[front cover]
MAY 31, 1998
SEMIANNUAL REPORT
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AMERICAN CENTURY
[graphic of globe, U.S. Currency, and money managers overlooking monitors]
TWENTIETH CENTURY GROUP
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INTERNATIONAL GROWTH
INTERNATIONAL DISCOVERY
EMERGING MARKETS
[american century logo(reg.sm)]
American
Century(reg.tm)
[inside front cover]
A Note from the Founder
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On our 40th anniversary, I would personally like to express my profound
appreciation for the confidence you have shown in American Century. We are
grateful for the opportunity to manage your money, and we will do our utmost to
continue to meet your expectations and justify your confidence in us.
I founded American Century on the belief that if we can make you
successful, you, in turn, will make us successful. That is the principle that
will guide us in the future.
Sincerely,
/s/James E. Stowers
About our New Report Design
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WHY WE CHANGED
We're trying hard to be reader-friendly. Our reports contain a lot of very good
information, from fund statistics and financials to Q&A's with fund managers. We
hope the new design will make the reports more interesting and understandable
while helping you to keep abreast of your fund's strategy and performance.
WHAT'S NEW
The reports are designed to be attractive and easy to use whether you're reading
them in depth or just skimming.
New features include:
* Larger type size in many sections.
* Brief explanations of the financial statements.
* More prominent graphs and charts.
* Quotes in the margins to highlight report content.
THE BOTTOM LINE
The new design actually costs slightly less than the old one. We reallocated
costs and eliminated a cover letter and the envelope that previously came with
your report enclosed. This not only saves money but reduces the number of
mailing pieces you receive.
The new reports also use roughly the same amount of paper as the old ones.
Previously, paper was trimmed and thrown away to produce the smaller report
size.
We believe we've come up with a more interesting, informative and user-friendly
publication.
We hope you enjoy it.
[left margin]
TWENTIETH CENTURY GROUP
INTERNATIONAL GROWTH
(TWIEX)
TWENTIETH CENTURY GROUP
INTERNATIONAL DISCOVERY
(TWEGX)
TWENTIETH CENTURY GROUP
EMERGING MARKETS
(TWMIX)
[40 Years logo]
Four Decades of Serving Investors
American Century
1958-1998
On the Cover:
Kevin Lewis and Cindy Miller are part of the investment group at American
Century.
Our Message to You
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[photo of James E. Stowers, Jr. with James E. Stowers III, seated]
James E. Stowers, Jr. with James E. Stowers III, seated
When we launched our first international fund in 1991, our purpose was to
provide meaningful diversification for investors in markets outside the U.S. We
also believed many internationally-based companies were attractive investments
in their own right, and we were convinced our proprietary discipline of
purchasing individual businesses with accelerating revenues and earnings would
prove effective abroad. Over the years, this strategy has been successful.
Foreign markets produced widely diverse returns during the six months ended
May 31. The Far East and many emerging markets finished the period sharply
lower, while Europe saw stock prices surge. Our international investment group
continued to find exciting companies worldwide. Although the historic
transformation of Europe's economic structure continued to generate many
compelling ideas, our investment team discovered earnings acceleration in
locations as diverse as Greece and India.
Our international investment team now stands at 11. Collectively its
members speak 11 languages and visited 21 countries over the past six months.
International Growth, International Discovery and Emerging Markets all
outperformed their benchmark indices during the period. While International
Growth and International Discovery generated substantial gains, we were
especially encouraged by the performance of Emerging Markets, which managed to
post positive returns despite serious crises in many developing economies.
On the corporate front, the past six months have been eventful for American
Century. As many of you may know, we gained a powerful business partner in
January, when J.P. Morgan, one of the oldest, largest and most respected
financial service institutions in the world, became a substantial minority
shareholder. The new business partnership will allow both companies to offer
investors a broader menu of investment options and services.
We also hope you like the new design of this report. Our annual and
semiannual reports contain a wealth of information about fund strategies and
holdings. The new design is intended to make this information more accessible
and to encourage you to take a closer look.
In 1998, we will mark our 40th anniversary. Few fund companies have been
around that long and can offer the wide array of funds or the fine performance
and service we do at American Century.
We appreciate your investment with us.
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 Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ....................................................... 2
Market Perspective ...................................................... 3
INTERNATIONAL GROWTH
Performance Information ................................................. 5
Management Q&A .......................................................... 6
Schedule of Investments ................................................. 9
Financial Highlights .................................................... 38
INTERNATIONAL DISCOVERY
Performance Information ................................................. 13
Management Q&A .......................................................... 14
Schedule of Investments ................................................. 17
Financial Highlights .................................................... 41
EMERGING MARKETS
Performance Information ................................................. 22
Management Q&A .......................................................... 23
Schedule of Investments ................................................. 26
Financial Highlights .................................................... 44
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ............................................................. 30
Statements of Operations ................................................ 31
Statements of Changes
in Net Assets ........................................................... 32
Notes to Financial
Statements .............................................................. 33
OTHER INFORMATION
Share Class and Retirement
Account Information ..................................................... 45
Background Information
Investment Philosophy and
Policies ............................................................. 46
How Currency Returns Affect
Fund Performance ..................................................... 46
Comparative Indices .................................................. 46
Portfolio Managers ................................................... 46
Glossary ................................................................ 47
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* Performance in foreign markets varied widely, with developed markets
generating strong gains and emerging markets losing ground. The Morgan
Stanley Capital International EAFE Index gained 16.06% during the six
months ended May 31. The Morgan Stanley Emerging Markets Free Index lost
7.17%.
* Some of the world's healthiest growth rates are in Europe, fueling a
powerful bull market. The anticipated introduction of a unified European
currency is driving business and government efforts to make European
investments more attractive.
* Japan is now officially in recession and the Far East is experiencing
contractions in manufacturing output and consumer spending.
INTERNATIONAL GROWTH
* International Growth's Investor Class shares returned 28.60% for the six
months ended May 31, 1998, compared to 16.06% for the fund's benchmark, the
Morgan Stanley Capital International EAFE Index. (See total returns on page
5.)
* The fund's greater exposure to European businesses and its lighter
weighting in Asia, relative to the benchmark, explains much of the
difference in performance.
* Banking, financial services, computer software and services and
communications equipment companies were among the fund's top contributors.
They are benefiting from major changes in European economies.
* The most significant change in the portfolio was an increased exposure to
cellular and telecommunications companies, which are experiencing rapid
subscriber expansion.
INTERNATIONAL DISCOVERY
* International Discovery's Investor Class shares posted a 33.92% return for
the six months ended May 31, 1998, or more than twice the benchmark index's
gain. (See totals returns on page 13.)
* The fund's greater exposure to European businesses and its lighter
weighting in Asia, relative to the benchmark, explains much of the
difference in performance.
* Companies that provide financial services, information technology and
temporary employment were among the fastest growers in Europe. The fund's
large exposure to these companies generated healthy returns.
* Changes to the portfolio have been few, due to our continued belief in the
sustainability of earnings growth among our European holdings.
EMERGING MARKETS
* Emerging Markets returned 2.41% for the six months ended May 31, 1998,
compared to a decline of 7.17% for its benchmark, the Morgan Stanley
Emerging Markets Free Index. (See total returns on page 22.) Many emerging
markets continued to suffer the effects of the economic and currency crises
that rocked Southeast Asia in late 1997.
* The fund's stronger performance, relative to the index, is explained by its
lower exposure to countries that are heavily represented in the index.
* We have found the strongest earnings growth in software services, banking
and cellular service companies. Companies in the oil services and utilities
industries were among the weaker performers.
* Changes to the portfolio include increased investments in export-oriented
software and financial services companies that have shown accelerating
earnings growth.
[left margin]
INTERNATIONAL GROWTH (TWIEX) (1)
TOTAL RETURNS: AS OF 5/31/98
6 Months 28.60%(2)
1 Year 30.30%
NET ASSETS: $2.4 billion
INCEPTION DATE: 5/9/91
INTERNATIONAL DISCOVERY (TWEGX) (1)
TOTAL RETURNS: AS OF 5/31/98
6 Months 33.92%(2)
1 Year 36.97%
NET ASSETS: $848.6 million
INCEPTION DATE: 4/1/94
EMERGING MARKETS (TWMIX)
TOTAL RETURNS: AS OF 5/31/98
6 Months 2.41%(2)
Since Inception -15.00%
NET ASSETS: $22 million
INCEPTION DATE: 9/30/97
(1) Investor Class.
(2) Not annualized.
Investment terms are defined in the Glossary on page 47.
2 1-800-345-2021
Market Perspective from Bob Puff
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[photo of Bob Puff, chief investment officer of American Century Investments]
Bob Puff, chief investment officer of American Century Investments
DIVERSITY IS STILL THE RULE
The behavior of international equity markets during the six months ended
May 31 demonstrates not only the extent of the decoupling of domestic and
foreign markets, but also the difference in performance among foreign markets
themselves. It shows as well that it is possible to produce positive investment
results even in a turbulent global economic environment.
During the six months, the Morgan Stanley Capital International EAFE Index
gained 16.06%, while the Morgan Stanley Emerging Markets Free Index lost 7.17%.
EAFE benefited from an impressive performance by mature European markets. The
much publicized crisis in Southeast Asia, which migrated to the developing
economies of Eastern Europe and Latin America, accounted for the Emerging
Markets Free Index's weak performance.
The chart on this page points out the difference among returns in Europe,
the U.S., and the Far East over the same six months.
A BRIEF LOOK BACK
In the late 1980s, the prevailing wisdom was that all international markets
carried more risk than domestic equities. International investment was seen as
risky for several reasons:
* Foreign currencies were volatile.
* The availability of accurate and useful information on non-U.S.-based
companies was extremely limited.
* Accounting standards around the globe were not comparable to U.S. standards
or were often not understandable to investors in other parts of the world.
* There were legitimate questions about regulatory issues and whether the
proper disclosure was available --something U.S. investors take for
granted.
* U.S. regulators encouraged mutual fund companies to put international funds
on the aggressive end of the risk spectrum.
* Finally, foreign investments were thought to hold additional political
risks, especially in developing countries.
Ten years later these issues are still with us, but the emergence of a
global economy and the desire of countries to participate in the post-Cold War
economic boom have brought about significant improvements. In a world where
Coca-Cola derives most of its profits from foreign customers and European
companies like pharmaceutical giant Novartis advertise regularly in the U.S., a
lot is riding on global interdependence.
But foreign companies are not just coming to the U.S. to tap into our
powerful consumer base. They are also looking for capital to build their
businesses. To obtain that capital they are increasingly being asked to reform
and clarify their accounting standards.
[right margin]
MARKET RETURNS
FOR THE SIX MONTHS ENDED MAY 31, 1998
MSCI EUROPE 29.69%
MSCI FAR EAST -11.03%
S&P 500 15.03%
Source: Lipper Analytical Services, Inc.
"Foreign companies are not just coming to the U.S. to tap into our powerful
consumer base. They are also looking for capital to build their businesses."
