UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-l2
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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PROXY STATEMENT
February 1, 2006
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IMPORTANT VOTING INFORMATION INSIDE
VP Large Company Value Fund
TABLE OF CONTENTS
1. PROXY STATEMENT SUMMARY...................................................1
2. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS.................................3
3. PROXY STATEMENT...........................................................4
4. PROPOSAL: APPROVAL OF MANAGEMENT AGREEMENT................................5
5. OTHER INFORMATION........................................................13
6. SCHEDULE I: MANAGEMENT AGREEMENT.........................................14
7. SCHEDULE II: NUMBER OF OUTSTANDING SHARES AS OF JANUARY 25, 2006.........14
8. SCHEDULE III: PRINCIPAL SHAREHOLDERS AS OF JANUARY 25, 2006 .............14
Letter from the President
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Large Company Value Fund
4500 Main Street
Kansas City, Missouri 64111
February 1, 2006
Dear American Century Shareholder,
I am writing to inform you of the upcoming Special Meeting of all of the
shareholders of VP Large Company Value Fund to be held on March 3, 2006. At this
meeting, you are being asked to vote on an important Proposal affecting the
Fund.
The Board of Directors of the Fund has unanimously approved the Proposal and
recommends a vote "FOR" the Proposal. REMEMBER, YOUR VOTE IS EXTREMELY IMPORTANT
TO US, NO MATTER HOW LARGE OR SMALL YOUR INVESTMENT IS IN THE FUND. PLEASE VOTE
YOUR SHARES TODAY. If you have any questions regarding the issue to be voted on
or need assistance in completing your proxy card, please contact your investment
professional. You also may contact American Century's proxy solicitor, at
1-866-241-6192.
I appreciate your consideration of this important Proposal. Thank you for
investing with American Century and for your continued support.
Sincerely,
- -------------------------------------
William M. Lyons
President
1. PROXY STATEMENT SUMMARY
The following Q&A is a brief summary of the Proposal to be considered at the
Special Meeting. The information below is qualified in its entirety by the more
detailed information contained elsewhere in this proxy statement ("Proxy
Statement"). Please read all the enclosed proxy materials before voting. PLEASE
REMEMBER TO VOTE AS SOON AS POSSIBLE.
WHEN WILL THE SPECIAL MEETING BE HELD? WHO IS ELIGIBLE TO VOTE?
The Special Meeting will be held on March 3, 2006, at 10 a.m. Central time at
American Century's offices at 4500 Main Street, Kansas City, Missouri. Shares of
the Fund are sold only to separate accounts of certain insurance companies
("Insurance Companies"), and to Insurance Companies directly in connection with
variable annuity contracts and/or variable life insurance contracts issued by
such companies. With respect to the proposal presented in this Proxy Statement,
the Insurance Companies will vote the shares of the Fund held in such separate
accounts based on the instructions timely received from the contract holders
that have a voting interest in the Fund. The record date for determining the
number of shares outstanding and the contract holders entitled to give voting
instructions to Insurance Companies is the close of business on January 25, 2006
("Record Date"). All of the shareholders who own shares of the VP Large Company
Value Fund (the "Fund"), a portfolio company of American Century Variable
Portfolios, Inc. ("Variable Portfolios"), at that time are eligible to vote at
the Special Meeting. Please note that this will be a business meeting only. No
presentations about the Fund are planned.
WHY ARE THE FUNDS HAVING A SPECIAL MEETING?
Shareholders are being asked to approve a management agreement between Variable
Portfolios, on behalf of the Fund, and American Century Investment Management,
Inc. (the "Advisor").
HOW DO THE DIRECTORS RECOMMEND THAT I VOTE ON THE PROPOSAL?
The Board of Directors (the "Board") unanimously recommends that you vote "FOR"
approval of the management agreement (the "Approval" or "Proposal").
WHY APPROVE A MANAGEMENT AGREEMENT BETWEEN AMERICAN CENTURY AND VARIABLE
PORTFOLIOS?
The Advisor has significant resources and experience in providing investment
advisory services to meet the investment objective of the Fund, and has been
providing investment advisory services to the Fund since its inception. Due to
circumstances described in more detail later in this Proxy Statement,
shareholder approval of a new management agreement is being sought.
HOW WILL THE APPROVAL OF THE MANAGEMENT AGREEMENT BE ACCOMPLISHED?
Because the Board of Directors has already approved the management agreement,
the agreement will be approved upon the receipt of the affirmative vote of
investors holding a majority of the Fund's voting securities. Following
approval, the Advisor will continue providing investment advisory services to
the Fund in the same manner as it has historically done since the inception of
the Fund.
WHY ARE THE DIRECTORS RECOMMENDING A VOTE "FOR" THE PROPOSAL?
Approval of the Proposal will enable the Fund to continue receiving investment
management services from the Advisor. Your Directors have reviewed this Proposal
with your interests in mind, have considered the nature and quality of the
services the Advisor provides to the Fund, and believe the Approval to be in
your and the Fund's best interests.
WHO IS ASKING FOR MY VOTE?
Your Board of Directors is asking you to sign and return the enclosed proxy card
so your votes can be cast at the Special Meeting. In the unlikely event your
Fund's meeting is adjourned, these proxies also would be voted at the reconvened
meeting.
WILL THE APPROVAL HAVE ANY EFFECT ON THE VALUE OF MY INVESTMENT?
Pending the Approval, the Advisor has waived the receipt of its management fee,
beginning December 31, 2004. The Approval will otherwise not have any affect on
the value of your investment. To the extent the Approval is obtained, the
Advisor will no longer waive receipt of its management fee.
HOW DO I VOTE MY SHARES?
