[front cover]
April 30, 2000
AMERICAN CENTURY(reg.sm)
Semiannual Report
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[graphic of person looking at computer screen]
Select
Heritage
Growth
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American
Century
[inside front cover]
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[left margin]
SELECT
(TWCIX)
-----------------------------
HERITAGE
(TWHIX)
-----------------------------
GROWTH
(TWCGX)
-----------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, rewarded growth investors in Select,
Heritage and Growth, all of which outperformed their relative performance
benchmarks.
The period was short, but momentous. So-called "New Economy" stocks led the
market -- in both directions. Investors stampeded into technology-oriented firms
at the end of 1999 and during the first quarter of 2000, triggering one of the
most powerful market advances ever. Then, suddenly, came the reminder that some
"old" rules of common stock investing still apply -- including one American
Century's growth fund managers hold dear: stock prices ultimately depend on
earnings.
Turning to corporate matters, the months covered in this report have been
important ones for American Century. Besides serving the nearly two million
investors who look to American Century for investment management, we have also
worked hard to serve and support the 3,000 people who work on your behalf -- to
create a positive, safe, and productive work environment. This commitment was
recognized and rewarded in late 1999 when American Century ranked in the top 40
of Fortune magazine's "100 Best Companies to Work For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and is essential in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's fund performance
reports like this one have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal from DALBAR. You can count on us to keep
looking for ways to improve the reports, literature and statements you receive
from us.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/ /signature/
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
SELECT
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Schedule of Investments ................................................ 8
HERITAGE
Performance Information ................................................ 11
Management Q&A ......................................................... 12
Schedule of Investments ................................................ 15
GROWTH
Performance Information ................................................ 18
Management Q&A ......................................................... 19
Schedule of Investments ................................................ 22
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ......................................................... 24
Statements of Operations ............................................... 25
Statements of Changes
in Net Assets ....................................................... 26
Notes to Financial
Statements .......................................................... 27
Financial Highlights ................................................... 31
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 40
Background Information
Investment Philosophy
and Policies ..................................................... 41
Comparative Indices ................................................. 41
Portfolio Managers .................................................. 41
Glossary ............................................................... 42
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* The highlight of the six months ended April 30, 2000, was the millennial
market event of record highs for the S&P 500, the Nasdaq Composite, and the
Dow. 1999 represented the fifth consecutive year that the S&P 500 returned 20%
or better. The tech-heavy Nasdaq was the biggest winner, closing 1999 by
posting an unprecedented gain of 86%--the largest one-year gain ever recorded
by any U.S. market index.
* "New Economy" stocks, particularly those of Internet and technology companies,
still held appeal for investors, but in such a rich atmosphere, uncertainty
got a foothold and volatility became the norm in this group. Despite rising
interest rates, valuations of technology stocks continued to climb until
investors lost faith, taking the Nasdaq down 25.33% in a single week in April.
SELECT
* Select gained 9.75% for the six-month period, outperforming its benchmark, the
S&P 500 Index, which was up 7.19%.
* Growth stocks, the pillars of Select's portfolio, led the market over the six
months, which rewarded the fund's discipline of seeking companies with
accelerating earnings and revenues.
* Holdings of technology companies, which comprised roughly a third of the
portfolio, were among the largest and most profitable positions. Similarly,
investments in companies involved in wireless telecommunications boosted
performance.
* Securities in financial services firms, especially banks, and home products
companies detracted from performance. Banks suffered in the rising interest
rate environment, while retail companies weakened under the pressure of a
potential slowdown in consumer spending.
HERITAGE
* Heritage gained 44.90% during the six-month period, beating its benchmark, the
S&P MidCap 400, which posted an increase of 21.26%.
* A speculative market climate and aggressive orientations led investors to
mid-cap stocks, the hallmark of Heritage's portfolio, which proved
particularly beneficial to performance.
* Electrical equipment providers, especially in wireless telecommunications,
were the best performers during the period. Strong positions in technology and
healthcare also boosted results.
* Though Heritage was underweight in financial services firms, its few holdings
in banks detracted from performance amid rising interest rates.
GROWTH
* Growth posted a gain of 20.99% during the six-month period, surpassing its
benchmark, the Russell 1000 Growth Index, which gained 18.72%.
* The fund's high-confidence holdings in technology-oriented firms, especially
those involved in increasing the speed and capacity of the Internet, provided
strong results. Burgeoning demand for wireless communications equipment and
services also played to Growth's strength.
* In addition to its technology holdings, Growth's holdings in healthcare firms
were bright spots. The fund looks for drug companies with strong product
pipelines and low exposure to competition from generic manufacturers.
* Performance was restrained by individual holdings, such as Microsoft, which
foundered amid an earnings slowdown and antitrust rulings.
[left margin]
SELECT(1)
(TWCIX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 9.75%(2)
1 Year 13.38%
INCEPTION DATE: 6/30/71(3)
NET ASSETS: $7.7 billion(4)
HERITAGE(1)
(TWHIX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 44.90%(2)
1 Year 54.89%
INCEPTION DATE: 11/10/87
NET ASSETS: $1.7 billion(4)
GROWTH(1)
(TWCGX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 20.99%(2)
1 Year 32.16%
INCEPTION DATE: 6/30/71(3)
NET ASSETS: $10.3 billion(4)
(1) Investor Class.
(2) Not annualized.
(3) Although the original inception date was 10/31/58, this inception date
corresponds with the management company's implementation of its current
investment practices.
(4) Includes Investor, Advisor, and Institutional classes.
Investment terms are defined in the Glossary on pages 42-43.
2 1-800-345-2021
Market Perspective from James E. Stowers III
--------------------------------------------------------------------------------
[photo of James E. Stowers III]
James E. Stowers III, Chief Executive Officer of American Century
Common stock investors will look back on the six-month interval covered by
this report as one of the more extraordinary short-term experiences in stock
market history.
The major market indices -- the Standard & Poor's 500 Index, the Nasdaq
Composite, and the Dow Jones Industrial Average -- all entered the new
millennium at record highs. The Nasdaq ended 1999 with a stunning 86% gain, the
largest one-year increase in any U.S. market index -- ever. The S&P 500 notched
its fifth consecutive year with a return of 20% or more.
HIGH EXPECTATIONS
This performance led investors to carry unrealistically high expectations
into 2000. Surveys showed the average investor expected the stock market overall
to rise 15% in 2000, and his or her stock portfolio to gain 18%. Perhaps they
also were reading headlines like this one from our hometown paper, The Kansas
City Star, in January: "New tech stocks defy old rules."
The Star appeared to be right. "New Economy" stocks -- especially those
associated with the Internet and biotechnology -- were all investors wanted to
own.
But what may have started out as "rational exuberance" for technology
issues turned into rampant speculation as 2000 progressed. This was most evident
in the extraordinary strength of the new-issue market, where hundreds of
unseasoned, untested, "dot-com" companies soared in price, as investors
scrambled to own the next America Online or Yahoo!. The technology run-up blew
past three interest rate increases as if they had never happened.
Herd-like behavior took the Nasdaq Composite up 70% from October 31, 1999,
the start of this report period, to a record 5,049 on March 10. In contrast, the
S&P 500 gained 2.63%. Many aggressive growth funds needed an extra decimal space
in the newspaper mutual fund tables to accommodate their outsized returns.
$2 TRILLION DISAPPEARS
But extreme market moves of this dimension do not last forever. In early
March, a controversy involving the ownership of genetic information staggered
the biotech sector, and one month later, the malaise had spread to technology.
By April 10, investors had decided how high was too high and let the air out of
the technology balloon. Nasdaq suffered its worst week ever, dropping 25.33%.
More than $2 trillion in investor wealth evaporated.
Right now, the stock market is moving in fits and starts, not sure where it
wants to go. Investors' enthusiasm for technology is still high; however, they
also have higher standards for the tech stocks they own. With first-quarter
earnings appearing strong, wages up and the economy humming, the tug between
interest rates and inflation will weigh on the stock market for a while, and
there will be a greater degree of volatility. That means investors may have to
recapture something that's been missing lately: patience.
[right margin]
"INVESTORS' ENTHUSIASM FOR TECHNOLOGY IS STILL HIGH; HOWEVER, THEY ALSO HAVE
HIGHER STANDARDS FOR THE TECH STOCKS THEY OWN."
MARKET RETURNS
FOR THE SIX MONTHS ENDED APRIL 30, 2000
S&P 500 7.19%
S&P MIDCAP 400 21.26%
RUSSELL 2000 18.72%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
[data for line chart]
S&P 500 S&P Mid-Cap 400 Russell 2000
10/31/1999 $1.00 $1.00 $1.00
11/30/1999 $1.02 $1.05 $1.06
12/31/1999 $1.08 $1.12 $1.18
1/31/2000 $1.03 $1.08 $1.16
2/29/2000 $1.01 $1.16 $1.35
3/31/2000 $1.11 $1.26 $1.26
4/30/2000 $1.07 $1.21 $1.19
Value on 4/30/00
S&P 500 $1.07
S&P Mid-Cap 400 $1.21
Russell 2000 $1.19
www.americancentury.com 3
Select--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 6/30/71)(1) (INCEPTION 8/8/97) (INCEPTION 3/13/97)
SELECT S&P 500 SELECT S&P 500 SELECT S&P 500
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(2) 9.75% 7.19% 9.69% 7.19% 9.83% 7.19%
1 YEAR 13.38% 10.13% 13.18% 10.13% 13.55% 10.13%
====================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 26.90% 23.69% -- -- 27.15% 23.69%
5 YEARS 24.15% 25.26% -- -- -- --
10 YEARS 16.20% 18.78% -- -- -- --
LIFE OF FUND 17.72% 13.77% 21.95% 18.41% 27.10% 23.24%
</TABLE>
(1) Although the fund's actual inception date was 10/31/58, this inception date
corresponds with the management company's implementation of its current
investment philosophy and practices.
(2) Returns for periods less than one year are not annualized.
See pages 40-42 for information about share classes, the S&P 500 Index and
returns.
GROWTH OF $10,000 OVER 10 YEARS
[mountain chart data below]
Value on 4/30/00
S&P 500 $55,896
Select $44,860
$10,000 investment made 4/30/90
Select S&P 500
Date Value Value
4/30/1990 $10,000 $10,000
4/30/1991 $11,611 $11,762
4/30/1992 $12,839 $13,412
4/30/1993 $13,662 $14,651
4/30/1994 $14,198 $15,431
4/30/1995 $15,210 $18,127
4/30/1996 $18,236 $23,603
4/30/1997 $21,981 $29,534
4/30/1998 $30,816 $41,664
4/30/1999 $39,570 $50,755
4/30/2000 $44,860 $55,896
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The S&P
500 Index is provided for comparison in each graph. Select's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the S&P 500 Index do not. The graphs
are based on Investor Class shares only; performance for other classes will vary
due to differences in fee structures (see the Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
[bar chart data below]
Select S&P 500
Date Return Return
4/30/1991 16.11% 17.56%
4/30/1992 10.58% 14.05%
4/30/1993 6.41% 9.22%
4/30/1994 3.92% 5.33%
4/30/1995 7.13% 17.42%
4/30/1996 19.89% 30.13%
4/30/1997 20.54% 25.10%
4/30/1998 40.19% 41.01%
4/30/1999 28.41% 21.80%
4/30/2000 13.38% 10.13%
4 1-800-345-2021
Select--Q&A
--------------------------------------------------------------------------------
[photo of Kenneth Crawford and Jerry Sullivan]
An interview with Kenneth Crawford and Jerry Sullivan, portfolio managers
on the Select investment team.
HOW DID THE FUND PERFORM?
For the six months ended April 30, 2000, Select posted a solid 9.75%
return.* The fund beat its benchmark, the S&P 500, which returned 7.19%.
WHAT ENABLED SELECT TO OUTPERFORM THE S&P 500?
Growth stocks--which are the core of Select's portfolio--continued to be
the market leaders over the past six months. Although stock prices experienced
greater day-to-day volatility and different sectors quickly went in and out of
favor, investors generally flocked to companies that produced strong earnings
and revenue growth. These are the kinds of stocks we own, so we were rewarded
for staying true to our investment philosophy.
WILL YOU PROVIDE A REFRESHER ON SELECT'S INVESTMENT APPROACH?
We buy the stocks of companies whose earnings and revenues are growing at
an accelerating rate. We're looking for a consistent pattern, such as profit
growth that increases from 10% to 15% to 25%. That's what we mean by earnings
acceleration. This reflects our belief that, when it comes to stock investing,
"money follows earnings."
We also monitor what we call "leading indicators"--signs that the earnings
growth of certain companies may soon be accelerating. Our goal is to invest as
early as possible in the acceleration process.
CAN YOU GIVE AN EXAMPLE OF THIS?
One indicator we tracked closely over the past six months was the price of
oil. The profits of energy services companies--which provide equipment and
services for oil and gas drillers--are leveraged to the price of oil. In other
words, their earnings increase or decrease dramatically as oil prices move up
and down.
As the price of oil surged in late 1999 and early 2000, we expanded our
holdings of energy services stocks, anticipating that their earnings would
accelerate. Three companies in Select's portfolio--Halliburton (up 17%),
Schlumberger (up 26%), and Transocean Sedco (up 73%)--were among the fund's
better performers this six-month period.
TECHNOLOGY STOCKS HAVE BECOME AN INCREASINGLY POWERFUL COMPONENT OF THE STOCK
MARKET. HOW DID SELECT'S TECHNOLOGY HOLDINGS FARE?
Technology stocks made up about a third of Select's portfolio throughout
the six-month period, and, consequently, this sector had a big effect on the
fund's return. Many of our largest tech holdings--Cisco Systems (up 88%), Oracle
(up 235%), and Intel (up 65%), to name a few--made strong contributions to fund
performance during this six-month period.
As we looked for earnings acceleration in the technology sector, several
themes emerged. One of those themes was fiber optics, which represent the
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"TECHNOLOGY STOCKS MADE UP ABOUT A THIRD OF SELECT'S PORTFOLIO THROUGHOUT THE
SIX-MONTH PERIOD, AND, CONSEQUENTLY, THIS SECTOR HAD A BIG EFFECT ON THE FUND'S
RETURN."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 93 89
MEDIAN P/E RATIO 41.5 34.8
MEDIAN MARKET $60.8 $59.2
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 33%(1) 130%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 42-43.
www.americancentury.com 5
Select--Q&A
--------------------------------------------------------------------------------
(Continued)
future of telecommunications networks. Local and regional telephone companies
are building infrastructure for high-speed Internet access and data
transmission, and this involves developing or expanding fiber-optic networks.
We invested in a number of companies that manufacture fiber-optic equipment
and components. A good example is Corning, which produces glass fibers for
optical telecommunications networks. The company is growing at a rapid rate as
it tries to keep up with the huge demand for its products. Corning was one of
the fund's best performers, rising by 150% in the last six months.
Other fiber-optic companies that we added to Select's portfolio included
JDS Uniphase (up 150%) and Nortel Networks (up 83%). Both of these companies
manufacture amplifiers and other fiber-optic components.
WHAT ABOUT THE TREMENDOUS GROWTH OF WIRELESS TECHNOLOGY?
That was another big theme in Select's portfolio. The use of cellular
phones, palm computers, and other wireless devices has exploded in the last year
or two, and Select has been in a position to benefit from this build-out.
We invested in wireless equipment manufacturers like Nokia (up 97%),
Ericsson (up 107%), and Motorola (up 22%). We also expanded our holdings of
wireless service providers, such as AT&T Wireless, which we added to the
portfolio when it was spun off from its parent company at the end of April.
Another related theme was computer chip makers. This included not only
semiconductor companies such as Intel, which benefited from increased demand for
personal computers, but also companies like Linear Technologies that manufacture
chips used in cell phones and other electronic devices.
YOU MENTIONED THE INCREASED VOLATILITY IN THE STOCK MARKET, AND TECHNOLOGY
STOCKS HAVE BEEN AMONG THE MOST VOLATILE. HOW DO YOU HANDLE THE DRAMATIC PRICE
SWINGS IN THE FUND'S STOCKS?
Periods of extreme volatility often lead to a "gut check"--taking a fresh
look at our portfolio and making sure we have good reasons for owning each and
every one of those stocks.
The dramatic decline in technology stocks in March and April was a gut
check for us. We went through the stocks in Select's portfolio one by one and
asked ourselves, "Why do we own this company?" In virtually every case, we
reaffirmed our confidence in the investments we'd made. And, for the most part,
these companies reported exceptionally strong earnings in the first quarter.
The recent downdraft in technology stocks also illustrated the benefits of
Select's diversified portfolio. As tech shares fell, some of the fund's other
holdings performed well.
WHAT ARE SOME EXAMPLES?
We've seen some of Select's retail stocks--such as Home Depot, Target, and
Wal-Mart--rebound in the last couple of months. Rising interest rates were
expected to reduce sales at retailers, but consumer spending remained very
strong.
The fund also benefited from its healthcare stocks, especially medical
product manufacturers. An example is Medtronic, which makes implantable
defibrillators, pacemakers, and other devices to prevent congestive heart
failure. Increased demand for these products helped boost Medtronic's earnings,
and the stock returned 50% during the six-month period.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
GENERAL ELECTRIC
CO. (U.S.) 5.9% 5.4%
CISCO SYSTEMS INC. 4.8% 2.9%
INTEL CORP. 4.3% 1.6%
TIME WARNER INC. 3.1% 0.7%
WARNER-LAMBERT CO. 2.9% 1.6%
MICROSOFT CORP. 2.7% 4.9%
AMERICAN
INTERNATIONAL
GROUP, INC. 2.5% 2.5%
EXXON MOBIL CORP. 2.4% 2.1%(1)
WAL-MART STORES, INC. 2.4% 2.7%
CITIGROUP INC. 2.4% 2.2%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
ELECTRICAL EQUIPMENT 11.1% 7.1%
FINANCIAL SERVICES 7.9% 7.1%
SEMICONDUCTOR 7.6% 3.8%
DRUGS 7.3% 9.3%
COMPUTER SOFTWARE 7.0% 6.7%
(1) Exxon Corp. and Mobil Corp. merged on 11/30/99. The percentage as of
10/31/99 represents Mobil Corp. shares owned by the fund.
6 1-800-345-2021
Select--Q&A
--------------------------------------------------------------------------------
(Continued)
Although pharmaceutical companies generally performed poorly, a couple of
Select's larger drug holdings boosted fund performance in recent months. We
expanded our holdings of Warner-Lambert at the beginning of this year after one
of our investment analysts realized that not only was the company a strong
investment by itself, but with the success of its new anti-cholesterol drug,
Lipitor, was a possible takeover candidate in an industry already undergoing
consolidation.
In February, Warner-Lambert agreed to a merger with another drug company,
Pfizer, in a deal valued well above Warner-Lambert's share price at the time.
Both Pfizer and Warner-Lambert, which are among the fund's biggest holdings,
have performed very well since the merger announcement. It was a great call by
one of our new analysts.
WE'VE COVERED PLENTY OF GOOD NEWS IN SELECT'S PORTFOLIO. WHAT HURT FUND
PERFORMANCE OVER THE PAST SIX MONTHS?
Financial stocks, especially banks, were among the fund's weakest
performers. Rising interest rates led to reduced lending activity, and that in
turn squeezed profit margins at many banks. Fund holdings like Wells Fargo (down
14% over the six-month period), Chase Manhattan (down 17%), and Bank of America
(down 24%)--which is no longer in the portfolio--were a drag on performance.
Home products makers also struggled with tighter profit margins. For
example, Procter & Gamble had trouble passing cost increases on to consumers
because of strong competition, and the company failed to meet earnings
expectations in the first quarter. Add to that a couple of unsuccessful
acquisition efforts, and you get about a 40% drop in the company's stock price.
P&G was a top 10 holding six months ago, but we've trimmed our position
significantly since then.
Interestingly, the fund's weakest performer in the past six months was a
technology stock--Microsoft. The antitrust investigation by the Justice
Department and the subsequent proposal to break up the company weighed on its
stock price, which fell about 25%. Although we sold some of our shares,
Microsoft is still a top 10 holding, and it has continued to produce excellent
earnings growth. We like the company's long-term prospects.
HAS A NEW MANAGER JOINED THE SELECT TEAM?
Yes. New portfolio manager Jerry Sullivan came on board in February. Jerry
has 18 years of experience in the investment industry, and he has worked with
co-manager Ken Crawford in the past.
WHAT ARE YOUR PLANS FOR SELECT IN THE COMING MONTHS?
We believe that the same themes that produced favorable returns in the past
six months still hold plenty of promise for the future. In particular, we like
the wireless and fiber-optic manufacturers--companies that produce or install
components for these booming industries are likely to be insulated from any
economic slowdown that may result from rising interest rates.
Beyond that, we'll continue to focus on our investment discipline--seeking
out successful companies with accelerating earnings and revenues. This
philosophy has been the backbone of the fund's long-term success.
"WE BELIEVE THAT THE SAME THEMES THAT PRODUCED FAVORABLE RETURNS IN THE PAST SIX
MONTHS STILL HOLD PLENTY OF PROMISE FOR THE FUTURE."
TYPES OF INVESTMENTS IN THE PORTFOLIO
================================================================================
AS OF APRIL 30, 2000
COMMON STOCKS AND FUTURES 96.0%
TEMPORARY CASH INVESTMENTS 2.0%
CONVERTIBLE BONDS 1.3%
CONVERTIBLE PREFERRED STOCK 0.7%
[pie chart]
================================================================================
AS OF OCTOBER 31, 1999
COMMON STOCKS AND FUTURES 97.4%
TEMPORARY CASH INVESTMENTS 2.6%
[pie chart]
www.americancentury.com 7
Select--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 95.3%
ALCOHOL -- 1.0%
1,068,400 Anheuser-Busch Companies, Inc. $ 75,389
-------------------------
BANKS -- 5.3%
2,069,500 Bank of New York Co., Inc. (The) 84,979
777,500 Chase Manhattan Corp. 56,029
3,085,100 Citigroup Inc. 183,371
2,101,000 Wells Fargo & Co. 86,272
-------------------------
410,651
-------------------------
CHEMICALS -- 0.5%
483,900 Minnesota Mining
& Manufacturing Co. 41,857
-------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 5.8%
775,000 Compaq Computer Corp. 22,669
2,252,000 Dell Computer Corp.(1) 112,811
872,000 EMC Corp. (Mass.)(1) 121,154
385,000 Hewlett-Packard Co. 51,975
1,496,400 Sun Microsystems, Inc.(1) 137,622
-------------------------
446,231
-------------------------
COMPUTER SOFTWARE -- 7.0%
1,462,800 International Business
Machines Corp. 163,285
2,968,200 Microsoft Corp.(1) 207,125
2,162,600 Oracle Corp.(1) 172,805
-------------------------
543,215
-------------------------
DEFENSE/AEROSPACE -- 0.5%
746,312 Honeywell Inc. 41,793
-------------------------
DEPARTMENT STORES -- 3.1%
758,600 Target Corporation 50,494
3,365,000 Wal-Mart Stores, Inc. 186,337
-------------------------
236,831
-------------------------
DRUGS -- 7.3%
495,500 Amgen Inc.(1) 27,763
1,463,100 Bristol-Myers Squibb Co. 76,721
617,000 Merck & Co., Inc. 42,882
3,346,500 Pfizer, Inc. 140,971
1,290,000 Schering-Plough Corp. 52,003
1,954,500 Warner-Lambert Co. 222,447
-------------------------
562,787
-------------------------
ELECTRICAL EQUIPMENT -- 10.8%
5,392,200 Cisco Systems Inc.(1) 374,084
301,600 Corning Inc. 59,566
453,600 Ericsson (L.M.) Telephone Co. ADR 40,129
215,000 JDS Uniphase Corp.(1) 22,300
300,000 Lucent Technologies Inc. 18,656
453,000 Motorola, Inc. 53,935
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
1,706,800 Nokia Corp. Cl A ADR $ 97,074
1,535,500 Nortel Networks Corp. 173,895
-------------------------
839,639
-------------------------
ELECTRICAL UTILITIES -- 0.5%
1,457,100 Southern Co. 36,336
-------------------------
ENERGY RESERVES & PRODUCTION -- 5.0%
475,900 Chevron Corp. 40,511
930,000 Enron Corp. 64,809
2,444,599 Exxon Mobil Corp. 189,915
1,632,500 Royal Dutch Petroleum Co.
New York Shares 93,665
-------------------------
388,900
-------------------------
FINANCIAL SERVICES -- 7.9%
452,600 American Express Co. 67,918
640,400 Fannie Mae 38,624
2,919,800 General Electric Co. (U.S.) 459,135
446,000 Marsh & McLennan Companies, Inc. 43,959
-------------------------
609,636
-------------------------
FOOD & BEVERAGE -- 1.5%
725,900 Coca-Cola Company (The) 34,163
2,209,900 PepsiCo, Inc. 81,076
-------------------------
115,239
-------------------------
FOREST PRODUCTS & PAPER -- 0.3%
385,700 Kimberly-Clark Corp. 22,395
-------------------------
HOME PRODUCTS -- 1.7%
1,137,800 Colgate-Palmolive Co. 64,997
470,000 Estee Lauder Companies, Inc. 20,739
385,000 Gillette Company 14,245
465,100 Procter & Gamble Co. (The) 27,732
-------------------------
127,713
-------------------------
INDUSTRIAL PARTS -- 1.1%
350,300 Textron Inc. 21,697
1,046,400 United Technologies Corp. 65,073
-------------------------
86,770
-------------------------
INFORMATION SERVICES -- 2.6%
1,092,200 Automatic Data Processing, Inc. 58,774
2,217,000 First Data Corp. 107,940
363,000 Omnicom Group Inc. 33,056
-------------------------
199,770
-------------------------
MEDIA -- 4.8%
820,200 CBS Corp.(1) 48,187
1,289,200 Disney (Walt) Co. 55,838
493,900 Gannett Co., Inc. 31,548
2,650,300 Time Warner Inc. 238,361
-------------------------
373,934
-------------------------
8 1-800-345-2021 See Notes to Financial Statements
Select--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 4.2%
1,590,000 Abbott Laboratories $ 61,116
537,000 ALZA Corp.(1) 23,662
322,500 Beckman Coulter Inc. 20,902
1,116,800 Guidant Corp.(1) 64,076
394,900 Johnson & Johnson 32,579
2,362,600 Medtronic, Inc. 122,708
-------------------------
325,043
-------------------------
MULTI-INDUSTRY -- 1.1%
1,785,600 Tyco International Ltd. 82,026
-------------------------
OIL SERVICES -- 2.1%
967,900 Halliburton Co. 42,769
1,220,300 Schlumberger Ltd. 93,429
631,250 Transocean Sedco Forex, Inc. 29,669
-------------------------
165,867
-------------------------
PROPERTY & CASUALTY INSURANCE -- 2.5%
1,793,750 American International Group, Inc. 196,752
-------------------------
RESTAURANTS -- 0.4%
867,800 McDonald's Corp. 33,085
-------------------------
SECURITIES & ASSET MANAGEMENT -- 1.2%
680,200 AXA Financial, Inc. 22,192
943,000 Morgan Stanley Dean Witter & Co. 72,375
-------------------------
94,567
-------------------------
SEMICONDUCTOR -- 7.6%
370,800 Applied Materials, Inc.(1) 37,764
2,625,200 Intel Corp. 332,990
1,639,200 Linear Technology Corp. 93,691
160,000 Micron Technology, Inc.(1) 22,280
628,000 Texas Instruments Inc. 102,286
-------------------------
589,011
-------------------------
SPECIALTY STORES -- 2.9%
455,500 Circuit City Stores-Circuit City Group 26,789
2,459,000 Home Depot, Inc. 137,858
601,900 Lowe's Companies, Inc. 29,794
1,117,000 Walgreen Co. 31,416
-------------------------
225,857
-------------------------
TELEPHONE -- 4.4%
2,681,000 AT&T Corp. 125,169
720,000 Bell Atlantic Corp. 42,660
581,100 GTE Corp. 39,370
1,606,316 SBC Communications Inc. 70,377
723,000 Sprint Corp. 44,464
320,300 U S WEST, Inc. 22,801
-------------------------
344,841
-------------------------
Shares/Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 2.2%
1,462,200 AT&T Wireless Group(1) $ 46,516
495,000 QUALCOMM Inc.(1) 53,692
1,574,500 Vodafone AirTouch PLC ADR 74,002
-------------------------
174,210
-------------------------
TOTAL COMMON STOCKS 7,390,345
-------------------------
(Cost $4,981,088)
CONVERTIBLE PREFERRED STOCKS -- 0.7%
MEDIA -- 0.2%
104,100 Tribune Co., 2.00%, 5/15/29 13,377
-------------------------
WIRELESS TELECOMMUNICATIONS -- 0.5%
361,630 Comcast Corp., 2.00%, 10/15/29 37,610
-------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS 50,987
-------------------------
(Cost $53,577)
CONVERTIBLE BONDS -- 1.3%
ELECTRICAL EQUIPMENT -- 0.3% $29,050 Level 3 Communications, Inc.,
6.00%, 3/15/10 26,345
-------------------------
INTERNET -- 0.1% 18,973 America Online, Inc.,
3.13%, 12/6/19(2) 10,008
-------------------------
WIRELESS TELECOMMUNICATIONS -- 0.9% 29,606 Nextel Communications, Inc.,
4.75%, 7/1/07 70,962
-------------------------
TOTAL CONVERTIBLE BONDS 107,315
-------------------------
(Cost $114,932)
TEMPORARY CASH INVESTMENTS(3) -- 2.7%*
207,400 FHLB Discount Notes,
5.88%, 5/1/00 207,400
-------------------------
(Cost $207,400)
TOTAL INVESTMENT SECURITIES -- 100.0% $7,756,047
==========================
(Cost $5,356,997)
See Notes to Financial Statements www.americancentury.com 9
Select--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
FUTURES CONTRACTS
($ in Thousands)
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Gain
--------------------------------------------------------------------------------
158 S&P 500 June
Futures 2000 $57,710 $1,354
===============================================
*FUTURES CONTRACTS typically are based on a stock index, such as the S&P 500,
and tend to track the performance of the index while remaining very liquid (easy
to buy and sell). By investing its cash assets in index futures, the fund can
stay fully invested in stocks and have easy access to the money. Temporary cash
investments, less the required reserves for futures contracts, are 2.0%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLB = Federal Home Loan Bank
(1) Non-income producing.
(2) Security is a zero-coupon bond. The yield to maturity at purchase is
indicated. Zero coupon securities are purchased at a substantial discount
from their value at maturity.
(3) Rate disclosed is the yield to maturity at purchase.
10 1-800-345-2021 See Notes to Financial Statements
Heritage--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 11/10/87) (INCEPTION 7/11/97) (INCEPTION 6/16/97)
HERITAGE S&P MIDCAP 400 HERITAGE S&P MIDCAP 400 HERITAGE S&P MIDCAP 400
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 44.90% 21.26% 44.80% 21.26% 45.20% 21.26%
1 YEAR 54.89% 23.52% 54.56% 23.52% 55.33% 23.52%
===============================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 25.41% 24.82% -- -- -- --
5 YEARS 21.16% 22.69% -- -- -- --
10 YEARS 16.81% 19.16% -- -- -- --
LIFE OF FUND 17.62% 19.23%(2) 19.71% 20.32% 21.63% 20.63%(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 10/31/87, the date nearest the class's inception for which data are
available.
(3) Since 6/19/97, the date nearest the class's inception for which data are
available.
See pages 40-42 for information about share classes, the S&P MidCap 400 Index
and returns.
GROWTH OF $10,000 OVER 10 YEARS
Value on 4/30/2000
S&P MidCap 400 Index $57,697
Heritage $47,251
$10,000 investment made 4/30/90
[mountain chart data below]
Heritage S&P MidCap 400 Index
Date Value Value
4/30/1990 $10,000 $10,000
4/30/1991 $11,305 $12,525
4/30/1992 $13,041 $15,035
4/30/1993 $15,105 $17,215
4/30/1994 $17,089 $18,904
4/30/1995 $18,098 $20,755
4/30/1996 $22,629 $26,942
4/30/1997 $23,989 $29,671
4/30/1998 $32,474 $43,889
4/30/1999 $30,510 $46,711
4/30/2000 $47,251 $57,697
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The S&P
MidCap 400 Index is provided for comparison in each graph. Heritage's total
returns include operating expenses (such as transaction costs and management
fees) that reduce returns, while the total returns of the S&P MidCap 400 Index
do not. The graphs are based on Investor Class shares only; performance for
other classes will vary due to differences in fee structures (see the Total
Returns table above). Past performance does not guarantee future results.
Investment return and principal value will fluctuate, and redemption value may
be more or less than original cost.
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
[bar chart data below]
Heritage S&P MidCap 400 Index
Date Return Return
4/30/1991 13.05% 25.25%
4/30/1992 15.36% 20.04%
4/30/1993 15.82% 14.50%
4/30/1994 13.14% 9.81%
4/30/1995 5.90% 9.79%
4/30/1996 25.04% 29.81%
4/30/1997 6.01% 10.13%
4/30/1998 35.37% 47.92%
4/30/1999 -6.05% 6.43%
4/30/2000 54.89% 23.52%
www.americancentury.com 11
Heritage--Q&A
--------------------------------------------------------------------------------
[photo of Kurt Stalzer and Linda Peterson]
An interview with Kurt Stalzer and Linda Peterson, portfolio managers on
the Heritage investment team.
HOW DID THE FUND PERFORM?
For the six months ended April 30, 2000, Heritage performed very well,
returning 44.90%.* This was more than twice the 21.26% return of its benchmark,
the S&P MidCap 400.
WHY DID THE FUND PERFORM SO WELL?
Heritage invests in medium-sized companies with strong earnings growth, and
these stocks dominated the market over the past six months. The environment was
somewhat speculative, which caused investors to become increasingly aggressive.
When that happens, investors usually gravitate to smaller companies with high
growth potential.
However, there wasn't enough liquidity--the ease of buying and selling
shares--in the small-cap market to handle the huge amount of money flowing into
stocks. So, investors found a happy medium in mid-cap growth stocks--more
aggressive than large-cap stocks, but with more liquidity than small-cap stocks.
In addition, our investment approach is driven by earnings growth, and that
kept us away from some of the weaker areas of the market, such as financial
services and consumer goods companies.
CAN YOU GIVE A QUICK EXPLANATION OF YOUR "EARNINGS ACCELERATION" PHILOSOPHY?
We look for medium-sized companies whose earnings and revenues are growing
at an accelerating rate. That means we're investing in companies whose profits
are growing at a faster and faster rate, rather than looking for any absolute
level of earnings growth.
This approach has many benefits. It imposes a strict discipline and helps
us to focus on those companies with sustainable trends of earnings growth.
WHERE WAS THIS APPROACH MOST SUCCESSFUL OVER THE PAST SIX MONTHS?
Technology stocks drove the overall market higher during the period, and
Heritage was well represented in this area. For the most part, we established
positions in our favorite technology holdings during the summer of 1999, and
then we held on as the sector soared in the fourth quarter and kept rising into
the early part of 2000.
Our best performers were electrical equipment manufacturers, especially
those associated with the wireless telecommunications industry. These companies
have noticeably improved profitability as they try to keep up with the
significant demand for their products. Another group benefiting from both the
wireless and fiber-optic expansion was semiconductor chip manufacturers. Fund
holdings such as International Rectifier Corporation were major contributors to
Heritage's performance.
A second example of a semiconductor chip manufacturer that had boosted
Heritage's returns is Analog Devices, a large holding that was up almost 200% in
the past six months. Analog is a
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"TECHNOLOGY STOCKS DROVE THE OVERALL MARKET HIGHER DURING THE PERIOD, AND
HERITAGE WAS WELL REPRESENTED IN THIS AREA."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 79 87
MEDIAN P/E RATIO 41.8 26.2
MEDIAN MARKET $4.24 $3.51
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 66%(1) 134%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 42-43.
12 1-800-345-2021
Heritage--Q&A
--------------------------------------------------------------------------------
(Continued)
high-performance semiconductor manufacturer focused primarily on wireless and
wireline communications. Many of its products are found in basestations and
wireless phones as well as in consumer products such as digital cameras and
DVDs. With communications continuing to increase in its importance to revenues,
margins have risen dramatically. Analog Devices is an excellent example of the
type of stock our investment discipline seeks. The firm's earnings growth has
actually accelerated for six consecutive quarters.
WHERE ELSE IN THE TECHNOLOGY SECTOR HAVE YOU SEEN EARNINGS ACCELERATION?
The fund also had success investing in fiber-optic component makers. The
aggressive expansion of fiber-optic networks has created a huge demand for the
materials and equipment needed to complete the telecommunications build-out.
One of Heritage's top performers was Optical Coating Laboratories, whose
thin-film coating technology is used to manage light in fiber-optic
telecommunications equipment. Strong demand boosted the company's earnings
growth and caught the attention of JDS Uniphase, the leading optical component
manufacturer. JDS Uniphase agreed to buy Optical Coating at a healthy premium,
and, by the time the deal was completed in February, the stock had risen by more
than 200%.
HOW HAVE THESE STOCKS HELD UP DURING THE RECENT DOWNDRAFT IN TECH STOCKS?
Although many technology stocks have fallen back from their peaks in the
last month or two, companies who have been reporting strong earnings have held
up better than other technology firms that may not reach profitability for
several years. As we noticed the market was beginning to broaden in the first
quarter of this year, we began to cut back on our technology exposure. We did
this by trimming some of our largest tech holdings.
WHERE DID YOU INVEST INSTEAD?
We invested in some healthcare and services names. We also built up our
holdings of energy services stocks. We originally bought a core position in
several of these companies back in the summer of 1999. Earnings were still
depressed--but we were seeing a turnaround in several key indicators that
usually are an early warning for rising profits.
One of those indicators is day rates--the average daily cost of hiring out
an oil rig. Energy services companies typically lock in a certain rate for a
year or more. But when day rates start to rise and older contracts expire, these
companies show an immediate increase in earnings.
Another useful indicator is rig utilization, which is the percentage of
existing oil rigs in use. Rig utilization is currently about 80%, up from around
50% a year ago.
SO YOU INVESTED IN ENERGY SERVICES COMPANIES AS THESE INDICATORS TURNED
POSITIVE?
Yes, and so far in 2000, we've started to see their earnings growth
accelerate. It's not what you normally think of as "earnings acceleration,"
where earnings grow by 5%, then 10%, then 15%. In this case, it's a reversal of
declining profits--earnings were once 50% lower, then 40% lower, and now 30%
lower. That's just another form of acceleration.
These stocks treaded water for most of 1999, then many of our
holdings--such as Ensco International (a top 10
[right margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
NATIONAL COMPUTER
SYSTEMS, INC. 3.2% 2.2%
GEMSTAR INTERNATIONAL
GROUP LTD. 3.0% 7.3%
AMDOCS AUTOMATIC,
6.75%, 9/11/02
(CONVERTIBLE
PREFERRED) 2.9% 0.5%
ENSCO
INTERNATIONAL INC. 2.9% 0.9%
MINIMED INC. 2.7% 0.9%
SIEBEL SYSTEMS, INC.,
5.50%, 9/15/06
(CONVERTIBLE BOND) 2.5% --
WATERS CORP. 2.3% --
VISHAY
INTERTECHNOLOGY, INC. 2.2% 1.4%
COPPER MOUNTAIN
NETWORKS, INC. 2.2% --
POWERWAVE
TECHNOLOGIES, INC. 2.2% --
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
COMPUTER SOFTWARE 13.2% 8.1%
ELECTRICAL EQUIPMENT 12.6% 8.6%
OIL SERVICES 10.1% 3.9%
SEMICONDUCTOR 6.9% 5.2%
MEDICAL PRODUCTS
& SUPPLIES 5.8% 2.5%
www.americancentury.com 13
Heritage--Q&A
--------------------------------------------------------------------------------
(Continued)
holding), Transocean Sedco Forex, and Santa Fe International--were up more than
50% in the first quarter. Oil services is now one of Heritage's biggest industry
holdings, at around 10% of fund assets.
WITH A 45% RETURN, IT'S NOT SURPRISING THAT THE PORTFOLIO CONTAINED LOTS OF
WINNERS. WHAT STOCKS HURT FUND PERFORMANCE?
We mentioned earlier that we were underweight in financial shares, but the
few companies we did own in this sector were among our worst performers.
Zions Bancorporation, a fund holding, agreed to buy another bank, First
Security. Although Zions continued to report healthy earnings in the face of
rising interest rates, First Security did not. Zions' stock price was punished
for First Security's earnings weakness.
MGIC Investment, another fund holding, is a large private mortgage
insurance company. Its stock price fell because investors expected rising
interest rates to slow down the housing market.
Our worst contributor was Concord EFS. Concord processes credit and debit
card transactions, and investors expressed some concern that the company was
focusing on a less- profitable aspect of its business. As a result, Concord's
share price fell about 20%, despite the fact that its earnings were still
accelerating. With its fundamental outlook still intact, we continue to own
Concord.
SPEAKING OF THE FUTURE, WHAT ARE YOUR PLANS FOR HERITAGE IN THE COMING MONTHS?
We plan to continue focusing on our disciplined investment approach,
seeking out companies whose earnings and revenues are growing at an accelerated
rate.
We believe "money follows earnings," and that firms demonstrating
acceleration in their earnings and revenues will experience higher stock prices
in any market environment.
HAVE YOU ADDED A NEW PORTFOLIO MANAGER TO THE HERITAGE INVESTMENT TEAM?
Yes. Kurt Stalzer joined Linda Peterson as co-manager of Heritage in
January. He replaced Harold Bradley, who has moved to a different position at
American Century. Kurt brings more than 17 years of investment experience to the
Heritage team, including 10 years managing small- and mid-cap stocks.
[left margin]
"WE BELIEVE 'MONEY FOLLOWS EARNINGS,' AND THAT FIRMS DEMONSTRATING
ACCELERATION IN THEIR EARNINGS AND REVENUES WILL EXPERIENCE HIGHER STOCK PRICES
IN ANY MARKET ENVIRONMENT."
TYPES OF INVESTMENTS IN THE PORTFOLIO
================================================================================
AS OF APRIL 30, 2000
COMMON STOCKS AND FUTURES 86.3%
CONVERTIBLE BONDS 5.4%
CONVERTIBLE PREFERRED STOCK 4.6%
TEMPORARY CASH INVESTMENTS 3.7%
[pie chart]
================================================================================
AS OF OCTOBER 31, 1999
COMMON STOCKS AND FUTURES 80.6%
CONVERTIBLE BONDS 7.3%
CONVERTIBLE PREFERRED STOCK 7.2%
TEMPORARY CASH INVESTMENTS 4.9%
14 1-800-345-2021
Heritage--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 85.3%
ALCOHOL -- 0.9%
303,800 Coors (Adolph) Co. Cl B $ 15,494
------------------------
APPAREL & TEXTILES -- 2.0%
539,200 Liz Claiborne, Inc. 24,972
477,000 Reebok International Ltd.(1) 8,109
------------------------
33,081
------------------------
BANKS -- 2.4%
278,800 Marshall & Ilsley Corp. 12,947
1,201,200 Toronto-Dominion Bank (The) ORD 27,779
------------------------
40,726
------------------------
CHEMICALS -- 2.4%
177,500 Avery Dennison Corp. 11,648
31,600 Cabot Microelectronics Corp.(1) 1,023
320,300 Lubrizol Corp. 8,208
517,700 Olin Corp. 9,189
240,200 Vulcan Materials Co. 10,524
------------------------
40,592
------------------------
CLOTHING STORES -- 1.0%
338,800 Talbots, Inc. 17,131
------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 3.1%
887,600 Henry (Jack) & Associates, Inc. 35,032
296,100 Symbol Technologies, Inc. 16,508
------------------------
51,540
------------------------
COMPUTER SOFTWARE -- 6.0%
245,200 Aware, Inc.(1) 9,570
1,109,200 Gemstar International Group Ltd.(1) 51,266
278,200 Macrovision Corp.(1) 13,606
309,900 Rational Software Corp.(1) 26,371
------------------------
100,813
------------------------
CONSTRUCTION & REAL PROPERTY -- 0.5%
330,900 Granite Construction Inc. 7,859
------------------------
DEPARTMENT STORES -- 0.6%
197,600 Kohl's Corp.(1) 9,485
------------------------
DRUGS -- 5.3%
518,600 Allergan, Inc. 30,533
568,483 ALPHARMA INC. 21,958
181,000 Pharmacyclics, Inc.(1) 8,236
627,200 Teva Pharmaceutical
Industries Ltd. ADR 27,558
------------------------
88,285
------------------------
ELECTRICAL EQUIPMENT -- 12.0%
140,800 AVX Technology 13,719
437,400 Copper Mountain Networks, Inc.(1) 36,455
379,400 Kent Electronics Corp.(1) 11,074
200,700 KLA-Tencor Corporation(1) 15,034
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
461,000 Millipore Corp. $ 33,048
128,000 Newport Corp. 15,668
174,300 Powerwave Technologies, Inc.(1) 36,260
58,600 Technitrol, Inc. 3,985
444,350 Vishay Intertechnology, Inc.(1) 37,270
------------------------
202,513
------------------------
ELECTRICAL UTILITIES -- 1.0%
398,700 Montana Power Co. 17,568
------------------------
FINANCIAL SERVICES -- 1.7%
224,300 Concord EFS, Inc.(1) 5,012
2,805 Julius Baer Holding AG ORD 9,820
539,000 MBNA Corp. 14,317
------------------------
29,149
------------------------
HEAVY ELECTRICAL EQUIPMENT -- 1.5%
506,200 Dover Corp. 25,721
------------------------
INDUSTRIAL PARTS -- 1.3%
550,000 Kennametal Inc. 15,812
204,000 Manitowoc Co., Inc. 6,770
------------------------
22,582
------------------------
INDUSTRIAL SERVICES -- 1.6%
757,300 Manpower Inc. 26,742
------------------------
INFORMATION SERVICES -- 5.0%
187,500 DST Systems, Inc.(1) 13,910
357,800 Fiserv, Inc.(1) 16,448
1,034,400 National Computer Systems, Inc. 53,591
------------------------
83,949
------------------------
INTERNET -- 1.2%
262,600 Digex, Inc.(1) 20,417
------------------------
LEISURE -- 2.9%
236,000 Four Seasons Hotels Inc. 13,216
879,800 Harley-Davidson, Inc. 35,027
------------------------
48,243
------------------------
MEDIA -- 1.4%
270,300 UnitedGlobalCom Cl A(1) 14,368
412,100 USA Networks Inc.(1) 9,491
------------------------
23,859
------------------------
MEDICAL PRODUCTS & SUPPLIES -- 5.3%
366,600 MiniMed Inc.(1) 45,057
82,200 PE Corp-PE Biosystems Group 4,932
407,200 Waters Corp.(1) 38,684
------------------------
88,673
------------------------
MEDICAL PROVIDERS & SERVICES -- 3.3%
1,779,000 Health Management
Associates, Inc.(1) 28,353
1,571,800 Hooper Holmes, Inc. 27,310
------------------------
55,663
------------------------
See Notes to Financial Statements www.americancentury.com 15
Heritage--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
MINING & METALS -- 0.7%
122,600 Nucor Corp. $ 5,272
225,900 Stillwater Mining Co.(1) 6,325
------------------------
11,597
------------------------
OIL SERVICES -- 10.1%
818,200 Diamond Offshore Drilling, Inc. 32,984
1,451,900 Ensco International Inc. 48,185
548,900 Helmerich & Payne, Inc. 17,187
1,042,500 Sante Fe International 35,836
765,521 Transocean Sedco Forex, Inc. 35,979
------------------------
170,171
------------------------
PROPERTY & CASUALTY INSURANCE -- 1.6%
348,800 Ambac Financial Group, Inc. 16,742
191,550 PMI Group, Inc. (The) 9,278
------------------------
26,020
------------------------
SECURITIES & ASSET MANAGEMENT -- 0.8%
321,000 Donaldson, Lufkin & Jenrette, Inc. 13,382
------------------------
SEMICONDUCTOR -- 6.9%
383,100 Analog Devices, Inc.(1) 29,427
577,100 International Rectifier Corp.(1) 28,350
336,200 Novellus Systems, Inc.(1) 22,389
401,000 PerkinElmer, Inc. 21,955
214,700 Semtech Corp.(1) 14,673
------------------------
116,794
------------------------
SPECIALTY STORES -- 0.7%
161,200 Tiffany & Co. 11,717
------------------------
TRUCKING, SHIPPING & AIR FREIGHT -- 0.3%
106,700 C.H. Robinson Worldwide, Inc. 5,332
------------------------
WIRELESS TELECOMMUNICATIONS -- 1.8%
181,684 QUALCOMM Inc.(1) 19,707
100,200 VoiceStream Wireless Corp.(1) 9,917
------------------------
29,624
------------------------
TOTAL COMMON STOCKS 1,434,722
------------------------
(Cost $1,049,381)
Shares/Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 4.6%
COMPUTER SOFTWARE -- 2.9%
826,800 Amdocs Automatic,
6.75%, 9/11/02 $ 49,298
------------------------
ELECTRICAL UTILITIES -- 0.6%
114,000 Calpine Capital Trust,
5.75%, 11/1/04 9,718
------------------------
WIRELESS TELECOMMUNICATIONS -- 1.1%
176,900 Comcast Corp., 2.00%, 10/15/29 18,398
------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS 77,414
------------------------
(Cost $61,877)
CONVERTIBLE BONDS -- 5.4%
COMPUTER SOFTWARE -- 4.3% $29,092 Citrix Systems, Inc.,
4.51%, 3/22/19(2) 25,692
3,500 Rational Software Corp.,
5.00%, 2/1/07 (Acquired
1/27/00, Cost $3,500)(3) 4,745
15,161 Siebel Systems, Inc.,
5.50%, 9/15/06 (Acquired
1/26/00-2/11/00,
Cost $34,306)(3) 41,475
------------------------
71,912
------------------------
ELECTRICAL EQUIPMENT -- 0.6%
5,223 Tekelec, Inc., 3.25%, 11/2/04
(Acquired 2/3/00-2/18/00,
Cost $10,352)(3) 10,599
------------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.5%
6,798 Affymetrix, Inc., 5.00%, 10/1/06 8,523
------------------------
TOTAL CONVERTIBLE BONDS 91,034
------------------------
(Cost $68,949)
TEMPORARY CASH INVESTMENTS -- 4.7%*
Repurchase Agreement, BA Security Services,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.67%, dated 4/28/00,
due 5/1/00 (Delivery value $78,837) 78,800
-------------------------
(Cost $78,800)
TOTAL INVESTMENT SECURITIES -- 100.0% $1,681,970
=========================
(Cost $1,259,007)
16 1-800-345-2021 See Notes to Financial Statements
Heritage--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
FUTURES CONTRACTS
($ in Thousands)
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Loss
-------------------------------------------------------------------------------
68 S&P Midcap 400 June
Futures 2000 $16,405 $(135)
=======================================
*FUTURES CONTRACTS typically are based on a stock index, such as the S&P 500,
and tend to track the performance of the index while remaining very liquid (easy
to buy and sell). By investing its cash assets in index futures, the fund can
stay fully invested in stocks and have easy access to the money. Temporary cash
investments, less the required reserves for futures contracts, are 3.7%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) Security is a zero-coupon bond. The yield to maturity at purchase is
indicated. Zero coupon securities are purchased at a substantial discount
from their value at maturity.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is a
private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, 2000, was $56,819
which represented 3.4% of net assets.
See Notes to Financial Statements www.americancentury.com 17
Growth--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 6/30/71)(1) (INCEPTION 6/4/97) (INCEPTION 6/16/97)
GROWTH RUSSELL 1000 S&P 500 GROWTH RUSSELL 1000 S&P 500 GROWTH RUSSELL 1000 S&P 500
GROWTH GROWTH
GROWTH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(2) 20.99% 18.72% 7.19% 20.91% 18.72% 7.19% 21.13% 18.72% 7.19%
1 YEAR 32.16% 27.57% 10.13% 31.88% 27.57% 10.13% 32.43% 27.57% 10.13%
==============================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 33.53% 31.88% 23.69% -- -- -- -- -- --
5 YEARS 25.65% 29.99% 25.26% -- -- -- -- -- --
10 YEARS 18.97% 21.17% 18.78% -- -- -- -- -- --
LIFE OF FUND 19.51% N/A(3) 13.77% 31.69% 29.79%(4) 21.95% 30.15% 28.99%(4) 20.78%(4)
</TABLE>
(1) Although the fund's actual inception date was 10/31/58, this inception date
corresponds with the management company's implementation of its current
investment philosophy and practices.
(2) Returns for periods less than one year are not annualized.
(3) Benchmark began 1/1/79.
(4) Since 6/30/97, the date nearest the class's inception for which data are
available.
See pages 40-42 for information about share classes, the indices, and returns.
GROWTH OF $10,000 OVER 10 YEARS
Value on 4/30/2000
Russell 1000 Growth Index $68,241
Growth $56,748
S&P 500 $55,896
$10,000 investment made 4/30/90
[mountain chart data below]
Growth Russell 1000 Growth Index S&P 500
Date Value Value Value
4/30/1990 $10,000 $10,000 $10,000
4/30/1991 $12,588 $12,319 $11,762
4/30/1992 $15,117 $14,184 $13,412
4/30/1993 $14,911 $14,808 $14,651
4/30/1994 $17,005 $15,374 $15,431
4/30/1995 $18,115 $18,390 $18,127
4/30/1996 $21,070 $24,378 $23,603
4/30/1997 $23,872 $29,756 $29,534
4/30/1998 $34,495 $42,280 $41,664
4/30/1999 $42,940 $53,493 $50,755
4/30/2000 $56,748 $68,241 $55,896
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The
indices are provided for comparison in each graph. Growth's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the indices do not. The graphs are
based on Investor Class shares only; performance for other classes will vary due
to differences in fee structures (see the Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
[bar chart data below]
. Growth Russell 1000 Growth Index
Date Return Return
4/30/1991 25.88% 23.19%
4/30/1992 20.09% 15.14%
4/30/1993 -1.36% 4.40%
4/30/1994 14.04% 3.82%
4/30/1995 6.53% 19.62%
4/30/1996 16.31% 32.56%
4/30/1997 13.30% 22.06%
4/30/1998 44.50% 42.09%
4/30/1999 24.48% 26.52%
4/30/2000 32.16% 27.57%
18 1-800-345-2021
Growth--Q&A
--------------------------------------------------------------------------------
[photo of C. Kim Goodwin, Prescott LeGard, and Greg Woodhams]
An interview with C. Kim Goodwin, Prescott LeGard, and Greg Woodhams,
portfolio managers on the Growth investment team.
HOW DID GROWTH PERFORM DURING THE FIRST HALF OF ITS FISCAL YEAR?
Growth posted a 20.99% gain for the six months ended April 30, 2000*. It
outperformed its benchmark, the Russell 1000 Growth Index, which gained 18.72%,
and significantly outpaced the S&P 500 Index, considered to be representative of
the broad market, which was up 7.19%.
WHAT HELPED THE FUND ACHIEVE ITS STRONG PERFORMANCE?
Several factors worked in our favor, but perhaps most significant was the
concentrated nature of the portfolio. We are research-intensive and frequently
take larger, "high-confidence" positions in companies that we believe hold the
most promise. This strategy has continued to work well: As of April 30, Growth's
top 10 holdings represented more than 37% of investments, and nine of them were
the fund's biggest contributors to performance.
A second factor leading to our results was fundamental research that led us
to technology firms--particularly semiconductor companies, electronic equipment
manufacturers, computer software and hardware firms, and Internet companies--in
which Growth was well represented. In fact, technology-oriented firms accounted
for more than 43% of investments at the end of the period.
Finally, strong individual stock selection played a key role. In searching
for candidates for Growth's portfolio, we look at large-capitalization companies
to identify those with accelerating earnings and revenues--in other words, firms
that are growing faster now than in previous quarters. Our search doesn't end
there, however. We look for evidence that the companies selected for Growth's
portfolio can sustain their growth going forward. This strategy has proved
successful over time. It also has enabled Growth to outperform its benchmark
over the period covered here. Effective stock selection led to better results,
despite a technology weighting for Growth that was similar to that of its
benchmark.
GIVEN THESE CRITERIA, WHERE DID YOU FIND YOUR BEST OPPORTUNITIES?
Growth's technology stake, which represented our largest sector weighting,
contributed the most to performance. The main factors driving growth among many
of the technology companies we own are rapidly increasing Internet and cellular
phone usage, and continued strong demand for computers, particularly among
corporations intent on achieving greater productivity. Our best contributors to
results were companies whose products increase the speed and communications
capacity of the Internet, store the massive amounts of data on the Web and
organize it into useful formats, and provide Internet access.
In a related vein, telecommunications providers with wireless or data
capabilities also boosted performance.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"IN SEARCHING FOR CANDIDATES FOR GROWTH'S PORTFOLIO, WE LOOK AT
LARGE-CAPITALIZATION COMPANIES TO IDENTIFY THOSE WITH ACCELERATING EARNINGS AND
REVENUES--IN OTHER WORDS, FIRMS THAT ARE GROWING FASTER NOW THAN IN PREVIOUS
QUARTERS."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 57 60
MEDIAN P/E RATIO 51.6 43.7
MEDIAN MARKET $57.5 $61.8
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 41%(1) 92%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 42-43.
www.americancentury.com 19
Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
CAN YOU PROVIDE SOME EXAMPLES?
Investments in our portfolio that are benefiting from the expansion of the
Internet include Cisco Systems, JDS Uniphase, and Oracle, all of which were
among Growth's ten largest holdings.
Cisco, our largest position at 6.4% of investments--and Growth's
best-contributing stock--is the leading supplier of equipment used in linking
local and wide-area networks. As more businesses move onto the Internet, demand
for Cisco's products has escalated; the stock gained more than 88% during the
period.
JDS Uniphase (JDSU) has benefited similarly. Like Cisco, JDSU is an
"enabler" for other firms: it is the leading supplier of fiber-optic components
(computer chips) that empower communications systems to carry greater amounts of
information. JDSU's stock rose 150% during the six months.
Oracle, a software maker, also enjoys a profitable market niche. The
company is the world's largest supplier of software that allows users to create
and manage data in computer-based files, and is benefiting from a newly
implemented strategy--designing its products to work through the Internet. The
more-than-four-fold increase in Oracle's share price made the company our
second-best performer for the period.
WHICH OTHER SECTORS OR INDUSTRIES CONTRIBUTED TO PERFORMANCE?
Growth's stake in telecommunications also boosted our results. There is a
great deal of consolidation going on in the industry, which has been of great
benefit to the fund. Again, strong individual stock selection made the
difference. We own stock in the German wireless telecommunications firm,
Mannesmann. Our investment received a boost when Mannesmann was acquired by
Britain's Vodafone, the leading global mobile telecommunications provider.
Selected healthcare holdings contributed as well. Our most significant
healthcare position, Warner-Lambert, appreciated 42% during the period, as
Pfizer acquired it. Our investment in that stock was based on its strong product
portfolio, low exposure to generics and attractive product pipeline.
Additionally, our holdings in medical device manufacturers contributed, led by
companies participating in the field of cardiac rhythm management.
WERE THERE ANY DISAPPOINTMENTS?
At the sector and industry levels, there were few detractors. However,
Microsoft, which has contributed significantly to performance in previous
periods, stumbled in the wake of disappointing first-quarter revenue growth. The
price decline was exacerbated by the uncertainty surrounding the outcome of its
antitrust lawsuit. We believe Microsoft's new Windows 2000 software will drive
incremental revenues. We do not believe the lawsuit will have a lasting effect
on the value of the company.
A second disappointment was Bristol-Myers Squibb. The company is facing
increased exposure to generic drugs following an adverse court ruling regarding
the patent on one of its major products. This compromised our original stock
selection criteria, and we eliminated our position.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
CISCO SYSTEMS INC. 6.4% 4.8%
GENERAL ELECTRIC
CO. (U.S.) 5.7% 5.8%
WARNER-LAMBERT CO. 4.2% 3.5%
INTEL CORP. 4.0% 1.2%
EMC CORP. (MASS.) 3.6% 2.2%
VODAFONE
AIRTOUCH PLC 3.6% 0.6%(1)
TEXAS
INSTRUMENTS INC. 3.3% 3.2%
ORACLE CORP. 3.2% 1.5%
MICROSOFT CORP. 3.0% 5.4%
JDS UNIPHASE CORP. 2.8% 1.8%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
ELECTRICAL EQUIPMENT 11.9% 9.1%
SEMICONDUCTOR 10.3% 8.4%
COMPUTER SOFTWARE 9.3% 11.4%
FINANCIAL SERVICES 8.4% 5.8%
COMPUTER HARDWARE
&
BUSINESS
MACHINES 8.2% 2.9%
(1) Vodafone Group plc and AirTouch Communications, Inc. merged on 6/30/99.
The percentage as of 10/31/99 represents Vodafone Group plc shares
owned by the fund.
20 1-800-345-2021
Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
DID YOU MAKE ANY SHIFTS IN THE PORTFOLIO SINCE THE LAST REPORT?
Our methodology led us to increase our exposure to computer hardware
manufacturers, where growth continues to be driven by increasing Internet usage
and strong demand for computers. On the sell side, we reduced our positions in
the pharmaceutical and consumer staples groups, as growth in these areas has
slowed. Growth remains fully invested, and maintains significant stakes in
selected computer software firms, telecommunications equipment companies and
semiconductor firms that continue to demonstrate acceleration in their earnings
and revenues and are positioned to continue their growth going forward.
HAVE THERE BEEN ANY CHANGES TO GROWTH'S MANAGEMENT TEAM?
Yes. Prescott LeGard, CFA, was promoted from investment analyst to
portfolio manager. LeGard brings more than six years of investment management
experience to the team. We believe our team's disciplined approach and depth of
investment experience will enable us to continue providing the competitive
performance you've come to expect.
[right margin]
"OUR METHODOLOGY LED US TO INCREASE OUR EXPOSURE TO COMPUTER HARDWARE
MANUFACTURERS, WHERE GROWTH CONTINUES TO BE DRIVEN BY INCREASING INTERNET USAGE
AND STRONG DEMAND FOR COMPUTERS."