[line chart - data below]
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED MAY 31, 1998
MSCI MSCI S&P
EUROPE FAR EAST 500
$1.00000 $1.00000 $1.00000
11/30-12/31 $1.03650 $0.94980 $1.01990
12/31-1/31 $1.07962 $1.00090 $1.03030
1/31-2/28 $1.16404 $1.03863 $1.10284
2/28-3/31 $1.24692 $0.97569 $1.16195
3/31-4/30 $1.27111 $0.95569 $1.17252
4/30-5/31 $1.29692 $0.88975 $1.15036
www.americancentury.com 3
Market Perspective (continued)
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The search for capital and the growing professionalism in the investment
management business around the world are also prompting corporations to raise
their standards for the release of pertinent, shareholder-relevant information.
Countries are being asked to put in place policies that will help stabilize
their economies and currencies and encourage foreign investment.
These trends are by no means uniform around the globe, but they are more
widely in evidence, especially in Europe.
EUROPE AT THE THRESHOLD
There has been a powerful bull market in Europe for several years now, as
the Continent prepares for the onset of the European Monetary Union (EMU) in
1999. Supporting the European equity rally was a substantial decline in interest
rates. On the corporate front, Europe has made great progress. Accounting
standards are improving. Companies are consolidating to meet global competition,
buying back their own stock, and tying management compensation to stock
performance, which tends to align management's interests with those of
shareholders. European governments continue to privatize--to sell off
corporations they once controlled to the private sector. Although tax rates in
Europe remain high, they could decline after the EMU is in place. This, along
with more equity-oriented savings and retirement practices--similar to those we
have seen in the U.S. during the last decade--should encourage investment.
THE ASIAN RECESSION
Recent events in Asia have taken a serious turn. Japan is now officially in
recession, and there have been major contractions in manufacturing output and
consumer spending throughout the Far East. Whereas mergers and market expansion
are the rule in Europe, companies in Asia are often merging to avoid
liquidation. The region remains awash in bad loans and overbuilt manufacturing
capacity. Credit is now extremely tight--after years of being abundant.
Political confrontation is also a concern. Many of the changes that could pull
Asia out of its current crisis are cultural, as opposed to simply economic, so
reforms may take longer to effect.
RISK AND FOREIGN INVESTING
The contrast between the ongoing Asian economic crisis and the strong
markets of Europe suggests that major global economic events in one part of the
world do not always have significant impact on other foreign markets. No one is
downplaying the seriousness of what has happened in Asia and the recent economic
and political events in Russia. But unless these events unfold into a
full-scale, global recession, which does not seem likely given the good health
of the U.S. and European economies, many foreign markets should continue to
provide a source of both positive investment returns and diversification for
U.S.-based investors.
[left margin]
"There has been a powerful bull market in Europe for several years now, as the
Continent prepares for the onset of the European Monetary Union (EMU) in 1999.
"Recent events in Asia have taken a serious turn. Japan is now officially in
recession, and there have been major contractions in manufacturing output and
consumer spending throughout the Far East."
4 1-800-345-2021
<TABLE>
International Growth--Performance
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TOTAL RETURNS AS OF MAY 31, 1998
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 5/9/91) (INCEPTION 10/2/96) (INCEPTION 11/20/97)
INTERNATIONAL MSCI INTERNATIONAL MSCI INTERNATIONAL MSCI
GROWTH EAFE(reg.tm) GROWTH EAFE(reg.tm) GROWTH
EAFE(reg.tm)
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ......... 28.60% 16.06% 28.44% 16.06% 28.75% 16.06%
1 YEAR .............. 30.30% 11.11% 29.99% 11.11% -- --
- -------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ............. 23.53% 9.76% -- -- -- --
5 YEARS ............. 17.57% 9.52% -- -- -- --
LIFE OF FUND ........ 16.81% 8.52%(2) 31.39% 12.32%(3) 28.19% 16.06%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Return from 5/31/91, the nearest date for which data are available.
(3) Return from 10/31/96, the nearest date for which data are available.
(4) Return from 11/30/97, the nearest date for which data are available.
See pages 45, 46 and 47 for information about share classes, MSCI EAFE(reg.tm)
and returns.
These charts 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). The chart at left shows the growth of a $10,000 investment in the
fund since the end of the month after inception, while the chart below shows the
fund's year-by-year performance. The MSCI EAFE(reg.tm) is provided for
comparison in each chart. 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. International Growth's total returns include
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the MSCI EAFE(reg.tm) do not.
[mountain chart - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
VALUE ON 5/31/98
International Growth $29,345
MSCI EAFE $17,724
INTERNATIONAL GROWTH MSCI EAFE INDEX
DATE ACCT VALUE ACCT VALUE
5/31/91 $10,000 $10,000
6/30/91 $9,596 $9,265
9/30/91 $10,231 $10,060
12/31/91 $10,802 $10,228
3/31/92 $11,418 $9,014
6/30/92 $12,112 $9,205
9/30/92 $11,611 $9,344
12/31/92 $11,325 $8,983
3/31/93 $12,301 $10,060
6/30/93 $12,818 $11,072
9/30/93 $13,654 $11,806
12/31/93 $16,155 $11,908
3/31/94 $15,568 $12,324
6/30/94 $15,778 $12,954
9/30/94 $16,344 $12,967
12/31/94 $15,387 $12,834
3/31/95 $14,879 $13,073
6/30/95 $15,741 $13,168
9/30/95 $16,581 $13,717
12/31/95 $17,216 $14,273
3/31/96 $17,614 $14,685
6/30/96 $18,455 $14,917
9/30/96 $18,500 $14,899
12/31/96 $19,700 $15,136
3/31/97 $20,789 $14,899
6/30/97 $23,610 $16,832
9/30/97 $24,501 $16,714
11/30/97 $22,819 $15,272
12/31/97 $23,585 $15,405
3/31/98 $27,819 $17,671
5/31/98 $29,345 $17,724
[bar chart - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING MAY 31)
INTERNATIONAL GROWTH MSCI EAFE (reg. tm)
5/31/92 23.43% -3.37%
5/31/93 5.79% 16.40%
5/31/94 22.72% 13.57%
5/31/95 -2.89% 4.93%
5/31/96 17.13% 10.67%
5/31/97 23.36% 7.54%
5/31/98 30.30% 11.11%
www.americancentury.com
5
International Growth--Q&A
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An interview with Henrik Strabo and Mark Kopinski, portfolio managers on
the International Growth team.
INTERNATIONAL GROWTH AGAIN HAS PERFORMED VERY WELL AND HAS BEEN ONE OF THE
BETTER PERFORMING INTERNATIONAL FUNDS FOR THE LAST TWO YEARS. WOULD YOU PLEASE
DISCUSS SOME OF THE REASONS FOR THESE RETURNS?
While we do not invest the portfolio against a specific index, we're
gratified that our investment approach again allowed us to outperform the Morgan
Stanley Capital International EAFE Index for the six months from November 30,
1997, through May 31, 1998. International Growth returned 28.60% compared with
EAFE's 16.06%.* During the 12 months ended May 31, International Growth rose
30.30% while the EAFE index returned 11.11%. For the three-year period ended May
31, International Growth had an average annual return of 23.53% versus 9.76% for
EAFE.
Relative to EAFE, International Growth had a much greater exposure to
businesses in Europe and a lighter weighting in Asia, and that largely explains
the wide performance gap between the fund and its benchmark.
International Growth also did far better than most foreign stock funds
during the six months. According to Lipper Analytical Services, Inc.,
International Growth finished in the top 4% of 474 international funds for the
12 months ended May 31. It also beat out its international fund peers for the
three-year period, finishing in the top 2% of 287 funds, according to Lipper.(+)
In addition, the fund was awarded five stars by Morningstar for the three- and
five-year periods ending May 31, 1998, out of 764 and 330 international equity
funds, respectively.(+)(+) Both Morningstar and Lipper are independent mutual
fund rating companies.
We believe our success in the current uncertain global economic environment
is attributable to our methodology of focusing on companies whose earnings are
growing at an accelerating rate. As we discussed in the annual report six months
ago, this approach pointed us toward certain fast-growing European businesses
and away from slower-growing companies in Asia and Japan.
Although we are currently heavily invested in Europe, our investment
strategy is not dictated by factors such as country or sector weightings. The
investment team continually monitors such macro factors as a country's political
and economic stability, but our primary strategy is to own companies with
accelerating revenues and earnings regardless of where they are located.
WHAT WERE SOME OF THE HOLDINGS THAT CONTRIBUTED MOST SIGNIFICANTLY TO RETURNS?
Accelerating earnings growth is evident in banking and financial services,
computer software and services, and communications equipment companies, all of
which were among the
* All fund returns referenced are for Investor Class shares.
(+) Lipper rankings are based on average annual total returns. The fund was
ranked in the top 6% for the five-year period out of 130 funds.
(+)(+) Morningstar proprietary ratings reflect risk-adjusted performance as of
May 31, 1998. The overall rating, which may change monthly, is calculated from
the fund's 3- and 5-year average total returns in excess of 90-day Treasury
bill returns with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day Treasury bill returns. Ten percent of the funds
in an investment category receive five stars and 22.5% receive four stars. Past
performance is no guarantee of future results.
[left margin]
PORTFOLIO AT A GLANCE
5/31/98 11/30/97
NO. OF COMPANIES 123 122
MEDIAN MARKET $6.7 $5.4
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 94%(1) 163%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.35(3) 1.38%
"Our primary strategy is to own companies with accelerating revenues and
earnings regardless of where they are located."
(1) Six months ended 5/31/98.
(2) Year ended 11/30/97.
(3) Annualized.
Investment terms are defined in the Glossary on page 47.
6 1-800-345-2021
International Growth--Q&A (continued)
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best-performing industry groups in the portfolio. Many of the companies are in
Europe, where rapidly developing economic crosscurrents are transforming
industry. The introduction of a single currency in 1999, corporate restructuring
and privatization, labor and pension reform, and corporate management's renewed
focus on the bottom line are some of the forces at work there.
Mannesmann AG, a German information technology and engineering firm, is one
of the leading providers of cellular telephone service in Germany. As one of the
largest holdings in the portfolio, Mannesmann represents about 2.6% of
investments and was one of our best-performing stocks. The extraordinary
popularity of cellular service across the European continent is largely
responsible for Mannesmann's performance. Many investors started to pull back
from some of the cellular service providers early this year, feeling that market
penetration could not expand much more. But cellular subscriptions in Europe
continue to grow at a surprising rate. This expansion in the cellular business
has helped Mannesmann's earnings growth.
While several new telecom ventures were started in Europe in the last year,
Mannesmann's established mobile facility service in Germany, and smaller
operations in France and Italy, position the company to become a major
competitor in the expanding European communications business. In addition,
Mannesmann's once unprofitable engineering division has started to contribute to
earnings. Other strong contributors from the telecommunications and cellular
group include Alcatel Alsthom, Nokia and Ericsson Telephone.
Referring to the chart on the right, you will see that financial services
was the largest industry holding in the portfolio at just over 12% of
investments. It was also one of the best-performing groups. Europe's changing
attitude toward the investment of personal savings means financial institutions
are well-positioned to take advantage of the growing interest in retirement
planning. Financial service institutions are starting to offer updated
investment products as individuals seek to shift out of traditional types of
investments, such as bank savings accounts, and into mutual funds.
