since 2007)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM, ACGIM,
ACIS and other ACC subsidiaries; Managing Director, MORGAN STANLEY (March 2000
to November 2005)

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 105

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------

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21

Independent Directors
--------------------------------------------------------------------------------
THOMAS A. BROWN, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1940

POSITION(S) HELD WITH FUNDS: Director (since 1980)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, ASSOCIATED
INVESTMENTS, LLC (real estate investment company); Managing Member, BROWN
CASCADE PROPERTIES, LLC (real estate investment company); Retired, Area Vice
President, APPLIED INDUSTRIAL TECHNOLOGIES

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------
ANDREA C. HALL, PH.D., 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1945

POSITION(S) HELD WITH FUNDS: Director (since 1997)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the President,
MIDWEST RESEARCH INSTITUTE

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------
JAMES A. OLSON, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1942

POSITION(S) HELD WITH FUNDS: Director (since 2007)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, PLAZA BELMONT LLC; Chief
Financial Officer, PLAZA BELMONT LLC (September 1999 to September 2006)

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, SAIA, INC. and ENTERTAINMENT
PROPERTIES TRUST
--------------------------------------------------------------------------------
DONALD H. PRATT, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1937

POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board
(since 2005)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, WESTERN INVESTMENTS, INC.; Retired Chairman of the Board, BUTLER
MANUFACTURING COMPANY

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------
GALE E. SAYERS, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1943

POSITION(S) HELD WITH FUNDS: Director (since 2000)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer
and Founder, SAYERS40, INC., a technology products and services provider

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------
M. JEANNINE STRANDJORD, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1945

POSITION(S) HELD WITH FUNDS: Director (since 1994)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, SPRINT CORPORATION

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST SYSTEMS, INC.; Director,
EURONET WORLDWIDE, INC.; Director, CHARMING SHOPPES, INC.
--------------------------------------------------------------------------------
TIMOTHY S. WEBSTER, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1961

POSITION(S) HELD WITH FUNDS: Director (since 2001)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Director, TDB ACQUISITION
GROUP LLC (September 2006 to present); President and Chief Executive Officer,
AMERICAN ITALIAN PASTA COMPANY (2001 to December 2005)

NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66

OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
--------------------------------------------------------------------------------

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22

Officers
--------------------------------------------------------------------------------
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1956

POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century funds (July 2000 to August 2006). Also serves as: Senior Vice President,
ACS
--------------------------------------------------------------------------------
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1957

POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (November 2005
to present); General Counsel, ACC (March 2007 to present). Also serves as:
General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries; and Senior
Vice President, ACIM, ACGIM and ACS
--------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1966

POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial
Officer (all since 2006)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000
to present); and Controller, various American Century funds (1997 to September
2006)
--------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111

YEAR OF BIRTH: 1967

POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998)

PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS

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

On December 23, 1999, American Century Services, LLC (ACS) entered into an
agreement with DST Systems, Inc. (DST) under which DST would provide back office
software and support services for transfer agency services provided by ACS (the
Agreement). ACS 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, 2006, DST received $22,142,003 in fees from ACS. DST's revenue for the
calendar year ended December 31, 2006, was approximately $2.24 billion.

Ms. Strandjord is a director of DST and a holder of 35,383 shares and possesses
options to acquire an additional 55,875 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 ACS. DST
was chosen by ACS for its industry-leading role in providing cost-effective back
office support for mutual fund service providers such as ACS. 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 ACS; she was not involved in any way with the
negotiations between ACS 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 has 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.

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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. 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.

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.

The Advisory Board

The funds also have an Advisory Board. Members of the Advisory Board, if any,
function like fund directors in many respects, but do not possess voting power.
Advisory Board members attend all meetings of the Board of Directors and the
independent directors and receive any materials distributed in connection with
such meetings. Advisory Board members may be considered as candidates to fill
vacancies on the Board of Directors.

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.

--------------------------------------------------------------------------------
COMMITTEE: Executive

MEMBERS: Donald H. Pratt, M. Jeannine Strandjord, Jonathan S. Thomas

FUNCTION: The Executive Committee performs the functions of the Board of
Directors between board meetings, 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.

NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 0
--------------------------------------------------------------------------------
COMMITTEE: Compliance and Shareholder Communications

MEMBERS: M. Jeannine Strandjord, Andrea C. Hall, Ph.D., James A. Olson

FUNCTION: The Compliance and Shareholder Communications Committee reviews the
results of the funds' compliance testing program, reviews quarterly 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.

NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 4
--------------------------------------------------------------------------------
COMMITTEE: Audit

MEMBERS: Thomas A. Brown, Donald H. Pratt, Gale E. Sayers, Timothy S. Webster

FUNCTION: The Audit Committee approves the engagement of the funds' independent
registered public accounting firm, recommends approval of such engagement to the
independent directors, and oversees the activities of the funds' independent
registered public accounting firm. 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.

NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 4
--------------------------------------------------------------------------------

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24

COMMITTEE: Governance

MEMBERS: Donald H. Pratt, Andrea C. Hall, Ph.D., Gale E. Sayers

FUNCTION: The Governance Committee primarily considers and recommends
individuals for nomination as directors. The names of potential director
candidates are drawn from a number of sources, including recommendations from
members of the board, management (in the case of interested directors only) and
shareholders. See NOMINATIONS OF DIRECTORS below. 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.

NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 2
--------------------------------------------------------------------------------
COMMITTEE: Fund Performance Review

MEMBERS: Timothy S. Webster, Thomas A. Brown, Andrea C. Hall, Ph.D., James A.
Olson, Donald H. Pratt, Gale E. Sayers, M. Jeannine Strandjord

FUNCTION: The Fund Performance Review Committee reviews quarterly the investment
activities and strategies used to manage fund assets. The committee regularly
receives reports from portfolio managers and other investment personnel
concerning the funds' investments.

NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 4

Nominations of Directors
--------------------------------------------------------------------------------

As indicated in the table above, the Governance Committee is responsible for
identifying, evaluating and recommending qualified candidates for election to
the funds' Board of Directors. While the Governance Committee largely considers
nominees from searches that it conducts, the committee will consider director
candidates submitted by shareholders. Any shareholder wishing to submit a
candidate for consideration should send the following information to the
Corporate Secretary, American Century Funds, P.O. Box 410141, Kansas City, MO
64141 or by email to corporatesecretary@americancentury.com:

* Shareholder's name, the fund name and number of fund shares owned and
length of period held;

* Name, age and address of the candidate;

* A detailed resume describing, among other things, the candidate's
educational background, occupation, employment history, financial knowledge
and expertise and material outside commitments (e.g., memberships on other
boards and committees, charitable foundations, etc.);

* Any other information relating to the candidate that is required to be
disclosed in solicitations of proxies for election of directors in an
election contest pursuant to Regulation 14A under the Securities Exchange Act
of 1934;

* Number of fund shares owned by the candidate and length of time held;

* A supporting statement which (i) describes the candidate's reasons for
seeking election to the Board of Directors and (ii) documents his/her ability
to satisfy the director qualifications described in the board's policy; and

* A signed statement from the candidate confirming his/her willingness to
serve on the Board of Directors.

The Corporate Secretary will promptly forward such materials to the Governance
Committee chairman. The Corporate Secretary also will maintain copies of such
materials for future reference by the Governance Committee when filling board
positions.

Shareholders may submit potential director candidates at any time pursuant to
these procedures. The Governance Committee will consider such candidates if a
vacancy arises or if the board decides to expand its membership, and at such
other times as the Governance Committee deems necessary or appropriate.

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25

Compensation of Directors

The directors serve as directors for seven American Century investment
companies. Each director who is not an interested person as defined in the
Investment Company Act receives compensation for service as a member of the
board of all 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 these 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 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, 2007
--------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
TOTAL COMPENSATION THE AMERICAN CENTURY
NAME OF DIRECTOR FROM THE FUNDS(1) FAMILY OF FUNDS(2)
--------------------------------------------------------------------------------
Thomas A. Brown $29,995 $109,499
--------------------------------------------------------------------------------
Andrea C. Hall, Ph.D. $30,846 $113,000
--------------------------------------------------------------------------------
D.D. (Del) Hock(3) $30,846 $113,000
--------------------------------------------------------------------------------
James A. Olson(4) $15,187 $55,875
--------------------------------------------------------------------------------
Donald H. Pratt $40,616 $148,500
--------------------------------------------------------------------------------
Gale E. Sayers $29,202 $106,750
--------------------------------------------------------------------------------
M. Jeannine Strandjord $29,996 $109,500
--------------------------------------------------------------------------------
Timothy S. Webster $31,193 $114,250
--------------------------------------------------------------------------------

(1) INCLUDES COMPENSATION PAID TO THE DIRECTORS FOR THE FISCAL YEAR ENDED
MARCH 31, 2007, 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 INVESTMENT COMPANIES 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,
$18,999; DR. HALL, $101,500; MR. HOCK, $99,500; MR. OLSON, $55,875; MR.
PRATT, $20,100, MR. SAYERS $0 AND MR. WEBSTER, $23,450.

(3) MR. HOCK RETIRED FROM THE BOARD OF DIRECTORS ON JULY 27, 2007.

(4) MR. OLSON JOINED THE ADVISORY BOARD ON JANUARY 1, 2006. HE JOINED THE
BOARD OF DIRECTORS ON JULY 28, 2007.