TYPES OF INVESTMENTS IN THE PORTFOLIO
================================================================================
AS OF APRIL 30, 2000
COMMON STOCKS AND FUTURES 96.2%
TEMPORARY CASH INVESTMENTS 3.8%
[pie chart]
================================================================================
AS OF OCTOBER 31, 1999
COMMON STOCKS AND FUTURES 96.8%
TEMPORARY CASH INVESTMENTS 3.2%
[pie chart]
www.americancentury.com 21
Growth--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 94.4%
BANKS -- 1.2%
2,071,800 Citigroup Inc. $ 123,143
-------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 8.2%
4,477,200 Dell Computer Corp.(1) 224,280
2,684,700 EMC Corp. (Mass.)(1) 373,006
1,253,800 Hewlett-Packard Co. 169,263
1,197,800 Network Appliances, Inc.(1) 88,600
-------------------------
855,149
-------------------------
COMPUTER SOFTWARE -- 9.3%
230,100 Check Point Software
Technologies Ltd.(1) 39,879
1,985,400 International Business
Machines Corp. 221,620
4,465,300 Microsoft Corp.(1) 311,594
4,177,900 Oracle Corp.(1) 333,840
534,800 Veritas Software Corp.(1) 57,374
-------------------------
964,307
-------------------------
DEPARTMENT STORES -- 1.8%
3,330,600 Wal-Mart Stores, Inc. 184,432
-------------------------
DRUGS -- 7.7%
1,285,100 Amgen Inc.(1) 72,006
5,759,700 Pfizer, Inc. 242,627
1,277,200 Schering-Plough Corp. 51,487
3,831,000 Warner-Lambert Co. 436,016
-------------------------
802,136
-------------------------
ELECTRICAL EQUIPMENT -- 11.9%
9,617,500 Cisco Systems Inc.(1) 667,214
2,774,000 JDS Uniphase Corp.(1) 287,716
2,003,800 Nortel Networks Corp. 226,930
879,400 Scientific-Atlanta, Inc. 57,216
-------------------------
1,239,076
-------------------------
ENERGY RESERVES & PRODUCTION -- 0.6%
788,000 Exxon Mobil Corp. 61,218
-------------------------
FINANCIAL SERVICES -- 8.4%
806,800 American Express Co. 121,071
3,757,300 General Electric Co. (U.S.) 590,835
1,592,600 Marsh & McLennan Companies, Inc. 156,971
-------------------------
868,877
-------------------------
FOOD & BEVERAGE -- 1.7%
4,371,200 Coca-Cola Enterprises, Inc. 93,161
2,404,400 PepsiCo, Inc. 88,212
-------------------------
181,373
-------------------------
INFORMATION SERVICES -- 1.2%
2,614,500 First Data Corp. 127,294
-------------------------
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
INTERNET -- 3.3%
3,047,300 America Online Inc.(1) $ 182,267
515,900 Digital Island(1) 17,976
1,254,000 Portal Software, Inc.(1) 57,370
1,166,800 Verio Inc.(1) 43,828
345,000 Yahoo! Inc.(1) 44,926
-------------------------
346,367
-------------------------
MEDIA -- 6.0%
2,498,100 CBS Corp.(1) 146,763
3,851,500 Clear Channel
Communications, Inc.(1) 277,308
3,097,200 Infinity Broadcasting Corp. Cl A(1) 105,111
896,400 Univision Communications Inc. Cl A(1) 97,932
-------------------------
627,114
-------------------------
MEDICAL PRODUCTS & SUPPLIES -- 3.5%
2,849,000 Guidant Corp.(1) 163,461
3,868,000 Medtronic, Inc. 200,894
-------------------------
364,355
-------------------------
OIL SERVICES -- 2.4%
1,768,400 Schlumberger Ltd. 135,393
2,431,667 Transocean Sedco Forex, Inc. 114,288
-------------------------
249,681
-------------------------
PROPERTY & CASUALTY INSURANCE -- 1.3%
1,271,825 American International Group, Inc. 139,503
-------------------------
SECURITIES & ASSET MANAGEMENT -- 0.9%
1,172,200 Morgan Stanley Dean Witter & Co. 89,966
-------------------------
SEMICONDUCTOR -- 10.3%
3,257,600 Intel Corp. 413,206
1,404,300 Linear Technology Corp. 80,265
1,573,800 Maxim Integrated Products, Inc.(1) 101,953
2,093,800 Texas Instruments Inc. 341,028
1,860,900 Xilinx, Inc.(1) 136,485
-------------------------
1,072,937
-------------------------
SPECIALTY STORES -- 2.5%
1,289,000 CVS Corp. 56,072
3,682,500 Home Depot, Inc. 206,450
-------------------------
262,522
-------------------------
TELEPHONE -- 4.1%
1,077,300 Bell Atlantic Corp. 63,830
900,350 Covad Communications Group, Inc.(1) 24,900
2,124,700 GTE Corp. 143,948
3,533,700 McLeodUSA Inc. Cl A(1) 88,453
1,234,200 NEXTLINK
Communications, Inc. Cl A(1) 104,020
-------------------------
425,151
-------------------------
22 1-800-345-2021 See Notes to Financial Statements
Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares/Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 8.1%
1,708,800 ALLTEL Corp. $ 113,849
1,845,500 QUALCOMM Inc.(1) 200,179
2,831,900 Sprint PCS(1) 155,754
138,900 Vodafone AirTouch PLC ADR 6,528
80,852,704 Vodafone AirTouch PLC ORD 370,013
-------------------------
846,323
-------------------------
TOTAL COMMON STOCKS 9,830,924
-------------------------
(Cost $6,508,572)
TEMPORARY CASH INVESTMENTS(2) -- 5.6%*
$303,600 FHLB Discount Notes,
5.88%, 5/1/00 303,600
50,000 FHLB Discount Notes,
5.87%, 5/5/00 49,966
50,000 FHLMC Discount Notes,
5.89%, 5/2/00 49,992
50,000 FHLMC Discount Notes,
5.88%, 5/9/00 49,933
25,000 FHLMC Discount Notes,
5.89%, 5/16/00 24,937
50,000 FHLMC Discount Notes,
5.89%, 5/23/00 49,815
50,520 FHLMC Discount Notes,
5.95%, 6/6/00 50,214
-------------------------
TOTAL TEMPORARY CASH INVESTMENTS 578,457
-------------------------
(Cost $578,233)
TOTAL INVESTMENT SECURITIES -- 100.0% $10,409,381
==========================
(Cost $7,086,805)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
($ in Thousands)
Contracts Settlement Unrealized
to Sell Date Value Gain
-------------------------------------------------------------------------------
115,003,263 GBP 5/31/00 $178,734 $2,860
======================================
(Value on Settlement Date $181,594)
FUTURES CONTRACTS
($ in Thousands)
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Gain
-------------------------------------------------------------------------------
506 S&P 500 June
Futures 2000 $184,817 $4,572
==========================================
*FUTURES CONTRACTS typically are based on a stock index, such as the S&P 500,
and tend to track the performance of the index while remaining very liquid (easy
to buy and sell). By investing its cash assets in index futures, the fund can
stay fully invested in stocks and have easy access to the money. Temporary cash
investments, less the required reserves for futures contracts, are 3.8%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
GBP = British Pound
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) Rate disclosed is the yield to maturity at purchase.
See Notes to Financial Statements www.americancentury.com 23
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
<TABLE>
<CAPTION>
APRIL 30, 2000 (UNAUDITED)
SELECT HERITAGE GROWTH
ASSETS ($ in Thousands Except Per-Share Amounts)
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $5,356,997,
$1,259,007, and $7,086,805,
respectively) (Note 3) ............... $ 7,756,047 $ 1,681,970 $ 10,409,381
Cash ................................... 541 484 707
Receivable for forward
foreign currency
exchange contracts ................... -- -- 2,860
Receivable for investments sold ........ 20,268 30,542 78,888
Receivable for capital
shares sold .......................... -- 5,911 --
Receivable for variation
margin on futures contracts .......... 2,694 1,298 8,631
Dividends and
interest receivable .................. 5,763 887 2,645
---------------- ---------------- ----------------
7,785,313 1,721,092 10,503,112
---------------- ---------------- ----------------
LIABILITIES
Payable for investments
purchased ............................ 111,137 40,229 220,647
Payable for capital shares redeemed .... 2,185 -- --
Accrued management fees (Note 2) ....... 6,084 1,346 8,381
Distribution fees payable (Note 2) ..... 3 -- 4
Service fees payable (Note 2) .......... 3 -- 4
Payable for directors'
fees and expenses .................... 2 1 3
Accrued expenses and
other liabilities .................... 2 -- 5
---------------- ---------------- ----------------
119,416 41,576 229,044
---------------- ---------------- ----------------
NET ASSETS ............................. $ 7,665,897 $ 1,679,516 $ 10,274,068
================ ================ ================
NET ASSETS CONSIST OF:
Capital (par value and
paid-in surplus) ..................... $ 4,938,241 $ 1,012,215 $ 6,170,792
Accumulated net investment loss ........ (853) (415) (16,030)
Accumulated undistributed
net realized gain
on investment and
foreign currency transactions ........ 328,105 244,903 788,971
Net unrealized appreciation
on investments and
translation of assets
and liabilities in foreign
currencies (Note 3) .................. 2,400,404 422,813 3,330,335
---------------- ---------------- ----------------
$ 7,665,897 $ 1,679,516 $ 10,274,068
================ ================ ================
INVESTOR CLASS,
$0.01 PAR VALUE
($ AND SHARES IN FULL)
Net assets ............................. $ 7,485,041,311 $ 1,671,199,879 $ 10,215,972,328
Shares outstanding ..................... 140,653,092 98,170,760 302,786,148
Net asset value per share .............. $ 53.22 $ 17.02 $ 33.74
ADVISOR CLASS,
$0.01 PAR VALUE
($ AND SHARES IN FULL)
Net assets ............................. $ 13,381,871 $ 1,647,825 $ 22,566,738
Shares outstanding ..................... 252,246 96,940 669,527
Net asset value per share .............. $ 53.05 $ 17.00 $ 33.71
INSTITUTIONAL CLASS,
$0.01 PAR VALUE
($ AND SHARES IN FULL)
Net assets ............................. $ 167,474,443 $ 6,668,532 $ 35,528,826
Shares outstanding ..................... 3,138,668 391,215 1,051,913
Net asset value per share .............. $ 53.36 $ 17.05 $ 33.78
</TABLE>
24 1-800-345-2021 See Notes to Financial Statements
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
SELECT HERITAGE GROWTH
INVESTMENT LOSS ($ in Thousands)
INCOME:
<S> <C> <C> <C>
Dividends (net of
foreign taxes withheld
of $83, $29, and $75,
respectively) ............................ $ 31,490 $ 3,411 $ 21,239
Interest ................................... 5,470 3,395 11,344
----------- ----------- -----------
36,960 6,806 32,583
----------- ----------- -----------
EXPENSES (Note 2):
Management fees ............................ 37,765 7,192 48,634
Distribution fees -
Advisor Class ............................ 14 2 22
Service fees -
Advisor Class ............................ 14 2 22
Directors' fees and expenses ............... 20 4 25
----------- ----------- -----------
37,813 7,200 48,703
----------- ----------- -----------
NET INVESTMENT LOSS ........................ (853) (394) (16,120)
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 3)
NET REALIZED GAIN (LOSS) ON:
Investments ................................ 360,914 245,308 806,884
Foreign currency transactions .............. -- (101) 11,659
----------- ----------- -----------
360,914 245,207 818,543
----------- ----------- -----------
CHANGE IN NET UNREALIZED APPRECIATION ON:
Investments ................................ 345,896 202,446 947,271
Translation of assets
and liabilities
in foreign currencies .................... -- (12) 3,275
----------- ----------- -----------
345,896 202,434 950,546
----------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN
ON INVESTMENTS
AND FOREIGN CURRENCY ..................... 706,810 447,641 1,769,089
----------- ----------- -----------
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS .......................... $ 705,957 $ 447,247 $ 1,752,969
=========== =========== ===========
</TABLE>
See Notes to Financial Statements www.americancentury.com 25
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
SELECT HERITAGE GROWTH
INCREASE IN NET ASSETS 2000 1999 2000 1999 2000 1999
OPERATIONS ($ in Thousands)
Net investment
<S> <C> <C> <C> <C> <C> <C>
income (loss) ................... $ (853) $ 1,766 $ (394) $ 1,832 $ (16,120) $ (18,074)
Net realized gain
on investments and
foreign currency
transactions .................... 360,914 754,322 245,207 126,044 818,543 1,118,381
Change in net
unrealized appreciation
on investments and
translation of assets
and liabilities
in foreign currencies ........... 345,896 987,503 202,434 138,185 950,546 1,113,300
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations ....... 705,957 1,743,591 447,247 266,061 1,752,969 2,213,607
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .................. -- (19,060) (3,439) (1,950) -- (7)
Advisor Class ................... -- (1) -- -- -- --
Institutional Class ............. -- (1) (1) -- -- --
From net realized gains on
investment transactions:
Investor Class .................. (681,130) (1,107,773) (114,650) -- (1,095,494) (1,171,233)
Advisor Class ................... (867) (328) (122) -- (1,720) (1,110)
Institutional Class ............. (12,251) (34) (10) -- (297) (36)
------------ ------------ ------------ ------------ ------------ ------------
Decrease in net
assets from distributions ....... (694,248) (1,127,197) (118,222) (1,950) (1,097,511) (1,172,386)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease)
in net assets
from capital share
transactions .................... 317,496 1,127,193 349,376 (242,256) 1,271,768 1,202,428
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS ........ 329,205 1,743,587 678,401 21,855 1,927,226 2,243,649
NET ASSETS
Beginning of period ............... 7,336,692 5,593,105 1,001,115 979,260 8,346,842 6,103,193
------------ ------------ ------------ ------------ ------------ ------------
End of period ..................... $ 7,665,897 $ 7,336,692 $ 1,679,516 $ 1,001,115 $ 10,274,068 $ 8,346,842
============ ============ ============ ============ ============ ============
Accumulated undistributed
net investment
income (loss) ................... $ (853) -- $ (415) $ 3,419 $ (16,030) --
============ ============ ============ ============ ============ ============
</TABLE>
26 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Select Fund (Select), Heritage Fund
(Heritage), and Growth Fund (Growth) (the funds) are three of the fourteen
series of funds issued by the corporation. The funds are diversified under the
1940 Act. The funds' investment objective is to seek capital growth by investing
primarily in equity securities. The following significant accounting policies
are in accordance with generally accepted accounting principles; these policies
may require the use of estimates by fund management.
MULTIPLE CLASS -- The funds are authorized to issue three classes of shares:
the Investor Class, the Advisor Class and the Institutional Class. The three
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of each fund represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. Debt securities not
traded on a principal securities exchange are valued through a commercial
pricing service or at the mean of the most recent bid and asked prices. When
valuations are not readily available, securities are valued at fair value as
determined in accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The funds may enter into stock index futures contracts
in order to manage the funds' exposure to changes in market conditions. One of
the risks of entering into futures contracts is the possibility that the change
in value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For assets
and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component of
realized gain (loss) on investments and unrealized appreciation (depreciation)
on investments, respectively.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into
forward foreign currency exchange contracts to facilitate transactions of
securities denominated in a foreign currency or to hedge the fund's exposure to
foreign currency exchange rate fluctuations. The net U.S. dollar value of
foreign currency underlying all contractual commitments held by the funds and
the resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The funds bear the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable each fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
www.americancentury.com 27
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. The differences reflect the differing character of
certain income items and net realized gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides each fund with investment advisory and management services
in exchange for a single, unified management fee per class. The Agreement
provides that all expenses of the funds, except brokerage commissions, taxes,
interest, expenses of those directors who are not considered "interested
persons" as defined in the 1940 Act (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on each fund's class average daily closing net assets during the previous month.
The annual management fee for the Investor Class, the Advisor Class and
Institutional Class is 1.00%, 0.75%, and 0.80%, respectively, for each of the
funds.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the 1940 Act.
The plan provides that the funds will pay ACIM an annual distribution fee equal
to 0.25% and service fee equal to 0.25%. The fees are computed daily and paid
monthly based on the Advisor Class's average daily closing net assets during the
previous month. The distribution fee provides compensation for distribution
expenses incurred by financial intermediaries in connection with distributing
shares of the Advisor Class including, but not limited to, payments to brokers,
dealers, and financial institutions that have entered into sales agreements with
respect to shares of the funds. The service fee provides compensation for
shareholder and administrative services rendered by ACIM, its affiliates or
independent third party providers. Fees incurred under the plan during the six
months ended April 30, 2000 were $27,512, $3,760, and $43,462 for Select,
Heritage, and Growth, respectively.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2000, were as follows:
SELECT HERITAGE GROWTH
(In Thousands)
PURCHASES ..................... $2,463,106 $1,093,763 $3,891,275
(In Thousands)
PROCEEDS FROM SALES ........... $2,743,219 $864,461 $3,747,984
On April 30, 2000, the composition of unrealized appreciation and depreciation
of investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:
SELECT HERITAGE GROWTH
(In Thousands)
Appreciation .................. $2,484,202 $ 442,746 $3,608,520
Depreciation .................. (111,926) (20,781) (307,271)
-------------- --------------- --------------
Net ........................... $2,372,276 $ 421,965 $3,301,249
============== =============== ==============
Federal Tax Cost .............. $5,383,771 $ 1,260,005 $7,108,132
============== =============== ==============
28 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of the funds were as follows:
SELECT HERITAGE GROWTH
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
SHARES AUTHORIZED ................ 360,000 354,000 710,000
========== ========== ===========
SIX MONTHS ENDED APRIL 30, 2000
Sold ............................. 12,860 $ 680,010 33,300 $ 547,028 38,370 $1,268,935
Issued in reinvestment
of distributions ............... 12,782 655,427 8,241 116,117 34,139 1,060,359
Redeemed ......................... (20,336) (1,077,223) (20,188) (319,841) (33,450) (1,098,679)
---------- ------------- ---------- ------------ ----------- -------------
Net increase ..................... 5,306 $ 258,214 21,353 $ 343,304 39,059 $1,230,615
========== ============= ========== ============ =========== =============
YEAR ENDED OCTOBER 31, 1999
Sold ............................. 23,866 $1,210,467 26,961 $ 312,108 51,420 $1,481,679
Issued in
reinvestment
of distributions ............... 23,864 1,081,597 179 1,912 44,062 1,134,197
Redeemed ......................... (25,239) (1,278,267) (48,363) (556,314) (49,284) (1,420,046)
---------- ------------- ---------- ------------ ----------- -------------
Net increase (decrease) .......... 22,491 $1,013,797 (21,223) $(242,294) 46,198 $1,195,830
========== ============= ========== ============ =========== =============
ADVISOR CLASS (In Thousands)
SHARES AUTHORIZED ................ 100,000 105,000 210,000
========== ========== ===========
SIX MONTHS ENDED APRIL 30, 2000
Sold ............................. 135 $ 7,151 32 $ 529 266 $ 8,894
Issued in reinvestment
of distributions ............... 17 844 8 120 54 1,687
Redeemed ......................... (57) (2,964) (25) (440) (55) (1,827)
---------- ------------- ---------- ------------ ----------- -------------
Net increase ..................... 95 $ 5,031 15 $ 209 265 $ 8,754
========== ============= ========== ============ =========== =============
YEAR ENDED OCTOBER 31, 1999
Sold ............................. 193 $ 9,734 225 $ 2,737 356 $10,388
Issued in reinvestment
of distributions ............... 7 314 -- -- 42 1,087
Redeemed ......................... (75) (3,833) (218) (2,701) (192) (5,674)
---------- ------------- ---------- ------------ ----------- -------------
Net increase ..................... 125 $ 6,215 7 $ 36 206 $ 5,801
========== ============= ========== ============ =========== =============
INSTITUTIONAL CLASS (In Thousands)
SHARES AUTHORIZED ................ 40,000 41,000 80,000
========== ========== ===========
SIX MONTHS ENDED APRIL 30, 2000
Sold ............................. 1,204 $ 63,534 727 $11,738 1,210 $39,239
Issued in
reinvestment
of distributions ............... 238 12,248 1 11 10 297
Redeemed ......................... (406) (21,531) (344) (5,886) (214) (7,137)
---------- ------------- ---------- ------------ ----------- -------------
Net increase ..................... 1,036 $ 54,251 384 $ 5,863 1,006 $32,399
========== ============= ========== ============ =========== =============
YEAR ENDED OCTOBER 31, 1999
Sold ............................. 2,398 $122,740 5 $ 56 117 $ 3,195
Issued in reinvestment
of distributions ............... 1 35 -- -- 1 35
Redeemed ......................... (300) (15,594) (5) (54) (89) (2,433)
---------- ------------- ---------- ------------ ----------- -------------
Net increase ..................... 2,099 $107,181 -- $ 2 29 $ 797
========== ============= ========== ============ =========== =============
</TABLE>
www.americancentury.com 29
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
5. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
six months ended April 30, 2000.
30 1-800-345-2021
Select--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $53.32 $49.54 $48.18 $41.52 $39.52 $37.67
------------ ----------- ----------- ----------- ------------ ----------
Income From Investment Operations
Net Investment Income (Loss)(2) ........ (0.01) 0.01 0.12 0.15 0.20 0.33
Net Realized and Unrealized Gain
on Investment Transactions ............. 5.01 13.73 9.37 10.51 6.73 4.68
------------ ----------- ----------- ----------- ------------ ----------
Total From Investment Operations ....... 5.00 13.74 9.49 10.66 6.93 5.01
------------ ----------- ----------- ----------- ------------ ----------
Distributions
From Net Investment Income ............. -- (0.17) (0.20) (0.32) (0.27) (0.28)
From Net Realized Gains
on Investment Transactions ............. (5.10) (9.79) (7.93) (3.68) (4.66) (2.75)
In Excess of Net Realized Gains ........ -- -- -- -- -- (0.13)
------------ ----------- ----------- ----------- ------------ ----------
Total Distributions .................... (5.10) (9.96) (8.13) (4.00) (4.93) (3.16)
------------ ----------- ----------- ----------- ------------ ----------
Net Asset Value, End of Period ........... $53.22 $53.32 $49.54 $48.18 $41.52 $39.52
============ =========== =========== =========== ============ ==========
TOTAL RETURN(3) ........................ 9.75% 31.22% 22.96% 27.89% 19.76% 15.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................... 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................... (0.03)%(4) 0.03% 0.25% 0.33% 0.50% 0.90%
Portfolio Turnover Rate .................. 33% 130% 165% 94% 105% 106%
Net Assets, End of Period (in millions) .. $7,485 $7,216 $5,591 $4,769 $4,039 $4,008
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 31
Select--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $53.19 $49.44 $48.16 $49.43
------------ ----------- ----------- ------------
Income From Investment Operations
Net Investment Loss(3) ................ (0.08) (0.13) -- (0.02)
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions ............... 5.04 13.71 9.37 (1.25)
------------ ----------- ----------- ------------
Total From Investment Operations ...... 4.96 13.58 9.37 (1.27)
------------ ----------- ----------- ------------
Distributions
From Net Investment Income ............ -- (0.04) (0.16) --
From Net Realized Gains
on Investment Transactions ............ (5.10) (9.79) (7.93) --
------------ ----------- ----------- ------------
Total Distributions ................... (5.10) (9.83) (8.09) --
------------ ----------- ----------- ------------
Net Asset Value, End of Period .......... $53.05 $53.19 $49.44 $48.16
============ =========== =========== ============
TOTAL RETURN(4) ....................... 9.69% 30.87% 22.67% (2.57)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 1.25%(5) 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Loss
to Average Net Assets ................... (0.28)%(5) (0.22)% -- (0.17)%(5)
Portfolio Turnover Rate ................. 33% 130% 165% 94%
Net Assets, End of Period
(in thousands) ......................... $13,382 $8,369 $1,617 $1,289
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) August 8, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
32 1-800-345-2021 See Notes to Financial Statements
Select--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $53.41 $49.63 $48.24 $40.56
------------ ----------- ----------- ------------
Income From Investment Operations
Net Investment Income(3) ................ 0.04 0.02 0.22 0.13
Net Realized and Unrealized Gain
on Investment Transactions .............. 5.01 13.83 9.37 7.55
------------ ----------- ----------- ------------
Total From Investment Operations ........ 5.05 13.85 9.59 7.68
------------ ----------- ----------- ------------
Distributions
From Net Investment Income .............. -- (0.28) (0.27) --
From Net Realized Gains
on Investment Transactions .............. (5.10) (9.79) (7.93) --
------------ ----------- ----------- ------------
Total Distributions ..................... (5.10) (10.07) (8.20) --
------------ ----------- ----------- ------------
Net Asset Value, End of Period ............ $53.36 $53.41 $49.63 $48.24
============ =========== =========== ============
TOTAL RETURN(4) ......................... 9.83% 31.47% 23.22% 18.93%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.80%(5) 0.80% 0.80% 0.80%(5)
Ratio of Net Investment Income
to Average Net Assets ..................... 0.17%(5) 0.23% 0.45% 0.45%(5)
Portfolio Turnover Rate ................... 33% 130% 165% 94%
Net Assets, End of Period (in thousands) .. $167,474 $112,293 $173 $11,486
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) March 13, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 33
Heritage--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $13.02 $9.98 $14.86 $12.24 $11.75 $10.32
------------ ----------- ----------- ----------- ------------ ----------
Income From Investment Operations
Net Investment Income(2) ................ --(3) 0.02 0.03 0.01 -- 0.05
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 5.52 3.04 (2.14) 3.41 1.15 1.96
------------ ----------- ----------- ----------- ------------ ----------
Total From Investment Operations ........ 5.52 3.06 (2.11) 3.42 1.15 2.01
------------ ----------- ----------- ----------- ------------ ----------
Distributions
From Net Investment Income .............. (0.04) (0.02) (0.07) (0.09) (0.05) (0.03)
From Net Realized Gains
on Investment Transactions .............. (1.48) -- (2.70) (0.71) (0.61) (0.52)
In Excess of Net Realized Gains ......... -- -- -- -- -- (0.03)
------------ ----------- ----------- ----------- ------------ ----------
Total Distributions ..................... (1.52) (0.02) (2.77) (0.80) (0.66) (0.58)
------------ ----------- ----------- ----------- ------------ ----------
Net Asset Value, End of Period ............ $17.02 $13.02 $9.98 $14.86 $12.24 $11.75
============ =========== =========== =========== ============ ==========
TOTAL RETURN(4) ......................... 44.90% 30.71% (15.87)% 29.56% 10.44% 21.04%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 1.00%(5) 1.00% 1.00% 1.00% 0.99% 0.99%
Ratio of Net Investment Income (Loss)
to Average Net Assets ..................... (0.05)%(5) 0.19% 0.29% 0.05% -- 0.50%
Portfolio Turnover Rate ................... 66% 134% 148% 69% 122% 121%
Net Assets, End of Period (in millions) ... $1,671 $1,000 $978 $1,321 $1,083 $1,008
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
34 1-800-345-2021 See Notes to Financial Statements
Heritage--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......$ 12.98 $ 9.96 $ 14.85 $ 14.23
--------- --------- --------- ---------
Income From Investment Operations
Net Investment Income (Loss)(3) .......... (0.02) (0.01) 0.02 (0.01)
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............... 5.52 3.03 (2.14) 0.63
--------- --------- --------- ---------
Total From Investment Operations ......... 5.50 3.02 (2.12) 0.62
--------- --------- --------- ---------
Distributions
From Net Investment Income ............... --(4) --(4) (0.07) --
From Net Realized Gains
on Investment Transactions ............... (1.48) -- (2.70) --
--------- --------- --------- ---------
Total Distributions ...................... (1.48) -- (2.77) --
--------- --------- --------- ---------
Net Asset Value, End of Period .............$ 17.00 $ 12.98 $ 9.96 $ 14.85
========= ========= ========= =========
TOTAL RETURN(5) .......................... 44.80% 30.37% (16.03)% 4.36%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 1.25%(6) 1.25% 1.25% 1.25%(6)
Ratio of Net Investment Income (Loss)
to Average Net Assets ......................(0.30)%(6) (0.06)% 0.04% (0.23)%(6)
Portfolio Turnover Rate .................... 66% 134% 148% 69%
Net Assets, End of Period (in thousands) ...$ 1,648 $ 1,060 $ 748 $ 120
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) July 11, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) Annualized.
See Notes to Financial Statements www.americancentury.com 35
<TABLE>
<CAPTION>
Heritage--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......$ 13.04 $ 10.00 $ 14.87 $ 13.60
--------- --------- --------- ---------
Income From Investment Operations
Net Investment Income(3) ................. 0.01 0.04 0.06 0.01
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............... 5.55 3.04 (2.14) 1.26
--------- --------- --------- ---------
Total From Investment Operations ......... 5.56 3.08 (2.08) 1.27
--------- --------- --------- ---------
Distributions
From Net Investment Income ............... (0.07) (0.04) (0.09) --
From Net Realized Gains
on Investment Transactions ............... (1.48) -- (2.70) --
--------- --------- --------- ---------
Total Distributions ...................... (1.55) (0.04) (2.79) --
--------- --------- --------- ---------
Net Asset Value, End of Period .............$ 17.05 $ 13.04 $ 10.00 $ 14.87
========= ========= ========= =========
TOTAL RETURN(4) .......................... 45.20% 30.92% (15.67)% 9.34%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.80%(5) 0.80% 0.80% 0.80%(5)
Ratio of Net Investment Income
to Average Net Assets ...................... 0.15%(5) 0.39% 0.49% 0.21%(5)
Portfolio Turnover Rate .................... 66% 134% 148% 69%
Net Assets, End of Period (in thousands) ...$ 6,669 $ 92 $ 70 $ 129
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) June 16, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
36 1-800-345-2021 See Notes to Financial Statements
Growth--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $31.60 $28.03 $27.86 $22.21 $23.88 $22.99
------------ ----------- ----------- ----------- ------------ ----------
Income From Investment Operations
Net Investment Income (Loss)(2) ......... (0.06) (0.07) (0.01) 0.01 (0.01) 0.08
Net Realized and Unrealized Gain
on Investment Transactions .............. 6.34 9.03 4.35 6.07 1.47 4.08
------------ ----------- ----------- ----------- ------------ ----------
Total From Investment Operations ........ 6.28 8.96 4.34 6.08 1.46 4.16
------------ ----------- ----------- ----------- ------------ ----------
Distributions
From Net Investment Income .............. -- -- -- (0.18) (0.07) (0.05)
From Net Realized Gains
on Investment Transactions .............. (4.14) (5.39) (4.17) (0.25) (2.98) (3.18)
In Excess of Net Realized Gains ......... -- -- -- -- (0.08) (0.04)
------------ ----------- ----------- ----------- ------------ ----------
Total Distributions ..................... (4.14) (5.39) (4.17) (0.43) (3.13) (3.27)
------------ ----------- ----------- ----------- ------------ ----------
Net Asset Value, End of Period ............ $33.74 $31.60 $28.03 $27.86 $22.21 $23.88
============ =========== =========== =========== ============ ==========
TOTAL RETURN(3) ......................... 20.99% 36.31% 18.53% 27.85% 8.18% 22.31%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets ..................... (0.33)%(4) (0.24)% (0.02)% 0.02% (0.10)% 0.40%
Portfolio Turnover Rate ................... 41% 92% 126% 75% 122% 141%
Net Assets, End of Period (in millions) ... $10,216 $8,333 $6,097 $5,113 $4,765 $5,130
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 37
<TABLE>
<CAPTION>
Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $31.52 $27.97 $27.84 $24.36
------------ ----------- ----------- ------------
Income From Investment Operations
Net Investment Loss(3) .................... (0.10) (0.15) (0.08) (0.06)
Net Realized and Unrealized Gain
on Investment Transactions ................ 6.34 9.02 4.35 3.54
------------ ----------- ----------- ------------
Total From Investment Operations .......... 6.24 8.87 4.27 3.48
------------ ----------- ----------- ------------
Distributions
From Net Realized Gains
on Investment Transactions ................ (4.05) (5.32) (4.14) --
------------ ----------- ----------- ------------
Net Asset Value, End of Period .............. $33.71 $31.52 $27.97 $27.84
============ =========== =========== ============
TOTAL RETURN(4) ........................... 20.91% 35.93% 18.23% 14.29%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....................... 1.25%(5) 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Loss
to Average Net Assets ....................... (0.58)%(5) (0.49)% (0.27)% (0.47)%(5)
Portfolio Turnover Rate ..................... 41% 92% 126% 75%
Net Assets, End of Period (in thousands) .... $22,567 $12,759 $5,520 $2,200
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) June 4, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
38 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $31.66 $28.08 $27.88 $25.75
------------ ----------- ----------- ------------
Income From Investment Operations
Net Investment Income (Loss)(3) ........... (0.03) (0.03) 0.05 0.01
Net Realized and Unrealized Gain
on Investment Transactions ................ 6.35 9.07 4.34 2.12
------------ ----------- ----------- ------------
Total From Investment Operations .......... 6.32 9.04 4.39 2.13
------------ ----------- ----------- ------------
Distributions
From Net Realized Gains
on Investment Transactions ................ (4.20) (5.46) (4.19) --
------------ ----------- ----------- ------------
Net Asset Value, End of Period .............. $33.78 $31.66 $28.08 $27.88
============ =========== =========== ============
TOTAL RETURN(4) ........................... 21.13% 36.62% 18.77% 8.27%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....................... 0.80%(5) 0.80% 0.80% 0.80%(5)
Ratio of Net Investment Income (Loss)
to Average Net Assets ....................... (0.13)%(5) (0.04)% 0.18% 0.07%(5)
Portfolio Turnover Rate ..................... 41% 92% 126% 75%
Net Assets, End of Period (in thousands) .... $35,529 $1,453 $465 $171
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) June 16, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 39
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the funds: Investor
Class, Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
40 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 14 growth funds including domestic equity,
specialty, international, and global. The philosophy behind these growth funds
focuses on three important principles. First, the funds seek to own successful
companies, which we define as those with growing earnings and revenues. Second,
we attempt to keep the funds fully invested, regardless of short-term market
activity. Experience has shown that market gains can occur in unpredictable
spurts and that missing those opportunities can significantly limit the
potential for gain. Third, the funds are managed by teams, rather than by one
"star." We believe this allows us to make better, more consistent management
decisions.
In addition to these principles, each fund has its own investment policies:
AMERICAN CENTURY SELECT seeks large, established companies that show
accelerating growth rates. Also, at least 80% of the fund's assets must be
invested in stocks or securities that pay regular dividends or otherwise produce
income. These dividends, and the established nature of the companies in which
Select invests, help lessen the fund's short-term price fluctuations.
AMERICAN CENTURY HERITAGE seeks smaller and midsized firms showing
accelerating growth rates, and at least 60% of its assets must be in stocks or
securities paying regular dividends or otherwise producing income. While
Heritage's dividend requirement should make the fund less volatile than funds
without dividends, it should also display somewhat more price variability -- and
greater long-term growth potential -- than Select. Historically, small-cap
stocks have been more volatile than the stocks of larger, more established
companies.
AMERICAN CENTURY GROWTH invests in larger, more established firms that
exhibit accelerating growth. Because the value of established firms tends to
change relatively slowly, Growth can ordinarily be expected to show more
moderate price fluctuations than growth funds that invest in smaller or midsized
firms.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded Blue Chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
dominant industries. Created by Standard & Poor's, it is considered to be a
broad measure of U.S. stock market performance.
The S&P MIDCAP 400 is the medium capitalization sector of the U.S. market.
Created by Standard & Poor's, it is considered to represent the performance of
mid-cap stocks generally.
The RUSSELL 2000 INDEX was created by the Frank Russell Company. It
measures the performance of the 2,000 smallest of the 3,000 largest publicly
traded U.S. companies based on total market capitalization. The Russell 2000
Index represents approximately 10% of the total market capitalization of the top
3,000 companies. The average market capitalization of the index is approximately
$420 million.
The RUSSELL 1000 INDEX, created by the Frank Russell Company, measures the
performance of the 1,000 largest companies in the Russell 3000 Index (the 3,000
largest publicly traded U.S. companies, based on total market capitalization).
The RUSSELL 1000 GROWTH INDEX measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth
rates.
[left margin]
PORTFOLIO MANAGERS
Select
--------------------------------
JERRY SULLIVAN
KENNETH CRAWFORD
Heritage
--------------------------------
LINDA PETERSON, CFA
KURT STALZER
Growth
--------------------------------
C. KIM GOODWIN
GREG WOODHAMS, CFA
PRESCOTT LEGARD, CFA
www.americancentury.com 41
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that
wouldhave produced the fund's cumulative total returns if the fund's performance
had been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 31-39.
INVESTMENT TERMS
* MEDIAN MARKET CAPITALIZATION -- Market capitalization (market cap) is the
total value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES -- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER -- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO -- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO -- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
TYPES OF STOCKS
* BLUE CHIP STOCKS -- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS -- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS -- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS -- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $10.3 billion. This is Lipper's market capitalization breakpoint as of
April 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $10.3 billion. This is Lipper's market capitalization
breakpoint as of April 30, 2000, although it may be subject to change based on
market fluctuations. The S&P 400 Index and Russell 2500 Index generally consist
of stocks in this range.
42 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS -- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of less
than $2.3 billion. This is Lipper's market capitalization breakpoint as of April
30, 2000, although it may be subject to change based on market fluctuations. The
S&P 600 Index and the Russell 2000 Index generally consist of stocks in this
range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that a fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on a fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price- fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price-fluctuation risk.
www.americancentury.com 43
Notes
--------------------------------------------------------------------------------
44 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation: Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
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--------------------------------------------------------------------------------
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P.O. Box 419200 U.S. POSTAGE PAID
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www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20655 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
April 30, 2000
AMERICAN CENTURY(reg.sm)
Semiannual Report
[graphic of runners]
[graphic of person looking at computer screen]
Ultra(reg.sm)
Vista
[american century logo(reg.sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
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To review Fund Advisor's unique perspective, go to www.americancentury.com
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[left margin]
ULTRA
(TWCUX)
-----------------------------------------
VISTA
(TWCVX)
-----------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Saving for College Just Got Easier
--------------------------------------------------------------------------------
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, rewarded growth investors in Ultra and
Vista, as both funds handily outperformed their respective benchmarks.
The period was short, but momentous. So-called "New Economy" stocks led the
market -- in both directions. Investors stampeded into technology-oriented firms
at the end of 1999 and during the first quarter of 2000, triggering one of the
most powerful market advances ever. Then, suddenly, came the reminder that some
"old" rules of common stock investing still apply -- including one American
Century's growth fund managers hold dear: stock prices ultimately depend on
earnings.
Turning to corporate matters, the months covered in this report have been
important ones for American Century. Besides serving the nearly two million
investors who look to American Century for investment management, we have also
worked hard to serve and support the 3,000 people who work on your behalf -- to
create a positive, safe, and productive work environment. This commitment was
recognized and rewarded in late 1999 when American Century ranked in the top 40
of Fortune magazine's "100 Best Companies to Work For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and is essential in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's fund performance
reports like this one have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal from DALBAR. You can count on us to keep
looking for ways to improve the reports, literature and statements you receive
from us.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/ /signature/
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
ULTRA
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Portfolio at a Glance .................................................. 5
Top Ten Holdings ....................................................... 6
Top Five Industries .................................................... 6
Types of Investments ................................................... 7
Schedule of Investments ................................................ 8
VISTA
Performance Information ................................................ 10
Management Q&A ......................................................... 11
Portfolio at a Glance .................................................. 11
Top Ten Holdings ....................................................... 12
Top Five Industries .................................................... 12
Types of Investments ................................................... 13
Schedule of Investments ................................................ 14
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ......................................................... 16
Statements of Operations ............................................... 17
Statements of Changes
in Net Assets ....................................................... 18
Notes to Financial
Statements .......................................................... 19
Financial Highlights ................................................... 23
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 29
Background Information
Portfolio Managers .................................................. 30
Investment Philosophy
and Policies ..................................................... 30
Comparative Indices ................................................. 30
Glossary ............................................................... 31
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* The six months ended April 30, 2000, saw the S&P 500, the Nasdaq Composite,
and the Dow all reach record highs as they entered the new millennium. 1999
represented the fifth consecutive year that the S&P 500 returned 20% or
better. The technology-laden Nasdaq was the biggest winner, closing 1999
with an unprecedented gain of 86% -- the largest one-year increase ever
recorded by any U.S. market index.
* While "New Economy" stocks -- particularly those of Internet and technology
companies -- still held appeal for investors, uncertainty got a foothold and
volatility became pervasive in this arena in recent months. Despite rising
interest rates, valuations of technology stocks continued to climb until
investors lost faith and interest, taking the Nasdaq down 25.33% during a
single week in April.
ULTRA
* Ultra gained 19.53% for the six-month period, outperforming its benchmark,
the S&P 500, which was up 7.19%.
* In seeking high-quality companies growing at an accelerating rate, the
securities of firms in the telecommunications, financial services, consumer
services, and healthcare industries emerged as winners and comprised nearly
50% of the portfolio.
* Electrical equipment and technology companies --especially those involved
with the Internet -- were among Ultra's strongest performers and some of the
fund's largest holdings.
* Notable individual securities from the technology and consumer cyclicals
sectors detracted from performance. Microsoft faltered under antitrust
pressures, while Wal-Mart and Procter & Gamble became less attractive
because of possible decelerating growth in future earnings.
VISTA
* Vista gained 66.91% during the six-month period, surpassing its benchmark,
the Russell 2500 Growth Index, which posted an increase of 38.11%.
* During the period growth stocks drove the market higher, with shares of
smaller and midsized companies out front. Technology stocks led the market,
and positions across such industries as semiconductors, electrical equipment
(especially concerning wireless telecommunications) and energy were Vista's
strongest contributors to performance.
* Performance was weakened by holdings in biotechnology and database
management firms, which suffered from a change in investor sentiment.
[left margin]
ULTRA(1)
(TWCUX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 19.53%(2)
1 Year 27.06%
INCEPTION DATE: 11/2/81
NET ASSETS: $43.6 billion(3)
VISTA(1)
(TWCVX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 66.91%(2)
1 Year 125.22%
INCEPTION DATE: 11/25/83
NET ASSETS: $2.4 billion(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor, Advisor, and Institutional classes.
Investment terms are defined in the Glossary on pages 31-32.
2 1-800-345-2021
Market Perspective from James E. Stowers III
--------------------------------------------------------------------------------
[photo of James E. Stowers III]
James E. Stowers III, Chief Executive Officer of American Century
Common stock investors will look back on the six-month interval covered by
this report as one of the more extraordinary short-term experiences in stock
market history.
The major market indices -- the Standard & Poor's 500 Index, the Nasdaq
Composite, and the Dow Jones Industrial Average -- all entered the new
millennium at record highs. The Nasdaq ended 1999 with a stunning 86% gain, the
largest one-year increase in any U.S. market index -- ever. The S&P 500 notched
its fifth consecutive year with a return of 20% or more.
HIGH EXPECTATIONS
This performance led investors to carry unrealistically high expectations
into 2000. Surveys showed the average investor expected the stock market overall
to rise 15% in 2000, and his or her stock portfolio to gain 18%. Perhaps they
also were reading headlines like this one from our hometown paper, The Kansas
City Star, in January: "New tech stocks defy old rules."
The Star appeared to be right. "New Economy" stocks -- especially those
associated with the Internet and biotechnology -- were all investors wanted to
own.
But what may have started out as "rational exuberance" for technology
issues turned into rampant speculation as 2000 progressed. This was most evident
in the extraordinary strength of the new-issue market, where hundreds of
unseasoned, untested, "dot-com" companies soared in price, as investors
scrambled to own the next America Online or Yahoo!. The technology run-up blew
past three interest rate increases as if they had never happened.
Herd-like behavior took the Nasdaq Composite up 70% from October 31, 1999,
the start of this report period, to a record 5,049 on March 10. In contrast, the
S&P 500 gained 2.63%. Many aggressive growth funds needed an extra decimal space
in the newspaper mutual fund tables to accommodate their outsized returns.
$2 TRILLION DISAPPEARS
But extreme market moves of this dimension do not last forever. In early
March, a controversy involving the ownership of genetic information staggered
the biotech sector, and one month later, the malaise had spread to technology.
By April 10, investors decided how high was too high and let the air out of the
technology balloon. Nasdaq suffered its worst week ever, dropping 25.33%. More
than $2 trillion in investor wealth evaporated.
Right now, the stock market is moving in fits and starts, not sure where it
wants to go. Investors' enthusiasm for technology is still high; however, they
also have higher standards for the tech stocks they own. With first-quarter
earnings appearing strong, wages up and the economy humming, the tug between
interest rates and inflation will weigh on the stock market for a while, along
with a higher degree of volatility. That means investors may have to recapture
something that's been missing lately: patience.
[right margin]
"INVESTORS' ENTHUSIASM FOR TECHNOLOGY IS STILL HIGH; HOWEVER, THEY ALSO HAVE
HIGHER STANDARDS FOR THE TECH STOCKS THEY OWN."
MARKET RETURNS
FOR THE SIX MONTHS ENDED APRIL 30, 2000
S&P 500 7.19%
S&P MIDCAP 400 21.26%
RUSSELL 2000 18.72%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
[line chart -- data below]
S&P 500 S&P Mid-Cap 400 Russell 2000
10/31/1999 $1.00 $1.00 $1.00
11/30/1999 $1.02 $1.05 $1.06
12/31/1999 $1.08 $1.12 $1.18
1/31/2000 $1.03 $1.08 $1.16
2/29/2000 $1.01 $1.16 $1.35
3/31/2000 $1.11 $1.26 $1.26
4/30/2000 $1.07 $1.21 $1.19
Value on 4/30/00
S&P 500 $1.07
S&P MIDCAP 400 $1.21
RUSSELL 2000 $1.19
www.americancentury.com 3
Ultra--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 11/2/81) (INCEPTION 10/2/96) (INCEPTION 11/14/96)
ULTRA S&P 500 ULTRA S&P 500 ULTRA S&P 500
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) .......... 19.53% 7.19% 19.54% 7.19% 19.53% 7.19%
1 YEAR ............... 27.06% 10.13% 26.93% 10.13% 27.17% 10.13%
=============================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS .............. 30.69% 23.69% 30.43% 23.69% 30.91% 23.69%
5 YEARS .............. 27.47% 25.26% -- -- -- --
10 YEARS ............. 25.14% 18.78% -- -- -- --
LIFE OF FUND ......... 19.46% 18.02% 26.38% 25.10% (2) 26.39% 23.54%
</TABLE>
(1) Returns for less than one year are not annualized.
(2) Since 9/30/96, the date nearest the class's inception for which data are
available.
See pages 29-31 for information about share classes, the S&P 500 Index, and
returns.
GROWTH OF $10,000 OVER 10 YEARS
Value on 4/30/00
Ultra $94,053
S&P 500 $55,896
[mountain chart -- data below]
Ultra S&P 500
4/30/1990 $10,000 $10,000
4/30/1991 $15,651 $11,762
4/30/1992 $18,839 $13,412
4/30/1993 $21,712 $14,651
4/30/1994 $26,311 $15,431
4/30/1995 $27,945 $18,127
4/30/1996 $38,122 $23,603
4/30/1997 $42,197 $29,534
4/30/1998 $58,971 $41,664
4/30/1999 $74,020 $50,755
4/30/2000 $94,053 $55,896
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The S&P
500 Index is provided for comparison in each graph. Ultra's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the S&P 500 Index do not. The graphs
are based on Investor Class shares only; performance for other classes will vary
due to differences in fee structures (see the Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
[bar chart -- data below]
Ultra S & P 500
4/30/1991 56.51% 17.56%
4/30/1992 20.37% 14.05%
4/30/1993 15.25% 9.22%
4/30/1994 21.18% 5.33%
4/30/1995 6.21% 17.42%
4/30/1996 36.42% 30.13%
4/30/1997 10.69% 25.10%
4/30/1998 39.75% 41.01%
4/30/1999 25.52% 21.80%
4/30/2000 27.06% 10.13%
4 1-800-345-2021
Ultra--Q&A
--------------------------------------------------------------------------------
[photo of John Sykora, Jim Stowers III, and Bruce Wimberly}
An interview with John Sykora, Jim Stowers III, and Bruce Wimberly,
portfolio managers on the Ultra investment team.
HOW DID ULTRA PERFORM FOR THE SIX MONTHS ENDED APRIL 30, 2000?
Ultra gained 19.53% for the period, well ahead of the 7.19% increase posted
by its benchmark, the Standard & Poor's 500 Index.*
Taking a longer view, investors who have been in Ultra for the last five
years have received an average annual return on their investment of 27.47%.
Our performance was helped by the fact that investors continued to favor
growth stocks over the short-term period, especially those of
technology-oriented businesses. Ultra was positioned to gain from the market's
tilt, with more than 40% of its assets in a wide variety of technology stocks.
BEFORE DISCUSSING YOUR INVESTMENTS, COULD YOU OUTLINE THE GROWTH STRATEGY YOU
FOLLOW TO FIND THEM?
We adhere to a very disciplined, growth-oriented investment process. The
most attractive company to us is one whose earnings and revenues are growing at
an accelerating pace, a firm that's doing better now than a short time ago.
We also want evidence -- and do a great deal of fundamental analysis to
obtain it -- that a firm is in a position to sustain its growth.
As we review our investments, you'll see common characteristics emerge
among the companies we own. Typically, the high-quality, fast-growing businesses
in Ultra tend to be leaders in their respective industries. These companies
often have high returns on invested capital. They create high barriers to entry
in their markets. That is, they are hard to compete against, whether because of
their scale, their management, the quality of their products, intellectual
properties or patents, technological expertise, or distribution channels.
Qualcomm, Inc., a wireless telecommunications company and our top
contributor for the period, presents a good illustration of what we're after in
an investment. This company owns the patent for CDMA, the dominant digital
technology used in wireless communications. This technology enables wireless
networks to carry greater volumes of data -- words, numbers, and other
information. Internet-savvy cell-phone users are demanding the ability to dial
remote databases for information from wherever they may be. CDMA helps make that
possible, and Qualcomm has licensed its technology to manufacturers of handsets
and other wireless products. It's all there: strong earnings growth, high
returns on capital, pricing power, and barriers to entry in the form of
technology and patents.
APART FROM TECHNOLOGY, IN WHICH MAJOR SECTORS WAS ULTRA INVESTED, AND HOW DID
THEY PERFORM IN GENERAL?
We spread a significant portion of our portfolio across several industry
sectors -- telecommunications, financial services, consumer services (mainly
media), and healthcare. Together, these four groups account for just under 50%
of the fund's holdings.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"TAKING A LONGER VIEW, INVESTORS WHO HAVE BEEN IN ULTRA FOR THE LAST FIVE YEARS
HAVE RECEIVED AN AVERAGE ANNUAL RETURN ON THEIR INVESTMENT OF 27.47%."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 73 68
MEDIAN P/E RATIO 55.8 43.7
MEDIAN MARKET $57.5 $65.2
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 34%(1) 42%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 31-32.
www.americancentury.com 5
Ultra--Q&A
--------------------------------------------------------------------------------
(Continued)
Our results from these broad areas of the economy were mixed. For example,
while our investments in firms providing wireless telecommunications services
performed well, the traditional telephone companies we owned performed below our
expectations. On the long-distance side, there's an ongoing price war that's
squeezing revenues, a consequence of over-capacity and competition. As a result,
we significantly reduced our investment in MCI WorldCom.
Looking at the financial services industry, the Federal Reserve's hikes in
short-term interest rates over the period pressured stocks of some large
financial services companies. Those included American Express, and mortgage
market participants such as Fannie Mae and Federal Home Loan Mortgage
Corporation, which we own.
Ultra's media stocks performed well, reflecting consumer demand for cable
and other services. Among them was our largest investment -- the cable,
publishing and entertainment conglomerate, Time Warner. A few years ago, Time
Warner saw the future and spent heavily to enable its cable network to carry
digital services, realizing that Americans will soon use their television sets
-- and their cable service -- to access the Internet. We also own AT&T
Corp.-Liberty Media, which provides a number of popular cable channels,
including the Discovery Channel.
In healthcare, we looked to makers of specialized medical equipment for the
positive results that sector delivered. One example is Medtronic, Inc. We've
committed 2% of Ultra's assets to this growth company, which makes equipment
used to treat cardiac problems and disease.
COULD YOU ELABORATE ON THE CURRENT THEMES SURROUNDING YOUR INVESTMENTS?
One theme that surrounds our portfolio is the Internet, the centerpiece of
the "digital revolution" that's underway. A number of Ultra's investments are in
companies whose technologies -- ranging from semiconductors (computer chips) and
communications equipment to computer hardware and software -- keep the Internet
running.
A good example is EMC Corporation, our second-best contributor (its shares
rose 90%), and a company we've owned for some time. EMC is a leader in high-end
storage hardware. Each time we click open an email message, or contact a
company's Web site, the Internet needs a little more storage capacity. And it
doesn't appear that the demand for data storage is going to slacken anytime
soon. Experts estimate that 96% of the Internet server capacity that will be
deployed by 2005 has yet to be installed.
On the electrical equipment side, we have nearly 4% of our portfolio
invested in Cisco Systems. Cisco is the leading supplier of communications
networking equipment for the Internet -- routers and switches that move data
from point A to point B. Cisco has beaten or met earnings expectations for 40
quarters in a row.
JDS Uniphase, another investment in the equipment area, makes components
for fiber-optic networks -- the preferred way of carrying Internet traffic. The
demand for JDS's integrated circuits is so great that the company is expanding
its manufacturing capacity four-fold.
A more familiar name we own in the Internet realm is America Online, the
nation's most popular online service with 22 million subscribers. AOL is in the
process of acquiring Time Warner. Time Warner will bring AOL substantial
content, as well as a high-capacity communications path to and from 20% of cable
households in this country.
AOL is emblematic of our favorite Internet theme: online advertising. Its
subscribers represent more than a pre-
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
TIME WARNER INC. 6.1% 3.8%
QUALCOMM INC. 6.1% 3.3%
AMERICAN INTERNATIONAL
GROUP, INC. 4.7% 5.1%
EMC CORP. (MASS.) 4.6% 3.5%
DELL COMPUTER CORP. 4.2% 2.1%
INTEL CORP. 3.9% 1.9%
CISCO SYSTEMS INC. 3.8% 2.1%
AMERICA ONLINE INC. 3.3% 5.2%
MICROSOFT CORP. 3.2% 6.1%
WARNER-LAMBERT CO. 3.2% 1.6%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
MEDIA 11.2% 9.8%
SEMICONDUCTOR 10.4% 5.7%
COMPUTER HARDWARE &
BUSINESS MACHINES 9.7% 6.1%
WIRELESS
TELECOMMUNICATIONS 9.1% 6.8%
ELECTRICAL EQUIPMENT 8.1% 4.5%
6 1-800-345-2021
Ultra--Q&A
--------------------------------------------------------------------------------
(Continued)
dictable source of revenue -- they're a captive audience for advertising, the
biggest driver behind AOL's growth. The company's first-quarter revenues from
online advertising grew sharply, and that appears to be just the start. Industry
spending for online advertising is expected to surge to $45 billion by 2005. We
own three other companies benefiting from this trend as well: Yahoo! and Lycos,
the second- and third-largest Internet portals, and Doubleclick, a firm that
helps companies with smaller Web sites sell online advertising.
WITH MORE THAN 16% OF YOUR ASSETS IN FINANCIAL SERVICES COMPANIES, YOU APPEAR
OPTIMISTIC ABOUT EARNINGS THERE.
Our proprietary database frequently leads us to companies experiencing
accelerating growth in unexpected areas of the economy. During the period, we
initiated a position in Charles Schwab Company, the country's leading discount
broker and a technology-oriented financial services company that's experiencing
strong growth. Schwab's first-quarter earnings were up over 100% from a year
earlier -- big numbers for a financial services company.
American International Group, Ultra's third-largest holding, has been a
strong long-term contributor to the fund's returns. AIG is a leading U.S.-based
international insurance and financial services organization, and the largest
underwriter of commercial and industrial insurance in the United States.
Outside the financial services realm, Enron is another example of our
system's ability to identify growing companies in supposedly "quiet" industries.
This Houston-based firm is the world's leading trader of gas and electricity. It
soon plans to buy and trade Internet communications capacity.
WHICH STOCKS OR SECTORS DIDN'T WORK OUT AS YOU EXPECTED?
Microsoft was our top detractor for the period. Investors reacted to
quarterly earnings that came in below expectations as well as the adverse court
ruling regarding the company's monopoly power and the government's subsequent
proposal to split the software giant in two.
We reduced our stake considerably in Wal-Mart, which has been a contributor
for quite some time. This is a vastly successful business, but we're not certain
about the strength of its future earnings. Wal-Mart's sheer size, coupled with
competition from online commerce, has led us to redeploy our investment in other
growth stories.
Similar thinking got us out of Procter & Gamble (P&G), the consumer
products company, well before the stock was hammered in January when the firm
preannounced disappointing fourth-quarter earnings. Our analysis showed that P&
G's margins were being squeezed by rising manufacturing costs on one side, and a
new retailing model on the other: giant national outlets that can exert pricing
leverage.
WHAT ARE YOUR PLANS FOR ULTRA FOR THE NEXT SIX MONTHS?
We do not let short-term market activity blow us off course -- we always
want to own successful, growing companies. Right now, the market is in a
heightened state of uncertainty and volatility, reflecting investors' concerns
about inflation, higher interest rates, and stretched valuations in the
technology sector. We put market volatility to work for us whenever we can by
adding to companies we own that are suddenly selling at more attractive prices
-- as we did during the correction embedded in this six-month period. Volatility
can be a friend to Ultra shareholders over time.
[rigtht margin]
"WE DO NOT LET SHORT-TERM MARKET ACTIVITY BLOW US OFF COURSE -- WE ALWAYS WANT
TO OWN SUCCESSFUL, GROWING COMPANIES."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF APRIL 30, 2000
U.S. STOCKS 94.9%
FOREIGN STOCKS 4.2%
TEMPORARY CASH INVESTMENTS 0.9%
[pie chart]
AS OF OCTOBER 31, 1999
U.S. STOCKS 96.1%
FOREIGN STOCKS 3.3%
TEMPORARY CASH INVESTMENTS 0.6%
[pie chart]
www.americancentury.com 7
<TABLE>
<CAPTION>
Ultra--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.1%
<S> <C> <C>
BANKS -- 2.8%
4,840,000 Bank of New York Co., Inc. (The) $ 198,742
16,966,700 Citigroup Inc. 1,008,458
-------------------------------
1,207,200
-------------------------------
COMPUTER HARDWARE
& BUSINESS MACHINES -- 9.7%
37,058,900 Dell Computer Corp.(1) 1,856,419
14,590,000 EMC Corp. (Mass.)(1) 2,027,099
1,410,200 SanDisk Corp.(1)(2) 129,166
2,340,100 Sun Microsystems, Inc.(1) 215,216
-------------------------------
4,227,900
-------------------------------
COMPUTER SOFTWARE -- 7.9%
4,640,100 Citrix Systems, Inc.(1) 283,481
4,399,400 Electronic Arts Inc.(1)(2) 265,751
10,854,200 Gemstar International Group Ltd.(1)(2) 501,668
20,324,500 Microsoft Corp.(1) 1,418,269
10,367,600 Oracle Corp.(1) 828,436
1,427,600 Veritas Software Corp.(1) 153,155
-------------------------------
3,450,760
-------------------------------
DEPARTMENT STORES -- 1.7%
4,678,000 Costco Companies, Inc.(1) 253,051
2,754,500 Target Corporation 183,346
5,555,600 Wal-Mart Stores, Inc. 307,641
-------------------------------
744,038
-------------------------------
DRUGS -- 7.4%
7,825,700 Amgen Inc.(1) 438,484
30,831,300 Pfizer, Inc. 1,298,769
1,663,400 Schering-Plough Corp. 67,056
12,411,900 Warner-Lambert Co. 1,412,629
-------------------------------
3,216,938
-------------------------------
ELECTRICAL EQUIPMENT -- 8.1%
23,765,600 Cisco Systems Inc.(1) 1,648,738
665,000 E-Tek Dynamics, Inc.(1) 136,138
975,000 Ericsson (L.M.) Telephone Co. ADR 86,257
2,173,000 JDS Uniphase Corp.(1) 225,381
9,902,000 Nokia Corp. Cl A ADR 563,176
5,380,000 Nortel Networks Corp.(1) 609,285
1,043,100 Sony Corp. New Shares ORD 120,696
1,243,100 Sony Corp. ORD 142,802
-------------------------------
3,532,473
-------------------------------
ENTERTAINMENT -- 1.7%
196,000 Viacom, Inc. Cl A(1) 10,743
13,798,000 Viacom, Inc. Cl B(1) 750,266
-------------------------------
761,009
-------------------------------
Shares ($ in Thousands) Value
-------------------------------------------------------------------------------
FINANCIAL SERVICES -- 7.3%
2,764,200 American Express Co. $ 414,803
16,156,600 Fannie Mae 974,445
10,410,500 Federal Home Loan
Mortgage Corporation 478,232
8,522,500 General Electric Co. (U.S.) 1,340,163
--------------------------------
0 3,207,643
--------------------------------
GAS & WATER UTILITIES -- 2.0%
12,826,000 Enron Corp. 893,812
--------------------------------
INFORMATION SERVICES -- 0.1%
747,600 CBT Group Public Limited
Company ADR(1) 35,978
--------------------------------
INTERNET -- 5.0%
24,220,200 America Online Inc.(1) 1,448,671
4,212,700 DoubleClick Inc.(1) 319,507
5,984,800 Lycos, Inc.(1)(2) 278,293
910,000 Yahoo! Inc.(1) 118,499
--------------------------------
2,164,970
--------------------------------
MEDIA -- 11.2%
28,199,400 AT&T Corp. - Liberty Media
Group Cl A(1) 1,408,208
7,558,160 Clear Channel Communications, Inc.(1) 544,188
7,452,700 Comcast Corp. Cl A(1) 298,807
29,425,000 Time Warner Inc. 2,646,410
--------------------------------
4,897,613
--------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 3.5%
8,981,100 Guidant Corp.(1) 515,291
19,163,400 Medtronic, Inc. 995,299
--------------------------------
1,510,590
--------------------------------
MULTI-INDUSTRY -- 1.7%
16,193,920 Tyco International Ltd. 743,908
--------------------------------
OIL SERVICES -- 1.8%
2,300,000 Baker Hughes Inc. 73,169
1,030,000 BJ Services Co.(1) 72,358
2,505,000 Global Marine Inc.(1) 60,120
1,255,000 Halliburton Co. 55,455
640,000 Noble Drilling Corp.(1) 25,560
2,045,000 R&B Falcon Corp.(1) 42,434
1,690,000 Rowan Companies, Inc.(1) 47,214
5,600,000 Schlumberger Ltd. 428,750
--------------------------------
805,060
--------------------------------
PROPERTY & CASUALTY INSURANCE -- 5.0%
18,539,781 American International Group, Inc. 2,033,583
2,766 Berkshire Hathaway Inc. Cl A(1) 164,024
--------------------------------
2,197,607
--------------------------------
SECURITIES & ASSET MANAGEMENT -- 1.3%
260,000 Morgan Stanley Dean Witter & Co. 19,955
12,050,000 Schwab (Charles) Corp. 536,225
--------------------------------
556,180
--------------------------------
8 1-800-345-2021 See Notes to Financial Statements
Ultra--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
SEMICONDUCTOR -- 10.4%
3,102,000 Applied Materials, Inc.(1) $ 315,919
3,090,000 Cypress Semiconductor Corp.(1) 160,487
13,570,300 Intel Corp. 1,721,308
3,997,200 Linear Technology Corp. 228,465
6,727,200 Maxim Integrated Products, Inc.(1) 435,796
8,148,800 Micron Technology, Inc.(1) 1,134,720
170,000 PMC-Sierra, Inc.(1) 32,608
230,000 Taiwan Semiconductor
Manufacturing Co. Ltd. ADR 12,032
1,865,400 Texas Instruments Inc. 303,827
2,470,000 Xilinx, Inc.(1) 181,159
-------------------------------
4,526,321
-------------------------------
SPECIALTY STORES -- 1.2%
9,399,000 Home Depot, Inc. 526,931
-------------------------------
TELEPHONE -- 0.2%
2,402,361 MCI WorldCom, Inc.(1) 109,232
-------------------------------
WIRELESS TELECOMMUNICATIONS -- 9.1%
9,674,000 China Telecom (Hong Kong)
Ltd. ORD(1) 69,861
24,389,200 QUALCOMM Inc.(1) 2,645,467
8,473,600 Sprint PCS(1) 466,048
16,177,500 Vodafone AirTouch PLC ADR 760,342
9,884,655 Vodafone AirTouch PLC ORD 45,236
-------------------------------
3,986,954
-------------------------------
TOTAL COMMON STOCKS 43,303,117
-------------------------------
(Cost $24,672,174)
Principal Amount ($ in Thousands) Value
-------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.9%
$265,000 FHLB Discount
Notes,
5.88%, 5/1/00(3) $ 265,000
100,000 FHLMC Discount Notes,
5.90%, 5/23/00(3) 99,631
50,000 FHLMC Discount Notes,
5.88%, 5/9/00(3) 49,933
--------------------------------
TOTAL TEMPORARY CASH INVESTMENTS 414,564
--------------------------------
(Cost $414,444)
TOTAL INVESTMENT SECURITIES -- 100.0% $43,717,681
=================================
(Cost $25,086,618)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
($ in Thousands)
Contracts Settlement Unrealized
to Sell Date Value Gain
-----------------------------------------------------------------------------------------------------------------
283,971,471 EURO 5/31/00 $258,747 $3,986
17,295,672,000 JPY 5/31/00 160,929 2,385
------------------------------------------------------------
$419,676 $6,371
============================================================
(Value on Settlement Date $426,047)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
JPY = Japanese Yen
ORD = Foreign Ordinary Share
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
(1) Non-income producing.