Some of the top-performing financial services names in the portfolio were
ING Groep N.V., Julius Baer Holding AG, Banca Intesa SPA and AMVESCAP.
Pension modernization is also stimulating demand for mutual funds, which
have been largely unavailable until recently. As a result, the asset management
business in Europe is starting to see significant inflows, similar to the United
States in the early 1980s. Julius Baer Holding AG, a Swiss private banking
concern with a substantial global asset management capability, represented more
than 2% of the portfolio at the end of the period. It also was among our top
performers. Banca Intesa SPA is one of the largest asset managers in Italy, a
country where cash flows into mutual funds have been very strong. AMVESCAP,
another major asset manager, has a global reach, having recently acquired LGT
Asset Management and AIM Management Group in 1997.
The European mutual fund business has the potential to experience similar
levels of growth to those seen in the U.S. fund business over the past 20 years.
WERE THERE ANY STOCKS THAT DIDN'T DO AS WELL AS YOU HAD EXPECTED?
Problems in the Asian economies and the worldwide decline in the price
[right margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
5/31/98 11/30/97
ING GROEP N.V. 2.9% 2.1%
MANNESMANN AG 2.6% 1.1%
MISYS PLC 2.3% 1.8%
JULIUS BAER
HOLDING AG 2.1% 1.3%
AXA-UAP 2.0% 1.7%
CAP GEMINI SA 1.7% 1.1%
NESTLE S.A. 1.7% 1.5%
CREDIT SUISSE GROUP 1.6% 1.7%
ALCATEL ALSTHOM
COMPAGNIE GENERALE 1.6% 0.5%
TELEFONICA DE ESPANA 1.6% --
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
5/31/98 11/30/97
FINANCIAL SERVICES 12.1% 12.6%
COMPUTER SOFTWARE
& SERVICES 10.2% 7.8%
BANKING 9.8% 12.2%
COMMUNICATIONS
SERVICES 8.5% 2.9%
INSURANCE 4.9% 4.1%
www.americancentury.com 7
International Growth--Q&A (continued)
- --------------------------------------------------------------------------------
of oil hurt the energy exploration and production companies in the portfolio.
Other commodity-based companies, including chemicals, did not do well. The drop
in oil prices and the fall-off in demand hurt several energy exploration
companies, including British-Borneo Petroleum, Transocean Offshore and Woodside
Petroleum LTD.
Takeda Chemical also was down due to a decline in earnings growth. The
stock had performed well but the fall in earnings, due to a restructuring in the
government-controlled pharmaceutical pricing structure, resulted in a drop in
its stock price.
DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO DURING THE LAST SIX
MONTHS?
As mentioned earlier, we made a significant move into cellular and
telecommunications companies. After reducing holdings in Nokia, Phillips
Electronics, Ericsson and Alcatel at the onset of the Asian economic crisis in
mid-1997, we moved back into these names this year. Cellular infrastructure
order growth continued to expand and demand for cellular services at the
consumer level remained high. Moreover, our analysis indicated earnings remained
on the upswing. We were able to build positions in these growth companies at
lower prices and then saw them move beyond their 1997 highs.
We also reduced holdings in Novartis AG to less than 2% of total
investments from nearly 5% six months ago, as earnings had begun to slow.
THE ASIAN ECONOMIC CRISIS IS THE DOMINANT FACTOR IN THE INTERNATIONAL INVESTMENT
PICTURE. DO YOU EXPECT TO MAKE ANY PORTFOLIO ADJUSTMENTS TO ACCOUNT FOR THIS?
The portfolio's exposure to Asian companies had already been cut back last
year and was reduced further during the period.
As mentioned earlier, our bottom-up earnings growth investment process has
led us to focus primarily on European companies while Asian companies suffer
from continuing economic deterioration. Business fundamentals have been
improving in Europe, economies are accelerating and earnings and profit
surprises are largely on the positive side. Almost exactly the opposite is
generally the case in Asia right now.
The fact that we, and many others, are not currently investing heavily in
Asian and Pacific Rim markets doesn't mean we aren't looking there. We are
continuing to evaluate Asian companies and companies that export to Asia, and we
expect to be there when the earnings picture begins to change or a positive
catalyst emerges to brighten the earnings outlook.
[pie charts]
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF MAY 31, 1998
Preferred Stocks 1.9%
Repurchase Agreements 3.8%
Common Stocks & Rights 94.3%
AS OF NOVEMBER 30, 1997
Repurchase Agreements 1.3%
Preferred Stocks 3.7%
Common Stocks & Rights 95.0%
[bar chart]
INTERNATIONAL GROWTH'S INVESTMENTS BY COUNTRY
5/31/98 11/30/97
France 14.3% 9.9%
U.K. 13.7% 19.1%
Germany 12.4% 9.2%
Netherlands 9.8% 10.3%
Switzerland 8.9% 12.7%
Canada 6.3% 6.7%
Sweden 4.9% 3.8%
Japan 4.6% 9.5%
Other 25.1% 18.8%
8 1-800-345-2021
International Growth--Schedule of Investments
- -------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS & RIGHTS
BELGIUM--1.2%
280,000 Lernout & Hauspie
Speech Products N.V.(1) $ 15,032,500
(computer software & services)
3,150 UCB SA 14,971,491
(pharmaceuticals) -------------------------
30,003,991
-------------------------
CANADA--6.3%
336,000 BCE Inc. 15,539,639
(communications services)
686,000 Bombardier Inc. Cl B 17,641,682
(aerospace & defense)
236,000 Canadian National Railway Company 13,969,579
(railroad)
513,000 Geac Computer Corp. Ltd.(1) 18,758,627
(computer software & services)
497,700 Investor's Group, Inc. 18,147,894
(financial services)
148,000 Magna International Inc. Cl A 10,407,004
(automobiles & auto parts)
637,010 Newcourt Credit Group Inc.
(Acquired 9/8/97--2/6/98,
Cost $21,884,242)(2) 31,276,371
(financial services)
258,100 Northern Telecom Ltd. 16,536,124
(communications equipment)
257,000 Teleglobe Inc. 13,333,116
(communications services) -------------------------
155,610,036
-------------------------
DENMARK--2.3%
208,000 Novo Nordisk A/S Cl B 32,729,893
(pharmaceuticals)
262,700 Tele Danmark A/S Cl B 24,570,538
(communications services) -------------------------
57,300,431
. -------------------------
FINLAND--3.4%
2,976,400 Merita OY Ltd. Cl A 18,706,731
(banking)
414,000 Nokia Corp. Cl A ADR 26,884,125
(communications equipment)
72,400 Raisio Group plc 13,544,308
(food & beverage)
542,100 Sampo Insurance Company Ltd. 25,178,635
(insurance) -------------------------
84,313,799
-------------------------
FRANCE--14.3%
116,000 Accor SA 31,800,200
(leisure)
185,675 Alcatel Alsthom
Compagnie Generale 39,703,308
(communications services)
Shares Value
- --------------------------------------------------------------------------------
54,069 Altran Technologies SA $ 11,064,906
(business services & supplies)
438,841 Axa--UAP 49,924,945
(insurance)
169,000 Banque Nationale de Paris 14,426,829
(banking)
276,711 Cap Gemini SA 41,280,141
(computer software & services)
123,000 Groupe Danone 33,102,740
(food & beverage)
276,000 Lafarge SA 27,987,304
(construction & property
development)
38,000 Pinault--Printemps--Redoute SA 31,264,617
(retail--general merchandise)
124,100 Societe Generale Cl A 24,567,073
(banking)
107,000 Societe Television Francaise 1 15,086,535
(broadcasting & media)
154,700 Vivendi 31,064,049
(utilities) -------------------------
351,272,647
-------------------------
GERMANY--10.7%
70,676 Allianz AG(1) 22,326,546
(insurance)
23,134 Bayerische Motoren Werke
(BMW) AG(1) 24,419,231
(automobiles & auto parts)
278,000 Daimler--Benz AG 28,002,465
(automobiles & auto parts)
82,000 Deutsche Bank AG 7,056,134
(financial services)
445,600 Deutsche Pfandbrief-und
Hypothekenbank AG 35,648,000
(banking)
248,000 Douglas Holding AG 13,476,751
(retail--general merchandise)
301,000 Dresdner Bank AG 16,913,333
(financial services)
65,270 Mannesmann AG 63,807,367
(industrial equipment
& machinery)
270,000 VEBA AG 17,727,731
(utilities)
40,153 Volkswagen AG 32,549,799
(automobiles & auto parts) -------------------------
261,927,357
-------------------------
GREECE--0.4%
289,000 Hellenic Telecommunication
Organization SA (OTE) 8,482,439
(communications services) -------------------------
HUNGARY--0.4%
307,000 Magyar Tavkozlesi Rt. ADR 8,596,000
(communications services) -------------------------
See Notes to Financial Statements
www.americancentury.com 9
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
IRELAND--2.2%
801,000 Bank of Ireland $ 15,048,084
(financial services)
318,000 CBT Group PLC ADR(1) 15,860,250
(computers--software & services)
196,000 Elan Corp., plc ADR(1) 11,992,750
(pharmaceuticals)
255,000 Saville Systems Ireland plc ADR(1) 10,215,938
(computer software & services) -------------------------
53,117,022
-------------------------
ITALY--4.6%
11,476,900 Banca di Roma 23,647,235
(banking)
2,738,600 Banca Intesa S.p.A. 17,060,310
(financial services)
253,079 Banca Popolare di Bergamo
Credito Varesino SpA 5,948,115
(banking)
3,199,300 Credito Italiano 17,829,958
(banking)
1,413,381 La Rinascente SpA 7,551,528
(retail--food & drug)
1,012,300 Mondadori (Arnoldo) Editore SpA 12,370,733
(printing & publishing)
3,661,300 Telecom Italia SpA 27,646,784
(communications services) -------------------------
112,054,663
-------------------------
JAPAN--4.6%
171,000 Aiwa Co., Ltd. 5,146,745
(electrical & electronic
components)
248,000 Bridgestone Corp. 5,642,857
(automobiles & auto parts)
2,397,000 Fujitsu Ltd. 27,442,612
(computer systems)
298,000 Honda Motor Co., Ltd. 10,127,880
(automobiles & auto parts)
162,000 Ito--Yokado Co., Ltd. 8,048,675
(retail--general merchandise)
77,500 Keyence Corporation 9,313,616
(control & measurement)
1,306,000 Minebea Company Ltd. 13,362,802
(electrical & electronic
components)
240 NTT Data Corp. 9,608,295
(communications services)
207,000 Sony Corp. 17,438,796
(electrical & electronic
components)
302,000 Takeda Chemical Inds. 7,784,850
(pharmaceuticals) -------------------------
113,917,128
-------------------------
Shares Value
- --------------------------------------------------------------------------------
MEXICO--(3)
1,184,000 Cemex SA de CV Cl B Rights(1) $ 12,341
(building & home improvements)
20,760 Fomento Economico Mexica UBD(1) 688,903
(food & beverage) -------------------------
701,244
-------------------------
NETHERLANDS--9.8%
297,377 ASR Verzekeringsgroep N.V. 25,940,486
(insurance)
254,500 Cap Gemini N.V. 19,935,981
(computer software & services)
502,100 Getronics N.V. 24,956,509
(computer software & services)
1,049,359 ING Groep N.V. 72,029,665
(financial services)
732,488 Koninklijke Ahold NV 23,118,936
(retail --food & drug)
190,000 Philips Electronics N.V. 18,073,750