We've made it easy for you. You can vote online, by phone, by mail, by fax or in
person at the Special Meeting. To vote online, access the Web site listed on
your proxy card (you will need the control number that appears on the right-hand
side of your proxy card). To vote by telephone, call the toll-free number listed
on your proxy card (you will need the control number that appears on the
right-hand side of your proxy card). To vote by mail, complete, sign and send us
the enclosed proxy voting card in the enclosed postage-paid envelope. To vote by
fax, complete and sign the proxy voting card and fax both sides of the card to
the toll-free number listed on your proxy card. You also may vote in person at
the meeting on March 3, 2006.
Your shares will be voted EXACTLY as you tell us. If you simply sign the
enclosed proxy card and return it, we will follow the recommendation of your
Board of Directors and vote it "FOR" the Proposal.
IF I SEND MY PROXY IN NOW AS REQUESTED, CAN I CHANGE MY VOTE LATER?
Yes. A proxy can be revoked at any time using any of the voting procedures
described on your proxy vote card or by attending the Special Meeting and voting
in person. Even if you plan to attend the Special Meeting and vote in person, we
ask that you return the enclosed proxy vote card. Doing so will preserve your
vote and help us achieve a quorum for the meeting.
If you have any questions regarding the Proxy Statement or need assistance in
voting your shares, please call your investment professional. You also may call
American Century's proxy solicitor, Computershare Fund Services, at
1-866-241-6192.
2. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 3, 2006
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Large Company Value Fund
4500 Main Street
Kansas City, Missouri 64111
1-800-345-2021
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of VP Large
Company Value Fund (the "Fund") of American Century Variable Portfolios, Inc., a
Maryland corporation ("Variable Portfolios"), will be held at Variable
Portfolios' offices at 4500 Main Street, Kansas City, Missouri, on March 3,
2006, at 10 a.m. Central time, for the following purposes:
PROPOSAL 1. To approve the proposed management agreement
between Variable Portfolios, on behalf of the
Fund, and American Century Investment Management,
Inc. (the "Advisor");
PROPOSAL 2. To transact such other business as may properly
come before the Special Meeting or any adjournment
thereof (the Board of Directors is not aware of
any other items to be considered).
This is a notice and Proxy Statement for the Special Meeting. All of the Fund's
shareholders will vote together with respect to the Proposal. Please complete,
sign and return the enclosed proxy voting card.
Only shareholders of record as of the close of business on January 25, 2006 are
eligible to notice of and to vote at the Special Meeting and any adjournments
thereof. Your attention is directed to the attached Proxy Statement.
Your vote is important regardless of the size of your holdings in the Fund.
Whether or not you expect to be present at the Special Meeting, we urge you to
complete, sign, date and mail the enclosed proxy card in the postage-paid
envelope provided so you will be represented at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU CAST YOUR VOTE "FOR" THE
PROPOSAL.
February 1, 2006
BY ORDER OF THE BOARD OF DIRECTORS
- -----------------------------------------
Ward D. Stauffer
Secretary
3. PROXY STATEMENT
February 1, 2005
This proxy statement ("Proxy Statement") is being furnished to the
shareholders of VP Large Company Value Fund (the "Fund") of record as of the
close of business on January 25, 2006, for their use in obtaining voting
instructions from the contract holders in connection with the solicitation of
proxies by and on behalf of the Board of Directors of American Century Variable
Portfolios, Inc. ("Variable Portfolios") to be used at the Special Meeting of
shareholders to be held on March 3, 2006. The Special Meeting will be held at
Variable Portfolios' offices at 4500 Main Street, Kansas City, Missouri, at 10
a.m. Central time, and any adjournments thereof. The approximate mailing date of
this Proxy Statement is February 1, 2006.
VOTING OF PROXIES. If you vote your proxy now, you may revoke it before the
Special Meeting using the voting procedures described on your proxy vote card or
by attending the Special Meeting and voting in person. If you properly execute
and return the enclosed proxy in time to be voted at the Special Meeting, your
shares represented by the proxy will be voted at the Special Meeting in
accordance with the your instructions. Unless revoked, proxies that have been
returned by shareholders without instructions will be voted in favor of the
Proposal. The proxy grants discretion to the persons named therein, as proxies,
to take such further action as they may determine appropriate in connection with
any other matter that may properly come before the Special Meeting or any
adjournments of the Special Meeting. The Board of Directors of Variable
Portfolios does not currently know of any matter to be considered at the Special
Meeting other than the matter set forth in the Notice of Special Meeting of
Shareholders.
SCHEDULE II to this Proxy Statement sets out, as of the close of business
on January 25, 2006 ("Record Date"), the date for determining the number of
shares outstanding and the contract holders entitled to give voting instructions
to Insurance Companies, the total number of shares of the Fund that are eligible
to vote at the Special Meeting. Except as set out in SCHEDULE III to this Proxy
Statement, to the knowledge of the Fund, as of the Record Date, no person or
"group" (as such term is defined in the Securities Exchange Act of 1934, as
amended, and the rules thereunder) was known to the Fund to have allocated
contributions under variable annuity contracts such that, upon pass-through of
voting rights by Insurance Company, such person or group would have the right to
give voting instructions with respect to more than 5% of the outstanding shares
of the Fund. As of the Record Date, the officers and Directors of Variable
Portfolios, as a group, owned less than 1% of the outstanding shares of each
class of the Fund.