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.

OWNERSHIP OF FUND SHARES

The directors owned shares in the funds as of December 31, 2006, as shown in the
table below.

NAME OF DIRECTORS
--------------------------------------------------------------------------------
JAMES E. JONATHAN S. THOMAS A. ANDREA C.
STOWERS, JR. THOMAS BROWN HALL, PH.D.
--------------------------------------------------------------------------------
Dollar Range of Equity
Securities in the Funds:
Equity Income A A C E
--------------------------------------------------------------------------------
Equity Index A A C A
--------------------------------------------------------------------------------
Large Company Value A A B A
--------------------------------------------------------------------------------
Mid Cap Value A A C A
--------------------------------------------------------------------------------
NT Large
Company Value A A A A
--------------------------------------------------------------------------------
NT Mid Company Value A A A A
--------------------------------------------------------------------------------
Real Estate A B C A
--------------------------------------------------------------------------------
Small Cap Value A A C A
--------------------------------------------------------------------------------
Value A A D C
--------------------------------------------------------------------------------
Aggregate Dollar Range
of Equity Securities in
all Registered Investment
Companies Overseen by
Director in Family of
Investment Companies D 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
--------------------------------------------------------------------------------
JAMES A. DONALD GALE E. M. JEANNINE TIMOTHY
OLSON H. PRATT SAYERS STRANDJORD WEBSTER
--------------------------------------------------------------------------------
Dollar Range of Equity
Securities in the Funds:
Equity Income A A A A C
--------------------------------------------------------------------------------
Equity Index A A A A A
--------------------------------------------------------------------------------
Large Company Value A A A A A
--------------------------------------------------------------------------------
Mid Cap Value A A A A C
--------------------------------------------------------------------------------
NT Large
Company Value A A A A A
--------------------------------------------------------------------------------
NT Mid Cap Value A A A A A
--------------------------------------------------------------------------------
Real Estate A E A D A
--------------------------------------------------------------------------------
Small Cap Value A A A A C
--------------------------------------------------------------------------------
Value A D A E A
--------------------------------------------------------------------------------
Aggregate Dollar Range
of Equity Securities in
all Registered Investment
Companies Overseen by
Director in Family of
Investment Companies D 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

------
27

CODE OF ETHICS

The funds, their investment advisor, principal underwriter and, if applicable,
subadvisor have adopted codes of ethics under Rule 17j-1 of the Investment
Company Act. They 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.

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.

------
28

In addition, to avoid any potential conflict of interest that may arise when one
American Century fund owns shares of another American Century fund, the advisor
will "echo vote" such shares, if possible. That is, it will vote the shares in
the same proportion as the vote of all other holders of the shares. Shares of
American Century "NT" funds will be voted in the same proportion as the vote of
the shareholders of the corresponding American Century policy portfolio for
proposals common to both funds. For example, NT Growth Fund shares will be echo
voted in accordance with the votes of Growth Fund shareholders. In all other
cases, the shares will be voted in direct consultation with a committee of the
independent directors of the voting fund.

A copy of the advisor's Proxy Voting Guidelines and information regarding how
the advisor voted proxies relating to portfolio securities during the most
recent 12-month period ended June 30 are available on the ABOUT US page at
americancentury.com. The advisor's proxy voting record also is available on the
SEC's website at sec.gov.

DISCLOSURE OF PORTFOLIO HOLDINGS

The advisor (ACIM) has adopted policies and procedures with respect to the
disclosure of fund portfolio holdings and characteristics, which are described
below.

Distribution to the Public

Full portfolio holdings for each fund will be made available for distribution 30
days after the end of each calendar quarter, and will be posted on
americancentury.com at approximately the same time. This disclosure is in
addition to the portfolio disclosure in annual and semiannual shareholder
reports, and on Form N-Q, which disclosures are filed with the Securities and
Exchange Commission within 60 days of each fiscal quarter end and also posted on
americancentury.com at the time the filings are made.

Top 10 holdings for each fund will be made available for distribution monthly 30
days after the end of each month, and will be posted on americancentury.com at
approximately the same time.

Certain portfolio characteristics determined to be sensitive and confidential
will be made available for distribution monthly 30 days after the end of each
month, and will be posted on americancentury.com at approximately the same time.
Characteristics not deemed confidential will be available for distribution at
any time. The advisor may make determinations of confidentiality on a
fund-by-fund basis, and may add or delete characteristics from those considered
confidential at any time.

So long as portfolio holdings are disclosed in accordance with the above
parameters, the advisor makes no distinction among different categories of
recipients, such as individual investors, institutional investors,
intermediaries that distribute the funds' shares, third-party service providers,
rating and ranking organizations, and fund affiliates. Because this information
is publicly available and widely disseminated, the advisor places no conditions
or restrictions on, and does not monitor, its use. Nor does the advisor require
special authorization for its disclosure.

Accelerated Disclosure

The advisor recognizes that certain parties, in addition to the advisor and its
affiliates, may have legitimate needs for information about portfolio holdings
and characteristics prior to the times prescribed above. Such accelerated
disclosure is permitted under the circumstances described below.

------
29

Ongoing Arrangements

Certain parties, such as investment consultants who provide regular analysis of
fund portfolios for their clients and intermediaries who pass through
information to fund shareholders, may have legitimate needs for accelerated
disclosure. These needs may include, for example, the preparation of reports for
customers who invest in the funds, the creation of analyses of fund
characteristics for intermediary or consultant clients, the reformatting of data
for distribution to the intermediary's or consultant's clients, and the review
of fund performance for ERISA fiduciary purposes.

In such cases, accelerated disclosure is permitted if the service provider
enters an appropriate non-disclosure agreement with the funds' distributor in
which it agrees to treat the information confidentially until the public
distribution date and represents that the information will be used only for the
legitimate services provided to its clients (i.e., not for trading).
Non-disclosure agreements require the approval of an attorney in the advisor's
legal department. The advisor's compliance department receives quarterly reports
detailing which clients received accelerated disclosure, what they received,
when they received it and the purposes of such disclosure. Compliance personnel
are required to confirm that an appropriate non-disclosure agreement has been
obtained from each recipient identified in the reports.

Those parties who have entered into non-disclosure agreements as of August 14,
2007 are as follows:

* Aetna, Inc.

* American Fidelity Assurance Co.

* AUL/American United Life Insurance Company

* Ameritas Life Insurance Corporation

* Annuity Investors Life Insurance Company

* Asset Services Company L.L.C.

* Bell Globemedia Publishing

* Bellwether Consulting, LLC

* Bidart & Ross

* Callan Associates, Inc.

* Cambridge Financial Services, Inc.

* Cleary Gull Inc.

* Commerce Bank, N.A.

* Connecticut General Life Insurance Company

* Consulting Services Group, LLC

* CRA RogersCasey, Inc.

* Defined Contribution Advisors, Inc.

* EquiTrust Life Insurance Company

* Evaluation Associates, LLC

* Evergreen Investments

* Farm Bureau Life Insurance Company

* First MetLife Investors Insurance Company

* Fund Evaluation Group, LLC

* The Guardian Life Insurance & Annuity Company, Inc.

* Hammond Associates, Inc.

* Hewitt Associates LLC

* ICMA Retirement Corporation

* ING Life Insurance Company & Annuity Co.

* Investors Securities Services, Inc.

* Iron Capital Advisors

* J.P. Morgan Retirement Plan Services LLC

* Jefferson National Life Insurance Company

* Jefferson Pilot Financial

* Jeffrey Slocum & Associates, Inc.

------
30

* Kansas City Life Insurance Company

* Kmotion, Inc.

* Liberty Life Insurance Company

* The Lincoln National Life Insurance Company

* Lipper Inc.

* Manulife Financial

* Massachusetts Mutual Life Insurance Company

* Merrill Lynch

* MetLife Investors Insurance Company

* MetLife Investors Insurance Company of California

* Midland National Life Insurance Company

* Minnesota Life Insurance Company

* Morgan Keegan & Co., Inc.

* Morgan Stanley & Co., Inc.

* Morningstar Associates LLC

* Morningstar Investment Services, Inc.

* National Life Insurance Company

* Nationwide Financial

* New England Pension Consultants

* Northwestern Mutual Life Insurance Co.

* NT Global Advisors, Inc.

* NYLIFE Distributors, LLC

* Principal Life Insurance Company

* Prudential Financial

* Rocaton Investment Advisors, LLC

* S&P Financial Communications

* Scudder Distributors, Inc.

* Security Benefit Life Insurance Co.

* Smith Barney

* SunTrust Bank

* Symetra Life Insurance Company

* Trusco Capital Management

* Union Bank of California, N.A.

* The Union Central Life Insurance Company

* VALIC Financial Advisors

* VALIC Retirement Services Company

* Vestek Systems, Inc.

* Wachovia Bank, N.A.

* Wells Fargo Bank, N.A.

Once a party has executed a non-disclosure agreement, it may receive any or all
of the following data for funds in which its clients have investments or are
actively considering investment:

(1) Full holdings quarterly as soon as reasonably available;

(2) Full holdings monthly as soon as reasonably available;

(3) Top 10 holdings monthly as soon as reasonably available; and

(4) Portfolio characteristics monthly as soon as reasonably available.