(electrical & electronic
components)
233,000 Unilever N.V. 18,392,438
(diversified companies)
310,000 Vedior NV
(Acquired 1/27/98--2/2/98,
Cost $6,674,374)(2) 9,861,325
(business services & supplies)
854,400 VNU Tijdschriftengroep Nederland 29,302,450
(printing & publishing) -------------------------
241,611,540
-------------------------
NORWAY--1.5%
342,000 Petroleum Geo-Services ASA ADR(1) 22,401,000
(energy --services)
1,611,000 Storebrand ASA 14,942,361
(insurance) -------------------------
37,343,361
-------------------------
POLAND--0.3%
605,000 Elektrim Spolka Akcyjna S.A. 7,954,598
(electrical & electronic -------------------------
components)
PORTUGAL--1.0%
399,037 Banco Espirito Santo e
Comercial de Lisboa, SA(1) 14,026,292
(banking)
354,700 Banco Espirito Santo e
Comercial de Lisboa, SA Rights(1) 2,493,566
(banking)
164,000 Portugal Telecom S.A. 8,607,983
(communications services) -------------------------
25,127,841
-------------------------
SINGAPORE--0.4%
7,820,100 Dairy Farm International
Holdings Ltd. 8,602,110
(retail--food & drug) -------------------------
See Notes to Financial Statements
10 1-800-345-2021
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
SOUTH AFRICA--0.4%
123,000 Liberty Life Association of Africa Ltd. $ 3,411,696
(insurance)
193,000 South African Breweries Ltd. 5,443,158
(food & beverage) -------------------------
8,854,854
-------------------------
SPAIN--3.0%
85,000 Banco Popular Espanol SA 6,736,335
(banking)
135,000 Corporacion Bancaria de Espana SA 11,491,066
(banking)
876,000 Telefonica de Espana 39,101,470
(communications services)
1,620,000 TelePizza, S.A.(1) 16,288,653
(restaurants) -------------------------
73,617,524
-------------------------
SWEDEN--4.9%
171,000 Assa Abloy AB Cl B 6,692,461
(construction & property
development)
176,000 Electrolux AB Cl B 17,500,829
(consumer products)
992,000 Ericsson (L.M.) Telephone Co. ADR 27,683,000
(communications equipment)
245,000 Europolitan Holdings AB 15,210,601
(communications equipment)
218,900 Hennes & Mauritz AB Cl B 12,278,626
(retail--apparel)
361,000 NetCom Systems AB Cl B(1) 13,806,379
(communications services)
1,828,000 Skandia Forsakrings AB 26,682,899
(financial services) -------------------------
119,854,795
-------------------------
SWITZERLAND--8.9%
182,900 Credit Suisse Group 40,197,802
(banking)
18,000 Julius Baer Holding AG 51,816,895
(financial services)
2,000 Kuoni Reisen Holding AG 10,719,342
(transportation)
20,000 Nestle S.A. 42,782,984
(food & beverage)
20,755 Novartis AG 35,093,063
(pharmaceuticals)
22,000 Union Bank of Switzerland 36,931,167
(banking) -------------------------
217,541,253
-------------------------
UNITED KINGDOM--13.7%
2,419,200 Amvescap Plc 25,883,193
(financial services)
3,417,880 British Aerospace PLC 30,292,144
(aerospace & defense)
1,307,000 British Airways plc 13,834,356
(airlines)
Shares Value
- --------------------------------------------------------------------------------
1,718,000 Capita Group Plc $ 15,170,287
(business services & supplies)
269,000 CMG plc 7,551,863
(computer software & services)
747,000 Compass Group PLC 15,484,518
(restaurants)
1,652,000 Diageo plc 18,672,531
(food & beverage)
306,146 Energis plc(1) 4,322,331
(communications services)
1,062,000 Hays plc 19,414,040
(business services & supplies)
537,000 Logica plc 15,842,582
(computer software & services)
949,834 Misys plc 57,299,792
(computer software & services)
446,754 Provident Financial plc 7,007,534
(financial services)
286,500 Schroders plc 8,407,903
(financial services)
280,300 SEMA Group plc 10,980,136
(computer software & services)
243,000 Siebe plc 6,088,188
(diversified companies)
1,924,000 Somerfield plc 12,451,499
(retail --food & drug)
2,509,765 Thomson Travel Group plc(1) 7,353,107
(leisure)
2,633,000 Vodafone Group plc 28,922,731
(communications services)
2,889,200 WPP Group plc 18,485,749
(business services & supplies)
322,000 Zeneca Group plc 13,081,397
(pharmaceuticals) -------------------------
336,545,881
-------------------------
TOTAL COMMON STOCKS & RIGHTS--94.3% 2,314,350,514
(Cost $1,707,732,965) -------------------------
PREFERRED STOCKS
BRAZIL--0.2%
30,136,000 Telecomunicacoes do
Rio de Janeiro S.A. 2,515,154
(communications services)
30,136,000 Telerj Celular S.A. Cl B(1) 2,200,760
(communications equipment) -------------------------
4,715,914
-------------------------
GERMANY--1.7%
174,000 Henkel KGaA 15,596,639
(chemicals & resins)
50,000 SAP AG 27,731,092
(computer software & services) -------------------------
43,327,731
-------------------------
TOTAL PREFERRED STOCKS--1.9% 48,043,645
(Cost $32,731,405) -------------------------
See Notes to Financial Statements
www.americancentury.com 11
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS--3.8%
Repurchase Agreement, State Street Boston
Corp., 5.48%, due 6/1/98, collateralized by
$92,150,000 par value U.S. Treasury Notes,
5.625%, due 12/31/02
(Delivery value $96,642,287) $ 92,600,000
(Cost $92,600,000) -------------------------
TOTAL INVESTMENT SECURITIES--100.0% $2,454,994,159
(Cost $1,833,064,370) =========================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain
- --------------------------------------------------------------------------------
31,158,633 CHF 6/29/98 $ 21,067,337 $ 179,600
47,737,665 DEM 6/29/98 26,785,987 214,955
199,027,966 FRF 6/29/98 33,301,108 303,155
20,637,252 GBP 6/29/98 33,640,186 58,991
1,460,526,200 JPY 6/29/98 10,556,825 84,609
48,967,394 NLG 6/29/98 24,377,861 195,776
95,527,937 SEK 6/29/98 12,188,090 136,505
---------------------------------------
$161,917,394 $1,173,591
=======================================
(Value on Settlement Date $163,090,985)
Forward foreign currency exchange contracts are used by the portfolio management
team in an effort to protect foreign investments against declines in foreign
currencies. This is also known as hedging. The contracts are called "forward"
because they allow your fund to exchange a foreign currency for U.S. dollars at
a date in the future -- and at a price (known as the exchange rate) agreed upon
when the contract is initially entered into.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
CHF = Swiss Franc
DEM = German Mark
FRF = French Franc
GBP = British Pound
JPY = Japanese Yen
NLG = Netherlands Guilder
SEK = Swedish Krona
(1) Non-income producing.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 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 May 31, 1998, was $41,137,696, which represented 1.7% of net
assets.
(3) Country was less than 0.05% of total investment securities.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* the percentage of total investments in each country
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
12 1-800-345-2021
<TABLE>
International Discovery--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF MAY 31, 1998
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 4/1/94) (INCEPTION 4/28/98) (INCEPTION 1/2/98)
INTERNATIONAL MSCI INTERNATIONAL MSCI INTERNATIONAL MSCI
DISCOVERY EAFE(reg.tm) DISCOVERY EAFE(reg.tm) DISCOVERY EAFE(reg.tm)
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ......... 33.92% 16.06% -- -- -- --
1 YEAR .............. 36.97% 11.11% -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ............. 31.07% 9.76% -- -- -- --
LIFE OF FUND ........ 23.61% 9.11% 6.73% -0.49%(2) 31.91%(1) 15.06%(1)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Return from 4/30/98, the nearest date for which data are available.
See pages 45, 46 and 47 for information about share classes, MSCI EAFE(reg.tm)
and returns.
These charts 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). The chart at left shows the growth of a $10,000 investment in the
fund since inception, while the chart below shows the fund's year-by-year
performance. The MSCI EAFE(reg.tm) is provided for comparison in each chart.
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. International Discovery's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the MSCI EAFE(reg.tm) do not.
[mountain chart]
GROWTH OF $10,000 OVER LIFE OF FUND
VALUE ON 5/31/98
International Discovery $24,103
MSCI EAFE Index $14,382
INTERNATIONAL DISCOVERY EAFE
DATE ACCT VALUE ACCT VALUE
4/01/94 $10,000 $10,000
6/30/94 $10,760 $10,511
9/30/94 $11,420 $10,521
12/31/94 $10,760 $10,414
3/31/95 $10,100 $10,608
6/30/95 $11,020 $10,685
9/30/95 $11,800 $11,130
12/31/95 $11,825 $11,581
3/31/96 $12,931 $11,916
6/30/96 $14,479 $12,104
9/30/96 $14,559 $12,089
12/31/96 $15,511 $12,281
3/31/97 $16,712 $12,089
6/30/97 $18,293 $13,658
9/30/97 $19,789 $13,562
12/31/97 $18,223 $12,500
3/31/98 $21,957 $14,338
5/31/98 $24,103 $14,382
[bar chart]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING MAY 31)
INTERNATIONAL DISCOVERY EAFE (reg. tm)
4/1/94-5/31/94 9.80% 3.64%
5/31/95 -2.37% 4.93%
5/31/96 33.00% 10.67%
5/31/97 23.42% 7.54%
5/31/98 36.97% 11.11%
*Returns from 4/1/94 to 5/31/94
www.americancentury.com 13
International Discovery--Q&A
- --------------------------------------------------------------------------------
An interview with Henrik Strabo and Mark Kopinski, portfolio managers on
the International Discovery investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED MAY 31, 1998?
International Discovery has had an excellent first half to its fiscal year,
generating a 33.92% total return.* By comparison, the Morgan Stanley Capital
International EAFE Index gained 16.06%. For the 12 months ended May 31, 1998,
Discovery returned 36.97% versus 11.11% for EAFE.
We should emphasize once again that our bottom-up approach to finding
companies with accelerating revenue and earnings growth accounted for most of
the difference in performance. As we reported six months ago, this approach led
us to European companies, where an earnings expansion was underway. Since then,
the growth rates of European economies and companies have actually increased,
while the economic contraction that had just begun in Southeast Asia has
intensified. Relative to EAFE, Discovery had a much greater exposure to
businesses in Europe and a lighter weighting in Asia, and that goes a long way
toward explaining the wide performance gap between the fund and its benchmark.
HOW DID DISCOVERY PERFORM COMPARED TO OTHER INTERNATIONAL EQUITY FUNDS?
International Discovery maintained its five-star rating from Morningstar, a
large mutual fund rating firm. The rating applies for the three years ending May
31, 1998, and puts Discovery in the top 10% of the 764 funds in its
international equity fund category.(+)
DISCOVERY HAS ABOUT 83% OF ITS ASSETS IN EUROPE. WHY?