(2) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements for
a summary of transactions for each issuer which is or was an affiliate at or
during the six months ended April 30, 2000.)
(3) Rate disclosed is the yield to maturity at purchase.
</TABLE>
See Notes to Financial Statements www.americancentury.com 9
<TABLE>
<CAPTION>
Vista--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 11/25/83) (INCEPTION 10/2/96) (INCEPTION 11/14/96)
VISTA RUSSELL 2500 VISTA RUSSELL 2500 VISTA RUSSELL 2500
GROWTH INDEX GROWTH INDEX GROWTH INDEX
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 66.91% 38.11% 67.00% 38.11% 66.76% 38.11%
1 YEAR 125.22% 51.24% 125.27% 51.24% 124.90% 51.24%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 33.81% 27.42% 33.60% 27.42% 34.02% 27.42%
5 YEARS 21.94% 21.78% -- -- -- --
10 YEARS 17.32% 17.34% -- -- -- --
LIFE OF FUND 15.24% N/A(2) 16.98% 20.14%(3) 20.40% 21.06%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Benchmark began 1/1/86.
(3) Since 9/30/96, the date nearest the class's inception for which data are
available.
(4) Since 11/30/96, the date nearest the class's inception for which data are
available.
See pages 29-31 for information about share classes, the Russell 2500 Growth
Index, and returns.
GROWTH OF $10,000 OVER 10 YEARS
Value on 4/30/00
Russell 2500 Growth $49,476
Vista $49,356
[mountain chart -- data below]
Vista Russell 2500 Growth
4/30/1990 $10,000 $10,000
4/30/1991 $11,452 $11,685
4/30/1992 $13,468 $13,528
4/30/1993 $13,929 $14,460
4/30/1994 $15,074 $16,539
4/30/1995 $18,309 $18,473
4/30/1996 $26,992 $25,712
4/30/1997 $20,633 $23,917
4/30/1998 $26,024 $33,310
4/30/1999 $21,917 $32,713
4/30/2000 $49,356 $49,476
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The
Russell 2500 Growth Index is provided for comparison in each graph. Vista's
total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the Russell
2500 Growth Index do not. The graphs are based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures
(see the Total Returns table above). Past performance does not guarantee future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
[bar chart -- data below]
Vista Russell 2500 Growth
4/30/1991 14.52% 16.85%
4/30/1992 17.60% 15.77%
4/30/1993 3.43% 6.89%
4/30/1994 8.22% 14.38%
4/30/1995 21.46% 11.69%
4/30/1996 47.42% 39.19%
4/30/1997 -23.56% -6.98%
4/30/1998 26.13% 39.27%
4/30/1999 -15.78% -1.79%
4/30/2000 125.22% 51.24%
10 1-800-345-2021
Vista--Q&A
--------------------------------------------------------------------------------
[photo of Arnie Douville and Glenn Fogle]
An interview with Arnie Douville and Glenn Fogle, portfolio managers on the
Vista investment team.
HOW DID VISTA PERFORM FOR THE FIRST HALF OF ITS FISCAL YEAR?
Vista gained an impressive 66.91% during the six months ended April 30,
2000.* It significantly outperformed its benchmark, the Russell 2500 Growth
Index, which returned 38.11% during the period.
WHAT CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE?
Perhaps the most significant factor was that growth stocks continued to
lead the market higher in late 1999 and early 2000, with the shares of smaller
and midsized firms -- Vista's primary capitalization range -- performing
particularly well. In addition, investors continued their almost frenzied
preference for technology stocks, especially companies in the electrical
equipment, semiconductor and computer hardware industries, and Vista was well
represented in those groups. In fact, the fund's stake in technology-oriented
companies totaled nearly 50% of investments at the end of the period.
Having said that, we'd like to point out that the half year covered in this
report ended quite differently than it began. January and February were
basically a continuation of the fourth quarter of 1999, during which Vista
gained a remarkable 72.22% -- its largest-ever return in a single quarter -- as
technology-oriented firms continued their extraordinary run-up. In March and
April, many of the tech stocks that had tripled or even quadrupled in value over
the course of a few short months suddenly declined. In those two months alone,
the tech-heavy Nasdaq Composite Index fell nearly 18%. Vista had room to give,
however. The fund was up 101% from October 31, 1999, to February 29, 2000.
While we're on the topic of technology, we'd like to describe our approach
surrounding those investments. Many growth funds have a substantial stake in the
sector. Compared to many of our peers, Vista's chosen investments appear almost
stodgy. Many of the hottest stocks of the past year have been recent initial
public offerings (IPOs), especially those of new companies promising to
capitalize on the Internet in some fashion. Despite the allure of easy money, we
have studiously avoided many of these firms, perhaps at some cost to short-term
performance. It is obvious to us that the Internet will revolutionize many
businesses, but it's less clear which companies are well positioned to actually
earn meaningful profits from this change. The explosive growth in Internet usage
has distracted many investors from the reality that a company's value is
ultimately derived from its ability to generate earnings--and we have always
invested with the belief that "money follows earnings."
The headline-making technology stocks of late have, for the most part, been
entirely unproven -- even speculative. Rather than simply trade today's popular
stocks, we have continued our search for firms with sustainable business models,
a meaningful revenue base, and a high probability of delivering accelerating
earnings growth. We search for industry leaders with some competitive advantage
that will allow them to
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"RATHER THAN SIMPLY TRADE TODAY'S POPULAR STOCKS, WE HAVE CONTINUED OUR SEARCH
FOR FIRMS WITH SUSTAINABLE BUSINESS MODELS, A MEANINGFUL REVENUE BASE, AND A
HIGH PROBABILITY OF DELIVERING ACCELERATING EARNINGS GROWTH."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 67 63
MEDIAN P/E RATIO 79.2 24.9
MEDIAN MARKET $2.57 $3.93
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 47%(1) 187%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 31-32.
www.americancentury.com 11
Vista--Q&A
--------------------------------------------------------------------------------
(Continued)
benefit from trends visible today. We believe what experience has shown us: that
companies with those characteristics are most likely to sustain their growth
going forward. Our weighting in technology is high because we have found a
disproportionate number of excellent investments that meet these criteria within
the sector.
GIVEN THOSE CRITERIA, WHERE DID YOU FIND YOUR BEST OPPORTUNITIES?
Vista benefited greatly from its heavy stakes in semiconductor and
electrical equipment companies. Growth in the semiconductor arena has been
robust, particularly for companies that make or distribute chips used in
telecommunications networks and wireless devices.
JDS Uniphase, our largest holding and also our top contributor, is a great
example of the type of company we seek. JDS is a leading supplier of fiber-optic
components, the essential building blocks of equipment that enables
communications systems to carry more information--more quickly--over greater
distances. The company's success has been driven primarily by dramatic growth in
its end markets. Internet, data and wireless services are growing exponentially,
forcing service providers to continually increase the information-carrying
capacity of their networks. Investors have recognized the critical role JDS
Uniphase plays in enabling other companies' products to operate, and that
interest drove the stock up 148% during the period covered in this report.
Although our weighting in this group remains significant, we trimmed our
position somewhat by eliminating several semiconductor firms after the
sustainability of their performance came into question.
WHAT OTHER AREAS WITHIN TECHNOLOGY PERFORMED WELL?
Growth has also been quite strong in the wireless arena. Our second-best
contributor for the period was Qualcomm Inc., which grew to 7.3% of investments
by April 30. Like JDS, Qualcomm is an "enabler" for other communications
equipment firms. Its patented technology increases the data-carrying capacity of
wireless networks -- technology that ultimately may be used in every wireless
phone in the world. Qualcomm is positioned to garner a royalty on every device
sold that uses this technology. Despite the March and April tech meltdown,
Qualcomm's stock closed the six months with a 94% gain.
Two other top contributors in this group were also among our largest
holdings -- Ciena Corporation and E-Tek Dynamics. Ciena makes wavelength
division multiplexing systems and software to manage fiber-optic communications
networks. The company is having great success worldwide as established
telecommunications firms and new competitors build state-of-the-art networks.
E-Tek, a new holding during the period, is another maker of fiber-optic
components. In January, E-Tek agreed to be acquired by JDS Uniphase.
DID YOU FIND MANY GOOD OPPORTUNITIES OUTSIDE OF TECHNOLOGY?
Yes. We fared well with our stake in energy, which was Vista's fourth-best
performing sector. We increased our weighting in this group from approximately
4% of investments at the beginning of the period to more than 15%, as oil and
gas prices were recovering in late 1999. Rising oil prices in recent months have
driven valuations significantly higher, particularly during March and April when
technology stocks were falling.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
JDS UNIPHASE CORP. 12.4% 9.7%
QUALCOMM INC. 7.3% 6.9%
CIENA CORP. 4.4% 1.8%
CYPRESS
SEMICONDUCTOR CORP. 4.2% 3.0%
PROTEIN DESIGN
LABS, INC. 3.5% 2.3%
SANDISK CORP. 3.4% --
TRITON ENERGY LTD. 3.0% --
UNITEDGLOBALCOM CL A 2.7% 4.3%
LAM RESEARCH CORP. 2.6% 3.3%
MICRON
TECHNOLOGY, INC. 2.5% 3.7%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
ELECTRICAL EQUIPMENT 23.9% 19.4%
SEMICONDUCTOR 13.6% 19.4%
OIL SERVICES 11.0% 1.6%
WIRELESS
TELECOMMUNICATIONS 9.3% 12.8%
DRUGS 7.3% 6.0%
12 1-800-345-2021
Vista--Q&A
--------------------------------------------------------------------------------
(Continued)
Vista's healthcare-related holdings also contributed significantly -- and
did so in an environment that wasn't kind to healthcare stocks in general. Good
stock selection played a critical role. Our best pick in this group was Protein
Design Labs (PDL), a leader in monoclonal antibody research. The firm's stock
rose an impressive 154% during the period. PDL remains our largest holding in
the healthcare sector at 3.5% of investments.
WHICH HOLDINGS DETRACTED THE MOST FROM PERFORMANCE?
Our largest disappointment was Diversa Corp., a small stake at 0.6% of
investments. Diversa is a biotechnology firm that develops enzymes and other
biologically active compounds for use in agricultural chemical processing and
pharmaceutical applications. We purchased it in its initial public offering in
February and subsequently bought additional shares. The firm's timing in going
public was unfortunate; the stock was barely launched before investors suddenly
abandoned anything new or technology-related in March. We have held this stock
because we think Diversa will benefit from ongoing growth and innovation by way
of a number of strategic alliances the company has formed with market-leading
partners.
Another holding, Informix Corporation, suffered similarly from a dramatic
change in investor sentiment. Informix makes database management systems and
software used increasingly in Internet-based business applications. The
company's first-quarter earnings release showed disappointing weakness in its
legacy database business, offsetting growth in newer markets. Lacking evidence
of accelerating and sustainable momentum in the company's earnings growth, we
sold our shares at a loss.
WHAT, IF ANY, CHANGES DID YOU MAKE TO VISTA'S PORTFOLIO SINCE THE LAST REPORT?
Our most significant changes in holdings were the increased stake in energy
services and the sale of certain wireless telecommunications and media companies
as their acceleration appeared to be peaking. In addition, the portfolio
statistics on page 12 show that Vista's turnover declined markedly while its
median price-to-earnings ratio tripled during the six months. These changes
resulted from our having held on to many stocks that rose significantly in price
while adding a large number of smaller positions in companies that were just
becoming -- or were about to become -- profitable.
WHAT ARE YOUR THOUGHTS ON THE MARKET GOING FORWARD?
For the last year, technology has provided spectacular returns across the
board, but little else has worked well. Although we do not attempt to predict
market direction, recent market behavior seems to suggest that leadership may be
changing. Certainly, all of the technology firms that have enjoyed dramatic
growth cannot continue to grow at such rapid rates. Those that continue to post
accelerating growth should continue to outperform, but those without the support
of earnings may be treated harshly. We would not be at all surprised in the
months ahead to see the market broaden somewhat, and non-technology sectors of
the market begin to move higher. Such an event would enable us to further
diversify Vista's portfolio and pursue fresh avenues for growth.
[right margin]
"WE WOULD NOT BE AT ALL SURPRISED IN THE MONTHS AHEAD TO SEE THE MARKET BROADEN
SOMEWHAT, AND NON-TECHNOLOGY SECTORS OF THE MARKET BEGIN TO MOVE HIGHER. SUCH AN
EVENT WOULD ENABLE US TO FURTHER DIVERSIFY VISTA'S PORTFOLIO AND PURSUE FRESH
AVENUES FOR GROWTH."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF APRIL 30, 2000
U.S. STOCKS 96.9%
FOREIGN STOCKS 2.3%
TEMPORARY CASH INVESTMENTS 0.8%
[pie chart]
AS OF OCTOBER 31, 1999
U.S. STOCKS 94.8%
TEMPORARY CASH INVESTMENTS 5.2%
[pie chart]
www.americancentury.com 13
<TABLE>
<CAPTION>
Vista--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 99.2%
APPAREL & TEXTILES -- 0.5%
290,950 Kenneth Cole Productions, Inc. Cl A(1) $ 11,893
-----------------------------
CLOTHING STORES -- 0.1%
70,400 Gadzooks, Inc.(1) 1,551
-----------------------------
COMPUTER HARDWARE
& BUSINESS MACHINES -- 5.2%
170,000 Flextronics International Ltd. ADR(1) 11,948
870,000 SanDisk Corp.(1) 79,687
500,000 Sanmina Corp.(1) 30,016
-----------------------------
121,651
-----------------------------
COMPUTER SOFTWARE -- 2.9%
3,600,000 Informix Corp.(1) 39,488
205,000 Lernout & Hauspie Speech
Products N.V.(1) 19,808
232,945 Visual Networks, Inc.(1) 9,056
-----------------------------
68,352
-----------------------------
CONSTRUCTION & REAL PROPERTY -- 1.5%
165,000 Mastec, Inc.(1) 14,252
450,000 Quanta Services, Inc.(1) 20,897
-----------------------------
35,149
-----------------------------
CONSUMER DURABLES -- 1.0%
2,000,000 Pier 1 Imports, Inc. 22,750
-----------------------------
DEPARTMENT STORES -- 1.5%
2,000,000 Ames Department Stores, Inc.(1)(2) 36,000
-----------------------------
DRUGS -- 7.3%
500,000 Diversa Corp.(1) 13,469
150,000 Enzon, Inc.(1) 5,583
400,000 ILEX Oncology, Inc.(1) 9,500
800,000 Protein Design Labs, Inc.(1) 81,475
250,000 QLT PhotoTherapeutics Inc.(1) 13,898
850,000 Rexall Sundown, Inc.(1) 16,416
400,000 Tanox, Inc.(1) 11,688
600,000 Titan Pharmaceuticals, Inc.(1) 19,200
-----------------------------
171,229
-----------------------------
ELECTRICAL EQUIPMENT -- 23.9%
840,000 CIENA Corp.(1) 103,819
1,060,000 Digital Microwave Corp.(1) 39,121
250,000 E-Tek Dynamics, Inc.(1) 51,180
2,800,000 JDS Uniphase Corp.(1) 290,410
200,000 KLA-Tencor Corporation(1) 14,981
950,000 Sawtek Inc.(1) 45,570
800,000 Sensormatic Electronics Corp.(1) 13,350
-----------------------------
558,431
-----------------------------
ELECTRICAL UTILITIES -- 2.5%
650,000 AES Corp. (The)(1) 58,459
-----------------------------
Shares ($ in Thousands) Value
-------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 5.3%
1,044,500 Kerr-McGee Corp. $ 54,053
1,925,000 Triton Energy Ltd.(1)(2) 70,142
------------------------------
124,195
------------------------------
ENERGY SERVICES -- 0.4%
475,000 Grant Prideco, Inc(1) 9,144
------------------------------
GAS & WATER UTILITIES -- 0.7%
550,000 Kinder Morgan, Inc. 16,672
------------------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.1%
50,000 C&D Technologies, Inc. 3,222
------------------------------
HOME PRODUCTS -- 0.4%
250,000 Avon Products, Inc. 10,375
------------------------------
HOTELS -- 0.9%
1,600,000 Park Place Entertainment Corp.(1) 20,500
------------------------------
INDUSTRIAL PARTS -- 0.6%
350,000 Cymer, Inc.(1) 13,661
------------------------------
INTERNET -- 1.2%
520,000 S1 Corp.(1) 28,226
------------------------------
LEISURE -- 0.4%
500,000 Polaroid Corp. 10,094
------------------------------
MEDIA -- 3.1%
130,000 Radio One, Inc.(1) 7,609
1,200,000 UnitedGlobalCom Cl A(1) 63,788
------------------------------
71,397
------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 3.5%
450,000 Aclara BioSciences, Inc.(1) 16,847
160,000 ArthroCare Corp.(1) 16,280
400,000 MiniMed Inc.(1) 49,162
------------------------------
82,289
------------------------------
MEDICAL PROVIDERS & SERVICES -- 1.0%
750,000 Health Management Associates, Inc.(1) 11,953
600,000 Oxford Health Plans, Inc.(1) 11,419
------------------------------
23,372
------------------------------
OIL SERVICES -- 11.0%
450,000 BJ Services Co.(1) 31,612
1,345,000 Global Marine Inc.(1) 32,280
2,625,000 Key Energy Group, Inc.(1) 25,594
1,275,000 Marine Drilling Co., Inc.(1) 33,150
500,000 Patterson Energy, Inc.(1) 14,094
1,835,000 R&B Falcon Corp.(1) 38,076
1,160,000 Rowan Companies, Inc.(1) 32,408
400,000 Smith International, Inc.(1) 30,400
475,000 Weatherford International, Inc.(1) 19,297
------------------------------
256,911
------------------------------
14 1-800-345-2021 See Notes to Financial Statements
Vista--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE -- 0.5%
250,000 MGIC Investment Corp. $ 11,953
-----------------------------
SEMICONDUCTOR -- 13.6%
1,050,000 ASM Lithography Holding N.V.
New York Shares(1) 41,967
1,900,000 Cypress Semiconductor Corp.(1) 98,681
1,330,000 Lam Research Corp.(1) 60,972
425,000 Micron Technology, Inc.(1) 59,181
90,000 PMC-Sierra, Inc.(1) 17,263
390,000 Qlogic Corp.(1) 39,110
-----------------------------
317,174
-----------------------------
SPECIALTY STORES -- 0.8%
1,020,000 NBTY, Inc.(1) 18,073
-----------------------------
WIRELESS TELECOMMUNICATIONS -- 9.3%
316,300 Audiovox Corp. Cl A(1) 10,843
200,000 Nextel Communications, Inc.(1) 21,894
600,000 Nextel Partners, Inc. Cl A(1) 13,181
1,575,000 QUALCOMM Inc.(1) 170,838
-----------------------------
216,756
-----------------------------
TOTAL COMMON STOCKS 2,319,479
-----------------------------
(Cost $1,373,550)
($ in Thousands) Value
-------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.8%
Repurchase Agreement, Merrill Lynch &
Co., Inc., (U.S. Treasury obligations),
in a joint trading account at 5.65%,
dated 4/28/00, due 5/1/00 (Delivery
value $18,309)
$ 18,300
----------------------------
(Cost $18,300)
TOTAL INVESTMENT SECURITIES -- 100.0% $ 2,337,779
============================
(Cost $1,391,850)
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
(2) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements for
a summary of transactions for each issuer which is or was an affiliate at or
during the six months ended April 30, 2000.)
See Notes to Financial Statements www.americancentury.com 15
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
<TABLE>
<CAPTION>
APRIL 30, 2000 (UNAUDITED) ULTRA VISTA
ASSETS (In Thousands Except Per-Share Amounts)
<S> <C> <C>
Investment securities - unaffiliated, at value
(identified cost of $23,800,983 and
$1,281,799, respectively) (Note 3) ...................... $ 42,542,803 $ 2,231,637
Investment securities - affiliated, at value
(identified cost of $1,285,635 and
$110,051, respectively) (Note 3 and 5) .................. 1,174,878 106,142
Cash ...................................................... 2,991 2,357
Receivable for investments sold ........................... 630,618 39,240
Receivable for forward foreign currency contracts ......... 6,371 --
Receivable for capital shares sold ........................ -- 7,658
Dividends and interest receivable ......................... 12,619 36
---------------- ----------------
44,370,280 2,387,070
---------------- ----------------
LIABILITIES
Payable for investments purchased ......................... 753,072 13,964
Payable for capital shares redeemed ....................... 5,874 --
Accrued management fees (Note 2) .......................... 35,837 1,910
Distribution fees payable (Note 2) ........................ 91 4
Service fees payable (Note 2) ............................. 91 4
Payable for directors' fees and expenses .................. 14 1
Accrued expenses and other liabilities .................... 10 --
---------------- ----------------
794,989 15,883
---------------- ----------------
NET ASSETS ................................................ $ 43,575,291 $ 2,371,187
================ ================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ................... $ 21,867,410 $ 1,185,715
Accumulated net investment loss ........................... (132,195) (7,852)
Accumulated undistributed net realized gain on
investment and foreign currency transactions ............ 3,202,839 247,395
Net unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies (Note 3) ............................. 18,637,237 945,929
---------------- ----------------
$ 43,575,291 $ 2,371,187
================ ================
INVESTOR CLASS, $0.01 Par Value ($ and shares in full)
Net assets ................................................ $ 42,711,295,618 $ 2,322,697,109
Shares outstanding ........................................ 946,601,094 94,903,559
Net asset value per share ................................. $ 45.12 $ 24.47
ADVISOR CLASS, $0.01 Par Value ($ and shares in full)
Net assets ................................................ $ 450,749,313 $ 18,449,864
Shares outstanding ........................................ 10,035,181 756,482
Net asset value per share ................................. $ 44.92 $ 24.39
INSTITUTIONAL CLASS, $0.01 Par Value ($ and shares in full)
Net assets ................................................ $ 413,246,463 $ 30,040,343
Shares outstanding ........................................ 9,120,232 1,222,607
Net asset value per share ................................. $ 45.31 $ 24.57
</TABLE>
16 1-800-345-2021 See Notes to Financial Statements
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
ULTRA VISTA
INVESTMENT LOSS (In Thousands)
Income:
Dividends (net of foreign
taxes withheld of $621 for Ultra) .... $ 69,773 $ 467
Interest ............................... 7,863 1,831
--------------- ---------------
77,636 2,298
--------------- ---------------
EXPENSES: (Note 2)
Management fees ........................ 208,916 10,110
Distribution fees - Advisor Class ...... 437 18
Service fees - Advisor Class ........... 437 18
Directors' fees and expenses ........... 110 4
--------------- ---------------
209,900 10,150
--------------- ---------------
NET INVESTMENT LOSS .................... (132,264) (7,852)
--------------- ---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 3)
NET REALIZED GAIN ON:
INVESTMENTS (includes $101,128 and
$(4,991), respectively, from affiliates) 3,248,692 248,644
Foreign currency transactions .......... 34,319 --
--------------- ---------------
3,283,011 248,644
--------------- ---------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
Investments ............................ 3,882,631 519,838
Translation of assets and liabilities
in foreign currencies ................ 6,539 --
--------------- ---------------
3,889,170 519,838
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY ..... 7,172,181 768,482
--------------- ---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............ $7,039,917 $760,630
=============== ===============
See Notes to Financial Statements www.americancentury.com 17
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
INCREASE IN NET ASSETS
ULTRA VISTA
2000 1999 2000 1999
OPERATIONS (In Thousands)
<S> <C> <C> <C> <C>
Net investment loss ...........$ (132,264) $ (125,574) $ (7,852) $ (3,832)
Net realized gain on
investments and foreign
currency transactions. ...... 3,283,011 1,330,054 248,644 107,173
Change in net unrealized
appreciation on investments
and translation of assets
and liabilities in foreign
currencies .................. 3,889,170 8,568,738 519,838 394,280
--------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations ... 7,039,917 9,773,218 760,630 497,621
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains on investment transactions:
Investor Class .............. (1,259,979) (2,558,619) (72,222) --
Advisor Class. .............. (9,302) (10,096) (464) --
Institutional Class ......... (6,990) (1,995) (11) --
--------------- --------------- --------------- ---------------
Decrease in net assets
from distributions. ......... (1,276,271) (2,570,710) (72,697) --
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease) in
net assets from capital
share transactions .......... 1,625,733 3,452,155 529,300 (242,960)
--------------- --------------- --------------- ---------------
NET INCREASE IN NET ASSETS .... 7,389,379 10,654,663 1,217,233 254,661
NET ASSETS
Beginning of period ........... 36,185,912 25,531,249 1,153,954 899,293
--------------- --------------- --------------- ---------------
End of period ................. $43,575,291 $36,185,912 $2,371,187 $1,153,954
=============== =============== =============== ================
Accumulated net
investment loss ............. $(132,195) -- $(7,852) --
=============== =============== =============== ================
</TABLE>
18 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Ultra Fund (Ultra) and Vista Fund
(Vista) (the funds) are two of the fourteen series of funds issued by the
corporation. The funds are diversified under the 1940 Act. The funds' investment
objective is to seek capital growth by investing primarily in equity securities.
Ultra generally invests in companies with medium to large size market
capitalization while Vista invests in companies with small to medium market
capitalization. The following significant accounting policies are in accordance
with generally accepted accounting principles; these policies may require the
use of estimates by fund management.
MULTIPLE CLASS -- The funds are authorized to issue three classes of shares:
Investor Class, Advisor Class, and Institutional Class. The three classes of
shares differ principally in their respective shareholder servicing and
distribution expenses and arrangements. All shares of each fund represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. Discount notes are
valued through a commercial pricing service. When valuations are not readily
available, securities are valued at fair value as determined in accordance with
procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For assets
and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component of
realized gain (loss) on investments and unrealized appreciation (depreciation)
on investments, respectively.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into
forward foreign currency exchange contracts to facilitate transactions of
securities denominated in a foreign currency or to hedge the fund's exposure to
foreign currency exchange rate fluctuations. The net U.S. dollar value of
foreign currency underlying all contractual commitments held by the funds and
the resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The funds bear the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable each fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
www.americancentury.com 19
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the funds with investment advisory and management services
in exchange for a single, unified management fee per class. The Agreement
provides that all expenses of the funds, except brokerage commissions, taxes,
interest, expenses of those directors who are not considered "interested
persons" as defined in the 1940 Act (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on each fund's class average daily closing net assets during the previous month.
The annual management fee is 1.00%, 0.75% and 0.80% for the Investor, Advisor,
and Institutional Classes, respectively.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the 1940 Act.
The plan provides that the funds will pay ACIM an annual distribution fee equal
to 0.25% and service fee equal to 0.25%. The fees are computed daily and paid
monthly based on the Advisor Class's average daily closing net assets during the
previous month. The distribution fee provides compensation for distribution
expenses incurred in connection with distributing shares of the Advisor Class
including, but not limited to, payments to brokers, dealers, and financial
institutions that have entered into sales agreements with respect to shares of
the funds. The service fee provides compensation for shareholder and
administrative services rendered by ACIM, its affiliates or independent third
party providers. Fees incurred by the funds under the plan during the six months
ended April 30, 2000, were $873,002 for Ultra and $36,117 for Vista.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments, for
the six months ended April 30, 2000, for Ultra and Vista were $14,433,155,400
and $1,332,464,483, respectively. Sales of investment securities, excluding
short-term investments, for the six months ended April 30, 2000, were
$14,243,974,965 and $917,870,772, respectively.
On April 30, 2000, accumulated net unrealized appreciation for Ultra and
Vista was $18,544,808,733 and $944,727,335, respectively, based on the aggregate
cost of investments for federal income tax purposes of $25,172,872,128 and
$1,393,051,517, respectively. Accumulated net unrealized appreciation consisted
of unrealized appreciation of $18,848,355,873 and $1,058,131,403 for Ultra and
Vista, respectively, and unrealized depreciation of $303,547,140 and
$113,404,068, respectively.
20 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of the funds were as follows:
ULTRA VISTA
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS (IN THOUSANDS)
<S> <C> <C> <C> <C>
SHARES AUTHORIZED ........... 3,500,000 710,000
=============== ===============
SIX MONTHS ENDED APRIL 30, 2000
Sold ........................ 203,768 $8,637,776 54,111 $1,302,775
Issued in reinvestment
of distributions .......... 29,187 1,240,142 3,748 70,007
Redeemed .................... (203,820) (8,613,391) (37,326) (876,726)
--------------- --------------- --------------- ---------------
Net increase ................ 29,135 $1,264,527 20,533 $ 496,056
=============== =============== =============== ================
YEAR ENDED OCTOBER 31, 1999
Sold ........................ 224,914 $8,003,665 57,121 $670,261
Issued in reinvestment
of distributions .......... 80,171 2,515,534 -- --
Redeemed .................... (205,318) (7,309,515) (79,279) (913,989)
--------------- --------------- --------------- ---------------
Net increase (decrease) ..... 99,767 $3,209,684 (22,158) $(243,728)
=============== =============== =============== ================
ADVISOR CLASS (IN THOUSANDS)
SHARES AUTHORIZED ........... 300,000 210,000
=============== ===============
SIX MONTHS ENDED APRIL 30, 2000
Sold ........................ 6,614 $294,152 791 $19,220
Issued in reinvestment
of distributions .......... 215 9,087 25 457
Redeemed .................... (3,181) (139,761) (567) (13,790)
--------------- --------------- --------------- ---------------
Net increase ................ 3,648 $163,478 249 $ 5,887
=============== =============== =============== ================
YEAR ENDED OCTOBER 31, 1999
Sold ........................ 6,738 $241,379 346 $4,163
Issued in reinvestment
of distributions .......... 318 9,982 -- --
Redeemed .................... (3,862) (139,274) (278) (3,338)
--------------- --------------- --------------- ---------------
Net increase ................ 3,194 $112,087 68 $ 825
=============== =============== =============== ================
INSTITUTIONAL CLASS (IN THOUSANDS)
SHARES AUTHORIZED ........... 200,000 80,000
=============== ===============
SIX MONTHS ENDED APRIL 30, 2000
Sold ........................ 5,672 $255,600 1,503 $34,964
Issued in reinvestment
of distributions .......... 164 6,990 1 11
Redeemed .................... (1,469) (64,862) (289) (7,618)
--------------- --------------- --------------- ---------------
Net increase ................ 4,367 $197,728 1,215 $27,357
=============== =============== =============== ================
YEAR ENDED OCTOBER 31, 1999
Sold ........................ 5,148 $184,926 295 $3,219
Issued in reinvestment
of distributions .......... 63 1,985 -- --
Redeemed .................... (1,616) (56,527) (294) (3,276)
--------------- --------------- --------------- ---------------
Net increase (decrease) ..... 3,595 $130,384 1 $ (57)
=============== =============== =============== ================
</TABLE>
www.americancentury.com 21
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
5. AFFILIATED COMPANY TRANSACTIONS
<TABLE>
<CAPTION>
A summary of transactions for each issuer which is or was an affiliate at or
during the six months ended April 30, 2000, follows:
SHARE BALANCE PURCHASE SALES REALIZED APRIL 30, 2000
FUND/ISSUER(1) 10/31/99 COST COST GAIN (LOSS) SHARE BALANCE MARKET VALUE
ULTRA ($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Electronics Arts Inc. -- $ 338,992 -- -- 4,399,400 $ 265,751
Gemstar International Group Ltd. 3,525,000 237,005 -- -- 10,854,200(2) 501,668
Lycos, Inc. -- 392,375 -- -- 5,984,800 278,293
SanDisk Corp. -- 110,719 $58,190 $101,128 1,410,200(2) 129,166
------------ --------- --------- ------------
$1,079,091 $58,190 $101,128 $1,174,878
============ ========= ========= ============
VISTA ($ IN THOUSANDS)
Ames Department Stores, Inc. 740,000 $38,725 $8,524 $(4,991) 2,000,000 $ 36,000
Triton Energy Ltd.(3) -- 51,606 -- -- 1,925,000 70,142
------------ --------- --------- ------------
$90,331 $8,524 $(4,991) $106,142
============ ========= ========= ============
</TABLE>
(1) None of the securities produced income during the period held.
(2) Includes adjustments for shares received from stock split and/or stock
spinoff during the period.
(3) Formerly known as Trinity Energy Ltd.
--------------------------------------------------------------------------------
6. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
six months ended April 30, 2000.
22 1-800-345-2021
<TABLE>
<CAPTION>
Ultra--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..$38.97 $31.06 $33.46 $29.52 $28.03 $21.16
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income (Loss)(2) ..... (0.14) (0.14) (0.02) 0.01 (0.05) (0.07)
Net Realized and Unrealized Gain
on Investment Transactions .......... 7.67 11.17 4.70 5.62 2.84 7.58
------- ------- ------- ------- ------- -------
Total From Investment Operations .... 7.53 11.03 4.68 5.63 2.79 7.51
------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income .......... -- -- (0.01) -- -- --
From Net Realized Gains on
Investment Transactions ........... (1.38) (3.12) (7.07) (1.69) (1.19) (0.64)
In Excess of Net Realized Gains ..... -- -- -- -- (0.11) --
------- ------- ------- ------- ------- -------
Total Distributions ................. (1.38) (3.12) (7.08) (1.69) (1.30) (0.64)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ........$45.12 $38.97 $31.06 $33.46 $29.52 $28.03
======= ======= ======= ======= ======= =======
Total Return(3) ..................... 19.53% 37.94% 17.61% 19.95% 10.79% 36.89%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets ..........................1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income (Loss) to Average
Net Assets .........................(0.63)%(4) (0.39)% (0.08)% 0.03% (0.20)% (0.30)%
Portfolio Turnover Rate. ............. 34% 42% 128% 107% 87% 87%
Net Assets, End of Period (in millions) $42,711 $35,752 $25,396 $21,695 $18,266 $14,376
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 23
<TABLE>
<CAPTION>
Ultra--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997 1996(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $38.80 $31.00 $33.36 $29.52 $29.55
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Loss(3) ......................... (0.20) (0.23) (0.11) (0.07) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investment Transactions ...................... 7.70 11.15 4.73 5.60 (0.01)
------- ------- ------- ------- -------
Total From Investment Operations ............... 7.50 10.92 4.62 5.53 (0.03)
------- ------- ------- ------- -------
Distributions
From Net Realized Gains on
Investment Transactions ...................... (1.38) (3.12) (6.98) (1.69) --
------- ------- ------- ------- -------
Net Asset Value, End of Period ................... $44.92 $38.80 $31.00 $33.36 $29.52
======= ======= ======= ======= =======
Total Return(4) ................................ 19.54% 37.63% 17.36% 19.59% (0.10)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets ............................. 1.25%(5) 1.25% 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Loss to
Average Net Assets ............................(0.88)%(5) (0.64)% (0.33)% (0.22)% (0.80)%(5)
Portfolio Turnover Rate .......................... 34% 42% 128% 107% 87%
Net Assets, End of Period (in thousands) ......... $450,749 $247,814 $98,965 $30,827 $13,051
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) October 2, 1996 (commencement of sale) through October 31, 1996.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
24 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Ultra--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................................ $39.13 $31.12 $33.53 $30.78
------- ------- ------- -------
Income From Investment Operations
Net Investment Income (Loss)(3) ................................... (0.10) (0.09) 0.03 0.06
Net Realized and Unrealized Gain on Investment Transactions ....... 7.66 11.22 4.72 4.38
------- ------- ------- -------
Total From Investment Operations .................................. 7.56 11.13 4.75 4.44
------- ------- ------- -------
Distributions
From Net Investment Income ........................................ -- -- (0.09) --
From Net Realized Gains on Investment Transactions ................ (1.38) (3.12) (7.07) (1.69)
------- ------- ------- -------
Total Distributions ............................................... (1.38) (3.12) (7.16) (1.69)
------- ------- ------- -------
Net Asset Value, End of Period ...................................... $45.31 $39.13 $31.12 $33.53
======= ======= ======= =======
Total Return(4) ................................................... 19.53% 38.21% 17.85% 15.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ...................0.80%(5) 0.80% 0.80% 0.80%(5)
Ratio of Net Investment Income (Loss) to Average Net Assets .......(0.43)%(5) (0.19)% 0.12% 0.23%(5)
Portfolio Turnover Rate ............................................. 34% 42% 128% 107%
Net Assets, End of Period (in thousands) ............................$413,246 $186,025 $36,065 $334
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) November 14, 1996 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 25
<TABLE>
<CAPTION>
Vista--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $15.41 $9.27 $14.53 $15.68 $15.73 $10.94
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Loss(2) ................. (0.09) (0.05) (0.05) (0.10) (0.11) (0.08)
Net Realized and Unrealized Gain
(Loss)
on Investment Transactions ........... 10.10 6.19 (4.41) 0.13 1.09 4.90
------- ------- ------- ------- ------- -------
Total From Investment Operations ....... 10.01 6.14 (4.46) 0.03 0.98 4.82
------- ------- ------- ------- ------- -------
Distributions
From Net Realized
Gains
on Investment Transactions ........... (0.95) -- (0.80) (1.18) (1.02) (0.03)
In Excess of Net Realized Gains. ....... -- -- -- -- (0.01) --
------- ------- ------- ------- ------- -------
Total Distributions .................... (0.95) -- (0.80) (1.18) (1.03) (0.03)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ........... $24.47 $15.41 $9.27 $14.53 $15.68 $15.73
======= ======= ======= ======= ======= =======
Total Return(3) ........................ 66.91% 66.24% (31.94)% 0.29% 6.96% 44.20%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets ............................. 1.00%(4) 1.00% 1.00% 1.00% 0.99% 0.98%
Ratio of Net Investment Loss to Average
Net Assets ............................(0.77)%(4) (0.40)% (0.42)% (0.73)% (0.70)% (0.60)%
Portfolio Turnover Rate .................. 47% 187% 229% 96% 91% 89%
Net Assets, End of Period (in millions) .. $2,323 $1,146 $895 $1,828 $2,276 $1,676
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
26 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Vista--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997 1996(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period. .............. $15.31 $9.23 $14.50 $15.67 $16.87
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Loss(3) ........................... (0.12) (0.08) (0.08) (0.14) (0.02)
Net Realized and Unrealized Gain
(Loss)
on Investment Transactions ..................... 10.10 6.16 (4.39) 0.15 (1.18)
------- ------- ------- ------- -------
Total From Investment Operations ................. 9.98 6.08 (4.47) 0.01 (1.20)
------- ------- ------- ------- -------
Distributions
From Net Realized Gains on Investment Transactions (0.90) -- (0.80) (1.18) --
------- ------- ------- ------- -------
Net Asset Value, End of Period ..................... $24.39 $15.31 $9.23 $14.50 $15.67
======= ======= ======= ======= =======
Total Return(4) .................................. 67.00% 65.87% (32.08)% 0.15% (7.11)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets ............................... 1.25%(5) 1.25% 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Loss to
Average Net Assets ..............................(1.02)%(5) (0.65)% (0.67)% (0.98)% (1.20)%(5)
Portfolio Turnover Rate............................. 47% 187% 229% 96% 91%
Net Assets, End of Period (in thousands) ........... $18,450 $7,755 $4,052 $6,553 $5,646
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) October 2, 1996 (commencement of sale) through October 31, 1996.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 27
<TABLE>
<CAPTION>
Vista--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $15.51 $9.32 $14.56 $15.73
------- ------- ------- -------
Income From Investment Operations
Net Investment Loss(3) .............................. (0.07) (0.04) (0.01) (0.07)
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ........................ 10.12 6.23 (4.43) 0.08
------- ------- ------- -------
Total From Investment Operations .................... 10.05 6.19 (4.44) 0.01
------- ------- ------- -------
Distributions
From Net Realized Gains on Investment Transactions... (0.99) -- (0.80) (1.18)
------- ------- ------- -------
Net Asset Value, End of Period ........................ $24.57 $15.51 $9.32 $14.56
======= ======= ======= =======
Total Return(4) ..................................... 66.76% 66.42% (31.72)% 0.17%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ..... 0.80%(5) 0.80% 0.80% 0.80%(5)
Ratio of Net Investment Loss to Average Net Assets ...(0.57)%(5) (0.20)% (0.22)% (0.53)%(5)
Portfolio Turnover Rate ............................... 47% 187% 229% 96%
Net Assets, End of Period (in thousands) .............. $30,040 $122 $60 $13,581
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) November 14, 1996 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
28 1-800-345-2021 See Notes to Financial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the funds: Investor
Class, Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 29
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 14 growth funds including domestic equity,
specialty, international, and global. The philosophy behind these growth funds
focuses on three important principles. First, the funds seek to own successful
companies, which we define as those with growing earnings and revenues. Second,
we attempt to keep the funds fully invested, regardless of short-term market
activity. Experience has shown that market gains can occur in unpredictable
spurts and that missing those opportunities can significantly limit the
potential for gain. Third, the funds are managed by teams, rather than by one
"star." We believe this allows us to make better, more consistent management
decisions.
In addition to these principles, each fund has its own investment policies:
AMERICAN CENTURY ULTRA generally invests in the securities of midsized and
larger companies that exhibit growth. It typically will have significant price
fluctuations.
AMERICAN CENTURY VISTA invests mainly in the securities of smaller and
medium-sized firms that exhibit growth. The fund is subject to significant price
volatility but offers high long-term growth potential. Historically, small- and
mid-cap stocks have been more volatile than the stocks of larger, more
established companies.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded Blue Chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The S&P 500 INDEX is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
dominant industries. Created by Standard & Poor's, it is considered to be a
broad measure of U.S. stock market performance.
The S&P 500/BARRA INDEX is a capitalization-weighted index consisting of
S&P 500 stocks. S&P 500/BARRA VALUE consists of stocks with lower price-to-book
ratios, and S&P 500/BARRA GROWTH consists of stocks with higher price-to-book
ratios. In general, both share other characteristics with value- or growth-style
stocks.
The S&P MIDCAP 400 is the medium capitalization sector of the U.S. market.
Created by Standard & Poor's, it is considered to represent the performance of
mid-cap stocks generally.
The RUSSELL 2000 INDEX was created by the Frank Russell Company. It
measures the performance of the 2,000 smallest of the 3,000 largest publicly
traded U.S. companies based on total market capitalization. The Russell 2000
represents approximately 10% of the total market capitalization of the top 3,000
companies. The average market capitalization of the index is approximately $420
million.
The RUSSELL 2500 INDEX was created by the Frank Russell Company. It
measures the performance of the 2,500 smallest of the 3,000 largest publicly
traded U.S. companies based on total market capitalization. The Russell 2500
represents approximately 23% of the total market capitalization of the top 3,000
companies. The average market capitalization of the index is approximately $650
million. The RUSSELL 2500 GROWTH INDEX measures the performance of those Russell
2500 companies with higher price-to-book ratios and higher forecasted growth
rates.
[left margin]
PORTFOLIO MANAGERS
Ultra
JIM STOWERS III
BRUCE WIMBERLY
JOHN SYKORA, CFA
Vista
GLENN FOGLE, CFA
ARNIE DOUVILLE
30 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 23 - 28.
INVESTMENT TERMS
* MEDIAN MARKET CAPITALIZATION -- Market capitalization (market cap) is the
total value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES -- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER -- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO -- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO -- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
TYPES OF STOCKS
* BLUE CHIP STOCKS -- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS -- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS -- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS --
the stocks of companies with a market capitalization (the total value of a
company's outstanding stock) of more than $10.3 billion. This is Lipper's market
capitalization breakpoint as of April 30, 2000, although it may be subject to
change based on market fluctuations. The Dow Jones Industrial Average and the
S&P 500 Index generally consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS --
the stocks of companies with a market capitalization (the total value of a
company's outstanding stock) of between $2.3 billion and $10.3 billion. This is
Lipper's market capitalization breakpoint as of April 30, 2000, although it may
be subject to change based on market fluctuations. The S&P 400 Index and Russell
2500 Index generally consist of stocks in this range.
www.americancentury.com 31
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS --
the stocks of companies with a market capitalization (the total value of a
company's outstanding stock) of less than $2.3 billion. This is Lipper's market
capitalization breakpoint as of April 30, 2000, although it may be subject to
change based on market fluctuations. The S&P 600 Index and the Russell 2000
Index generally consist of stocks in this range.
* VALUE STOCKS -- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that a fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price-fluctuation risk.
32 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation: Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth Value
Strategic Allocation: Large Cap
Conservative Value
Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[graphic of runners]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20654 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
APRIL 30, 2000
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
Balanced
[american century logo(reg.sm)]
American
Century
[inside front cover]
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[left margin]
BALANCED
(TWBIX)
---------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, served as yet another reminder of the
importance of a diversified investment portfolio. The stock market grew
increasingly volatile, with so-called "New Economy" technology stocks
leading the market--both up and down--in dramatic fashion. In the bond market,
rising interest rates put pressure on bond prices, while the federal government
began using the budget surplus to buy back its own debt.
In this unusual environment, the American Century Balanced fund's portfolio
of both stocks and bonds held up well, outperforming its benchmark index. Our
investment professionals review the period and the fund's performance in more
detail beginning on page 3.
Besides serving the nearly two million investors who look to American
Century for investment management, we also have an obligation to the 3,000
people who work on your behalf--to create a positive, safe, and productive work
environment for American Century staff. This commitment was recognized and
rewarded in late 1999 when American Century ranked in the top 40 of Fortune
magazine's "100 Best Companies to Work For."
We do not take this recognition lightly--acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and an essential one in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's shareholder
reports--like this one--have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal of approval from DALBAR. You can count on
us to keep looking for ways to improve the reports, literature, and statements
you receive from us.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
BALANCED
Performance Information ................................................ 4
Management Q&A ..................................................... 5
Types of Investments ................................................... 5
Top Ten Stock Holdings ................................................. 6
Top Five Stock Industries .............................................. 6
Fixed-Income Portfolio ................................................. 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 14
Statement of Operations ................................................ 15
Statements of Changes
in Net Assets ....................................................... 16
Notes to Financial
Statements .......................................................... 17
Financial Highlights ................................................... 20
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 22
Background Information
Investment Philosophy
and Policies ..................................................... 23
Comparative Indices ................................................. 23
Investment Team
Leaders .......................................................... 23
Credit Rating
Guidelines ....................................................... 23
Glossary ............................................................... 24
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* During the six months ended April 30, 2000, stocks produced healthy returns,
while bonds struggled with rising interest rates.
* Stocks rallied in late 1999, led by technology shares, bellwethers of the
New Economy.
* Day-to-day volatility increased as equity investors became more uncertain
about economic conditions.
* Stocks stumbled late in the period, with the technology sector again leading
the way.
* Rising interest rates led to weak bond market performance.
* In response to strong economic growth and rising inflation, the Federal
Reserve raised short-term interest rates three times during the six-month
period.
* Longer-term Treasury bonds benefited from reduced issuance and buy-backs by
the federal government.
* As short-term Treasury yields rose and long-term yields fell, the Treasury
yield curve inverted--the yield of the two-year note was higher than that of
the 30-year bond for the first time since 1990.
* Other sectors of the bond market did not fare as well as Treasurys.
FUND PERFORMANCE
* Balanced outperformed its benchmark index (60% S&P 500 and 40% Lehman
Aggregate Bond Index) for the six-month period.
* The fund's stock portfolio solidly outpaced the S&P 500, while the bond
portfolio performed in line with the Lehman index.
BALANCED'S STOCK PORTFOLIO
* The portfolio benefited from a heavy weighting in technology stocks,
especially companies in the electrical equipment, semiconductor, and
computer hardware industries.
* An overweight in energy shares boosted fund performance in the last half of
the period.
* On the negative side, fund holdings among banking, financial services, and
home products stocks were a drag on performance.
BALANCED'S BOND PORTFOLIO
* The portfolio remained overweight in non-Treasury bonds, which offered
relatively attractive yields.
* Although the portfolio's overall duration (a measure of price volatility as
interest rates change) remained neutral to the benchmark index, we extended
the duration of our Treasury holdings to take advantage of their price
gains.
OUTLOOK
* The performance of the stock and bond markets will hinge on whether the
Federal Reserve can successfully slow the economy to a moderate, sustainable
growth rate while keeping a lid on inflation.
* We expect to see continued volatility in the stock market and further
Treasury bond buy-backs by the federal government.
* In the stock portfolio, we'll continue to focus on seeking out the most
attractive companies in each industry of the market.
* In the bond portfolio, we'll be keeping a close eye on the credit quality of
our corporate and asset-backed bonds.
[left margin]
BALANCED(1)
(TWBIX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 5.85%(2)
1 Year 8.16%
30-DAY SEC YIELD: 2.54%
INCEPTION DATE: 10/20/88
NET ASSETS: $915.4 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on page 4.
Investment terms are defined in the Glossary on pages 24-25.
2 1-800-345-2021
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
[photo of Mark Mallon]
Mark Mallon, head of growth and income equity, specialty, and asset allocation
funds at American Century
OVERVIEW
The six months ended April 30, 2000, were an extraordinary period in the
U.S. financial markets. Stocks produced healthy returns but were subject to
increased volatility. Bonds struggled with interest rate hikes by the Federal
Reserve and were also impacted by the federal government's unprecedented
buy-back of Treasury bonds.
U.S. STOCKS
The stock market began the six-month period with a furious rally. As
investors grew more confident about the U.S. economy, the major stock indexes
soared, finishing 1999 at record highs.
Technology stocks led the late-year rally--investors embraced the promise
of electronic commerce and bid up the stock prices of "dot-coms" and other
Internet- and computer-related companies.
This behavior pushed the Nasdaq Composite Index, which is dominated by tech
stocks, up 70% from October 31, 1999, to its peak on March 10, 2000. In
contrast, the S&P 500 gained less than 3%.
But the speculative fervor contributed to greater market volatility.
Day-to-day swings of 2% or more in the major stock indexes became increasingly
common as investors scurried from dot-com to dot-com, trying to latch on to the
next "big thing."
By mid-March, market sentiment had changed. Concerns about sustainability
in the tech sector, as well as the potential impact of several interest rate
hikes by the Federal Reserve, led many investors to seek out value elsewhere or
sit on the sidelines. The Nasdaq suffered a dramatic decline, including a record
25% plunge in the second week of April, while the S&P 500 eked out a small gain.
U.S. BONDS
Strong economic growth and inflation fears created a challenging
environment for bonds. The U.S. economy grew at an annual rate of more than 7%
in the fourth quarter of 1999--the strongest quarter in nearly 16 years--and
growth in the first quarter of 2000 was also healthy.
On top of that, inflation increased to a 3.5% annual rate during the
six-month period, primarily because of soaring oil prices. In response, the
Federal Reserve raised short-term interest rates three times.
Despite rising rates, Treasury bonds performed well. The federal budget
surplus motivated the U.S. Treasury to reduce new issuance and buy back some of
its own bonds, mainly those with longer maturities. This caused long-term
Treasury yields to plunge, while short-term yields rose along with the Fed's
moves. As a result, Treasury yields "inverted" with the yield of the 30-year
bond falling below the yield of the two-year note for the first time since 1990.
The non-Treasury bond sectors--including corporate, government agency, and
mortgage-backed securities--did not fare as well. Corporate bonds struggled the
most, hurt by a glut of new issuance and sharply reduced demand.
[right margin]
"DAY-TO-DAY SWINGS OF 2% OR MORE IN THE MAJOR STOCK INDEXES BECAME INCREASINGLY
COMMON."
U.S. STOCK MARKET PERFORMANCE
FOR THE SIX MONTHS ENDED APRIL 30, 2000
S&P 500 7.19%
S&P MIDCAP 400 21.26%
S&P SMALLCAP 600 17.25%
U.S. BOND MARKET PERFORMANCE
FOR THE SIX MONTHS ENDED APRIL 30, 2000
LEHMAN AGGREGATE BOND INDEX 1.42%
Lehman Treasury Bond Index 2.58%
Lehman Mortgage-Backed 1.26%
Securities Index
Lehman Corporate Bond Index 0.11%
Source: Russell/Mellon Analytical and Lipper Inc.
www.americancentury.com 3
Balanced--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS (INCEPTION 10/20/88) ADVISOR CLASS (INCEPTION 1/6/97)
BALANCED BLENDED S&P LEHMAN AGGREGATE BALANCED BLENDED S&P LEHMAN AGGREGATE
INDEX 500 BOND INDEX INDEX 500 BOND INDEX
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 5.85% 4.88% 7.19% 1.42% 5.72% 4.88% 7.19% 1.42%
1 YEAR 8.16% 6.58% 10.13% 1.26% 7.89% 6.58% 10.13% 1.26%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 14.38% 16.65% 23.69% 6.07% 14.10% 16.65% 23.69% 6.07%
5 YEARS 14.14% 17.87% 25.26% 6.79% -- -- -- --
10 YEARS 12.40% 14.50% 18.78% 8.09% -- -- -- --
LIFE OF FUND 12.40% 14.25%(2) 18.41%(2) 8.00%(2) 12.49% 16.82%(3) 24.20%(3) 5.74%(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Return from 10/31/88, the date nearest the class's inception for which data
are available.
(3) Return from 12/31/96, the date nearest the class's inception for which data
are available.
See pages 22-24 for information about share classes, indices, and returns.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 4/30/00
S&P 500 $55,896
Blended Index $39,026
Balanced $32,161
Lehman Aggregate
Bond Index $21,759
Lehman Aggregate
Balanced Blended Index Bond Index S&P 500
DATE VALUE VALUE VALUE VALUE
4/30/1990 $10,000 $10,000 $10,000 $10,000
4/30/1991 $12,094 $11,665 $11,519 $11,762
4/30/1992 $14,090 $13,160 $12,786 $13,412
4/30/1993 $14,383 $14,588 $14,482 $14,651
4/30/1994 $15,546 $15,103 $14,605 $15,431
4/30/1995 $16,605 $17,127 $15,672 $18,127
4/30/1996 $19,512 $20,825 $17,026 $23,603
4/30/1997 $21,510 $24,555 $18,232 $29,534
4/30/1998 $27,019 $31,676 $20,221 $41,664
4/30/1999 $29,735 $36,617 $21,489 $50,755
4/30/2000 $32,161 $39,026 $21,759 $55,896
$10,000 investment made 4/30/90
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The S&P
500, Lehman Aggregate Bond, and blended indices are provided in the graph at
left, while the blended index is provided in the graph below. Balanced's total
returns include operating expenses (such as transaction costs and management
fees) that reduce returns, while the total returns of the indices do not. These
graphs are based on Investor Class shares only; performance for other classes
will vary due to differences in fee structures (see Total Returns table above).
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
Balanced Blended Index
DATE RETURN RETURN
4/30/1991 20.94% 16.65%
4/30/1992 16.50% 12.82%
4/30/1993 2.08% 10.85%
4/30/1994 8.09% 3.53%
4/30/1995 6.81% 13.41%
4/30/1996 17.51% 21.58%
4/30/1997 10.24% 17.91%
4/30/1998 25.61% 29.01%
4/30/1999 10.05% 15.60%
4/30/2000 8.16% 6.58%
4 1-800-345-2021
Balanced--Q&A
--------------------------------------------------------------------------------
[photo of Jeff Tyler] [photo of Jeff Houston]
Equity team leader (left): Jeff Tyler
Fixed-income team leader (right): Jeff Houston
Based on interviews with Jeff Tyler and Jeff Houston, portfolio managers on
the Balanced fund investment team.
HOW DID THE FUND PERFORM?
For the six months ended April 30, 2000, Balanced posted a total return of
5.85%.* This performance beat the 4.88% return of its benchmark, a blended index
that is 60% U.S. stocks, represented by the S&P 500, and 40% U.S. bonds,
represented by the Lehman Brothers Aggregate Bond Index. (See the previous page
for other fund performance comparisons.)
WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
It was mainly due to Balanced's equity portfolio. The bond portfolio
slightly underperformed the Lehman Aggregate Bond Index, but the stock portfolio
solidly outperformed the S&P 500.
LET'S TALK FIRST ABOUT BALANCED'S EQUITY PORTFOLIO. WHAT CONTRIBUTED TO ITS
OUTPERFORMANCE OF THE S&P 500?
Growth stocks continued to be the market leaders over the past six months.
We incorporate both growth and value measures into our quantitative stock
selection process, but we put more of an emphasis on growth, so the fund
benefited from the dominance of growth stocks.
In particular, the portfolio's technology holdings contributed
significantly to fund performance. Although tech stocks struggled during the
last two months of the period, this sector's overall performance was quite
strong.
CAN YOU GIVE SOME SPECIFIC EXAMPLES FROM THE PORTFOLIO?
Our quantitative models gravitated to electrical equipment companies,
especially those involved in manufacturing fiber-optic equipment and components.
Fiber-optic networks are the backbone of the developing infrastructure for
high-speed Internet access and data transmission.
A good example is Corning, which produces glass fibers for
telecommunications networks. The company is growing as fast as it possibly can
and still has a backlog of orders for its products. Corning's stock price rose
by more than 150% in the last six months.
Other top-performing electrical equipment companies in the portfolio
included Cisco Systems (up 88% during the period), our top holding and the
dominant maker of Internet routers and switches; Scientific Atlanta (up 127%),
which makes set-top boxes that connect digital cable and the Internet to your TV
or computer; and Vishay Intertechnology (up 243%), one of the largest
manufacturers of components and circuitry for cellular phones and other wireless
devices.
ANY OTHER WINNERS AMONG TECHNOLOGY STOCKS?
The stocks of semiconductor manufacturers like Intel (up 64%) and
Integrated Device Technologies (up 134%) surged in response to stronger demand
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF APRIL 30, 2000
COMMON STOCKS & FUTURES 60%
MORTGAGE- & ASSET-BACKED
SECURITIES 15%
CORPORATE BONDS 11%
U.S. TREASURY SECURITIES 8%
U.S. GOVERNMENT AGENCY
SECURITIES 3%
TEMPORARY CASH INVESTMENTS 3%
AS OF OCTOBER 31, 1999
COMMON STOCKS & FUTURES 60%
MORTGAGE- & ASSET-BACKED
SECURITIES 14%
CORPORATE BONDS 14%
U.S. TREASURY SECURITIES 8%
U.S. GOVERNMENT AGENCY
SECURITIES 2%
TEMPORARY CASH INVESTMENTS 2%
Investment terms are defined in the Glossary on pages 24-25.
www.americancentury.com 5
Balanced--Q&A
--------------------------------------------------------------------------------
(Continued)
for personal computers, cell phones, and other electronic devices that require
chips. Increased chip production also boosted companies like Applied Materials
(up 127%), which makes equipment for semiconductor manufacturers.
Among computer hardware companies, the one that stood out in the portfolio
was Apple Computer (up 74%), which found success with the introduction of the
iMac.
HOW DID THE PORTFOLIO FARE IN OTHER SECTORS OF THE MARKET?
Results were mixed. On the plus side, the portfolio was overweight in
energy stocks, including Amerada Hess (up 12%) and Apache (up 25%). These
companies benefited from the soaring price of oil and performed well in the last
half of the period.
On the down side, financial stocks, especially banks, were among the
portfolio's weakest performers. Rising interest rates led to reduced lending
activity, and that in turn squeezed profit margins at many banks. Fund holdings
like Chase Manhattan (down 17%), UnionBanCal (down 35%), and Bank of America
(down 24%) were a drag on fund performance.
Home products makers also struggled with tighter profit margins. Procter
& Gamble, for example, saw its stock price tumble almost 40% after the
company failed to meet earnings expectations in the first quarter. Strong
competition made it difficult for P&G to pass cost increases on to
consumers.
And then there's Microsoft, the portfolio's third-largest holding.
Microsoft's antitrust violations and a possible break-up by the Justice
Department pushed its stock price down about 25%.
LET'S SHIFT TO BALANCED'S BOND PORTFOLIO. HOW DID IT PERFORM?
The bond portfolio's performance came up a little short of the Lehman
Aggregate Bond Index. The main reason for this was the portfolio's heavier
weighting in corporate bonds and a corresponding underweight in Treasury bonds.
Treasurys generally outperformed corporate bonds during the past six months.
WHY THE OVERWEIGHT IN CORPORATE BONDS?
We felt that corporate bonds and other non-Treasury securities--such as
mortgage- and asset-backed securities, which were also fund overweights--were
more attractive than Treasury bonds. Corporate bonds typically have higher
yields than Treasurys, and by late 1999 this yield advantage had grown to
historically wide spreads. In addition, the economy's continued strength was
good news for the credit quality of corporate bonds.
However, the Treasury's issuance reductions and bond buy-backs changed the
dynamics of the market. As the Federal Reserve raised interest rates, bond
yields in general followed suit. But the reduced supply of Treasury bonds caused
their yields to fall at a time when they would ordinarily be rising.
So, contrary to expectations, Treasury yields fell, producing price gains,
while yields in other bond sectors rose, resulting in price declines.
HOW DID YOU REACT TO THIS UNUSUAL ENVIRONMENT?
We made a few adjustments to the portfolio. Although we maintained an
underweight in Treasury bonds, we extended the duration (a measure of price
volatility as interest rates change) of our Treasury holdings to take greater
[left margin]
TOP TEN STOCK HOLDINGS
% OF EQUITY PORTFOLIO
AS OF AS OF
4/30/00 10/31/99
CISCO SYSTEMS INC. 4.0% 1.5%
GENERAL ELECTRIC CO.
(U.S.) 3.4% 2.1%
MICROSOFT CORP. 3.0% 4.7%
WAL-MART STORES, INC. 2.5% 3.4%
CHASE MANHATTAN
CORP. 2.4% 3.0%
INTEL CORP. 2.1% --
CITIGROUP INC. 1.9% 0.6%
HEWLETT-PACKARD CO. 1.9% 1.5%
ORACLE CORP. 1.9% --
MORGAN STANLEY
DEAN WITTER & CO. 1.8% 2.5%
TOP FIVE STOCK INDUSTRIES
% OF EQUITY PORTFOLIO
AS OF AS OF
4/30/00 10/31/99
ELECTRICAL EQUIPMENT 10.3% 6.5%
DRUGS 7.2% 7.9%
COMPUTER SOFTWARE 7.0% 6.7%
TELEPHONE 6.9% 8.6%
BANKS 6.4% 7.5%
Investment terms are defined in the Glossary on pages 24-25.
6 1-800-345-2021
Balanced--Q&A
--------------------------------------------------------------------------------
(Continued)
advantage of their price gains. To keep our overall duration in line with that
of the Lehman Aggregate Bond Index, we shortened the duration of our other
holdings.
We also adopted a slightly more conservative position by reducing our
exposure to lower-rated corporate bonds (see the table at right). With the Fed
raising rates to slow the economy, we preferred to hold high-quality bonds
issued by stable, well-known companies.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR THE U.S. ECONOMY AND THE FINANCIAL
MARKETS?
The performance of the stock and bond markets in 2000 will likely hinge on
how successful the Federal Reserve is in achieving a "soft landing"--slowing the
economy to a moderate, sustainable growth rate while keeping a lid on inflation.
So far, the economy has remained healthy--it grew at an annual rate of more
than 6% during the past six months. But the Fed has raised short-term interest
rates six times since the middle of 1999, and we're finally starting to see some
evidence that higher rates are slowing the economy.
If the Fed pulls this off successfully, as it did in 1995, it would be
positive for both the stock and bond markets. If unsuccessful--either by failing
to stay ahead of the inflation curve or tightening the screws too hard, causing
a recession--it could be a rough year for investors.
We wouldn't be surprised to see continued volatility in the stock market.