The types, frequency and timing of disclosure to such parties vary. In most
situations, the information provided pursuant to a non-disclosure agreement is
limited to certain portfolio characteristics and/or top 10 holdings, which
information is provided on a monthly basis. In limited situations, and when
approved by a member of the legal department and responsible chief investment
officer, full holdings may be provided.

------
31

Single Event Requests

In certain circumstances, the advisor may provide fund holding information on an
accelerated basis outside of an ongoing arrangement with manager-level or higher
authorization. For example, from time to time the advisor may receive requests
for proposals (RFPs) from consultants or potential clients that request
information about a fund's holdings on an accelerated basis. As long as such
requests are on a one-time basis, and do not result in continued receipt of
data, such information may be provided in the RFP as of the most recent month
end regardless of lag time. Such information will be provided with a
confidentiality legend and only in cases where the advisor has reason to believe
that the data will be used only for legitimate purposes and not for trading.

In addition, the advisor occasionally may work with a transition manager to move
a large account into or out of a fund. To reduce the impact to the fund, such
transactions may be conducted on an in-kind basis using shares of portfolio
securities rather than cash. The advisor may provide accelerated holdings
disclosure to the transition manager with little or no lag time to facilitate
such transactions, but only if the transition manager enters into an appropriate
non-disclosure agreement.

Service Providers

Various service providers to the funds and the funds' advisor must have access
to some or all of the funds' portfolio holdings information on an accelerated
basis from time to time in the ordinary course of providing services to the
funds. These service providers include the funds' custodian (daily, with no
lag), auditors (as needed) and brokers involved in the execution of fund trades
(as needed). Additional information about these service providers and their
relationships with the funds and the advisor are provided elsewhere in this
statement of additional information.

Additional Safeguards

The advisor's policies and procedures include a number of safeguards designed to
control disclosure of portfolio holdings and characteristics so that such
disclosure is consistent with the best interests of fund shareholders. First,
the frequency with which this information is disclosed to the public, and the
length of time between the date of the information and the date on which the
information is disclosed, are selected to minimize the possibility of a third
party improperly benefiting from fund investment decisions to the detriment of
fund shareholders. Second, distribution of portfolio holdings information,
including compliance with the advisor's policies and the resolution of any
potential conflicts that may arise, is monitored quarterly. Finally, the funds'
Board of Directors exercises oversight of disclosure of the funds' portfolio
securities. The board has received and reviewed a summary of the advisor's
policy and is informed on a quarterly basis of any changes to or violations of
such policy detected during the prior quarter.

Neither the advisor nor the funds receive any compensation from any party for
the distribution of portfolio holdings information.

The advisor reserves the right to change its policies and procedures with
respect to the distribution of portfolio holdings information at any time. There
is no guarantee that these policies and procedures will protect the funds from
the potential misuse of holdings information by individuals or firms in
possession of such information.

------
32

THE FUNDS' PRINCIPAL SHAREHOLDERS

As of July 2, 2007, the following shareholders, beneficial or of record, owned
more than 5% of the outstanding shares of any class of a fund.

PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Equity Income
--------------------------------------------------------------------------------
Investor Class
Charles Schwab & Co., Inc. 22% 0%
San Francisco, California

National Financial 9% 0%
Services Corp.
New York, New York
--------------------------------------------------------------------------------
Institutional Class
Fidelity FIIOC TR 28% 0%
FBO Certain Employee
Benefit Plans
c/o Fidelity Investments
Covington, Kentucky

UBATCO & Co. 23% 0%
FBO College Savings Plan
Lincoln, Nebraska

Charles Schwab & Co. Inc. 8% 0%
San Francisco, California

National Financial 7% 0%
Services LLC
New York, New York

JPMorgan Chase TR 7% 0%
Ericsson Capital Accumulation
and Savings Plan
Kansas City, Missouri
--------------------------------------------------------------------------------
C Class
None
--------------------------------------------------------------------------------
R Class
ING Life Insurance 32% 0%
and Annuity Co.
Hartford, Connecticut

Hartford Life Ins. Co. 24% 0%
Hartford, Connecticut

ING National Trust 16% 0%
Hartford, Connecticut

Symetra Investment Services 9% 0%
Seattle, Washington
--------------------------------------------------------------------------------

(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
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Equity Income
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co., Inc. 43% 0%
San Francisco, California

MLPF&S 9% 0%
Jacksonville, Florida

Delaware Charter 6% 0%
Guarantee & Trust
FBO Various Qualified Plans
Des Moines, Iowa
--------------------------------------------------------------------------------
Equity Index
--------------------------------------------------------------------------------
Investor Class
Pershing LLC 11% 0%
Jersey City, New Jersey
--------------------------------------------------------------------------------
Institutional Class
Northwestern Mutual Life 13% 0%
Milwaukee, Wisconsin

JPMorgan Chase 13% 0%
Bank Trustee
Texas Health Retirement
Program
Kansas City, Missouri

JPMorgan Chase Bank TR 7% 0%
Newell Rubbermaid 401k
Savings Plan and Trust
Kansas City, Missouri

JP Morgan Chase 7% 0%
& Co TTEE
Perot Systems Corp
Retirement Saving Plan
Kansas City, Missouri
--------------------------------------------------------------------------------
Large Company Value
--------------------------------------------------------------------------------
Investor Class
Fidelity FIIOC TR 19% 0%
FBO Certain Employee
Benefit Plans
c/o Fidelity Investments
Covington, Kentucky

Saxon & Co. 6% 0%
Philadelphia, Pennsylvania

JP Morgan Chase 5% 0%
Bank Trustee
FBO Coca-Cola
Enterprises, Inc.
Matched Empl Svgs &
Investment Plan
Kansas City, Missouri

Citigroup Global Markets Inc. 5% 0%
Philadelphia, Pennsylvania
--------------------------------------------------------------------------------
Institutional Class
Saxon & Co. 19% 0%
Philadelphia, Pennsylvania
--------------------------------------------------------------------------------

------
34

Large Company Value
--------------------------------------------------------------------------------
Institutional Class
JPMorgan Chase Bank Trustee 11% 0%
FBO Toro Co. Investment
Savings & Employee Stock
Ownership Plan
Kansas City, Missouri

Mercer Trust Co TR FBO 8% 0%
Kinder Morgan Inc
Savings Plan
Norwood, Massachusetts

JPMorgan Chase 7% 0%
Bank Trustee
Taylor Companies 401k
and Profit Sharing Plans
Kansas City, Missouri

JPMorgan Chase as Trustee 7% 0%
FBO HP Hood LLC
Retirement Savings Plan
Kansas City, Missouri

JP Morgan Chase 6% 0%
Bank Trustee
FBO Clarian Health Partners
Defined Contribution Plan
Kansas City, Missouri

Fidelity FIIOC TR 5% 0%
FBO Certain Employee
Benefit Plans
c/o Fidelity Investments
Covington, Kentucky
--------------------------------------------------------------------------------
A Class
Charles Schwab & Co., Inc. 68% 0%
San Francisco, California

HUBCO 6% 0%
Regions Financial Corporation
Birmingham, Alabama
--------------------------------------------------------------------------------
B Class
MLPF&S Inc. 8% 0%
Jacksonville, Florida
--------------------------------------------------------------------------------
C Class
MLPF&S, Inc. 58% 0%
Jacksonville, Florida
--------------------------------------------------------------------------------
R Class
ING Life Insurance and 64% 0%
Annuity Co.
Hartford, Connecticut

ING National Trust 21% 0%
Hartford, Connecticut

Hartford Life Ins. Co. 10% 0%
Hartford, Connecticut
--------------------------------------------------------------------------------

------
35

PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Large Company Value
--------------------------------------------------------------------------------
Advisor Class
TransAmerica Life 14% 0%
Insurance Company
Cedar Rapids, Iowa

Nationwide Insurance 13% 0%
Co. Trust
Columbus, Ohio

National Financial Services LLC 8% 0%
New York, New York

American Century Serv. Corp. 7% 0%
SchwabEn dash Moderately
Aggressive Large Co. Value
Advisor Omnibus
Kansas City, Missouri

American United Life 7% 0%
Group Retirement Annuity II
Indianapolis, Indiana

American Century Serv. Corp. 6% 0%
SchwabEn dash Aggressive
Large Co. Value
Advisor Omnibus
Kansas City, Missouri
--------------------------------------------------------------------------------
Mid Cap Value
--------------------------------------------------------------------------------
Investor Class
National Financial 7% 0%
Services Corp
New York, New York

Charles Schwab & Co., Inc. 7% 0%
San Francisco, California
--------------------------------------------------------------------------------
Institutional Class
Trustees of American Century 35% 0%
P/S & 401k Savings
Plan & Trust
Kansas City, Missouri

Rockhurst University 26% 0%
Endowment Fund
Kansas City, Missouri

UBS Securities LLC 24% 0%
Stamford, Connecticut

Charles Schwab & Co., Inc. 7% 0%
San Francisco, California

JPMorgan Chase TR 7% 0%
American Century Executive
Def Comp Plan Trust
Kansas City, Missouri
--------------------------------------------------------------------------------
R
GPC Agent For 19% 0%
MFS Heritage Trust Co
FBO Leach Wallace
Associates, Inc. 401k
Atlanta, Georgia

GPC Agent For 13% 0%
MFS Heritage Trust Co
FBO USU Charter FCU
401K EE Ret Pl Svg.
Atlanta, Georgia
--------------------------------------------------------------------------------

