SEC Division of Investment Management staff letter: Twentieth Century Investors, Inc.

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R~=-CElVED
DEC 1 0 1981 t
OhlCt UF CHIEF COUNSEU
CORPORATION FINANCE
1940 Act/1n
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Securities & Exchange commissiori.Ru1.~.... .~;J¡-,~.::::..a. l"~''''~'"--''.''-' 500 North Capitol Street ¡rUb1i07)1':J~ ~ ; DEC 1 0 1981 Washi ngton, DC 20549 \AvailablH ty ....._.. .~..... .. ~~.'".. .d. 1;( P c...~ý. . Rl)CE~IfC SECí\)~ - Gentlemen:
This letter constitutes a request for a no action letter with respect to the participation by Twentieth Century Investors, Inc. (lithe Companyll) in the Indemnified Securities Lending Program of United States Trust Company of New York. The Company is a registered, open-end, diversified investment company of the management type. The custodian of its portfolio securities is United States Trust Company, of New York. By loaning its securities to qualified borrowers the Company is able to realize significant income. In a typical transaction portfolio securities are loaned and cash collateral is received by the custodian and invested. The finder is paid a fee which is negoti ab 1 e and whi ch we understand ranges from 60 to 80 percent of the investment income realized on the collateraL. We understand .further that the finder may remit a portion of his fee to the borrower. The remaining income is shared 1/3 by the custodian and 2/3 by the Company. Alternatively, the collateral does not consist of cash but instead is in the form of a bank letter of credit. The borrower pays interest on the loan, and the net income is divided in the same way, namely 1/3 to the custodian and 2/3 to the Company. The participation in the net income by the custodian gives it an incentive to make the best deal possible for it and the Company. The program is administered entirely by the custodian which determi nes the borrowers to whom securiti es wi 11 be loaned, the interest to be charged to borrowers, the nature of the coll ateral whether cash or letter of credtt, loan limits per borrower, loan limits per securities issue, the finders with whom it will deal and the fees to be paid to finders. ....,;. .... ,..n..... '.~__,,,.' f'

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Securi ties & Exchange Commi ss i on
December 7, 1981
The Board of Directors has (1) authorized the investment of the co 11 atera 1 on ly in overn i ght repurchase agreements or such other securities as may be approved by the Executive Committee (which has not approved any other investments), and (2) authori zed the acceptance of bank letters of credit as collateral. The administrative functions which the custodian is equipped to perform (most of which the Company cannot perform) are:

1. Determination of th~ credit worthiness of borrowers.
2. Negot i at i on of loan terms.
3. Participation or membership in various clearing
   f ac il it i es .
4. L i ason between the fi nder, the borrower and the Company.
   .
5. Delivery of securities to the borrower.
6. Receipt of cash collateral.
7. Investment of cash collateraL.
8. Monitoring market price of securities, and making any
   required adjustment of cash collateral by requesting additional cash, or returning excess cash.
9. Collection of interest and dividends on securities
   loaned.
10. Receipt of securities in return of cash collateral on
    termi nati on of loan.
11. Record keeping of dividends, splits, exchanges and
    similar transactions affecting the loaned securities.
12. Cal cu 1 at i on and payment of fi nder and broker bi 11 s. to.
13. Preparation of month end security position reports.

Securities & Exchange Commission
December 7, 1981
One of the considerations moving the Directors to participate in the program is the i ndemn ity provi ded by the custodi an. The custod i an has agreed to i ndemn ify the Company against any loss resulting from (1) failure to remit when due amounts equal to interest, dividends or other distributions on securities loaned, (2) failure to timely return the securities loaned; (3) failure to maintain the required amount of collateral. So long as the custodian is able to meet its committment, the transaction is virtually riskless. The shift of risk to the custodian by the i ndemnifi cati on agreement provi des the custodi an with the incentive to administer the program with the degree of caution commensurate with its risk. All of the published comments of the staff of ~hich we are aware on this subject are now at least seven years old and, we believe, . are not appropriate to the manner in which the business is now being conducted. The guidelines which we find particularly unsuitable to today's method of doing bU9iness are:

1. The Company must receive 100% cash' collateral from the
   borrower, In some instances in lieu of cash the borrower delivers an irrevocable letter of credit from a bank acceptable to the custodian. We understand that an insistence upon cash collateral would substanti ally narrow the number of borrowers with whom the Company could do business. The risk to the Company would appear to be minimal, for in the case of default by the borrower, the Company could look both to the letter of credit and to the indemnification by the custodian.
2. The Company is not required to pay any service,
   placement or other fees in connection with the loan, or as a f' 1State Street Bank & Trust Co., ~971-1972 CCH Dec 79676 Salomon Brothers, 1972-1973 CCH Dec 79056 State Street Bank & Trust Co., 1973 CCH Dec 79347 Standard Shares, Inc., 1974-1975 CCH Dec 79981 Adams Express Company, 1974-1975 CCH Dec 80043