When a bull market lasts this long, investors tend to get a little jumpy and
react to any news--good or bad--in swift and dramatic fashion. In addition,
uncertainty about the Fed and the economy has made investors more cautious.
Trading activity on the major stock exchanges has been light, exacerbating the
day-to-day volatility.
In the bond market, supply remains an important factor. The federal
government expects to buy back approximately $30 billion in long-term Treasury
bonds in 2000, further reducing supply in the Treasury market. Government
agencies and corporations are expected to fill the void, increasing their
issuance of bonds.
WHAT ARE YOUR PLANS FOR BALANCED GOING FORWARD?
We plan to stay true to our investment discipline, maintaining a 60%
position in stocks and 40% in bonds.
In the stock portfolio, we'll continue to use our quantitative computer
models to help us select what we believe are the most attractive companies in
each industry. We're constantly exploring ways to improve our stock-ranking
models; we've recently enhanced the way we evaluate companies in the technology
sector.
On the bond side, we intend to maintain our current positioning, with a
longer duration in our Treasury bond holdings and overweights in corporate,
mortgage-backed, and asset-backed bonds. However, we'll be keeping a close eye
on the credit quality of these non-Treasury bonds, sticking with those that we
think can remain financially sound in an uncertain economic environment.
[right margin]
"THE PERFORMANCE OF THE STOCK AND BOND MARKETS IN 2000 WILL HINGE ON HOW
SUCCESSFUL THE FEDERAL RESERVE IS IN ACHIEVING A 'SOFT LANDING'--SLOWING THE
ECONOMY TO A MODERATE, SUSTAINABLE GROWTH RATE WHILE KEEPING A LID ON
INFLATION."
FIXED-INCOME PORTFOLIO
AS OF AS OF
4/30/00 10/31/99
PORTFOLIO SENSITIVITY TO INTEREST RATES
WEIGHTED AVERAGE MATURITY 8.7 YEARS 7.8 YEARS
DURATION 4.9 YEARS 4.7 YEARS
PORTFOLIO CREDIT QUALITY % OF FIXED-INCOME PORTFOLIO
AAA 72% 65%
AA 3% 5%
A 11% 13%
BBB 11% 13%
BB 3% 4%
------ ------
100% 100%
====== ======
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
23 for more information.
www.americancentury.com 7
Balanced--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 60.3%
AIRLINES -- 0.1%
12,000 AMR Corp.(1) $ 409
5,700 Delta Air Lines Inc. 301
--------
710
--------
ALCOHOL -- 0.3%
21,600 Anheuser-Busch Companies, Inc. 1,524
18,000 Coors (Adolph) Co. Cl B 918
--------
2,442
--------
APPAREL & TEXTILES -- 0.1%
33,100 Jones Apparel Group, Inc.(1) 983
--------
BANKS -- 3.9%
102,100 Bank of America Corp. 5,003
187,400 Chase Manhattan Corp. 13,505
177,000 Citigroup Inc. 10,520
50,700 Old Kent Financial Corp. 1,527
9,500 Silicon Valley Bancshares(1) 586
138,200 UnionBanCal Corp. 3,826
20,600 Wells Fargo & Co. 846
--------
35,813
--------
CHEMICALS -- 0.9%
55,400 Dow Chemical Co. 6,260
47,000 du Pont (E.I.) de Nemours
& Co. 2,230
--------
8,490
--------
CLOTHING STORES(2)
23,200 American Eagle Outfitters, Inc.(1) 395
--------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 3.4%
39,000 Adaptec, Inc.(1) 1,054
20,700 Apple Computer, Inc.(1) 2,569
50,500 Dell Computer Corp.(1) 2,530
18,200 Electronics for Imaging, Inc.(1) 948
45,900 EMC Corp. (Mass.)(1) 6,377
77,900 Hewlett-Packard Co. 10,516
80,600 Sun Microsystems, Inc.(1) 7,413
--------
31,407
--------
COMPUTER SOFTWARE -- 4.2%
40,800 Computer Associates
International, Inc. 2,277
52,400 International Business Machines
Corp. 5,849
236,100 Microsoft Corp.(1)(3) 16,475
130,700 Oracle Corp.(1) 10,444
5,200 Siebel Systems, Inc.(1) 639
40,600 Sybase, Inc.(1) 821
17,000 Symantec Corp.(1) 1,060
11,500 Veritas Software Corp.(1) 1,234
--------
38,799
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.3%
39,800 Whirlpool Corp. $ 2,592
--------
DEFENSE/AEROSPACE -- 0.4%
101,300 Boeing Co. 4,020
--------
DEPARTMENT STORES -- 1.8%
27,500 Federated Department Stores,
Inc.(1) 935
44,700 Sears, Roebuck & Co. 1,637
252,700 Wal-Mart Stores, Inc. 13,993
--------
16,565
--------
DRUGS -- 4.3%
17,600 Allergan, Inc. 1,036
62,900 Amgen Inc.(1) 3,524
10,700 Andrx Corp.(1) 547
23,200 Biogen, Inc.(1) 1,364
75,100 Bristol-Myers Squibb Co. 3,938
117,600 IVAX Corp.(1) 3,219
28,350 Jones Pharma Inc. 814
8,600 MedImmune, Inc.(1) 1,373
49,200 Merck & Co., Inc. 3,419
182,700 Pfizer, Inc. 7,696
144,700 Schering-Plough Corp.(3) 5,833
61,800 Warner-Lambert Co. 7,034
--------
39,797
--------
ELECTRICAL EQUIPMENT -- 6.2%
17,000 ADTRAN, Inc.(1) 1,148
15,200 AVX Technology 1,481
323,100 Cisco Systems Inc.(1) 22,415
38,100 Comverse Technology, Inc.(1) 3,399
31,500 Corning Inc. 6,221
8,600 Credence Systems Corp.(1) 1,228
8,700 Harmonic Inc.(1) 642
35,100 KEMET Corp.(1) 2,615
74,300 Lucent Technologies Inc. 4,621
8,200 Motorola, Inc. 976
46,700 Nortel Networks Corp. 5,289
32,300 Scientific-Atlanta, Inc. 2,102
64,400 Vishay Intertechnology, Inc.(1) 5,402
--------
57,539
--------
ELECTRICAL UTILITIES -- 1.2%
10,000 AES Corp. (The)(1) 899
14,500 Calpine Corp.(1) 1,327
24,400 Energy East Corp. 509
42,500 Minnesota Power & Light Co. 784
73,700 Public Service Enterprise Group
Inc. 2,644
79,700 Reliant Energy, Inc. 2,122
57,100 Southern Co. 1,424
25,700 Texas Utilities Co. 866
32,000 Utilicorp United Inc. 616
--------
11,191
--------
8 1-800-345-2021 See Notes to Finanncial Statements
Balanced--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 2.7%
157,500 Amerada Hess Corp. $ 10,021
106,200 Apache Corp. 5,144
35,501 Exxon Mobil Corp. 2,758
94,800 Kerr-McGee Corp. 4,906
110,200 Union Pacific Resources 2,114
--------
24,943
--------
ENTERTAINMENT -- 0.3%
13,500 Carnival Corp. Cl A 336
21,500 Pixar, Inc.(1) 799
32,400 Viacom, Inc. Cl B(1) 1,762
--------
2,897
--------
FINANCIAL SERVICES -- 3.6%
122,900 Fannie Mae 7,412
51,800 Federal Home Loan Mortgage
Corporation 2,380
51,300 Gallagher (Arthur J.) & Co. 1,911
121,900 General Electric Co. (U.S.) 19,169
31,600 Providian Financial Corp. 2,783
--------
33,655
--------
FOOD & BEVERAGE -- 1.7%
14,100 General Mills, Inc. 513
59,400 Hormel Foods Corp. 906
148,400 IBP, Inc. 2,449
47,800 PepsiCo, Inc. 1,754
110,500 Quaker Oats Co. (The) 7,203
56,700 Suiza Foods Corp.(1) 2,208
14,500 SYSCO Corp. 546
--------
15,579
--------
FOREST PRODUCTS & PAPER -- 0.7%
31,300 Georgia-Pacific Corp. 1,150
24,600 Kimberly-Clark Corp. 1,428
24,300 Temple-Inland Inc. 1,218
45,700 Weyerhaeuser Co. 2,442
--------
6,238
--------
GROCERY STORES -- 0.3%
55,500 Safeway Inc.(1) 2,449
--------
HEAVY ELECTRICAL EQUIPMENT -- 0.7%
21,500 American Power Conversion
Corp.(1) 759
64,900 CommScope, Inc.(1) 3,083
42,700 Cummins Engine Company, Inc. 1,519
20,500 Rockwell International Corp. 807
--------
6,168
--------
HOME PRODUCTS -- 0.8%
34,500 Avon Products, Inc. 1,432
28,800 Fortune Brands, Inc. 720
43,200 Procter & Gamble Co. (The) 2,576
75,800 Ralston Purina Co. 1,341
56,100 Tupperware Corp. 1,059
--------
7,128
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 1.0%
86,500 Illinois Tool Works Inc. $ 5,541
49,500 Ingersoll-Rand Co. 2,323
21,300 United Technologies Corp. 1,325
--------
9,189
--------
INDUSTRIAL SERVICES -- 0.2%
47,100 Hertz Corp. Cl A 1,469
--------
INFORMATION SERVICES -- 0.8%
36,500 Automatic Data Processing, Inc. 1,964
43,000 Electronic Data Systems Corp. 2,956
73,600 Valassis Communications, Inc.(1) 2,507
--------
7,427
--------
INTERNET -- 1.2%
115,500 America Online Inc.(1) 6,908
7,400 DoubleClick Inc.(1) 561
3,000 Exodus Communications, Inc.(1) 265
28,800 Yahoo! Inc.(1) 3,750
--------
11,484
--------
LIFE & HEALTH INSURANCE -- 0.8%
27,800 CIGNA Corp. 2,217
143,100 Lincoln National Corp. 4,982
--------
7,199
--------
MEDIA -- 1.7%
13,500 Adelphia Communications Corp.
Cl A(1) 668
108,100 CBS Corp.(1) 6,351
78,500 Comcast Corp. Cl A(1) 3,147
37,900 Cox Communications, Inc. Cl A(1) 1,623
90,700 Disney (Walt) Co. 3,928
--------
15,717
--------
MEDICAL PRODUCTS
& SUPPLIES -- 0.9%
49,600 Bard (C.R.), Inc. 2,161
68,600 Johnson & Johnson 5,660
29,700 Mallinckrodt Inc. 798
--------
8,619
--------
MEDICAL PROVIDERS
& SERVICES -- 0.6%
22,200 Elan Corp., plc ADR(1) 952
62,500 Oxford Health Plans, Inc.(1) 1,189
18,100 PacifiCare Health Systems, Inc.(1) 930
36,300 United HealthCare Corp. 2,421
--------
5,492
--------
MINING & METALS -- 0.4%
26,500 Alcan Aluminium Ltd. 868
19,400 Alcoa Inc. 1,259
26,400 Ball Corporation 832
20,200 Centex Construction Products Inc. 624
--------
3,583
--------
See Notes to Financial Statements www.americancentury.com 9
Balanced--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 0.8%
73,600 Ford Motor Co. $ 4,025
17,300 General Motors Corp. 1,620
28,700 PACCAR Inc. 1,364
--------
7,009
--------
MULTI-INDUSTRY -- 0.3%
62,000 Tyco International Ltd. 2,848
--------
OIL REFINING -- 0.1%
12,700 Texaco Inc. 629
--------
OIL SERVICES -- 0.6%
54,120 BP Amoco Plc ADR 2,760
63,600 Ensco International Inc. 2,111
16,900 Noble Drilling Corp.(1) 675
--------
5,546
--------
PROPERTY & CASUALTY
INSURANCE -- 1.0%
100,900 Ambac Financial Group, Inc. 4,843
7,550 American International Group, Inc. 828
44,400 MGIC Investment Corp. 2,123
26,400 Radian Group Inc. 1,345
--------
9,139
--------
PUBLISHING -- 0.2%
85,400 Deluxe Corp.(3) 2,151
--------
RESTAURANTS -- 0.4%
54,200 Brinker International, Inc.(1) 1,728
67,600 Jack in the Box Inc.(1) 1,656
--------
3,384
--------
SECURITIES & ASSET MANAGEMENT -- 1.2%
7,500 Merrill Lynch & Co., Inc. 765
131,800 Morgan Stanley Dean Witter & Co. 10,116
--------
10,881
--------
SEMICONDUCTOR -- 3.6%
86,600 Applied Materials, Inc.(1) 8,820
9,700 Conexant Systems, Inc.(1) 581
78,900 Integrated Device Technology, Inc.(1) 3,790
92,500 Intel Corp. 11,733
45,900 Lam Research Corp.(1) 2,104
33,800 LSI Logic Corp.(1) 2,112
40,600 National Semiconductor Corp.(1) 2,466
12,300 Texas Instruments Inc. 2,003
--------
33,609
--------
SPECIALTY STORES -- 1.5%
23,600 Best Buy Co., Inc.(1) 1,906
172,200 Home Depot, Inc. 9,654
9,800 Tiffany & Co. 712
43,800 Zale Corp.(1) 1,807
--------
14,079
--------
TELEPHONE -- 4.1%
138,000 AT&T Corp. 6,443
36,800 Bell Atlantic Corp. 2,180
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
149,000 BellSouth Corp.(3) $ 7,254
10,800 Dycom Industries, Inc.(1) 562
68,100 GTE Corp. 4,614
28,400 MCI WorldCom, Inc.(1) 1,291
6,800 NEXTLINK Communications, Inc.
Cl A(1) 573
175,300 SBC Communications Inc. 7,680
104,000 Sprint Corp. 6,396
15,600 U S WEST, Inc. 1,111
--------
38,104
--------
TOBACCO -- 0.1%
26,300 Universal Corp. 496
--------
WIRELESS TELECOMMUNICATIONS -- 0.9%
16,200 Nextel Communications, Inc.(1) 1,773
44,200 QUALCOMM Inc.(1) 4,794
32,000 Sprint PCS(1) 1,760
--------
8,327
--------
TOTAL COMMON STOCKS 556,181
--------
(Cost $436,186)
U.S. TREASURY SECURITIES -- 8.1%
$4,075 U.S. Treasury Notes, 7.75%,
2/15/01 4,118
5,000 U.S. Treasury Notes, 4.875%,
3/31/01 4,930
2,460 U.S. Treasury Notes, 6.625%,
7/31/01 2,460
7,150 U.S. Treasury Notes, 6.25%,
8/31/02 7,088
1,000 U.S. Treasury Notes, 6.00%,
8/15/04 980
4,000 U.S. Treasury Notes, 7.00%,
7/15/06 4,096
3,300 U.S. Treasury Bonds, 9.25%,
2/15/16 4,253
4,750 U.S. Treasury Bonds, 9.125%,
5/15/18 6,178
8,250 U.S. Treasury Bonds, 8.875%,
2/15/19 10,569
4,450 U.S. Treasury Bonds, 8.50%,
2/15/20 5,554
2,750 U.S. Treasury Bonds, 7.50%,
11/15/24 3,186
4,200 U.S. Treasury Bonds, 6.50%,
11/15/26 4,363
5,000 U.S. Treasury Bonds, 6.375%,
8/16/27 5,114
4,600 U.S. Treasury Bonds, 5.25%,
11/15/28 4,041
7,250 U.S. Treasury Bonds, 6.125%,
8/15/29 7,264
--------
TOTAL U.S. TREASURY SECURITIES 74,194
--------
(Cost $76,323)
10 1-800-345-2021 See Notes to Finanncial Statements
Balanced--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 2.6%
$5,000 FHLB, 5.50%, 8/13/01 $ 4,917
3,000 FNMA, 5.25%, 1/15/09 2,602
4,500 FNMA, 7.25%, 1/15/10 4,489
1,500 FNMA, 7.125%, 1/15/30 1,485
3,750 FNMA MTN, 5.83%, 2/2/04 3,572
4,000 FNMA MTN, 5.54%, 2/5/04 3,771
4,000 FNMA MTN, 5.74%, 1/21/09 3,570
--------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 24,406
--------
(Cost $25,781)
MORTGAGE-BACKED SECURITIES(4) -- 11.4%
3,213 FHLMC Pool #E67887, 7.00%,
10/1/12 3,143
4,037 FHLMC Pool #C00578, 6.50%,
1/1/28 3,776
3,945 FHLMC Pool #C30257, 7.00%,
8/1/29 3,779
3,012 FHLMC Pool #C30060, 7.50%,
8/1/29 2,953
2,000 FHLMC REMIC, Series 77,
Class H PAC, 8.50%, 9/15/20 2,038
4,349 FNMA Pool #050985, 6.00%,
3/1/00 4,134
384 FNMA Pool #347879, 6.50%,
5/1/11 370
3,567 FNMA Pool #377656, 7.50%,
11/1/11 3,557
89 FNMA Pool #398955, 6.50%,
10/1/12 85
312 FNMA Pool #251700, 6.50%,
5/1/13 299
136 FNMA Pool #429525, 6.50%,
5/1/13 130
332 FNMA Pool #421163, 6.50%,
6/1/13 319
526 FNMA Pool #421173, 6.50%,
6/1/13 506
469 FNMA Pool #421501, 6.50%,
6/1/13 450
326 FNMA Pool #429306, 6.50%,
6/1/13 313
179 FNMA Pool #433184, 6.50%,
6/1/13 171
3,036 FNMA Pool #433885, 6.50%,
7/1/13 2,910
1,508 FNMA Pool #252213, 6.00%,
1/1/14 1,414
4,317 FNMA Pool #412562, 6.50%,
1/1/28 4,035
2,960 FNMA Pool #413812, 6.50%,
1/1/28 2,766
4,986 FNMA Pool #411821, 7.00%,
1/1/28 4,777
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$3,511 FNMA Pool #440691, 6.50%,
11/1/28 $ 3,281
3,668 FNMA Pool #450619, 6.00%,
12/1/28 3,327
1,887 FNMA Pool #453956, 6.00%,
12/1/28 1,712
3,154 FNMA Pool #454947, 6.00%,
12/1/28 2,861
2,813 FNMA Pool #252211, 6.00%,
1/1/29 2,552
2,787 FNMA Pool #252212, 6.50%,
1/1/29 2,605
4,446 FNMA Pool #485403, 6.00%,
2/1/29 4,033
3,461 FNMA Pool #485438, 6.50%,
2/1/29 3,235
3,441 FNMA Pool #492315, 6.50%,
4/1/29 3,214
4,315 FNMA Pool #506995, 7.50%,
7/1/29 4,227
4,945 FNMA Pool #252874, 7.50%,
11/1/29 4,844
5,717 FNMA Pool #526231, 7.50%,
12/1/29 5,600
2,000 FNMA REMIC, Series 1997-58,
Class PB PAC, 6.50%,
6/18/24 1,867
4,468 GNMA Pool #002202, 7.00%,
4/20/26 4,281
2,856 GNMA Pool #780412, 7.50%,
8/15/26 2,813
2,265 GNMA Pool #467626, 7.00%,
2/15/28 2,181
2,394 GNMA Pool #458862, 7.50%,
2/15/28 2,357
3,899 GNMA Pool #469811, 7.00%,
12/15/28 3,754
3,951 GNMA Pool #509502, 8.00%,
12/15/29 3,966
--------
TOTAL MORTGAGE-BACKED SECURITIES 104,635
--------
(Cost $109,207)
ASSET-BACKED SECURITIES(4) -- 3.1%
2,800 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%,
2/15/12 2,705
1,082 First Merchants Auto Receivables
Corp., Series 1996 B, Class A2,
6.80%, 5/15/01 1,083
5,387 First Union-Lehman Brothers
Commercial Mortgage, Series
1998 C2, Class A1 SEQ,
6.28%, 6/18/07 5,136
2,122 FNMA Whole Loan, Series
1995 W1, Class A6 SEQ,
8.10%, 4/25/25 2,133
See Notes to Financial Statements www.americancentury.com 11
Balanced--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$6,500 GMAC Commercial Mortgage
Securities Inc., Series
1999 C1, Class A2 SEQ,
6.18%, 5/15/33 $ 5,858
3,000 Money Store (The) Home Equity
Trust, Series 1997 C,
Class AF6 SEQ, 6.67%,
2/15/25 2,947
4,250 PECO Energy Transition Trust,
Series 1999 A, Class A6 SEQ,
6.05%, 3/1/09 3,913
2,474 United Companies Financial Corp.,
Home Equity Loan, Series
1996 D1, Class A4, 6.78%,
2/15/16 2,469
2,100 United Companies Financial Corp.,
Home Equity Loan, Series
1996 D1, Class A5, 6.92%,
10/15/18 2,086
--------
TOTAL ASSET-BACKED SECURITIES 28,330
--------
(Cost $29,803)
CORPORATE BONDS -- 10.6%
AIRLINES -- 0.2%
2,250 Delta Air Lines Inc., 8.30%,
12/15/29 (Acquired 12/8/99,
Cost $2,231)(5) 2,022
--------
BANKS -- 0.5%
2,500 Bank of America Corp., 7.80%,
2/15/10 2,499
2,000 Fleet Boston Financial Corp.,
5.75%, 1/15/09 1,736
--------
4,235
--------
DEFENSE/AEROSPACE -- 0.3%
2,550 Raytheon Co., 8.20%, 3/1/06
(Acquired 3/3/00, Cost
$2,571)(5) 2,547
--------
DEPARTMENT STORES -- 0.4%
4,000 Sears, Roebuck & Co. MTN,
7.12%, 6/4/04 3,854
--------
ELECTRICAL EQUIPMENT -- 0.4%
4,200 Yorkshire Power Finance,
Series B, 6.15%, 2/25/03 4,004
--------
ELECTRICAL UTILITIES -- 0.6%
3,400 Cilcorp, Inc., 8.70%, 10/15/09 3,439
2,000 Texas Utilities Electric Co.,
8.125%, 2/1/02 2,011
--------
5,450
--------
ENERGY EQUIPMENT & SERVICES -- 0.3%
3,000 Petroleum Geo-Services ASA,
6.625%, 3/30/08 2,745
--------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 0.4%
$3,650 EOG Resources Inc., 6.70%,
11/15/06 $ 3,430
--------
FINANCIAL SERVICES -- 1.7%
4,000 Comdisco, Inc., 6.375%,
11/30/01 3,902
3,500 Ford Motor Credit Co., 6.125%,
4/28/03 3,363
3,000 Ford Motor Credit Co., 7.50%,
3/15/05 2,963
2,700 Ford Motor Credit Co., 6.75%,
5/15/05 2,584
3,000 Money Store Inc. (The), 8.05%,
4/15/02 3,028
--------
15,840
--------
GAS & WATER UTILITIES -- 0.2%
2,000 K N Energy, Inc., 6.45%,
11/30/01 1,964
--------
GOLD -- 0.4%
3,500 Barrick Gold Corp., 7.50%,
5/1/07 3,353
--------
HEAVY ELECTRICAL EQUIPMENT -- 0.6%
6,000 Anixter International Inc., 8.00%,
9/15/03 5,903
--------
INFORMATION SERVICES -- 0.2%
2,000 KPNQwest B.V., 8.125%,
6/1/09 1,910
--------
LIFE & HEALTH INSURANCE -- 0.8%
5,000 Aetna Services, Inc., 6.75%,
8/15/01 4,945
3,600 Conseco Inc., 6.40%, 6/15/01 2,358
--------
7,303
--------
MEDIA -- 0.8%
1,900 British Sky Broadcasting,
6.875%,
2/23/09 1,667
2,250 CSC Holdings Inc., 7.625%,
7/15/18 1,952
2,000 CSC Holdings Inc., Series B,
8.125%, 7/15/09 1,897
2,000 Liberty Media Group, 8.25%,
2/1/30 (Acquired 1/26/00,
Cost $1,984)(5) 1,902
--------
7,418
--------
MOTOR VEHICLES & PARTS -- 0.4%
3,750 Lear Corp., Series B, 7.96%,
5/15/05 3,485
--------
MULTI-INDUSTRY -- 0.4%
4,000 Tyco International Group SA,
6.875%, 9/5/02 (Acquired
1/11/00, Cost $3,931)(5) 3,929
--------
12 1-800-345-2021 See Notes to Finanncial Statements
Balanced--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
REAL ESTATE -- 0.5%
$5,000 Spieker Properties, Inc., 6.80%,
12/15/01 $ 4,923
--------
SECURITIES & ASSET
MANAGEMENT -- 0.2%
2,000 Morgan Stanley Dean
Witter & Co.,
7.125%, 1/15/03 1,978
--------
TELEPHONE -- 1.0%
5,000 GTE North Inc., Series H, 5.65%,
11/15/08 4,333
3,000 GTE South, 7.25%, 8/1/02 2,984
2,250 MCI WorldCom, Inc., 6.95%,
8/15/28 1,993
--------
9,310
--------
WIRELESS TELECOMMUNICATIONS -- 0.3%
2,540 Vodafone AirTouch PLC, 7.125%,
7/15/01 2,526
--------
TOTAL CORPORATE BONDS 98,129
--------
(Cost $102,692)
SOVEREIGN GOVERNMENTS & AGENCIES -- 0.2%
2,000 Province of Quebec, 7.50%,
9/15/29 1,954
--------
(Cost $1,988)
FORWARD COMMITMENTS -- 0.6%
5,500 FNMA Purchase, 8.00%,
settlement 5/15/00 5,491
--------
(Cost $5,526)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 3.1%*
$ 300 FHLB Discount Notes, 5.88%,
5/1/00(6) $ 300
Repurchase Agreement, Goldman Sachs &
Co., Inc., (U.S. Treasury obligations), in a joint
trading account at 5.62%, dated 4/28/00,
due 5/1/00 (Delivery value $28,213) 28,200
--------
TOTAL TEMPORARY CASH INVESTMENTS 28,500
--------
(Cost $28,500)
TOTAL INVESTMENT SECURITIES -- 100.0% $921,820
========
(Cost $816,006)
FUTURES CONTRACTS
($ in Thousands)
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Gain
--------------------------------------------------------------------------------
7 S&P 500 June
Futures 2000 $2,557 $60
=======================================
* Futures contracts typically are based on a stock index, such as the S&P
500, and tend to track the performance of the index while remaining very
liquid (easy to buy and sell). By investing its cash assets in index futures,
the fund can stay fully invested in stocks and have easy access to the money.
Temporary cash investments, less the required reserves for futures contracts,
are 2.8%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
MTN = Medium Term Note
(1) Non-income producing.
(2) Industry is less than 0.05% of total investment securities.
(3) Security, or a portion thereof, has been segregated at the custodian bank
for Forward Commitments.
(4) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(5) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, 2000, was $10,400
which represented 1.1% of net assets.
(6) Rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements www.americancentury.com 13
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
APRIL 30, 2000 (UNAUDITED)
ASSETS (In Thousands Except Per Share Amounts)
Investment securities, at value
(identified cost of $816,006) (Note 3) .................... $ 921,820
Cash ......................................................... 188
Receivable for investments sold .............................. 963
Receivable for variation
margin on futures contracts ................................ 123
Dividends and interest receivable ............................ 4,976
------------
928,070
------------
LIABILITIES
Payable for investments purchased ............................ 8,331
Payable for capital shares redeemed .......................... 3,622
Accrued management fees (Note 2) ............................. 755
Distribution fees payable (Note 2) ........................... 3
Service fees payable (Note 2) ................................ 3
Accrued expenses and other liabilities ....................... 1
------------
12,715
------------
Net Assets ................................................... $ 915,355
============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) ...................... $ 779,270
Undistributed net investment income .......................... 1,841
Accumulated undistributed net realized
gain on investment transactions ............................ 28,370
Net unrealized appreciation
on investments (Note 3) .................................... 105,874
------------
$ 915,355
============
Investor Class, $0.01 Par Value
($ and shares in full)
Net assets ................................................... $903,001,517
Shares outstanding ........................................... 52,463,464
Net asset value per share .................................... $ 17.21
Advisor Class, $0.01 Par Value ($ and shares in full)
Net assets ................................................... $ 12,353,843
Shares outstanding ........................................... 718,038
Net asset value per share .................................... $ 17.20
14 1-800-345-2021 See Notes to Finanncial Statements
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INVESTMENT INCOME (In Thousands)
Income:
Interest ......................................................... $12,596
Dividends ........................................................ 2,882
-------
15,478
-------
Expenses (Note 2):
Management fees .................................................. 4,603
Distribution fees -- Advisor Class ............................... 15
Service fees -- Advisor Class .................................... 15
Directors' fees and expenses ..................................... 2
-------
4,635
-------
Net investment income ............................................ 10,843
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ................................. 31,596
Change in net unrealized appreciation
on investments ................................................. 10,184
-------
Net realized and unrealized gain
on investments ................................................. 41,780
-------
Net Increase in Net Assets
Resulting from Operations ...................................... $52,623
=======
See Notes to Financial Statements www.americancentury.com 15
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
Decrease in Net Assets 2000 1999
OPERATIONS (In Thousands)
Net investment income ............................ $ 10,843 $ 23,183
Net realized gain on investments ................. 31,596 126,427
Change in net unrealized appreciation
on investments ................................. 10,184 (40,562)
--------- ---------
Net increase in net assets resulting
from operations ................................ 52,623 109,048
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ................................. (11,100) (23,448)
Advisor Class .................................. (128) (199)
From net realized gains on
investment transactions:
Investor Class ................................. (121,973) (102,260)
Advisor Class .................................. (1,446) (747)
--------- ---------
Decrease in net assets from distributions ........ (134,647) (126,654)
--------- ---------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease) in net assets
from capital share transactions ................ 72,059 (1,938)
--------- ---------
Net decrease in net assets ....................... (9,965) (19,544)
NET ASSETS
Beginning of period .............................. 925,320 944,864
--------- ---------
End of period .................................... $ 915,355 $ 925,320
========= =========
Undistributed net investment income .............. $ 1,841 $ 2,226
========= =========
16 1-800-345-2021 See Notes to Finanncial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Balanced Fund (the fund) is one of the
fourteen series of funds issued by the corporation. The fund is diversified
under the 1940 Act. The fund's investment objective is to seek capital growth
and current income. The following significant accounting policies are in
accordance with generally accepted accounting principles; these policies may
require the use of estimates by fund management.
MULTIPLE CLASS -- The fund is authorized to issue three classes of shares:
the Investor Class, the Advisor Class, and the Institutional Class. The three
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the fund represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Sale of the Institutional
Class had not commenced as of April 30, 2000.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. Debt securities not
traded on a principal securities exchange are valued through a commercial
pricing service or at the mean of the most recent bid and asked prices. When
valuations are not readily available, securities are valued at fair value as
determined in accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts
in order to manage the fund's exposure to changes in market conditions. One of
the risks of entering into futures contracts is the possibility that the change
in value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that collateral, represented by securities, received in
a repurchase transaction be transferred to the custodian in a manner sufficient
to enable the fund to obtain those securities in the event of a default under
the repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to the
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
treasury or agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid quarterly. Distributions from net realized gains are declared and paid
annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
www.americancentury.com 17
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee per class. The Agreement provides
that all expenses of the fund, except brokerage commissions, taxes, interest,
expenses of those directors who are not considered "interested persons"
as defined in the 1940 Act (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on the fund's class average daily closing net assets during the previous month.
The annual management fee is 1.00% for the Investor Class and 0.75% for the
Advisor Class.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the 1940 Act.
The plan provides that the fund will pay ACIM an annual distribution fee equal
to 0.25% and annual service fee equal to 0.25%. The fees are computed daily and
paid monthly based on the Advisor Class's average daily closing net assets
during the previous month. The distribution fee provides compensation for
distribution expenses incurred by financial intermediaries in connection with
distributing shares of the Advisor Class including, but not limited to, payments
to brokers, dealers, and financial institutions that have entered into sales
agreements with respect to shares of the fund. The service fee provides
compensation for shareholder and administrative services rendered by ACIM, its
affiliates or independent third party providers. Fees incurred by the fund under
the plan during the six months ended April 30, 2000 were $29,088.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments, for
the six months ended April 30, 2000, totaled $326,924,332 of which $60,305,057
represented U.S. Treasury and Agency obligations. Sales of investment
securities, excluding short-term investments, for the six months ended April 30,
2000, totaled $364,601,966, of which $60,225,230 represented U.S. Treasury and
Agency obligations.
On April 30, 2000, accumulated net unrealized appreciation was $103,754,325,
based on the aggregate cost of investments for federal income tax purposes of
$818,065,931, which consisted of unrealized appreciation of $137,419,524 and
unrealized depreciation of $33,665,199.
18 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
INVESTOR CLASS (In Thousands)
Shares Authorized ............................... 134,000
=========
Six months ended April 30, 2000
Sold ............................................ 7,561 $ 135,361
Issued in reinvestment of distributions ......... 7,769 130,600
Redeemed ........................................ (11,117) (196,215)
-------- ---------
Net increase .................................... 4,213 $ 69,746
======== =========
Year ended October 31, 1999
Sold ............................................ 9,402 $ 176,617
Issued in reinvestment of distributions ......... 6,821 122,812
Redeemed ........................................ (16,358) (305,659)
-------- ---------
Net decrease .................................... (135) $ (6,230)
======== =========
ADVISOR CLASS
Shares Authorized ............................... 50,000
=========
Six months ended April 30, 2000
Sold ............................................ 152 $ 2,588
Issued in reinvestment of distributions ......... 92 1,551
Redeemed ........................................ (104) (1,826)
-------- ---------
Net increase .................................... 140 $ 2,313
======== =========
Year ended October 31, 1999
Sold ............................................ 575 $ 10,802
Issued in reinvestment of distributions ......... 52 931
Redeemed ........................................ (396) (7,441)
-------- ---------
Net increase .................................... 231 $ 4,292
======== =========
--------------------------------------------------------------------------------
5. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
six months ended April 30, 2000.
www.americancentury.com 19
Balanced--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ..............$ 18.95 $ 19.39 $ 19.55 $ 18.55 $ 17.70 $ 15.94
------- ------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income(2) .......... 0.21 0.46 0.42 0.40 0.44 0.48
Net Realized and Unrealized Gain
on Investment Transactions ........ 0.81 1.69 1.45 2.41 1.88 2.03
------- ------- ------- ------- ------- -------
Total From Investment Operations .. 1.02 2.15 1.87 2.81 2.32 2.51
------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ........ (0.22) (0.47) (0.43) (0.43) (0.46) (0.48)
From Net Realized Gains on
Investment Transactions ........... (2.54) (2.12) (1.60) (1.38) (1.01) (0.27)
------- ------- ------- ------- ------- -------
Total Distributions ............... (2.76) (2.59) (2.03) (1.81) (1.47) (0.75)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ......$ 17.21 $ 18.95 $ 19.39 $ 19.55 $ 18.55 $ 17.70
======= ======= ======= ======= ======= =======
Total Return(3) ................... 5.85% 12.03% 10.46% 16.34% 14.04% 16.36%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 1.00%(4) 1.00% 1.00% 1.00% 0.99% 0.98%
Ratio of Net Investment Income
to Average Net Assets ............... 2.35%(4) 2.44% 2.16% 2.15% 2.50% 2.90%
Portfolio Turnover Rate ............. 37% 128% 102% 110% 130% 85%
Net Assets, End of Period
(in millions) .....................$ 903 $ 914 $ 938 $ 926 $ 879 $ 816
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
20 1-800-345-2021 See Notes to Finanncial Statements
Balanced--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C>
Beginning of Period ...............$ 18.94 $ 19.38 $ 19.55 $ 17.46
---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income(3) .......... 0.18 0.41 0.37 0.29
Net Realized and Unrealized Gain
on Investment Transactions ........ 0.82 1.69 1.44 2.04
---------- ---------- ---------- ----------
Total From Investment Operations .. 1.00 2.10 1.81 2.33
---------- ---------- ---------- ----------
Distributions
From Net Investment Income ........ (0.20) (0.42) (0.38) (0.24)
From Net Realized Gains on
Investment Transactions ........... (2.54) (2.12) (1.60) --
---------- ---------- ---------- ----------
Total Distributions ............... (2.74) (2.54) (1.98) (0.24)
---------- ---------- ---------- ----------
Net Asset Value, End of Period ......$ 17.20 $ 18.94 $ 19.38 $ 19.55
========== ========== ========== ==========
Total Return(4) ................... 5.72% 11.74% 10.15% 13.42%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 1.25%(5) 1.25% 1.25% 1.25%(5)
Ratio of Net Investment Income
to Average Net Assets ............... 2.10%(5) 2.19% 1.91% 1.90%(5)
Portfolio Turnover Rate ............. 37% 128% 102% 110%
Net Assets, End of Period
(in thousands) ......................$ 12,354 $ 10,946 $ 6,723 $ 5,724
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) January 6, 1997 (commencement of sale) through October 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 21
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the fund: Investor Class,
Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares. Sale of the Institutional Class had
not commenced as of April 30, 2000.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
22 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 14 growth and income funds, including domestic
equity, balanced, asset allocation, and specialty funds.
AMERICAN CENTURY BALANCED seeks capital growth and current income. The fund
keeps about 60% of its assets in a diversified portfolio of common stocks. Under
normal market conditions, the remaining assets are held in Treasury,
mortgage-backed, and corporate bonds.
We attempt to keep the fund fully invested at all times, regardless of
short-term market activity. Experience has shown that market gains can occur in
unpredictable spurts and that missing even some of those opportunities may
significantly limit the potential for gain.
For the equity portfolio, the goal is to achieve a total return that
exceeds that of the S&P 500. The portfolio is managed using computer models
as key tools in making investment decisions. One model ranks stocks based on
their expected return, using both growth and value measures such as cash flow,
earnings growth, and price/earnings ratio. Another model creates a portfolio
that balances high-ranking stocks with an overall risk level that is comparable
to the S&P 500.
The fixed-income portfolio is also index based. The management team
attempts to add value by making modest portfolio adjustments based on its
analysis of prevailing market conditions. The team typically seeks to overweight
relatively undervalued sectors of the market.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The BLENDED INDEX is considered the benchmark for Balanced. It combines two
widely known indices in proportion to the asset mix of the fund. Accordingly,
60% of the index is represented by the S&P 500, which reflects the
approximately 60% of the fund's assets invested in stocks. The remaining 40% of
the index is represented by the Lehman Brothers Aggregate Bond Index, which
reflects the roughly 40% of the fund's assets invested in fixed-income
securities.
The LEHMAN BROTHERS AGGREGATE BOND INDEX is composed of the Lehman Brothers
Government/Corporate Index and the Lehman Brothers Mortgage-Backed Securities
Index. It reflects the price fluctuations of Treasury securities, U.S.
government agency securities, corporate bond issues, and mortgage-backed
securities.
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
dominant industries. Created by Standard & Poor's Corporation, the index is
viewed as a broad measure of U.S. stock market performance.
[right margin]
INVESTMENT TEAM LEADERS
Equity Portfolio
JEFF TYLER
Fixed-Income Portfolio
JEFF HOUSTON
Credit Research
GREG AFIESH
CREDIT RATING GUIDELINES
CREDIT RATINGS ARE ISSUED BY INDEPENDENT RESEARCH COMPANIES SUCH AS STANDARD
& POOR'S AND MOODY'S. THEY ARE BASED ON AN ISSUER'S FINANCIAL STRENGTH AND
ABILITY TO PAY INTEREST AND PRINCIPAL IN A TIMELY MANNER.
SECURITIES RATED AAA, AA, A, OR BBB ARE CONSIDERED "INVESTMENT-
GRADE" SECURITIES, MEANING THEY ARE RELATIVELY SAFE FROM DEFAULT. HERE ARE
THE MOST COMMON CREDIT RATINGS AND THEIR DEFINITIONS:
* AAA -- EXTREMELY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* AA -- VERY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* A -- STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* BBB -- GOOD ABILITY TO MEET FINANCIAL OBLIGATIONS.
* BB -- SECURITIES THAT ARE LESS VULNERABLE TO DEFAULT THAN OTHER
LOWER-QUALITY ISSUES BUT DO NOT QUITE MEET INVESTMENT-GRADE STANDARDS.
IT'S IMPORTANT TO NOTE THAT CREDIT RATINGS ARE SUBJECTIVE, REFLECTING THE
OPINIONS OF THE RATING AGENCIES; THEY ARE NOT ABSOLUTE STANDARDS OF QUALITY.
www.americancentury.com 23
Glossary
--------------------------------------------------------------------------------
FIXED-INCOME TERMS
* ASSET-BACKED SECURITIES -- debt securities that represent ownership in a pool
of receivables, such as credit-card debt, auto loans, and commercial mortgages.
* CORPORATE BONDS -- debt securities or instruments issued by companies and
corporations.
* MORTGAGE-BACKED SECURITIES -- debt securities that represent ownership in
pools of mortgage loans.
* U.S. GOVERNMENT AGENCY SECURITIES -- debt securities issued by U.S. government
agencies (such as the Federal Home Loan Bank and the Federal Farm Credit Bank).
* U.S. TREASURY SECURITIES -- debt securities issued by the U.S. Treasury and
backed by the direct "full faith and credit" pledge of the U.S.
government.
* DURATION -- a measure of the sensitivity of a fixed-income portfolio to
interest rate changes. It is a time-weighted average of the interest and
principal payments of the securities in a portfolio. As the duration of a
portfolio increases, the impact of a change in interest rates on the value of
the portfolio also increases.
* WEIGHTED AVERAGE MATURITY (WAM) -- another measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and interest rate sensitivity
the portfolio has.
EQUITY TERMS
* BLUE CHIP STOCKS -- generally considered to be the stocks of the most
established companies in American industry. They are generally large, fairly
stable companies that have demonstrated consistent earnings and usually have
long-term growth potential.
* COMMON STOCKS -- units of ownership of public corporations. All of the stocks
described in this section are types of common stock.
* CYCLICAL STOCKS -- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle.
* GROWTH STOCKS -- generally considered to be the stocks of companies that have
experienced above-average earnings growth and appear likely to continue such
growth.
* VALUE STOCKS -- generally considered to be stocks that are relatively
inexpensive.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
of more than $10.3 billion. This is Lipper's market-capitalization breakpoint as
of April 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 are
representative indexes of large-cap stock performance.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
between $2.3 billion and $10.3 billion. This is Lipper's market-capitalization
breakpoint as of April 30, 2000, although it may be subject to change based on
market fluctuations. The S&P 400 and Russell 2500 are representative of
mid-cap stock performance.
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
of less than $2.3 billion. This is Lipper's market-capitalization breakpoint as
of April 30, 2000, although it may be subject to change based on market
fluctuations. The S&P 600 and the Russell 2000 are representative of
small-cap stock performance.
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as year-by-year results.
For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 20-21.
24 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
YIELDS
* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies, and risk potential are consistent
with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
www.americancentury.com 25
Notes
--------------------------------------------------------------------------------
26 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 27
Notes
--------------------------------------------------------------------------------
28 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20932 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
April 30, 2000
AMERICAN CENTURY
SEMIANNUAL REPORT
[graphic of runners]
[graphic of person looking at computer screen]
Giftrust(reg.sm)
[american century logo (reg. sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
They say hindsight is 20/20. But what about insight? That's what you really
want when choosing mutual funds. Now you can get the insight you need with Fund
Advisor, an online tool that helps you select the right no-load funds for
you--on a goal by goal basis. Fund Advisor helps you:
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Receive recommendations based on funds available through your current fund
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Gain confidence.
Whether you want to analyze your current investments, or find new ones, Fund
Advisor can help you feel confident with the decisions you make.
How does it work?
Just tell Fund Advisor about your investing style, your current investments
and your goals. It will analyze your investments and offer impartial
recommendations to help you get on track.
To review Fund Advisor's unique perspective, go to www.americancentury.com
and select Fund Advisor at the top of the page. For the initial set-up, you
might want to have available:
* Your latest tax return
* Your most recent investment account statements
* Printouts from any software you use to track your personal finances
To learn more about this new tool and how it can help you better manage your
financial future, select the "Demo" from the Fund Advisor introduction page.
*Patent pending. It was developed for Acumation, Inc., a registered investment
advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through Fund Advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
[left margin]
Giftrust
(TWGTX)
-----------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Saving for College Just Got Easier
--------------------------------------------------------------------------------
Introducing LEARNING QUEST, a powerful new program that lets you save
tax-deferred for your child's education. Key benefits include:
* Anyone can open an account, and anyone can be named the beneficiary, even
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* Taxes aren't due on the earnings until they are withdrawn, and earnings on
qualified expenses are taxed at the student's rate.
* High contribution limits ($127,000 for 2000).
For more information, including estate-planning benefits, call
1-800-579-2203, or visit www.learningquestsavings.com.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, rewarded growth investors in Giftrust,
as the fund significantly outperformed its benchmark.
The period was short, but momentous. So-called "New Economy" stocks led the
market -- in both directions. Investors stampeded into technology-oriented firms
at the end of 1999 and during the first quarter of 2000, triggering one of the
most powerful market advances ever. Then, suddenly, came the reminder that some
"old" rules of common stock investing still apply -- including one American
Century's growth fund managers hold dear: stock prices ultimately depend on
earnings.
Turning to corporate matters, the months covered in this report have been
important ones for American Century. Besides serving the nearly two million
investors who look to American Century for investment management, we also have
worked hard to serve and support the 3,000 people who work on your behalf -- to
create a positive, safe, and productive work environment for American Century
staff. This commitment was recognized and rewarded in late 1999 when American
Century ranked in the top 40 of Fortune magazine's "100 Best Companies to Work
For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and is essential in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's fund performance
reports like this one have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal from DALBAR. You can count on us to keep
looking for ways to improve the reports, literature and statements you receive
from us.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/ James E. Stowers, Jr /signature/ James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
GIFTRUST
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Portfolio at a Glance .................................................. 5
Top Ten Holdings ....................................................... 6
Top Five Industries .................................................... 6
Types of Investments ................................................... 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ............................................................ 10
Statement of Operations ................................................ 11
Statements of Changes
in Net Assets .......................................................... 12
Notes to Financial
Statements ............................................................. 13
Financial Highlights ................................................... 15
OTHER INFORMATION
Background Information
Investment Philosophy
and Policies ........................................................... 16
Comparative Indices ................................................. 16
Portfolio Managers .................................................. 16
Glossary ............................................................... 17
1 www.americancentury.com
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* The six months ended April 30, 2000, saw the S&P 500, the Nasdaq Composite,
and the Dow all enter the new millennium at record highs. 1999 represented
the fifth consecutive year that the S&P 500 was up 20% or more. The
tech-heavy Nasdaq was the biggest winner, closing 1999 by posting an
unprecedented gain of 86% --the largest one-year advance ever recorded by
any U.S. market index.
* During the first quarter of 2000, investors continued to rush into "New
Economy" stocks, particularly those of Internet and technology companies,
triggering a powerful market advance. As valuations in the technology realm
grew richer, though, uncertainty and volatility both increased
dramatically. Spooked by the possibility of rising interest rates,
investors stampeded out of technology in early March. The Nasdaq Composite
was taken down 25.33% in a single week in April.
GIFTRUST
* Giftrust turned in strong results for the six-month period, with a return
more than twice that of its benchmark. The fund experienced one of its
sharpest run-ups ever, gaining over 90% from October 31, 1999, through
February 29, 2000. Unfortunately, investors in Giftrust had to give back a
portion of that gain when high-expectation growth stocks underwent a
correction.
* Giftrust was buoyed by significant investments in technology-oriented
companies, particularly those providing communications equipment or
technology associated with the expansion of the Internet, where the level
of traffic is doubling every few months. Firms producing semiconductors,
components for fiber-optic communications systems, and software that
enables electronic commerce on the Internet were among the fund's top
performers. Apart from technology, Giftrust was helped by selective
investments in the healthcare and utility sectors.
* Shifts in the portfolio over the period included a reduction of investments
in cable firms, and increased positions in energy services companies
resulting from rising oil prices and increased drilling and production by
major oil companies.
[left margin]
GIFTRUST
(TWGTX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 56.94%*
1 Year 113.18%
INCEPTION DATE: 11/25/83
NET ASSETS: $2.0 billion
*Not annualized.
Investment terms are defined in the Glossary on pages 17-18.
2 1-800-345-2021
Market Perspective from James E. Stowers III
--------------------------------------------------------------------------------
[photo of James E. Stowers III]
James E. Stowers III, Chief Executive Officer of American Century
Common stock investors will look back on the six-month interval covered by
this report as one of the more extraordinary short-term experiences in stock
market history.
The major market indices -- the Standard & Poor's 500 Index, the Nasdaq
Composite, and the Dow Jones Industrial Average -- all entered the new
millennium at record highs. The Nasdaq ended 1999 with a stunning 86% gain, the
largest one-year increase in any U.S. market index -- ever. The S&P 500 notched
its fifth consecutive year with a return of 20% or more.
HIGH EXPECTATIONS
This performance led investors to carry unrealistically high expectations
into 2000. Surveys showed the average investor expected the stock market overall
to rise 15% in 2000, and his or her stock portfolio to gain 18%. Perhaps they
also were reading headlines like this one from our hometown paper, The Kansas
City Star, in January: "New tech stocks defy old rules."
The Star appeared to be right. "New Economy" stocks -- especially those
associated with the Internet and biotechnology -- were all investors wanted to
own.
But what may have started out as "rational exuberance" for technology
issues turned into rampant speculation as 2000 progressed. This was most evident
in the extraordinary strength of the new-issue market, where hundreds of
unseasoned, untested, "dot-com" companies soared in price, as investors
scrambled to own the next America Online or Yahoo!. The technology run-up blew
past three interest rate increases as if they had never happened.
Herd-like behavior took the Nasdaq Composite up 70% from October 31, 1999,
the start of this report period, to a record 5,049 on March 10. In contrast, the
S&P 500 gained 2.63%. Many aggressive growth funds needed an extra decimal space
in the newspaper mutual fund tables to accommodate their outsized returns.
$2 TRILLION DISAPPEARS
But extreme market moves of this dimension do not last forever. In early
March, a controversy involving the ownership of genetic information staggered
the biotech sector, and one month later, the malaise had spread to technology.
By April 10, investors had decided how high was too high and let the air out of
the technology balloon. Nasdaq suffered its worst week ever, dropping 25.33%.
More than $2 trillion in investor wealth evaporated.
Right now, the stock market is moving in fits and starts, not sure where it
wants to go. Investors' enthusiasm for technology is still high; however, they
also have higher standards for the tech stocks they own. With first-quarter
earnings appearing strong, wages up and the economy humming, the tug between
interest rates and inflation will weigh on the stock market for a while, along
with a higher degree of volatility. That means investors may have to recapture
something that's been missing for a while: patience.
[right margin]
"INVESTORS' ENTHUSIASM FOR TECHNOLOGY IS STILL HIGH; HOWEVER, THEY ALSO HAVE
HIGHER STANDARDS FOR THE TECH STOCKS THEY OWN."
MARKET RETURNS
FOR THE SIX MONTHS ENDED APRIL 30, 2000
S&P 500 7.19%
S&P MIDCAP 400 21.26%
RUSSELL 2000 18.72%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
[mountain chart data below]
S&P 500 S&P Mid-Cap 400 Russell 2000
10/31/99 $1.00 $1.00 $1.00
11/30/99 $1.02 $1.05 $1.06
12/31/99 $1.08 $1.12 $1.18
1/31/00 $1.03 $1.08 $1.16
2/29/00 $1.01 $1.16 $1.35
3/31/00 $1.11 $1.26 $1.26
4/30/00 $1.07 $1.21 $1.19
Value on 4/30/00
S&P 500 $1.07
S&P MidCap 400 $1.21
Russell 2000 $1.19
www.americancentury.com 3
Giftrust--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF APRIL 30, 2000
GIFTRUST RUSSELL 2000
GROWTH
6 MONTHS(1) ........................ 56.94% 27.78%
1 YEAR ............................. 113.18% 31.38%
AVERAGE ANNUAL RETURNS
3 YEARS ............................ 32.12% 22.02%
5 YEARS ............................ 18.67% 16.96%
10 YEARS ........................... 22.60% 13.96%
LIFE OF FUND(2) .................... 20.39% 10.29%(3)
(1) Returns for periods less than one year are not annualized.
(2) Inception was 11/25/83.
(3) Since 11/30/83, the date nearest the fund's inception for which data are
available.
See pages 16-17 for information about the Russell 2000 Growth Index and returns
GROWTH OF $10,000 OVER 10 YEARS
[mountain chart data below]
Value on 4/30/00
Giftrust $76,628
Russell 2000 Growth Index $36,930
Giftrust Russell 2000 Growth
4/30/90 $10,000 $10,000
4/30/91 $11,612 $11,279
4/30/92 $15,071 $12,793
4/30/93 $18,960 $13,547
4/30/94 $24,617 $15,517
4/30/95 $32,554 $16,872
4/30/96 $45,627 $23,511
4/30/97 $33,271 $20,328
4/30/98 $45,502 $29,211
4/30/99 $35,937 $28,109
4/30/00 $76,628 $36,930
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The
Russell 2000 Growth Index is provided for comparison in each graph. Giftrust's
total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the Russell
2000 Growth Index do not. Past performance does not guarantee future results.
Investment return and principal value will fluctuate, and redemption value may
be more or less than original cost.
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
[bar chart data below]
Giftrust Russell 2000 Growth
4/30/1991 16.12% 12.79%
4/30/1992 29.79% 13.42%
4/30/1993 25.80% 5.90%
4/30/1994 29.84% 14.54%
4/30/1995 32.24% 8.73%
4/30/1996 40.16% 39.35%
4/30/1997 -27.08% -13.54%
4/30/1998 36.76% 43.70%
4/30/1999 -21.02% -3.77%
4/30/2000 113.18% 31.38%
4 1-800-345-2021
Giftrust--Q&A
--------------------------------------------------------------------------------
[photo of Tom Telford, Chris Boyd and John Seitzer]
An interview with Tom Telford, Chris Boyd, and John Seitzer, portfolio
managers on the Giftrust investment team.
HOW DID GIFTRUST PERFORM FOR THE SIX MONTHS ENDED APRIL 30, 2000?
Giftrust turned in strong results for the period. The fund gained 56.94%,
more than twice the 27.78% increase posted by its benchmark, the Russell 2000
Growth Index. In contrast, the average mid-cap growth fund tracked by Lipper
Inc., gained 39.55%.
Nestled in this period was one of the strongest short-term increases the
fund has ever experienced. Giftrust was up a remarkable 90.22% from the end of
October until the end of February. However, a correction in technology stocks in
March and April shaved away a portion of that outsized gain.
WHAT HELPED THE FUND SUBSTANTIALLY OUTPERFORM ITS BENCHMARK?
There are several factors behind our performance, beginning with our
investment approach. We are aggressive growth investors: the most attractive
company to us is one whose earnings and revenues are growing at an accelerating
pace, faster this quarter than the last one, and the one before that. In
addition, we want evidence that the company is in position to sustain its
growth.
The market played to our strength. Growth stocks of smaller and midsized
companies--our hunting ground-- performed particularly well during the period.
Within that universe, technology stocks unquestionably delivered the best
returns. We were positioned to take advantage of the market's preference, with
nearly half of Giftrust invested in a broad mix of technology-oriented companies
at the start of the period.
WHAT COMPANIES OR SECTORS CONTRIBUTED THE MOST TO PERFORMANCE?
Much of Giftrust's gain can be traced to investments in three broad
industry groups that are tied closely to the "digital revolution" that is
reshaping our economy and the way we live and work: semiconductors (computer
chips), electrical equipment and computer software. Together, these three groups
account for more than 60% of the fund's assets.
Most of us had never heard of the Internet four years ago. Today, using PCs
and laptops, we routinely surf the Internet to do research, send and receive
electronic mail, and shop for everything from airline tickets to insurance to
cars. And although still in its infancy, "B2B"--business-to-business electronic
commerce over the Net--is quickly making the purchase order process obsolete.
The Department of Commerce estimates that the annual volume of Internet B2B
commerce will reach $300 billion by 2002.
The upshot is this: Internet traffic is doubling roughly every 100
days--which means the capacity of the communications pipelines carrying all
these bits and bytes must grow in tandem. That's where many of the companies we
own come into play: building out the Internet.
Though microscopic in size, semiconductors are the workhorses of the
Internet, processing and storing the information millions of us click for every
[right margin]
"NESTLED IN THIS PERIOD WAS ONE OF THE STRONGEST SHORT-TERM INCREASES THE FUND
HAS EVER EXPERIENCED. GIFTRUST WAS UP A REMARKABLE 90.22% FROM THE END OF
OCTOBER UNTIL THE END OF FEBRUARY."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 74 76
MEDIAN P/E RATIO 86.0 43.8
MEDIAN MARKET $4.21 $3.16
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 40%(1) 117%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.00%(3) 1.00%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 17-18.
www.americancentury.com 5
Giftrust--Q&A
--------------------------------------------------------------------------------
(Continued)
day. Giftrust owns PMC Sierra, a premium producer of semiconductors for
communications equipment that links computer networks. We're not alone in our
recognition of PMC's accelerating growth; the stock gained 307% over the
six-month period. We also raised our stake in Conexant Systems, Inc., a
broadband semiconductor company whose chips are used in a variety of
communications devices, such as modems, cellular phones and digital cameras, as
well as in communications equipment that links computer networks.
Our search for accelerating growth also led us to makers of equipment that
semiconductor companies use to produce their tiny chips. Two examples are
Teradyne Inc., and PRI Automation. Teradyne is the world's largest supplier of
test equipment and software used in the production of semiconductors and circuit
boards. PRI Automation makes systems that automate the movement and storage of
semiconductors as they go through the fabrication process.
WHERE DID YOU FIND ACCELERATING GROWTH IN THE ELECTRICAL EQUIPMENT INDUSTRY?
A number of our investments there are firms that make equipment and
components used in fiber-optic communications systems, the backbone of the
Internet. Less than 20 years ago, data traveled primarily over copper wires
which have a top speed of about one page per second. Today, in that same second,
one strand of optical fiber can transmit the equivalent of 90,000 volumes of an
encyclopedia. Giftrust's third-largest holding is JDS Uniphase (JDSU), the
leading maker of complex components and laser systems for fiber-optic networks.
Demand for JDSU's technology from communications equipment providers, such as
Nortel Networks and Lucent Technologies, is so great that the company intends to
increase production capacity fourfold. GlobeSpan, Inc., a newcomer to the
portfolio, provides digital subscriber line (DSL) technology that enables
high-speed data transmission over existing copper telephone wires. Its shares
gained 295% during the period.
ABOUT ONE-FOURTH OF GIFTRUST'S ASSETS ARE INVESTED IN SOFTWARE COMPANIES. WHAT'S
DRIVING GROWTH THERE?
Two words: electronic commerce. A strong contributor in our portfolio over
the period was BEA Systems, Inc. This firm makes "middleware"--software that
links the multiple computer systems and databases that companies need to operate
their Web sites.
Another significant software holding in the same field has been TIBCO
Software, Inc. TIBCO's products focus on the rapidly expanding B2B marketplace.
The company's shares rose almost 600% during the period, making it our top
contributor to results.
In the area of data storage, we own shares of Veritas Software Corporation.
The company was just chosen to provide data-protection capabilities to the U.S.
Census Bureau. Two other noteworthy names were Mercury Interactive Corporation
and Rational Software Corporation. Mercury's software is used by corporations to
test the capacities of their Internet sites. Rational makes software used to
develop other software.
WHAT WERE SOME SUCCESSFUL INVESTMENTS OUTSIDE TECHNOLOGY?
Our proprietary database frequently leads us to companies experiencing
accelerating growth in unexpected areas of the economy. For example, our
eighth-largest holding is Calpine Corporation, the nation's fastest-growing
independent power company. Calpine provides
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
BEA SYSTEMS, INC. 6.5% 2.8%
TIBCO SOFTWARE INC. 6.0% 1.6%
JDS UNIPHASE CORP. 5.9% 3.7%
PMC-SIERRA, INC. 5.4% 1.8%
GEMSTAR INTERNATIONAL
GROUP LTD. 4.1% 6.1%
CONEXANT SYSTEMS, INC. 2.8% 1.9%
FLEXTRONICS
INTERNATIONAL LTD.
ADR 2.6% 2.1%
CALPINE CORP. 2.4% 2.3%
MERCURY INTERACTIVE
CORP. 2.4% 1.7%
JABIL CIRCUIT, INC. 2.1% 2.1%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
COMPUTER SOFTWARE 24.8% 10.9%
SEMICONDUCTOR 22.1% 16.5%
ELECTRICAL EQUIPMENT 18.9% 8.5%
INTERNET 6.2% 6.5%
INFORMATION SERVICES 6.2% 13.4%
6 1-800-345-2021
Giftrust--Q&A
--------------------------------------------------------------------------------
(Continued)
electricity in 20 states and parts of Canada. The company's first-quarter 2000
earnings were up more than 300% from the same quarter a year earlier.
In the healthcare area, we started a position in Health Management
Associates, Inc., (HMA) an operator of acute-care hospitals located primarily in
rural areas in the Southeast and Southwest. Those communities are often
underserved medically, and the populations in the areas HMA serves are growing
more rapidly than in other parts of the country. HMA's shares rose nearly 80%
during the period.
In terms of new investments, we were rewarded for a position we initiated
in SanDisk Corporation. This firm makes "flash memory" products that store data,
digital images and digital audio in a growing number of applications, such as
digital cameras, cellular handsets, and portable music players. The stock has
gained 164% since we purchased it.
WHICH COMPANIES DIDN'T LIVE UP TO YOUR EXPECTATIONS?
We didn't get the boost we'd hoped for from our investment in Power
Integrations, Inc. Among its products are semiconductors that go into battery
chargers for cellular phones, primarily for high-end handsets. When one of the
company's larger clients indicated it was going to raise its production of
inexpensive cell phones that do not use Power Integration's chips, investors
pummeled the stock, making it Giftrust's worst performer.
Another laggard was a high-tech financial services company called Express
Scripts. Involved in "pharmacy benefit management," Express Scripts is
electronically linked to 50,000 pharmacies around the country and manages
prescription benefits for corporations and other clients. Although it's the
leader in its field, we think the company is facing an uncertain future due to
regulatory issues. We sold our position entirely.
WHAT SHIFTS DID YOU MAKE IN GIFTRUST'S PORTFOLIO DURING THE PERIOD?
We reduced our investments in cable firms. Cable service providers are
investing in their networks to carry the next generation of digital services. We
shifted our focus to companies supplying them with technology and equipment.
In the energy area, increased oil field activity led us to raise our
weighting in oil services companies, such as Weatherford International, which
provides equipment used in the drilling and production of oil and natural gas
wells, and off-shore drillers, including Global Marine, Inc. Oil services turned
out to be one of our top-contributing industries for the period.
HAS A NEW MANAGER BEEN ADDED TO THE GIFTRUST TEAM?
Yes. Tom Telford was promoted to portfolio manager in February. He
previously was an investment analyst for Giftrust. Tom joined the company in
1996.
WHAT ARE YOUR PLANS FOR GIFTRUST OVER THE NEXT SIX MONTHS?
We will continue to apply our investment approach with diligence and
discipline. Right now, we're seeing unprecedented levels of volatility in the
markets as a result of concerns about higher interest rates, and extreme
valuations on many technology-oriented companies. We think the best way to ride
through volatile periods is by owning the types of firms our process is designed
to lead us to: successful businesses with solid earnings. This is especially
true in the technology area, where the recent correction has made investors much
more discriminating.