We are finding high growth rates on the Continent for a number of reasons.
The biggest factor is the pending European Monetary Union (EMU), which will
introduce a single currency (the euro) and unify the economies of 11 European
countries. To participate in the EMU, these countries were required to cut
government spending sharply and reduce inflation. The resulting drop in interest
rates coupled with business restructuring across Europe has been a boon to
corporate profits. In addition, compensation of managers is now increasingly
tied to share price performance, creating strong incentives to increase
shareholder value. European companies have pushed well ahead of any change
enacted by government because they recognize the need to stay competitive and
productive.
We are always looking for the strongest accelerating growth stocks we can
find, wherever they are located. Although we found a wealth of good ideas in
Europe, we continue to investigate growth opportunities worldwide. Members of
our team visited 21 countries in the past six months, including Singapore, Peru,
South Africa and Germany.
*All fund returns referenced are for Investor Class shares.
(+)Morningstar proprietary ratings reflect risk-adjusted performance as of May
31, 1998. The overall rating, which may change monthly, is calculated from the
fund's three-year average total returns in excess of 90-day Treasury bill
returns with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day Treasury bill returns. Ten percent of the funds in an
investment category receive five stars. Past performance is no guarantee of
future results.
[left margin]
PORTFOLIO AT A GLANCE
5/31/98 11/30/97
NO. OF COMPANIES 161 154
MEDIAN MARKET $589 $451
CAPITALIZATION MILLION MILLION
PORTFOLIO TURNOVER 86%(1) 146%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 1.66(3) 1.70%
"The growth rates of European economies and companies have actually increased,
while the economic contraction that had just begun in Southeast Asia has
intensified."
(1) Six months ended 5/31/98.
(2) Year ended 11/30/97.
(3) Annualized.
Investment terms are defined in the Glossary on page 47.
14 1-800-345-2021
International Discovery--Q&A (continued)
- --------------------------------------------------------------------------------
WHICH COMPANIES WERE AMONG DISCOVERY'S BEST PERFORMERS?
The environment we've just described has created huge opportunities for
companies that help manage change, and these companies have produced the
portfolio's best returns. Financial services, information technology and
temporary employment are among the industries generating the most significant
earnings growth.
Among financial service companies, those engaged in asset management,
insurance brokerage and banking have been outstanding performers. Marschollek,
Lautenschlaeger und Partner, a German financial service company, Banco Popolare
di Brescia of Italy, and Kempen & Company of Holland posted excellent results.
As interest rates dropped across Europe, savers have shifted assets away from
conservative bank accounts and into the mutual fund and insurance products these
companies offer. Some European countries, to a greater extent than America, face
the problem of too few workers supporting too many retirees. We expect financial
stocks to continue to perform well as workers increasingly turn to retirement
plans like defined contribution plans and other investment vehicles to manage
their savings.
In the information technology area, CGI Group of Canada and Tieto Corp. in
Finland also posted substantial gains. Both are helping companies update
software to enable computers to distinguish the year 2000 from 1900. In
addition, Tieto installs, builds and tests computer networks that are being used
by European companies facing conversion to the new euro currency.
WHICH STOCKS OR SECTORS HELD BACK PERFORMANCE?
Energy services was the worst-performing group, although the downward move
was modest. Falling oil prices, in the wake of overproduction and depressed
demand in Asia, led to diminished earnings expectations for the oil industry,
which hurt the shares of service companies that provide equipment and technology
to oil drillers.
Tecnomatix Technologies was one of our weakest individual holdings.
Tecnomatix makes software that designs manufacturing plants, among other
applications. The stock dropped after the company announced that profits would
not meet expectations. Although we believe this is a solid company with a
promising product line, we sold the position after a disruption in its shipment
flow raised questions about the sustainability of its earnings.
WHAT CHANGES HAVE YOU MADE IN THE PORTFOLIO DURING THE LAST SIX MONTHS?
As you can see from the chart to the right, holdings in financial services
and business services have climbed as we responded to positive trends in Europe.
In terms of investments by country, little has changed. The themes that applied
six months ago are still in place: An economic revival in Europe is producing
some of the strongest growth stories on the globe, while Asian economies are
contracting.
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
5/31/98 11/30/97
MARSCHOLLEK,
LAUTENSCHLAEGER
UND PARTNER AG 3.9% 2.8%
HAVAS ADVERTISING SA 2.5% 1.6%
KEMPEN &
COMPANY NV 2.5% 1.9%
CGI GROUP, INC. 2.1% 0.8%
TIETO CORP. CL B 2.0% 1.9%
INTERNATIO-MULLER NV 2.0% 1.8%
CORPORACION
FINANCIERA
REUNIDA, S.A. 1.7% 1.4%
VERWALTUNGS-UND
PRIVAT-BANK AG 1.7% 0.6%
MERKANTILDATA ASA 1.7% --
VONTOBEL HOLDING
AG CL B 1.6% 1.3%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
5/31/98 11/30/97
FINANCIAL SERVICES 15.9% 12.5%
BUSINESS SERVICES
& SUPPLIES 12.9% 5.9%
COMPUTER SOFTWARE
& SERVICES 12.8% 12.5%
BANKING 8.5% 4.3%
ELECTRICAL & ELECTRONIC
COMPONENTS 4.3% 2.4%
www.americancentury.com 15
International Discovery--Q&A (continued)
- --------------------------------------------------------------------------------
DO YOU EXPECT THE RAPID GROWTH RATES YOU ARE SEEING IN EUROPE TO CONTINUE?
Frankly, we were surprised at the magnitude of European earnings growth.
Economies there are among the fastest growing in the world right now. In
addition, a confluence of factors, such as the introduction of a common currency
and a huge shift in corporate strategies, are providing a foundation for strong
profit growth. Regardless of these macro factors, we will continue to use our
bottom-up strategy in an effort to make sure the portfolio has the best growth
stocks from around the globe.
[pie charts]
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF MAY 31, 1998
Repurchase Agreements 0.7%
Preferred Stocks 5.9%
Common Stocks & Warrants 93.4%
AS OF NOVEMBER 30, 1997
Repurchase Agreements 4.7%
Preferred Stocks 5.7%
Common Stocks & Warrants 89.6%
[bar chart]
INTERNATIONAL DISCOVERY'S INVESTMENTS BY COUNTRY
5/31/98 11/30/97
Netherlands 14.1% 12.5%
U.K. 13.4% 12.6%
Germany 10.1% 6.6%
Canada 9.0% 9.6%
France 8.6% 5.5%
Switzerland 5.5% 7.1%
Finland 5.5% 6.4%
Spain 4.2% 2.6%
Other 29.6% 37.1%
16 1-800-345-2021
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS
AUSTRIA--1.0%
148,000 Erste Bank Der Oesterreichischen
Sparkassen AG $ 8,968,269
(banking) ------------------------
BELGIUM--1.4%
22,000 Creyf's NV 5,734,378
(business services & supplies)
70,000 Telinfo NV(1) 6,880,167
(communications services) ------------------------
12,614,545
------------------------
CANADA--9.0%
233,300 Architel Systems Corp.(1) 2,491,203
(computer peripherals)
387,400 Berkley Petroleum Corp.(1) 3,152,405
(energy--services)
245,000 Boardwalk Equities, Inc.(1) 3,701,282
(financial services)
474,700 Bracknell Corp.(1) 1,695,066
(business services & supplies)
932,000 Canadian 88 Energy Corp.(1) 4,160,000
(energy production & marketing)
151,000 Certicom Corp.(1) 3,421,803
(computer peripherals)
919,000 CGI Group, Inc.(1) 18,995,296
(business services & supplies)
165,000 Dorel Industries Inc. Cl B(1) 5,523,605
(furniture & furnishings)
164,000 JetForm Corp.(1) 3,126,250
(computer software & services)
520,000 Kingsway Financial Services(1) 6,320,343
(insurance)
235,300 Newcourt Credit Group Inc.