------
36

Mid Cap Value
--------------------------------------------------------------------------------
R
GPC Agent For 11% 0%
MFS Heritage Trust Co
FBO Electric Pump Inc
401k Plan
Atlanta, Georgia

GPC Agent For 10% 0%
MFS Heritage Trust Co
FBO Frankel Automotive
Group 401k Plan
Atlanta, Georgia

GPC Agent For 7% 0%
MFS Heritage Trust Co
FBO Burrell Consulting
Group Inc Plan
Atlanta, Georgia
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co., Inc. 64% 0%
San Francisco, California

Commerce Trust 7% 0%
Kansas City, Missouri

Fifth Third Bank TTEE 6% 0%
FBO Van Dorn Demag Corp
Cincinnati, Ohio

DCGT Trustee & or Custodian 5% 0%
FBO Principal Financial Group
Omnibus Qualified
Des Moines, Iowa
--------------------------------------------------------------------------------
NT Large Company Value
--------------------------------------------------------------------------------
Institutional Class
American Century Serv Port 34% 34%
LIVESTRONG(TM)
2025 Portfolio
NT Large Company
Value Omnibus
Kansas City, Missouri

American Century Serv Corp 24% 24%
LIVESTRONG(TM)
2015 Portfolio
NT Large Company
Value Omnibus
Kansas City, Missouri

American Century Serv Corp 20% 20%
LIVESTRONG(TM)
2035 Portfolio
NT Large Company
Value Omnibus
Kansas City, Missouri

American Century Serv Corp 15% 15%
LIVESTRONG(TM)
2045 Portfolio
NT Large Company
Value Omnibus
Kansas City, Missouri

American Century Serv Corp 8% 8%
LIVESTRONG(TM)
Income Portfolio
NT Large Company
Value Omnibus
Kansas City, Missouri
--------------------------------------------------------------------------------

------
37

NT Mid Cap Value
--------------------------------------------------------------------------------
Institutional Class
American Century Serv Port 32% 32%
LIVESTRONG(TM)
2025 Portfolio
NT Mid Cap Value Omnibus
Kansas City, Missouri

American Century Serv Corp 24% 24%
LIVESTRONG(TM)
2015 Portfolio
NT Mid Cap Value Omnibus
Kansas City, Missouri

American Century Serv Corp 22% 22%
LIVESTRONG(TM)
2035 Portfolio
NT Mid Cap Value Omnibus
Kansas City, Missouri

American Century Serv Corp 16% 16%
LIVESTRONG(TM)
2045 Portfolio
NT Mid Cap Value Omnibus
Kansas City, Missouri

American Century Serv Corp 6% 6%
LIVESTRONG(TM)
Income Portfolio
NT Mid Cap Value Omnibus
Kansas City, Missouri
--------------------------------------------------------------------------------
Real Estate
--------------------------------------------------------------------------------
Investor Class
Charles Schwab & Co., Inc. 10% 0%
San Francisco, California

ICMA Retirement Trust-NAV 9% 0%
Washington, D.C.
Pershing LLC 5% 0%
Jersey City, New Jersey
--------------------------------------------------------------------------------
Institutional Class
FIIOC 72% 0%
c/o Fidelity Investments
Covington, Kentucky

State Street Bank 7% 0%
& Trust Co TTEE
FBO Towers Perrin
Deferred PSP
Westwood, Massachusetts
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co., Inc. 30% 0%
San Francisco, California

Nationwide Trust Co. FSB 12% 0%
Columbus, Ohio

American United Life 8% 0%
Group Retirement Annuity II
Indianapolis, Indiana

The Guardian Insurance & 7% 0%
Annuity Company Inc.
Bethlehem, Pennsylvania

Reliance Trust Company TR 5% 0%
FBO MetLife NAV Plans
Greenwood Vlg, Colorado
--------------------------------------------------------------------------------

------
38

PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Small Cap Value
--------------------------------------------------------------------------------
Investor Class
Delaware Charter Guar 9% 0%
& TR Co. Cust
FBO Principal Financial Group
Des Moines, Iowa

Charles Schwab & Co., Inc. 7% 0%
San Francisco, California

Amer United Life Ins 6% 0%
Co. Group
Retirement Annuity
Sep Acct II
Indianapolis, Indiana

Hartford Life Insurance 5% 0%
Company Sep
Hartford, Connecticut
--------------------------------------------------------------------------------
Institutional Class
Fidelity FIIOC TR 33% 0%
FBO Certain Employee
Benefit Plans
c/o Fidelity Investments
Covington, Kentucky

MLPF&S 13% 0%
Jacksonville, Florida

JPMorgan Chase & Co TTEE 6% 0%
Perot Systems Corp
Retirement
PS Employee Savings
Plan & Trust
Kansas City, Missouri

Charles Schwab & Co., Inc. 6% 0%
San Francisco, California

JPMorgan Chase 5% 0%
Bank Trustee
Hitachi Employee 401k
Ret Plan
Kansas City, Missouri

JPMorgan Chase 5% 0%
Bank Trustee
St. Jude Medical Inc
PS Employee Savings
Plan & Trust
Kansas City, Missouri
--------------------------------------------------------------------------------
C Class
None
--------------------------------------------------------------------------------
Advisor Class
Nationwide Trust 27% 0%
Company FSB
Columbus, Ohio

Hartford Life Insurance 17% 0%
Company
Hartford, Connecticut

Delaware Charter 13% 0%
Guarantee & Trust
FBO Principal Financial Group
Des Moines, Iowa

TransAmerica Life 8% 0%
Insurance Company
Cedar Rapids, Iowa
--------------------------------------------------------------------------------

------
39

Small Cap Value
--------------------------------------------------------------------------------
Advisor Class
Saxon & Co. 6% 0%
Philadelphia, Pennsylvania

Investor Class
None
--------------------------------------------------------------------------------
Institutional Class
Mercer Trust Co Tr FBO 41% 0%
Bosch Savings Incentive Plan
Norwood, Massachusetts

State Street Bank & Trust TR 12% 0%
Lowes 401k Plan
Westwood, Massachusetts

JP Morgan Chase 10% 0%
Bank Trustee
Black & Veatch Employee
Savings Plan
Kansas City, Missouri

Trustees of American 6% 0%
Century P/S &
401k Savings Plan & Trust
Kansas City, Missouri
--------------------------------------------------------------------------------
A Class
Charles Schwab & Co., Inc. 53% 0%
San Francisco, California

FIIOC 6% 0%
FBO Lindsay Manufacturing
Covington, Kentucky
--------------------------------------------------------------------------------
B Class
MLPF&S, Inc. 5% 0%
Jacksonville, Florida
--------------------------------------------------------------------------------
C Class
MLPF&S, Inc. 17% 0%
Jacksonville, Florida
--------------------------------------------------------------------------------
R Class
Massachusetts Mutual 42% 0%
Life Insurance
Springfield, Massachusetts

Trustlynx & Co. 28% 0%
Denver, Colorado

State Street Bank Trust 26% 0%
Co Cust
For Various Symetra
Retirement Plans
Kansas City, Missouri
--------------------------------------------------------------------------------

------
40

PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Value
--------------------------------------------------------------------------------
Advisor Class
Nationwide Trust 14% 0%
Company FSB
Columbus, Ohio

Delaware Charter 10% 0%
Guarantee & Trust
FBO Principal Financial Group
Des Moines, Iowa

Nationwide Insurance 9% 0%
Company QPVA
Columbus, Ohio

James B. Anderson TR 9% 0%
American Chamber of
Commerce Execut. &
Restated 401k Plan & Trust
Springfield, Missouri

Reliance Trust Co. TR 7% 0%
FBO Nav Plans
Greenwood Vlg, Colorado

Delware Charter 6% 0%
Guarantee & Trust
FBO Various Qualified Plans
Des Moines, Iowa
--------------------------------------------------------------------------------

The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of any class of a fund's outstanding shares. The funds are
unaware of any other shareholders, beneficial or of record, who own more than
25% of the voting securities of the corporation. A shareholder owning of record
or beneficially more than 25% of the corporation'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 July 2, 2007, the officers and directors of the funds,
as a group, own less than 1% of any fund's outstanding shares.

SERVICE PROVIDERS

The funds have no employees. To conduct the funds' day-to-day activities, the
corporation has 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, ACS and ACIS are wholly owned, directly or indirectly, by ACC. James E.
Stowers, Jr. 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.

------
41

For services provided to each fund, the advisor receives a unified management
fee based on a percentage of the net assets of each fund. For more information
about the unified management fee, see THE INVESTMENT ADVISOR under the heading
MANAGEMENT in each fund's prospectus. The amount of the fee is calculated daily
and paid monthly in arrears. For each fund with a stepped fee schedule, the rate
of the fee is determined by applying the formula indicated in the table below.
This formula takes into account all of the advisor's assets under management in
the fund's investment strategy (strategy assets). Strategy assets include assets
of the fund and certain assets of other clients of the advisor outside the
American Century fund family that use very similar investment teams and
strategies. For a fund with a corresponding NT fund, strategy assets for both
funds also include the assets of the other. The use of strategy assets, rather
than fund assets, in calculating the fee rate for a particular fund could allow
the fund to realize scheduled cost savings more quickly. However, it is possible
that a fund's strategy assets will not include assets of other client accounts
or that any such assets may not be sufficient to result in a lower fee rate. The
management fee schedules for the funds appear below.