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Securit i es & Exchange Commi ss i on
December 7, 1981 condition of utilizing brokers, the broker must disclose in writing to the Companys' directors that it is possible to arrange for securities to be borrowed without paying any fee, and neither the broker nor any of its aNil i ated persons is an anil i ated person .of the fund, the investment manager or the principal underwriter, and the Company represents to the broker in writing that its directors have determi ned that the fee is reasonabl e based solely upon services rendered and that the directors separate ly cons i der the propri ety of the fee pa i d to the borrower. These requirements presuppose that the management of the fund and the directors are in contact with the brokers, and are in a position to select the ones with whom they will deal and are in a position to negotiate interest rates, fees, commissions and other terms,' the nature of the collateral and the loan 1 imits. They presuppose that the offi cers of the Company coul d somehow engage in the highly sophisticated business with which they are unfami 1 i ar without the payment of a fee by the Company, . and that the directors have some background or knowl edge wh i ch enable them to determi ne that the fees charged from time to time are reasonable and that they have some means to cons i der the propriety of the fee paid to the borrower. None of these conditions prevail, and neither the officers 'nor the directors of the Company have any means of determining who the borrowers are from time to time, or who the brokers are, or what services they have rendered, and whether the fees and commissions paid to the brokers and borrowers are competitive. The Company has neither the personnel nor the physical facilities to administer the program by performing the functions described above. Accordingly, the Company cannot continue to engage in the program unless some of the guidelines are made to conform to the business as it is now conducted. Otherwise, the Company will be forced to abandon the program which it has found profitable. Thus in a practical sense it is not correct to state that securities may be loaned without the employment of a broker and payment of a fee. The choice is not participation with or without fees; the choice is whether to part i c i pate wi th fees or not part i c i pate at all. We can of course represent, and do represent that no broker or any of its affil i ated persons is qr wi 11 be an affil i ated person of the fund, the investment manager or the principal underwriter. No purpose would be served by requiring an assurance to that effect from the broker. . r

Securities & Exchange Commission
December 7, 1981
For your information, particularly with reference to the expertise required to administer the program and the competitive nature of the business, we enclose documents entitled IISecurity Loans to Brokersll and IIAn Introduction to Securities Lending, II both publ ished by United States Trust Company of New York, and an
article IISecond Thoughts about Securities Lendingll from the
Institutional Investor of September, 1981.
We would appreciate a no action letter from staff will recommend no action if Twentieth participate in the United States Trust Securities Lending Program even if:
you stating that the
Century cont i nues to
Company Indemnified

1. The Company secures as collateral a bank letter of credit
   from the borrower in 1 i eu of cas h.
2. The Company pays service, placement or other fees in
   connection with the loan as determined by the custodian in its day to day admi n i strati on of the Plan. i'
3. The assurances described above from the broker to the
   Company, and the representations from the Company to the broker, are dispensed with. Very truly yours, ( ì ~t. ", / ". / .~ ",.Ju,J~' . ~. C1rVing, Kuraner . Vice President IK/l s to.

Q:ir Ref. "'Nõ. al-720-CC \PUQli!1
'l\æntieth Century Investors, Inc.
File No. aii -ai 7
October 27) 1982
RESPCNSE OF 'lEE OFFICE OF æIEF OXlNSEL
DIVISlOO OF INVES'IMENl MANAGEMENT
Based on the foregoing representations and your oral representations to Elizabeth Tsai of this office, we understand the following. Under a securities lending agreement ("agreerrent") with its custodian Bank, United States Trust Canpany of New York ("Bank"), Twentieth Century Investors, Inc. ("Fund") loans cciiiion stock in its portfolio having a value of not nore than 10 percent of the Fund's net asset value. Pursuant to the agreement, the Bank detennines, aJ"OC)l')ÇJ other things, the brokers to whcrn securities are loaned, the interest to be charged to them, the nature of the collateral (whether cash or irrevocable letter of credit), the finders with whan it deals, and the arocxint of the finders' . fees. As part of the agreement, the Bank has agreed to indeimiify the fund against any loss resulting fran (1) the failure of any borrCMer to remit when due amounts equal to interest, dividends or other distributions on the securities loaned; (2) a default :
on the part of the borrc::Mer in making a timely return of the securities loaned or in failing to maintain the required amount of collateral securing the loan, in either case by crediting the Fund's account, within a reason￾able time following the termination of the loan, with either the securities in kind or, at the Fund i s option, an anount equal to the market value of the securi ties as of the close of business on the day the Fund's account is so credited. The agreement will be amended to provide (1) that each loan must be daily marked to the market and i:fl the aggregate market value : of all securities loaned at the end of the business day exceeds 100 per￾ænt of the collateral then held by the Bank, the oorrcMer shall provide addi tional collateral by the close of the next business day as may be necessary to collateralize the securities loaned to the extent of their full market value; and (2) that an irrevocable letter of credit issued by a foreign bank cannot be accepted as collateral unless that bank is eligible to file, and has filed, an agreement with the Federal Reserve Board, on Form F.R. ~2, to canply with the same rules and regulations applicable to U.S. banks in securities credit transactions. However, this Division expresses no view on whether the letter of credit of such a bank could be provided to the Fund as collateral by a broker or dealer. see securi ties Exchange Act Rule lSc3- 3 (b) (3) (iii) .
section 17(f) of the Investinent Cæipany Act of 1940 ("Act-) requires
every registered management ccmpany to place and maintain its securities and similar investinents ("portfolio securities") in the custody of (1) a bank; (2) a member of a national securities exchange, subject to such rules as the Camiission may prescribe; or (3) such registered canpany, but only in accordance with such rules or orders as the Commission may prescribe. On July 31, 1941, nine IOCX1ths after tJ1e effective date of the Act, the Commission adopted rule 17f-2 under the Act which specifies the conditions r