(Acquired 12/4/95-8/7/97,
Cost $1,659,961)(2) 11,552,927
(financial services)
75,000 Perigee Inc.(1) 1,125,322
(financial services)
223,000 QLT PhotoTherapeutics, Inc.(1) 4,303,039
(biotechnology)
142,000 Rand A Technology Corp.(1) 2,779,056
(computer software & services)
349,200 Royal Group Technologies Ltd.(1) 9,459,873
(building & home improvements) ------------------------
81,807,470
------------------------
CROATIA--0.2%
121,888 Pliva d.d. GDR 2,005,058
(pharmaceuticals) ------------------------
DENMARK--0.3%
70,000 Vestas Wind Systems A/S(1) 2,882,395
(utilities) ------------------------
Shares Value
- --------------------------------------------------------------------------------
FINLAND--5.5%
331,723 Asko Oyj Cl A $ 7,122,849
(diversified companies)
401,000 Finnair Oyj 4,138,897
(airlines)
35,000 Fiskars Oyj AB Cl A 4,967,193
(diversified companies)
102,500 KCI Konecranes International plc
(Acquired 5/12/98-5/26/98,
Cost $5,588,828)(2) 5,270,846
(machinery & equipment)
89,450 OY Hartwall AB 2,596,648
(food & beverage)
130,000 Pohjola Insurance Group Cl B 7,116,264
(insurance)
85,000 Tieto Corp. Cl B 18,643,099
(computer software & services) ------------------------
49,855,796
------------------------
FRANCE--8.6%
33,000 Altran Technologies SA 6,753,258
(business services & supplies)
55,000 Cie des Signaux SA 4,274,307
(aerospace & defense)
13,000 Galeries Lafayette 12,596,057
(retail--general merchandise)
110,000 Havas Advertising SA 23,245,907
(broadcasting & media)
110,000 Havas Advertising Warrants(1) 312,396
(broadcasting & media)
99,000 Infogrames Entertainment SA(1) 6,251,587
(leisure)
21,000 Jet Multimedia(1) 4,490,478
(computer software & services)
20,538 Le Carbone-Lorraine 9,366,646
(electrical & electronic
components)
21,066 NRJ SA 3,501,615
(broadcasting & media)
40,000 Omnicom SA(1) 4,710,992
(communications equipment)
71,000 Societe Generale
d'Entreprises SA(1) 3,285,500
(construction & property ------------------------
development)
78,788,743
------------------------
GERMANY--4.2%
4,000 Aixtron AG 1,622,409
(machinery & equipment)
48,000 DIS Deutscher Industrie Service AG 3,495,798
(business services & supplies)
21,000 DLW AG(1) 3,635,294
(construction & property
development)
5,000 Porsche AG 13,725,490
(automobiles & auto parts)
See Notes to Financial Statements
www.americancentury.com 17
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
11,795 Sartorius AG $ 5,947,059
(electrical & electronic
components)
52,000 Sixt AG 8,098,599
(business services & supplies)
38,700 Winkler & Duennebier AG(1) 1,799,496
(machinery & equipment) -------------------------
38,324,145
-------------------------
GREECE--1.8%
175,000 Athens Medical Care S.A. 3,712,573
(healthcare)
61,000 Intrasoft S.A. 4,059,932
(communications services)
261,000 Mytilineos S.A. 4,048,569
(metals & mining)
66,000 National Mortgage Bank of Greece 4,720,624
(banking) -------------------------
16,541,698
-------------------------
HONG KONG--0.3%
5,094,954 Founder Hong Kong Limited 3,172,429
(computer software & services) --------------------------
INDIA--1.6%
774,000 Corporation Bank(1) 2,176,120
(banking)
85,000 Hero Honda Motors Ltd. 2,208,163
(leisure)
550 Indian Hotels Company Limited 6,840
(leisure)
8,000 Larsen & Toubro Ltd. 49,114
(diversified companies)
120,000 NIIT Limited 4,797,119
(computer software & services)
200 Oriental Bank of Commerce 305
(banking)
156,000 Pentafour Software & Exports Ltd. 3,915,918
(computer software & services)
100,000 Satyam Computer 1,339,136
(computer software & services) -------------------------
14,492,715
-------------------------
IRELAND--0.7%
2,454,000 Anglo Irish Bank Corp. plc 6,648,995
(banking) -------------------------
ISRAEL--0.6%
636,200 Oshap Technologies, Ltd.(1)(3) 5,308,294
(computer software & services) --------------------------
ITALY--2.5%
180,000 Banca Nazionale del Lavoro(1) 4,859,749
(financial services)
260,000 Banca Popolare di Brescia 5,371,870
(banking)
5,042,000 Ciga Spa(1) 5,703,004
(leisure)
Shares Value
- --------------------------------------------------------------------------------
486,000 Gruppo Editoriale L'Espresso $ 4,419,814
(printing & publishing)
2,782,900 Premafin Finanziaria S.p.A.(1) 2,404,302
(insurance) -------------------------
22,758,739
-------------------------
JAPAN--2.4%
124,000 Fuji Soft ABC, Inc. 4,330,357
(computer software & services)
48,400 Fujimi Incorporated 1,847,062
(electrical & electronic
components)
89,000 Itoen, Ltd. 2,742,800
(food & beverage)
116,000 Meitec 3,950,749
(computer software & services)
69,580 Ministop Co., Ltd. 1,350,217
(retail--food & drug)
75,000 Nippon System Development 1,933,324
(computer software & services)
97,000 Noritsu Koki Co. Limited 2,507,416
(electrical & electronic
components)
11,000 Ryohin Keikaku Company Limited 982,143
(retail--general merchandise)
319,000 Yoshitomi Pharmaceutical
Industries, Ltd. 1,963,890
(healthcare) -------------------------
21,607,958
-------------------------
LIECHTENSTEIN--1.6%
5,000 Verwaltungs-und Privat-Bank AG 15,084,609
(banking) -------------------------
MEXICO--0.4%
19,000 ARA, S.A. de C.V.(1) 75,772
(construction & property
development)
3,030,000 Biper, S.A. de C.V. Series B(1) 1,414,332
(communications services)
523,600 Corporacion Interamericana de
Entretenimiento S.A. Cl B(1) 1,753,819
(leisure) -------------------------
3,243,923
-------------------------
NETHERLANDS--14.1%
247,227 Aalberts Industries N.V. 7,544,976
(metals & mining)
44,500 Atag Holding N.V. 3,067,821
(consumer products)
56,000 Athlon Groep N.V. 9,992,544
(business services & supplies)
101,537 Brunel International NV. 3,961,755
(business services & supplies)
57,400 Draka Holding N.V. 2,453,601
(electrical & electronic
components)
See Notes to Financial Statements
18 1-800-345-2021
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
100,000 Fugro N.V. $ 4,771,609
(business services & supplies)
88,000 GTI Holding N.V. 3,477,310
(construction & property
development)
501,400 Internatio-Muller NV 18,068,244
(transportation)
321,337 Kempen & Company NV 22,711,925
(financial services)
251,264 Ordina Beheer N.V.(1) 8,454,979
(computer software & services)
81,000 Samas Groep N.V. 6,018,937
(office equipment & supplies)
49,126 Simac Techniek N.V. 10,072,307
(computer software & services)
324,571 Unique International NV 10,857,214
(business services & supplies)
183,000 Unit 4(1) 5,912,322
(computer software & services)
153,750 Van der Moolen Holding N.V. 11,119,154
(banking) -------------------------
128,484,698
-------------------------
NORWAY--3.6%
130,000 ContextVision AB(1) 2,463,230
(computer software & services)
175,000 Det Sondenfjelds-Norske
Dampskibsselskab Cl A 3,744,866
(energy--services)
1,079,000 Merkantildata ASA 15,083,411
(financial services)
146,000 Provida ASA(1) 3,250,033
(computer software & services)
203,000 Tandberg Television ASA(1) 2,084,603
(communications equipment)
200,000 Tomra Systems ASA 6,201,140
(environmental services) -------------------------
32,827,283
-------------------------
POLAND--1.0%
590,000 Elektrim Spolka Akcyjna S.A. 7,757,376
(electrical & electronic
components)
127,750 Wielkopolski Bank Kredytowy S.A.(1) 914,852
(banking) -------------------------
8,672,228
-------------------------
PORTUGAL--3.7%
628,300 Banco Mello, S.A. 8,746,046
(banking)
313,000 Companhia de Seguros Mundial
Confianca, SA(1) 9,626,162
(insurance)
399,000 Espirito Santo Financial
Holding S.A. ADR 10,149,563
(banking)
Shares Value
- --------------------------------------------------------------------------------
32,000 Telecel-Comunicacaoes
Pessoais, SA(1) $ 5,598,688
(communications services) -------------------------
34,120,459
-------------------------
RUSSIAN FEDERATION--0.1%
65,400 SUN Brewing Ltd. GDR(1) 868,336
(food & beverage) -------------------------
SINGAPORE--0.3%
927,000 Datacraft Asia Limited 2,688,300
(communications services) -------------------------
SOUTH AFRICA--1.1%
533,581 Primedia Limited Cl N 4,243,395
(broadcasting & media)
406,600 Sage Group Limited 2,149,132
(insurance)
948,300 Super Group Limited(1) 3,678,790
(transportation) -------------------------
10,071,317
-------------------------
SPAIN--4.2%
27,000 Azkoyen SA 4,165,623
(financial services)
4,454 Banco Pastor SA 246,678
(banking)
79,000 Campofrio Alimentacion SA(1) 6,641,063
(food & beverage)
1,087,000 Corporacion Financiera
Reunida, S.A.(1) 15,695,457
(financial services)
44,000 Grupo Acciona SA 11,314,037
(construction & property -------------------------
development)
38,062,858
-------------------------
SWEDEN--3.7%
51,000 ADB-Gruppen Mandator AB 1,885,470
(computer software & services)
418,252 Castellum AB 5,065,391
(real estate)
195,000 Enator AB 6,140,206
(computer software & services)
36,000 Enea Data AB Cl B 2,850,004
(computer software & services)
399,100 OM Gruppen AB 8,140,537
(financial services)
9,049 Resco AB Cl B 298,780
(computer software & services)
166,000 Scandic Hotels AB 6,348,640
(leisure)
87,000 Sigma AB Cl B 2,861,477
(computer software & services) -------------------------
33,590,505
-------------------------
See Notes to Financial Statements
www.americancentury.com 19
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
SWITZERLAND--5.5%
15,200 Danzas Holding AG $ 4,334,659
(railroad)
15,125 Georg Fischer AG 6,627,958
(machinery & equipment)
600 Kudelski SA 4,591,114
(electrical & electronic
components)
126,000 MFC Bancorp Ltd. 1,472,625
(financial services)
7,000 Moevenpick Holding AG Bearer 3,987,730
(leisure)
4,000 Phoenix Mecano AG 2,615,789
(electrical & electronic
components)
6,000 Rieter Holdings Ltd.(1) 4,546,619
(machinery & equipment)
8,000 SAIA-Burgess Electronics AG(1) 2,292,186
(electrical & electronic
components)
50,000 Swisslog Holding AG 5,224,837
(machinery & equipment)
10,500 Vontobel Holding AG Cl B 14,865,503
(financial services) -------------------------
50,559,020
-------------------------
TURKEY--0.2%
31,863,000 Aksigorta A.S. 1,942,712
(insurance) -------------------------
UNITED KINGDOM--13.4%
380,000 Admiral plc 7,659,915
(business services & supplies)
1,400,000 Ashtead Group plc 6,226,843
(industrial equipment & machinery)
621,291 Bodycote International plc 12,726,593
(diversified companies)
423,000 Close Brothers Group plc 5,626,928
(financial services)
460,000 Computacenter plc(1) 5,473,419
(computer software & services)
2,130,000 Electronics Boutique plc(1) 3,407,054
(retail--general merchandise)
370,000 Goode Durrant plc 3,442,310
(business services & supplies)
799,000 Iceland Group Plc 3,175,551
(food & beverage)
854,000 Jarvis plc 10,656,356
(construction & property
development)
1,664,000 London Scottish Bank plc 4,006,072
(banking)
1,101,000 Meggitt plc 4,169,161
(industrial equipment & machinery)
334,000 Micro Focus Group plc(1) 3,039,238
(computer software & services)
302,000 MSB International PLC 4,966,213
(business services & supplies)
Shares Value
- --------------------------------------------------------------------------------
348,000 Northern Leisure plc $ 2,945,109
(leisure)
490,250 Parity plc 6,841,591
(business services & supplies)
720,237 Robert Walters plc 6,060,068
(business services & supplies)
269,000 Sage Group plc (The) 6,498,115
(computer software & services)
621,000 Select Appointments Holdings plc 8,884,171
(business services & supplies)
1,911,700 SkyePharma plc(1) 2,558,627
(pharmaceuticals)
2,147,000 Taylor Nelson AGB plc 4,765,893
(broadcasting & media)
412,500 Triad Group PLC 5,026,054
(business services & supplies)
550,000 WS Atkins plc 4,591,787
(textiles & apparel) -------------------------
122,747,068
-------------------------
UNITED STATES--0.4%
99,700 Global TeleSystems Group, Inc.(1) 3,816,641
(communications services) -------------------------
TOTAL COMMON STOCKS & WARRANTS--93.4% 852,557,206
(Cost $594,624,921) -------------------------
PREFERRED STOCKS
GERMANY--5.9%
9,000 Friedrich Grohe AG 3,126,050
(machinery & equipment)
5,500 Hugo Boss AG 11,862,745
(textiles & apparel)
7,000 Jil Sander AG 2,960,784
(textiles & apparel)
72,000 Marschollek, Lautenschlaeger
und Partner AG 35,697,479
(financial services) -------------------------
TOTAL PREFERRED STOCKS--5.9% 53,647,058
(Cost $22,113,458) -------------------------
TEMPORARY CASH INVESTMENTS-0.7%
Repurchase Agreement, State Street
Boston Corp., 5.48%, due 6/1/98,
collateralized by $6,370,000 par value
U.S. Treasury Notes, 5.625%, due 12/31/02
(Delivery value $6,402,923) 6,400,000
(Cost $6,400,000) -------------------------
TOTAL INVESTMENT SECURITIES--100.0% $ 912,604,264
(Cost $623,138,379) =========================
See Notes to Financial Statements
20 1-800-345-2021
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain
- --------------------------------------------------------------------------------
9,633,441 CHF 6/29/98 $ 6,513,474 $ 55,528
14,403,718 DEM 6/29/98 8,082,042 64,857
27,546,295 FIM 6/29/98 5,084,476 45,187
44,894,064 FRF 6/29/98 7,511,618 68,382
7,738,313 GBP 6/29/98 12,614,000 22,120
259,354,809 JPY 6/29/98 1,874,642 15,025
5,192,142 NLG 6/29/98 12,541,622 100,720
2,806,311 SEK 6/29/98 2,909,781 32,589
----------------------------------------
$57,131,655 $404,408
========================================
(Value on Settlement Date $57,536,063)
Forward foreign currency exchange contracts are used by the portfolio management
team in an effort to protect foreign investments against declines in foreign
currencies. This is also known as hedging. The contracts are called "forward"
because they allow your fund to exchange a foreign currency for U.S. dollars at
a date in the future -- and at a price (known as the exchange rate) agreed upon
when the contract is initially entered into.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
CHF = Swiss Franc
DEM = German Mark
FIM = Finnish Markka
FRF = French Franc
GBP = British Pound
GDR = Global Depositary Receipt
JPY = Japanese Yen
NLG = Netherlands Guilder
SEK = Swedish Krona
(1) Non-income producing.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 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 May 31, 1998, was $16,823,773, which represented 1.8% of net
assets.