FUND CLASS PERCENTAGE OF STRATEGY ASSETS
--------------------------------------------------------------------------------
Equity Income Investor, A, B, C and R 1.00% of the first $2.5 billion
0.95% of the next $2.5 billion
0.90% of the next $5.0 billion
0.85% of the next $5.0 billion
0.80% over $15.0 billion
-------------------------------------------------------------
Institutional 0.80% of the first $2.5 billion
0.75% of the next $2.5 billion
0.70% of the next $5.0 billion
0.65% of the next $5.0 billion
0.60% over $15.0 billion
--------------------------------------------------------------------------------
Equity Index Investor 0.490% of the first $1.0 billion
0.470% of the next $1.0 billion
0.455% of the next $1.0 billion
0.445% of the next $1.0 billion
0.435% of the next $1.0 billion
0.430% over $5.0 billion
-------------------------------------------------------------
Institutional 0.290% of the first $1.0 billion
0.270% of the next $1.0 billion
0.255% of the next $1.0 billion
0.245% of the next $1.0 billion
0.235% of the next $1.0 billion
0.230% over $5.0 billion
--------------------------------------------------------------------------------
Large Investor, A, B, C, R 0.90% of first $1 billion
Company and Advisor 0.80% of the next $4 billion
Value 0.70% over $5 billion
-------------------------------------------------------------
Institutional 0.70% of first $1 billion
0.60% of the next $4 billion
0.50% over $5 billion
--------------------------------------------------------------------------------

------
42

FUND CLASS PERCENTAGE OF STRATEGY ASSETS
--------------------------------------------------------------------------------
Mid Cap Investor, R and Advisor 1.00%
Value --------------------------------------------------------------
Institutional 0.80%
--------------------------------------------------------------------------------
NT Large Institutional 0.70% of first $1 billion
Company 0.60% of the next $4 billion
Value 0.50% over $5 billion
--------------------------------------------------------------------------------
NT Mid Institutional 0.80%
Cap Value
--------------------------------------------------------------------------------
Real Estate Investor, A, B, C and R 1.20% of first $100 million
1.15% of the next $900 million
1.10% of the next $1.0 billion
1.05% over $2.0 billion
--------------------------------------------------------------
Institutional 1.00% of first $100 million
0.95% of the next $900 million
0.90% of the next $1.0 billion
0.85% over $2.0 billion
--------------------------------------------------------------------------------
Small Cap Investor, C and Advisor 1.25% of the first $2.5 billion
Value 1.00% over $2.5 billion
--------------------------------------------------------------
Institutional 1.05% of the first $2.5 billion
0.80% over $2.5 billion
--------------------------------------------------------------------------------
Value Investor, A, B, C and R 1.00% of the first $2.5 billion
0.95% of the next $2.5 billion
0.90% of the next $2.5 billion
0.85% over $7.5 billion
--------------------------------------------------------------
Institutional 0.80% of the first $2.5 billion
0.75% of the next $2.5 billion
0.70% of the next $2.5 billion
0.65% over $7.5 billion
--------------------------------------------------------------------------------

On each calendar day, each class of each fund accrues a management fee that is
equal to the class's management fee rate (as calculated pursuant to the above
schedules) times the net assets of the class divided by 365 (366 in leap years).
On the first business day of each month, the funds pay a management fee to the
advisor for the previous month. The management fee is the sum of the daily fee
calculations for each day of the previous month.

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.

------
43

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. A
particular security may be bought for one client or fund on the same day it is
sold for another client or fund, and a client or fund may hold a short position
in a particular security at the same time another client or fund holds a long
position. In addition, purchases or sales of the same security may be made for
two or more clients or funds on the same date. The advisor has adopted
procedures designed to ensure such transactions will be allocated among clients
and funds 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. To the extent equity trades are aggregated, shares
purchased or sold are generally allocated to the participating portfolios pro
rata based on order size. The advisor will not aggregate portfolio transactions
of the funds unless it believes such aggregation is consistent with its duty to
seek best execution on behalf of the funds and the terms of the management
agreement. The advisor receives no additional compensation or remuneration as a
result of such aggregation.

Unified management fees incurred by each fund for the fiscal periods ended March
31, 2007, 2006 and 2005 are indicated in the following table.

UNIFIED MANAGEMENT FEES
--------------------------------------------------------------------------------
FUND/CLASS 2007 2006 2005
--------------------------------------------------------------------------------
Equity Income $51,707,703 $46,351,964 $32,736,171
--------------------------------------------------------------------------------
Equity Index $3,355,819 $2,783,794 $3,225,669
--------------------------------------------------------------------------------
Large Company Value $18,281,944 $14,026,998 $7,913,649
--------------------------------------------------------------------------------
Mid Cap Value $2,390,210 $917,499 $272,297
--------------------------------------------------------------------------------
NT Large Company Value $336,337 N/A N/A
--------------------------------------------------------------------------------
NT Mid Cap Value $192,541 N/A N/A
--------------------------------------------------------------------------------
Real Estate $20,280,190 $12,118,199 $7,025,450
--------------------------------------------------------------------------------
Small Cap Value $24,739,671 $24,513,482 $22,221,894
--------------------------------------------------------------------------------
Value $28,453,054 $27,601,592 $26,177,471
--------------------------------------------------------------------------------

------
44

SUBADVISORS

Equity Index Fund

The investment management agreement provides that the advisor may delegate
certain responsibilities under the agreement to a subadvisor. Currently,
Northern Trust Investments, N.A. (NTI) serves as subadvisor to the Equity Index
Fund under a subadvisory agreement between the advisor and NTI dated August 1,
2007. The subadvisory agreement continues in effect until July 31, 2009 and
thereafter so long as its 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 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 NTI, the advisor, 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 advisor.

The subadvisory agreement provides that NTI 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 advisor from time to time. For these services, the advisor pays
NTI a monthly fee at an annual rate of 0.02% of the fund's average daily net
assets up to $500 million, and 0.01% of the average daily net assets over $500
million.

During the period from the Equity Index Fund's inception to July 31, 2007,
Barclays Global Fund Advisors (BGFA) served as the fund's subadvisor. For the
fiscal years ended March 31, 2007, 2006 and 2005, the advisor paid BGFA
subadvisory fees as listed in the following table:

SUBADVISORY FEES
--------------------------------------------------------------------------------
2007 $211,827
--------------------------------------------------------------------------------
2006 $198,001
--------------------------------------------------------------------------------
2005 $195,452
--------------------------------------------------------------------------------

Real Estate Fund

The investment management agreement provides that the advisor may delegate
certain responsibilities under the agreement to a subadvisor. Currently, J.P.
Morgan Investment Management, Inc. (JPMIM) serves as subadvisor to the Real
Estate Fund under a subadvisory agreement between the advisor 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 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 the advisor, 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 advisor.

------
45

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 advisor 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 up to $500 million, 0.400% of the average daily net assets of the next
$500 million, 0.350% of the average daily net assets of the next $1.250 billion,
and 0.330% of the average daily net assets over $2.250 billion.

For the fiscal years ended March 31, 2007, 2006 and 2005 the manager paid JPMIM
subadvisory fees as listed in the following table:

JPMIM SUBADVISORY FEES
--------------------------------------------------------------------------------
2007 $8,000,991
--------------------------------------------------------------------------------
2006 $4,799,550
--------------------------------------------------------------------------------
2005 $2,836,427
--------------------------------------------------------------------------------

PORTFOLIO MANAGERS

Equity Income Fund, Large Company Value Fund, Mid Cap Value Fund, NT Large
Company Value Fund, NT Mid Cap Value Fund, Small Cap Value Fund and Value Fund

Other Accounts Managed

The portfolio managers also may be responsible for the day-to-day management of
other accounts, as indicated by the following table. None of these accounts has
an advisory fee based on the performance of the account.