QUORUM. A quorum is the number of shares legally required to be present at
a meeting in order to conduct business. The quorum for the Special Meeting is a
majority of the shares of the Fund issued and outstanding. Shares may be
represented in person or by proxy. Abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot vote on a proposal
because instructions have not been received from the beneficial owners) will be
counted as "present" for purposes of determining whether or not a quorum is
present for the Special Meeting. If a quorum is not present at the Special
Meeting, or if a quorum is present at the Special Meeting but sufficient votes
are not received to approve the Proposal, the persons named as proxies may
propose one or more adjournments of the Special Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares affected by the adjournment that are represented
at the Special Meeting in person or by proxy. If a quorum is not present, the
persons named as proxies will vote in favor of such adjournments those proxies
which they are authorized to vote "FOR" the Proposal, and will vote against such
adjournments those proxies which they are authorized to vote "AGAINST" such
Proposal.
SHAREHOLDER VOTE REQUIRED. The Proposal requires the approval of a majority
of the outstanding voting securities as defined in the 1940 Act, which means the
affirmative vote of the lesser of (i) 67% of the shares represented at the
Special Meeting at which more than 50% of the outstanding shares of the Fund are
represented or (ii) more than 50% of the outstanding shares of the Fund. The
Fund uses dollar-based voting, meaning that the number of votes a shareholder is
entitled to cast is based upon the dollar amount of the shareholder's investment
in shares of the Fund.
Insurance Companies, the holders of record of shares of the Fund, are
required to "pass through" to their contract holders the right to vote shares of
the Fund. The Fund expects that Insurance Companies will solicit voting
instructions from their contract holders and that Insurance Companies will vote
100% of the shares of the Fund held by their respective separate accounts.
Insurance Companies will vote shares of the Fund for which no instructions have
been received in the same proportion as they vote shares for which they have
received instructions. Abstentions and broker non-votes will have the same
effect as a negative vote on the Proposal. Unmarked voting instructions from
contract holders will be voted in favor of the Proposal. Insurance Companies, as
record shareholders of the Fund, may adjourn the meeting of shareholders for a
period or periods of not more than 120 days in the aggregate if necessary to
obtain additional voting instructions from contract holders. The cost of
preparing and distributing to contract holders additional proxy materials if
required in connection with any adjournment will be borne by the Advisor.
PROXY SOLICITATION. This notice of Special Meeting and Proxy Statement are
first being mailed to shareholders on or around February 1, 2006. Supplementary
solicitations may be made by mail, telephone, telegraph, facsimile or other
electronic means by representatives of the Advisor. In addition, Computershare
Fund Services, a proxy solicitation firm, will be paid to solicit shareholders
on behalf of the Fund. The total anticipated cost of such services to be
rendered by Computershare Fund Services is estimated to be [$ ]. THE EXPENSES IN
CONNECTION WITH PREPARING THIS PROXY STATEMENT AND ITS ENCLOSURES AND OF ALL
SOLICITATIONS WILL BE PAID BY THE ADVISOR.
4. PROPOSAL: APPROVAL OF MANAGEMENT AGREEMENT
REASONS FOR APPROVAL OF THE PROPOSED MANAGEMENT AGREEMENT.
Under the Investment Company Act of 1940 (the "1940 Act"), any person
acting as investment adviser to a registered investment company is required to
serve pursuant to a written contract. A number of procedural requirements apply
to the approval of an investment advisory agreement with a fund. Those
requirements include:
o approval by the fund's directors, including by a majority of the
Independent Directors ;
o approval by a majority of the outstanding voting securities of the
fund; and
o that the original management agreement shall continue in effect for a
maximum of two years, unless prior to its expiration the board of
directors approves the continuance of the agreement, at least annually
thereafter.
The process by which a mutual fund board evaluates and approves the renewal
of an investment advisory contract (or in the case of American Century, a
management agreement), is referred to in the industry as the "15(c) Process" or
"15(c) Review." If a new management agreement between the fund and Advisor is
not approved within two years of the execution of the original agreement, or if
the board fails or refuses to approve the renewal as a result of its 15(c)
Process, the original agreement is terminated.
In the case of the Fund, the Board approved its original management
agreement between the Advisor and Variable Portfolios at a meeting held on
December 31, 2002. On April 30, 2003, the management agreement between the
Advisor and Variable Portfolios was approved by an affiliate of the Advisor,
which at the time was the sole shareholder of the Fund. Following approval by
the sole shareholder of the Fund, the management agreement was properly approved
under the 1940 Act. In order for the management agreement to continue in effect
beyond its initial term, it should have been evaluated and approved for renewal
in connection with a 15(c) Review prior to December 31, 2004. However, the
agreement inadvertently was not renewed by the Board in time and, as a result, a
new management agreement is required.
The Advisor continues to provide to the Fund investment advisory services
of the same nature as it has historically provided. Although the Advisor has
continued to incur the same costs in the provision of these services following
the termination of the agreement, the Advisor has reimbursed the Fund for all
management fees received from January 1, 2005 through December 19, 2005, and has
agreed to waive receipt of such fees pending the approval of the management
agreement in accordance with the Proposal. Upon reimbursement of management fees
by the Advisor on December 20, 2005, the Fund's net asset value increased
[$0.09] per share. If the proposed management agreement is approved by a
majority of the Fund's outstanding voting securities, the Advisor will not be
reimbursed for these costs nor receive any fees from the Fund for the period
beginning January 1, 2005 and ending on the date of approval of the agreement.
At a meeting held on December 13, 2005, the Board considered the matter and
approved a new management agreement for the Fund (the "Agreement"). The terms of
the Agreement are substantially the same as the terms of the original management
agreement. The Agreement also must be approved by a majority of the Fund's
outstanding voting securities, as defined in this Proxy Statement. If approved
by a majority of the Fund's outstanding voting securities, the Agreement will
become effective immediately upon such approval. The Advisor, and not the Fund,
is bearing all of the cost of the approval process.