[right margin]
"WE THINK THE BEST WAY TO RIDE THROUGH VOLATILE PERIODS IS BY OWNING THE TYPES
OF FIRMS OUR PROCESS IS DESIGNED TO LEAD US TO: SUCCESSFUL BUSINESSES WITH SOLID
EARNINGS."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF APRIL 30, 2000
COMMON STOCKS 97.0%
TEMPORARY CASH INVESTMENTS 3.0%
[pie chart]
AS OF OCTOBER 31, 1999
COMMON STOCKS 98.0%
TEMPORARY CASH INVESTMENTS 2.0%
[pie chart]
www.americancentury.com 7
Giftrust--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
COMMON STOCKS -- 97.3%
COMPUTER HARDWARE & BUSINESS MACHINES -- 0.3%
83,700 Proxim, Inc.(1) $ 6,406
--------------------
COMPUTER SOFTWARE -- 24.8%
2,651,000 BEA Systems, Inc.(1) 127,662
258,400 Cognos, Inc.(1) 9,690
1,766,600 Gemstar International Group Ltd.(1) 81,650
167,400 i2 Technologies, Inc.(1) 21,647
516,000 Mercury Interactive Corp.(1) 46,408
467,200 Rational Software Corp.(1) 39,756
94,900 Siebel Systems, Inc.(1) 11,664
1,337,400 TIBCO Software Inc.(1) 119,071
297,000 Veritas Software Corp.(1) 31,863
--------------------
489,411
--------------------
DEPARTMENT STORES -- 1.2%
1,259,800 Family Dollar Stores, Inc. 24,015
--------------------
DRUGS -- 4.7%
60,400 Abgenix, Inc.(1) 5,408
429,200 Biovail Corp. International(1) 20,467
283,200 Enzon, Inc.(1) 10,540
340,000 Millennium Pharmaceuticals, Inc.(1) 26,966
98,000 Protein Design Labs, Inc.(1) 9,981
209,800 QLT PhotoTherapeutics Inc.(1) 11,664
278,800 Tanox, Inc.(1) 8,146
---------------------
93,172
---------------------
ELECTRICAL EQUIPMENT -- 18.9%
150,000 ADC Telecommunications, Inc.(1) 9,108
519,100 ANTEC Corp.(1) 27,869
254,400 Comverse Technology, Inc.(1) 22,697
555,100 Digital Microwave Corp.(1) 20,487
733,800 Flextronics International Ltd. ADR(1) 51,572
266,800 Harmonic Inc.(1) 19,685
985,800 Jabil Circuit, Inc.(1) 40,356
1,121,136 JDS Uniphase Corp.(1) 116,283
70,100 Netro Corp.(1) 3,060
602,200 P-COM, Inc.(1) 6,492
157,200 Powerwave Technologies, Inc.(1) 32,703
90,000 Sawtek Inc.(1) 4,317
325,600 Tekelec, Inc.(1) 11,345
360,900 Viasystems Group, Inc.(1) 5,752
--------------------
371,726
--------------------
Shares ($ in Thousands) Value
-------------------------------------------------------------------------------
ELECTRICAL UTILITIES -- 2.4%
511,000 Calpine Corp.(1) $ 46,756
------------------
INFORMATION SERVICES -- 6.2%
604,600 CBT Group Public Limited
Company ADR(1) 29,096
272,100 Diamond Technology Partners Inc.(1) 21,555
499,500 eLoyalty Corp.(1) 8,211
856,100 Proxicom, Inc.(1) 29,214
400,400 Sapient Corp.(1) 31,694
46,000 Wireless Facilities, Inc.(1) 2,659
------------------
122,429
-------------------
INTERNET -- 6.2%
99,200 Ariba, Inc.(1) 7,344
169,700 Art Technology Group, Inc.(1) 10,272
156,000 Commerce One, Inc.(1) 9,521
276,600 Exodus Communications, Inc.(1) 24,436
339,600 GlobeSpan, Inc.(1) 32,570
161,300 Inktomi Corp.(1) 24,825
297,000 USinternetworking, Inc.(1) 7,379
135,000 Vignette Corporation(1) 6,514
------------------
122,861
------------------
MEDIA -- 3.3%
185,000 Hispanic Broadcasting Corp.(1) 18,662
792,600 TV Guide, Inc. Cl A(1) 23,803
210,000 Univision Communications Inc. Cl A(1) 22,942
------------------
65,407
------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.6%
187,700 Aclara BioSciences, Inc.(1) 7,027
38,600 Aurora Biosciences Corp.(1) 1,394
114,100 Nanogen, Inc.(1) 2,774
------------------
11,195
------------------
MEDICAL PROVIDERS & SERVICES -- 1.4%
1,652,500 Health Management Associates, Inc.(1) 26,337
------------------
OIL SERVICES -- 5.2%
561,800 Ensco International Inc. 18,645
970,700 Global Marine Inc.(1) 23,297
606,300 R&B Falcon Corp.(1) 12,581
352,900 Sante Fe International 12,131
284,500 Transocean Sedco Forex, Inc. 13,372
563,400 Weatherford International, Inc.(1) 22,888
------------------
102,914
------------------
8 1-800-345-2021 See Notes to Financial Statements
Giftrust--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
SEMICONDUCTOR -- 22.1%
105,000 Altera Corp.(1) $ 10,733
175,000 Applied Micro Circuits Corp.(1) 22,548
395,600 Asyst Technologies, Inc.(1) 21,152
302,300 Chartered Semiconductor
Manufacturing ADR(1) 26,470
916,200 Conexant Systems, Inc.(1) 54,886
219,300 Exar Corp.(1) 17,578
563,400 Grant Prideco, Inc.(1) 10,845
376,600 Lattice Semiconductor Corp.(1) 25,232
557,800 PMC-Sierra, Inc.(1) 106,993
356,000 Power Integrations, Inc.(1) 8,121
368,700 PRI Automation, Inc.(1) 29,461
340,000 Qlogic Corp.(1) 34,096
330,000 SanDisk Corp.(1) 30,226
326,800 Teradyne, Inc.(1) 35,948
------------------
434,289
------------------
TOTAL COMMON STOCKS 1,916,918
------------------
(Cost $863,292)
($ in Thousands) Value
TEMPORARY CASH INVESTMENTS -- 2.7%
Repurchase Agreement, BA Security Services,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.67%, dated 4/28/00,
due 5/1/00 (Delivery value $27,113) 27,100
Repurchase Agreement, Merrill Lynch & Co.
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.65%, dated 4/28/00,
due 5/1/00 (Delivery value $26,713) 26,700
------------------
TOTAL TEMPORARY CASH INVESTMENTS 53,800
------------------
(Cost $53,800)
TOTAL INVESTMENT SECURITIES -- 100.0% $1,970,718
==================
(Cost $917,092)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 9
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
APRIL 30, 2000 (UNAUDITED)
ASSETS (In Thousands Except Per-Share Amounts)
Investment securities, at value
(identified cost of $917,092) (Note 3) ....................... $ 1,970,718
Receivable for investments sold .............................. 25,760
Dividends and interest receivable ............................ 25
-----------
1,996,503
-----------
LIABILITIES
Disbursements in excess of demand deposit cash ............... 352
Payable for investments purchased ............................ 4,163
Accrued management fees (Note 2) ............................. 1,526
Payable for directors' fees and expenses ..................... 1
Accrued expenses and other liabilities ....................... 3
-----------
6,045
-----------
NET ASSETS ................................................... $ 1,990,458
===========
CAPITAL SHARES, $0.01 PAR VALUE
Authorized ................................................... 200,000
===========
Outstanding .................................................. 47,328
===========
NET ASSET VALUE PER SHARE .................................... $ 42.06
===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ...................... $ 946,901
Accumulated net investment loss .............................. (7,991)
Accumulated undistributed net realized
loss on investment transactions .............................. (2,078)
Net unrealized appreciation on investments (Note 3) .......... 1,053,626
-----------
$ 1,990,458
===========
10 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INVESTMENT LOSS (In Thousands)
Income:
Interest ....................................................... $ 1,148
Dividends ...................................................... 292
---------
1,440
---------
Expenses (Note 2):
Management fees ................................................ 9,427
Directors' fees and expenses ................................... 4
---------
9,431
---------
Net investment loss ............................................ (7,991)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ............................... 122,041
Change in net unrealized appreciation on investments ........... 599,833
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................ 721,874
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 713,883
=========
See Notes to Financial Statements www.americancentury.com 11
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
INCREASE IN NET ASSETS
2000 1999
OPERATIONS (In Thousands)
Net investment loss .......................... $ (7,991) $ (6,317)
Net realized gain on investments ............. 122,041 24,582
Change in net unrealized appreciation
on investment transactions ................... 599,833 440,765
----------- -----------
Net increase in net assets resulting
from operations .............................. 713,883 459,030
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................... 53,464 49,917
Payments for shares redeemed ................. (27,158) (16,082)
----------- -----------
Net increase in net assets from
capital share transactions ................... 26,306 33,835
----------- -----------
NET INCREASE IN NET ASSETS ................... 740,189 492,865
NET ASSETS
Beginning of period .......................... 1,250,269 757,404
----------- -----------
End of period ................................ $ 1,990,458 $ 1,250,269
=========== ===========
Accumulated net investmen .................... $ (7,991) --
TRANSACTIONS IN SHARES OF THE FUND
Sold ......................................... 1,355 2,452
Redeemed ..................................... (675) (765)
----------- -----------
Net increase ................................. 680 1,687
=========== ===========
12 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Giftrust (the fund) is one of the
fourteen series of funds issued by the corporation. The fund is diversified
under the 1940 Act. The fund's investment objective is to seek capital growth by
investing primarily in common stocks. The following significant accounting
policies are in accordance with generally accepted accounting principles; these
policies may require the use of estimates by fund management.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts
in order to manage the fund's exposure to changes in market conditions. One of
the risks of entering into futures contracts is the possibility that the change
in value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively. There were no open futures
contracts at April 30, 2000.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee. The Agreement provides that all
expenses of the fund, except brokerage commissions, taxes, interest, expenses of
those directors who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is computed daily and paid monthly based on the fund's average
daily closing net assets during the previous month. The annual management fee
for the fund is 1.00%.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six months ended April 30, 2000, totaled $724,713,596 and
$758,158,892.
On April 30, 2000, accumulated net unrealized appreciation on investments
was $1,052,002,170, based on the aggregate cost of investments for federal
income tax purposes of $918,715,914, which consisted of unrealized appreciation
of $1,101,875,157 and unrealized depreciation of $49,872,987.
--------------------------------------------------------------------------------
4. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
six months April 30, 2000.
14 1-800-345-2021
Giftrust--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years. It also
includes several key statistics for each reporting period, including TOTAL
RETURN, INCOME RATIO (net income as a percentage of average net assets), EXPENSE
RATIO (operating expenses as a percentage of average net assets), and PORTFOLIO
TURNOVER (a gauge of the fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ......... $ 26.80 $ 16.85 $ 25.46 $ 25.79 $ 25.63 $ 20.50
--------- --------- --------- --------- --------- ---------
Income From Investment
Operations
Net Investment Loss ....... (0.17)(2) (0.14) (0.12)(2) (0.18)(2) (0.20)(2) (0.16)(2)
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions ... 15.43 10.09 (7.74) 0.63 2.46 6.37
--------- --------- --------- --------- --------- ---------
Total From Investment
Operations ............... 15.26 9.95 (7.86) 0.45 2.26 6.21
--------- --------- --------- --------- --------- ---------
Distributions
From Net Realized Gains on
Investment Transactions ... -- -- (0.75) (0.78) (2.10) (1.08)
In Excess of Net
Realized Gains .............. -- -- --(3) -- -- --
--------- --------- --------- --------- --------- ---------
Total Distributions ....... -- -- (0.75) (0.78) (2.10) (1.08)
--------- --------- --------- --------- --------- ---------
Net Asset Value,
End of Period ............... $ 42.06 $ 26.80 $ 16.85 $ 25.46 $ 25.79 $ 25.63
Total Return(4) ........... 56.94% 59.05% (31.55)% 1.95% 9.72% 32.52%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....... 1.00%(5) 1.00% 1.00% 1.00% 0.98% 0.98%
Ratio of Net Investment
Loss to Average Net Assets .. (0.85)%(5) (0.66)% (0.54)% (0.74)% (0.80)% (0.70)%
Portfolio Turnover Rate ..... 40% 117% 147% 118% 121% 105%
Net Assets, End of Period
(in millions) ............... $ 1,990 $ 1,250 $ 757 $ 1,024 $ 866 $ 561
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 15
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 14 growth funds including domestic equity,
specialty, international, and global. The philosophy behind these growth funds
focuses on three important principles. First, the funds seek to own successful
companies, which we define as those with growing earnings and revenues. Second,
we attempt to keep the funds fully invested, regardless of short-term market
activity. Experience has shown that market gains can occur in unpredictable
spurts and that missing those opportunities can significantly limit the
potential for gain. Third, the funds are managed by teams, rather than by one
"star." We believe this allows us to make better, more consistent management
decisions.
In addition to these principles, each fund has its own investment policies
AMERICAN CENTURY GIFTRUST generally invests in the securities of small and
medium-sized companies that exhibit accelerating growth. Shares of Giftrust can
be given only as a gift to someone other than yourself or spouse, and all
investments must remain in the fund for a minimum of 10 years or until the
recipient reaches the age of majority, whichever is later. Historically,
small-cap stocks have been more volatile than the stocks of larger,
more-established companies. Therefore, the fund is subject to significant price
volatility but offers high long-term growth potential.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
dominant industries. Created by Standard & Poor's, it is considered to be a
broad measure of U.S. stock market performance.
The S&P MIDCAP 400 is the medium capitalization sector of the U.S. market.
Created by Standard & Poor's, it is considered to represent the performance of
mid-cap stocks generally.
The RUSSELL 2000 GROWTH INDEX was created by the Frank Russell Company. It
measures the performance of the 2,000 smallest of the 3,000 largest publicly
traded U.S. companies based on total market capitalization. The Russell 2000
represents approximately 10% of the total market capitalization of the top 3,000
companies. The average market capitalization of the index is approximately $420
million.
The RUSSELL 2500 INDEX was created by the Frank Russell Company. It
measures the performance of the 2,500 smallest of the 3,000 largest publicly
traded U.S. companies based on total market capitalization. The Russell 2500
represents approximately 23% of the total market capitalization of the top 3,000
companies. The average market capitalization of the index is approximately $650
million. The RUSSELL 2500 GROWTH INDEX measures the performance of those Russell
2500 companies with higher price-to-book ratios and higher forecasted growth
rates.
[left margin]
PORTFOLIO MANAGERS
Giftrust
CHRIS BOYD, CFA
JOHN SEITZER, CFA
TOM TELFORD, CFA
16 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 15.
INVESTMENT TERMS
* MEDIAN MARKET CAPITALIZATION-- Market capitalization (market cap) is the total
value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES-- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER-- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO-- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO-- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
TYPES OF STOCKS
* BLUE CHIP STOCKS-- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS-- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS-- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $10.3 billion. This is Lipper's market capitalization breakpoint as of
April 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $10.3 billion. This is Lipper's market capitalization
breakpoint as of April 30, 2000, although it may be subject to change based on
market fluctuations. The S&P 400 Index and Russell 2500 Index generally consist
of stocks in this range.
www.americancentury.com 17
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of less
than $2.3 billion. This is Lipper's market capitalization breakpoint as of April
30, 2000, although it may be subject to change based on market fluctuations. The
S&P 600 Index and the Russell 2000 Index generally consist of stocks in this
range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price- fluctuation risk.
18 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 19
Notes
--------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation: Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[graphic of runners]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20656 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
APRIL 30, 2000
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
Limited-Term Bond
Intermediate-Term Bond
Bond
[american century logo(reg.sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
They say hindsight is 20/20. But what about insight? That's what you really
want when choosing mutual funds. Now you can get the insight you need with Fund
Advisor, an online tool that helps you select the right no-load funds for
you--on a goal by goal basis. Fund Advisor helps you:
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Receive recommendations based on funds available through your current fund
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Whether you want to analyze your current investments, or find new ones, Fund
Advisor can help you feel confident with the decisions you make.
How does it work?
Just tell Fund Advisor about your investing style, your current investments
and your goals. It will analyze your investments and offer impartial
recommendations to help you get on track.
To review Fund Advisor's unique perspective, go to www.americancentury.com
and select Fund Advisor at the top of the page. For the initial set-up, you
might want to have available:
* Your latest tax return
* Your most recent investment account statements
* Printouts from any software you use to track your personal finances
To learn more about this new tool and how it can help you better manage your
financial future, select the "Demo" from the Fund Advisor introduction page.
* Patent pending. It was developed for Acumation, Inc., a registered investment
advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through Fund Advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
[left margin]
LIMITED-TERM BOND
(ABLIX)
------------------------
INTERMEDIATE-TERM BOND
(TWITX)
------------------------
BOND
(TWLBX)
------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Saving for College Just Got Easier
--------------------------------------------------------------------------------
Introducing LEARNING QUEST, a powerful new program that lets you save
tax-deferred for your child's education. Key benefits include:
* Anyone can open an account, and anyone can be named the beneficiary, even
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* The student can attend any accredited institution (college, university,
vocational program) anywhere in the United States.
* Taxes aren't due on the earnings until they are withdrawn, and earnings on
qualified expenses are taxed at the student's rate.
* High contribution limits ($127,000 for 2000).
For more information, including estate-planning benefits, call
1-800-579-2203, or visit www.learningquestsavings.com.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, proved relatively difficult for U.S.
bond investors, as the pace of U.S. economic growth and inflation quickened.
Trying to keep economic growth and inflation under control, the Federal Reserve
raised short-term interest rates three times in the last six months.
Although higher rates put significant pressure on bond prices overall,
Treasury bonds held up relatively well because of the Treasury Department's
efforts to reduce government debt. American Century Limited-Term Bond,
Intermediate-Term Bond, and Bond were able to offer better-than-average yields
in that environment, but their returns slightly lagged their respective Lipper
peer groups. (Detailed performance information on the funds can be found on
pages 4, 9, and 15.)
Besides serving the two million investors who look to American Century for
investment management, we also have an obligation to the 3,000 people who work
on your behalf--to create a positive, safe, and productive work environment for
American Century staff. This commitment was recognized and rewarded in late 1999
when American Century ranked in the top 40 of Fortune magazine's "100 Best
Companies to Work For."
We do not take this recognition lightly--acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and an essential one in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's shareholder
reports--like this one--have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal of approval from DALBAR. You can count on
us to keep looking for ways to improve the reports, literature, and statements
you receive from us.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
LIMITED-TERM BOND
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Schedule of Investments ................................................ 7
INTERMEDIATE-TERM BOND
Performance Information ................................................ 9
Management Q&A ......................................................... 10
Schedule of Investments ................................................ 12
BOND
Performance Information ................................................ 15
Management Q&A ......................................................... 16
Schedule of Investments ................................................ 18
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ......................................................... 21
Statements of Operations ............................................... 22
Statements of Changes
in Net Assets ....................................................... 23
Notes to Financial
Statements .......................................................... 24
Financial Highlights ................................................... 27
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 33
Background Information
Investment Philosophy
and Policies ..................................................... 34
Comparative Indices ................................................. 34
Lipper Rankings ..................................................... 34
Investment Team
Leaders .......................................................... 34
Credit Rating
Guidelines ....................................................... 34
Glossary ............................................................... 35
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* Inflation fears and rising interest rates buffeted U.S. bonds during the six
months ended April 30, 2000, leading to a disappointing performance for most
fixed-income securities.
* In response to robust economic growth and rising inflation, the Fed
continued to raise interest rates.
* In spite of that unfavorable environment, Treasury bonds rallied in the
first quarter of 2000 because of widely anticipated cutbacks in supply.
* Bonds outside of the Treasury market--including mortgage-backed, government
agency, and corporate securities--did not fare as well.
LIMITED-TERM BOND
* The fund provided a higher yield than its average Lipper peer, in spite of
the difficult performance environment, but it underperformed in terms of
total return. (See detailed performance information on page 4.)
* We sold Treasurys to meet the fund's significant cash outflows, resulting in
a smaller Treasury position than we would have preferred.
* We kept Limited-Term Bond's duration--its sensitivity to interest rate
fluctuations--fairly short relative to that of its Lipper peers and
benchmark over the six months, meaning that the fund was less affected as
interest rates went up.
* We will probably maintain that duration position for now, while continuing
to monitor the relative values of fixed-income securities.
INTERMEDIATE-TERM BOND
* The fund provided a higher yield than its average Lipper peer, in spite of
the difficult performance environment, but it fell just shy of the group's
average total return. (See detailed performance information on page 9.)
* Since the fund was a bit overweight in corporates--the bottom performers
over the six months--compared with many of its Lipper peers, the result was
a slightly lower relative return.
* We kept the fund's duration--a measure of sensitivity to changes in interest
rates--fairly neutral relative to that of its Lipper group.
* Spreads have widened considerably over the last four months, so there may
finally be some light at the end of the tunnel for non-Treasurys.
BOND
* The fund provided a higher yield than its average Lipper peer, in spite of
the difficult performance environment, but it fell just shy of the group's
average total return. (See detailed performance information on page 15.)
* We kept the fund's duration--a measure of sensitivity to changes in interest
rates--short, relative to that of its Lipper group.
* We increased the portfolio's Treasury exposure to take advantage of the
positive effects of the Treasury Department's buy-back efforts, while
decreasing its corporate bond holdings.
* The net result of those adjustments was that the portfolio's exposure to
securities rated A and lower decreased, while AAA holdings rose.
[left margin]
LIMITED-TERM BOND(1)
(ABLIX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 0.99%(2)
1 Year 2.01%
30-DAY SEC YIELD: 6.56%
INCEPTION DATE: 3/1/94
NET ASSETS: $13.8 million(3)
INTERMEDIATE-TERM BOND(1)
(TWITX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 0.73%(2)
1 Year 0.15%
30-DAY SEC YIELD: 6.78%
INCEPTION DATE: 3/1/94
NET ASSETS: $31.6 million(3)
BOND(1)
(TWLBX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 0.47%(2)
1 Year -0.62%
30-DAY SEC YIELD: 6.86%
INCEPTION DATE: 3/2/87
NET ASSETS: $109.7 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 4, 9, and 15. Investment terms are defined in the
Glossary on pages 35-36.
2 1-800-345-2021
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
PERFORMANCE SNAPSHOT
Inflation fears and rising interest rates buffeted U.S. bonds during the
six months ended April 30, 2000, leading to a disappointing performance for most
fixed-income securities. The Lehman Brothers Aggregate Bond Index--a broad
measure of U.S. bond performance--returned 1.42%.
VIBRANT GROWTH
The U.S. economy reached a record tenth year of expansion in February and
exhibited few signs of slowing. Economic growth was an estimated 5.4% annually
during the first quarter of 2000, on the heels of a 7.4% annualized jump during
the final quarter of 1999--the fastest pace since the first quarter of 1984.
Inflation also made an appearance. As measured by the consumer price index,
prices jumped 0.7% in March, fueling concerns that the Federal Reserve (the Fed)
might get more aggressive with its interest rate hikes. A 1.4% jump in the
first-quarter employment cost index--a broad measure of the cost of wages and
benefits to companies--did little to help matters.
In response, the Fed continued to hike interest rates in an attempt to keep
inflationary pressures from boiling over. The Fed increased rates three times
during the six months, raising the benchmark federal funds target rate from
5.25% to 6.00%.
TREASURYS LED THE MARKET . . .
In spite of strong economic growth and rising interest rates, Treasury
bonds rallied in the first quarter of 2000 because of widely anticipated
restrictions on supply. The robust U.S. economy and projected federal budget
surpluses motivated the Treasury Department to reduce sales of its securities
and buy back higher-yielding, longer-term bonds. Investors responded to the
perceived future shortage of Treasurys by going on a buying spree, spurring a
sharp rally. As long-term bond yields plunged and the Fed raised short-term
interest rates, Treasury yields "inverted," with the yield of the 30-year bond
falling below the yield of the two-year note for the first time since 1990.
. . . WHILE OTHER SECTORS STRUGGLED
Outside of the Treasury market, fixed-income securities--including
mortgage-backed, government agency, and corporate securities--were generally
hard pressed by rising interest rates. Mortgage-backed securities performed
better than the other spread sectors because rising interest rates dampened
refinancing activity. Agency bonds were hampered by heavy issuance, while
questions in Congress about the future of the implicit government guarantee
enjoyed by government-sponsored entities dampened returns on their securities.
Corporate bonds underperformed other fixed-income sectors. Even though corporate
earnings remained strong, a glut of new supply and sharply reduced demand caused
corporate yields to soar.
[right margin]
"INFLATION FEARS AND RISING INTEREST RATES BUFFETED U.S. BONDS DURING THE
SIX MONTHS, LEADING TO A DISAPPOINTING PERFORMANCE FOR MOST FIXED-INCOME
SECURITIES."
BOND INDEX RETURNS
FORTHE SIX MONTHS ENDED APRIL 30, 2000 LEHMAN AGGREGATE BOND INDEX 1.42% Lehman
Treasury Bond Index 2.58% Lehman Mortgage-Backed
Securities Index 1.26%
Lehman Corporate Bond Index 0.11%
Source: Russell/Mellon Analytical
www.americancentury.com 3
Limited-Term Bond--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS (INCEPTION 3/1/94) ADVISOR CLASS (INCEPTION 11/12/97)
MERRILL LYNCH MERRILL LYNCH
LIMITED-TERM 1-5 YR. SHORT INVESTMENT-GRADE DEBT FUNDS(2) LIMITED-TERM 1-5 YR.
BOND GOVT./CORP. INDEX AVERAGE RETURN FUND'S RANKING BOND GOVT./CORP. INDEX
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 0.99% 1.52% 1.73% -- 0.86% 1.52%
1 YEAR 2.01% 2.79% 2.93% 95 OUT OF 113 1.75% 2.79%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 4.78% 5.64% 4.92% 63 OUT OF 99 -- --
5 YEARS 5.36% 6.12% 5.46% 41 OUT OF 70 -- --
LIFE OF FUND 4.98% 5.69% 5.22%(3) 32 OUT OF 56(3) 3.87% 4.85%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 3/31/94, the date nearest the class's inception for which data are
available.
(4) Since 10/31/97, the date nearest the class's inception for which data are
available.
See pages 33-35 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND Value on 4/30/00 Limited-Term Bond $13,493
Merrill Lynch 1- to 5-Year
Govt./Corp. Index $14,066
Merrill Lynch
Limited-Term 1- to 5-Year
Bond Govt./Corp. Index
DATE VALUE VALUE
3/1/1994 $10,000 $10,000
3/31/1994 $9,933 $9,909
6/30/1994 $9,906 $9,885
9/30/1994 $9,989 $9,974
12/31/1994 $9,979 $9,961
3/31/1995 $10,291 $10,348
6/30/1995 $10,620 $10,764
9/30/1995 $10,794 $10,928
12/31/1995 $11,072 $11,253
3/31/1996 $11,094 $11,243
6/30/1996 $11,193 $11,336
9/30/1996 $11,364 $11,529
12/31/1996 $11,560 $11,772
3/31/1997 $11,638 $11,817
6/30/1997 $11,886 $12,111
9/30/1997 $12,115 $12,386
12/31/1997 $12,300 $12,614
3/31/1998 $12,463 $12,809
6/30/1998 $12,650 $13,023
9/30/1998 $13,019 $13,509
12/31/1998 $13,075 $13,583
3/31/1999 $13,180 $13,639
6/30/1999 $13,222 $13,670
9/30/1999 $13,351 $13,824
12/31/1999 $13,400 $13,880
3/31/2000 $13,566 $14,057
4/30/2000 $13,493 $14,066
$10,000 investment made 3/1/94
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Merrill Lynch 1- to 5-Year Government/Corporate Index is provided for comparison
in each graph. Limited-Term Bond's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not. These graphs are based on Investor Class
shares only; performance for other classes will vary due to differences in fee
structures (see Total Returns table above). Past performance does not guarantee
future results. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED APRIL 30)
Merrill Lynch
Limited-Term 1- to 5-Year
Bond Govt./Corp. Index
DATE RETURN RETURN
4/30/1994* -1.12% -1.49%
4/30/1995 5.11% 6.12%
4/30/1996 6.69% 7.43%
4/30/1997 5.78% 6.23%
4/30/1998 6.76% 7.88%
4/30/1999 5.62% 6.33%
4/30/2000 2.01% 2.79%
* From 3/1/94 (the fund's inception date) to 4/30/94.
4 1-800-345-2021
Limited-Term Bond--Q&A
--------------------------------------------------------------------------------
[photo of John Walsh]
An interview with John Walsh, a portfolio manager on the Limited-Term Bond
fund investment team.
HOW DID LIMITED-TERM BOND PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 2000?
For the six-month period, Limited-Term Bond returned 0.99%, compared with
the 1.73% average return of the 115 "Short Investment-Grade Debt Funds" tracked
by Lipper Inc., and the 1.52% return of the fund's benchmark, the Merrill Lynch
1- to 5-Year Government/Corporate Bond Index.*
HOW DID THE FUND'S YIELD STACK UP?
Limited-Term Bond continued to provide more income than its Lipper peers.
As of April 30, the fund's 30-day SEC yield was 6.56%, compared with the 6.41%
average yield of its Lipper group.
That's an important advantage, because income tends to comprise a
significant portion of Limited-Term Bond's total return. In spite of that higher
yield, however, the fund lagged its peers.
CAN YOU ELABORATE ON THAT DISPARITY?
Limited-Term Bond experienced significant cash outflows between October
1999 and early January 2000. To meet these liquidations, we used Treasury
securities because they were the easiest to sell. Unfortunately, that left the
fund with fewer Treasurys than we would have preferred, especially given that
Treasurys solidly outperformed all other segments of the bond market during the
period (see page 3).
HOW DID THE TREASURY LIQUIDATIONS IMPACT THE FUND'S EXPOSURE TO OTHER
FIXED-INCOME SECTORS?
In particular, they resulted in an increased corporate bond position (see
the charts on page 6). Corporate bonds were sub-par performers over the six
months. Concerns over potential Y2K computer problems caused liquidity in the
corporate market to dry up in late August through October of 1999.
Additionally, investors were worried that the Federal Reserve's bent toward
raising interest rates to slow economic growth and head off inflation would hurt
the financial health of corporate issuers.
SPEAKING OF FINANCIAL HEALTH, WERE THERE ANY CREDIT ISSUES IN THE CORPORATE
MARKET DURING THE SIX MONTHS?
Yes. With liquidity drying up, and bond dealers not building up their
inventories because of weak demand, some companies met with financial
difficulties. Thanks largely to our careful screening and selection process,
which seeks to avoid such issuers, we were able to sidestep many credit
pitfalls.
In spite of our prudent research, we held two issues that dampened
performance because of credit downgrades: Rite Aid, which we discussed in the
last performance report (for the period ended October 31, 1999), and Conseco.
The Conseco bonds that were in the portfolio represented around 2.0% of assets
and were attractive buys when first added. The bonds mature in June 2001, so
they are fairly short-term securities. From the credit side, the company
received two rating upgrades in the second half of 1999 and seemed poised for
yet another. So from maturity and credit standpoints, the bonds looked good.
* All fund returns and yields referenced in this interview are for Investor
Class shares.
[right margin]
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NUMBER OF SECURITIES 40 44
WEIGHTED AVERAGE
MATURITY 2.0 YRS 1.9 YRS
AVERAGE DURATION 1.7 YRS 1.7 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.70%* 0.70%
* Annualized.
YIELDS AS OF APRIL 30, 2000
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 6.56% 6.30%
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
AAA 43% 58%
AA 2% 1%
A 27% 22%
BBB 23% 14%
BB 5% 5%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
34 for more information.
Investment terms are defined in the Glossary on pages 35-36.
www.americancentury.com 5
Limited-Term Bond--Q&A
--------------------------------------------------------------------------------
(Continued)
Unfortunately, Conseco's credit prospects changed dramatically in late
March and early April, and that spelled bad news for the company's bonds. As a
result, we have been reducing the portfolio's Conseco exposure.
LET'S MOVE ON TO YOUR DURATION STRATEGY. WHAT DID YOU DO THERE?
We kept Limited-Term Bond's duration fairly short relative to that of its
Lipper peers and benchmark over the six months, meaning that the fund was less
sensitive to price declines as interest rates went up. We pursued this approach
because we expected that robust economic growth and tight labor markets would
encourage the Fed to keep raising rates. This positioning helped the fund.
WHAT SECURITIES DID YOU FAVOR TO ACCOMPLISH THAT STRATEGY?
We employed what's known as a barbell--heavy on the ends and light in the
middle. That means we chose some longer-term securities and balanced them with
short-maturity bonds. On the longer side of the barbell, we targeted
single-family, 15-year Fannie Mae mortgage-backed securities because they
offered attractive yields. We offset that position with two-year or shorter
Treasurys, which performed well. The fund's corporate holdings were generally
limited to bonds with maturities of two years or less for liquidity purposes. We
also maintained a stake in very short-term repurchase agreements and agency
discount notes to help shorten Limited-Term Bond's duration further. These
investments also helped the fund quickly take advantage of rising short-term
rates.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
We expect continued strong growth and tight labor markets and we'll be on
the lookout for additional signs of rising inflation. The Fed has been fairly
open about its plans, saying that if growth remains strong it will raise rates.
So far the Fed has done just that. We expect the Fed's vigilance to continue,
and if growth remains as vibrant as it has in recent quarters, we wouldn't be
surprised to see a few more rate hikes.
GIVEN THAT OUTLOOK, HOW WILL YOU POSITION LIMITED-TERM BOND?
We anticipate keeping duration short relative to the fund's peers and
benchmark for now. Though two-year Treasury notes are currently expensive, we
intend to add some if they become attractive again. Corporate yields remain
appealing due to their underperformance of Treasurys. So we will probably
maintain the portfolio's corporate exposure, but we'll continue looking for
opportunities to add higher-quality corporates while reducing lower-credit
positions. If market sentiment changes regarding corporate bonds, the
higher-credit corporates should be the first ones to benefit.
Agency yields are also attractive on a historical basis because of concerns
raised by debates in Congress over the implicit government guarantee of
government-sponsored entities. However, we don't expect any resolution to this
discussion in the short term, so we think agency bonds are very attractive.
Their AAA rating also gives us the ability to upgrade the fund's overall credit
quality.
[left margin]
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF APRIL 30, 2000
CORPORATE BONDS 58%
MORTGAGE-BACKED SECURITIES 17%
U.S. TREASURY SECURITIES 12%
ASSET-BACKED SECURITIES 11%
OTHER 2%
AS OF OCTOBER 31, 1999
CORPORATE BONDS 46%
MORTGAGE-BACKED SECURITIES 12%
U.S. TREASURY SECURITIES 21%
ASSET-BACKED SECURITIES 12%
OTHER 9%
Investment terms are defined in the Glossary on pages 35-36.
6 1-800-345-2021
Limited-Term Bond--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 12.4%
$350 U.S. Treasury Notes, 4.625%,
11/30/00 $ 347
350 U.S. Treasury Notes, 5.50%,
12/31/00 349
500 U.S. Treasury Notes, 5.875%,
11/30/01 494
500 U.S. Treasury Notes, 6.375%,
1/31/02 497
-------
TOTAL U.S. TREASURY SECURITIES 1,687
-------
(Cost $1,694)
U.S. GOVERNMENT AGENCY SECURITIES -- 1.8%
250 FHLB, 6.75%, 2/1/02 249
-------
(Cost $249)
MORTGAGE-BACKED SECURITIES(1) -- 17.2%
765 FHLMC Pool #E73566, 7.00%,
11/1/13 748
231 FNMA Pool #378698, 8.00%,
5/1/12 233
367 FNMA Pool #411016, 6.50%,
3/1/13 352
417 FNMA Pool #433184, 6.50%,
6/1/13 400
487 FNMA Pool #252213, 6.00%,
1/1/14 457
141 FNMA Whole Loan, Series 1995
W1, Class A6, 8.10%, 4/25/25 142
-------
TOTAL MORTGAGE-BACKED SECURITIES 2,332
-------
(Cost $2,370)
ASSET-BACKED SECURITIES(1) -- 10.6%
500 Case Equipment Loan Trust,
Series 1998 B, Class A4 SEQ,
5.92%, 10/15/05 490
500 CIT RV Trust, Series 1997 A,
Class A5 SEQ, 6.25%,
11/17/08 499
253 Money Store (The) Home Equity
Trust, Series 1994 B, Class A4
SEQ, 7.60%, 7/15/21 253
43 First Merchants Auto Receivables
Corp., Series 1996 B, Class A2,
6.80%, 5/15/01 43
65 Textron Financial Corp. Receivables
Trust, Series 1997 A, Class A,
6.05%, 3/16/09 (Acquired
9/18/97, Cost $65)(2) 64
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$ 85 United Companies Financial Corp.,
Home Equity Loan, Series
1996 D1, Class A4, 6.78%,
2/15/16 $ 85
-------
TOTAL ASSET-BACKED SECURITIES 1,434
-------
(Cost $1,448)
CORPORATE BONDS -- 57.9%
BANKS -- 2.2%
300 Bank One Corp., 6.40%, 8/1/02 292
-------
DEPARTMENT STORES -- 2.2%
300 Wal-Mart Stores, Inc., 6.15%,
8/10/01 296
-------
ELECTRICAL UTILITIES -- 3.6%
500 CMS Energy Corp., 8.00%,
7/1/01 494
-------
FINANCIAL SERVICES -- 10.1%
375 Aristar Inc., 6.75%, 8/15/01 371
350 Comdisco, Inc. MTN, Series H,
7.23%, 8/16/01 347
250 Ford Motor Credit Co., 6.125%,
4/28/03 240
200 Franchise Finance Corp., 7.00%,
11/30/00 199
215 International Lease Finance Corp.,
6.875%, 5/1/01 214
-------
1,371
-------
GAS & WATER UTILITIES -- 2.9%
400 K N Energy, Inc., 6.45%,
11/30/01 393
-------
GROCERY STORES -- 2.2%
300 Safeway Inc., 5.75%, 11/15/00 298
-------
LIFE & HEALTH INSURANCE -- 1.9%
400 Conseco Inc., 6.40%, 6/15/01 262
-------
MOTOR VEHICLES & PARTS -- 6.1%
300 DaimlerChrysler AG, 7.125%,
3/1/02 298
300 General Motors Corp. Global
Notes, 9.625%, 12/1/00 304
250 Lear Corp., Series B, 7.96%,
5/15/05 232
-------
834
-------
MULTI-INDUSTRY -- 3.6%
500 Tyco International Group SA,
6.875%, 9/5/02 (Acquired
9/15/99, Cost $500)(2) 491
-------
RAILROADS -- 3.0%
415 Norfolk Southern Corp., 6.95%,
5/1/02 410
-------
See Notes to Financial Statements www.americancentury.com 7
Limited-Term Bond--Q&A
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
REAL ESTATE -- 5.3%
$ 430 Chelsea GCA Realty Partners,
7.75%, 1/26/01 $ 428
300 Spieker Properties, Inc., 6.80%,
12/15/01 295
-------
723
-------
SECURITIES & ASSET MANAGEMENT -- 7.5%
400 Lehman Brothers Holdings Inc.
MTN, Series E, 6.33%, 8/1/00 399
250 Merrill Lynch & Co., Inc., 6.50%,
4/1/01 249
385 Paine Webber Group Inc. MTN,
6.65%, 10/15/02 373
-------
1,021
-------
TELEPHONE -- 3.6%
500 U S West Capital Funding Inc.,
6.125%, 7/15/02 486
-------
WIRELESS TELECOMMUNICATIONS -- 3.7%
$500 Vodafone AirTouch PLC, 7.125%,
7/15/01 $ 497
-------
TOTAL CORPORATE BONDS 7,868
-------
(Cost $8,136)
TEMPORARY CASH INVESTMENTS -- 0.1%
Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.62%, dated 4/28/00,
due 5/1/00 (Delivery value $20) 20
-------
(Cost $20)
TOTAL INVESTMENT SECURITIES -- 100.0% $13,590
=======
(Cost $13,917)
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
MTN = Medium Term Note
(1) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, 2000 was $555 which
represented 4.0% of net assets.
8 1-800-345-2021 See Notes to Financial Statements
Intermediate-Term Bond--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS (INCEPTION 3/1/94) ADVISOR CLASS (INCEPTION 8/14/97)
LEHMAN INTERM. LEHMAN INTERM.
INTERMEDIATE-TERM GOVT./CORP. INTERM. INVESTMENT-GRADE DEBT FUNDS(2) INTERMEDIATE-TERM GOVT./CORP.
BOND INDEX AVERAGE RETURN FUND'S RANKING BOND INDEX
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 0.73% 1.07% 0.90% -- 0.60% 1.07%
1 YEAR 0.15% 1.55% 0.10% 150 OUT OF 285 -0.10% 1.55%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 4.94% 5.57% 5.06% 108 OUT OF 207 -- --
5 YEARS 5.73% 6.19% 5.84% 76 OUT OF 151 -- --
LIFE OF FUND 5.24% 5.67% 5.70%(3) 60 OUT OF 115(3) 3.81% 4.66%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 3/31/94, the date nearest the class's inception for which data are
available.
(4) Since 7/31/97, the date nearest the class's inception for which data are
available.
See pages 33-35 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 4/30/00
Intermediate-Term Bond $13,702
Lehman Intermediate
Govt./Corp. Index $14,049
Intermediate-Term Lehman Intermediate
Bond Govt./Corp. Index
DATE VALUE VALUE
3/1/1994 $10,000 $10,000
3/31/1994 $9,856 $9,835
6/30/1994 $9,801 $9,776
9/30/1994 $9,882 $9,856
12/31/1994 $9,880 $9,845
3/31/1995 $10,265 $10,278
6/30/1995 $10,754 $10,790
9/30/1995 $10,950 $10,969
12/31/1995 $11,374 $11,356
3/31/1996 $11,217 $11,261
6/30/1996 $11,255 $11,332
9/30/1996 $11,451 $11,533
12/31/1996 $11,745 $11,815
3/31/1997 $11,714 $11,802
6/30/1997 $12,089 $12,151
9/30/1997 $12,469 $12,479
12/31/1997 $12,707 $12,746
3/31/1998 $12,906 $12,945
6/30/1998 $13,135 $13,188
9/30/1998 $13,676 $13,780
12/31/1998 $13,654 $13,821
3/31/1999 $13,647 $13,795
6/30/1999 $13,482 $13,740
9/30/1999 $13,581 $13,866
12/31/1999 $13,568 $13,873
3/31/2000 $13,851 $14,081
4/30/2000 $13,702 $14,049
$10,000 investment made 3/1/94
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Lehman Intermediate Government/ Corporate Index is provided for comparison in
each graph. Intermediate-Term Bond's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not. These graphs are based on Investor Class
shares only; performance for other classes will vary due to differences in fee
structures (see Total Returns table above). Past performance does not guarantee
future results. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED APRIL 30)
Intermediate-Term Lehman Intermediate
Bond Govt./Corp. Index
DATE RETURN RETURN
4/30/1994* -2.16% -2.32%
4/30/1995 5.98% 6.51%
4/30/1996 7.57% 7.84%
4/30/1997 6.30% 6.41%
4/30/1998 9.26% 8.94%
4/30/1999 5.61% 6.37%
4/30/2000 0.15% 1.55%
* From 3/1/94 (the fund's inception date) to 4/30/94.
www.americancentury.com 9
Intermediate-Term Bond--Q&A
--------------------------------------------------------------------------------
[photo of Bud Hoops] {photo of Jeff Houston]
An interview with Bud Hoops and Jeff Houston, portfolio managers on the
Intermediate-Term Bond fund investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 2000?
Intermediate-Term Bond weathered a difficult period of rising interest
rates and underperformance by bonds outside of the Treasury market as yield
spreads--the difference between the yields of non-Treasury securities and
Treasurys--widened substantially (see page 3). The fund returned 0.73% in that
unfavorable environment, close to the 0.90% average return of the 297
"Intermediate Investment-Grade Debt Funds" tracked by Lipper Inc.*
Intermediate-Term Bond's 30-day SEC yield was 6.78% at the end of April,
which compared favorably with the 6.43% average yield of the Lipper group.
TREASURYS OUTPERFORMED CORPORATE BONDS AND OTHER FIXED-INCOME SECTORS BY A WIDE
MARGIN OVER THE SIX MONTHS. CAN YOU PUT THAT DISPARITY INTO PERSPECTIVE?
Let's use an A-rated 10-year bond issued by Ford to illustrate how sharply
corporate yields increased. Back in 1997, the yield difference between that
10-year corporate security and a like-maturity Treasury bond was around 0.7%. By
the start of 2000, the yield difference between the two bonds was around 1.0%.
During the first four months of this year, the yield on the same 10-year
corporate rose from 7.0% to around 8.3%, while the like-maturity Treasury yield
was only at 6.5%, up from 6.0%. So the yield difference by the end of April had
grown to 1.8%, increasing the spread by 0.8% in a very short period of time.
Since the fund was more heavily invested in corporates compared with many of its
Lipper peers, the result was a slightly lower relative return.
SPEAKING OF CORPORATES, WHAT WERE SOME OF THE FACTORS LEADING TO THEIR
UNDERPERFORMANCE?
Concerns over potential Y2K computer problems caused liquidity to dry up in
late August through October of 1999. Additionally, investors were worried that
the Federal Reserve's bent toward raising interest rates to slow economic growth
and head off inflation would hurt the financial health of corporate issuers.
Corporate bonds have struggled in that environment.
WERE THERE ANY CREDIT ISSUES THAT CROPPED UP DURING THE SIX MONTHS?
Yes. With liquidity drying up in the corporate sector, and bond dealers not
building up their inventories because of weak demand, some companies met with
financial difficulties. Thanks largely to our careful screening and selection
process, which seeks to avoid such issuers, we were able to sidestep many credit
pitfalls.
In spite of our prudent research, we held one issue that dampened
performance because of credit downgrades: Conseco. The Conseco bonds that were
in the portfolio represented around 1.5% of assets and were attractive buys when
* All fund returns and yields referenced in this interview are for Investor
Class shares.
[left margin]
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NUMBER OF SECURITIES 80 82
WEIGHTED AVERAGE
MATURITY 8.2 YRS 7.7 YRS
AVERAGE DURATION 4.8 YRS 4.7 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.75%* 0.75%
* Annualized.
YIELDS AS OF APRIL 30, 2000
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 6.78% 6.52%
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
AAA 56% 56%
AA 4% 5%
A 17% 14%
BBB 17% 17%
BB 6% 8%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
34 for more information.
Investment terms are defined in the Glossary on pages 35-36.
10 1-800-345-2021
Intermediate-Term Bond--Q&A
--------------------------------------------------------------------------------
(Continued)
first added. The bonds mature in June 2001, so they are fairly short-term
securities. From the credit side, the company received two rating upgrades in
the second half of 1999 and seemed poised for yet another. So from maturity and
credit standpoints, the bonds looked good.
Unfortunately, Conseco's credit prospects changed dramatically in late
March and early April, and that spelled bad news for the company's bonds. As a
result, we have been reducing the portfolio's Conseco exposure.
LET'S TALK ABOUT THE FUND'S INTEREST RATE SENSITIVITY. HOW WAS THAT MANAGED OVER
THE SIX MONTHS?
We kept Intermediate-Term Bond's duration--a measure of sensitivity to
changes in interest rates--fairly neutral relative to that of its Lipper group.
We employed this approach because we thought that robust economic growth and
tight labor markets might encourage the Federal Reserve to keep raising rates.
HOW DID YOU ACCOMPLISH THAT DURATION STRATEGY?
We used a bit of a barbell: we balanced heavier weightings in short- and
long-term bonds against fairly light holdings of securities in the middle. Along
those lines, we decreased the portfolio's corporate exposure slightly and kept
around the four- to five-year maturity range there, while increasing our
long-term Treasury position with 15-year or greater maturities.
By adding those long Treasurys, we were able to better take advantage of
the effects of the Treasury buy-backs. We also increased the portfolio's
mortgage-backed holdings by adding some AAA-rated Fannie Mae securities, which
looked attractive compared with corporates and helped to better diversify the
portfolio.
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
We think there's a good chance that rates will continue to head higher, at
least for the near term. Economic growth has remained robust, labor markets have
tightened, and inflation has recently emerged, with consumer prices in 2000
rising noticeably from 1998 and even 1999 levels. An impressive performance by
the U.S. stock market in recent years has been a strong driver of our record
economic expansion. Consumers have seen the value of their investments increase
substantially and therefore have spent money more freely.
Consequently, the Fed has actively raised interest rates over the past
year, including a 50-basis-point increase in mid-May. That move sent a strong
signal to the financial markets, alerting investors that the Fed wants to see a
more manageable pace of economic growth and isn't afraid to raise rates
aggressively.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO?
Spreads have widened considerably over the last four months, so there may
finally be some light at the end of the tunnel for non-Treasurys. Along those
lines, we have swapped some of our low-quality corporate bonds for high-quality
ones, which should be the first part of the corporate debt market to benefit if
sentiment turns favorable. Government agency and related bonds also look
appealing--we think the market has overreacted to congressional discussions
regarding the implicit backing of government-sponsored entities. From a duration
standpoint, we will probably stay cautious until we see signs suggesting that
economic growth is slowing.
[right margin]
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF APRIL 30, 2000
CORPORATE BONDS 42%
U.S. TREASURY SECURITIES 22%
MORTGAGE-BACKED SECURITIES 22%
ASSET-BACKED SECURITIES 6%
OTHER 8%
AS OF OCTOBER 31, 1999
CORPORATE BONDS 43%
U.S. TREASURY SECURITIES 24%
MORTGAGE-BACKED SECURITIES 16%
ASSET-BACKED SECURITIES 7%
OTHER 10%
Investment terms are defined in the Glossary on pages 35-36.
www.americancentury.com 11
Intermediate-Term Bond--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 21.8%
$2,200 U.S. Treasury Notes, 4.875%,
3/31/01(1) $ 2,168
300 U.S. Treasury Notes, 7.875%,
11/15/04 315
504 U.S. Treasury Inflation Indexed
Notes, 4.25%, 1/15/10 515
100 U.S. Treasury Notes, 6.50%,
2/15/10 102
500 U.S. Treasury Bonds, 9.25%,
2/15/16 644
600 U.S. Treasury Bonds, 9.125%,
5/15/18 780
650 U.S. Treasury Bonds, 8.50%,
2/15/20 811
650 U.S. Treasury Bonds, 7.50%,
11/15/24 753
300 U.S. Treasury Bonds, 6.50%,
11/15/26 312
300 U.S. Treasury Bonds, 5.25%,
11/15/28 264
250 U.S. Treasury Bonds, 6.125%,
8/15/29 250
-------
TOTAL U.S. TREASURY SECURITIES 6,914
-------
(Cost $7,048)
U.S. GOVERNMENT AGENCY SECURITIES -- 0.8%
250 FNMA, Series B, 7.25%,
1/15/10 249
-------
(Cost $253)
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(2) -- 1.7%
525 FHLB Discount Notes, 5.88%,
5/1/00 525
-------
(Cost $525)
MORTGAGE-BACKED SECURITIES(3) -- 20.0%
393 FHLMC Pool #E00279, 6.50%,
2/1/09 379
242 FHLMC Pool #C00578, 6.50%,
1/1/28 227
178 FHLMC Pool #G00907, 7.00%,
2/1/28 171
532 FHLMC Pool #C30060, 7.50%,
8/1/29 521
289 FNMA Pool #427913, 6.00%,
5/1/13 272
185 FNMA Pool #413812, 6.50%,
1/1/28 173
260 FNMA Pool #411821, 7.00%,
1/1/28 249
322 FNMA Pool #431837, 7.00%,
6/1/28 308
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$ 282 FNMA Pool #450619, 6.00%,
12/1/28 $ 256
287 FNMA Pool #454947, 6.00%,
12/1/28 260
281 FNMA Pool #252211, 6.00%,
1/1/29 255
496 FNMA Pool #492315, 6.50%,
4/1/29 463
325 FNMA Pool #506995, 7.50%,
7/1/29 318
500 FNMA REMIC, Series 1997-58,
Class PB PAC, 6.50%,
6/18/24 467
298 GNMA Pool #002202, 7.00%,
4/20/26 285
226 GNMA Pool #780412, 7.50%,
8/15/26 222
227 GNMA Pool #467626, 7.00%,
2/15/28 219
150 GNMA Pool #458862, 7.50%,
2/15/28 147
370 GNMA Pool #436277, 6.50%,
3/15/28 348
314 GNMA Pool #469811, 7.00%,
12/15/28 302
494 GNMA Pool #509502, 8.00%,
12/15/29 496
-------
TOTAL MORTGAGE-BACKED SECURITIES 6,338
-------
(Cost $6,606)
ASSET-BACKED SECURITIES(3) -- 5.9%
65 First Merchants Auto Receivables
Corp., Series 1996 B, Class A2,
6.80%, 5/15/01 65
449 First Union-Lehman Brothers
Commercial Mortgage, Series
1998 C2, Class A1 SEQ,
6.28%, 6/18/07 428
600 GMAC Commercial Mortgage
Securities Inc., Series 1999 C1,
Class A2 SEQ, 6.18%,
5/15/33 541
319 Nationslink Funding Corp., Series
1998-2, Class A1 SEQ, 6.00%,
11/20/07 300
142 United Companies Financial
Corp., Home Equity Loan,
Series 1996 D1, Class A4,
6.78%, 2/15/16 142
400 United Companies Financial
Corp., Home Equity Loan,
Series 1996 D1, Class A5,
6.92%, 10/15/18 397
-------
TOTAL ASSET-BACKED SECURITIES 1,873
-------
(Cost $1,985)
12 1-800-345-2021 See Notes to Financial Statements
Intermediate-Term Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
CORPORATE BONDS -- 42.1%
AIRLINES -- 0.8%
$ 300 Delta Air Lines Inc., 8.30%,
12/15/29 (Acquired
12/17/99, Cost $293)(4) $ 270
-------
BANKS -- 5.7%
350 Bank of America Corp., 7.80%,
2/15/10 350
500 BankAmerica Corp., 7.75%,
7/15/02 502
300 Capital One Bank, 5.95%,
2/15/01 297
250 Corestates Capital Corp., 5.875%,
10/15/03 235
500 Fleet Boston Financial Corp.,
5.75%, 1/15/09 434
-------
1,818
-------
DEFENSE/AEROSPACE -- 1.3%
400 Raytheon Co., 8.20%, 3/1/06
(Acquired 3/3/00, Cost
$403)(4) 400
-------
DEPARTMENT STORES -- 0.6%
200 Sears, Roebuck & Co., Inc.
MTN, 8.29%, 6/10/02 202
-------
ELECTRICAL EQUIPMENT -- 0.9%
300 Yorkshire Power Finance,
Series B, 6.15%, 2/25/03 286
-------
ELECTRICAL UTILITIES -- 2.5%
350 Alliant Energy Resources,
7.375%, 11/9/09 (Acquired
11/4/99, Cost $349)(4) 341
450 Cilcorp, Inc., 8.70%, 10/15/09 455
-------
796
-------
ENERGY EQUIPMENT & SERVICES -- 1.4%
500 Petroleum Geo-Services ASA,
6.625%, 3/30/08 457
-------
ENERGY RESERVES & PRODUCTION -- 1.0%
350 EOG Resources Inc., 6.70%,
11/15/06 329
-------
FINANCIAL SERVICES -- 1.7%
250 Ford Motor Credit Co., 6.125%,
4/28/03 240
300 Franchise Finance Corp., 7.00%,
11/30/00 299
-------
539
-------
GAS & WATER UTILITIES -- 1.9%
600 K N Energy, Inc., 6.45%,
11/30/01 589
-------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
GOLD -- 1.2%
$ 400 Barrick Gold Corp., 7.50%,
5/1/07 $ 383
-------
GROCERY STORES -- 2.2%
700 Safeway Inc., 5.75%, 11/15/00 695
-------
HEAVY ELECTRICAL EQUIPMENT -- 0.9%
300 Anixter International Inc., 8.00%,
9/15/03 295
-------
INFORMATION SERVICES -- 0.9%
290 KPNQwest B.V., 8.125%, 6/1/09 277
-------
LIFE & HEALTH INSURANCE -- 2.0%
300 Aetna Services, Inc., 6.75%,
8/15/01 297
500 Conseco Inc., 6.40%, 6/15/01 328
-------
625
-------
MEDIA -- 4.9%
250 British Sky Broadcasting,
6.875%, 2/23/09 219
250 CSC Holdings Inc., 7.625%,
7/15/18 217
350 CSC Holdings Inc., Series B,
8.125%, 7/15/09 332
250 Liberty Media Group, 8.25%,
2/1/30 (Acquired 1/26/00,
Cost $248)(4) 238
500 TCI Communications, Inc.,
8.75%, 8/1/15 532
-------
1,538
-------
MOTOR VEHICLES & PARTS -- 1.5%
500 Lear Corp., Series B, 7.96%,
5/15/05 465
-------
MULTI-INDUSTRY -- 2.3%
250 Hutchison Whampoa Financial,
Series B, 7.45%, 8/1/17
(Acquired 11/19/99, Cost
$228)(4) 229
500 Tyco International Group SA,
6.875%, 9/5/02 (Acquired
12/1/99, Cost $494)(4) 491
-------
720
-------
OIL SERVICES -- 0.8%
250 Gulf Canada Resources Ltd.,
8.35%, 8/1/06 246
-------
REAL ESTATE -- 1.5%
200 Chelsea GCA Realty Partners,
7.25%, 10/21/07 181
300 Spieker Properties, Inc., 6.80%,
12/15/01 295
-------
476
-------
See Notes to Financial Statements www.americancentury.com 13
Intermediate-Term Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 2.0%
$ 250 Merrill Lynch & Co., Inc.,
6.50%, 4/1/01 $ 249
400 Morgan Stanley Dean Witter
& Co., 7.125%, 1/15/03 396
-------
645
-------
TELEPHONE -- 2.2%
500 GTE North Inc., Series H, 5.65%,
11/15/08 433
300 MCI WorldCom, Inc., 6.95%,
8/15/28 266
-------
699
-------
WIRELESS TELECOMMUNICATIONS -- 1.9%
600 Vodafone AirTouch PLC, 7.125%,
7/15/01 597
-------
TOTAL CORPORATE BONDS 13,347
-------
(Cost $13,991)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS & AGENCIES -- 1.1%
$ 350 Province of Quebec, 7.50%,
9/15/29 $ 342
-------
(Cost $348)
FORWARD COMMITMENTS -- 1.6%
500 FNMA Purchase, 8.00%,
settlement 5/15/00 499
-------
(Cost $502)
TEMPORARY CASH INVESTMENTS -- 5.0% Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.62%, dated 4/28/00,
due 5/1/00 (Delivery value $1,574) 1,573
-------
(Cost $1,573)
TOTAL INVESTMENT SECURITIES -- 100.0% $31,660
=======
(Cost $32,831)
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
MTN = Medium Term Note
(1) Security, or a portion thereof, has been segregated at the custodian bank
for Forward Commitments.
(2) Rate indicated is the yield to maturity at purchase.
(3) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(4) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, 2000 was $1,969 which
represented 6.2% of net assets.
14 1-800-345-2021 See Notes to Financial Statements
Bond--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS (INCEPTION 3/2/87) ADVISOR CLASS (INCEPTION 8/8/97)
LEHMAN AGGREGATE A-RATED CORPORATE DEBT FUNDS(2) LEHMAN AGGREGATE
BOND BOND INDEX AVERAGE RETURN FUND'S RANKING BOND BOND INDEX
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 0.47% 1.42% 0.73% -- 0.34% 1.42%
1 YEAR -0.62% 1.26% -0.66% 91 OUT OF 170 -0.87% 1.26%
====================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 4.36% 6.07% 4.86% 103 OUT OF 136 -- --
5 YEARS 5.72% 6.79% 5.80% 62 OUT OF 111 -- --
10 YEARS 7.51% 8.09% 7.70% 21 OUT OF 41 -- --
LIFE OF FUND 6.74% 7.71% 7.32%(3) 24 OUT OF 27(3) 3.21% 4.81%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 3/31/87, the date nearest the class's inception for which data are
available.
(4) Since 7/31/97, the date nearest the class's inception for which data are
available.
See pages 33-35 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER 10 YEARS
Value on 4/30/00
Bond $20,625
Lehman Aggregate
Bond Index $21,759
Lehman Aggregate
Bond Bond Index
DATE VALUE VALUE
4/30/1990 $10,000 $10,000
4/30/1991 $11,559 $11,519
4/30/1992 $12,951 $12,786
4/30/1993 $14,614 $14,482
4/30/1994 $14,652 $14,605
4/30/1995 $15,622 $15,672
4/30/1996 $17,015 $17,026
4/30/1997 $18,146 $18,232
4/30/1998 $19,983 $20,221
4/30/1999 $20,756 $21,489
4/30/2000 $20,625 $21,759
$10,000 investmemt made 4/30/90
The graph at left shows the growth of a $10,000 investment in the fund over 10
years, while the graph below shows the fund's year-by-year performance. The
Lehman Aggregate Bond Index is provided for comparison in each graph. Bond's
total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the index do
not. These graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). Past performance does not guarantee future results. Investment return
and principal value will fluctuate, and redemption value may be more or less
than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED APRIL 30)
Lehman Aggregate
Bond Bond Index
DATE RETURN RETURN
4/30/1991 15.59% 15.19%
4/30/1992 12.04% 11.00%
4/30/1993 12.84% 13.26%
4/30/1994 0.26% 0.85%
4/30/1995 6.62% 7.31%
4/30/1996 8.92% 8.64%
4/30/1997 6.65% 7.08%
4/30/1998 10.12% 10.91%
4/30/1999 3.87% 6.27%
4/30/2000 -0.62% 1.26%
www.americancentury.com 15
Bond--Q&A
--------------------------------------------------------------------------------
An interview with Bud Hoops and Jeff Houston (pictured on page 10),
portfolio managers on the Bond fund investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 2000?
American Century Bond weathered a difficult period of rising interest rates
and underperformance by bonds outside of the Treasury market. Yield spreads--the
difference between the yields of non-Treasury securities and Treasurys--widened
substantially during the period (see page 3). The fund returned 0.47% in that
environment, compared with the 0.73% average return of the 181 "A-Rated
Corporate Debt Funds" tracked by Lipper Inc.*
The fund continued to deliver more current income than its average Lipper
peer. American Century Bond's yield was 6.86% at the end of April, compared with
only a 6.35% average yield for the Lipper group.
TREASURYS OUTPERFORMED CORPORATE BONDS AND OTHER FIXED-INCOME SECTORS BY A WIDE
MARGIN OVER THE SIX MONTHS. CAN YOU PUT THAT DISPARITY INTO PERSPECTIVE?
Let's use an A-rated 10-year bond issued by Ford to illustrate how sharply
corporate yields increased. Back in 1997, the yield difference between that
10-year corporate security and a like-maturity Treasury bond was around 0.7%. By
the start of 2000, the yield difference between the two bonds was around 1.0%.
During the first four months of this year, the yield on the same 10-year
corporate rose from 7.0% to around 8.3%, while the like-maturity Treasury yield
was only at 6.5%, up from 6.0%. So the yield difference by the end of April had
grown to 1.8%, increasing the spread by 0.8% in a very short period of time.
WHAT WERE SOME OF THE FACTORS LEADING TO CORPORATES' UNDERPERFORMANCE?
Concerns over potential Y2K computer problems caused liquidity to dry up in
late August through October of 1999. Additionally, investors were worried that
the Federal Reserve's bent toward raising interest rates to slow economic growth
and head off inflation would hurt the financial health of corporate issuers.
Corporate bonds have struggled in that environment.
WERE THERE ANY CREDIT ISSUES THAT CROPPED UP DURING THE SIX MONTHS?
Yes. With liquidity drying up in the corporate sector, and bond dealers not
building up their inventories because of weak demand, some companies met with
financial difficulties. Thanks largely to our careful screening and selection
process, which seeks to avoid such issuers, we were able to sidestep many credit
pitfalls.