------
46

OTHER ACCOUNTS MANAGED (AS OF MARCH 31, 2007)
REGISTERED OTHER
INVESTMENT OTHER ACCOUNTS
COMPANIES POOLED (E.G., SEPARATE
(E.G., OTHER INVESTMENT ACCOUNTS AND
AMERICAN VEHICLES (E.G., CORPORATE
CENTURY COMMINGLED ACCOUNTS
FUNDS AND TRUSTS AND INCLUDING
AMERICAN 529 INCUBATION
CENTURY - EDUCATION STRATEGIES AND
SUBADVISED SAVINGS CORPORATE
FUNDS) PLANS) MONEY)
-----------------------------------------------------------------------------------
Large Company Value
-----------------------------------------------------------------------------------
Charles A. Number of Other 9 0 3
Ritter Accounts Managed
----------------------------------------------------------------------
Assets in Other $2,184,197,537 N/A $264,486,598
Accounts Managed
-----------------------------------------------------------------------------------
Brendan Number of Other 9 0 3
Healy Accounts Managed
----------------------------------------------------------------------
Assets in Other $2,184,197,537 N/A $264,486,598
Accounts Managed
-----------------------------------------------------------------------------------
Mid Cap Value
-----------------------------------------------------------------------------------
Phillip N. Number of Other 7 0 2
Davidson Accounts Managed
----------------------------------------------------------------------
Assets in Other $13,140,396,622 N/A $137,580,816
Accounts Managed
-----------------------------------------------------------------------------------
Scott A. Number of Other 7 0 2
Moore Accounts Managed
----------------------------------------------------------------------
Assets in Other $13,140,396,622 N/A $137,580,816
Accounts Managed
-----------------------------------------------------------------------------------
Michael Number of Other 6 0 2
Liss Accounts Managed
----------------------------------------------------------------------
Assets in Other $6,427,605,926 N/A $137,580,816
Accounts Managed
-----------------------------------------------------------------------------------
NT Large Company Value
-----------------------------------------------------------------------------------
Charles A. Number of Other 9 0 3
Ritter Accounts Managed
----------------------------------------------------------------------
Assets in Other $4,816,765,034 N/A $264,486,598
Accounts Managed
-----------------------------------------------------------------------------------
Brendan Number of Other 9 0 3
Healy Accounts Managed
----------------------------------------------------------------------
Assets in Other $4,816,765,034 N/A $264,486,598
Accounts Managed
-----------------------------------------------------------------------------------
NT Mid Cap Value
-----------------------------------------------------------------------------------
Phillip N. Number of Other 7 0 2
Davidson Accounts Managed
----------------------------------------------------------------------
Assets in Other $13,448,835,994 N/A $137,580,816
Accounts Managed
-----------------------------------------------------------------------------------
Scott A. Number of Other 7 0 2
Moore Accounts Managed
----------------------------------------------------------------------
Assets in Other $13,448,835,994 N/A $137,580,816
Accounts Managed
-----------------------------------------------------------------------------------
Michael Number of Other 6 0 2
Liss Accounts Managed
----------------------------------------------------------------------
Assets in Other $6,736,045,298 N/A $137,580,816
Accounts Managed
-----------------------------------------------------------------------------------

------
47

Potential Conflicts of Interest

Certain conflicts of interest may arise in connection with the management of
multiple portfolios. Potential conflicts include, for example, conflicts among
investment strategies and conflicts in the allocation of investment
opportunities. American Century has adopted policies and procedures that are
designed to minimize the effects of these conflicts.

Responsibility for managing American Century client portfolios is organized
according to investment discipline. Investment disciplines include, for example,
core equity, small- and mid-cap growth, large-cap growth, value, international,
fixed income, asset allocation, and sector funds. Within each discipline are one
or more portfolio teams responsible for managing specific client portfolios.
Generally, client portfolios with similar strategies are managed by the same
team using the same objective, approach, and philosophy. Accordingly, portfolio
holdings, position sizes, and industry and sector exposures tend to be similar
across similar portfolios, which minimizes the potential for conflicts of
interest.

For each investment strategy, one portfolio is generally designated as the
"policy portfolio." Other portfolios with similar investment objectives,
guidelines and restrictions, if any, are referred to as "tracking portfolios."
When managing policy and tracking portfolios, a portfolio team typically
purchases and sells securities across all portfolios that the team manages.
American Century's trading systems include various order entry programs that
assist in the management of multiple portfolios, such as the ability to purchase
or sell the same relative amount of one security across several funds. In some
cases a tracking portfolio may have additional restrictions or limitations that
cause it to be managed separately from the policy portfolio. Portfolio managers
make purchase and sale decisions for such portfolios alongside the policy
portfolio to the extent the overlap is appropriate, and separately, if the
overlap is not.

------
48

American Century may aggregate orders to purchase or sell the same security for
multiple portfolios when it believes such aggregation is consistent with its
duty to seek best execution on behalf of its clients. Orders of certain client
portfolios may, by investment restriction or otherwise, be determined not
available for aggregation. American Century has adopted policies and procedures
to minimize the risk that a client portfolio could be systematically advantaged
or disadvantaged in connection with the aggregation of orders. To the extent
equity trades are aggregated, shares purchased or sold are generally allocated
to the participating portfolios PRO RATA based on order size. Because initial
public offerings (IPOs) are usually available in limited supply and in amounts
too small to permit across-the-board pro rata allocations, American Century has
adopted special procedures designed to promote a fair and equitable allocation
of IPO securities among clients over time. Fixed income securities transactions
are not executed through a centralized trading desk. Instead, portfolio teams
are responsible for executing trades with broker/dealers in a predominantly
dealer marketplace. Trade allocation decisions are made by the portfolio manager
at the time of trade execution and orders entered on the fixed income order
management system.

Finally, investment of American Century's corporate assets in proprietary
accounts may raise additional conflicts of interest. To mitigate these potential
conflicts of interest, American Century has adopted policies and procedures
intended to provide that trading in proprietary accounts is performed in a
manner that does not give improper advantage to American Century to the
detriment of client portfolios.

Compensation

American Century portfolio manager compensation is structured to align the
interests of portfolio managers with those of the shareholders whose assets they
manage. It includes the components described below, each of which is determined
with reference to a number of factors such as overall performance, market
competition, and internal equity. Compensation is not directly tied to the value
of assets held in client portfolios.

Base Salary

Portfolio managers receive base pay in the form of a fixed annual salary.

Bonus

A significant portion of portfolio manager compensation takes the form of an
annual incentive bonus tied to performance. Bonus payments are determined by a
combination of factors. One factor is fund investment performance. For policy
portfolios, such as the funds described in this statement of additional
information (other than NT Large Company Value and NT Mid Cap Value), investment
performance is measured by a combination of one- and three-year pre-tax
performance relative to a pre-established, internally-customized peer group
and/or market benchmark. Custom peer groups are constructed using all the funds
in appropriate Lipper or Morningstar categories as a starting point. Funds are
then eliminated from the peer group based on a standardized methodology designed
to result in a final peer group that more closely represents the fund's true
peers based on internal investment mandates and that is more stable (i.e., has
less peer turnover) over the long-term. In cases where a portfolio manager has
responsibility for more than one policy portfolio, the performance of each is
assigned a percentage weight commensurate with the portfolio manager's level of
responsibility.

With regard to tracking portfolios, such as NT Large Company Value and NT Mid
Cap Value, investment performance may be measured in a number of ways. The
performance of the tracking portfolio may be measured against a customized peer
group and/or market benchmark as described above for policy portfolios.
Alternatively, the tracking portfolio may be evaluated relative to the
performance of its policy portfolio, with the goal of matching the policy
portfolio's performance as closely as possible. In some cases, the performance
of a tracking portfolio is not separately considered; rather, the performance of
the policy portfolio is the key metric. This is the case for NT Large Company
Value and NT Mid Cap Value.

------
49

A second factor in the bonus calculation relates to the performance of all
American Century funds managed according to a particular investment style, such
as U.S. growth or value. Performance is measured for each product individually
as described above and then combined to create an overall composite for the
product group. These composites may measure one-year performance (equal
weighted) or a combination of one- and three-year performance (asset weighted)
depending on the portfolio manager's responsibilities and products managed. This
feature is designed to encourage effective teamwork among portfolio management
teams in achieving long-term investment success for similarly styled portfolios.

A portion of some portfolio managers' bonuses may be tied to individual
performance goals, such as research projects and the development of new
products.

Restricted Stock Plans

Portfolio managers are eligible for grants of restricted stock of ACC. These
grants are discretionary, and eligibility and availability can vary from year to
year. The size of an individual's grant is determined by individual and product
performance as well as other product-specific considerations. Grants can
appreciate/depreciate in value based on the performance of the ACC stock during
the restriction period (generally three years).

Deferred Compensation Plans

Portfolio managers are eligible for grants of deferred compensation. These
grants are used in very limited situations, primarily for retention purposes.
Grants are fixed and can appreciate/depreciate in value based on the performance
of the American Century mutual funds in which the portfolio manager chooses to
invest them.

Ownership of Securities

The following table indicates the dollar range of securities of each fund
beneficially owned by the fund's portfolio managers as of March 31, 2007, the
fund's most recent fiscal year end.

OWNERSHIP OF SECURITIES
--------------------------------------------------------------------------------

AGGREGATE DOLLAR RANGE OF SECURITIES IN FUND
--------------------------------------------------------------------------------
Equity Income
Phillip N. Davidson F
--------------------------------------------------------------------------------
Scott A. Moore C
--------------------------------------------------------------------------------
Kevin Toney E
--------------------------------------------------------------------------------
Large Company Value
Charles A. Ritter E
--------------------------------------------------------------------------------
Brendan Healy E
--------------------------------------------------------------------------------
Mid Cap Value
Phillip N. Davidson E
--------------------------------------------------------------------------------
Scott A. Moore E
--------------------------------------------------------------------------------
Michael Liss C
--------------------------------------------------------------------------------
NT Large Company Value
Charles A. Ritter(1) A
--------------------------------------------------------------------------------
Brendan Healy(1) A
--------------------------------------------------------------------------------

RANGES: A - NONE; B - $1-$10,000; C - $10,001-$50,000; D - $50,001-$100,000; E -
$100,001-$500,000; F - $500,001-$1,000,000; G - MORE THAN $1,000,000.

(1) AMERICAN CENTURY HAS ADOPTED A POLICY THAT, WITH LIMITED EXCEPTIONS,
REQUIRES ITS PORTFOLIO MANAGERS TO MAINTAIN INVESTMENTS IN THE POLICY
PORTFOLIOS THEY OVERSEE. HOWEVER, BECAUSE THIS PORTFOLIO MANAGER SERVES ON
AN INVESTMENT TEAM THAT OVERSEES A NUMBER OF FUNDS IN THE SAME BROAD
INVESTMENT CATEGORY, THE PORTFOLIO MANAGER IS NOT REQUIRED TO INVEST IN
EACH FUND.