PRINCIPAL FEATURES OF THE PROPOSED MANAGEMENT AGREEMENT
The Advisor has served as investment adviser to the Fund since its
inception. The Fund was organized in 2002 as a series of Variable Portfolios, a
registered, open-end management investment company. Except as noted below, the
terms of the Agreement are substantially the same as the terms of the management
agreement pursuant to which the Advisor had been providing services to the Fund.
The following is a summary of the material terms of the Agreement:
MANAGEMENT SERVICES. Pursuant to the Agreement, the Advisor is responsible for
managing the investment portfolios of the Fund and directing the purchase and
sale of its investment securities. The Advisor also arranges for transfer
agency, custody and all other services necessary for the Fund to operate. In
addition, the Advisor is required to maintain and preserve any books and records
with respect to the Funds' securities transactions. The Advisor will provide the
Fund with all physical facilities and personnel required to carry on the
business of each class of the Fund's shares, including but not limited to office
space, office furniture, fixtures and equipment, office supplies, computer
hardware and software and salaried and hourly paid personnel. All of the
Advisor's duties under the Agreement are to be performed subject to oversight of
the Board, and in accordance with the investment objectives and policies of the
Fund. The Agreement is attached as SCHEDULE I.
MANAGEMENT FEE. Under the Agreement, the Fund will pay to the Advisor on the
first business day of each month a unified management fee based on a percentage
of the daily net assets of the specific class of shares of the Fund. The annual
management fee rate for Class I shares is determined pursuant to the following
stepped fee schedule: 0.90% of the first $1 billion of assets under management,
0.80% of the next $4 billion of assets under management and 0.70% of assets
under management above $5 billion. The annual management fee rate for Class II
shares is determined pursuant to the following stepped fee schedule: 0.80% of
the first $1 billion of assets under management, 0.70% of the next $4 billion of
assets under management and 0.60% of assets under management above $5 billion.
The effective management fee paid by the Fund to the Advisor as a percentage of
average net assets for the most recent fiscal year ended December 31, 2005 was
[0.90% for Class I and 0.80% for Class II].
PAYMENT OF ADVISORY EXPENSES. The Agreement provides that the Advisor will pay
all expenses of managing and operating the Fund except brokerage expenses,
taxes, interest, fees and expenses of the Independent Directors (including legal
counsel fees), and extraordinary expenses. The Advisor may at its expense employ
others to provide all or any part of such facilities and personnel. A portion of
the management fee may be paid by the Advisor to unaffiliated third parties who
provide recordkeeping and administrative services that would otherwise be
performed by an affiliate of the Advisor.
TERM. In conformity with the requirements of the 1940 Act, the Agreement
provides that it will continue in effect, unless sooner terminated, until July
31, 2007 and for as long thereafter as its continuance has been specifically
approved at least annually (a) by the Board or by the vote of a majority of the
outstanding class of voting securities of each class and (b) by the vote of a
majority of the Directors of the Fund, who are not parties to the Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
TERMINATION; ASSIGNMENT. The Agreement (a) may be terminated at any time without
penalty by the Board or by vote of a majority of the outstanding voting
securities of each class on sixty days' written notice to the Advisor, (b) may
be terminated by the Advisor at any time without penalty upon giving the Fund
sixty days' written notice, and (c) terminates automatically in the event of its
assignment.
LIMITATION OF LIABILITY. Under the Agreement, the Advisor will not be subject to
any liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services or for any
losses that may be sustained in the purchase, holding or sale of any security in
the absence of willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations or duties.
INFORMATION ABOUT THE ADVISOR
The Advisor is a corporation organized under the laws of the State of
Delaware, with its headquarters at 4500 Main Street, Kansas City, Missouri
64111. The Advisor is wholly owned by American Century Companies, Inc. ("ACC"),
which is controlled by James E. Stowers, Jr., by virtue of his ownership of a
majority of its voting stock. As of December 31, 2005, the Advisor managed
approximately [$102] billion of assets. The Advisor is a registered investment
adviser and has managed mutual funds since 1958.
The Directors and principal executive officer of the Advisor follow. Unless
otherwise noted, the address for each is 4500 Main Street, Kansas City, MO
64111.
POSITION(S) WITH
ADVISOR AND
NAME PRINCIPAL OCCUPATION
---- ---------------------
James E. Stowers, Jr. Director, Chairman
James E. Stowers III Director
William M. Lyons Director, Chief Executive
Officer and President
The chart below lists those Directors and officers of the Fund who are also
affiliated with the Advisor, and sets out the nature of those affiliations:
POSITION(S) AT THE
NAME POSITION AT THE FUNDS INVESTMENT ADVISOR
---- --------------------- ------------------
James E. Stowers, Jr. Director, Co-Vice Chairman Director, Chairman
James E. Stowers III Director, Co-Vice Chairman Director
William M. Lyons President Director, Chief Executive
Officer and President
Robert T. Jackson Executive Vice Chief Financial Officer,
President Executive Vice
President and Treasurer
Maryanne Roepke Senior Vice Assistant Treasurer
President, Treasurer and
Chief Financial Officer
David C. Tucker Senior Vice Senior Vice President
President and and General Counsel
General Counsel
Charles C.S. Park Vice President Chief Compliance Officer
and Chief Compliance
Officer
Jon Zindel Tax Officer Vice President
CONSIDERATIONS OF THE BOARD OF DIRECTORS IN APPROVING THE AGREEMENTS
The Board is comprised of nine Directors, seven of which are not affiliated
with the Advisor in any way (the "Independent Directors"). The Chairman of the
Board is an Independent Director. The Board oversees the activities of the
Advisor in managing the Fund and meets at least quarterly to review reports
about Fund operations. Independent counsel to the Independent Directors attends
all in-person Board meetings and other meetings at the request of the
Independent Directors. The Board has five standing committees to oversee
specific functions of the Fund's operations.