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-2- \ -'~~~"," : ~. U" t1. ~,..¡,~" : i. ".'~'" , Î .'Ull under which registered management investment canpar1ies may maintain their portfolio securities in their own custody. This rule provides that its safekeeping requirements .shall not apply to securities on loan which are collateralized to the extent of their full market value." In adopting the rule, the Ccmnission stated that the rule "in substance codifies certain accepted practices nore or less generally followed at present in the management of securities. a Investment Cooipany Act Release No. 172, July 31,
1941. Thus, alnost fran the carimencement of the regulation of investment
canpanies, it has been recognized that registered management investment c:aripanies may loan their portfolio securities and that the usual custody requirements do not apply to securities on loan so long as they are fully collateralized . Based on the foregoing, we \tt'Ould not reccmnend that the camiission take any enforcement action under section 17(f) of the Act against the Fund if it loans its portfolio securities under the terms described above. Stanley B. Ju Deputy Chief Counsel f to.

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INVESTORS June 3, 1982
Elizabeth T. Tsai
Off i ce of the Ch i ef Counse 1
Division of Investment Management
Securities and Exchange Commission
500 North Capitol Street
Washington, DC 20549
Dear Ms. Tsai:
With reference to my 1 etter of December 7, 1981, about our Indemnified Securities Lending Program and Section 17f of the 1940 . Act, and to our telephone conversation of June 1, I enclose the following:
Copy of Letter agreement dated November 5, 1980 (executed by Twentieth Century Investors, Inc. on April 10, 1981) between United States Trust Company of New York and Twentieth Century Investors, Inc. ' f An excerpt from the proxy statement with respect to the shareholders meeting on July 15, 1980. An excerpt from the mi nutes of a meet i ng of the Board of Directors on February 28, 1981. (~__'!._ery truly y~ -'- h-'--r~ rving Kaner Vi ce Pres i dent IK/dl Enclosures to.

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UNITED STATES TRUST COMPANY
OF NEW You
~ WALL STREET NEW YORK, N. Y. 1000s
:iu..P5--4500
November 5, 1980
Twentieth Century Investors Inc.
605 West 47th Street
Kansas city, Missouri 64112
Gentlemen:
This letter constitutes our agreement concerning the lending of securities by you to the security brokers approved by you as listed in Attachment A. We shall establish a separate secur i ty lending account in your name and administer any such loans subj ect to the following terms and conditions:
. 1. We shall secure a Broker Loan Agreement in the ferm of Attachment B hereto from ea9h security broker to ¡- whom securities are loaned pursuant to this agree~ent. We shall use our best efforts to complete promptly the delivery of securities against delivery of casn col~ lateral or other collateral acceptable to us for your account. 2.' We shall invest the cash collateral received for your .....~ . ).~ " account from borrowers in our' Has tei 'Notes or in over￾night repurchase agreements earning interest at pre￾vailing rates and shall credit to your account all to. such interest, together with interest or dividends or other distributions paid on securities loaned to borrO.¡ers.
3. We shall provide you with (a) our us~al fo=m of
security advice. recor¿incr th~ ~øl ivp~v ~n~ roro~n~

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UNITED STATES'TRUST COMPANY
£W ~E"" You of securities and cash or other collateral for your account, and (b) weekly statements of trans￾actions, recording principal and income receipts and disbursements for your account. Upon your request, we also shall provide you with copies of all bills for fees paid to brokers or finders.
4. If the aggregate market value of all securities
loaned to a borrower pursuant to this agreement (determined on the basis of the last reported sales prices (regular way) on the national securities ..., exchange on which the securities are traded or, if \ not so traded, as reasonably determined by us) shall exceed, at any time as of the close of business on . any business day, the greater of (a) 105% of the amount of the Current Collateral (as hereinafter defL~ed) or (b) the amount of such Current Col￾lateral plus $10,000, we shall promptly demand that .. the borrower increase the amount of collateral ("mark to market") by an amount sufficient to cause the aggregate amount of the Current Collateral to equal not less than 100% of the then market value of the securities loaned to such borrower pursuant to this agreement. ("Current Collateral" shall to. mean the cash or other collateral initially delivered by the borrower in an amount equal to at least 100% -2-

UNITED STATES TRUST COMPANY Of !'iR"'0 Ynaiii. of the market value of the securities loaned to the borrower pursuant to this agreement, plus the aggregate of all additional amounts deposited by the borrower, if any, and less the aggregate of all amounts released to the borrower, if any.) In such event, we shall demand that the borrower deliver to us for your account, no later than the close of business on the second business day fol￾lowing demand, cash collateral or other collateral acceptable to us in the appropriate amount. S. You shall pay to us for services provided to you under this agreement compenpation at the rates and in the amounts set forth in Atuachment C hereto. #
6. This agreement may be modified by mutual consent
in writing and may be terminated at the option of either party upon three days' prior written notice to the other party i provided i however, that upon # our receipt of a termination notice from. you we shall not make any new loans pursuant hereto.
7. This agreement shall be governed by and construed
in accordance with the laws of the State of New York.
If the foregoing co~ectly sets forth our agreement, please so indicate by signing the enclosed copy of this letter in the place ~rovided below and returning it to us, whereupon

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UNITED STATES TRUST Cc
CW Nn,i YORk this letter shall become a binding agreement between US. ATTEST:
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By
Accepted and agreed to:
Twentieth Century Investors, Inc.
B ..-----.) . tl':' ;(' ,_ yi 'i"?¡Ud' Co' rl' (Ü'tf.'i ( /J ,,-;#/ .' ..t=e:___ Date:('~)~-c''(_' /0/ /?p/ '-"-- -. --'" to. Very truiy yours, UNITED STATES TRUST By nc.-~ b".e'siãent # .