(3) 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 for
the six months ended May 31, 1998.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* the percentage of total investments in each country
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 21
Emerging Markets--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF MAY 31, 1998(1)
INVESTOR CLASS (INCEPTION 9/30/97)
EMERGING MSCI EMERGING
MARKETS MARKETS FREE INDEX
6 MONTHS ........................... 2.41% -7.17%
LIFE OF FUND ....................... -15.00% -25.24%
(1) Returns for periods less than one year are not annualized.
See pages 46 and 47 for information about MSCI Emerging Markets Free and
returns.
[mountain chart]
PERFORMANCE OF $10,000 OVER LIFE OF FUND
VALUE ON 5/31/98
Emerging Markets $8,500
MSCI EMF Index $7,476
EMERGING MARKETS EMF
DATE ACCT VALUE ACCT VALUE
9/30/97 $10,000 $10,000
10/31/97 $8,480 $8,359
11/30/97 $8,300 $8,054
12/31/97 $8,360 $8,248
1/31/98 $7,800 $7,601
2/28/98 $8,700 $8,395
3/31/98 $9,060 $8,759
4/30/98 $9,400 $8,664
5/31/98 $8,500 $7,476
The chart at left shows the performance of a $10,000 investment in the fund
since inception. MSCI Emerging Markets Free is provided for comparison. 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. Emerging Markets' total return includes operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
return of the MSCI Emerging Markets Free Index does not.
22 1-800-345-2021
Emerging Markets--Q&A
- --------------------------------------------------------------------------------
An interview with Mark Kopinski and Michael Donnelly, portfolio managers on
the Emerging Markets fund team.
HOW DID EMERGING MARKETS PERFORM FOR THE SIX MONTHS ENDED MAY 31, 1998?
The fund held its own in a very difficult investment environment. Many
emerging markets continued to suffer the effects of the economic and currency
crises that rocked Southeast Asia in late 1997. As a result, returns have been
weak on an absolute basis, but relative to our benchmark and mutual fund peer
group, Emerging Markets performed well. The fund posted a 2.41% gain for the six
months, versus a decline of 7.17% for its benchmark, the Morgan Stanley Emerging
Markets Free Index. According to Lipper Analytical Services, an independent
company that ranks mutual funds, the fund was in the top 7% of its peer group of
156 emerging markets funds. Its Lipper peers posted an average return of
- -6.09%.*
Emerging Markets' favorable relative performance was driven primarily by
good stock selection in markets that had positive momentum. We were able to
sidestep a number of "potholes" by focusing on the earnings growth of individual
companies, a strategy that moved us away from troubled areas and toward growing
companies in countries with healthier, more robust prospects.
WHAT EXPLAINS EMERGING MARKETS' BETTER PERFORMANCE RELATIVE TO ITS BENCHMARK AND
PEER GROUP?
The most significant factor is the fund's relatively low exposure to some
countries that are heavily represented in the index, such as Malaysia and
Taiwan, which were adversely affected by the collapse of the Asian economies. We
wish to stress that although we pay close attention to macro factors, such as a
country's economic health and political stability, we select stocks using a
bottom-up approach. In other words, investments are made on a stock-by-stock
basis, and not solely by country allocation.
We did stake out a modest position in some companies in Asia when prices
were much lower than a year ago. Those investments were concentrated in
companies that continue to demonstrate good growth patterns, such as
export-oriented companies, or domestic companies that we thought would survive
the crisis on the basis of their fundamental stability and operating prospects.
IN WHICH COUNTRIES AND SECTORS HAVE YOU FOUND THE GREATEST GROWTH?
Worldwide, we found earnings growth in companies in software services,
banking and cellular service providers. There is a vast array of fast-growing
software companies located in emerging market countries. Many of these are high
quality firms that supply first-rate services and are heavily involved in
network integration and in solving Year 2000 programming problems. We also had
success in banks with strong franchises and expanding product lines. The
penetration of sophisticated banking and financial services is occurring in many
markets around the globe. Cellular service providers was another group that
continued to post much stronger than expected subscriber growth, which is a
catalyst for revenue and earnings acceleration. Analysts were repeatedly
*Lipper rankings are based on average annual total returns. Past performance is
no guarantee of future results.
[right margin]
PORTFOLIO AT A GLANCE
5/31/98 11/30/97
NO. OF COMPANIES 109 113
MEDIAN MARKET $769 $894
CAPITALIZATION MILLION MILLION
PORTFOLIO TURNOVER 143%(1) 36%(2)
EXPENSE RATIO 2.00%(3) 2.00%(3)
"Worldwide, we found earnings growth in companies in software services, banking
and cellular service providers. There is a vast array of fast-growing software
companies located in emerging market countries."
(1) Six months ended 5/31/98.
(2) For the period from 9/30/97 to 11/30/97.
(3) Annualized.
Investment terms are defined in the Glossary on page 47.
www.americancentury.com 23
Emerging Markets--Q&A (continued)
- --------------------------------------------------------------------------------
surprised by expanding penetration rates, not only in developed economies but
also in the emerging markets where we invest.
WHICH STOCKS CONTRIBUTED THE MOST TO RETURNS?
Two of Emerging Market's top performers, Wipro Ltd. and Infosys
Technologies, Ltd., are computer software companies based in India. Both
companies have strong client relationships in Europe and the United States and
are enjoying robust sales of software products that help companies address Year
2000 programming issues. Two primary factors are driving that success. First,
costs in India are relatively low, so these companies can offer high-quality
products and services at relatively inexpensive prices compared to U.S. or
European software companies. Second, because they are located in different time
zones than their Western customers, Wipro and Infosys can provide service to
European and American companies during their non-business hours. Many of Wipro's
and Infosys's largest customers are banks and financial service companies that
are updating their computer systems to be Year 2000 compliant. Advances in
telecommunication and computer technologies allow for off-site analysis and
upgrades of computer code.
A third Indian company, Pentafour Software, also helped boost returns. Like
Wipro and Infosys, Pentafour's profits stem largely from its strong business
ties to U.S. companies. Pentafour stands to benefit additionally from its
ability to do three-dimensional computer modeling, which is used in the media
industry.
Other top-performing stocks included Hellenic Bottling Company, a Greek
bottler of Coca-Cola, fruit juices and mineral water, and Telemig Cellular, a
cellular services provider in Southeastern Brazil.
WHICH SECTORS OR STOCKS HURT PERFORMANCE?
Securities in the oil sector were weak. Many of these companies are located
in Asia and, although we felt earnings would be relatively stable, falling oil
prices proved to be a large negative factor. Names such as Medco Energi
Corporation in Malaysia and Gulf Indonesia Resources in Indonesia did not
provide safe havens for investment, despite relatively positive earnings
momentum.
Utilities outside of Asia also suffered. At the beginning of the period, we
were optimistic that Brazil's move toward privatization would bode well for its
utility sector, and that the Brazilian government would sell off its utility
holdings quickly and profitably to the private sector. Because of the global
emerging markets turmoil, the process was set back, and that took many of our
Brazilian utilities holdings down substantially.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PERIOD?
As we discussed earlier, we were drawn to rapidly growing computer software
companies in India and increased holdings there to 8.9% of investments. When the
period began, Emerging Markets did not hold any Indian companies. We also found
accelerating growth in exporters and financial services in Greece and increased
portfolio holdings from 1.9% of investments to 9.6%. In South Africa, banking
and financial services demonstrated rapid acceleration, and holdings there rose
from 4.7% to 9.2% of investments. Brazil and Greece now represent
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
5/31/98 11/30/97
MAILLIS 2.4% --
PENTAFOUR SOFTWARE
& EXPORTS LTD. 2.4% --
FOLLI-FOLLIE ABEE 2.1% --
BELL CANADA
INTERNATIONAL INC. 2.0% 1.1%
SUN BREWING
LTD. GDR 1.9% 0.9%
OY HARTWALL AB 1.8% 1.4%
ELEKTRIM SPOLKA
AKCYJNA S.A. 1.8% --
MELIA INVERSIONES
AMERICANAS, N.V. 1.8% --
SOUTH AFRICAN
BREWERIES LTD. 1.8% --
PERSETEL Q DATA
HOLDINGS LTD. 1.8% --
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
5/31/98 11/30/97
COMMUNICATIONS
SERVICES 13.5% 14.7%
BANKING 12.3% 5.7%
FOOD & BEVERAGE 12.0% 8.2%
RETAIL (GENERAL
MERCHANDISE) 8.2% 1.7%
ELECTRICAL & ELECTRONIC
COMPONENTS 5.7% 2.1%
24 1-800-345-2021
Emerging Markets--Q&A (continued)
- --------------------------------------------------------------------------------
Emerging Market's heaviest geographical concentrations. Positions in food and
beverage stocks grew from 8.2% of investments to 12%, and retail (general
merchandise) stocks moved up from 1.7% to 8.2%. These groups are doing well in a
number of markets.
On the sell side, we reduced Emerging Markets' weighting in countries
heavily dependent on oil revenues, such as Mexico. When oil trends down, as it
has over the last six months, economic growth slows and company earnings
decelerate. As a result, holdings in Mexico dropped from 6.9% to 4.4%, a level
significantly lower than that held by our benchmark index.
WHAT IS YOUR OUTLOOK FOR THE WORLD'S EMERGING MARKETS GOING FORWARD?