At a meeting held on December 13, 2005, the Board, including all seven
Independent Directors, considered the Agreement, as well as the effect of the
termination of the prior management agreement. The Independent Directors
discussed the matter in executive session and were represented by independent
counsel who assisted in their deliberations.
Following the executive session, the Independent Directors unanimously
approved the Agreement (based on the factors discussed in detail below). In
reaching its determination they considered, among other things, the impact to
the Fund and its shareholders if the Agreement was not approved, together with
the Advisor's agreement to reimburse and/or waive any fees received since
December 31, 2004.
FACTORS CONSIDERED BY THE BOARD
NATURE, EXTENT AND QUALITY OF SERVICES. The Board noted that under the
management agreement, the Advisor provides or arranges at its own expense for
the provision of a wide variety of services. The Independent Directors noted
that many of these services have expanded over time both in terms of quantity
and complexity in response to shareholder demands, competition in the industry
and the changing regulatory environment. The Board noted that the nature of the
investment management services provided is quite complex and allows Fund
shareholders access to professional money management, instant diversification of
their investments within an asset class, the opportunity to easily diversify
among asset classes, and liquidity. Annually, the Independent Directors review
detailed performance information, comparing the Fund's performance with that of
similar funds not managed by the Advisor. The Fund's performance for both the
one and three year periods was above the median of its peer group. The Advisor
provides the Fund with a comprehensive package of transfer agency, shareholder,
and other services. The Independent Directors review reports and evaluations of
such services at its regular quarterly meetings and in conjunction with its
annual 15(c) Review. Certain aspects of shareholder and transfer agency service
level efficiency and the quality of securities trading activities are measured
by independent third party providers and are presented in comparison to other
fund groups not managed by the Advisor.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The Advisor
provides detailed information concerning its cost of providing various services
to the Fund, its profitability in managing the Fund, its overall profitability,
and its financial condition. The Independent Directors have reviewed with the
Advisor the methodology used to prepare this financial information. This
financial information regarding the Advisor is considered in order to evaluate
the Advisor's financial condition, its ability to continue to provide services
under the management agreement, and the reasonableness of the current management
fee.
ETHICS OF THE ADVISOR. The Independent Directors generally considered the
Advisor's commitment to providing quality services to shareholders and to
conducting its business ethically. They noted that the Advisor's practices
generally meet or exceed industry best practices and that the Advisor was not
implicated in the industry scandals of 2003-2005.
ECONOMIES OF SCALE. The Independent Directors review reports provided by the
Advisor on economies of scale for the complex as a whole and the year-over-year
changes in revenue, costs, and profitability. The Independent Directors
concluded that economies of scale are difficult to measure with precision,
particularly on a fund-by-fund basis. The Independent Directors believe the
Advisor is appropriately sharing any economies of scale through a competitive
fee structure, through breakpoints that reduce fees as the Fund increases in
size, and through reinvestment in its business to provide shareholders
additional content and services.
COMPARISON TO OTHER FUNDS' FEES. The Fund pays the Advisor a single,
all-inclusive (or unified) management fee for providing all services necessary
for the management and operation of the Fund, other than brokerage expenses,
taxes, interest, extraordinary expenses, and the fees and expenses of the
Independent Directors (including their independent legal counsel). By contrast,
most other fund groups are charged a variety of fees, including a management
fee, a transfer agency fee, an administrative fee, distribution charges and
other expenses. The Board believes the unified fee structure is a benefit to
Fund shareholders because it clearly discloses to shareholders the cost of
owning Fund shares, and, since the unified fee cannot be increased without a
vote of Fund shareholders, it shifts to the Advisor the increased costs of
operating the Funds and the risk of administrative inefficiencies. Part of the
Independent Directors' analysis of fee levels involves comparing the Fund's
unified fee to the total expense ratio of other funds in the Fund's peer group.
The unified fee charged to shareholders of the Fund was at the median of the
total expense ratios of its peer group.
COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The
Independent Directors also requested and received information from the Advisor
concerning the nature of the services, fees, and profitability of its advisory
services to advisory clients other than the Fund. They observed that these
varying types of client accounts require different services and involve
different regulatory and entrepreneurial risks than the management of the Fund.
The Independent Directors analyzed this information and concluded that the fees
charged and services provided to the Fund were reasonable by comparison.
COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Independent Directors reviewed
information from the Advisor concerning collateral benefits it receives as a
result of its relationship with the Fund. They concluded that the Advisor's
primary business is managing mutual funds and it generally does not use the Fund
or shareholder information to generate profits in other lines of business, and
therefore does not derive any significant collateral benefits from them.
CONCLUSION OF THE INDEPENDENT DIRECTORS. As a result of this process, the
Independent Directors, assisted by the advice of legal counsel that is
independent of the Advisor, taking into account all of the factors discussed
above and the information provided by the Advisor, concluded that the investment
management agreement between Variable Portfolios, on behalf of the Fund, and the
Advisor is fair and reasonable in light of the services provided.
EFFECT OF FAILURE TO APPROVE NEW AGREEMENT
The Board also considered the fact that the failure of the Board to approve the
agreement and recommend the agreement to the Fund's shareholders could lead to
the following:
o The Advisor could not continue to serve as investment adviser to the
Fund.
o The Advisor would have to seek other alternatives.
o Because the Fund is managed substantially the same as another fund
advised by the Advisor, Large Cap Value, and another investment
adviser would not be able to manage in that same manner, the Advisor
has notified the Directors it will likely recommend to the Board that
the Board liquidate the Fund.
PAYMENTS TO THE ADVISOR AND AFFILIATES OF THE ADVISOR BY THE FUND
During the Fund's last fiscal year, the aggregate amount of the Advisor's
unified management fee paid by the Fund was [$ ].