ADDENDUM
UNITED STATES TRUST COMP....NY
Of'N&wY~
This Addendum is added to and forms a part of the letter agreement dated ~iover.iber 5 1980, between / and agreed to A~ri 1 10, 1981 Twentieth Century Investors, Inc. (the "Lender") and United States Trust Company of New York ("U. S. Trust"). In consideration of the fee charged, u. S. Trust hereby agrees to indemnify the Lender against loss in the manner and to the extent set forth below.

1. u.s. Trust shall indemnify the Lender against
   ..., any loss resulting from the failure of any borrower to remit when due amounts equal to interest, dividends or other dis￾tributions on the securities loaned.
2. U. S. Trust shall indemnify the Lender against .
   any loss resulting from a default on the ,part of the borrower in making a timely return of the securities loaned or in failing # to maintain the required amount of collateral securing the loan ("marking to market"), in either case by crediting the account of the Lender, wi thin a reasonable time following the . termination of the loan, with either the securities in kind or, at the option of U. S. Trust; an amount in cash equal to the market value of the securities (determined in the manner pro~ vided in paragraph 4 of the aforesaid letter agreement of which this Addendum is a part) as of the close of business on the day to. the account of the Lender is so credited. Accepted and agreed to:
   Twentieth Century Investors, Inc.
   UNITED §TATES TRUST ~O~ AJ.'JY OF NEW
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   YORK
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UNITED STATES TRUST COMPANY
OF SEW YORK
45 WALL STREET NEW YORK. N. Y. 10005
2U-42S-4500
October 31, 1980
ATTACHMENT "A"
List of Brokers Covering Lending of Securities Allen & Company Asiel & Company Aubrey G. Lans ton Arnhold & S. Bleichroeder 3ache Halsey Stuart Shields Inc; Eberstadt Edwards, A. G. Ernst & Co. First Boston Freeman Securities Barclay's Bank Gintel & Co. , , Bear Stearns Goldman Sac~iS A. G. Becker Harris Trust - Chicagc Bernstein, Sanford C & Co. Herzfeld & Stern ~ Boesky, Ivan F. & Co.' Hutton, E. F. Inc. Briggs, Schaedle Jeffries & Co. .I Carroll McEntee Josepthal & Co. Chapdelaine l 2131 Colin, Hochstin Co. Kaufman, Alsberg Keefe Bruyette & Woods Cowen' Co. Kidder Peabody & Co. to. Dillon Read & Co. Laidlaw, Adams & Peck Discount Corp. of New York )onaldson, Lufkin & Jenrette Sec. Lasker, Stone & Stern
C. J. Lawrence
Drexel Burnham Lambert Lehman Bros., Kuhn Loeb

. UNITED STATES TRUST COMPANY or N.. Yoa..
-2- October 31, 19 ao
List of Brokers Covering Lending of Securities (Cont' d) Mabon Nugent Robb, Peck & McCooey Co., Inc. Ropinson Humphrey Rothschild L. F. Unterberg Towbin Lewco Lombard-Wall Inc. McLeod, Young, Weir Inc. Salomon Brothers Merrill Lynch Securi ties Settlement Mesirow MOrgan Stanley & Co., Inc. Shearson Leob Rhoades Shelby Cullom Davis Neuberger & Berman New Japan Securities Seligman, J ~ & w. Smi th Barney, Harris .Upham Nuveen (John) & Co. Spear Leeds & Kellogg Oppenheimer & Co. Stuart Brothers " Paine, Webber, Jack~on & Curtis Sutro & Co., Inc. Pershing & Co. Prescott Ball & Turben Swiss American Securities Thompson & McKinnon Sec., ¡nc::. Pollock, Wm. E. Tucker Anthony & R.L. Day Purcell Graham & Co. Wagner Stott & Company i Quincey, Charles Weiss Peck & Greer Rhode Island Hospital Trust Richardson Securities Wheat First Securities Witter (Dean) Reynolds & Sec. to.

Attachment B
AGREEMENT, dated , 19 , between UNITED
STATES TRUST COMPANY OF NEW YORK, as agent for various cus￾todial accounts (the "Lender"), and (the "Borrower").