In spite of our prudent research, we held one issue that dampened
performance because of credit downgrades: Conseco. The Conseco bonds that were
in the portfolio represented around 1.5% of assets and were attractive buys when
first added. The bonds mature in June 2001, so they are fairly short-term
securities. From the credit side, the company received two rating upgrades in
the second half of 1999 and seemed poised for yet another. So from maturity and
credit standpoints, the bonds looked good.
Unfortunately, Conseco's credit prospects changed dramatically in late
March and early April, and that spelled bad news for the company's bonds. As a
result, we have been reducing the portfolio's Conseco exposure.
* All fund returns and yields referenced in this interview are for Investor
Class shares.
[left margin]
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NUMBER OF SECURITIES 62 61
WEIGHTED AVERAGE
MATURITY 8.8 YRS 9.7 YRS
AVERAGE DURATION 5.0 YRS 5.3 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.80%* 0.80%
* Annualized.
YIELDS AS OF APRIL 30, 2000
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 6.86% 6.61%
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
AAA 50% 43%
AA 4% 5%
A 19% 22%
BBB 19% 20%
BB 8% 10%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 34
for more information.
Investment terms are defined in the Glossary on pages 35-36.
16 1-800-345-2021
Bond--Q&A
--------------------------------------------------------------------------------
(Continued)
LET'S TALK ABOUT THE FUND'S INTEREST RATE SENSITIVITY. HOW WAS THAT MANAGED OVER
THE SIX MONTHS?
We kept American Century Bond's duration--a measure of sensitivity to
changes in interest rates--short, relative to that of its Lipper group. So the
fund's price probably fell less than its average peer as interest rates rose. We
employed this approach because we thought that robust economic growth and tight
labor markets would encourage the Federal Reserve to keep raising rates.
To achieve that positioning, we used a bit of a barbell, where we balanced
heavier weightings in short- and long-term bonds against a fairly light
weighting of securities in the middle.
WHAT OTHER CHANGES DID YOU MAKE TO THE PORTFOLIO'S HOLDINGS?
The main change was to increase the fund's Treasury exposure, while
decreasing its corporate bond holdings (see the charts at right). We used the
proceeds from those corporate bonds to add holdings of long-term Treasurys,
primarily ones with 15-year or greater maturities.
By adding those long Treasurys, we were able to better take advantage of
the effects of the Treasury Department's buy-backs. We also increased the
portfolio's mortgage-backed holdings a bit by adding some Fannie Mae securities.
WHAT IMPACT DID THOSE ADJUSTMENTS HAVE ON THE FUND'S OVERALL CREDIT QUALITY?
The Treasury and mortgage-backed positions had a positive impact on
American Century Bond's overall credit quality because they were all AAA-rated
securities. In addition, we swapped some of our lower-grade corporate names for
higher-grade ones, providing an additional credit boost.
The net result of those adjustments was that the portfolio's exposure to
securities rated A and lower decreased, while AAA holdings rose (see the table
on page 16).
WHAT'S YOUR OUTLOOK FOR INTEREST RATES?
We think there's a good chance that rates will continue to head higher, at
least for the near term. Economic growth has remained robust, labor markets have
tightened, and inflation has recently emerged, with consumer prices in 2000
rising noticeably from 1998 and even 1999 levels.
Consequently, the Fed has actively raised interest rates over the past
year, including a 50-basis-point increase in mid-May. That latest move sent a
strong signal to the financial markets, alerting investors that the Fed wants to
see a more-manageable pace of economic growth and isn't afraid to raise rates
aggressively.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO?
Spreads have widened since late last year, but particularly over the last
four months. Historically speaking, that's a fairly protracted period for
non-Treasury bonds to underperform, so there may be some light at the end of the
tunnel. We continue to like the outlook for high-quality corporate bonds, which
should be the first part of the corporate market to benefit if market sentiment
changes. Government agency and related bonds also look appealing--we think the
market has overreacted to congressional discussions regarding the implicit
backing of government-sponsored entities.
From a duration standpoint, we will probably stay cautious until we see
signs suggesting that economic growth is slowing.
[right margin]
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF APRIL 30, 2000
CORPORATE BONDS 47%
MORTGAGE-BACKED SECURITIES 21%
U.S. TREASURY SECURITIES 16%
ASSET-BACKED SECURITIES 6%
OTHER 10%
AS OF OCTOBER 31, 1999
CORPORATE BONDS 58%
MORTGAGE-BACKED SECURITIES 20%
U.S. TREASURY SECURITIES 10%
ASSET-BACKED SECURITIES 8%
OTHER 4%
Investment terms are defined in the Glossary on pages 35-36.
www.americancentury.com 17
Bond--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 16.0%
$1,000 U.S. Treasury Notes, 4.625%,
11/30/00 $ 990
5,000 U.S. Treasury Notes, 5.625%,
5/15/01(1) 4,960
2,000 U.S. Treasury Inflation Indexed
Notes, 4.25%, 1/15/10 2,059
500 U.S. Treasury Notes, 6.50%,
2/15/10 510
1,000 U.S. Treasury Bonds, 9.25%,
2/15/16 1,289
4,000 U.S. Treasury Bonds, 8.50%,
2/15/20 4,992
1,000 U.S. Treasury Bonds, 7.50%,
11/15/24 1,159
1,000 U.S. Treasury Bonds, 6.125%,
8/15/29 1,002
1,000 U.S. Treasury Bonds, 6.25%,
5/15/30 1,040
--------
TOTAL U.S. TREASURY SECURITIES 18,001
--------
(Cost $17,891)
U.S. GOVERNMENT AGENCY SECURITIES -- 0.4%
500 FNMA, Series B, 7.25%,
1/15/10 499
--------
(Cost $509)
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(2) -- 2.5%
2,826 FHLB Discount Notes, 5.88%,
5/1/00 2,826
--------
(Cost $2,826)
MORTGAGE-BACKED SECURITIES(3) -- 19.5%
3,691 FHLMC Pool #E68681, 6.00%,
1/1/13 3,464
1,184 FHLMC Pool #C30257, 7.00%,
8/1/29 1,133
1,772 FHLMC Pool #C30060, 7.50%,
8/1/29 1,737
2,835 FHLMC Pool #C00731, 6.50%,
3/1/29 2,652
1,447 FNMA Pool #453124, 6.00%,
12/1/13 1,357
2,773 FNMA Pool #484698, 6.00%,
2/1/14 2,601
2,913 FNMA Pool #250452, 6.50%,
1/1/26 2,728
2,813 FNMA Pool #252211, 6.00%,
1/1/29 2,552
1,490 FNMA Pool #503915, 7.00%,
7/1/29 1,426
445 FNMA Pool #504748, 7.00%,
7/1/29 426
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
$1,392 FNMA Pool #506995, 7.50%,
7/1/29 $ 1,364
382 FNMA REMIC, Series 1989-35,
Class G, 9.50%, 7/25/19
396
--------
TOTAL MORTGAGE-BACKED SECURITIES 21,836
--------
(Cost $22,907)
ASSET-BACKED SECURITIES(3) -- 6.4%
1,500 BMW Vehicle Owner Trust, Series
1999 A, Class A3 SEQ, 6.41%,
4/25/03 1,487
2,000 Comed Transitional Funding Trust,
Series 1998-1, Class A6 SEQ,
5.63%, 6/25/09 1,820
2,400 GMAC Commercial Mortgage
Securities Inc., Series 1999 C1,
Class A2 SEQ, 6.18%,
5/15/33 2,163
1,824 Nationslink Funding Corp., Series
1998-2, Class A1 SEQ, 6.00%,
11/20/07 1,716
--------
TOTAL ASSET-BACKED SECURITIES 7,186
--------
(Cost $7,763)
CORPORATE BONDS -- 47.1%
AIRLINES -- 0.8%
1,000 Delta Air Lines Inc., 8.30%,
12/15/29 (Acquired
12/17/99, Cost $978)(4) 899
--------
BANKS -- 6.0%
2,000 Bank of America Corp., 7.80%,
2/15/10 1,999
2,000 Corestates Capital Corp., 5.875%,
10/15/03 1,877
3,000 Mellon Financial Co., 6.00%,
3/1/04 2,848
--------
6,724
--------
CHEMICALS -- 1.3%
1,500 ARCO Chemical Co., 10.25%,
11/1/10 1,493
--------
DEFENSE/AEROSPACE -- 1.3%
1,500 Raytheon Co., 8.20%, 3/1/06
(Acquired 3/3/00,
Cost $1,512)(4) 1,498
--------
ELECTRICAL UTILITIES -- 4.3%
1,500 Alliant Energy Resources,
7.375%, 11/9/09 (Acquired
11/4/99, Cost $1,498)(4) 1,463
1,500 Cilcorp, Inc., 8.70%, 10/15/09 1,517
2,000 Southern Investments UK, 6.80%,
12/1/06 1,884
--------
4,864
--------
18 1-800-345-2021 See Notes to Finanncial Statements
Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.6%
$2,000 Petroleum Geo-Services ASA,
6.625%, 3/30/08 $ 1,830
--------
ENERGY RESERVES & PRODUCTION -- 1.3%
1,600 EOG Resources Inc., 6.70%,
11/15/06 1,503
--------
FINANCIAL SERVICES -- 2.6%
2,000 Comdisco, Inc., 6.375%,
11/30/01 1,951
1,000 Ford Motor Credit Co., 7.50%,
3/15/05 988
--------
2,939
--------
GOLD -- 1.3%
1,500 Barrick Gold Corp., 7.50%,
5/1/07 1,437
--------
GROCERY STORES -- 0.9%
1,000 Safeway Inc., 5.75%, 11/15/00 993
--------
INFORMATION SERVICES -- 0.9%
1,000 KPNQwest B.V., 8.125%, 6/1/09 955
--------
LIFE & HEALTH INSURANCE -- 4.5%
1,500 Conseco Inc., 6.40%, 6/15/01 982
1,000 Delphi Financial Group, Inc.,
9.31%, 3/25/27 899
3,000 Lincoln National Corp., 9.125%,
10/1/04 3,153
--------
5,034
--------
MEDIA -- 5.8%
1,000 British Sky Broadcasting, 6.875%,
2/23/09 877
2,000 CSC Holdings Inc., 7.25%,
7/15/08 1,810
1,250 Liberty Media Group, 8.25%,
2/1/30 (Acquired 1/26/00,
Cost $1,240)(4) 1,189
2,500 TCI Communications, Inc., 8.75%,
8/1/15 2,658
--------
6,534
--------
MOTOR VEHICLES & PARTS -- 1.7%
2,000 Lear Corp., Series B, 7.96%,
5/15/05 1,859
--------
MULTI-INDUSTRY -- 2.6%
1,000 Hutchison Whampoa Financial,
Series B, 7.45%, 8/1/17
(Acquired 11/19/99, Cost
$914)(4) 914
2,000 Tyco International Group SA,
6.875%, 9/5/02 (Acquired
12/1/99-1/11/00, Cost
$1,972)(4) 1,965
--------
2,879
--------
Principal Amount ($ in Thousands) Value
--------------------------------------------------------------------------------
NATURAL GAS -- 2.5%
$3,000 Columbia Energy Group, 7.42%,
11/28/15 $ 2,801
--------
OIL SERVICES -- 0.6%
650 Gulf Canada Resources Ltd.,
8.35%, 8/1/06 640
--------
REAL ESTATE -- 3.5%
1,000 Chelsea GCA Realty Partners,
7.25%, 10/21/07 905
3,000 Spieker Properties, Inc. MTN,
7.58%, 12/17/01 2,988
--------
3,893
--------
SECURITIES & ASSET MANAGEMENT -- 0.9%
1,000 Morgan Stanley Dean Witter
& Co., 7.125%, 1/15/03 989
--------
TELEPHONE -- 2.7%
2,000 GTE North Inc., Series H, 5.65%,
11/15/08 1,733
1,500 MCI WorldCom, Inc., 6.95%,
8/15/28 1,329
--------
3,062
--------
TOTAL CORPORATE BONDS 52,826
--------
(Cost $55,781)
SOVEREIGN GOVERNMENTS & AGENCIES -- 1.3%
1,500 Province of Quebec, 7.50%,
9/15/29 1,466
--------
(Cost $1,491)
FORWARD COMMITMENTS -- 1.8%
2,000 FNMA Purchase, 8.00%,
settlement 5/15/00 1,997
--------
(Cost $2,009)
TEMPORARY CASH INVESTMENTS -- 5.0% Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.62%, dated 4/28/00,
due 5/1/00 (Delivery value $5,569) 5,566
--------
(Cost $5,566)
TOTAL INVESTMENT SECURITIES -- 100.0% $112,203
========
(Cost $116,743)
See Notes to Financial Statements www.americancentury.com 19
Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
MTN = Medium Term Note
(1) Security, or a portion thereof, has been segregated at the custodian bank
for Forward Commitments.
(2) Rate indicated is the yield to maturity at purchase.
(3) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(4) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, 2000 was $7,928 which
represented 7.2% of net assets.
20 1-800-345-2021 See Notes to Finanncial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
APRIL 30, 2000 (UNAUDITED)
INTERMEDIATE-
LIMITED-TERM TERM BOND
ASSETS (In Thousands Except Per-Share Amounts)
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $13,917,
$32,831, and $116,743,
respectively) (Note 3) .................. $13,590 $31,660 $112,203
Cash ...................................... -- 18 --
Interest receivable ....................... 222 462 1,717
------------- ------------- ------------
13,812 32,140 113,920
------------- ------------- ------------
LIABILITIES
Disbursements in excess
of demand deposit cash .................. 1 -- 2,054
Payable for investments purchased ......... -- 504 2,015
Accrued management fees (Note 2) .......... 8 19 74
Distribution fees payable (Note 2) ........ 1 1 1
Service fees payable (Note 2) ............. 1 1 1
Dividends payable ......................... 8 14 44
------------- ------------- ------------
19 539 4,189
------------- ------------- ------------
Net Assets ................................ $13,793 $31,601 $109,731
============= ============= ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ... $14,366 $33,502 $117,752
Accumulated net realized loss
on investment transactions .............. (246) (730) (3,481)
Net unrealized depreciation
on investments (Note 3) ................. (327) (1,171) (4,540)
------------- ------------- ------------
$13,793 $31,601 $109,731
============= ============= ============
Investor Class, $0.01 Par Value
($ and shares in full)
Net assets ................................ $10,352,077 $28,378,749 $106,325,863
Shares outstanding ........................ 1,082,650 3,008,463 11,968,129
Net asset value per share ................. $9.56 $9.43 $8.88
Advisor Class, $0.01 Par Value
($ and shares in full)
Net assets ................................ $3,440,556 $3,222,124 $3,404,730
Shares outstanding ........................ 359,863 341,582 383,417
Net asset value per share ................. $9.56 $9.43 $8.88
</TABLE>
See Notes to Financial Statements www.americancentury.com 21
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INTERMEDIATE-
LIMITED-TERM TERM BOND
INVESTMENT INCOME (In Thousands)
Income:
Interest ............................... $500 $1,106 $4,118
-------- --------- --------
Expenses (Note 2):
Management fees ........................ 50 117 460
Distribution fees -- Advisor Class ..... 5 5 4
Service fees -- Advisor Class .......... 5 5 4
-------- --------- --------
60 127 468
-------- --------- --------
Net investment income .................. 440 979 3,650
-------- --------- --------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (NOTE 3)
Net realized loss on investments ....... (159) (452) (2,239)
Change in net unrealized
depreciation on investments .......... (114) (311) (918)
-------- --------- --------
Net realized and unrealized
loss on investments .................. (273) (763) (3,157)
-------- --------- --------
Net Increase in Net Assets
Resulting from Operations ............ $167 $216 $493
======== ========= ========
22 1-800-345-2021 See Notes to Finanncial Statements
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
Increase (Decrease) in Net Assets
LIMITED-TERM INTERMEDIATE-TERM BOND
2000 1999 2000 1999 2000 1999
OPERATIONS (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net investment income ....... $ 440 $ 1,067 $ 979 $ 1,840 $ 3,650 $ 8,002
Net realized loss on
investment transactions ... (159) (87) (452) (271) (2,239) (1,195)
Change in net unrealized
appreciation (depreciation)
on investments ............ (114) (456) (311) (1,458) (918) (8,377)
-------- -------- -------- -------- --------- ---------
Net increase (decrease) in
net assets resulting
from operations ........... 167 524 216 111 493 (1,570)
-------- -------- -------- -------- --------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Investor Class ............ (342) (1,004) (871) (1,605) (3,556) (7,892)
Advisor Class ............. (98) (63) (108) (235) (94) (110)
From net realized gains
on investment transactions:
Investor Class ............ -- (87) -- (178) -- (68)
Advisor Class ............. -- (5) -- (22) -- (1)
-------- -------- -------- -------- --------- ---------
Decrease in net assets
from distributions ........ (440) (1,159) (979) (2,040) (3,650) (8,071)
-------- -------- -------- -------- --------- ---------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase (decrease) in
net assets from capital
share transactions ........ (4,247) (736) (1,826) 6,172 (9,929) (15,191)
-------- -------- -------- -------- --------- ---------
Net increase (decrease)
in net assets ............. (4,520) (1,371) (2,589) 4,243 (13,086) (24,832)
NET ASSETS
Beginning of period ......... 18,313 19,684 34,190 29,947 122,817 147,649
-------- -------- -------- -------- --------- ---------
End of period ............... $ 13,793 $ 18,313 $ 31,601 $ 34,190 $ 109,731 $ 122,817
======== ======== ======== ======== ========= =========
</TABLE>
See Notes to Financial Statements www.americancentury.com 23
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Limited-Term Bond Fund (Limited-Term),
Intermediate-Term Bond Fund (Intermediate-Term), and Bond Fund (Bond) (the
funds) are three of the fourteen series of funds issued by the corporation. The
funds are diversified under the 1940 Act. The funds' investment objective is to
seek income by investing in bonds and other debt obligations. The following
significant accounting policies are in accordance with generally accepted
accounting principles; these policies may require the use of estimates by fund
management.
MULTIPLE CLASS -- The funds are authorized to issue two classes of shares:
the Investor Class and the Advisor Class. The two classes of shares differ
principally in their respective shareholder servicing and distribution expenses
and arrangements. All shares of the fund represent an equal pro rata interest in
the assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes.
SECURITY VALUATIONS -- Portfolio securities are valued through a commercial
pricing service or at the mean of the most recent bid and asked prices. When
valuations are not readily available, securities are valued at fair value as
determined in accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The funds require that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the funds to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the funds under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
treasury or agency obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
At October 31, 1999, Limited-Term, Intermediate-Term and Bond had
accumulated net realized capital loss carryovers for federal income tax purposes
of $87,095, $274,921 and $1,183,191 (expiring in 2007), respectively, which may
be used to offset future taxable gains.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
24 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides each fund with investment advisory and management services
in exchange for a single, unified management fee per class. Expenses excluded
from the agreement are brokerage commissions, taxes, interest, expenses of those
directors who are not considered "interested persons" as defined in the 1940 Act
(including counsel fees) and extraordinary expenses. The fee is computed daily
and paid monthly based on each fund's class average daily closing net assets
during the previous month. The annual management fee for the Investor Class of
Limited-Term, Intermediate-Term and Bond is 0.70%, 0.75% and 0.80%,
respectively. The annual management fee for the Advisor Class of Limited-Term,
Intermediate-Term and Bond is 0.45%, 0.50% and 0.55%, respectively.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the 1940 Act.
The plan provides that the funds will pay ACIM an annual distribution fee equal
to 0.25% and service fee equal to 0.25%. The fees are computed daily and paid
monthly based on the Advisor Class's average daily closing net assets during the
previous month. The distribution fee provides compensation for distribution
expenses incurred by financial intermediaries in connection with distributing
shares of the Advisor Class including, but not limited to, payments to brokers,
dealers, and financial institutions that have entered into sales agreements with
respect to shares of the funds. The service fee provides compensation for
shareholder and administrative services rendered by ACIM, its affiliates or
independent third party providers. Fees incurred under the plan during the six
months ended April 30, 2000 for Limited-Term, Intermediate-Term and Bond were
$9,002, $9,306, and $7,680, respectively.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six
months ended April 30, 2000, were as follows:
LIMITED-TERM INTERMEDIATE-TERM BOND
PURCHASES (In Thousands)
U.S. Treasury & Agency
Obligations ................. $2,236 $6,083 $28,975
Other Debt Obligations ........ 2,093 7,778 34,783
PROCEEDS FROM SALES (In Thousands)
U.S. Treasury & Agency
Obligations ................. $5,425 $6,556 $25,404
Other Debt Obligations ........ 2,182 8,928 49,619
On April 30, 2000, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
LIMITED-TERM INTERMEDIATE-TERM BOND
(In Thousands)
Appreciation .................. $6 $28 $378
Depreciation .................. (333) (1,200) (4,975)
--------- -------- --------
Net ........................... $(327) $(1,172) $(4,597)
========= ======== ========
Federal Tax Cost .............. $13,917 $32,832 $116,800
========= ======== ========
www.americancentury.com 25
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
<TABLE>
<CAPTION>
LIMITED-TERM INTERMEDIATE-TERM BOND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Shares Authorized .......... 150,000 150,000 150,000
======= ======= =======
Six months ended
April 30, 2000
Sold ....................... 459 $4,434 884 $8,467 3,440 $31,118
Issued in reinvestment
of distributions ......... 32 308 81 772 365 3,279
Redeemed ................... (923) (8,926) (1,081) (10,335) (5,139) (46,347)
------- ------------ ------- ------------ ------- --------
Net decrease ............... (432) $(4,184) (116) $(1,096) (1,334) $(11,950)
======= ============ ======= ============ ======= ========
Year ended
October 31, 1999
Sold ....................... 428 $4,235 1,477 $14,664 4,841 $46,081
Issued in reinvestment
of distributions ......... 102 1,004 161 1,599 785 7,384
Redeemed ................... (890) (8,730) (1,132) (11,234) (7,217) (68,105)
------- ------------ ------- ------------ ------- --------
Net increase (decrease) .... (360) $(3,491) 506 $5,029 (1,591) $(14,640)
======= ============ ======= ============ ======= ========
ADVISOR CLASS (In Thousands)
Shares Authorized .......... 50,000 50,000 50,000
======= ======= =======
Six months ended
April 30, 2000
Sold ....................... 111 $1,072 61 $587 317 $2,863
Issued in reinvestment
of distributions ......... 10 92 9 85 7 61
Redeemed ................... (127) (1,227) (147) (1,402) (100) (903)
------- ------------ ------- ------------ ------- --------
Net increase (decrease) .... (6) $(63) (77) $(730) 224 $2,021
======= ============ ======= ============ ======= ========
Year ended
October 31, 1999
Sold ....................... 404 $3,946 699 $6,859 166 $ 1,552
Issued in reinvestment
of distributions ......... 6 59 22 221 11 104
Redeemed ................... (128) (1,250) (610) (5,937) (237) (2,207)
------- ------------ ------- ------------ ------- --------
Net increase (decrease) .... 282 $2,755 111 $1,143 (60) $(551)
======= ============ ======= ============ ======= ========
</TABLE>
--------------------------------------------------------------------------------
5. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
six months ended April 30, 2000.
26 1-800-345-2021
Limited-Term Bond--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .. $9.74 $10.05 $9.98 $9.93 $9.96 $9.68
-------- -------- -------- --------- -------- --------
Income From Investment Operations
Net Investment Income ............... 0.27 0.53 0.55 0.56 0.56 0.56
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ...(0.18) (0.26) 0.08 0.05 (0.03) 0.28
-------- -------- -------- --------- -------- --------
Total From Investment Operations .... 0.09 0.27 0.63 0.61 0.53 0.84
-------- -------- -------- --------- -------- --------
Distributions
From Net Investment Income ..........(0.27) (0.53) (0.55) (0.56) (0.56) (0.56)
From Net Realized Gains on
Investment Transactions ............. -- (0.05) (0.01) -- -- --
-------- -------- -------- --------- -------- --------
Total Distributions .................(0.27) (0.58) (0.56) (0.56) (0.56) (0.56)
-------- -------- -------- --------- -------- --------
Net Asset Value, End of Period ........ $9.56 $9.74 $10.05 $9.98 $9.93 $9.96
======== ======== ======== ========= ======== ========
Total Return(2) ..................... 0.99% 2.75% 6.58% 6.30% 5.48% 8.89%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..............0.70%(3) 0.70% 0.70% 0.69% 0.68% 0.69%
Ratio of Net Investment Income
to Average Net Assets ..............5.73%(3) 5.38% 5.56% 5.63% 5.63% 5.70%
Portfolio Turnover Rate .............. 32% 72% 97% 109% 121% 116%
Net Assets, End of Period
(in thousands) ..................... $10,352 $14,747 $18,838 $15,269 $8,092 $7,193
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements www.americancentury.com 27
Limited-Term Bond--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ....... $9.74 $10.05 $9.97
-------- -------- --------
Income From Investment Operations
Net Investment Income .................... 0.26 0.50 0.51
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ........ (0.18) (0.26) 0.09
-------- -------- --------
Total From Investment Operations ......... 0.08 0.24 0.60
-------- -------- --------
Distributions
From Net Investment Income ............... (0.26) (0.50) (0.51)
From Net Realized Gains on
Investment Transactions .................. -- (0.05) (0.01)
-------- -------- --------
Total Distributions ...................... (0.26) (0.55) (0.52)
-------- -------- --------
Net Asset Value, End of Period ............. $9.56 $9.74 $10.05
======== ======== ========
Total Return(3) .......................... 0.86% 2.49% 6.23%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................... 0.95%(4) 0.95% 0.95%(4)
Ratio of Net Investment Income
to Average Net Assets .................... 5.48%(4) 5.13% 5.26%(4)
Portfolio Turnover Rate .................... 32% 72% 97%
Net Assets, End of Period
(in thousands) ........................... $3,441 $3,566 $845
(1) Six months ended April 30, 2000 (unaudited).
(2) November 12, 1997 (commencement of sale) through October 31, 1998.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
28 1-800-345-2021 See Notes to Finanncial Statements
Intermediate-Term Bond--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $9.65 $10.24 $10.07 $9.91 $10.07 $9.53
-------- -------- -------- --------- -------- -------
Income From Investment Operations
Net Investment Income ................ 0.29 0.55 0.58 0.59 0.58 0.59
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... (0.22) (0.52) 0.17 0.16 (0.06) 0.54
-------- -------- -------- --------- -------- -------
Total From Investment Operations ..... 0.07 0.03 0.75 0.75 0.52 1.13
-------- -------- -------- --------- -------- -------
Distributions
From Net Investment Income ........... (0.29) (0.55) (0.58) (0.59) (0.58) (0.59)
From Net Realized Gains on
Investment Transactions .............. -- (0.07) -- -- (0.10) --
-------- -------- -------- --------- -------- -------
Total Distributions .................. (0.29) (0.62) (0.58) (0.59) (0.68) (0.59)
-------- -------- -------- --------- -------- -------
Net Asset Value, End of Period ......... $9.43 $9.65 $10.24 $10.07 $9.91 $10.07
======== ======== ======== ========= ======== =======
Total Return(2) ...................... 0.73% 7.71% 7.71% 7.87% 5.36% 12.19%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................0.75%(3) 0.75% 0.75% 0.75% 0.74% 0.74%
Ratio of Net Investment Income
to Average Net Assets ................6.10%(3) 5.73% 5.73% 5.99% 5.90% 6.05%
Portfolio Turnover Rate ................ 46% 89% 89% 99% 87% 133%
Net Assets, End of Period
(in thousands) ....................... $28,379 $26,797 $26,797 $18,126 $15,626 $12,827
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements www.americancentury.com 29
Intermediate-Term Bond--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $9.65 $10.24 $10.07 $9.96
-------- -------- -------- --------
Income From Investment Operations
Net Investment Income ..................... 0.28 0.53 0.56 0.12
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ................ (0.22) (0.52) 0.17 0.11
-------- -------- -------- --------
Total From Investment Operations .......... 0.06 0.01 0.73 0.23
-------- -------- -------- --------
Distributions
From Net Investment Income ................ (0.28) (0.53) (0.56) (0.12)
From Net Realized Gains on
Investment Transactions ................... -- (0.07) -- --
-------- -------- -------- --------
Total Distributions ....................... (0.28) (0.60) (0.56) (0.12)
-------- -------- -------- --------
Net Asset Value, End of Period .............. $9.43 $9.65 $10.24 $10.07
======== ======== ======== ========
Total Return(3) ........................... 0.60% 0.05% 7.44% 2.33%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .....................1.00%(4) 1.00% 1.00% 1.00%(4)
Ratio of Net Investment Income
to Average Net Assets .....................5.85%(4) 5.35% 5.48% 6.05%(4)
Portfolio Turnover Rate ..................... 46% 106% 89% 99%
Net Assets, End of Period
(in thousands) ............................ $3,222 $4,040 $3,150 $2,017
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) August 14, 1997 (commencement of sale) through October 31, 1997.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
30 1-800-345-2021 See Notes to Finanncial Statements
Bond--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $9.12 $9.77 $9.73 $9.63 $9.78 $8.91
-------- --------- -------- -------- --------- --------
Income From Investment Operations
Net Investment Income ................ 0.28 0.55 0.57 0.60 0.60 0.61
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... (0.24) (0.65) 0.07 0.19 (0.14) 0.87
-------- --------- -------- -------- --------- --------
Total From Investment Operations ..... 0.04 (0.10) 0.64 0.79 0.46 1.48
-------- --------- -------- -------- --------- --------
Distributions
From Net Investment Income ........... (0.28) (0.55) (0.57) (0.60) (0.60) (0.61)
From Net Realized Gains on
Investment Transactions .............. -- --(2) (0.03) (0.09) (0.01) --
-------- --------- -------- -------- --------- --------
Total Distributions .................. (0.28) (0.55) (0.60) (0.69) (0.61) (0.61)
-------- --------- -------- -------- --------- --------
Net Asset Value, End of Period ......... $8.88 $9.12 $9.77 $9.73 $9.63 $9.78
======== ========= ======== ======== ========= ========
Total Return(3) ...................... 0.47% (1.00)% 6.79% 8.57% 4.91% 17.16%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................0.80%(4) 0.80% 0.80% 0.80% 0.79% 0.78%
Ratio of Net Investment Income
to Average Net Assets ................6.31%(4) 5.82% 5.87% 6.25% 6.18% 6.53%
Portfolio Turnover Rate ................ 58% 107% 66% 52% 100% 105%
Net Assets, End of Period
(in thousands) .......................$106,326 $121,358 $145,496 $126,580 $142,567 $149,223
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 31
Bond--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $9.12 $9.77 $9.73 $9.55
-------- -------- -------- --------
Income From Investment Operations
Net Investment Income ..................... 0.27 0.52 0.55 0.13
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ................ (0.24) (0.65) 0.07 0.18
-------- -------- -------- --------
Total From Investment Operations .......... 0.03 (0.13) 0.62 0.31
-------- -------- -------- --------
Distributions
From Net Investment Income ................ (0.27) (0.52) (0.55) (0.13)
From Net Realized Gains on
Investment Transactions ................... -- --(3) (0.03) --
-------- -------- -------- --------
Total Distributions ....................... (0.27) (0.52) (0.58) (0.13)
-------- -------- -------- --------
Net Asset Value, End of Period .............. $8.88 $9.12 $9.77 $9.73
======== ======== ======== ========
Total Return(4) ........................... 0.34% (1.25)% 6.52% 3.27%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .....................1.05%(5) 1.05% 1.05% 1.05%(5)
Ratio of Net Investment Income
to Average Net Assets .....................6.06%(5) 5.57% 5.62% 5.92%(5)
Portfolio Turnover Rate ..................... 58% 107% 66% 52%
Net Assets, End of Period
(in thousands) ............................ $3,405 $1,459 $2,153 $462
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) August 8, 1997 (commencement of sale) through October 31, 1997.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
32 1-800-345-2021 See Notes to Finanncial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the funds: Investor Class
and Advisor Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
Both classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 33
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each is managed to provide a "pure play" on a specific sector of the
fixed-income market.
To ensure adherence to this principle, the basic structure of each
portfolio is tied to a specific market index. Fund managers attempt to add value
by making modest portfolio adjustments based on their analysis of prevailing
market conditions.
Investment decisions are made by management teams, which meet regularly to
discuss market analysis and investment strategies.
In addition to these principles, each fund has its own investment policies:
LIMITED-TERM BOND seeks to provide interest income by investing in a
diversified portfolio of fixed-income securities. The fund maintains a weighted
average maturity of five years or less.
INTERMEDIATE-TERM BOND seeks to provide interest income by investing in a
diversified portfolio of fixed-income securities. The fund maintains a weighted
average maturity of 3-10 years.
BOND seeks to provide interest income by investing in a diversified
portfolio of fixed-income securities. The fund has no weighted average maturity
limitations, but typically invests in intermediate- and long-term bonds.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The MERRILL LYNCH 1- TO 5-YEAR GOVERNMENT/CORPORATE INDEX is composed of
corporate and Treasury debt with an overall maturity of approximately three
years. The index consists of approximately 24% corporate debt and 76% government
debt. The corporate debt issues are rated BBB or better by Standard & Poor's.
The LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE INDEX includes the Lehman
Government Index and the Lehman Intermediate Corporate Bond Index, which reflect
the price fluctuations of U.S. Treasury and government agency securities,
corporate bonds, and Yankee bonds with maturities of 1-10 years.
The LEHMAN AGGREGATE BOND INDEX is composed of the Lehman
Government/Corporate Index and the Lehman Mortgage-Backed Securities Index. It
reflects the price fluctuations of Treasury securities, U.S. government agency
securities, corporate bond issues, and mortgage-backed securities.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
The Lipper categories for the funds are:
SHORT INVESTMENT-GRADE DEBT FUNDS (Limited-Term Bond)--funds with
dollar-weighted average maturities of five years or less that invest at least
65% of their assets in investment-grade debt.
INTERMEDIATE INVESTMENT-GRADE DEBT FUNDS (Intermediate-Term Bond)-- funds
with dollar-weighted average maturities of 5-10 years that invest at least 65%
of their assets in investment-grade debt.
A-RATED CORPORATE DEBT FUNDS (Bond)--funds that invest at least 65% of
their assets in government issues or corporate debt issues rated A or better.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
BUD HOOPS
JEFF HOUSTON
JOHN WALSH
Credit Research Manager
GREG AFIESH
CREDIT RATING GUIDELINES
CREDIT RATINGS ARE ISSUED BY INDEPENDENT RESEARCH COMPANIES SUCH AS STANDARD
& POOR'S AND MOODY'S. THEY ARE BASED ON AN ISSUER'S FINANCIAL STRENGTH AND
ABILITY TO PAY INTEREST AND PRINCIPAL IN A TIMELY MANNER.
SECURITIES RATED AAA, AA, A, OR BBB ARE CONSIDERED "INVESTMENT- GRADE"
SECURITIES, MEANING THEY ARE RELATIVELY SAFE FROM DEFAULT. HERE ARE THE MOST
COMMON CREDIT RATINGS AND THEIR DEFINITIONS:
* AAA -- EXTREMELY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* AA -- VERY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* A -- STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* BBB -- GOOD ABILITY TO MEET FINANCIAL OBLIGATIONS.
* BB -- SECURITIES THAT ARE LESS VULNERABLE TO DEFAULT THAN OTHER
LOWER-QUALITY ISSUES BUT DO NOT QUITE MEET INVESTMENT-GRADE STANDARDS.
IT'S IMPORTANT TO NOTE THAT CREDIT RATINGS ARE SUBJECTIVE, REFLECTING THE
OPINIONS OF THE RATING AGENCIES; THEY ARE NOT ABSOLUTE STANDARDS OF QUALITY.
34 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 27-32.
YIELDS
* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES --the number of different securities held by a fund on a
given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
* AVERAGE DURATION -- another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF FIXED-INCOME SECURITIES
* ASSET-BACKED SECURITIES -- debt securities that represent ownership in a pool
of receivables, such as credit-card debt, auto loans, and commercial mortgages.
* CORPORATE BONDS -- debt securities or instruments issued by companies and
corporations. Short-term corporate securities are typically issued to raise cash
and cover current expenses in anticipation of future revenues; long-term
corporate securities are issued to finance capital expenditures, such as new
plant construction or equipment purchases.
* MORTGAGE-BACKED SECURITIES -- debt securities that represent ownership in
pools of mortgage loans. Most mortgage-backed securities are structured as
"pass-throughs"--the monthly payments of principal and interest on the mortgages
in the pool are collected by the bank that is servicing the mortgages and are
"passed through" to investors. While the payments of principal and interest are
considered secure (many are backed by government agency guarantees), the cash
flow is less certain than in other fixed-income investments. Mortgages that are
paid off early reduce future interest payments from the pool.
* U.S. TREASURY SECURITIES -- debt securities issued by the U.S. Treasury and
backed by the direct "full faith and credit" pledge of the U.S. government.
Treasury securities include bills (maturing in one year or less), notes
(maturing in two to 10 years), and bonds (maturing in more than 10 years).
www.americancentury.com 35
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies, and risk potential are consistent
with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
36 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20930 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
April 30, 2000
AMERICAN CENTURY(reg.sm)
Semiannual Report
[graphic of runners]
[graphic of person looking at computer screen]
New Opportunities
[american century logo(reg.sm)]
American
Century
[inside front cover]
NEW OPPORTUNITIES
(TWNOX)
-------------------------------------------------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
They say hindsight is 20/20. But what about insight? That's what you really
want when choosing mutual funds. Now you can get the insight you need with Fund
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goals--short-term and long-term. Fund Advisor helps you:
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Get recommendations based on funds available through your current fund family
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Whether you want to analyze your current investments, or find new ones, Fund
Advisor can help you feel confident with the decisions you make.
How does it work?
Just tell Fund Advisor about your investing style, your current investments
and goals. It will analyze your investments and offer impartial recommendations
to help you get on track for your future.
To get Fund Advisor's unique perspective, go to www.americancentury.com and
select Fund Advisor at the top of the page. For the initial set-up, you will
need:
* Your OnePIN to log in to Fund Advisor
* Your latest tax return
* Your most recent investment account statements
To learn more about this new tool and how it can help you better manage your
financial future, select the "Online Demo" from the Fund Advisor introduction
page.
*Patent pending. Fund Advisor is guided by the portfolio management expertise of
leading investment professionals. It was developed for Acumation, Inc., a
registered investment advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through Fund Advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
Saving for Higher Education Just Got Easier
--------------------------------------------------------------------------------
Introducing LEARNING QUEST, a powerful new education savings plan. Brought to
you by the state of Kansas and managed by American Century Investments, Learning
Quest allows you to save tax-deferred for higher education. State and federal
income taxes aren't due on the earnings until they are withdrawn, when they are
taxed at the student's tax rate, which is usually lower than the contributor's.
Parents, grandparents, -- anyone can open an account. And, anyone can be
named the recipient -- even yourself. The plan can be used for any accredited
university, college or approved vocational program, anywhere in the United
States.
For more information, including estate-planning benefits, call
1-800-579-2203, or visit www.learningquestsavings.com.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, rewarded investors in New
Opportunities, as the fund significantly outperformed its benchmark.
The period was short, but momentous. So-called "New Economy" stocks led the
market -- in both directions. Investors stampeded into technology-oriented firms
at the end of 1999 and during the first quarter of 2000, triggering one of the
most powerful market advances ever. Then, suddenly, came the reminder that some
"old" rules of common stock investing still apply -- including one American
Century's growth fund managers hold dear: stock prices ultimately depend on
earnings.
Turning to corporate matters, the months covered in this report have been
important ones for American Century. Besides serving the nearly two million
investors who look to American Century for investment management, we also have
worked hard to serve and support the 3,000 people who work on your behalf -- to
create a positive, safe, and productive work environment. This commitment was
recognized and rewarded in late 1999 when American Century ranked in the top 40
of Fortune magazine's "100 Best Companies to Work For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and is essential in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's fund performance
reports like this one have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal from DALBAR. You can count on us to keep
looking for ways to improve the reports, literature and statements you receive
from us.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/
James E. Stowers, Jr.
Chairman of the Board and Founder
/signature/
James E. Stowers III
Vice Chairman of the Board and Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
NEW OPPORTUNITIES
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Portfolio at a Glance .................................................. 5
Top Ten Holdings ....................................................... 6
Top Five Industries .................................................... 6
Types of Investments ................................................... 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 10
Statement of Operations ................................................ 11
Statements of Changes
in Net Assets ....................................................... 12
Notes to Financial Statements .......................................... 13
Financial Highlights ................................................... 15
OTHER INFORMATION
Retirement Account Information ......................................... 16
Background Information
Investment Philosophy
and Policies ....................................................... 17
Comparative Indices .................................................. 17
Portfolio Managers ................................................... 17
Glossary ............................................................... 18
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
[left margin]
NEW OPPORTUNITIES
(TWNOX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 88.53%*
1 Year 172.82%
INCEPTION DATE: 12/26/96
NET ASSETS: $887.1 million
* Not annualized.
Investment terms are defined in the Glossary on pages 18-19.
MARKET PERSPECTIVE
* The six months ended April 30, 2000, saw the S&P 500, the Nasdaq Composite,
and the Dow all enter the new millennium at record highs. 1999 represented the
fifth consecutive year that the S&P 500 was up 20% or more. The tech-heavy
Nasdaq was the biggest winner, closing 1999 by posting an unprecedented gain
of 86%--the largest one-year advance ever recorded by any U.S. market index.
* During the first quarter of 2000, investors continued to rush into "New
Economy" stocks, particularly those of Internet and technology companies,
triggering a powerful market advance. As valuations in the technology realm
grew richer, though, uncertainty and volatility both increased dramatically.
Spooked by the possibility of rising interest rates, investors stampeded out
of technology in early March. The Nasdaq Composite was taken down 25.33% in a
single week in April.
NEW OPPORTUNITIES
* New Opportunities turned in remarkable results for the six-month period, with
a gain of more than three times that of its benchmark. The fund recorded one
of its most powerful advances ever, gaining 125% from October 31, 1999,
through February 29, 2000. New Opportunities had to give up part of that gain
when investors moved out of high-expectation growth stocks in March and April.
* Several factors contributed to New Opportunities' outsized return, beginning
with the fact that growth stocks led the stock market, with shares of smaller
and midsized companies--the fund's hunting ground-- performing particularly
well.
* A significant portion of New Opportunities' returns came from significant
investments in technology-oriented companies, particularly those providing
communications equipment or technology associated with the expansion of the
Internet, where the level of traffic is doubling every few months. Firms
producing semiconductors, components for fiber-optic communications systems,
and software that enables electronic commerce on the Internet were among the
fund's top performers. Apart from technology, New Opportunities was helped by
selective investments in the biotechnology sector.
* Shifts in the portfolio over the period included a reduction of investments in
cable firms and increased positions in energy services companies made
attractive by rising oil prices and increased drilling and production by major
oil companies.
2 1-800-345-2021
Market Perspective from James E. Stowers III
--------------------------------------------------------------------------------
[photo of James E. Stowers III]
James E. Stowers III, Chief Executive Officer of American Century
Common stock investors will look back on the six-month interval covered by
this report as one of the more extraordinary short-term experiences in stock
market history.
The major market indices -- the Standard & Poor's 500 Index, the Nasdaq
Composite, and the Dow Jones Industrial Average -- all entered the new
millennium at record highs. The Nasdaq ended 1999 with a stunning 86% gain, the
largest one-year increase in any U.S. market index -- ever. The S&P 500 notched
its fifth consecutive year with a return of 20% or more.
HIGH EXPECTATIONS
This performance led investors to carry unrealistically high expectations
into 2000. Surveys showed the average investor expected the stock market overall
to rise 15% in 2000, and his or her stock portfolio to gain 18%. Perhaps they
also were reading headlines like this one from our hometown paper, The Kansas
City Star, in January: "New tech stocks defy old rules."
The Star appeared to be right. "New Economy" stocks -- especially those
associated with the Internet and biotechnology -- were all investors wanted to
own.
But what may have started out as "rational exuberance" for technology
issues turned into rampant speculation as 2000 progressed. This was most evident
in the extraordinary strength of the new-issue market, where hundreds of
unseasoned, untested, "dot-com" companies soared in price, as investors
scrambled to own the next America Online or Yahoo!. The technology run-up blew
past three interest rate increases as if they had never happened.
Herd-like behavior took the Nasdaq Composite up 70% from October 31, 1999,
the start of this report period, to a record 5,049 on March 10. In contrast, the
S&P 500 gained 2.63%. Many aggressive growth funds needed an extra decimal space
in the newspaper mutual fund tables to accommodate their outsized returns.
$2 TRILLION DISAPPEARS
But extreme market moves of this dimension do not last forever. In early
March, a controversy involving the ownership of genetic information staggered
the biotech sector, and one month later, the malaise had spread to technology.
By April 10, investors had decided how high was too high and let the air out of
the technology balloon. Nasdaq suffered its worst week ever, dropping 25.33%.
More than $2 trillion in investor wealth evaporated.
Right now, the stock market is moving in fits and starts, not sure where it
wants to go. Investors' enthusiasm for technology is still high; however, they
also have higher standards for the tech stocks they own. With first-quarter
earnings appearing strong, wages up and the economy humming, the tug between
interest rates and inflation will weigh on the stock market for a while, and
there will be a greater degree of volatility. That means investors may have to
recapture something that's been missing lately: patience.
[right margin]
"INVESTORS' ENTHUSIASM FOR TECHNOLOGY IS STILL HIGH; HOWEVER, THEY ALSO HAVE
HIGHER STANDARDS FOR THE TECH STOCKS THEY OWN."
MARKET RETURNS
FOR THE SIX MONTHS ENDED APRIL 30, 2000
S&P 500 7.19%
S&P MIDCAP 400 21.26%
RUSSELL 2000 18.72%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
[data shown in line chart]
S&P 500 S&P Mid-Cap 400 Russell 2000
10/31/1999 $1.00 $1.00 $1.00
11/30/1999 $1.02 $1.05 $1.06
12/31/1999 $1.08 $1.12 $1.18
1/31/2000 $1.03 $1.08 $1.16
2/29/2000 $1.01 $1.16 $1.35
3/31/2000 $1.11 $1.26 $1.26
4/30/2000 $1.07 $1.21 $1.19
Value on 4/30/00
Russell 20000 $1.19
S&P MidCap 400 $1.21
S&P 500 $1.07
www.americancentury.com 3
New Opportunities--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF APRIL 30, 2000
NEW OPPORTUNITIES RUSSELL 2000 GROWTH INDEX
6 MONTHS(1) ................... 88.53% 27.78%
1 YEAR ........................ 172.82% 31.38%
==============================================================================
AVERAGE ANNUAL RETURNS
3 YEARS ....................... 62.98% 22.02%
LIFE OF FUND(2) ............... 44.98% 15.30%(3)
(1) Returns for periods less than one year are not annualized.
(2) Inception was 12/26/96.
(3) Since 12/31/96, the date nearest the fund's inception for which data are
available.
See pages 17-18 for information about the Russell 2000 Growth Index and returns
GROWTH OF $10,000 OVER LIFE OF FUND
[data shown in line chart]
New Opportunities Russell 2000 Growth Index
Date Value Value
12/31/1996 $10,000 $10,000
3/31/1997 $7,957 $8,951
6/30/1997 $9,961 $10,522
9/30/1997 $11,710 $12,302
12/31/1997 $10,315 $11,293
3/31/1998 $11,455 $12,635
6/30/1998 $11,631 $11,910
9/30/1998 $9,117 $9,247
12/31/1998 $11,690 $11,433
3/31/1999 $11,768 $11,241
6/30/1999 $14,381 $12,898
9/30/1999 $16,345 $12,263
12/31/1999 $28,985 $16,358
3/31/2000 $37,345 $17,876
4/30/2000 $33,928 $16,074
Value on 4/30/00
New Opportunities $33,928
Russell 2000 Growth $16,074
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Russell 2000 Growth Index is provided for comparison in each graph. The index
returns in this graph is as of 12/31/96, the date nearest the Investor Class's
inception for which data is available. New Opportunities' total returns include
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the Russell 2000 Growth Index do not. Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED APRIL 30)
[data shown in bar chart]
New Opportunities Russell 2000 Growth Index
Date Return Return
4/30/1997 -21.41% -11.52%
4/30/1998 50.50% 43.70%
4/30/1999 5.15% -3.77%
4/30/2000 172.82% 31.38%
* From 12/26/96 to 4/30/97; index performance from 12/31/96 to 4/30/97.
4 1-800-345-2021
New Opportunities--Q&A
--------------------------------------------------------------------------------
[photo of Tom Telford, Chris Boyd, and John Seitzer]
An interview with Tom Telford, Chris Boyd, and John Seitzer, portfolio
managers on the New Opportunities investment team.
HOW DID NEW OPPORTUNITIES PERFORM FOR THE SIX MONTHS ENDED APRIL 30, 2000?
New Opportunities turned in remarkable results for the period. The fund
gained 88.53% --more than three times the increase posted by its benchmark, the
Russell 2000 Growth Index, which was up 27.78%. In contrast, the average mid-cap
growth fund tracked by Lipper Inc., gained 39.55%.
Nestled in this period was one of the strongest short-term increases the
fund has ever experienced. New Opportunities was up 125% from the end of October
until the end of February. However, a correction in technology stocks during
March and April shaved away a portion of that outsized gain.
WHAT HELPED NEW OPPORTUNITIES OUTPERFORM ITS BENCHMARK BY SUCH A WIDE MARGIN?
Our performance is the result of several factors, beginning with our
investment process. We are aggressive growth investors: the most attractive
company to us is one whose top and bottom lines are growing quarter-by-quarter
at an accelerating pace. Also, we want evidence that the firm is in a position
to sustain that type of growth going forward.
The market played to our strength. Growth stocks continued to lead the
market, and shares of small and midsized companies--our universe-- performed
particularly well. Within the growth realm, technology stocks unquestionably
delivered the best returns as investors focused on companies benefiting from the
growth of the Internet. We began the period with close to half our assets
invested in a broad mix of technology-oriented companies. New issues--stock sold
by companies in their initial public offering--also continue to have a role in
our portfolio. Beyond contributing meaningfully to returns, these companies have
kept us up-to-date with cutting-edge technology. Importantly, though, while
we're pleased to provide this strong performance, shareholders should understand
that outsized returns of this level are not sustainable over time.
WHAT COMPANIES OR SECTORS CONTRIBUTED THE MOST TO PERFORMANCE?
Much of our gain can be traced to substantial investments in three industry
groups that are tied closely to the "digital revolution" that is rapidly
changing the way we live, work and entertain ourselves: semiconductors (computer
chips), electrical equipment, and computer software. Together, these three
groups accounted for almost 60% of the fund at the end of the period.
Most of us had never heard of the Internet four years ago. Today, using PCs
and laptops, we routinely surf the Internet to do research, send and receive
electronic mail, and shop for everything from airline tickets to insurance to
cars. "B2B"--business-to-business electronic commerce over the Net--is also
booming.
The upshot is this: Internet traffic is doubling roughly every 100 days--
[right margin]
"THE MARKET PLAYED TO OUR STRENGTH. GROWTH STOCKS CONTINUED TO LEAD THE
MARKET, AND SHARES OF SMALL AND MIDSIZED COMPANIES --OUR UNIVERSE-- PERFORMED
PARTICULARLY WELL."
PORTFOLIO AT A GLANCE
------------------------------------------------------------
4/30/00 10/31/99
------------------------------------------------------------
NO. OF COMPANIES 72 87
MEDIAN P/E RATIO 76.5 29.5
MEDIAN MARKET $1.80 $1.13
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 54%(1) 156%(2)
EXPENSE RATIO 1.50%(3) 1.50%
(1) Six months ended 4/30/00.
(2) Year ended 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 18-19.
www.americancentury.com 5
New Opportunities--Q&A
--------------------------------------------------------------------------------
(Continued)
which means the capacity of the communications pipelines carrying all these
bits and bytes must grow in tandem. That's where many of the companies we own
come into play: building out the Internet.
Though microscopic in size, semiconductors are the workhorses of the
Internet, processing, storing and transmitting the information millions of us
click for every day. New Opportunities owns PMC Sierra, a premium producer of
semiconductors for communications equipment that links computer networks. We're
not alone in our recognition of PMC's accelerating growth; the stock gained 307%
over the six-month period. We also built a large position (4% of the fund) in
Exar, a semiconductor company whose expertise lies in devices that raise the
data-carrying capacity of telephone lines.
Our search for accelerating growth also led us to makers of the equipment
that semiconductor companies use to produce their tiny chips. Two noteworthy
examples are Brooks Automation (up 370% for the period) and Asyst Technologies.
As Brooks' name implies, the firm makes tools and equipment, such as robotics,
that automate and speed up this highly complex manufacturing process. Similarly,
Asyst manufactures equipment that reduces wafer contamination in clean-room
production facilities.
THE ELECTRICAL EQUIPMENT INDUSTRY ACCOUNTS FOR 21% OF THE FUND. WHERE DID YOU
FIND ACCELERATING GROWTH IN THAT SECTOR?
A number of our investments make equipment and components used in
fiber-optic communications systems, the backbone of the Internet. Less than 20
years ago, data still traveled over copper wires whose top speed was about one
page per second. Today, in that same second, one strand of optical fiber can
transmit the equivalent of 90,000 volumes of an encyclopedia. Among our 10
largest holdings is JDS Uniphase (JDSU), the leading maker of complex components
and laser systems for fiber optic networks. Demand for JDSU's technology from
communications companies is so great that the company intends to increase
production capacity fourfold.
Globespan, Inc., a newcomer to the portfolio, provides digital subscriber
line (DSL) technology that enables high-speed data transmission over existing
copper telephone lines. Its shares gained 259% over the period.
Powerwave Technologies, Inc., (up 222% during the period) makes amplifiers
used in wireless communications equipment, selling to equipment manufacturers
such as Nortel Networks, Lucent Technologies, and Ericsson.
Pinnacle Systems, Inc., our largest position, has been a consistently
strong contributor to New Opportunities' results. Pinnacle makes equipment for
video editing systems.
ROUGHLY 16% OF THE FUND IS INVESTED IN SOFTWARE COMPANIES. WHAT IS DRIVING
ACCELERATING GROWTH THERE?
Two words: electronic commerce. A strong contributor in our portfolio over
the period was BEA Systems, Inc. This firm makes "middleware"--software that
links the multiple computer systems and databases that companies need to operate
their Web sites.
Another significant--and profitable--software holding in the same field has
been TIBCO Software, Inc. TIBCO's products focus on the rapidly expanding B2B
marketplace. The company's shares rose almost 600% during the period, making it
our top contributor to results.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
PINNACLE SYSTEMS,
INC. 5.5% 4.3%
POWERWAVE
TECHNOLOGIES, INC. 5.1% 2.1%
JDS UNIPHASE CORP. 4.3% 1.9%
BEA SYSTEMS, INC. 4.3% 2.7%
TIBCO SOFTWARE INC. 4.2% 1.6%
EXAR CORP. 4.0% -
FLEXTRONICS
INTERNATIONAL LTD.
ADR 3.6% 1.1%
PMC-SIERRA, INC. 3.2% 0.5%
GLOBESPAN, INC. 3.1% -
GEMSTAR INTERNATIONAL
GROUP LTD. 2.8% 5.3%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
ELECTRICAL EQUIPMENT 21.3% 17.0%
SEMICONDUCTOR 18.3% 6.8%
COMPUTER SOFTWARE 16.5% 13.8%
INFORMATION SERVICES 10.5% 18.7%
INTERNET 8.0% 4.4%
6 1-800-345-2021
New Opportunities--Q&A
--------------------------------------------------------------------------------
(Continued)
WERE THERE OTHER STOCKS THAT PERFORMED WELL?
Our search for firms with accelerating growth led us to two contract
manufacturers specializing in telecommunications equipment, Flextronics
International and Jabil Circuit, Inc. Based in Singapore, Flextronics provides
electronics manufacturing services for numerous communications applications.
Jabil manufactures circuit boards for personal computers and telecom equipment.
High-tech manufacturers like Cisco Systems and Dell outsource manufacturing and
assembly functions to expert firms like Flextronics and Jabil.
In the healthcare area, two of our better performers were Millennium
Pharmaceuticals, Inc., and Qiagen N.V. Millennium's field is genomics--the
analysis and manipulation of genetic information to help develop new drugs. Its
shares gained 125% over the period. Qiagen, a Netherlands-based firm, is the
world's leading supplier of technologies for separating and purifying nucleic
acids (DNA and RNA).
WHICH INVESTMENTS DIDN'T LIVE UP TO YOUR EXPECTATIONS?
We didn't get the boost we'd hoped for from our investment in Power
Integrations, Inc. Among its products are semiconductors that go into battery
chargers for cellular phones, primarily for high-end handsets. When one of the
company's larger clients indicated it was going to raise production of
inexpensive cell phones that do not use Power Integrations' chips, investors
pummeled the stock, making it New Opportunities' worst performer.
Chirex, Inc., was another disappointment. This is an outsourcing firm that
provides services to pharmaceutical companies, concentrating on the research,
development and manufacturing of drug substances. Chirex reported a
first-quarter loss amid weak demand for antiviral products sold by its largest
client, GlaxoWellcome. We sold the stock.
WHAT SHIFTS DID YOU MAKE IN NEW OPPORTUNITIES' PORTFOLIO?
We closed out a number of positions in the media industry. Cable service
providers are spending a great deal to prepare their networks to carry the next
generation of digital services. We shifted our focus to companies supplying them
with technology and equipment.
Finally, higher oil prices led us to initiate positions in oil services
companies. Two of them are Marine Drilling Company, which does offshore drilling
for the large oil companies, and National Oilwell, which sells machinery and
drilling equipment. Overall, oil services turned out to be among our
best-contributing industries.
HAS A NEW MANAGER BEEN ADDED TO THE NEW OPPORTUNITIES TEAM?
Yes. Tom Telford was promoted to portfolio manager in February. He
previously was an investment analyst for New Opportunities. Tom joined the
company in 1996.
WHAT ARE YOUR PLANS FOR NEW OPPORTUNITIES DURING THE NEXT SIX MONTHS?
Shareholders can count on us to continue applying our investment approach
with diligence and discipline. Right now, we're seeing unprecedented levels of
volatility in the markets as a result of concerns about higher interest rates,
and extreme valuations on many technology-oriented companies. We think the best
way to ride through volatile periods is by owning the types of firms our process
is designed to lead us to: successful businesses with solid earnings. This is
especially true in the technology area, where investors are becoming much more
discriminating.
[right martin]
"WE THINK THE BEST WAY TO RIDE THROUGH VOLATILE PERIODS IS BY OWNING THE TYPES
OF FIRMS OUR PROCESS IS DESIGNED TO LEAD US TO: SUCCESSFUL BUSINESSES WITH SOLID
EARNINGS."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF APRIL 30, 2000
[data shown in pie chart]
COMMON STOCKS 96.3%
TEMPORARY CASH INVESTMENTS 3.7%
AS OF OCTOBER 31, 1999
[data shown in pie chart]
COMMON STOCKS 99.5%
TEMPORARY CASH INVESTMENTS 0.5%
www.americancentury.com 7
New Opportunities--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.3%
COMPUTER HARDWARE &
BUSINESS MACHINES -- 6.1%
71,800 Network Peripherals, Inc.(1) $ 2,013
2,012,000 Pinnacle Systems, Inc.(1) 48,348
36,800 Proxim, Inc.(1) 2,816
-------------
53,177
-------------
COMPUTER SOFTWARE -- 16.5%
776,200 BEA Systems, Inc.(1) 37,379
117,400 Cognos, Inc.(1) 4,402
540,600 Gemstar International Group Ltd.(1) 24,986
439,700 General Magic, Inc.(1) 2,425
195,600 National Instruments Corp.(1) 9,529
344,900 Objective Systems Integrators, Inc.(1) 4,893
461,200 ONYX Software Corp.(1) 9,873
170,300 Rational Software Corp.(1) 14,491
409,200 TIBCO Software Inc.(1) 36,432
-------------
144,410
-------------
DRUGS -- 5.1%
27,000 Abgenix, Inc.(1) 2,417
138,600 Biovail Corp. International(1) 6,609
127,300 Enzon, Inc.(1) 4,738
138,200 Millennium Pharmaceuticals, Inc.(1) 10,961
43,600 Protein Design Labs, Inc.(1) 4,440
56,000 QIAGEN N.V.(1) 8,152
63,600 QLT PhotoTherapeutics Inc.(1) 3,536
122,700 Tanox, Inc.(1) 3,585
-------------
44,438
-------------
ELECTRICAL EQUIPMENT -- 21.3%
232,200 Digital Microwave Corp.(1) 8,570
445,059 Flextronics International Ltd. ADR(1) 31,279
421,000 Glenayre Technologies, Inc.(1) 5,539
175,600 Harmonic Inc.(1) 12,956
284,600 Jabil Circuit, Inc.(1) 11,651
365,312 JDS Uniphase Corp.(1) 37,890
32,500 Netro Corp.(1) 1,419
430,200 P-COM, Inc.(1) 4,638
213,000 Powerwave Technologies, Inc.(1) 44,311
142,600 Tekelec, Inc.(1) 4,969
271,600 Tollgrade Communications, Inc.(1) 17,917
196,600 Westell Technologies, Inc.(1) 5,585
-------------
186,724
-------------
ELECTRICAL UTILITIES -- 0.8%
80,900 Calpine Corp.(1) 7,402
-------------
INDUSTRIAL PARTS -- 0.3%
84,200 Mettler-Toledo International, Inc.(1) 2,905
-------------
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
INFORMATION SERVICES -- 10.5%
160,500 BISYS Group, Inc. (The)(1) $ 10,026
204,200 CBT Group Public Limited
Company ADR(1) 9,827
172,500 Cysive, Inc.(1) 9,385
269,550 Diamond Technology Partners Inc.(1) 21,353
509,900 LCC International, Inc. Cl A(1) 12,349
393,200 Proxicom, Inc.(1) 13,418
136,200 Sapient Corp.(1) 10,781
181,900 TenFold Corp.(1) 4,667
-------------
91,806
-------------
INTERNET -- 8.0%
137,600 Active Software, Inc.(1) 5,543
153,500 Art Technology Group, Inc.(1) 9,292
124,000 Exodus Communications, Inc.(1) 10,955
283,200 GlobeSpan, Inc.(1) 27,161
65,000 Inktomi Corp.(1) 10,004
128,800 Saba Software, Inc.(1) 3,675
129,150 USinternetworking, Inc.(1) 3,209
-------------
69,839
-------------
MEDIA -- 2.4%
493,400 TV Guide, Inc. Cl A(1) 14,817
58,900 Univision Communications
Inc. Cl A(1) 6,435
-------------
21,252
-------------
MEDICAL PRODUCTS & SUPPLIES -- 1.2%
85,100 Aclara BioSciences, Inc.(1) 3,186
17,500 Aurora Biosciences Corp.(1) 632
226,800 CONMED Corp.(1) 5,911
51,200 Nanogen, Inc.(1) 1,245
-------------
10,974
-------------
OIL SERVICES -- 4.6%
435,300 Marine Drilling Co., Inc.(1) 11,318
263,800 Maverick Tube Corp.(1) 7,560
397,500 National-Oilwell, Inc.(1) 9,515
431,100 Rowan Companies, Inc.(1) 12,044
-------------
40,437
-------------
REAL ESTATE -- 1.2%
192,400 Pinnacle Holdings Inc.(1) 10,792
-------------
8 1-800-345-2021 See Notes to Financial Statements
New Opportunities--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares ($ in Thousands) Value
--------------------------------------------------------------------------------
SEMICONDUCTOR -- 18.3%
222,800 Advanced Energy Industries, Inc.(1) $ 15,380
206,000 Asyst Technologies, Inc.(1) 11,015
120,300 Brooks Automation, Inc.(1) 10,782
136,600 Conexant Systems, Inc.(1) 8,183
435,250 Exar Corp.(1) 34,888
208,600 Kopin Corp.(1) 16,147
102,700 M-Systems Flash Disk Pioneers(1) 6,772
113,800 Pericom Semiconductor Corp.(1) 4,997
145,600 PMC-Sierra, Inc.(1) 27,928
161,000 Power Integrations, Inc.(1) 3,673
132,700 PRI Automation, Inc.(1) 10,604
280,700 REMEC, Inc.(1) 10,579
--------------
160,948
--------------
TOTAL COMMON STOCKS 845,104
--------------
(Cost $429,249)
($ in Thousands) Value
------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS - 3.7%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.68%, dated 4/28/00,
due 5/1/00 (Delivery value $32,215) 32,200
--------------
(Cost $32,200)
TOTAL INVESTMENT SECURITIES -- 100.0% $877,304
=============
(Cost $461,449)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 9
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
APRIL 30, 2000 (UNAUDITED)
ASSETS (In Thousands Except Per Share Amounts)
Investment securities, at value
(identified cost of $461,449) (Note 3) ........................ $ 877,304
Cash .......................................................... 53
Receivable for investments sold ............................... 15,748
Dividends and interest receivable ............................. 15
---------
893,120
---------
LIABILITIES
Payable for investments purchased ............................. 4,970
Accrued management fees (Note 2) .............................. 1,033
---------
6,003
---------
Net Assets .................................................... $ 887,117
=========
CAPITAL SHARES, $0.01 PAR VALUE
Authorized .................................................... 200,000
=========
Outstanding ................................................... 56,200
=========
Net Asset Value Per Share ..................................... $ 15.79
=========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ....................... $ 364,997
Accumulated net investment loss ............................... (5,342)
Accumulated undistributed net realized
gain on investment transactions ............................ 111,607
Net unrealized appreciation on investments (Note 3) ........... 415,855
---------
$ 887,117
=========
10 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INVESTMENT LOSS (In Thousands)
Income:
Interest ....................................................... $ 647
Dividends ...................................................... 38
---------
685
---------
Expenses (Note 2):
Management fees ................................................ 6,025
Directors' fees and expenses ................................... 2
---------
6,027
---------
Net investment loss ............................................ (5,342)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ............................... 112,006
Change in net unrealized appreciation on investments ........... 286,289
---------
Net realized and unrealized gain on investments ................ 398,295
---------
Net Increase in Net Assets Resulting from Operations ........... $ 392,953
=========
See Notes to Financial Statements www.americancentury.com 11
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
Increase in Net Assets
2000 1999
OPERATIONS (In Thousands)
<S> <C> <C>
Net investment loss .........................................$ (5,342) $ (3,583)
Net realized gain on investments ............................ 112,006 74,553
Change in net unrealized appreciation on investments ........ 286,289 115,193
--------- ---------
Net increase in net assets resulting from operations ........ 392,953 186,163
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains on investment transactions .......... (57,661) --
--------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................... 183,326 49,239
Proceeds from reinvestment of distributions ................. 56,051 --
Payments for shares redeemed ................................ (88,514) (47,931)
--------- ---------
Net increase in net assets from capital share transactions .. 150,863 1,308
--------- ---------
Net increase in net assets .................................. 486,155 187,471
NET ASSETS
Beginning of period ......................................... 400,962 213,491
--------- ---------
End of period ...............................................$ 887,117 $ 400,962
========= =========
Net investment loss .........................................$ (5,342) --
========= =========
TRANSACTIONS IN SHARES OF THE FUND
Sold ........................................................ 13,812 7,011
Issued in reinvestment of distributions ..................... 4,591 --
Redeemed .................................................... (5,995) (8,016)
--------- ---------
Net increase (decrease) ..................................... 12,408 (1,005)
========= =========
</TABLE>
12 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. New Opportunities Fund (the fund) is one
of the fourteen series of funds issued by the corporation. The fund is
diversified under the 1940 Act. The fund's investment objective is to seek
capital growth by investing primarily in common stocks that are considered by
management to have better-than-average prospects for appreciation. The following
significant accounting policies are in accordance with generally accepted
accounting principles; these policies may require the use of estimates by fund
management.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts
in order to manage the fund's exposure to changes in market conditions. One of
the risks of entering into futures contracts is the possibility that the change
in value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively. There were no open futures
contracts on April 30, 2000.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee. The Agreement provides that all
expenses of the fund, except brokerage commissions, taxes, interest, expenses of
those directors who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is computed daily and paid monthly based on the fund's average
daily closing net assets during the previous month. The annual management fee is
1.50%.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six months ended April 30, 2000, were $457,057,330 and
$408,119,443, respectively.