The Fund has adopted a distribution plan for its Class II shares pursuant to
Rule 12b-1 under the 1940 Act (the "Class II Plan"). The Fund's Class II shares
are made available exclusively to insurance companies to fund their obligations
under variable annuity and variable life insurance contracts purchased by their
customers. The Fund's distributor enters into contracts with various insurance
companies with respect to the sale of the Fund's shares and/or the use of the
Fund's shares in various insurance products.
The insurance companies provide various distribution services pursuant to the
Class II Plan. To enable the Fund's shares to be made available through such
insurance products, and to compensate the insurance companies for such services,
the Advisor has reduced its management fee by 0.10% per annum with respect to
the Class II shares, and the Board has adopted the Class II Plan. Pursuant to
the Class II Plan, Class II pays the distributor 0.25% annually of the average
daily net asset value of the Fund's Class II shares 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. The Class II
Plan is a compensation type plan and the amount paid does not depend on the
actual expense incurred. During the fiscal year ended December 31, 2005, the
aggregate amount of fees paid under the Class II Plan was [$ ].
INFORMATION RELATING TO SIMILAR FUNDS
The Advisor is the investment adviser for certain other investment
companies that have investment objectives similar to the investment objectives
of the Fund. The table below provides certain information relating to each such
similar fund.
NET ASSETS AS OF ANNUAL RATE OF NET MANAGEMENT
NAME OF SIMILAR FUND DECEMBER 31, 2005 MANAGEMENT FEE FEE WAIVER FEE
- ----------------------------- ----------------- --------------- ---------------- ----------------
Large Company Value Fund
THE BOARD OF THE FUND RECOMMENDS THAT THE SHAREHOLDERS OF THE FUND VOTE TO
APPROVE THE AGREEMENT.
5. OTHER INFORMATION
INVESTMENT ADVISOR AND ADMINISTRATOR. American Century Services, LLC ("ACS
LLC"), an affiliate of the Advisor, serves as transfer agent and dividend-paying
agent for the Fund. It provides physical facilities, computer hardware and
software and personnel for the day-to-day administration of the Fund and the
Advisor. The Advisor and ACS LLC are wholly owned subsidiaries of ACC. The
mailing address of ACC, ACS LLC, the Advisor and the Fund is P.O. Box 419200,
Kansas City, Missouri 64141-6200.
DISTRIBUTOR. American Century Investment Services, Inc. ("ACIS") is the Fund's
principal underwriter. ACIS's mailing address is P.O. Box 419200, Kansas City,
Missouri 64141-6200.
SHAREHOLDER REPORTS. The Fund will furnish, without charge, a copy of its most
recent annual and semiannual report upon request. To request these materials,
please call us at 1-800-378-9878 or send a request by mail to American Century
Investments at P.O. Box 419786, Kansas City, Missouri 64141-6786.
OTHER MATTERS. The Board is not aware of any other matters that are expected to
arise at the Special Meeting. If any other matter should arise, however, the
persons named in properly executed proxies have discretionary authority to vote
such proxies as they decide.
The Articles of Incorporation and By-laws of Variable Portfolios do not provide
for annual meetings of shareholders unless required by the 1940 Act and the
Company does not currently intend to hold such a meeting for 2006.
Shareholder proposals for inclusion in a Proxy Statement for any subsequent
meeting of shareholders must be received by Variable Portfolios within a
reasonable period of time prior to any such meeting and must satisfy all
applicable federal and state requirements.
6. SCHEDULE I: MANAGEMENT AGREEMENT
7. SCHEDULE II: NUMBER OF OUTSTANDING SHARES AS OF JANUARY 25, 2006
8. SCHEDULE III: PRINCIPAL SHAREHOLDERS AS OF JANUARY 25, 2006
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Large Company Value Fund
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 3, 2006
This Proxy is solicited on behalf of the Board of Directors
This proxy shall be voted on the Proposal described in the accompanying Proxy
Statement as specified below. By signing below, I (we) appoint as proxies
Charles A. Etherington, Ward D. Stauffer, and Otis H. Cowan, and each of them,
as attorneys, with full power of substitution to vote for the undersigned all
shares of common stock I (we) own in the fund. The authority I am (we are)
granting applies to the above-referenced meeting and any adjournments of that
meeting, with all the power I (we) would have if personally present. I
understand that if I sign without otherwise marking this proxy, the shares
represented by this proxy will be voted as recommended by the Board of Directors
on all maters to be considered at the meeting.
VOTE VIA THE INTERNET: https://vote.proxy-direct.com
VOTE BY TELEPHONE: 1-866-241-6192
CONTROL NUMBER: 999 9999 9999 999
Note: If shares are held by an individual, sign
your name exactly as it appears on this card. If
shares are held jointly, either party may sign,
but the name of the party signing should conform
exactly to the name shown on this proxy card. If
shares are held by a corporation, partnership or
similar account, the name and the capacity of the
individual signing the proxy card should be
indicated - for example: "ABC Corp., John Doe,
Treasurer."
-----------------------------
Signature
-----------------------------
Signature (if held jointly)
-----------------------------
Date
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
You can vote your proxy on the PHONE or the INTERNET - 24 hours a day.
1. Read your proxy statement and have it at hand.
2. Call toll-free 1-866-241-6192 or go online at:
http://vote.proxy-direct.com
3. Follow the recorded or on-screen directions.
4. Do NOT mail your Proxy Card if you vote by phone or Internet.
TO VOTE BY MAIL, please date and sign the proxy below and either return it in
the enclosed envelope to: American Century Investments, c/o Proxy Tabulator,
P.O. Box 9043, Smithton, NY 11787-9831 or fax both sides to 1-888-796-9932. This
proxy will not be voted unless it is dated and signed exactly as instructed on
this card.