1. Loan of Securities. The Lender, in its sole
   discretion, may from time to time lend securities to the Borrower at the Borrower i s request. If the Lender decides to make such a loan, it shall deliver or cause to be de￾livered to the Borrower certificates representing the se￾curities loaned in form for good delivery or shall direct that the securities loaned be credited to the Borrower's ac￾count at Depository Trust Company. (Each security loaned to the Borrower is hereinafter called a IISecurity" and col￾lectively the "Securities"). Each such loan shall be evi￾denced by appropriate receipts or notifications customary ~ in such transactions. , , Borrower shall deliver to the Lender cash collateral or other
2. Collateral. On receipt of the Securities, the
   collateral acceptable to the Lender in an amount equal to at least 100% of the market value of the Securities. (The amount of any such cash or other collateral plus the aggregate of all additional amounts depo?ited by the Borrower with the Lender pursuant to paragraph 3 hereof and less the aggregate

of all amounts released by the Lender to the Borrower pur￾suant to paragraph 3 hereof' are hereinafter called the "CurrenL Collateral"). The market value of the Securities and of any securities accepted by the Lender as collateral shall be determined on the basis of the last reported sales prices (regular way) on the principal national securities exchange on which the Securities or such securities accepted as collateral are traded or, if not so traded, as reasonably determined by the Lender. The Current Collateral shall secure all obligations of the Borrower to the Lender hereunder, and the Lender, in a9di tion to all its other rights with respect thereto under this Agreement, shall have a security interest in and lien upon the Current Collateral and shall have a right of set-off with respect to , all obligations of the Borrower to the Lender whether aris- ~ ing under this Agreement or otherwise.
3. Marking to Market. If the aggregate market value
of the Securities (determined in the manner provided in para- i graph 2 hereof) shall exceed, at any time as of the close of business on any business day, the greater of (a) 105% of the i amount of the Current Collateral or (b) the amount of such Current Collateral plus $10,000, the Lender may, by notice to the Borrower, demand that the Borrower increase the Cur￾rent Collateral by delivering to the Lender, no later than to. the opening of business on the business day following such demand (or such later time as may be speci fied by the Lender in such demand), cash collateral or other collateral acceptable

to the Lender in an amount sufficient to cause the aggregate anount of Current Collateral to equal not less than 100% of the then market value of the Securities. If, at the close of business on any business day, the amount of Current Collateral shall exceed 110% of the aggregatè market ,value of the Se,cur i ties, the Borrower may, by notice to the Lender, demand that the Lender release to the Borrower, no later than the close of business on the, business day following such demand, an amount of Current Collateral (to be selected by the Lender) necessary to . " cause the aggregate amount of Current Collateral not to exceed 100% of the then aggregate market value of the Securi ties. ~
4. Termination of Loan.
(a) The Borrower may terminate a loan of any Securities upon 24 hours prior notice to the Lender. In # addition to its right to terminate any or all loans pursuant to paragraph 7 hereof, the Lender may terminate ,a ~oan of any Securities upon five business days prior notice to the Borrower, provided, however, that if the Securities loaned are United States Government obligations or obligations of United States Government Agencies, the Lender may terminate the loan on one to. business day prior notice to the Borrower. The effective date' as of which a loan of any Securities is terminated, whether pursuant to this paragraph 4 (~) or otherwise pursuant to the terms of this Agreement, is hereinafter called the "Termination Date" .

(b) On the Termination Date, the Borrower shall deliver the Securities which are the subject of the termina ted loan in form for good deli very to the Lender or credit such Securities to the account of the Lender at Depository Trust Company or, in the case of u.s. Treasury securities, in the Federal Reserve book-entry system. Upon return of such Securities to the Lender as aforesaid, the Lender shall re￾deliver to the Borrower cash or other collateral in an amount equal to the amount of the Current Collateral securing the loan of such Securities, less any amounts due and owing to the Lender pursuant to this Agreement. The five-day rule of New York Stock Exchange Rule 160 and American Stock Exchange Rule 862 shall not apply to the obligations of the' Borrower to return the Securities, but such Securities shall be promptly delivered ~ or credited to or for the account of the Lender on the Ter￾mination Date. '*
5. Dividends, Distributions r etc. The Lender shall
be entitled to receive and retain all distributions made on or with respect to the Securities, including ali cash,divi￾dends, stock dividends, interest, warrants and all other distr ibutions, and the Lender shall retain and may exercise all rights or options granted to or held by the holders of the Securities to purchase additional securities. If any to. such distribution shall be made ~~t or received by, the Bor￾rower, it shall promptly remit the same, with all necessary endorsemen ts, to the Lender.
6. Use of Collateral. The Lender may commingle

'\ the Current Collateral with its own funds, may transfer all or any portion of the Current Collateral among the various custodial accounts for which it is acting as agent hereunder as necessary to assure that the obligations of the Borrower to each such account are adequa tely secured, and may use or invest the Current Collateral as the Lender may see fit, at its own risk and for its own account, and shall retain aii income and profit therefrom and shall bear all losses from any such use and investment. The sole obligation of the Lender with respect to the Current Collateral shall be to return so much of the Current Collateral to the Borrower as the Borrower may be entitled pursuant to paragraph 4 hereof upo~ the termination of the loan of the Securities which the Current Collateral secures. l
7. Remedies for Default by Borrower. In the event
that the Borrower shall breach any of its covenants, agree￾ments or obligations contõ ined herein (including, without # limi tation, the obligations of the Borrower to "mark to market" pursuant to paragraph 3 hereof, to returin any Se- , . curities to the Lender on the Termination Date pursuant to paragraph 4 hereof or to remit all distributions on or with respect to the Securities to the Lender pursuant to paragraph 5 hereof), the Lender shall have, in addition to all other to. rights and remedies allowed by law (including the right of a secured party under the Un i form Commerc ial Code), the right to terminate immediately any or all loans of Securi￾ties and to apply the Current Collateral to the payment of the purchase pr ice (including commissions, taxes and other