------
50

OWNERSHIP OF SECURITIES
--------------------------------------------------------------------------------

AGGREGATE DOLLAR RANGE OF SECURITIES IN FUND
--------------------------------------------------------------------------------
NT Mid Cap Value
Phillip N. Davidson(1) A
--------------------------------------------------------------------------------
Scott A. Moore(1) A
--------------------------------------------------------------------------------
Michael Liss(1) A
--------------------------------------------------------------------------------
Small Cap Value
Benjamin Z. Giele E
--------------------------------------------------------------------------------
Steve Roth C
--------------------------------------------------------------------------------
Value
Phillip N. Davidson C
--------------------------------------------------------------------------------
Scott A. Moore E
--------------------------------------------------------------------------------
Michael Liss E
--------------------------------------------------------------------------------

RANGES: A - NONE; B - $(1)-$(1)0,000; C - $(1)0,00(1)-$50,000; D -
$50,00(1)-$(1)00,000; E - $(1)00,00(1)-$500,000; F - $500,00(1)-$(1),000,000; G
- MORE THAN $(1),000,000.

Equity Index Fund

The information under this heading has been provided by NTI, the subadvisor for
the Equity Index Fund.

Other Accounts Managed

The individuals named as portfolio managers in the prospectus were also
primarily responsible for the day-to-day management of certain types of other
portfolios and/or accounts in addition to the Equity Index Fund, as indicated in
the table below. None of these portfolios or accounts has an advisory fee based
on the performance of the portfolio or account.

OTHER ACCOUNTS MANAGED (AS OF MARCH 31, 2007)
OTHER
REGISTERED POOLED
INVESTMENT INVESTMENT OTHER
COMPANIES VEHICLES ACCOUNTS
--------------------------------------------------------------------------------
Equity Index
--------------------------------------------------------------------------------
Chad M. Number of Other 18 30 74
Rakvin Accounts Managed
---------------------------------------------------------------------
Assets in Other $15,045,355,481 $72,543,888,865 $48,055,518,853
Accounts Managed
--------------------------------------------------------------------------------
Brent D. Number of Other 18 30 74
Reeder Accounts Managed
Assets in Other $15,045,355,481 $72,543,888,865 $48,055,518,853
Accounts Managed
--------------------------------------------------------------------------------

Potential Conflicts of Interest

NTI's portfolio managers are often responsible for managing one or more
portfolios, as well as other accounts, including separate accounts and other
pooled investment vehicles. A portfolio manager may manage a separate account or
other pooled investment vehicle that may have a materially higher or lower fee
arrangement. The side-by-side management of these accounts may raise potential
conflicts of interest relating to cross trading, the allocation of investment
opportunities and the aggregation and allocation

------
51

of trades. In addition, while portfolio managers generally only manage accounts
with similar investment strategies, it is possible that due to varying
investment restrictions among accounts that certain investments are made for
some accounts and not others or conflicting investment positions are taken among
accounts. The portfolio managers have a fiduciary responsibility to manage all
client accounts in a fair and equitable manner. NTI seeks to provide best
execution of all securities transactions and aggregate and then allocate
securities to client accounts in a fair and timely manner. To this end, NTI has
developed policies and procedures designed to mitigate and manage the potential
conflicts of interest that may arise from side-by-side management. In addition,
NTI has adopted policies limiting the circumstances under which cross-trades may
be effected. NTI conducts periodic reviews of trades for consistency with these
policies.

Compensation

Compensation for NTI index portfolio managers is based on the competitive
marketplace and consists of a fixed base salary plus a variable annual cash
incentive award. In addition, non-cash incentives, such as stock options or
restricted stock of Northern Trust Corporation, may be awarded from time to
time. The annual incentive award is discretionary and is based on the overall
financial performance of Northern Trust Corporation, the overall performance of
the investment management unit plus a qualitative evaluation of each portfolio
manager's performance and contribution to his or her respective team. For NTI
index portfolio managers, the annual incentive award is not based on performance
of the Portfolios or the amount of assets held in the Portfolios. Moreover, no
material differences exist between the compensation structure for mutual fund
accounts and other types of accounts.

Ownership of Securities

As of March 31, 2007, the fund's most recent fiscal year end, the portfolio
managers beneficially owned no shares of the fund.

Real Estate Fund

The information under this heading has been provided by JPMIM, the subadvisor
for the Real Estate Fund.

Other Accounts Managed

The portfolio manager also is responsible for the day-to-day management of other
accounts, as indicated by the following table.

OTHER ACCOUNTS MANAGED (AS OF MARCH 31, 2007)
OTHER
REGISTERED POOLED
INVESTMENT INVESTMENT OTHER
COMPANIES VEHICLES ACCOUNTS(1)
------------------------------------------------------------------------------
Real Estate
------------------------------------------------------------------------------
Scott W. Number of Other 2 8 6
Blasdell Accounts Managed
-----------------------------------------------------------------
Assets in Other $179.5 $625.5 $352.9
Accounts Managed
($mm)
------------------------------------------------------------------------------
Kay Herr Number of Other 2 8 6
Accounts Managed
-----------------------------------------------------------------
Assets in Other $179.5 $625.5 $352.9
Accounts Managed
($mm)
------------------------------------------------------------------------------

(1) ONE OF THE FOUR OTHER ACCOUNTS, TOTALING $238.3 MM IN ASSETS, HAS AN
ADVISORY FEE THAT IS BASED ON THE PERFORMANCE OF THE ACCOUNT.

------
52

Potential Conflicts of Interest

The chart above shows the number, type and market value as of March 31, 2007, of
the accounts other than the fund that are managed by the fund's portfolio
managers. The potential material conflicts of interest that may arise in
connection with the portfolio managers' management of the fund and the
management of their other accounts include:

(1) A conflict between investment strategy of the fund and the investment
strategy of the other accounts managed by the portfolio manager.

(2) A conflict in allocation of investment opportunities between the fund
and the other accounts managed by the portfolio manager. However, the
subadvisor's allocation practices are designed to achieve fair and
equitable allocation of investment opportunities among its clients over
time. Orders for the same equity security are aggregated on a continual
basis throughout each trading day consistent with the subadvisor's duty of
best execution for its clients. If aggregated trades are fully executed,
accounts participating in the trade will be allocated their pro rata share
on an average price basis. For equity securities, partially completed
orders generally will be allocated among accounts with similar investment
objectives and strategies on a pro-rata average price basis, subject to
certain limited exceptions. One such exception provides that if an
allocation results in a de minimis allocation relative to the size of the
account or its investment strategy, the allocation may be reallocated to
other accounts. While aggregation of the fund's order for a security with
orders for the subadvisor's other clients seeks to achieve an equitable
allocation of the order between the fund and the subadvisor's other
clients, it may adversely affect the size of the position the fund may
obtain or the price paid or received by the fund.

(3) The fund is subject to different regulation than the other pooled
investment vehicles and other accounts managed by the portfolio managers.
As a consequence of this difference in regulatory requirements, the fund
may not be permitted to engage in all the investment techniques or
transactions or to engage in these transactions to the same extent as the
other accounts managed by the portfolio managers.

Compensation

The subdvisor's portfolio managers participate in a competitive compensation
program that is designed to attract and retain outstanding people and closely
link the performance of investment professionals to client investment
objectives. The total compensation program includes a base salary fixed from
year to year and a variable performance bonus consisting of cash incentives and
restricted stock and, in some cases, mandatory deferred compensation. These
elements reflect individual performance and the performance of the subadvisor's
business as a whole.

Each portfolio manager's performance is formally evaluated annually based on a
variety of factors including the aggregate size and blended performance of the
portfolios such portfolio manager manages. Individual contribution relative to
client goals carries the highest impact. Portfolio manager compensation is
primarily driven by meeting or exceeding clients' risk and return objectives,
relative performance to competitors or competitive indices and compliance with
firm policies and regulatory requirements. In evaluating each portfolio
manager's performance with respect to the mutual funds he or she manages, the
funds' pre-tax performance is compared to the appropriate market peer group and
to each fund's benchmark index listed in the fund's prospectus over one, three
and five year periods (or such shorter time as the portfolio manager has managed
the fund). Investment performance is generally more heavily weighted to the
long-term.

Stock awards are granted as part of an employee's annual performance bonus and
comprise from 0% to 35% of a portfolio manager's total award. As the level of
incentive compensation increases, the percentage of compensation awarded in
restricted stock also increases. Certain investment professionals may also be
subject to a mandatory deferral of a portion of their compensation into
proprietary mutual funds based on long-term sustained investment performance.

Ownership of Securities

As of March 31, 2007, the fund's most recent fiscal year end, the portfolio
managers beneficially owned no shares of the fund.

------
53

TRANSFER AGENT AND ADMINISTRATOR

American Century Services, LLC (ACS), 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
ACS'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 41.

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

DISTRIBUTOR

The funds' shares are distributed by American Century Investment Services, Inc.
(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 41. ACIS does not earn commissions for distributing the funds'
shares.

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 that 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.