Please detach at perforation before mailing.
Please indicate your vote by marking the appropriate box.
The Board of Directors recommends a vote "FOR" the proposal.
Your shares will be voted EXACTLY as marked.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
1. Approval of the management agreement between American Century Variable
Portfolios, Inc., on behalf of VP Large Company Value Fund, and American
Century Investment Management, Inc.
IMPORTANT: PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY
SCHEDULE I
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
FORM OF PROPOSED
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is made as of the 3rd day of March,
2006, by and between AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., a Maryland
corporation (hereinafter called the "Company"), and AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC., a Delaware corporation (hereinafter called the "Investment
Manager").
WHEREAS, the Investment Manager is registered as an investment advisor with
the Securities and Exchange Commission;
WHEREAS, THE COMPANY is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has registered its shares for public offering under the Securities Act of
1933, as amended; and
WHEREAS, the Company is authorized to create separate funds, each with its
own separate investment portfolio of which the beneficial interests are
represented by a separate series of shares of the Company, including those Funds
listed on Schedule A hereto.
NOW, THEREFORE, IN CONSIDERATION of the mutual promises and agreements
herein contained, the parties agree as follows:
1. INVESTMENT MANAGEMENT SERVICES. The Investment Manager shall supervise the
investments of each class of each series of shares of the Company
contemplated as of the date hereof, and each class of each subsequent
series of shares as the Company shall select the Investment Manager to
manage. In such capacity, the Investment Manager shall either directly, or
through the utilization of others as contemplated by Section 7 below,
maintain a continuous investment program for each series, determine what
securities shall be purchased or sold by each series, secure and evaluate
such information as it deems proper and take whatever action is necessary
or convenient to perform its functions, including the placing of purchase
and sale orders. In performing its duties hereunder, the Investment Manager
will manage the portfolio of all classes of shares of a particular series
as a single portfolio.
2. COMPLIANCE WITH LAWS. All functions undertaken by the Investment Manager
hereunder shall at all times conform to, and be in accordance with, any
requirements imposed by:
(a) the 1940 Act and any rules and regulations promulgated thereunder;
(b) any other applicable provisions of law;
(c) the Articles of Incorporation of the Company as amended from time to
time;
(d) the Bylaws of the Company as amended from time to time;
(e) the Multiple Class Plan; and
(f) the registration statement(s) of the Company, as amended from time to
time, filed under the Securities Act of 1933 and the 1940 Act.
Page 1
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
3. BOARD SUPERVISION. All of the functions undertaken by the Investment
Manager hereunder shall at all times be subject to the direction of the
Board of Directors of the Company, its executive committee, or any
committee or officers of the Company acting under the authority of the
Board of Directors.
4. PAYMENT OF EXPENSES. The Investment Manager will pay all of the expenses of
each class of each series of the Company's shares that it shall manage
other than interest, taxes, brokerage commissions, extraordinary expenses,
the fees and expenses of those directors who are not "interested persons"
as defined in the 1940 Act (hereinafter referred to as the "Independent
Directors") (including counsel fees), and expenses incurred in connection
with the provision of shareholder services and distribution services under
a plan adopted pursuant to Rule 12b-1 under the 1940 Act. The Investment
Manager will provide the Company with all physical facilities and personnel
required to carry on the business of each class of each series of the
Company's shares that it shall manage, including but not limited to office
space, office furniture, fixtures and equipment, office supplies, computer
hardware and software and salaried and hourly paid personnel. The
Investment Manager may at its expense employ others to provide all or any
part of such facilities and personnel.
5. ACCOUNT FEES. The Company, by resolution of the Board of Directors,
including a majority of the Independent Directors, may from time to time
authorize the imposition of a fee as a direct charge against shareholder
accounts of any class of one or more of the series, such fee to be retained
by the Company or to be paid to the Investment Manager to defray expenses
which would otherwise be paid by the Investment Manager in accordance with
the provisions of paragraph 4 of this Agreement. At least sixty days prior
written notice of the intent to impose such fee must be given to the
shareholders of the affected class and series.
6. MANAGEMENT FEES.
(a) In consideration of the services provided by the Investment Manager,
each class of each series of shares of the Company managed by the
Investment Manager shall pay to the Investment Manager a management
fee that is calculated as described in this Section 6 using the fee
schedules set forth on Schedule A.
(b) DEFINITIONS
(1) An "INVESTMENT TEAM" is the Portfolio Managers that the
Investment Manager has designated to manage a given portfolio.
(2) An "INVESTMENT STRATEGY" is the processes and policies
implemented by the Investment Manager for pursuing a particular
investment objective managed by an Investment Team.
(3) A "PRIMARY STRATEGY PORTFOLIO" is each series of the Company, as
well as any other series of any other registered investment
company for which the Investment Manager serves as the investment
manager and for which American Century Investment Services, Inc.
serves as the distributor.
Page 2
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
(4) A "SECONDARY STRATEGY PORTFOLIO" of a series of the Company is
another account managed by the Investment Manager that is managed
by the same Investment Team but is not a Primary Strategy
Portfolio.
(5) The "SECONDARY STRATEGY SHARE RATIO" of a series of the Company
is calculated by dividing the net assets of the series by the sum
of the Primary Strategy Portfolios that share a common Investment
Strategy.
(6) The "SECONDARY STRATEGY ASSETS" of a series of the Company is the
sum of the net assets of the series' Secondary Strategy
Portfolios multiplied by the series' Secondary Strategy Share
Ratio.
(7) The "INVESTMENT STRATEGY ASSETS" of a series of the Company is
the sum of the net assets of the series and the series' Secondary
Strategy Assets.