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. , costs) of a like amount of the Securities. In the event the Current Collateral shall be less than such purchase price or shall be less than the market value of the Securi￾ties (determined in the manner provided in paragraph 2 hereof) as of the clpse of business on the Termination Date, or in the event the Borrower shall have failed to deliver any other payments or distributions due to the Lender pursuant to this Agreement, or in the event of any loss suf￾fered by the Lender as a result of breach by the Borrower of any of the covenants, agreements or obligations contained herein, the Borrower shall be liable to the Lender for aii such losses, deficiencies and other amounts plus interest at the rate charged on the Termination Date by, United States r Trust Company of New York on broker call loans,
8. Transfer Taxes and Costs. All transfer taxes
and necessary costs with respect to the transfer of the Se- ~ curities, either by the Lender to the Borrower or by the Borrower to the Lender, shall be paid by the Borrower. If , the Lender shall incur any loss by reason of the Bdrröwer IS failure to pay all said taxes and costs as may be due, the Lender shall be entitled to receive the .same from the Bor￾rower and may retain an amount of the Current Collateral sufficient to satisfy its clbim against the Borrower in re￾spect of said taxes and costs.
9. Notices, Deliveries, etc. All notices, deliveries

. ". , and payments pursuant hereto shall be sufficient if in writ￾ing and delivered, or mailed by registered or certified mail, to the party entitled to receive such notice, delivery or payment at the following addresses:
If to the Lender:
United States Trust
45 Wall Street
New York, New York
Attention: Louis C.
Company of New York
10005
Perrone
If to the Borrower:
Attention:
or to such other address as either party may furnish in wr i t￾ing to the other party. Notices may. also be given by cable, telex or telegram, confirmed by regist~red or certified l mail. Demands and notices pursuant" to paragraphs 3 and 4 may be given orally, confirmed by registered or certified mail. All notices given by registered or certified mail ... shall be effective upon receipt, and all notices given orally or by cable, telex or telegram shall be effective w.heD made.
10. Regulation T. The Borrower represents to and
covenants with the Lender that the Securities borrowed by it are being used only for such purposes as are specifically permitted by Regulation T of the Board of Governors of the to. Federal Reserve System, particularly Section 220.6 (h) thereof.
11. Miscellaneous. This Agreement and the rights
of the parties hereunder shall not be assignable by either

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party without the prior written consent of the other party.
Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. This Agree￾ment shall not be changed except by an instrument in writing signed by each of the parties hereto.
12. Governing Law. This Agreement shall be gov￾erned by and construed in accordance with the laws of the
State of New York.
13. Headings. Paragraph headings used in this
Agreement are used solely for convenience and shaii not affect the construction of this Agreement. f UNITED STATES TRUST COMPANY OF NEi-J YORK as agent for vari-ous custodial accounts' By .., By to.

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Attachment C
SCHEDULE OF UNITED STATES TRUST COMPANY FEES
WITH INDEMNIFICATION PROVISION

1. Loans using cash collateral
   a. Flat fee of $50 for each loan. b. Based on monthly average interest rate of U. S. Trust Company Master Notes:
   ...,
   If the Master Note interest rate is 60/0 or less, the annual charge will be 1% on average invested collateral. If the Master Note inte rest rate is over 6%. but not more than 8%. annual charge will be 1 1/4% on average invested collateral. If the Master Note interest rate is over 8%. but not more than 10%. the annual ~harge will be 1 1/2% on average invested collateral. If the Master Note interest rate is over 10%, the annual charge will be 2% on average invested collateraL. ..
2. Loans using other than cash collateral
   Fee will be 1/3 of the income generated from each loan.. to.

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"",~. '- ...". .- "':S.' ....::..1.,...:... '. .~, ' ., . ' ",':- .I ../ " .' .'" .' ,..~" ".. '~. ,....- ~; .'; ",' ,'J . ... .', . .~ '-','.'." .... .' . -:i:' .,'. , .. I. . ~ ..~.. ~.. . .... . .....:. . -', :.' ";. .; ".," .." . . I . . - "'.: ~ ::.' ~. . .:':.~.; ," ". ,",: "., . ".: ":'.' ", . .. . '.'~. " ~ . :. .' ". ' '. . '. ". '. . . .'::".. ", " PROXY STATEMENT AND PROXY -, ,). ..~., r NOTICE OF o Annual Meeting JULY 15, 1980 IMPORTANT Stockholders who do not expect to attend the meeting are urged to sign, mark preferences on, and return their proxy in the enclosed prepaid envelope. This is imp'ortant in order that a ,to. quorum may be present at the meeting.