At April 30, 2000, accumulated net unrealized appreciation was $415,518,952,
based on the aggregate cost of investments for federal income tax purposes of
$461,784,599, which consisted of unrealized appreciation of $446,644,645 and
unrealized depreciation of $31,125,693.
--------------------------------------------------------------------------------
4. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
six months ended April 30, 2000.
14 1-800-345-2021
New Opportunities--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
2000(1) 1999 1998 1997(2)
--------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................$ 9.16 $ 4.77 $ 5.31 $ 5.00
----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Loss ............................... (0.10) (0.08) (0.06) (0.04)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ................ 7.87 4.47 (0.48) 0.35
----------- ----------- ----------- -----------
Total From Investment Operations .................. 7.77 4.39 (0.54) 0.31
----------- ----------- ----------- -----------
Distributions
From Net Realized Gains on Investments ............ (1.14) -- -- --
----------- ----------- ----------- -----------
Net Asset Value, End of Period ......................$ 15.79 $ 9.16 $ 4.77 $ 5.31
=========== =========== =========== ===========
Total Return(3) ................................... 88.53% 92.03% (10.17)% 6.20%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ... 1.50%(4) 1.50% 1.50% 1.49%(4)
Ratio of Net Investment Loss to Average Net Assets .. (1.33)%(4) (1.29)% (1.16)% (1.09)%(4)
Portfolio Turnover Rate ............................. 54% 156% 147% 118%
Net Assets, End of Period (in thousands) ............$ 887,117 $ 400,962 $ 213,491 $ 231,266
</TABLE>
(1) Six months ended April 30, 2000 (unaudited).
(2) December 26, 1996 (inception) through October 31, 1997.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 15
Retirement Account Information
--------------------------------------------------------------------------------
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
16 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 14 growth funds including domestic equity,
specialty, international, and global. The philosophy behind these growth funds
focuses on three important principles. First, the funds seek to invest in
successful companies, which we define as those with growing earnings and
revenues. Second, we attempt to keep the funds fully invested, regardless of
short-term market activity. Experience has shown that market gains can occur in
unpredictable spurts and that missing those opportunities can significantly
limit the potential for gain. Third, the funds are managed by teams rather than
by one "star." We believe this allows us to make better, more consistent
management decisions.
In addition to these principles, each fund has its own investment policies
AMERICAN CENTURY NEW OPPORTUNITIES generally invests in the securities of
small companies that exhibit accelerating growth. Historically, small-cap stocks
have been more volatile than the stocks of larger, more-established companies.
Therefore, the fund is subject to significant price volatility, but offers long-
term growth potential. To enable the fund to maintain its emphasis on small
growth companies, it has always been our intention to close New Opportunities to
new investors when it reached $400 million in assets. The fund reached that
asset level in November 1999 and closed to new investors on November 22, 1999.
Current shareholders as of that date may continue to invest in the fund.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded Blue Chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The NASDAQ COMPOSITE is a market capitalization price-only index that
reflects the aggregate performance of domestic common stocks traded on the
regular Nasdaq market, as well as national market system-traded foreign common
stocks and American Depositary Receipts. It is considered to represent the
performance of smaller-capitalization and growth-oriented U.S. stocks generally
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
dominant industries. Created by Standard & Poor's, it is considered to be a
broad measure of U.S. stock market performance.
The S&P MIDCAP 400 is the medium capitalization sector of the U.S. market.
Created by Standard & Poor's, it is considered to represent the performance of
mid-cap stocks generally.
The RUSSELL 2000 INDEX was created by the Frank Russell Company. It
measures the performance of the 2,000 smallest of the 3,000 largest publicly
traded U.S. companies based on total market capitalization. The Russell 2000
represents approximately 10% of the total market capitalization of the top 3,000
companies. The index is further broken down into two mutually exclusive value
and growth indices. The RUSSELL 2000 GROWTH INDEX, used in this report, measures
the performance of those Russell 2000 companies with higher price-to-book ratios
and higher forecasted growth rates.
[right margin]
PORTFOLIO MANAGERS
New Opportunities
CHRIS BOYD, CFA
JOHN SEITZER, CFA
TOM TELFORD, CFA
www.americancentury.com 17
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 15.
INVESTMENT TERMS
* MEDIAN MARKET CAPITALIZATION-- Market capitalization (market cap) is the total
value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES-- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER-- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO-- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO-- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
TYPES OF STOCKS
* BLUE CHIP STOCKS-- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS-- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS-- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $10.3 billion. This is Lipper's market capitalization breakpoint as of
April 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $10.3 billion. This is Lipper's market capitalization
breakpoint as of April 30, 2000, although it may be subject to change based on
market fluctuations. The S&P 400 Index and Russell 2500 Index generally consist
of stocks in this range.
18 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of less
than $2.3 billion. This is Lipper's market capitalization breakpoint as of April
30, 2000, although it may be subject to change based on market fluctuations. The
S&P 600 Index and the Russell 2000 Index generally consist of stocks in this
range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price- fluctuation risk.
www.americancentury.com 19
Notes
--------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation: Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(SM) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
[photo of runners]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0004 American Century Investment Services, Inc.
SH-SAN-20657 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
APRIL 30, 2000
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
[graphic of runners]
High-Yield
[american century logo (reg.sm)]
American
Century
[inside front cover]
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[left margin]
HIGH-YIELD
(ABHIX)
---------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, proved relatively difficult for
high-yield bond investors as the pace of U.S. economic growth and inflation
quickened. Trying to keep growth and inflation under control, the Federal
Reserve raised short-term interest rates three times in the last six months.
Higher rates put significant pressure on bond prices. A lack of demand
further limited high-yield bond returns. Despite this challenging environment,
American Century High-Yield's performance was better than average--the fund
outperformed both its benchmark and Lipper group average.
Besides serving the nearly two million investors who look to American
Century for investment management, we also have an obligation to the 3,000
people who work on your behalf--to create a positive, safe, and productive work
environment for American Century staff. This commitment was recognized and
rewarded in late 1999 when American Century ranked in the top 40 of Fortune
magazine's "100 Best Companies to Work For."
We do not take this recognition lightly--acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and an essential one in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's shareholder
reports--like this one--have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal of approval from DALBAR. You can count on
us to keep looking for ways to improve the reports, literature, and statements
you receive from us.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
Credit Review .......................................................... 4
HIGH-YIELD
Performance Information ................................................ 5
Management Q&A ......................................................... 6
Portfolio at a Glance .................................................. 6
Yields ................................................................. 6
Portfolio Composition
by Credit Rating .................................................... 7
Top Five Industries .................................................... 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 11
Statement of Operations ................................................ 12
Statements of Changes
in Net Assets ....................................................... 13
Notes to Financial
Statements .......................................................... 14
Financial Highlights ................................................... 16
OTHER INFORMATION
Retirement Account
Information ......................................................... 17
Background Information
Investment Philosophy
and Policies ..................................................... 18
Comparative Indices ................................................. 18
Lipper Rankings ..................................................... 18
Credit Rating
Guidelines ....................................................... 18
Investment Team
Leaders .......................................................... 18
Glossary ............................................................... 19
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* Rising interest rates, weak demand, and volatile financial markets made for
a difficult environment for high-yield bonds during the six months ended
April 30, 2000.
* Economic growth surged in late 1999 and early 2000. Stronger growth and a
big jump in oil prices meant inflation also ticked up.
* To head off inflation, the Federal Reserve raised short-term interest rates
several times in the six months.
* Demand for high-yield bonds fell. More than $4 billion left high-yield
mutual funds in the first four months of 2000.
CREDIT REVIEW
* The default rate among high-yield bonds moderated somewhat in 2000 after
peaking at about 6% last October.
* Defaults rose last year largely because of problems among high-yield issuers
in the energy and basic materials sectors, as well as select healthcare
companies.
* Volatile equity markets weighed on credit quality because they closed a key
avenue of financing for many small high-yield companies.
FUND PERFORMANCE
* Despite the relatively tough environment for high-yield bonds, the portfolio
outperformed its benchmark and Lipper category average.
* The fund's 30-day SEC yield rose significantly over the six months. Higher
rates and falling bond prices were part of the story; in addition, we
reduced our cash position after Y2K went off without a hitch.
FUND STRATEGY
* We reduced our exposure to bonds rated BB and added lower-quality securities
with shorter durations. That decreased the fund's interest rate sensitivity.
* Telecommunications bonds continued to be the portfolio's largest holding.
Despite a rough start to 2000, these bonds held up better than the broader
market for the six months.
OUTLOOK
* We expect the Federal Reserve to raise interest rates again in the coming
months in an attempt to pre-empt inflation.
* We're positive on high-yield bonds going forward--defaults appear to have
peaked, the economy's healthy, and these bonds are offering the most
attractive yields since 1998.
[left margin]
HIGH-YIELD
(ABHIX)
TOTAL RETURNS: AS OF 4/30/00
6 Months 2.63%*
1 Year -1.11%
30-DAY SEC YIELD: 10.93%
INCEPTION DATE: 9/30/97
NET ASSETS: $32.1 million
* Not annualized.
See Total Returns on page 5.
Investment terms are defined in the Glossary on pages 19-20.
2 1-800-345-2021
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
LIMITED PERFORMANCE
Several factors combined to limit high-yield bond returns during the six
months ended April 30, 2000. These included weak demand for high-yield
securities and sharp volatility in the stock and bond markets, as well as higher
interest rates and inflation. For the six months, the DLJ High Yield Index
returned 1.20%.
RATES AND INFLATION RISE
Rapid economic growth and a big increase in oil prices put upward pressure
on inflation. Consumer prices rose 3% for the 12 months ended April 30, with the
biggest increases coming in 2000. Even after stripping out food and energy
costs, prices rose at a 3.2% annual rate during the three months ended in April.
Concern about inflation led the Federal Reserve to raise short-term
interest rates beginning in the summer of 1999.
STOCKS AND BONDS CHOPPY
While short-term rates were rising, long-term Treasury yields actually
fell. That was a result of the Treasury Department's plan to trim sales of new
securities and to buy back $30 billion in existing longer-dated bonds.
On top of all the volatility in the bond market, stocks also seesawed.
Stocks skyrocketed in late 1999 and early 2000, and many investors abandoned the
high-yield sector for the lure of juicier returns in equities.
But that trade looked less attractive in late March and April, when stocks
fell sharply. However, stocks' swoon also proved bad news for high-yield bonds
because investors worried that a wobbly equity market would limit the ability of
some high-yield issuers to raise capital. As a result, high-yield bonds were hit
from both sides during the six months.
YIELD SPREADS WIDEN
Poor performance by high-yield bonds and the technical rally in long-term
Treasurys meant the high-yield sector underperformed Treasurys. As a result, the
spread--or difference in yield--between high-yield and Treasury bonds widened,
reaching levels not seen since the Asian economic crisis and Russian debt
default of 1998 (see the graph at right). The wider the yield spread, the more
attractive high-yield bonds become.
POOR DEMAND
Demand for high-yield bonds ebbed significantly over the last six months.
According to AMG Data Services, more than $4 billion flowed out of high-yield
mutual funds in just the first four months of 2000.
With demand so weak, the supply of new high-yield bonds fell. So far in
2000, supply is running at about half last year's pace. And what new issues
there are have been forced to offer very high interest rates to attract buyers.
[right margin]
"POOR PERFORMANCE BY HIGH-YIELD BONDS AND THE TECHNICAL RALLY IN LONG-TERM
TREASURYS MEANT THE HIGH-YIELD SECTOR UNDERPERFORMED TREASURYS."
[line graph - data below]
HIGH-YIELD/TREASURY YIELD SPREAD
DATE YIELD SPREAD
4/30/97 343
5/30/97 318
6/30/97 320
7/30/97 329
8/30/97 318
9/30/97 313
10/30/97 361
11/30/97 347
12/30/97 356
1/30/98 366
2/28/98 349
3/30/98 345
4/30/98 357
5/30/98 384
6/30/98 409
7/30/98 400
8/30/98 617
9/30/98 687
10/30/98 735
11/30/98 618
12/30/98 641
1/30/99 626
2/28/99 585
3/30/99 588
4/30/99 537
5/30/99 545
6/30/99 549
7/30/99 553
8/30/99 573
9/30/99 611
10/30/99 616
11/30/99 577
12/30/99 549
1/30/00 549
2/29/00 573
3/30/00 657
4/30/00 654
In Basis Points (a basis point equals 0.01%)
This chart shows the yield difference, or spread, between the bonds in the DLJ
High Yield Index and 10-year Treasury securities.
Source: Donaldson, Lufkin & Jenrette
www.americancentury.com 3
Credit Review
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DEFAULTS TREND LOWER
The default rate--a measure of high-yield bond issuers who missed an
interest or principal payment--moderated somewhat for the 12 months ended April
30, 2000. The current rate of 5.6% is down slightly from a peak of a little more
than 6% last October, according to Merrill Lynch.
DEFAULTS NARROWLY CONCENTRATED
Defaults peaked late last year because of a shakeout in a handful of
sectors of the high-yield market. Energy and basic materials companies were
relatively hard hit last year because of fallout from the Asian economic crisis
and global slowdown in 1998, which weighed on commodity prices and hurt profits
In addition, long-term care facilities came under significant pressure last
year, largely because the government's overhaul of the Medicare reimbursement
system crimped profits for these companies.
LIMITED ACCESS TO CAPITAL
Sharp volatility in equity markets also weighed on the creditworthiness of
some high-yield issuers because it effectively closed the window for initial
public offerings, or IPOs. In an IPO, a company raises capital by selling stock
publicly for the first time.
For many small high-yield companies, the IPO market is a key source of
investment capital. But the IPO bubble burst in the first quarter of 2000,
eliminating that avenue of financing. As a result, it was harder for companies
to raise money to finance operations and build their infrastructure.
Meanwhile, it was also difficult for smaller, less well-known companies to
raise the money they needed to finance their businesses in the high-yield
market. Nervous investors showed a reluctance to buy anything but the largest,
most liquid bond deals.
CREDIT OUTLOOK UNCERTAIN
There is some debate about the outlook for defaults going forward.
Independent credit rating agency Moody's predicts the default rate for
high-yield bonds will rise to about 7% in the first quarter of 2001.
At that time, many of the high-yield bonds issued from 1996 to 1998--when
credit standards were relatively lax--will have their fourth or fifth birthday.
Historically, default rates on high-yield bonds peak around that time--call it
high yield's "mid-life crisis."
On the other hand, many industry experts think Moody's numbers overshoot
the mark by relying on overly pessimistic assumptions of economic and financial
conditions.
We believe many of the excesses and less creditworthy deals of the mid- to
late-1990s have already worked their way through the system. In addition, we
think the larger problems that led to the peak in default rates last year are
well behind us. As a result, we expect default rates to level off or continue to
fall, rather than increase, as Moody's predicts.
[left margin]
"DEFAULTS PEAKED LATE LAST YEAR BECAUSE OF A SHAKEOUT IN A HANDFUL OF SECTORS OF
THE HIGH-YIELD MARKET."
HIGH-YIELD CREDIT
ANALYSIS TEAM
MICHAEL DIFLEY
LYNDA LOWRY
4 1-800-345-2021
High-Yield--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF APRIL 30, 2000
DLJ HIGH YIELD HIGH CURRENT YIELD FUNDS(2)
HIGH-YIELD INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) 2.63% 1.20% 1.03%
1 YEAR -1.11% -2.42% -2.56% 125 OUT OF 347
================================================================================
AVERAGE ANNUAL RETURNS
LIFE OF FUND 1.89% 1.68% 0.89% 90 OUT OF 216
The fund's inception date was 9/30/97.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 18-19 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
PERFORMANCE OF $10,000 OVER LIFE OF FUND Value on 4/30/00 High-Yield $10,496 DLJ
High Yield Index $10,439
High-Yield DLJ High Yield Index
DATE VALUE VALUE
9/30/1997 $10,000 $10,000
10/31/1997 $9,963 $9,987
11/30/1997 $10,044 $10,073
12/31/1997 $10,174 $10,173
1/31/1998 $10,437 $10,330
2/28/1998 $10,491 $10,412
3/31/1998 $10,667 $10,529
4/30/1998 $10,718 $10,574
5/31/1998 $10,729 $10,583
6/30/1998 $10,717 $10,595
7/31/1998 $10,781 $10,678
8/31/1998 $10,097 $9,953
9/30/1998 $9,947 $9,929
10/31/1998 $9,548 $9,723
11/30/1998 $10,144 $10,269
12/31/1998 $10,044 $10,228
1/31/1999 $10,210 $10,368
2/28/1999 $10,209 $10,313
3/31/1999 $10,409 $10,452
4/30/1999 $10,606 $10,699
5/31/1999 $10,468 $10,540
6/30/1999 $10,445 $10,549
7/31/1999 $10,514 $10,552
8/31/1999 $10,360 $10,448
9/30/1999 $10,283 $10,374
10/31/1999 $10,219 $10,315
11/30/1999 $10,376 $10,489
12/31/1999 $10,634 $10,596
1/31/2000 $10,659 $10,559
2/29/2000 $10,786 $10,615
3/31/2000 $10,503 $10,442
4/30/2000 $10,496 $10,439
$10,000 investment made 9/30/97
The graph at left shows the performance of a $10,000 investment over the life of
the fund. The DLJ High Yield Index is provided for comparison. High-Yield's
total return includes operating expenses (such as transaction costs and
management fees) that reduce returns, while the total return of the index does
not. Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED APRIL 30)
High-Yield DLJ High Yield Index
DATE RETURN RETURN
4/30/1998* 7.26% 5.74%
4/30/1999 -1.03% 1.18%
4/30/2000 -1.11% -2.42%
* From 9/30/97 (the fund's inception date) to 4/30/98.
www.americancentury.com 5
High-Yield--Q&A
--------------------------------------------------------------------------------
[photo of Theresa Fennell]
An interview with Theresa Fennell, a portfolio manager on the High-Yield
fund investment team.
HOW DID HIGH-YIELD PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 2000?
Though high-yield bond returns were somewhat disappointing overall, the
fund performed very well relative to its benchmark and Lipper group average. For
the six months, High-Yield had a return of 2.63%. By comparison, the fund's
benchmark, the DLJ High Yield Index, returned 1.20%. The 370 "High Current Yield
Funds" tracked by Lipper Inc. averaged a 1.03% return for the same period. (See
the previous page for detailed performance comparisons.)
CAN YOU TALK ABOUT THE BIG INCREASE IN THE FUND'S YIELD IN THE LAST SIX MONTHS?
The portfolio's 30-day SEC yield was nearly 11% as of April 30. That's up
quite a bit from about 9.25% just six months ago.
Two important reasons for the increase in the fund's yield were rising
interest rates and the relatively poor performance of high-yield bonds. Bond
prices and yields move in opposite directions, so lower prices mean higher
yields.
Another reason for the fund's higher yield in the last six months is that
we reduced our cash position significantly. We went into late 1999 holding
additional cash ahead of year-end, but we drew down that position after Y2K went
off without a hitch and money flowed out of the fund in 2000.
HOW DID YOU POSITION THE PORTFOLIO DURING A PERIOD THAT WAS PRETTY ROUGH
SLEDDING FOR HIGH-YIELD BONDS?
We made some changes to the fund's credit quality and sector weightings to
try to ride out a period where interest rates were rising, money was flowing out
of the high-yield market, and stocks and bonds were volatile.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S CREDIT QUALITY?
We tried to reduce our exposure to high-yield bonds that are most sensitive
to interest rate changes. For example, BB bonds tend to move in line with
interest rates. As a result, we cut our exposure to BB securities by about half
(see the charts on page 7). We also reduced the fund's rate sensitivity by
adding some lower-quality bonds with shorter durations. (Duration is defined on
page 19.) This move helped reduce the fund's exposure to rising interest rates
while allowing us to better utilize our experienced credit research team.
HOW ABOUT THE PORTFOLIO'S SECTOR WEIGHTINGS?
Telecommunications bonds--including those issued by phone, wireless, and
Internet companies, among others--continued to be the fund's largest holding.
Four of our top five industry weightings are in this sector (see page 7). These
bonds held up a little better than the broader high-yield market in spite of the
volatility that hit telecommunication stocks during March and April.
[left margin]
"THE FUND PERFORMED VERY WELL RELATIVE TO ITS BENCHMARK AND LIPPER GROUP
AVERAGE."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NUMBER OF SECURITIES 66 63
WEIGHTED AVERAGE
MATURITY 6.2 YRS 6.6 YRS
AVERAGE DURATION 4.4 YRS 4.9 YRS
EXPENSE RATIO 0.90%* 0.90%
* Annualized.
YIELD AS OF APRIL 30, 2000
30-DAY SEC YIELD 10.93%
Investment terms are defined in the Glossary on pages 19-20.
6 1-800-345-2021
High-Yield--Q&A
--------------------------------------------------------------------------------
(Continued)
Despite their recent slump, many of these securities performed well in late
1999 and early 2000. The sector benefited from globalization, mergers,
acquisitions, and high-profile strategic investments. Outperformance by
telecommunications bonds was a key reason the fund beat its benchmark for the
six months.
YOU ALSO CONTINUED TO FAVOR BONDS OF PAPER AND FOREST PRODUCTS COMPANIES. WHAT'S
THE ATTRACTION?
We like paper and forest products companies because we think supply and
demand for these basic materials look good. Bonds in this sector looked cheap,
having tumbled after the economic and financial crisis of 1998. But the global
economy has recovered since, so we felt the prices and yields available on these
bonds were just too good to pass up.
One way these companies have improved the supply outlook is by building
market share through consolidation, rather than creating new capacity. Demand
for these commodities also improved along with global growth.
Of course, world central banks are trying to pre-empt inflation by raising
interest rates. These bonds could suffer if rates rise enough to slow the
economy significantly.
IT SOUNDS LIKE YOU THINK INTEREST RATES ARE HEADED HIGHER. WHY?
The U.S. economy grew at an annual rate of more than 6% in the last few
quarters. That's about twice as fast as the Federal Reserve would like to see.
In addition, inflation is rising at a faster rate than it has in the past
several years, though it's still relatively low by historical standards.
Add it all up, and we think the Fed will raise short-term interest rates in
the coming months to tap the brakes and try to bring the economy back below its
speed limit for non-inflationary growth.
WHAT'S YOUR OUTLOOK FOR THE HIGH-YIELD MARKET?
We think high-yield bonds represent excellent values right now--they're
trading with prices and yields we haven't seen since the global economic crisis
of 1998, but we see no comparable risks this year. We're also optimistic longer
term because we think global economic growth remains strong, and high-yield bond
defaults appear to have peaked (see page 4).
But near term, it's hard to see a sustained rally until the Fed's done
raising rates. Another guidepost for high-yield bonds is the stock market--less
volatility in technology stocks would likely help our market.
GIVEN THAT OUTLOOK, HOW WILL YOU POSITION THE PORTFOLIO IN THE COMING MONTHS?
In terms of sector weightings, we're likely to continue to overweight
telecommunications bonds. These securities have been key to the fund's
outperformance of its benchmark and Lipper group, and we think they've got some
more room to run.
In terms of credit quality, we're likely to continue with our current
positioning as long as we're comfortable with the strength of the economy. But
if we think higher interest rates might slow economic growth too much, we would
likely move back up in credit quality, buying BB rated bonds.
[right margin]
"WE THINK HIGH-YIELD BONDS REPRESENT EXCELLENT VALUES RIGHT NOW."
PORTFOLIO COMPOSITION BY
CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
AAA 7% 3%
BBB 1% 1%
BB 8% 16%
B 67% 67%
CCC 12% 7%
UNRATED 5% 6%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page
18 for more information.
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
TELEPHONE 18.3% 16.1%
MEDIA 12.0% 8.7%
INTERNET 9.5% 4.6%
FOREST PRODUCTS &
PAPER 7.7% 6.7%
WIRELESS
TELECOMMUNICATIONS 7.2% 5.3%
www.americancentury.com 7
High-Yield--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
CORPORATE BONDS -- 87.4%
AIRLINES -- 2.4%
$ 750,000 Atlas Air, Inc., 10.75%, 8/1/05 $ 753,750
-----------
APPAREL & TEXTILES -- 2.7%
500,000 Delta Mills, Inc., Series B, 9.625%,
9/1/07 366,250
500,000 Supreme International Corp.,
12.25%, 4/1/06 475,000
-----------
841,250
-----------
BANKS -- 1.9%
750,000 Bay View Capital Corp., 9.125%,
8/15/02 579,375
-----------
CHEMICALS -- 3.8%
1,000,000 Huntsman ICI Chemicals, 11.80%,
12/31/09(1) 320,000
500,000 Lyondell Chemical Co., Series B,
9.875%, 5/1/07 494,375
500,000 United Industries Corp., Series B,
9.875%, 4/1/09 (Acquired
8/16/99, Cost $440,000)(3) 367,500
-----------
1,181,875
-----------
COMPUTER SOFTWARE -- 0.2%
870,000 Telehub Communications Corp.,
36.78%, 7/31/05(2) 73,950
-----------
CONSTRUCTION & REAL PROPERTY -- 1.6%
500,000 Omega Cabinets, 10.50%,
6/15/07 487,500
-----------
ELECTRICAL EQUIPMENT -- 2.5%
250,000 International Utility Structures Inc.,
10.75%, 2/1/08 208,750
750,000 Trench Electric & Trench Inc.,
10.25%, 12/15/07 566,250
-----------
775,000
-----------
ENERGY RESERVES & PRODUCTION -- 1.9%
570,000 Belco Oil & Gas Corp., Series B,
10.50%, 4/1/06 578,550
-----------
ENVIRONMENTAL SERVICES -- 1.6%
750,000 Allied Waste Industries, Inc.,
Series B, 10.00%, 8/1/09 511,875
-----------
FINANCIAL SERVICES -- 1.8%
750,000 Nationwide Credit, Inc., Series A,
10.25%, 1/15/08 551,250
-----------
FOREST PRODUCTS & PAPER -- 7.7%
750,000 Ainsworth Lumber Co. Ltd., PIK,
12.50%, 7/15/07 787,500
500,000 Gaylord Container Corp., Series B,
9.875%, 2/15/08 397,500
500,000 Repap New Brunswick, 10.625%,
4/15/05 473,750
Principal Amount Value
--------------------------------------------------------------------------------
$ 250,000 Riverwood International, 10.875%,
4/1/08 $ 241,250
500,000 Stone Container, 10.75%,
10/1/02 505,000
-----------
2,405,000
-----------
HOTELS -- 3.2%
500,000 Hollywood Casino Corp., 11.25%,
5/1/07 510,000
500,000 Venetian Casino/Las Vegas
Sands, 12.25%, 11/15/04 490,000
-----------
1,000,000
-----------
INDUSTRIAL -- 2.8%
750,000 Graham Packaging Co., Series B,
9.21%, 1/15/09(2) 423,750
500,000 Key Components, Inc., 10.50%,
6/1/08 451,250
-----------
875,000
-----------
INDUSTRIAL SERVICES -- 3.6%
500,000 Building One Services, 10.50%,
5/1/09 (Acquired 11/23/99,
Cost $470,000)(3) 456,250
750,000 United Rentals, Inc., Series B,
9.25%, 1/15/09 680,625
-----------
1,136,875
-----------
INTERNET -- 7.1%
1,000,000 Amazon.com, Inc., 10.47%,
5/1/08(2) 582,500
500,000 Exodus Communications, Inc.,
10.75%, 12/15/09 501,250
750,000 PSINet Inc., Series B, 10.00%,
2/15/05 667,500
500,000 Verio Inc., 10.375%, 4/1/05 481,250
-----------
2,232,500
-----------
MEDIA -- 10.2%
500,000 AMFM Inc., 8.00%, 11/1/08 499,375
1,000,000 Charter Communication Holdings
LLC, 8.64%, 4/1/11(2) 552,500
750,000 Imax Corp., 7.875%, 12/1/05 686,250
500,000 NTL Inc., Series B, 11.50%,
2/1/06(2) 462,500
750,000 RCN Corp., 10.25%,
10/15/07(2) 481,875
500,000 SFX Entertainment, Inc., 9.125%,
12/1/08 502,500
-----------
3,185,000
-----------
MEDICAL PROVIDERS & SERVICES -- 0.5%
250,000 Magellan Health Services, 9.00%,
2/15/08 166,250
-----------
MOTOR VEHICLES & PARTS -- 1.5%
500,000 Oxford Automotive Inc., Series D,
10.125%, 6/15/07 (Acquired
2/15/00, Cost $473,750)(3) 467,500
-----------
8 1-800-345-2021 See Notes to Financial Statements
High-Yield--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
MULTI-INDUSTRY -- 0.6%
$ 750,000 Metallurg Holdings Inc., Series B,
20.51%, 7/15/08(2) $ 198,750
-----------
OIL SERVICES -- 1.0%
500,000 Universal Compression Inc.,
9.02%, 2/15/08(2) 315,000
-----------
SPECIALTY STORES -- 2.9%
500,000 Musicland Group, 9.00%,
6/15/03 452,500
500,000 Sonic Automotive, Inc., Series B,
11.00%, 8/1/08 457,500
-----------
910,000
-----------
TELEPHONE -- 17.3%
1,000,000 Allegiance Telecom Inc., Series B,
10.64%, 2/15/08(2) 710,000
500,000 AT&T Canada Inc., 7.76%,
6/15/08(2) 394,363
500,000 Covad Communications Group,
Inc., 12.00%, 2/15/10
(Acquired 1/21/00, Cost
$500,000)(3) 472,500
1,000,000 GST USA, Inc., 9.79%,
12/15/05(2) 415,000
1,000,000 ICG Services Inc., 9.14%,
2/15/08(2) 515,000
500,000 Jazztel PLC, 14.00%, 4/1/09 515,000
500,000 McLeodUSA Inc., 9.50%,
11/1/08 483,750
500,000 Rhythms NetConnections Inc.,
12.75%, 4/15/09 425,000
500,000 RSL Communications, Ltd.,
12.25%, 11/15/06 497,500
500,000 Viatel, Inc., 11.25%, 4/15/08 457,500
500,000 Williams Communication Group
Inc., 10.875%, 10/1/09 505,000
-----------
5,390,613
-----------
THRIFTS -- 1.4%
790,000 Ocwen Capital Trust I, 10.875%,
8/1/27 446,350
-----------
WIRELESS TELECOMMUNICATIONS -- 7.2%
250,000 Metrocall, Inc., 10.375%,
10/1/07 198,750
500,000 Nextel Communications, Inc.,
9.375%, 11/15/09 480,000
500,000 Nextel Partners Inc., 11.00%,
3/15/10 492,500
750,000 SBA Communications Corp.,
12.93%, 3/1/08(2) 521,250
500,000 Telecorp PCS Inc., 10.48%,
4/15/09(2) 330,000
250,000 Teligent Inc., 11.50%, 12/1/07 216,250
-----------
2,238,750
-----------
TOTAL CORPORATE BONDS 27,301,963
-----------
(Cost $30,914,145)
Shares/Principal Amount Value
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS & WARRANTS -- 6.4%
COMPUTER SOFTWARE(4)
500 Telehub Communications Corp.
Warrants(5) $ 500
-----------
INTERNET -- 2.4%
580 Concentric Network Corp., PIK,
13.50%, 6/1/10 591,600
5,000 PSINet Inc., Series D, 7.00%,
12/31/49 (Acquired 3/24/00,
Cost $239,375)(3) 158,125
-----------
749,725
-----------
MEDIA -- 1.8%
5,281 CSC Holdings Inc., Series M, PIK,
11.125%, 4/1/08 570,348
-----------
OIL SERVICES -- 1.2%
340 R&B Falcon Corp., PIK, 13.875%,
5/1/09 379,100
-----------
TELEPHONE -- 1.0%
875 Jazztel PLC Warrants(5) 153,891
1,000 Allegiance Telecom Inc.
Warrants(5) 153,375
-----------
307,266
-----------
TOTAL CONVERTIBLE PREFERRED
STOCKS & WARRANTS 2,006,939
-----------
(Cost $1,615,952)
TEMPORARY CASH INVESTMENTS -- 6.2%
$ 340,000 FHLB Discount Notes, 5.88%,
5/1/00(6) 340,000
-----------
Repurchase Agreement, Goldman Sachs &
Co., Inc., (U.S. Treasury obligations), in a joint
trading account at 5.62%, dated 4/28/00,
due 5/1/00 (Delivery value $1,596,747) 1,596,000
-----------
TOTAL TEMPORARY CASH INVESTMENTS 1,936,000
-----------
(Cost $1,936,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $31,244,902
===========
(Cost $34,466,097)
See Notes to Financial Statements www.americancentury.com 9
High-Yield--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
PIK = Payment in Kind. Coupon payments may be in the form of additional
securities.
(1) Security is a zero-coupon bond. The yield to maturity at purchase is
indicated. Zero coupon securities are purchased at a substantial discount
from their value at maturity.
(2) Step-coupon security. Yield to maturity at purchase is indicated. These
securities become interest bearing at a predetermined rate and future date
and are purchased at a substantial discount from their value at maturity.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, 2000, was $1,921,875
which represented 6.0% of net assets.
(4) Industry is less than 0.05% of total investment securities.
(5) Non-income producing.
(6) Rate disclosed is the yield to maturity at purchase.
10 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $34,466,097)
(Note 3) ............................................... $ 31,244,902
Receivable for investments sold .......................... 479,375
Interest receivable ...................................... 701,069
-------------
32,425,346
-------------
LIABILITIES
Disbursements in excess of
demand deposit cash .................................... 254,549
Accrued management fees (Note 2) ......................... 23,359
Dividends payable ........................................ 18,018
Payable for directors' fees and expenses ................. 10
Accrued expenses and other liabilities ................... 70
-------------
296,006
-------------
Net Assets ............................................... $ 32,129,340
=============
CAPITAL SHARES, $0.01 PAR VALUE
Authorized -- Investor Class ............................. 100,000,000
=============
Outstanding -- Investor Class ............................ 3,838,866
=============
Net Asset Value Per Share ................................ $ 8.37
=============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .................. $ 38,321,662
Accumulated net realized loss
on investment transactions ............................. (2,971,127)
Net unrealized depreciation on
investments (Note 3) ................................... (3,221,195)
-------------
$ 32,129,340
=============
See Notes to Financial Statements www.americancentury.com 11
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................ $ 1,721,188
Dividends ............................................... 11,515
-----------
1,732,703
-----------
Expenses (Note 2):
Management fees ......................................... 154,625
Directors' fees and expenses ............................ 90
-----------
154,715
-----------
Net investment income ................................... 1,577,988
-----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized loss on investments ........................ (585,908)
Change in net unrealized
depreciation on investments ........................... 29,482
-----------
Net realized and unrealized
loss on investments ................................... (556,426)
-----------
Net Increase in Net Assets
Resulting from Operations ............................. $ 1,021,562
===========
12 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 1999
Increase (Decrease) in Net Assets
2000 1999
OPERATIONS
Net investment income ...................... $ 1,577,988 $ 3,564,954
Net realized loss on investments ........... (585,908) (2,378,561)
Change in net unrealized
depreciation on investments .............. 29,482 1,540,173
------------ ------------
Net increase in net assets
resulting from operations ................ 1,021,562 2,726,566
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................. (1,577,988) (3,564,954)
From net realized gains on
investment transactions .................. -- (36,637)
------------ ------------
Decrease in net assets
from distributions ....................... (1,577,988) (3,601,591)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................. 27,397,227 54,275,762
Proceeds from reinvestment
of distributions ......................... 1,171,411 2,823,755
Payments for shares redeemed ............... (29,419,474) (54,916,823)
------------ ------------
Net increase (decrease) in
net assets from capital
share transactions ....................... (850,836) 2,182,694
------------ ------------
Net increase (decrease)
in net assets ............................ (1,407,262) 1,307,669
NET ASSETS
Beginning of period ........................ 33,536,602 32,228,933
------------ ------------
End of period .............................. $ 32,129,340 $ 33,536,602
============ ============
TRANSACTIONS IN SHARES OF THE FUND
Sold ....................................... 3,187,735 5,993,456
Issued in reinvestment of distributions .... 136,112 313,678
Redeemed ................................... (3,412,579) (6,071,866)
------------ ------------
Net increase (decrease) .................... (88,732) 235,268
============ ============
See Notes to Financial Statements www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. High-Yield Fund (the fund) is one of the
fourteen series of funds issued by the corporation. The fund is diversified
under the 1940 Act. The fund's investment objective is to seek high current
income by investing in a diversified portfolio of high-yielding corporate bonds,
debentures and notes. The fund invests primarily in lower-rated debt securities,
which are subject to greater credit risk and consequently offer higher yield.
Securities of this type are subject to substantial risks including price
volatility, liquidity risk and default risk. The following significant
accounting policies are in accordance with generally accepted accounting
principles; these policies may require the use of estimates by fund management.
MULTIPLE CLASS -- The fund is authorized to issue two classes of shares: the
Investor Class and the Advisor Class. The two classes of shares differ
principally in their respective shareholder servicing and distribution expenses
and arrangements. All shares of the fund represent an equal pro rata interest in
the assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Sale of the Advisor Class had not commenced as of April
30, 2000.
SECURITY VALUATIONS -- Debt securities are valued through a commercial
pricing service or at the mean of the most recent bid and asked prices.
Portfolio securities traded primarily on a principal securities exchange are
valued at the last reported sales price, or at the mean of the latest bid and
asked prices where no last sales prices is available. When valuations are not
readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
At October 31, 1999, the fund had accumulated net realized capital loss
carryovers for federal income tax purposes of $2,378,561 (expiring in 2007)
which may be used to offset future taxable gains.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
14 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee per class. The Agreement provides
that all expenses of the fund, except brokerage commissions, taxes, interest,
expenses of those directors who are not considered "interested persons& quot; as
defined in the 1940 Act (including counsel fees) and extraordinary expenses,
will by paid by ACIM. The fee is computed daily and paid monthly based on the
fund's class average closing net assets during the previous month. The annual
management fee for the Investor Class is 0.90%.
The Board of Directors adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the 1940 Act.
The plan provides that the fund will pay ACIM an annual distribution fee equal
to 0.25% and service fee equal to 0.25%. The fees are computed daily and paid
monthly based on the Advisor Class's average daily closing net assets during the
previous month. The distribution fee provides compensation for distribution
expenses incurred by financial intermediaries in connection with distributing
shares of the Advisor Class including, but not limited to, payments to brokers,
dealers, and financial institutions that have entered into sales agreements with
respect to shares of the fund. The service fee provides compensation for
shareholder and administrative services rendered by ACIM, its affiliates or
independent third party providers.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments, for the
six months ended April 30, 2000, were $14,501,448 and $14,570,423, respectively.
On April 30, 2000, accumulated net unrealized depreciation was $3,227,120,
based on the aggregate cost of investments for federal income tax purposes of
$34,472,022, which consisted of unrealized appreciation of $685,098 and
unrealized depreciation of $3,912,218.
--------------------------------------------------------------------------------
4. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
six months ended April 30, 2000.
www.americancentury.com 15
High-Yield--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
Net Asset Value,
Beginning of Period .............. $8.54 $8.73 $9.91 $10.00
--------- ---------- --------- --------
Income From Investment Operations
Net Investment Income ............ 0.40 0.80 0.83 0.06
Net Realized and Unrealized Loss
on Investment Transactions ....... (0.17) (0.18) (1.18) (0.09)
--------- ---------- --------- --------
Total From Investment Operations ... 0.23 0.62 (0.35) (0.03)
--------- ---------- --------- --------
Distributions
From Net Investment Income ....... (0.40) (0.80) (0.83) (0.06)
From Net Realized Gains
on Investment Transactions ....... -- (0.01) -- --
--------- ---------- --------- --------
Total Distributions .............. (0.40) (0.81) (0.83) (0.06)
--------- ---------- --------- --------
Net Asset Value, End of Period ..... $8.37 $8.54 $8.73 $9.91
========= ========== ========= ========
Total Return(3) .................. 2.63% 7.03% (4.09)% (0.27)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .......... 0.90%(4) 0.90% 0.90% 0.90%(4)
Ratio of Net Investment Income
to Average Net Assets .......... 9.20%(4) 8.90% 8.41% 7.39%(4)
Portfolio Turnover Rate .......... 47% 95% 85% --
Net Assets, End of Period
(in thousands) ................. $32,129 $33,537 $32,229 $11,072
(1) Six months ended April 30, 2000 (unaudited).
(2) September 30, 1997 (inception) through October 31, 1997.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
16 1-800-345-2021 See Notes to Financial Statements
Retirement Account Information
--------------------------------------------------------------------------------
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 17
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each is managed to provide a "pure play" on a specific sector of the
fixed-income market.
To ensure adherence to this principle, the basic structure of each
portfolio is tied to a specific market index. Fund managers attempt to add value
by making modest portfolio adjustments based on their analysis of prevailing
market conditions.
Investment decisions are made by management teams, which meet regularly to
discuss market analysis and investment strategies.
In addition to these principles, each fund has its own investment policies:
AMERICAN CENTURY HIGH-YIELD seeks to provide a high level of interest
income by investing in a diversified portfolio of high-yielding fixed-income
securities. As a secondary objective, the fund seeks capital appreciation. The
fund invests primarily in lower-quality corporate bonds, with an emphasis on
securities rated BB or B. The fund has no average maturity limitations, but it
typically invests in intermediate- and long-term bonds.
Lower-rated bonds may be subject to greater default risk, liquidity risk,
and price volatility.
COMPARATIVE INDICES
The following index is used in the report for fund performance comparisons.
It is not an investment product available for purchase.
The DLJ HIGH YIELD INDEX is a broad index of corporate bonds with credit
ratings below investment grade. The index has an average maturity of 8 years and
an average credit rating of BB/B.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
The HIGH CURRENT YIELD FUNDS category includes funds that aim at high
current yield from fixed-income securities. No quality or maturity restrictions;
funds tend to invest in lower-grade debt issues.
CREDIT RATING GUIDELINES
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. Ratings are based on an issuer's financial
strength and ability to pay interest and principal in a timely manner.
Securities rated AAA, AA, A, or BBB are considered "investment-grade"
securities, meaning they are relatively safe from default. The High-Yield fund
generally invests in securities that are below investment grade, including those
with the following credit ratings:
BB -- securities that are less vulnerable to default than other
lower-quality issues but do not quite meet investment-grade standards.
B -- securities that are more vulnerable to default than BB-rated
securities but whose issuers are currently able to meet their obligations.
CCC -- securities that are currently vulnerable to default and are
dependent on favorable economic or business conditions for the issuers to meet
their obligations.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Manager
THERESA FENNELL
High-Yield Analysts
MICHAEL DIFLEY
LYNDA LOWRY
18 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 16.
YIELDS
* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES -- the number of different securities held by the fund on
a given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
* AVERAGE DURATION -- another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF FIXED-INCOME SECURITIES
* CORPORATE BONDS -- debt securities or instruments issued by companies and
corporations. Short-term corporate securities are typically issued to raise cash
and cover current expenses in anticipation of future revenues; longer-term
corporate securities are issued to finance capital expenditures, such as new
plant construction or equipment purchases.
www.americancentury.com 19
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies, and risk potential are consistent
with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high
price-fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20931 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
April 30, 2000
AMERICAN CENTURY(reg.sm)
Semiannual Report
[graphic of runners]
[graphic of person looking at computer screen]
Tax-Managed Value
[american century logo(reg.sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
They say hindsight is 20/20. But what about insight? That's what you really
want when choosing mutual funds. Now you can get the insight you need with Fund
Advisor, an online tool that helps you select the right no-load funds for your
goals--short-term and long-term. Fund Advisor helps you:
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Whether you want to analyze your current investments, or find new ones, Fund
Advisor can help you feel confident with the decisions you make.
How does it work?
Just tell Fund Advisor about your investing style, your current investments
and goals. It will analyze your investments and offer impartial recommendations
to help you get on track for your future.
To get Fund Advisor's unique perspective, go to www.americancentury.com and
select Fund Advisor at the top of the page. For the initial set-up, you will
need:
* Your OnePIN to log in to Fund Advisor
* Your latest tax return
* Your most recent investment account statements
To learn more about this new tool and how it can help you better manage your
financial future, select the "Online Demo" from the Fund Advisor introduction
page.
*Patent pending. Fund advisor is guided by the portfolio management expertise of
leading investment professionals. It was developed for Acumation, Inc., a
registered investment advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through fund advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
[left margin]
TAX-MANAGED VALUE
(ACTIX)
-----------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Saving for Higher Education Just Got Easier
--------------------------------------------------------------------------------
Introducing LEARNING QUEST, a powerful new education savings plan. Brought to
you by the state of Kansas and managed by American Century Investments, Learning
Quest allows you to save tax-deferred for higher education. State and federal
income taxes aren't due on the earnings until they are withdrawn, when they are
taxed at the student's tax rate, which is usually lower than the contributor's.
Parents, grandparents, -- anyone can open an account. And, anyone can be
named the recipient -- even yourself. The plan can be used for any accredited
university, college or approved vocational program, ANYWHERE IN THE UNITED
STATES.
For more information, including estate-planning benefits, call
1-800-579-2203, or visit www.learningquestsavings.com.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The six months ended April 30, 2000, offered few bright spots for impatient
value-oriented investors. Except for a brief time at the end of the period,
value stocks could gain little traction amid the almost frenzied preference
investors had for high-growth technology stocks. As a result, Tax-Managed Value
declined slightly during the period.
As your portfolio managers indicate in their discussions, they adhered to
their disciplined strategies of investing in high-quality, inexpensively priced
companies. True, that genre of firms has been out of favor for a frustratingly
long time, but we think we're seeing signs that investors could be starting to
notice the abundance of fundamentally sound companies whose share prices are
extremely attractive. In any event, we are staying true to our investment style
and discipline and are filling Tax-Managed Value's portfolio with what we
perceive as the market's best value opportunities. This approach has proven
successful over time.
Turning to corporate matters, the months covered in this report have been
important ones for American Century. Besides serving the nearly two million
investors who look to American Century for investment management, we also worked
hard to serve and support the 3,000 people who work on your behalf--to create a
positive, safe, and productive work environment. This commitment was recognized
and rewarded in late 1999 when American Century ranked in the top 40 of FORTUNE
magazine's "100 Best Companies to Work For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and is essential in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's fund performance
reports like this one have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal from DALBAR. You can count on us to keep
looking for ways to improve the reports, literature and statements you receive
from us.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/ /signature/
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
TAX-MANAGED VALUE
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Portfolio at a Glance .................................................. 5
Top Ten Holdings ....................................................... 6
Top Five Industries .................................................... 6
Types of Investments ................................................... 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 10
Statement of Operations ................................................ 11
Statements of Changes
in Net Assets ....................................................... 12
Notes to Financial
Statements .......................................................... 13
Financial Highlights ................................................... 15
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 16
Background Information
Investment Philosophy
and Policies ..................................................... 17
Comparative Indices ................................................. 17
Portfolio Managers .................................................. 17
Glossary ............................................................... 18
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* The six months ended April 30, 2000, proved to be difficult ones for
value-oriented investors. During the period, the Standard & Poor's
500/BARRA Value Index returned 2.70%. Shifting sentiment regarding the
direction of the economy, Federal Reserve Board monetary policy and
corporate profit outlook led to increased volatility during the period. The
U.S. economy continued its run of robust growth, prompting the Fed to hike
interest rates in an attempt to head off inflation.
* From November 1999 through February 2000, we witnessed the astounding
share-price growth of nearly every technology-oriented stock, while nearly
every other segment of the market wallowed. In mid-March, however,
investors lost faith in "New Economy" stocks, many of which had reached
sky-high valuations. The market shifted abruptly, and value stocks enjoyed
a brief renaissance.
TAX-MANAGED VALUE
* Tax-Managed Value returned -0.77% for the six months ended April 30, 2000.
It underperformed its benchmark, the S&P 500/BARRA Value Index, which
returned 2.70%. The S&P 500 gained 7.19% during that timeframe.
* "New Economy" technology stocks led the market during the period.
Generally, these were mid-capitalization growth stocks with high
price-to-earnings ratios and very little, if any, earnings. These
characteristics place most of these stocks outside of Tax-Managed Value's
investment parameters.
* The fund benefited significantly from its holdings in several older, more
established companies, such as General Motors and Hewlett-Packard, that
undertook structural changes in their business that resulted in greater
shareholder value.
* Performance was dampened by the fund's stake in financial services firms,
despite the fact that the fund held a relatively lighter stake in this
group than its benchmark index. Rising interest rates spurred by Federal
Reserve Board monetary policy weighed heavily on these firms.
Telecommunications stocks also hurt performance, due to regulatory issues
surrounding consolidation within the industry.
[left margin]
TAX-MANAGED VALUE
(ACTIX)
TOTAL RETURNS: AS OF 4/30/00
6 Months -0.77%*
1 Year -6.71%
INCEPTION DATE: 3/31/99
NET ASSETS: $40.1 million
*Not annualized.
Investment terms are defined in the Glossary on pages 18-19.
2 1-800-345-2021
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
[photo of Mark Mallon]
Mark Mallon, head of specialty, asset allocation, and growth and income equity
funds at American Century
SUBDUED RETURNS FOR VALUE STOCKS
Value stocks continued to underperform the overall market during the six
months ended April 30, 2000. During that period, the Standard & Poor's 500/
BARRA Value Index returned 2.70%, while the S&P 500 posted a return of 7.19%.
But there was a silver lining. . . .
NEW ECONOMY STOCKS BLOW THE TOP OFF THE MARKET
There was increased volatility during the period, arising from shifting
sentiment regarding the direction of the economy, Federal Reserve Board monetary
policy, and the resulting corporate profit outlook. The U.S. economy continued
to fire on all cylinders, prompting the Fed to continue hiking interest rates in
an attempt to head off inflation.
From November 1999 through February 2000, we witnessed the astonishing
share-price growth of virtually every stock that had a connection to the new
economy developing over the Internet. Meanwhile, nearly every other segment of
the market wallowed, especially old economy established companies. Look at the
numbers: for the four-month period ended February 29, 2000, the technology-laden
Nasdaq Composite Index returned an astonishing 58.33%. At the same time, the S&P
500 returned 0.67% and the S&P 500/BARRA Value Index returned -6.37%.
A TURN IN THE MARKET
In mid-March, however, the market shifted. Investors lost faith in new-
economy stocks, many of which had reached extraordinary valuations despite the
fact that they had yet to post earnings. Some have speculated that it was the
judgment against Microsoft in early March, or eroding confidence brought on by
the steady drumbeat of Fed rate increases that led to this tech downturn.
Nevertheless, the data for March and April 2000 paint a clear picture of a very
different market environment. During those two months, the S&P 500/BARRA Value
Index returned 9.69%, the S&P 500 returned 6.48%, and the growth-biased Nasdaq
limped along to a -17.80% return.
A WEALTH OF OPPORTUNITIES
The renaissance of value stocks brought with it recognition that the value
universe had expanded to include a number of established companies. In its rush
to embrace speculative Internet shares, the market rejected many firms -- even
though they offered solid earnings growth -- to the point where they were
selling at levels indicating an impending recession. Staying the course,
Tax-Managed Value was able to sweep up many of these opportunities and benefit
from the market's new-found affection for old-economy stocks. By doing so, it
proved once again the benefit of staying true to an investment discipline.
[right margin]
"THE RENAISSANCE OF VALUE STOCKS BROUGHT WITH IT RECOGNITION THAT THE VALUE
UNIVERSE HAD EXPANDED TO INCLUDE A NUMBER OF ESTABLISHED COMPANIES."
MARKET RETURNS
FOR THE SIX MONTHS ENDED APRIL 30, 2000
S&P 500/BARRA VALUE 2.70%
S&P MidCap 400/BARRA VALUE 10.75%
S&P SmallCap 600/BARRA VALUE
8.77%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization value stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED APRIL 30, 2000
[line chart -- data below]
S&P 500/ S&P 400/ S&P 600/
BARRA VALUE BARRA VALUE BARRA VALUE
10/31/1999 $1.00 $1.00 $1.00
11/30/1999 $0.99 $1.02 $1.02
12/31/1999 $1.03 $1.05 $1.05
1/31/2000 $1.00 $1.01 $1.00
2/29/2000 $0.94 $0.97 $1.04
3/31/2000 $1.03 $1.12 $1.08
4/30/2000 $1.03 $1.11 $1.09
Value on 4/30/00
S&P 500 $1.07
S&P MIDCAP 400 $1.21
RUSSELL 2000 $1.19
www.americancentury.com 3
Tax-Managed Value--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF APRIL 30, 2000
INVESTOR CLASS (INCEPTION 3/31/99)
TAX-MANAGED VALUE S&P 500/BARRA VALUE
6 MONTHS* .......... -0.77% 2.70%
1 YEAR ............. -6.71% 0.46%
================================================================================
AVERAGE ANNUAL RETURNS
LIFE OF FUND ....... 2.60% 8.39%
*Returns for periods less than one year are not annualized.
See pages 16-18 for information about share classes, the S&P 500/BARRA Value
Index and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 4/30/00
Ultra $94,053
S&P 500 $55,896
[mountain chart -- data below]
Tax-Managed Value S&P 500/BARRA Value
3/31/1999 $10,000 $10,000
4/30/1999 $11,020 $10,862
5/31/1999 $10,940 $10,670
6/30/1999 $11,299 $11,079
7/31/1999 $10,780 $10,738
8/31/1999 $10,359 $10,467
9/30/1999 $9,919 $10,057
10/31/1999 $10,359 $10,625
11/30/1999 $10,340 $10,562
12/31/1999 $10,260 $10,959
1/31/2000 $9,997 $10,610
2/29/2000 $9,150 $9,947
3/31/2000 $10,200 $10,985
4/30/2000 $10,281 $10,911
The graph at left shows the growth of a $10,000 investment over the life of the
fund. The S&P 500/BARRA Value Index is provided for comparison. Tax-Managed
Value's total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the S&P
500/BARRA Value Index do not. Past performance does not guarantee future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
4 1-800-345-2021
Tax-Managed Value--Q&A
--------------------------------------------------------------------------------
[photo of Mark Mallon and Chuck Ritter}
An interview with Mark Mallon and Chuck Ritter, portfolio managers on the
Tax-Managed Value investment team.
HOW DID TAX-MANAGED VALUE PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 2000?
In a market that was generally unfriendly to value stocks for most of the
period, Tax-Managed Value returned -0.77%. Its benchmark, the S&P 500/BARRA
Value Index, returned 2.70% during the same period, while the S&P 500 returned
7.19%.
WHY DID THE FUND UNDERPERFORM ITS BENCHMARK INDEX?
During the period covered by this report, "New Economy" technology stocks
were the market leaders. For the most part, these were mid-capitalization growth
stocks with high price-to-earnings ratios and very little, if any, earnings.
Tax-Managed Value looks for stocks of more established, value-oriented
companies--precisely the types of firms that were out of favor during most of
the period. Tax-Managed Value also carries more of a value bias than its
performance benchmark, which means when the value style is out of favor, the
fund will typically lag its benchmark.
SINCE THE FUND IS FAIRLY NEW -- JUST OVER A YEAR OLD -- CAN YOU REMIND US OF
YOUR INVESTMENT APPROACH?
We use a disciplined, bottom-up approach, selecting companies one at a time
for Tax-Managed Value's portfolio. That means we buy and sell stocks on the
basis of the companies' individual merits, rather than as a result of broad
sector or industry themes. Good value stocks are those that are bought at
relatively inexpensive prices, with the hope that they will increase in share
price over time due to positive developments in their specific businesses,
industries or the overall investment environment.
Our search for these stocks begins with proprietary database screening that
identifies attractively priced stocks. To identify those that are attractively
priced, we compare a stock's current statistical values--such as
price-to-earnings ratios (market price divided by the company's earnings per
share over a 12-month period) or price-to-book ratios (market price compared to
the company's liquidation value)--to its historical values. We also look for
companies with high cash flow and above-average dividend growth potential. Next,
we depend on fundamental research to determine which companies are financially
strong and appear to have solid long-term prospects. We focus for the most part
on larger companies--those with a market capitalization of $5 billion or
more--and also take care to maintain a portfolio well diversified across sectors
and industries.
AS FAR AS SECTORS WERE CONCERNED, TECHNOLOGY PROVED TO BE A BIG WINNER DURING
THE PERIOD. HOW DID YOU REACT TO THAT DEVELOPMENT?
Technology is typically not an area that we emphasize because tech stocks
tend to carry pretty high valuations. Nevertheless, about a year ago we were
able to invest in some technology companies selling at below-normal valuations.
Oracle Systems -- the world's largest maker of database management
[right margin]
"WE USE A DISCIPLINED, BOTTOM-UP APPROACH, SELECTING COMPANIES ONE AT A TIME FOR
TAX-MANAGED VALUE'S PORTFOLIO. THAT MEANS WE BUY AND SELL STOCKS ON THE BASIS OF
THE COMPANIES' INDIVIDUAL MERITS, RATHER THAN AS A RESULT OF BROAD SECTOR OR
INDUSTRY THEMES."
PORTFOLIO AT A GLANCE
4/30/00 10/31/99
NO. OF COMPANIES 86 90
MEDIAN P/E RATIO 13.0 16.5
MEDIAN MARKET $11.5 $19.5
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 44%(1) 41%(2)
EXPENSE RATIO 1.10%(3) 1.10%(3)
(1) Six months ended 4/30/00.
(2) Period from 3/31/99 to 10/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 18-19.
www.americancentury.com 5
Tax-Managed Value--Q&A
--------------------------------------------------------------------------------
(Continued)
software -- and Nortel Networks -- a leading supplier of electronic equipment,
were reasonably priced in the spring of 1999 because investors had overreacted
to short-term problems or overlooked some strengths. Over the last year, market
perceptions changed. Investors began focusing on the role these companies are
playing in the development of the Internet's infrastructure. Their valuations --
along with virtually anything tied to the Internet -- moved up dramatically.
While acknowledging the improved potential, we stuck to our value discipline and
sold these stocks after realizing significant profits.
SINCE YOU MANAGE THE FUND TO BE TAX-EFFICIENT, WHAT DID YOU DO ABOUT THE
SUBSTANTIAL GAINS REALIZED FROM THE SALE OF THESE INVESTMENTS?
We offset the gains by harvesting losses in other positions, being careful
to maintain our exposure to attractive areas of the market. For example, with
interest rates on the rise, bank stocks came under pressure and experienced
significant sell-offs. To harvest losses in our bank stocks, we cut our
positions in some bank stocks while increasing our positions in others. After
waiting a month to comply with IRS rules, we reversed the process, returning to
our original positions. Each of the sales allowed us to realize some capital
losses, which were used to offset the realized capital gains from selling some
of our winners. Importantly, the fund remained positioned throughout the process
in stocks we thought were attractive, a fact that helped the fund when bank
stocks rebounded in mid-March.
WHAT ARE SOME OF THE OTHER STRATEGIES YOU GENERALLY FOLLOW TO MINIMIZE THE
IMPACT OF FEDERAL TAXES ON SHAREHOLDER RETURNS?
We're less likely than some managers to sell off a stock that has enjoyed a
sudden run-up in price. While some managers sell off a position as soon the
stock reaches a predetermined price target, we buy a stock when it's cheap and
we'll tend to hold on to it over a longer period of time, as long as the
company's prospects stay positive.
WHAT WERE SOME OF THE OTHER STOCKS THAT HELPED THE FUND'S PERFORMANCE?