CUSTODIAN BANKS

JPMorgan Chase Bank, 4 Metro Tech Center, Brooklyn, New York, 11245, and
Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves as
custodian of the assets of the funds. Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004, maintains custody accounts for the safekeeping of futures
trading margin for all funds except Equity Index and Real Estate. 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. JPMorgan Chase Bank is paid based on the
monthly average of assets held in custody plus a transaction fee.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP is the independent registered public accounting firm of
the funds. The address of Deloitte & Touche LLP is 1100 Walnut Street, Kansas
City, Missouri 64106. As the independent registered public accounting firm of
the funds, Deloitte & Touche LLP and its affiliates provide services including

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

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

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54

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, their 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. Such 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.
Because NT Large Company Value Fund and NT Mid Cap Value Fund were not in
operation as of the fiscal year end, they are not included in the table below.

In the fiscal years March 31, 2007, 2006, and 2005, the brokerage commissions of
each fund are listed in the following table:

FUND 2007 2006 2005
--------------------------------------------------------------------------------
Equity Income $5,352,613 $5,328,101 $5,498,584
--------------------------------------------------------------------------------
Equity Index $29,017 $88,426 $43,485
--------------------------------------------------------------------------------
Large Company Value $322,466 $360,868 $409,532
--------------------------------------------------------------------------------
Mid Cap Value $442,989 $222,402 $80,775
--------------------------------------------------------------------------------
NT Large Company Value $12,198 N/A N/A
--------------------------------------------------------------------------------
NT Mid Cap Value $45,629 N/A N/A
--------------------------------------------------------------------------------
Real Estate $7,729,724 $5,068,027 $3,465,071
--------------------------------------------------------------------------------
Small Cap Value $2,924,130 $2,724,024 $3,445,890
--------------------------------------------------------------------------------
Value $3,086,940 $4,248,322 $5,351,928
--------------------------------------------------------------------------------

The funds' distributor (ACIS) and investment advisor (ACGIM) are wholly owned,
directly or indirectly, by ACC. JPMorgan Chase & Co. (JPM) is an equity investor
in ACC. The funds paid J.P. Morgan Securities Inc. (JPMS), the following
brokerage commissions for the fiscal years ended March 31, 2007, 2006 and 2005.

----------------------------------------------
2007 2006 2005
--------------------------------------------------------------------------------
FUND JPMS JPMS JPMS
--------------------------------------------------------------------------------
Equity Income $6,707 $18,932 $13,368
--------------------------------------------------------------------------------
Equity Index - - -
--------------------------------------------------------------------------------
Large Company Value $464 $536 $476
--------------------------------------------------------------------------------
Mid Cap Value $929 $92 $141
--------------------------------------------------------------------------------
NT Large Company Value - N/A N/A
--------------------------------------------------------------------------------
NT Mid Cap Value $20 N/A N/A
--------------------------------------------------------------------------------
Real Estate - - -
--------------------------------------------------------------------------------
Small Cap Value $2,400 - $6,806
--------------------------------------------------------------------------------
Value $3,835 $3,640 $7,391
--------------------------------------------------------------------------------

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55

For the fiscal year ended March 31, 2007, the following table shows the
percentage of each fund's aggregate brokerage commissions paid to JPMS and the
percentage of each fund's aggregate dollar amount of portfolio transactions
involving the payment of commissions effected through JPMS.

--------------------------------------------
PERCENTAGE OF
PERCENTAGE DOLLAR AMOUNT
OF BROKERAGE OF PORTFOLIO
COMMISSIONS TRANSACTIONS
-------------------------------------------------------------------------------
FUND JPMS JPMS
-------------------------------------------------------------------------------
Equity Income 0.12% 0.05%
-------------------------------------------------------------------------------
Equity Index - -
-------------------------------------------------------------------------------
Large Company Value 0.14% 0.16%
-------------------------------------------------------------------------------
Mid Cap Value 0.21% 0.05%
-------------------------------------------------------------------------------
NT Large Company Value - -
-------------------------------------------------------------------------------
NT Mid Cap Value 0.04% 0.03%
-------------------------------------------------------------------------------
Real Estate - -
-------------------------------------------------------------------------------
Small Cap Value 0.08% 0.07%
-------------------------------------------------------------------------------
Value 0.12% 0.05%
-------------------------------------------------------------------------------

Brokerage commissions paid by a fund may vary significantly from year to year as
a result of changing asset levels throughout the year, portfolio turnover,
varying market conditions and other factors.

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.

REGULAR BROKER-DEALERS

As of the end of its most recently completed fiscal year, each of the funds
listed below owned securities of its regular brokers or dealers (as defined by
Rule 10b-1 under the Investment Company Act of 1940) or of their parent
companies.

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56

VALUE OF SECURITIES
FUND BROKER, DEALER OR PARENT OWNED AS OF MARCH 31, 2007
--------------------------------------------------------------------------------
Equity Index Citigroup, Inc. $20,360,055
-------------------------------------------------------------
Bank of America Corp. $18,467,403
-------------------------------------------------------------
Wachovia Corp. $8,480,011
-------------------------------------------------------------
Merrill Lynch & Co., Inc. $5,834,178
-------------------------------------------------------------
Goldman Sachs Group Inc. $6,931,402
-------------------------------------------------------------
Morgan Stanley $6,774,384
-------------------------------------------------------------
Lehman Brothers Holdings, Inc. $2,994,582
-------------------------------------------------------------
Charles Schwab Corp. $1,508,980
-------------------------------------------------------------
Ameriprise Financial Inc. $1,115,430
-------------------------------------------------------------
Fiserv Inc. $741,726
-------------------------------------------------------------
E*Trade Financial Corp. $730,647
--------------------------------------------------------------------------------
Large Company Citigroup Inc. $125,192,590
Value -------------------------------------------------------------
Bank of America Corp. $90,208,462
-------------------------------------------------------------
Morgan Stanley $44,507,276
-------------------------------------------------------------
Merrill Lynch $42,109,052
-------------------------------------------------------------
Wachovia Corp. $41,463,660
-------------------------------------------------------------
Fiserv Inc. $14,161,714
--------------------------------------------------------------------------------
Mid Cap Value None
--------------------------------------------------------------------------------
NT Large Citigroup Inc. $3,444,914
Company Value -------------------------------------------------------------
Bank of America Corp. $2,479,572
-------------------------------------------------------------
Morgan Stanley $1,220,780
-------------------------------------------------------------
Wachovia Corp. $1,145,040
-------------------------------------------------------------
Merrill Lynch & Co., Inc. $1,127,046
-------------------------------------------------------------
Fiserv Inc. $382,032
--------------------------------------------------------------------------------
NT Mid Cap None
Value
--------------------------------------------------------------------------------
Real Estate None
--------------------------------------------------------------------------------
Small Cap None
Value
--------------------------------------------------------------------------------
Value Bank of America Corp. $147,456,729
-------------------------------------------------------------
Citigroup, Inc. $33,502,122
-------------------------------------------------------------
Merrill Lynch & Co., Inc. $15,253,996
--------------------------------------------------------------------------------

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.

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57

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. 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 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 is made available to investors directly from American Century
and/or through some financial intermediaries. Investor Class shares charge a
single unified management fee, without any load or commission payable to
American Century. Additional information regarding eligibility for Investor
Class shares may be found in the funds' prospectuses. The Institutional Class is
made available to institutional shareholders or through financial intermediaries
whose clients 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 this class a lower total management fee. The A, B, C
and Advisor 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, R and Advisor Classes is the same as for
Investor Class, but the A, B, C, R and Advisor 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, R Class Plan and Advisor Class Plan,
respectively, and collectively, 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 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 ratio 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 quarterly for its consideration in continuing the plans.
Continuance of the plans must be approved by the Board of Directors, including

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58

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 2830 of
the Conduct Rules of the Financial Industry Regulatory Authority (FINRA).

A Class Plan

As described in the prospectuses, the A Class shares of the funds are made
available to participants in employer-sponsored retirement 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. The distributor may use these fees to pay for
certain ongoing shareholder and administrative services (as described below) and
for distribution services, including past distribution services (as described
below). This payment is fixed at 0.25% and is not based on expenses incurred by
the distributor. During the fiscal year ended March 31, 2007, the aggregate
amount of fees paid under the A Class Plan was:

Large Company Value $575,638
Value $167,555

The distributor then makes these payments to the financial intermediaries
(including underwriters and broker-dealers, who may use some of the proceeds to
compensate sales personnel) who offer the A Class shares for the services
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;

(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.

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59

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) paying 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) compensating registered representatives or other employees of the
distributor who engage in or support distribution of the funds' A Class
shares;

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

(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' shareholders and prospective shareholders;

(f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;

(g) providing facilities to answer questions from prospective shareholders
about fund shares;

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

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

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

(k) organizing and conducting 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 FINRA; 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 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.

------
60

including past 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, 2007, the aggregate amount of fees paid under the B
Class Plan was:

Large Company Value $166,291
Value $72,697

Because the B Classes of Equity Income and Real Estate were not in operation as
of the fiscal year end, they are not included. The distributor then makes these
payments to the financial intermediaries (including underwriters and
broker-dealers, who may use some of the proceeds to compensate sales personnel)
who offer the B Class shares for the services 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;

(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) paying 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) compensating registered representatives or other employees of the
distributor who engage in or support distribution of the funds' B Class
shares;