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IMPORTANT... SEND IN YOUR PROXY
It is Urgently Requested That You Date, Fill In and Sign the Enclosed Proxy and Return it Promptly, This will Save Your Company the Expense of Follow-Up Letters, Telephone Calls, Etc. TWENTIETH CENTURY INVESTORS, INC. 605 WEST 4TfH STREET . KANSAS crn', MISSOURI 64112 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS r :
To the Stockholders of Twentieth Century Investors, Inc.
NOTICE IS HEREBY GIYE~, that the Annual Meeting of the Stockholders of Twentieth Century Investors, Inc., a Delaware Corporation, will be held at the office of the Corporation, 605 West 47th Street, Kansas City, Missouri on Tuesday, July 15, 1980, at 2:00 o'clock P.M. for the purpose of:
(1) Electing a Board of Directors of seven members to hold office for the ensuing year and until their successors are duly elected and qualified; (2) Approving or disapproving the Management Agreement with Investors Re￾search Corporation (3) Considering and acting upon a proposal to, amend the statement of fundamen￾tal policy to permit loans of corporate assets (4) Considering and acting upon a proposal to amend paragraph 5 of Article IVof the Certificate of Incorporation to permit loans of corporate assets (5) Considering and acting upon a proposal to change the statement offundamen￾tal policy of Twentieth Century Select Investors; (6) Ratifying or rejecting the selection by the Board of Directors of Baird, Kurtz & Dobson as independent auditors for the year ending October 31, 1980; (7) Transacting such other business as may properly come before said meeting or any adjournment or adjournments thereof. IMPORTANT - if you are unable to be present at the meeting, please mi in, sign, and return the enclosed proxy to this OWIcc. It is very important that you sign and send your Proxy to your Corporation, or that you attend the meeting in person. The Corporation is required to hold an annual meeting of stockholders each year and unless a majority of the outstanding voting shares is represented at the regular meeting, it will be necessary to adjourn the meeting and to incur considerable expense in order to secure the n~ssary proxies or stockholders to constitute a majority at the adjourned meeting. In accordance with a resolution of the Board of Directors, stockholders of record at the close of business May 30, 1980, shall be entitled to notice of and to vote at the said meeting and at any adjournment or adjournments thereof. By order of the Board of Dirpctors, FRANCIS J, RAW, Secretary OJ ':1' f J iiiw 6, i 980

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disapprove the Agreement,
The Management Agreement is set out herein verbatim as Exhibit A. For a summary of the tenns of the Agreement, see the caption "The Management Agreement" at page 3 above., (3) AMENDING THE STATEMENT OF FUNDAMENTAL POllCY TO PERMIT THE CORPORATION TO LOAN CASH OR ASSETS TO OTHERS. The present statement of fundamental policy of Twentieth Century Investors, Inc. states:
"The CorpQratiC!n shall not lend any of its cash funds or other assets to any person, firm or
corporation except through the purchase of marketable debt securities." .....
The management proposes to change the statement as foilows:
"The Corporation may lend its portfolio securities to unaffiliated persons subject to the rules end regulations adopted under the Investment Company Act of 1940." t In the past few years, a growing number of institutions have been lending their portfolios. Brokers orrow securities to cover short sales and for other reasons. In return for the securities, the lending institution receives cash collateral in an amount not less than the value of the securities'loaned. The cash collateral can then be invested to realize additional inc-orne. The only risk to the institution occurs if the value of the stock increases and if the broker defaults on the loan, in which case the lending institution loses the appreciation in the value of the security. The risk can be minimized by careful selection of borrowing brokers and by observing the rules and regulations of the Securities and Exchange Commission, which state: (1) the Corporation must receh'e 100% cash collateral from the borower; (2) the borrower must add to the cash collateral whenever the price of the loaned securities rises (i. e., mark to market on a daily basis); (3) the Corporation may terminate the loan at any time; (4) the Corporation must receive reasonable interest on the loan, together with any interest, dividends, or other distribution on the loaned securities, and any increase in their market value; (5) the Corporation may not be required to pay any service, placement, or other fees in connection with such a loan unless the Corporation's Board of Directors has determined that the fee is t) reasonable and based solely on the services rendered; (6) the Corporation must retain the votiag rights to the loaned securities, The management believes that, properly administered, a program of loaning portfolio securities to brokers can provide Twentieth Century with additional income at minimal risk. In order to undertake the program, the statement of fundamental policy must be changed as stated above. (4) AMENDING PARAGRAPH 5 OF ARTICLE IV OF THE CERTIFICATE OF INCORPORATION Q,f THE CORPORATION Paragraph .5 of Article IV of the Corporation's Certificate of Incorporation states:
"The Corporation shall not lend any of its cash funds or other assets to any person, firm or corporation except through the purchase of bonds, debentures, notes or other evidences of indebtedness as herein authorized," The management proposes to amend the Certificate of Incorporation by deleting that paragraph. -10- , '.~. ,.' .. .i " ",:' . .. ' 1 ~ . ~ ..,. .' '. "" ',,' ""; :.~ t. '; '.,'.:.. . ~ ;. jti;;l,j;;:'t · Í:i,,~"~:; \ '. ,,:,\i;(";:.-, .': " '.ß.:.::' :;.." ,"
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The reason for the amendment is to permit the corporation to lend its portfolio securities as described in the caption above, "To Amend the Statement of Fundamental Policy to Permit the Corporation to Loan Cash or Assets to Others." (5) CHANGING THE STATEMENT OF FUNDAMENTAL POLICY OF TWENTIETH CENTURY SELECT INVESTORS (TO BE VOTED ON ONLY BY SELECT INVESTORS) t The statement of fundamental policy of Twentieth Century Select Investors states:
"Twentieth Century Select Investors is designed for investors who are interested in current cash distributions. The primary objective of Select Investors is to produce cash distributions from either or both interest and dividends, and from capital gains, and at the same time to seek significant appreciation of the value of your investment." Management proposes to change the investment objective to read as follows:
"Twentieth Century Select Investors is designed for investors who are interested in having lfieir money grow and also in receiving distributions from net investment income, which the investor may elect to receive in cash or reinvest in additional shares. The primary objective is capital growth through investment in securities which the management considers to have better , than average prospects for appreciation of value and which also pay qividends or interest." The change in the statement offundamental policy will not change the kinds of securities selected for the portfolio of Twentieth Century Select Investors. Those securities will, as they have În the past, be those which management believes to have better than average prospects for appreciation in value and which also pay dividends or interest. If the policy is successful, holders of shares of Twentieth Century Select Investors will receive cash distributions from both ordinary income and capital gains. The management believes that the current statement misplaces the emphasis on current cash distributions and that the proposed restatement of fundamental policy is more descriptive and more understandable to shareholders. The change will not affect the portfolio turnover rate of Select Investors. ..., # , (6) RATIFYING OR REJECTING EMPWYMENT OF AUDITORS Subject to the approval of the stockholders, the Board of Directors recommends the employment of Baird, Kurtz & Dobson as independent auditors with respect to the operations of the Corporation for the year ending October 31, 1980, The selection and recommendation of Baird, Kurtz & Dobson, as auditors was made at a meeting of the Board of Directors held November 28, 1979, by a majority of those Directors who are not investment advisors of, or interested persons of an investment advisor of, or officers or employees, of the Corporation. Neither Baird, Kurtz & Dobson nor any of its partners has any financial interest in Twentieth Century Investors, Inc. nor has had any connection during the past three years with Twentieth Century Investors, Inc., in any capacity other than as independent public accountants. The only professional service provided by the Corporationli accountants was that of thè annual audit and in conjunction therewith to prepare the Corporation's tax return. The fee for the tax return was about 7% of the audit fee. Representatives of Baird, Kurtz & Dobson, the Corporation's accountants, are expected to be present at he Stockholders meeting with the opportunity to make a statement if they desire to do so and are expected to 'be available to respond to appropriate questions. -ll-