The fund benefited significantly from three older, more established
companies that took actions to unlock shareholder value. General Motors
announced a program enabling investors to exchange shares of General Motors for
shares of GM Hughes Electronics, a subsidiary. The program should lead to a
significant reduction in General Motors shares outstanding. The stock reacted
very positively as growth investors bought shares of General Motors as a way of
buying GM Hughes Electronics at a discount and value investors bought shares in
anticipation of much higher earnings per share at General Motors.
Hewlett-Packard also performed well. It spun off a portion of one of its
operations into a new company, Agilent Technologies, a test-equipment provider.
This spring, Hewlett-Packard shareholders will receive one-third of a share of
Agilent for every share of Hewlett-Packard they own. As Agilent's stock price
skyrocketed, and the company maintained its strong position in the printer
market, the price investors were willing to pay for Hewlett-Packard also
increased.
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
EXXON MOBILE CORP. 4.9% 4.3%(1)
CITIGROUP INC. 3.3% 2.8%
MCI WORLDCOM, INC. 2.6% 2.4%
AT&T CORP. 2.5% 2.3%
ROYAL DUTCH
PETROLEUM
CO. NEW YORK SHARES 2.2% 2.0%
FORD MOTOR CO. 2.1% 2.1%
BELL ATLANTIC CORP. 2.1% 2.1%
PHILLIP MORRIS
COMPANIES INC. 2.0% 1.9%
INTERNATIONAL BUSINESS
MACHINES CORP. 2.0% 1.6%
COMPUTER ASSOCIATES
INTERNATIONAL, INC. 1.7% 0.9%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
4/30/00 10/31/99
BANKS 11.1% 13.3%
TELEPHONE 8.7% 8.4%
ENERGY RESERVES
&
PRODUCTION 7.9% 7.8%
PROPERTY & CASUALTY
INSURANCE 5.4% 6.6%
INVESTMENT TRUSTS 4.8% --
(1) Exxon Corp. and Mobil Corp. merged on 11/30/99. The 10/31/99 percentage
represents both Exxon Corp. and Mobil Corp. shares owned by the fund.
6 1-800-345-2021
Tax-Managed Value--Q&A
--------------------------------------------------------------------------------
(Continued)
A third contributor to performance was TRW, a firm that could be considered
representative of both the old and new economies. TRW is a major supplier of
auto parts, but it also has operations in defense electronics. The technology in
its defense operations has been cutting edge, but the company has historically
failed to successfully commercialize its technology. Recently, TRW began
licensing its technology to other companies in return for equity stakes. The
initial results have been very promising and its stock price has responded
nicely.
WHICH INVESTMENTS PROVED TO BE DISAPPOINTING?
Financial services stocks struggled. Although Tax-Managed Value remained
slightly underweighted in financial stocks relative to its index, these stocks
were a drag on performance. Rising interest rates spurred by Federal Reserve
Board monetary policy was one of the main reasons for their underperformance.
However, some banks and financial firms suffered even more from company-
specific problems. Banc One, for example, encountered an unexpected slowdown in
the growth in one of its credit card units. Meanwhile, Allstate faced a tough
pricing environment in the personal property and casualty insurance industry.
At the same time, not all of the fund's finance-related stocks posted poor
performance. In fact, Citigroup proved to be one of the better-performing stocks
for us. This company benefited from the synergy emerging from the marriage
between Citicorp and the Travelers Group that created it. In addition, during a
period when the capital markets were very strong, the company benefited from the
solid performance of its Salomon Smith Barney franchise.
Telecommunications stocks also hit a hard patch, due to issues surrounding
when and under what conditions the many mergers in the industry would be
approved by federal regulators. In addition, long-distance plans have become
increasingly competitive, diminishing the pricing power of long-distance
carriers. In this environment, fund investments Bell Atlantic and MCI WorldCom
suffered declines.
WHAT IS YOUR OUTLOOK?
The economy seems to have strong momentum. As the Federal Reserve Board
moves to pre-empt inflation, interest rates should be on the rise, which we feel
could cause the economy to slow down. Rising interest rates and slower economic
growth could set the stage for a tougher environment for stocks in general.
The bright side is that there are still many attractively valued stocks in
the market. We have seen some signs that investors are returning to focusing on
fundamentals and the prices they pay for fundamentals instead of simply buying
concepts -- a shift that favors our investment style.
[right margin]
"WE HAVE SEEN SOME SIGNS THAT INVESTORS ARE RETURNING TO FOCUSING ON
FUNDAMENTALS AND THE PRICES THEY PAY FOR FUNDAMENTALS INSTEAD OF SIMPLY BUYING
CONCEPTS -- A SHIFT THAT FAVORS OUR INVESTMENT STYLE."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF APRIL 30, 2000
COMMON STOCKS 96%
TEMPORARY CASH INVESTMENTS 4%
[pie chart]
AS OF OCTOBER 31, 1999
COMMON STOCKS 98%
TEMPORARY CASH INVESTMENTS 2%
[pie chart]
www.americancentury.com 7
Tax-Managed Value--Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.2%
APPAREL & TEXTILES -- 1.7%
4,400 Liz Claiborne, Inc. $ 203,775
16,700 VF Corp. 471,775
-----------------------
675,550
-----------------------
BANKS -- 11.1%
20,800 Banc One Corp. 634,400
9,000 Bank of America Corp. 441,000
5,300 Chase Manhattan Corp. 381,931
22,000 Citigroup Inc. 1,307,626
9,000 First Union Corp. 286,875
11,000 Fleet Boston Financial Corp. 389,812
12,600 KeyCorp 233,100
18,400 National City Corp. 312,800
7,500 Summit Bancorp. 190,312
13,500 U.S. Bancorp 274,219
-----------------------
4,452,075
-----------------------
CHEMICALS -- 3.2%
10,900 Air Products and Chemicals, Inc. 338,581
7,000 FMC Corp.(1) 407,312
2,400 Minnesota Mining & Manufacturing Co. 207,600
13,500 Sherwin-Williams Co. 335,812
-----------------------
1,289,305
-----------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 2.8%
14,900 Compaq Computer Corp. 435,825
6,400 Hewlett Packard Co.(1)(2) 663,600
14,200 Lanier Worldwide Inc.(1) 27,512
-----------------------
1,126,937
-----------------------
COMPUTER SOFTWARE -- 4.3%
12,000 Computer Associates International, Inc. 669,750
7,000 International Business Machines Corp. 781,375
4,000 Microsoft Corp.(1) 279,125
-----------------------
1,730,250
-----------------------
CONSUMER DURABLES -- 1.1%
7,000 Whirlpool Corp. 455,875
-----------------------
DEFENSE/AEROSPACE -- 2.4%
12,000 Boeing Co. 476,250
12,000 Raytheon Co. Cl A 275,250
3,300 TRW Inc. 193,050
-----------------------
944,550
-----------------------
DEPARTMENT STORES -- 2.9%
25,000 Dillard's Inc. Cl A 348,438
43,900 Kmart Corp.(1) 356,688
12,800 Sears, Roebuck & Co. 468,800
-----------------------
1,173,926
-----------------------
Shares Value
--------------------------------------------------------------------------------
DRUGS -- 3.0%
8,100 Bristol-Myers Squibb Co. $ 424,744
5,000 Lilly (Eli) & Co. 386,562
5,600 Merck & Co., Inc. 389,200
------------------------
1,200,506
------------------------
ELECTRICAL EQUIPMENT -- 2.6%
7,900 Harris Corp. 255,269
7,000 Lucent Technologies Inc. 435,312
2,800 Motorola, Inc. 333,375
------------------------
1,023,956
------------------------
ELECTRICAL UTILITIES -- 2.9%
5,500 American Electric Power Co., Inc. 201,438
25,000 Edison International 476,562
10,500 FPL Group, Inc. 474,469
------------------------
1,152,469
------------------------
ENERGY RESERVES & PRODUCTION -- 7.9%
4,300 Chevron Corp. 366,038
25,005 Exxon Mobil Corp. 1,942,576
15,100 Royal Dutch Petroleum Co.
New York Shares 866,362
------------------------
3,174,976
------------------------
ENVIRONMENTAL SERVICES -- 0.9%
22,000 Waste Management, Inc. 349,250
------------------------
FINANCIAL SERVICES -- 3.1%
12,500 Countrywide Credit Industries, Inc. 345,312
6,300 Fannie Mae 379,969
12,200 Household International, Inc. 509,350
------------------------
1,234,631
------------------------
FOOD & BEVERAGE -- 2.3%
25,500 ConAgra, Inc. 481,312
13,000 Heinz (H.J.) Co. 442,000
------------------------
923,312
------------------------
FOREST PRODUCTS & PAPER -- 0.5%
8,000 Fort James Corp. 191,500
------------------------
GROCERY STORES -- 0.5%
6,700 Albertson's, Inc. 218,169
------------------------
HEAVY ELECTRICAL EQUIPMENT -- 2.2%
8,100 Cooper Industries, Inc. 277,931
11,300 Emerson Electric Co. 620,088
------------------------
898,019
------------------------
HOME PRODUCTS -- 0.8%
7,500 Avon Products, Inc. 311,250
------------------------
INDUSTRIAL PARTS -- 2.5%
11,000 ITT Industries, Inc. 347,188
7,000 Parker-Hannifin Corp. 325,500
12,500 Snap-on Inc. 330,469
------------------------
1,003,157
------------------------
8 1-800-345-2021 See Notes to Financial Statements
Tax-Managed Value--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
INFORMATION SERVICES -- 0.7%
4,000 Electronic Data Systems Corp. $ 275,000
------------------------
INVESTMENT TRUSTS -- 4.8%
10,000 Equity Residential Properties Trust 455,000
10,000 Standard and Poor's 500
Depositary Receipt 1,454,376
------------------------
1,909,376
------------------------
LEISURE -- 1.3%
7,700 Eastman Kodak Co. 430,719
9,000 Mattel, Inc. 110,250
------------------------
540,969
------------------------
LIFE & HEALTH INSURANCE -- 0.7%
11,200 Torchmark Corp. 280,700
------------------------
MEDIA -- 2.1%
7,700 Disney (Walt) Co. 333,506
6,500 MediaOne Group Inc.(1) 491,562
------------------------
825,068
------------------------
MEDICAL PROVIDERS & SERVICES -- 1.9%
18,000 Columbia/HCA Healthcare Corp. 511,875
33,000 HEALTHSOUTH Corp.(1) 266,062
------------------------
777,937
------------------------
MINING & METALS -- 0.7%
16,400 Crown Cork & Seal Co., Inc. 266,500
------------------------
MOTOR VEHICLES & PARTS -- 3.4%
15,500 Ford Motor Co. 847,656
5,400 General Motors Corp. 505,575
------------------------
1,353,231
------------------------
OIL REFINING -- 1.1%
18,500 USX-Marathon Group 431,281
------------------------
PROPERTY & CASUALTY INSURANCE -- 5.4%
21,800 Allstate Corp. 515,025
5,900 Chubb Corp. (The) 375,388
9,700 Loews Corp. 534,712
6,600 MBIA Inc. 326,288
8,500 MGIC Investment Corp. 406,406
------------------------
2,157,819
------------------------
Shares Value
--------------------------------------------------------------------------------
PUBLISHING -- 2.4%
13,000 American Greetings Corp. Cl A $ 235,625
14,000 Deluxe Corp. 352,625
7,500 Knight-Ridder, Inc. 367,969
------------------------
956,219
------------------------
RESTAURANTS -- 0.8%
8,000 McDonald's Corp. 305,000
------------------------
SECURITIES & ASSET MANAGEMENT -- 0.5%
5,900 Franklin Resources, Inc. 190,275
------------------------
SEMICONDUCTOR(3)
118 Agilent Technologies, Inc.(1)(2) 10,443
------------------------
TELEPHONE -- 8.7%
21,200 AT&T Corp. 989,775
14,100 Bell Atlantic Corp.(4) 835,425
9,000 GTE Corp. 609,750
22,500 MCI WorldCom, Inc.(1) 1,023,047
------------------------
3,457,997
------------------------
THRIFTS -- 1.0%
15,200 Washington Mutual, Inc. 388,550
------------------------
TOBACCO -- 2.0%
37,000 Philip Morris Companies Inc. 809,375
------------------------
TOTAL COMMON STOCKS 38,465,403
------------------------
(Cost $37,607,521)
TEMPORARY CASH INVESTMENTS -- 3.8%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.68%, dated 4/28/00,
due 5/1/00 (Delivery value $1,500,710)
(Cost $1,500,000) 1,500,000
------------------------
TOTAL INVESTMENT SECURITIES -- 100.0% $39,965,403
========================
(Cost $39,107,521)
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
(2) When-issued security.
(3) Industry is less than 0.05% of the fund's total investment securities.
(4) Security, or a portion thereof, has been segregated at the custodian bank
for a when-issued security.
See Notes to Financial Statements www.americancentury.com 9
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. The net assets divided by shares outstanding is the share price, or NET
ASSET VALUE PER SHARE. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $39,107,521) (Note 3) ................. $ 39,965,403
Cash ......................................................... 96,134
Receivable for investments sold .............................. 307,850
Dividends and interest receivable ............................ 60,060
------------
40,429,447
------------
LIABILITIES
Payable for investments purchased ............................ 307,886
Accrued management fees (Note 2) ............................. 36,775
Payable for directors' fees and expenses ..................... 13
Accrued expenses and other liabilities ....................... 30
------------
344,704
------------
NET ASSETS ................................................... $ 40,084,743
============
CAPITAL SHARES, $0.01 PAR VALUE
Authorized - Investor Class .................................. 134,000,000
============
Outstanding - Investor Class ................................. 7,875,369
============
Net Asset Value Per Share .................................... $ 5.09
============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ...................... $ 40,475,502
Undistributed net investment income .......................... 157,869
Accumulated net realized loss on investment transactions ..... (1,406,510)
Net unrealized appreciation on investments (Note 3) .......... 857,882
------------
$ 40,084,743
============
10 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INVESTMENT INCOME
Income:
Dividends .................................................... $ 503,684
Interest ..................................................... 35,396
-----------
539,080
-----------
Expenses (Note 2):
Management fees .............................................. 233,716
Directors' fees and expenses ................................. 89
-----------
233,805
-----------
Net investment income ........................................ 305,275
-----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized loss on investments ............................. (1,233,599)
Change in net unrealized appreciation on investments ......... 349,942
-----------
Net realized and unrealized loss on investments .............. (883,657)
-----------
Net Decrease in Net Assets Resulting from Operations ......... $ (578,382)
===========
See Notes to Financial Statements www.americancentury.com 11
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED) AND PERIOD ENDED OCTOBER 31, 1999
Increase (Decrease) in Net Assets
2000 1999(1)
OPERATIONS
Net investment income ..................... $ 305,275 $ 286,032
Net realized loss on investments .......... (1,233,599) (172,911)
Change in net unrealized appreciation
on investment transactions ............. 349,942 507,940
------------ ------------
Net increase (decrease) in net assets
resulting from operations .............. (578,382) 621,061
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................ (433,438) --
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................. 3,797,702 47,330,405
Proceeds from reinvestment of distributions 428,437 --
Payments for shares redeemed .............. (9,261,744) (1,819,298)
------------ ------------
Net increase (decrease) in net assets from
capital share transactions ............. (5,035,605) 45,511,107
------------ ------------
Net increase (decrease) in net assets ..... (6,047,425) 46,132,168
NET ASSETS
Beginning of period ....................... 46,132,168 --
------------ ------------
End of period ............................. $ 40,084,743 $ 46,132,168
============ ============
Undistributed net investment income ....... $ 157,869 $ 286,032
============ ============
TRANSACTIONS IN SHARES OF THE FUND
Sold ...................................... 763,645 9,255,286
Issued in reinvestment of distributions ... 85,687 --
Redeemed .................................. (1,877,012) (352,237)
------------ ------------
Net increase (decrease) ................... (1,027,680) 8,903,049
============ ============
(1) March 31, 1999 (inception) through October 31, 1999.
12 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Tax-Managed Value Fund (the fund) is one
of the fourteen series of funds issued by the corporation. The fund is
diversified under the 1940 Act. The fund's investment objective is to seek
long-term capital growth by investing primarily in common stocks that management
believes to be undervalued at the time of purchase while attempting to minimize
the impact of federal taxes on shareholder returns. The following significant
accounting policies are in accordance with generally accepted accounting
principles; these policies may require the use of estimates by fund management.
MULTIPLE CLASS -- The fund is authorized to issue three classes of shares:
the Investor Class, the Advisor Class, and the Institutional Class. The three
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the fund represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Sale of the Advisor Class and
Institutional Class had not commenced as of April 30, 2000.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that collateral, represented by securities, received in
a repurchase transaction be transferred to the custodian in a manner sufficient
to enable the fund to obtain those securities in the event of a default under
the repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to the
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are generally declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
At October 31, 1999, accumulated net realized capital loss carryovers of
$172,911 (expiring in 2007) may be used to offset future taxable gains.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee per class. The Agreement provides
that all expenses of the fund, except brokerage commissions, taxes, interest,
expenses of those directors who are not considered "interested persons" as
defined in the 1940 Act (including counsel fees) and extraordinary expenses,
will be paid by ACIM. The fee is computed daily and paid monthly based on the
fund's class average daily closing net assets during the previous month.
The annualized fee schedule for the fund is as follows:
1.10% on the first $500 million
1.00% on the next $500 million
0.90% over $1 billion
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the six months ended April 30, 2000, were $18,153,894 and
$24,173,712, respectively.
On April 30, 2000, accumulated net unrealized appreciation was $857,882,
which consisted of unrealized appreciation of $3,345,513 and unrealized
depreciation of $2,487,631. The aggregate cost of investments for federal income
tax purposes was the same as the cost for financial reporting purposes.
--------------------------------------------------------------------------------
4. BANK LOAN
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
six months ended April 30, 2000.
14 1-800-345-2021
Tax-Managed Value--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
2000(1) 1999(2)
=============================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period .................... $5.18 $5.00
-------- --------
Income From Investment Operations
Net Investment Income ................................. 0.04 0.04
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ......................... (0.08) 0.14
-------- ---------
Total From Investment Operations ...................... (0.04) 0.18
-------- ---------
Distributions
From Net Investment Income ............................ (0.05) --
-------- ---------
Net Asset Value, End of Period .......................... $5.09 $5.18
======== =========
Total Return(3) ....................................... (0.77)% 3.60%
======== =========
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets .......1.10%(4) 1.10%(4)
Ratio of Net Investment Income to Average Net Assets ....1.44%(4) 1.14%(4)
Portfolio Turnover Rate ................................. 44% 41%
Net Assets, End of Period (in thousands) ................ $40,085 $46,132
(1) Six months ended April 30, 2000 (unaudited).
(2) March 31, 1999 (inception) through October 31, 1999.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 15
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the fund: Investor Class,
Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
16 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 15 growth and income funds including domestic
equity, balanced, asset allocation, and specialty. Tax-Managed Value is a
general equity fund managed to provide growth over time with less volatility
than more aggressive growth funds.
AMERICAN CENTURY TAX-MANAGED VALUE invests primarily in common stocks of
medium to large companies that the management team believes are temporarily
undervalued. Stock purchases are based on a company-by-company analysis to
determine whether a stock is trading below what the fund management team
considers fair value. This is determined by comparing a stock's share price with
key financial measures, including earnings, book value, cash flow, and
dividends. If the stock's price relative to these measures is low relative to
where it typically has traded, it is a candidate for purchase.
The managers also will attempt to minimize the impact of federal income
taxes on shareholder returns by attempting to minimize taxable distributions to
shareholders.
Broad diversification across many industries is stressed to prevent the
performance of one sector from dominating fund returns.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded Blue Chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
leading industries. Created by Standard & Poor's, it is intended to be a broad
measure of U.S. stock market performance.
The S&P 500/BARRA VALUE INDEX is a capitalization-weighted index consisting
of S&P 500 stocks that have lower price- to-book ratios, and, in general, share
other characteristics associated with value-style stocks.
The S&P MIDCAP 400/BARRA VALUE INDEX is a capitalization-weighted index
consisting of S&P 400 stocks that have lower price-to-book ratios and, in
general, share other characteristics associated with value-style stocks.
The S&P SMALLCAP 600/BARRA VALUE INDEX is a capitalization-weighted index
consisting of S&P SmallCap 600 stocks that have lower price-to-book ratios. The
S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market size,
liquidity, and industry group representation.
[left margin]
PORTFOLIO MANAGERS
Tax-Managed Value
MARK MALLON, CFA
CHARLES RITTER, CFA
www.americancentury.com 17
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all the fund's distributions
are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 15.
INVESTMENT TERMS
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
* MEDIAN MARKET CAPITALIZATION -- Market capitalization (market cap) is the
total value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES -- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER -- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO -- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO -- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
TYPES OF STOCKS
* BLUE CHIP STOCKS -- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS -- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS -- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech, health
care and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS -- these are stocks generally
considered to be companies with a market capitalization (the total value of a
company's outstanding stock) of more than $10.3 billion. Though dynamic given
its sensitivity to market fluctuation, this is the market capitalization
breakpoint on April 30, 2000, as determined by Lipper Inc. The Dow Jones
Industrial Average and the S&P 500 Index generally consist of stocks in this
range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- these are stocks generally
considered to be companies with a market capitalization (the total value of a
company's outstanding stock) of between $2.3 billion and $10.3 billion. Though
dynamic given its sensitivity to market fluctuation, this is the market
capitalization range on April 30, 2000, as determined by Lipper Inc. The S&P 400
Index and Russell 2500 Index generally consist of stocks in this range.
18 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS -- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of less
than $2.3 billion. This is Lipper's market capitalization breakpoint as of April
30, 2000, although it may be subject to change based on market fluctuations. The
S&P 600 Index and the Russell 2000 Index generally consist of stocks in this
range.
* VALUE STOCKS -- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on a fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price fluctuation risk.
www.americancentury.com 19
Notes
--------------------------------------------------------------------------------
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation: Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth Value
Strategic Allocation: Large Cap
Conservative Value
Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[graphic of runners]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0006 American Century Investment Services, Inc.
SH-SAN-20658 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
April 30, 2000
AMERICAN CENTURY(reg.sm)
Semiannual Report
[graphic of runners]
[graphic of person looking at computer screen]
Veedot(reg.sm)
[american century logo(reg.sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
They say hindsight is 20/20. But what about insight? That's what you really
want when choosing mutual funds. Now you can get the insight you need with Fund
Advisor, an online tool that helps you select the right no-load funds for
you--on a goal by goal basis. Fund Advisor helps you:
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Receive recommendations based on funds available through your current fund
family or financial service provider -- not just American Century funds.
Gain confidence.
Whether you want to analyze your current investments, or find new ones, Fund
Advisor can help you feel confident with the decisions you make.
How does it work?
Just tell Fund Advisor about your investing style, your current investments
and your goals. It will analyze your investments and offer impartial
recommendations to help you get on track.
To review Fund Advisor's unique perspective, go to www.americancentury.com
and select Fund Advisor at the top of the page. For the initial set-up, you
might want to have available:
* Your latest tax return
* Your most recent investment account statements
* Printouts from any software you use to track your personal finances
To learn more about this new tool and how it can help you better manage your
financial future, select the "Demo" from the Fund Advisor introduction page.
*Patent pending. It was developed for Acumation, Inc., a registered investment
advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through Fund Advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
[left margin]
VEEDOT
(AMVIX)
-----------------------------------------
TURN TO THE INSIDE BACK COVER OF THIS REPORT TO SEE A LIST OF AMERICAN CENTURY
FUNDS CLASSIFIED BY OBJECTIVE AND RISK.
Saving for College Just Got Easier
--------------------------------------------------------------------------------
Introducing LEARNING QUEST, a powerful new program that lets you save
tax-deferred for your child's education. Key benefits include:
* Anyone can open an account, and anyone can be named the beneficiary, even
yourself.
* The student can attend any accredited institution (college, university,
vocational program) anywhere in the United States.
* Taxes aren't due on the earnings until they are withdrawn, and earnings on
qualified expenses are taxed at the student's rate.
* High contribution limits ($127,000 for 2000).
For more information, including estate-planning benefits, call
1-800-579-2203, or visit www.learningquestsavings.com.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The five months ended April 30, 2000, rewarded growth investors in Veedot,
as the fund handily outperformed its benchmark.
The period was short, but momentous. So-called "New Economy" stocks led the
market -- in both directions. Investors stampeded into technology-oriented firms
at the end of 1999 and during the first quarter of 2000, triggering one of the
most powerful market advances ever. Then, suddenly, came the reminder that some
"old" rules of common stock investing still apply -- including one American
Century's growth fund managers hold dear: stock prices ultimately depend on
earnings.
Turning to corporate matters, the months covered in this report have been
important ones for American Century. Besides serving the nearly two million
investors who look to American Century for investment management, we also worked
hard to serve and support the 3,000 people who work on your behalf -- to create
a positive, safe, and productive work environment. This commitment was
recognized and rewarded in late 1999 when American Century ranked in the top 40
of Fortune magazine's "100 Best Companies to Work For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This intellectual capital is our most valuable
resource and is essential in our efforts to provide you with excellent
investment management and service.
Finally, we're pleased to announce that American Century's fund performance
reports like this one have won the Communications Seal from DALBAR, Inc., an
independent financial services research firm. DALBAR commends us for meeting
investors' needs with an attractive document that's easy to read and understand.
In 1999, American Century's investor account statement became the first fund
company statement to win the same seal from DALBAR. You can count on us to keep
looking for ways to improve the reports, literature, and statements you receive
from us.
We appreciate your continued confidence in American Century.
Sincerely,
/signature/ /signature/
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
VEEDOT
Performance Information ................................................ 4
Management Q&A ......................................................... 5
Portfolio at a Glance .................................................. 5
Top Ten Holdings ....................................................... 6
Top Five Industries .................................................... 6
Types of Investments ................................................... 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 11
Statement of Operations ................................................ 12
Statements of Changes
in Net Assets ....................................................... 13
Notes to Financial
Statements .......................................................... 14
Financial Highlights ................................................... 16
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 17
Background Information
Investment Philosophy
and Policies ..................................................... 18
Comparative Indices ................................................. 18
Portfolio Managers .................................................. 18
Glossary ............................................................... 19
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* The five months ended April 30, 2000, saw the S&P 500, the Nasdaq
Composite, and the Dow all reach record highs in the new millennium. 1999
represented the fifth consec- utive year that the S&P 500 returned 20% or
better. The technology-laden Nasdaq was the biggest winner, closing 1999
with an unprecedented gain of 86% -- the largest one-year increase ever
recorded by any U.S. market index.
* While "New Economy" stocks -- particularly those of Internet and technology
companies -- still held appeal for investors, uncertainty got a foothold
and volatility became pervasive in this arena. Despite rising interest
rates, valuations of technology stocks continued to climb until investors
lost faith and interest, taking the Nasdaq down 25.33% in a single week in
April.
VEEDOT
* Veedot gained 35.20% during its first five months in operation. It
outperformed its benchmark, the Wilshire 5000 Index, which posted a 5.88%
gain during the same timeframe. The fund also outpaced the Lipper average
multi-cap core fund, which gained 9.63% during the period.
* The fund's largest positions were in the technology sector, which
represented 49% of investments at April 30. The fund's best contributors
were electrical equipment companies, semiconductor firms, and computer
software manufacturers.
* Veedot's 15% stake in energy also added to performance as oil and gas
prices moved higher in recent months. The fund's relatively lighter
weighting in the consumer sector also proved beneficial, as this group
generally struggled during the period.
* Securities and asset management firms and banks, which were hurt by rising
interest rates, were the fund's worst performing holdings, followed by
forest products and paper firms.
[left margin]
VEEDOT
(AMVIX)
TOTAL RETURNS: AS OF 4/30/00
Since Inception 35.20%*
INCEPTION DATE: 11/30/99
NET ASSETS: $373.5 million
*Not annualized.
Investment terms are defined in the Glossary on pages 19-20.
2 1-800-345-2021
Market Perspective from James E. Stowers III
--------------------------------------------------------------------------------
[photo of James E. Stowers III]
James E. Stowers III, Chief Executive Officer of American Century
Common stock investors will look back on the five-month interval covered by
this report as one of the more extraordinary short-term experiences in stock
market history.
The major market indices -- the Standard & Poor's 500 Index, the Nasdaq
Composite, and the Dow Jones Industrial Average -- all entered the new
millennium at record highs. The Nasdaq ended 1999 with a stunning 86% gain, the
largest one-year increase in any U.S. market index -- ever. The S&P 500 notched
its fifth consecutive year with a return of 20% or more.
HIGH EXPECTATIONS
This performance led investors to carry unrealistically high expectations
into 2000. Surveys showed the average investor expected the stock market overall
to rise 15% in 2000, and his or her stock portfolio to gain 18%. Perhaps they
were also reading headlines like this one from our hometown paper, The Kansas
City Star, in January: "New tech stocks defy old rules."
The Star appeared to be right. "New Economy" stocks -- especially those
associated with the Internet and biotechnology -- were all investors wanted to
own.
But what may have started out as "rational exuberance" for technology
issues turned into rampant speculation as 2000 progressed. This was most evident
in the extraordinary strength of the new-issue market, where hundreds of
unseasoned, untested, "dot-com" companies soared in price, as investors
scrambled to own the next Yahoo! or America Online. The technology run-up blew
past three interest rate increases as if they had never happened.
Herd-like behavior took the Nasdaq Composite up 51% from November 30, 1999,
the start of this report period, to a record 5,049 on March 10. In contrast, the
S&P 500 gained 0.73%. Many aggressive growth funds needed an extra decimal space
in the newspaper mutual fund tables to accommodate their outsized returns.
$2 TRILLION DISAPPEARS
But extreme market moves of this dimension do not last forever. In early
March, a controversy involving the ownership of genetic information staggered
the biotech sector, and one month later, the malaise had spread to technology.
By April 10, investors decided how high was too high and let the air out of the
technology balloon. Nasdaq suffered its worst week ever, dropping 25.33%. More
than $2 trillion in investor wealth evaporated.
Right now, the stock market is moving in fits and starts, not sure where it
wants to go. Investors' enthusiasm for technology is still high; however, they
also have higher standards for the tech stocks they own. With first-quarter
earnings appearing strong, wages up and the economy humming, the tug between
interest rates and inflation will weigh on the stock market for a while, along
with a higher degree of volatility. That means investors may have to recapture
something that's been missing lately: patience.
[right margin]
"INVESTORS' ENTHUSIASM FOR TECHNOLOGY IS STILL HIGH; HOWEVER, THEY ALSO HAVE
HIGHER STANDARDS FOR THE TECH STOCKS THEY OWN."
MARKET RETURNS
FOR THE FIVE MONTHS ENDED APRIL 30, 2000
S&P 500 5.04%
S&P MIDCAP 400 15.21%
RUSSELL 2000 12.03%
Sources: Lipper Inc.
These indices represent the performance of large-, medium- , and
small-capitalization stocks.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE FIVE MONTHS ENDED APRIL 30, 2000
[line chart -- data below]
S&P 500 Index S&P Midcap 400 Russell 2000
11/30/99 $1.00 $1.00 $1.00
12/31/99 $1.06 $1.06 $1.11
1/31/00 $1.01 $1.03 $1.10
2/29/00 $0.99 $1.10 $1.28
3/31/00 $1.08 $1.19 $1.19
4/30/00 $1.05 $1.15 $1.12
Value on 4/30/99
S&P500 $1.05
S&P MIDCAP 400 $1.15
RUSSELL 2000 $1.12
www.americancentury.com 3
Veedot --Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF APRIL 30, 2000*
INVESTOR CLASS (INCEPTION 11/30/99)
VEEDOT WILSHIRE 5000 INDEX
LIFE OF FUND ....................... 35.20% 5.88%
* Returns for periods less than one year are not annualized.
See pages 18-19 for information about the Wilshire 5000 Index and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
Value as of 4/30/2000:
Veedot $13,520
Wilshire 5000 Index $10,588
[mountain chart -- data below]
Veedot Wilshire 5000 Index
11/30/1999 $10,000 $10,000
12/31/1999 $11,840 $10,759
1/31/2000 $11,800 $10,313
2/29/2000 $15,320 $10,544
3/31/2000 $14,820 $11,170
4/30/2000 $13,520 $10,588
The graph at left shows the growth of a $10,000 investment over the life of the
fund. The Wilshire 5000 Index is provided for comparison. Veedot's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Past performance
does not guarantee future results. Investment return and principal value will
fluctuate, and redemption value may be more or less than original cost.
4 1-800-345-2021
Veedot --Q&A
--------------------------------------------------------------------------------
[photo of Jim Stowers III and John Small, Jr.]
An interview with Jim Stowers III and John Small, Jr., portfolio managers
on the Veedot investment team.
HOW DID VEEDOT PERFORM DURING ITS FIRST FEW MONTHS IN OPERATION?
Veedot has performed well since it opened on November 30, 1999. As of April
30, 2000, the fund had gained 35.20%, dramatically outperforming the 5.88%
return of its benchmark, the Wilshire 5000 Index.
SINCE THIS IS THE FIRST REPORT TO INVESTORS, WILL YOU DESCRIBE HOW THE FUND IS
MANAGED?
Certainly. Veedot seeks long-term investment returns using a time-tested
investment strategy that focuses on companies whose earnings and revenues are
growing at an accelerating rate -- that is, firms that are growing faster now
than they have in the past.
To find those firms, we rely on a proprietary database that screens
approximately 12,000 stocks. It tracks companies of all sizes, without regard to
sector, industry, or geographical location, and filters out those best meeting
our fundamental criteria. We then apply technical analysis (the study of a
stock's historical price pattern) to help improve our likelihood of finding
stock market winners. In particular, we are trying to find the "sweet spot" --
the most dramatic part of a given company's growth rate -- and gear our buying
and selling activities appropriately.
What's especially important about this approach is its adherence to a
systematic, repeatable discipline. Because we focus solely on a stock's
fundamentals and how investor behavior has affected its performance, we aren't
distracted by either qualitative or speculative input. The opportunity for human
bias -- what we personally think about a company or its products -- to influence
a buy or sell decision is minimized.
VEEDOT'S EARLY PERFORMANCE HAS BEEN IMPRESSIVE. WHAT FACTORS CONTRIBUTED TO ITS
RETURN?
This report will be somewhat different than reports on most of American
Century's other funds, in that we won't be providing detailed stock stories.
That's because we are primarily interested in a given company's accelerating
earnings and revenues, how its stock has performed in the past, and how it is
currently performing. We aren't looking at what the company makes or how it is
managed -- it simply has to meet our strict fundamental and technical criteria.
Because emotion and opinion aren't part of our process, no sectors are
favored. However, the process automatically identifies market trends and helps
point us toward the fastest-growing sectors and industries. We also may take
heavy positions in the best-performing companies in these areas.
[right margin]
"VEEDOT SEEKS LONG-TERM INVESTMENT RETURNS USING A TIME-TESTED INVESTMENT
STRATEGY THAT FOCUSES ON COMPANIES WHOSE EARNINGS AND REVENUES ARE GROWING AT AN
ACCELERATING RATE -- THAT IS, FIRMS THAT ARE GROWING FASTER THAN THEY HAVE IN
THE PAST."
PORTFOLIO AT A GLANCE
4/30/00
NO. OF COMPANIES 173
MEDIAN P/E RATIO 51.2
MEDIAN MARKET $5.33
CAPITALIZATION BILLION
PORTFOLIO TURNOVER 84%(1)
EXPENSE RATIO 1.50%(2)
(INVESTOR CLASS)
(1) From 11/30/99 to 4/30/00.
(2) Annualized.
Investment terms are defined in the Glossary on pages 19-20.
www.americancentury.com 5
Veedot --Q&A
--------------------------------------------------------------------------------
(Continued)
As of April 30, our biggest positions were in technology-oriented
companies, which represented 49% of investments, and technology was also our
top-performing sector. Along with this overweight position, strong individual
stock selection played a role. Our best contributors were electrical equipment
companies, semiconductor firms, and computer software manufacturers.
Growth in the electrical equipment group has been driven by the rapidly
expanding use of the Internet and increasing demand for wireless phones. Growth
in the semiconductor industry likewise has been robust, particularly for
companies that make or distribute chips used in telecommunications devices and
wireless communications systems. The software industry in general is benefiting
from the move by many companies -- with Y2K concerns now behind them -- to
upgrade their operations and increase efficiencies.
WERE THERE AREAS OUTSIDE OF TECHNOLOGY THAT ADDED TO PERFORMANCE?
Yes. The fund got a nice boost from its 15% stake in energy --
specifically,oil services providers -- as oil and gas prices have moved higher
in recent months.
In discussing what contributed to performance, we'd be remiss if we didn't
acknowledge that Veedot's return was also influenced by what it didn't own. Our
systematic methodology led us to a relatively small stake in the struggling
consumer sector, which also helped boost returns.
WHICH SECTORS OR INDUSTRIES DETRACTED FROM PERFORMANCE?
On an absolute basis, Veedot's worst performers were banks, brokers, and
asset management firms, which were hurt by rising interest rates. Forest
products and paper companies also underperformed.
Another factor that influenced performance that isn't evident in the fund's
healthy return is the hit that most technology firms took in March and April.
Investors reacted swiftly when several leading tech firms announced
disappointing first-quarter earnings, abandoning technology stocks for the
shares of more established, "Old Economy" companies. In those two months alone,
the Nasdaq fell nearly 20%, and we watched as a number of our top holdings gave
back some of their earlier gains. Frustrating as that can be to investors, we
believe Veedot's strong return -- despite the sell-off in technology -- is
attributable to strong individual stock selection and adherence to our
discipline.
WHO ARE THE MEMBERS OF VEEDOT'S INVESTMENT TEAM?
We co-manage the Veedot portfolio, along with Randy Pittman, who serves as
our Investment Systems Engineer. Randy is the architect responsible for
developing the specialized computer tools that help us sort out and choose what
we believe are the best accelerating companies in our database. Although
Veedot's investment team
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF
4/30/00
LONE STAR TECHNOLOGIES, INC. 1.6%
APPLIED MICRO CIRCUITS CORP. 1.3%
SHERWIN-WILLIAMS CO. 1.3%
APPLE COMPUTER, INC. 1.3%
TERADYNE, INC. 1.3%
ROBOTIC VISION SYSTEMS, INC. 1.3%
GENERAL ELECTRIC CO. (U.S.) 1.2%
SUN MICROSYSTEMS, INC. 1.2%
ADVANCED MICRO DEVICES, INC. 1.1%
CREDENCE SYSTEMS CORP. 1.1%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF
4/30/00
ELECTRICAL EQUIPMENT 20.7%
SEMICONDUCTOR 18.4%
OIL SERVICES 10.5%
ENERGY RESERVES & PRODUCTION 5.2%
COMPUTER HARDWARE &
BUSINESS MACHINES 4.2%
6 1-800-345-2021
Veedot --Q&A
--------------------------------------------------------------------------------
(Continued)
is relatively small, it's important to remember that we use a very different
approach. Traditionally, a team of investment analysts performs technical and
fundamental analysis. An investment team managing a fund of Veedot's size might
have three or four analysts, each assigned to a different area of the market.
However, our reliance on established data systems and specialized investment
tools negates the need for more hands on the tiller. For investors, this also
means the fund's performance is not directly tied to us as managers.
WHAT'S YOUR OUTLOOK FOR THE MARKET AND VEEDOT GOING FORWARD?
We do not attempt to predict the market's direction; however, we do believe
that our approach will continue to lead us to the most attractive companies,
wherever they are, regardless of the market environment. Investor preference may
shift out of technology and into other, currently overlooked or neglected
sectors, or may move from one capitalization range to another. Because we're
tracking acceleration wherever it occurs and are attempting to identify
companies in the early stages of their growth, our goal is to be "early and
right" on the market's most exciting opportunities.
[right margin]
"WE DO NOT ATTEMPT TO PREDICT THE MARKET'S DIRECTION; HOWEVER, WE DO BELIEVE
THAT OUR APPROACH WILL CONTINUE TO LEAD US TO THE MOST ATTRACTIVE COMPANIES,
WHEREVER THEY ARE, REGARDLESS OF THE MARKET ENVIRONMENT."
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF APRIL 30, 2000
COMMON STOCKS 96.6%
TEMPORARY CASH INVESTMENTS 3.4%
[pie chart]
www.americancentury.com 7
Veedot --Schedule of Investments
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
<TABLE>
Shares Value
------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 96.6%
APPAREL & TEXTILES -- 0.7%
70,000 Guess?, Inc.(1) $ 1,925,000
50,000 Reebok International Ltd.(1) 850,000
-------------------
2,775,000
--------------------
BANKS -- 1.6%
55,000 Bank of New York Co., Inc. (The) 2,258,437
60,000 Firstar Corp. 1,492,500
35,000 Northern Trust Corp. 2,245,469
--------------------
5,996,406
--------------------
CHEMICALS -- 1.5%
200,000 Sherwin-Williams Co. 4,975,000
30,000 Tredegar Industries, Inc. 774,375
--------------------
5,749,375
--------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 4.2%
40,000 Apple Computer, Inc.(1) 4,963,750
10,000 EMC Corp. (Mass.)(1) 1,389,375
30,000 SanDisk Corp.(1) 2,747,812
40,000 Sanmina Corp.(1) 2,401,250
50,000 Sun Microsystems, Inc.(1) 4,598,438
--------------------
16,100,625
--------------------
COMPUTER SOFTWARE -- 3.7%
20,000 Adobe Systems Inc. 2,419,375
30,000 Aspect Development, Inc.(1) 2,070,938
30,000 Autodesk, Inc. 1,155,000
40,000 BEA Systems, Inc.(1) 1,926,250
25,000 i2 Technologies, Inc.(1) 3,232,812
20,000 IONA Technologies PLC ADR(1) 1,137,500
15,000 Oracle Corp.(1) 1,198,594
5,000 Siebel Systems, Inc.(1) 614,531
10,000 Symantec Corp.(1) 623,438
--------------------
14,378,438
--------------------
CONSTRUCTION & REAL PROPERTY -- 0.3%
15,000 Mastec, Inc.(1) 1,295,625
--------------------
CONSUMER DURABLES -- 0.9%
300,000 Pier 1 Imports, Inc. 3,412,500
--------------------
DEFENSE/AEROSPACE -- 0.3%
20,000 Honeywell Inc. 1,120,000
--------------------
DRUGS -- 2.6%
40,000 Alliance Pharmaceutical Corp.(1) 316,250
45,000 American Home Products Corp. 2,528,438
25,000 Bristol-Myers Squibb Co. 1,310,938
17,000 Genentech, Inc.(1) 1,989,000
150,000 Organogenesis Inc.(1) 1,715,625
15,000 Priority Healthcare Corp. Cl B(1) 828,750
75,000 Rexall Sundown, Inc.(1) 1,448,438
--------------------
10,137,439
--------------------
Shares Value
------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 20.7%
55,000 ADC Telecommunications, Inc.(1) $ 3,339,531
27,000 Advanced Fibre Communications,
Inc.(1) 1,232,719
20,000 Amphenol Corp. Cl A(1) 1,275,000
13,000 Anaren Microwave, Inc.(1) 1,343,875
30,000 Andrew Corp.(1) 885,938
25,000 CIENA Corp.(1) 3,089,844
50,000 Cisco Systems Inc.(1) 3,468,750
25,000 Cognex Corp.(1) 1,409,375
20,000 Corning Inc. 3,950,000
30,000 Credence Systems Corp.(1) 4,285,312
30,000 DSP Group, Inc.(1) 2,132,812
40,000 Flextronics International Ltd. ADR(1) 2,811,250
55,000 Harris Corp. 1,777,188
50,000 Jabil Circuit, Inc.(1) 2,046,875
30,000 JDS Uniphase Corp.(1) 3,111,562
40,000 KEMET Corp.(1) 2,980,000
60,000 Kent Electronics Corp.(1) 1,751,250
20,000 KLA-Tencor Corporation(1) 1,498,125
40,000 Littelfuse, Inc.(1) 1,417,500
30,000 LTX Corp.(1) 1,373,438
50,000 Nanometrics Inc.(1) 1,909,375
10,000 NetOptix Corp.(1) 1,770,000
20,000 Newport Corp. 2,448,125
20,000 Nortel Networks Corp. 2,265,000
5,000 Powerwave Technologies, Inc.(1) 1,040,156
330,000 Robotic Vision Systems, Inc.(1) 4,919,062
119,800 ROHN Industries, Inc.(1) 460,481
30,000 Scientific-Atlanta, Inc. 1,951,875
60,000 Solectron Corp.(1) 2,808,750
40,000 Tekelec, Inc.(1) 1,393,750
45,000 Teradyne, Inc.(1) 4,950,000
25,000 Tollgrade Communications, Inc.(1) 1,649,219
50,000 Universal Electronics Inc.(1) 1,018,750
50,000 Vishay Intertechnology, Inc.(1) 4,193,750
55,000 Westell Technologies, Inc.(1) 1,562,344
-------------------
79,520,981
-------------------
ELECTRICAL UTILITIES -- 2.5%
45,000 AES Corp. (The)(1) 4,047,188
20,000 Calpine Corp.(1) 1,830,000
20,000 Consolidated Edison, Inc. 703,750
60,000 PG&E Corp. 1,556,250
50,000 Reliant Energy, Inc. 1,331,250
-------------------
9,468,438
-------------------
ENERGY RESERVES & PRODUCTION -- 5.2%
30,000 Apache Corp. 1,453,125
41,000 BP Amoco Plc ADR 2,091,000
70,000 Burlington Resources Inc. 2,751,875
30,000 Chevron Corp. 2,553,750
35,000 Enron Corp. 2,439,062
20,000 Exxon Mobil Corp. 1,553,750
45,000 Kerr-McGee Corp. 2,328,750
8 1-800-345-2021 See Notes to Financial Statements
Veedot --Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares Value
------------------------------------------------------------------------------------------------
40,000 Pogo Producing Co. $ 1,025,000
--------------------
25,000 Triton Energy Ltd.(1) 910,938
150,000 Union Pacific Resources 2,878,125
--------------------
19,985,375
--------------------
FINANCIAL SERVICES -- 1.8%
10,000 American Express Co. 1,500,625
30,000 General Electric Co. (U.S.) 4,717,500
10,000 Kansas City Southern Industries, Inc. 718,750
--------------------
6,936,875
--------------------
FOREST PRODUCTS & PAPER -- 0.3%
30,000 International Paper Co. 1,102,500
--------------------
GROCERY STORES -- 1.5%
90,000 Kroger Co. (The)(1) 1,670,625
90,000 Safeway Inc.(1) 3,971,250
--------------------
5,641,875
--------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.9%
25,000 C&D Technologies, Inc. 1,610,938
40,000 Dover Corp. 2,032,500
--------------------
3,643,438
--------------------
HEAVY MACHINERY -- 0.5%
50,000 Deere & Co. 2,018,750
--------------------
HOME PRODUCTS -- 0.8%
50,000 Avon Products, Inc. 2,075,000
30,000 Gillette Company 1,110,000
--------------------
3,185,000
--------------------
INDUSTRIAL PARTS -- 1.4%
25,000 Cymer, Inc.(1) 975,781
40,000 Helix Technology Corp. 2,041,250
40,000 United Technologies Corp. 2,487,500
--------------------
5,504,531
--------------------
INDUSTRIAL SERVICES -- 0.8%
30,000 Hanover Compressor Company(1) 1,747,500
20,000 Robert Half International Inc.(1) 1,222,500
--------------------
2,970,000
--------------------
INFORMATION SERVICES -- 1.4%
50,000 Automatic Data Processing, Inc. 2,690,625
35,000 Avert, Inc. 877,188
24,400 Diamond Technology Partners Inc.(1) 1,932,938
--------------------
5,500,751
--------------------
INTERNET -- 1.0%
40,000 Network Associates Inc.(1) 1,016,250
45,000 RSA Security Inc.(1) 2,639,531
--------------------
3,655,781
--------------------
LEISURE -- 0.4%
80,000 Concord Camera Corp.(1) 1,457,500
--------------------
Shares Value
------------------------------------------------------------------------------------------------
MEDIA -- 2.7%
90,000 Disney (Walt) Co. $ 3,898,125
40,000 Time Warner Inc. 3,597,500
25,000 Univision Communications Inc. Cl A(1) 2,731,250
--------------------
10,226,875
---------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.9%
16,000 ArthroCare Corp.(1) 1,628,000
35,000 Cytyc Corp.(1) 1,572,812
30,000 Medtronic, Inc. 1,558,125
40,000 Novoste Corp.(1) 1,638,750
120,000 Quidel Corp.(1) 948,750
---------------------
7,346,437
---------------------
MINING & METALS -- 2.2%
35,000 Alcoa Inc. 2,270,625
130,000 Lone Star Technologies, Inc.(1) 5,996,250
---------------------
8,266,875
---------------------
OIL REFINING -- 0.7%
40,000 Sunoco, Inc. 1,212,500
50,000 Valero Energy Corp. 1,450,000
---------------------
2,662,500
---------------------
OIL SERVICES -- 10.5%
60,000 BJ Services Co.(1) 4,215,000
90,000 Ensco International Inc. 2,986,875
50,000 Global Marine Inc.(1) 1,200,000
200,000 Grey Wolf, Inc.(1) 812,500
300,000 Key Energy Group, Inc.(1) 2,925,000
90,000 Marine Drilling Co., Inc.(1) 2,340,000
90,000 Maverick Tube Corp.(1) 2,579,062
60,000 Nabors Industries, Inc.(1) 2,366,250
50,000 National-Oilwell, Inc.(1) 1,196,875
70,000 Patterson Energy, Inc.(1) 1,973,125
150,000 Rowan Companies, Inc.(1) 4,190,625
50,000 Schlumberger Ltd. 3,828,125
45,000 Smith International, Inc.(1) 3,420,000
70,000 UTI Energy Corp.(1) 2,432,500
40,000 Veritas DGC Inc.(1) 960,000
70,000 Weatherford International, Inc.(1) 2,843,750
---------------------
40,269,687
---------------------
PROPERTY & CASUALTY INSURANCE -- 0.6%
20,000 American International Group, Inc. 2,193,750
---------------------
SECURITIES & ASSET MANAGEMENT -- 2.0%
40,000 Donaldson, Lufkin & Jenrette, Inc. 1,667,500
35,000 Knight/Trimark Group, Inc. Cl A(1) 1,317,969
15,000 Merrill Lynch & Co., Inc. 1,529,062
75,000 Schwab (Charles) Corp. 3,337,500
--------------------
7,852,031
--------------------
See Notes to Financial Statements www.americancentury.com 9
Veedot--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
Shares Value
------------------------------------------------------------------------------------------------
SEMICONDUCTOR -- 18.4%
50,000 Advanced Micro Devices, Inc.(1) $ 4,387,500
35,000 Altera Corp.(1) 3,577,656
35,000 Amkor Technology, Inc.(1) 2,139,375
45,000 Analog Devices, Inc.(1) 3,456,562
35,000 Applied Materials, Inc.(1) 3,564,531
40,000 Applied Micro Circuits Corp.(1) 5,153,750
20,000 Arrow Electronics, Inc.(1) 876,250
35,000 Atmel Corp.(1) 1,711,719
40,000 Cypress Semiconductor Corp.(1) 2,077,500
25,000 Electroglas, Inc.(1) 967,969
35,000 Exar Corp.(1) 2,805,469
40,000 Integrated Device Technology, Inc.(1) 1,921,250
25,000 Intel Corp. 3,171,094
40,000 International Rectifier Corp.(1) 1,965,000
40,000 IXYS Corp.(1) 986,250
40,000 Kulicke & Soffa Industries, Inc.(1) 3,133,750
40,000 Lam Research Corp.(1) 1,833,750
40,000 Linear Technology Corp. 2,286,250
20,000 M-Systems Flash Disk Pioneers(1) 1,318,750
35,000 Maxim Integrated Products, Inc.(1) 2,267,343
15,000 Micrel, Inc.(1) 1,294,219
60,000 Novellus Systems, Inc.(1) 3,995,625
10,000 PMC-Sierra, Inc.(1) 1,918,125
25,000 PRI Automation, Inc.(1) 1,997,656
10,000 SDL, Inc.(1) 1,949,688
20,000 Semtech Corp.(1) 1,366,875
8,000 STMicroelectronics N.V.
New York Shares 1,517,500
40,000 TelCom Semiconductor, Inc.(1) 988,750
6,000 Texas Instruments Inc. 977,250
15,000 TriQuint Semiconductor, Inc.(1) 1,541,718
25,000 Vitesse Semiconductor Corp.(1) 1,700,781
25,000 Xilinx, Inc.(1) 1,833,594
--------------------
70,683,499
--------------------
Shares Value
-----------------------------------------------------------------------------------------------
SPECIALTY STORES -- 2.0%
45,000 Best Buy Co., Inc.(1) $ 3,633,750
30,000 Fastenal Company 1,750,312
15,000 Home Depot, Inc. 840,938
75,000 NBTY, Inc.(1) 1,328,905
--------------------
7,553,905
--------------------
TELEPHONE -- 0.6%
50,000 Qwest Communications
International Inc.(1) 2,168,750
--------------------
TOTAL COMMON STOCKS 370,781,512
--------------------
(Cost $334,207,386)
TEMPORARY CASH INVESTMENTS -- 3.4%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.68%, dated 4/28/00,
due 5/1/00 (Delivery value $13,006,153) 13,000,000
--------------------
(Cost $13,000,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $ 383,781,512
====================
(Cost $347,207,386)
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
10 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
<TABLE>
APRIL 30, 2000 (UNAUDITED)
ASSETS
<S> <C>
Investment securities, at value
(identified cost of $347,207,386) ............................ $ 383,781,512
Cash ......................................................... 1,119,451
Receivable for investments sold .............................. 3,415,056
Dividends and interest receivable ............................ 31,695
-------------
388,347,714
-------------
LIABILITIES
Payable for investments purchased ............................ 14,431,174
Accrued management fees (Note 2) ............................. 434,551
Payable for directors' fees and expenses ..................... 114
Accrued expenses and other liabilities ....................... 80
-------------
14,865,919
-------------
Net Assets ................................................... $ 373,481,795
=============
CAPITAL SHARES, $0.01 PAR VALUE
Authorized - Investor Class .................................. 200,000,000
=============
Outstanding - Investor Class ................................. 55,238,560
=============
Net Asset Value Per Share .................................... $ 6.76
=============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ...................... $ 364,866,763
Accumulated net investment loss .............................. (975,238)
Accumulated net realized loss on investment transactions ..... (26,983,856)
Net unrealized appreciation on investments (Note 3) .......... 36,574,126
-------------
$ 373,481,795
=============
</TABLE>
See Notes to Financial Statements www.americancentury.com 11
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
NOVEMBER 30, 1999 (INCEPTION) THROUGH APRIL 30, 2000 (UNAUDITED)
INVESTMENT LOSS
Income:
Interest ...................................................... $ 261,324
Dividends ..................................................... 81,934
------------
343,258
------------
Expenses (Note 2):
Management fees ............................................... 1,318,045
Directors' fees and expenses .................................. 451
------------
1,318,496
------------
Net investment loss ........................................... (975,238)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3)
Net realized loss on investments .............................. (26,983,856)
Change in net unrealized appreciation on investments .......... 36,574,126
------------
Net realized and unrealized gain on investments ............... 9,590,270
------------
Net Increase in Net Assets
Resulting from Operations ..................................... $ 8,615,032
============
12 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past reporting
period. It details how much a fund grew or shrank as a result of operations (as
detailed on the previous page for the most recent period), income and capital
gain distributions, and shareholder investments and redemptions.
NOVEMBER 30, 1999 (INCEPTION) THROUGH APRIL 30, 2000 (UNAUDITED)
Increase in Net Assets
OPERATIONS
Net investment loss .......................................... $ (975,238)
Net realized loss on investment transactions ................. (26,983,856
Change in net unrealized appreciation on investments ......... 36,574,126
-------------
Net increase in net assets resulting from operations ......... 8,615,032
-------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................................... 377,768,886
Payments for shares redeemed ................................. (12,902,123)
-------------
Net increase in net assets from capital share transactions ... 364,866,763
-------------
Net increase in net assets ................................... 373,481,795
NET ASSETS
Beginning of period .......................................... --
-------------
End of period ................................................ $ 373,481,795
=============
Accumulated net investment loss .............................. $ (975,238)
=============
TRANSACTIONS IN SHARES OF THE FUNDS
Sold ......................................................... 57,173,468
Redeemed ..................................................... (1,934,908)
-------------
Net increase ................................................. 55,238,560
=============
See Notes to Financial Statements www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Veedot Fund (the fund) is one of the
fourteen series of funds issued by the corporation. The fund is non-diversified
under the 1940 Act. The fund's investment objective is to seek long-term capital
growth by investing primarily in common stocks that management believes to have
better than average prospects for appreciation. The fund generally invests in
companies with small, medium, and large market capitalization. The following
significant accounting policies are in accordance with generally accepted
accounting principles; these policies may require the use of estimates by fund
management.
MULTIPLE CLASS -- The fund is authorized to issue three classes of shares:
the Investor Class, the Advisor Class, and the Institutional Class. The three
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the fund represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Sale of the Investor Class
commenced on November 30, 1999. Sale of the Advisor and Institutional Classes
had not commenced as of April 30, 2000.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that collateral, represented by securities, received in
a repurchase transaction be transferred to the custodian in a manner sufficient
to enable the fund to obtain those securities in the event of a default under
the repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including accrued interest, of the securities
under each repurchase agreement is equal to or greater than amounts owed to the
fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
treasury or agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are generally declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation
14 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee per class. The Agreement provides
that all expenses of the fund, except brokerage commissions, taxes, interest,
expenses of those directors who are not considered "interested persons" as
defined in the 1940 Act (including counsel fees) and extraordinary expenses,
will be paid by ACIM. The fee is computed daily and paid monthly based on the
fund's class average daily closing net assets during the previous month. The
annual fee schedule for the Investor Class is as follows:
1.50% on the first $500 million
1.45% on the next $500 million
1.40% over $1 billion
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
investments, for the period November 30, 1999 through April 30, 2000, were
$540,935,730 and $179,718,488, respectively.
On April 30, 2000, accumulated net unrealized appreciation was $36,574,126,
which consisted of unrealized appreciation of $46,216,123 and unrealized
depreciation of $9,641,997. The aggregate cost of investments for federal income
tax purposes was the same as the cost for financial reporting purposes.
www.americancentury.com 15
Veedot--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the fund is not five years old). It also includes several key statistics for
each reporting period, including TOTAL RETURN, INCOME RATIO (net income as a
percentage of average net assets), EXPENSE RATIO (operating expenses as a
percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the fund's
trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
2000(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ...................... $ 5.00
-----------
Income From Investment Operations
Net Investment Loss(2) .................................. (0.03)
Net Realized and Unrealized Gain on
Investment Transactions .............................. 1.79
-----------
Total From Investment Operations ........................ 1.76
-----------
Net Asset Value, End of Period ............................ $ 6.76
===========
Total Return(3) ......................................... 35.20%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ......... 1.50%(4)
Ratio of Net Investment Loss to Average Net Assets ........ (1.11)%(4)
Portfolio Turnover Rate ................................... 84%
Net Assets, End of Period (in thousands) .................. $ 373,482
(1) November 30, 1999 (inception) through April 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
16 1-800-345-2021 See Notes to Financial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the fund: Investor Class,
Advisor Class and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations, defined
benefit pension plans or financial intermediaries serving these investors. This
class recognizes the relatively lower cost of serving institutional customers
and others who invest at least $5 million in an American Century fund or at
least $10 million in multiple funds. In recognition of the larger investments
and account balances and comparatively lower transaction costs, the total
expense ratio of the Institutional Class shares is 0.20% less than the total
expense ratio of the Investor Class shares.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 17
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 14 growth funds including domestic equity
specialty, international, and global. The philosophy behind these growth funds
focuses on three important principles. First, the funds seek to own successful
companies, which we define as those with growing earnings and revenues. Second,
we attempt to keep the funds fully invested, regardless of short-term market
activity. Experience has shown that market gains can occur in unpredictable
spurts and that missing those opportunities can significantly limit the
potential for gain. Third, the funds are managed by teams, rather than by one
"star." We believe this allows us to make better, more consistent management
decisions.
In addition to these principles, each fund has its own investment policies
AMERICAN CENTURY VEEDOT is a non-diversified fund, which uses a systematic,
highly disciplined investment process, relying heavily on quantitative tools to
identify attractive investment opportunities. It is designed to identify
companies, regardless of size or industry type, whose growth is accelerating and
whose share price patterns suggest their stocks are likely to increase in value
Due to the sector focus of this fund, it may experience greater volatility
than funds with a broader investment strategy. It is not intended to serve as a
complete investment program by itself.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded U.S. companies that are considered to be leading firms in
dominant industries. Created by Standard & Poor's, it is considered to be a
broad measure of U.S. stock market performance.
The S&P MIDCAP 400 is the medium capitalization sector of the U.S. market.
Created by Standard & Poor's, it is considered to represent the performance of
mid-cap stocks generally.
The RUSSELL 2000 INDEX was created by the Frank Russell Company. It
measures the performance of the 2,000 smallest of the 3,000 largest
publicly-traded U.S. companies based on total market capitalization. The Russell
2000 represents approximately 10% of the total market capitalization of the top
3,000 companies. The average market capitalization of the index is approximately
$420 million.
The WILSHIRE 5000 TOTAL MARKET INDEX measures the performance of all U.S.
headquartered equity securities with readily available price data. Over 7,000
capitalization weighted security returns are used to adjust the index. The
Wilshire 5000 base is its December 31, 1980 capitalization of $1,404,596
billion. Therefore, the index is an excellent approximation of dollar changes in
the U.S. equity market. The Wilshire 5000 is the best measure of the entire U.S.
stock market.
[left margin[
PORTFOLIO MANAGERS
Veedot
JAMES E. STOWERS III
JOHN SMALL, JR.
18 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 16.
INVESTMENT TERMS
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
* MEDIAN MARKET CAPITALIZATION -- Market capitalization (market cap) is the
total value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES -- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER -- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* PRICE/BOOK RATIO -- a stock value measurement calculated by dividing a
company's stock price by its book value per share, with the result expressed as
a multiple instead of as a percentage. (Book value per share is calculated by
subtracting a company's liabilities from its assets, then dividing that value by
the number of outstanding shares.)
* PRICE/EARNINGS (P/E) RATIO -- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
TYPES OF STOCKS
* BLUE CHIP STOCKS -- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS -- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS -- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staple companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS -- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $10.3 billion. This is Lipper's market capitalization breakpoint as of
April 30, 2000, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 Index generally
consist of stocks in this range.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of
between $2.3 billion and $10.3 billion. This is Lipper's market capitalization
breakpoint as of April 30, 2000, although it may be subject to change based on
market fluctuations. The S&P 400 Index and Russell 2500 Index generally consist
of stocks in this range.
www.americancentury.com 19
Glossary
--------------------------------------------------------------------------------
(Continued)
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- the stocks of companies with a
market capitalization (the total value of a company's outstanding stock) of less
than $2.3 billion. This is Lipper's market capitalization breakpoint as of April
30, 2000, although it may be subject to change based on market fluctuations. The
S&P 600 Index and the Russell 2000 Index generally consist of stocks in this
range.
* VALUE STOCKS-- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
Please be aware that the fund's category may change over time. Therefore, it
is important that you read the fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies and risk potential are
consistent with your needs.
INVESTMENT OBJECTIVE
The investment objective may be based on fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with correspondingly high
price fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
correspondingly high price fluctuation risk.
20 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation: Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth Value
Strategic Allocation: Large Cap
Conservative Value
Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[graphic of runners]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0005 American Century Investment Services, Inc.
SH-ANN-20659 (c)2000 American Century Services Corporation