(8) The "PER ANNUM FEE DOLLAR AMOUNT" is the dollar amount resulting
from applying the applicable Fee Schedule for a class of a series
of the Company using the Investment Strategy Assets.
(9) The "PER ANNUM FEE RATE" for a class of a series of the Company
is the percentage rate that results from dividing the Per Annum
Fee Dollar Amount for the class of a series by the Investment
Strategy Assets of the series.
(c) DAILY MANAGEMENT FEE CALCULATION. For each calendar day, each class of
each series of shares set forth on Schedule A shall accrue a fee
calculated by multiplying the Per Annum Fee Rate for that class times
the net assets of the class on that day, and further dividing that
product by 365 (366 in leap years).
(d) MONTHLY MANAGEMENT FEE PAYMENT. On the first business day of each
month, each class of each series of shares set forth on Schedule A
shall pay the management fee to the Investment Manager for the
previous month. The fee for the previous month shall be the sum of the
Daily Management Fee Calculations for each calendar day in the
previous month.
(e) ADDITIONAL SERIES OR CLASSES. In the event that the Board of Directors
of the Company shall determine to issue any additional series or
classes of shares for which it is proposed that the Investment Manager
serve as investment manager, the Company and the Investment Manager
may enter into an Addendum to this Agreement setting forth the name of
the series and/or class, the Fee Schedule for each and such other
terms and conditions as are applicable to the management of such
series of shares.
7. SUBCONTRACTS. In rendering the services to be provided pursuant to this
Agreement, the Investment Manager may, from time to time, engage or
associate itself with such persons or entities as it determines is
necessary or convenient in its sole discretion and may contract with such
persons or entities to obtain information, investment advisory and
management services, or such other services as the Investment Manager deems
appropriate. Any fees, compensation or expenses to be paid to any such
person or entity shall be paid by the Investment Manager, and no obligation
to such person or entity shall be incurred on behalf of the Company. Any
arrangement entered into pursuant to this paragraph shall, to the extent
required by law, be subject to the
Page 3
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
approval of the Board of Directors of the Company, including a majority of
the Independent Directors, and the shareholders of the Company.
8. CONTINUATION OF AGREEMENT. This Agreement shall continue in effect July 31,
2007, unless sooner terminated as hereinafter provided, and shall continue
in effect from year to year thereafter only so long as such continuance is
specifically approved at least annually by the Board of Directors of the
Company (including a majority of those Directors who are not parties hereto
or interested persons of any such party) cast in person at a meeting called
for the purpose of voting on the approval of the terms of such renewal, or
by the vote of a majority of the outstanding class of voting securities of
each series. The annual approvals provided for herein shall be effective to
continue this Agreement from year to year if given within a period
beginning not more than ninety (90) days prior to July 31 of each
applicable year, notwithstanding the fact that more than three hundred
sixty-five (365) days may have elapsed since the date on which such
approval was last given.
9. TERMINATION. This Agreement may be terminated by the Investment Manager at
any time without penalty upon giving the Company 60 days' written notice,
and may be terminated at any time without penalty by the Board of Directors
of the Company or by vote of a majority of the outstanding voting
securities of each class of each series on 60 days' written notice to the
Investment Manager.
10. EFFECT OF ASSIGNMENT. This Agreement shall automatically terminate in the
event of assignment by the Investment Manager, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the 1940 Act.
11. OTHER ACTIVITIES. Nothing herein shall be deemed to limit or restrict the
right of the Investment Manager, or the right of any of its officers,
directors or employees (who may also be a director, officer or employee of
the Company), to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
12. STANDARD OF CARE. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations or duties hereunder on
the part of the Investment Manager, it, as an inducement to it to enter
into this Agreement, shall not be subject to liability to the Company or to
any shareholder of the Company for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
13. SEPARATE AGREEMENT. The parties hereto acknowledge that certain provisions
of the 1940 Act, in effect, treat each series of shares of an investment
company as a separate investment company. Accordingly, the parties hereto
hereby acknowledge and agree that, to the extent deemed appropriate and
consistent with the 1940 Act, this Agreement shall be deemed to constitute
a separate agreement between the Investment Manager and each series of
shares of the Company managed by the Investment Manager.
14. USE OF THE NAME "AMERICAN CENTURY". The name "American Century" and all
rights to the use of the name "American Century" are the exclusive property
of American Century Proprietary Holdings, Inc. ("ACPH"). ACPH has consented
to, and granted a non-exclusive license for, the
Page 4
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
use by the Company of the name "American Century" in the name of the
Company and any series of shares thereof. Such consent and non-exclusive
license may be revoked by ACPH in its discretion if ACPH, the Investment
Manager, or a subsidiary or affiliate of either of them is not employed as
the investment adviser of each series of shares of the Company. In the
event of such revocation, the Company and each series of shares thereof
using the name "American Century" shall cease using the name "American
Century" unless otherwise consented to by ACPH or any successor to its
interest in such name.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the day and year first above
written.
AMERICAN CENTURY INVESTMENT AMERICAN CENTURY VARIABLE
MANAGEMENT, INC. PORTFOLIOS, INC.
- ------------------------------------ -------------------------------------
WILLIAM M. LYONS CHARLES A. ETHERINGTON
President Vice President
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. SCHEDULE A: FEE SCHEDULES
- --------------------------------------------------------------------------------
SCHEDULE A
FEE SCHEDULES
- ------------------------------- ----------------- --------------- --------------
CLASS I CLASS II
- ------------------------------- ----------------- --------------- --------------
VP Large Company Value Fund First $1 billion 0.900% 0.800%
Next $4 billion 0.800% 0.700%
----------------- --------------- --------------
Over $5 billion 0.700% 0.600%
=============================== ================= =============== ==============
Page A-1