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TWENTIETH CENTURY INVESTORS, INC.
MINUTES OF MEETING OF BOARD OF DIRECTORS
A meeting of the Board of Directors of Twent ieth Century Investors, Inc. was held at the office of the Corporat ion at 605 West 47th Street, Kansas City, Missouri at 9:00 a.m. on Saturday, February 28, 1981 pursuant to notice. All of the Directors, namely Messrs. Brown, Doering, Lundgaard, Raw, Si lver, Stowers and Urie were present. Also present were Messrs. Nevi lIe, J, Michael Urie, von Waaden and Kuraner. Mr. Stowers called the meeting to order and presided. Mr. Kuraner acted as secret ary of the meet ing and recorded the minutes. The minutes of the previous meeting of the Board having been circulated to the Directors by mail, the reading of the minJtes was waived. . The Chairman stated that the first business to come before the meeting r was the proposed Indemnified Security Lending Program of United States Trust # Company. The Board reviewed Mr. Kuraner's memorandum of January 14,1981 which had been mailed to them; the proposed Agreement of November 5, 1980; the i Addendum constituting the indemnification provision, and attachments.' It was the consensus of the Board that the Corporation should not delegate to United States Trust Company discretion to select corporations to whom the cash col￾lateral would be loaned by means of the Master Notes, and that the program (~ should be entered into only if the cash collateral would be invested in over￾night repurchase agreements or other s~urities satisfactory to the Executive Committee. Thereupon, upon motion made by Mr. Urie, seconded by Mr. Raw, and unanimous ly carried, it was:
, RESOLVED, that the officers of this Corporation are authorized, in its name and on its behalf, to enter

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I into the United States Trust Company Indemnified Security Lending Program but only if the cash col￾lateral is invested in overnight repurchase agree￾ments or in other securit ies specifically approved by the Corporation's Executive Committee. RESOLVED FURTHER, that the Executive Committee is authorized to make such changes in the documents submitted as the Executive Committee shall deem appropriate and in keeping with the sense, of the Board and this resolution. The Chairman stated that the next business to come before the meeting was to reconsider and act upon the resolution fixing the time of determining the net asset value of the Corporation's shares as described in Mr. Kuraner i s memorandum of February 14, 1981. The Chairman stated that the Corporation does not invest in securities other than those whose prices are readily avail￾able from domestic stock exchanges or over the .counter markets and that the determination of net asset value had not presented any significant problems. Thereupon, upon motion by Mr. Lundgaard, seconded by Mr. Silver and unani￾t mously carried, it was:
RESOLVED, that the current net asset value of the shares of this Corporat ion shall be computed at the ~lose of business on the New York Stock Exchange, i.e. 3:00 p.m. Central Time, and that such determin￾ation shall prevail until the next day on which the New York Stock Exchange is open for business. The Chairman cal led it to the Board i s attention that at the previous meeting it had created a new class of shares denominated Twentieth Century Plaza Investors and that management had concluded that the name Twentieth Century Ultra Investors would be preferable. Thereupon, upon motion made, 'to. seconded and unanimously carried, it was:
RESOLVED, that the new class of shares to be issued by this Corporation shall be called Twentieth Cen￾tury Ultra Investors instead of Twentieth Century Plaza Investors and that the resolution adopted at the previous meeting of the Board with respect to a new c lass of shares cal led Twentieth Century Plaza Investors is hereby amended accordingly.