We continue to be excited about the opportunities we see in markets across
the globe. The long-standing criticism of emerging markets is that their growth
is typically limited to banks, breweries and cement companies, but we are
finding other growth industries. For example, we've observed that industries
demonstrating growth in the U.S. or in other developed countries are often
having similar success in emerging markets. As we stated earlier, software
service companies, for example, are doing well both here and abroad, as are
financial services companies and cellular service providers. Our earnings
methodology has pointed us to these and other opportunities that lie outside
typical emerging market growth areas. A good example of such a stock is
Folli-Follie, a manufacturer of designer jewelry in Greece. The company makes
high-quality jewelry that retails from $100 to $2,500. Folli-Follie is enjoying
success in the United States, Europe and in Greece, its primary market, and is
doing especially well in Japan, where its first-quarter 1998 sales were up 100%
over the previous year's first quarter. This is a classic growth stock: The
company is doing a great job establishing itself as a brand name, is
demonstrating rapid acceleration in earnings and revenues, and we believe it has
excellent potential for growth going forward. This is exactly what we're looking
for -- and continuing to find -- in a number of emerging markets around the
world.
[pie charts]
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF MAY 31, 1998
Repurchase Agreements 3.9%
Preferred Stocks 8.2%
Common Stocks & Rights 87.9%
AS OF NOVEMBER 30, 1997
Preferred Stocks 9.8%
Repurchase Agreements 11.0%
Common Stocks & Rights 79.2%
[bar chart]
EMERGING MARKETS' INVESTMENTS BY COUNTRY
5/31/98 11/30/97
Brazil 11.2% 11.7%
Greece 9.6% 1.9%
South Africa 9.2% 4.7%
India 8.9% 0.0%
Portugal 6.5% 5.6%
Poland 5.4% 3.4%
Finland 4.8% 3.0%
Mexico 4.4% 6.9%
Turkey 3.9% 1.7%
Other 36.1% 61.1%
www.americancentury.com 25
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS & RIGHTS
ARGENTINA--3.4%
35,000 IRSA Inversiones y
representaciones S.A. Cl B $ 123,954
(real estate)
10,000 Mirgor S.A. C.I.F.I.A. Cl C 280,122
(automobiles & auto parts)
50,000 Renault Argentina S.A. 103,545
(automobiles & auto parts)
49,000 Siderar S.A.I.C. Cl A 200,987
(steel) -------------------------
708,608
-------------------------
BRAZIL--3.0%
750,000 Companhia de Saneamento
Basico do Estado de Sao Paulo 127,146
(utilities)
800,000 Light - Servicos de Eletricidade S/A 281,678
(utilities)
2,000,000 Telecomunicacoes Brasileiras S.A. 168,659
(communications services)
500 Telecomunicacoes
Brasileiras S.A. ADR 53,313
(communications services) -------------------------
630,796
-------------------------
CANADA--2.2%
16,500 Bell Canada International Inc.(1) 423,844
(communications services)
29,297 Sedna Geotech, Inc.(1) 22,130
(metals & mining) -------------------------
445,974
-------------------------
CHILE--1.2%
10,000 Compania Cervecerias
Unidas S.A. ADR 240,938
(food & beverage) -------------------------
CROATIA--1.4%
18,000 Pliva d.d. GDR 296,100
(pharmaceuticals) -------------------------
CZECH REPUBLIC--2.6%
1,246 Cokoladovny a.s.(1) 220,654
(food & beverage)
1,509 Prazska Energetika a.s.(1) 86,792
(utilities)
800 SPT Telecom a.s.(1) 102,682
(communications services)
1,668 Stredoceska Energetika a.s.(1) 71,701
(utilities)
1,405 Vychodoceska Energetika (VCE)(1) 57,546
(utilities) -------------------------
539,375
-------------------------
Shares Value
- --------------------------------------------------------------------------------
FINLAND--4.8%
20,000 Elcoteq Network Corp. Cl A $ 254,350
(electrical & electronic
components)
7,000 Nokian Renkaat Oyj 352,219
(rubber & plastics)
13,000 OY Hartwall AB 377,378
(food & beverage) -------------------------
983,947
-------------------------
GREECE--9.6%
2,000 Alpha Credit Bank 208,540
(banking)
10,000 Chipita International S.A. 288,591
(food & beverage)
3,000 Ergo Bank S.A. 272,423
(banking)
14,000 Folli-Follie Abee(1) 445,348
(retail-general merchandise)
8,900 Hellenic Telecommunication
Organization SA (OTE) 261,224
(communications services)
23,000 Maillis 504,985
(retail-general merchandise) -------------------------
1,981,111
-------------------------
HONG KONG--1.5%
250,000 Cafe De Coral Holdings 77,429
(food & beverage)
7,000 Peak International Ltd.(1) 112,219
(packaging & containers)
305,000 Qingling Motors Company 120,048
(automobiles & auto parts) -------------------------
309,696
-------------------------
HUNGARY--1.8%
6,000 Magyar Tavkozlesi Rt. ADR(1) 168,000
(communications services)
4,000 Mezogazdasagi Gepgyarto
Reszvenytarsasag(1) 89,759
(automobiles & auto parts)
4,500 MOL Magyar Olaj-es Gazipari Rt. 102,978
(energy-services) -------------------------
360,737
-------------------------
INDIA--8.9%
36,000 Corporation Bank(1) 101,215
(banking)
8,000 Hero Honda Motors Ltd. 207,827
(leisure)
5,000 Infosys Technologies Ltd. 292,407
(electrical & electronic
components)
20,000 Larsen & Toubro Ltd. 122,785
(diversified companies)
11,000 Nicholas Piramal Limited 109,604
(pharmaceuticals)
See Notes to Financial Statements
26 1-800-345-2021
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
20,000 Pentafour Software & Exports Ltd. $ 502,041
(computer software & services)
9,000 Ranbaxy Laboratories Ltd. 126,681
(pharmaceuticals)
10,000 SmithKline Beecham Consumer
Healthcare Ltd. 104,082
(pharmaceuticals)
6,450 Wipro Limited 284,907
(computer peripherals) -------------------------
1,851,549
-------------------------
INDONESIA--0.7%
900,000 PT Indah Kiat Pulp & Paper
Corporation Tbk 147,345
(paper & forest products) -------------------------
ISRAEL--1.7%
75,000 Bank Hapoalim Ltd. 230,501
(banking)
15,000 Oshap Technologies, Ltd.(1) 125,156
(computer software & services) -------------------------
355,657
-------------------------
LATVIA--0.5%
25,000 Latvijas Unibanka GDR 106,875
(banking) --------------------------
MALAYSIA--0.6%
165,000 Puncak Niaga Holding Berhad(1) 131,561
(construction & property ---------------------------
development)
MEXICO--4.4%
45,000 ARA, S.A. de C.V.(1) 179,460
(construction & property
development)
409,137 Biper, S.A. de C.V. Series B(1) 190,975
(communications services)
21,000 Cemex SA de CV Cl B(1) 103,019
(building & home improvements)
35,000 Cemex SA de CV Cl B Rights(1) 365
(building & home improvements)
6,000 Coca-Cola FEMSA, S.A.
de C.V. ADR(1) 102,000
(food & beverage)
55,000 Corporacion Interamericana de
Entretenimiento S.A. Cl B(1) 185,691
(leisure)
4,533 Corporacion Interamericana de
Entretenimiento S.A. Cl L(1) 14,277
(leisure)
4,000 Fomento Economico Mexica UBD 132,737
(food & beverage) -------------------------
908,524
-------------------------
PERU--1.2%
160,993 Cementos Norte Pacasmayo S.A. 257,836
(construction & property --------------------------
development)
Shares Value
- --------------------------------------------------------------------------------
PHILIPPINES--3.0%
1,300,000 International Container Terminal
Services, Inc.(1) $ 186,189
(transportation)
10,000 Philippine Long Distance
Telephone Company ADR 253,750
(communications services)
360,000 Security Bank Corp.(1) 177,238
(banking) -------------------------
617,177
-------------------------
POLAND--5.4%
23,000 Bank Ochrony Srodowiska S.A. 275,394
(banking)
28,400 Elektrim Spolka Akcyjna S.A. 373,406
(electrical & electronic
components)
12,000 Kredyt Bank S.A. GDR
(Aquired 12/11/97-1/28/98,
Cost $144,393)(1)(2) 204,600
(banking)
23,000 Softbank S.A. GDR(1) 258,750
(electrical & electronic -------------------------
components)
1,112,150
. -------------------------
PORTUGAL--6.5%
6,750 Banco Espirito Santo e
Comercial de Lisboa, SA 237,265
(banking)
6,000 Banco Espirito Santo e
Comercial de Lisboa, SA Rights(1) 42,180
(banking)
8,000 Cimpor-Cimentos de Portugal,
SGPS, SA 305,960
(building & home improvements)
10,000 EDP-Electricidade de Portugal, S.A. 262,438
(utilities)
8,000 Espirito Santo Financial
Holding S.A. ADR 203,500
(banking)
1,700 Telecel-Comunicacaoes
Pessoais, SA(1) 297,430
(communications services) -------------------------
1,348,773
-------------------------
RUSSIAN FEDERATION--3.9%
29,000 SUN Brewing Ltd. GDR(1) 385,042
(food & beverage)
10,000 Unified Energy Systems GDR(1) 178,750
(energy-services)
5,000 Vimpel-Communications ADR(1) 242,188
(communications services) -------------------------
805,980
-------------------------
See Notes to Financial Statements
www.americancentury.com 27
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
SOUTH AFRICA--9.2%
7,000 Ellerine Holdings Limited $ 59,878
(retail-general merchandise)
8,000 Fedsure Holdings Limited 123,208
(insurance)
68,000 Foschini Limited(1) 250,606
(retail-general merchandise)
2,000 Investec Holdings Limited 93,570
(financial services)
4,000 Liberty Life Association of Africa Ltd. 110,949
(insurance)
3,000 Nedcor Limited 80,303
(banking)
35,000 Persetel Q Data Holdings Ltd. 366,599
(computer software & services)
26,000 Primedia Limited Cl N 206,769
(broadcasting & media)
55,000 Real Africa Holdings Limited(1) 248,569
(insurance)
13,000 South African Breweries Ltd. 366,638
(food & beverage) -------------------------
1,907,089
-------------------------
SOUTH KOREA--0.4%
8,000 Korea Electric Power Corp. 80,142
(utilities) --------------------------
SPAIN--1.8%
7,700 Melia Inversiones Americanas, N.V.(1) 371,115
(hotels) --------------------------
SRI LANKA--1.4%
30,000 John Keells Holdings Ltd. 115,500
(food & beverage)
189,700 Maskeliya Plantation Ltd.(1) 180,945
(food & beverage) -------------------------
296,445
-------------------------
TAIWAN (PEOPLE'S REPUBLIC OF CHINA)--1.2%
14,000 Asustek Computer Inc.(1) 257,250
(computer peripherals) -------------------------
THAILAND--1.1%
35,000 Compass East Industry Public
Company Limited 232,236
(retail-general merchandise) -------------------------
TUNISIA--0.6%
10,000 Banque Internationale Arabe
Tunisie GDR(1) 116,500
(banking) --------------------------
TURKEY--3.9%
3,200,000 Akbank T.A.S. 94,147
(banking)
2,800,000 Aksigorta A.S. 170,718
(insurance)
200,000 Carsi Buyuk Magazacilik A.S. 106,457
(retail-general merchandise)
Shares Value
- --------------------------------------------------------------------------------
2,500,000 Dogan Sirketler Grubu
Holding A.S.(1) $ 147,588
(printing & publishing)
2,884,500 Turkiye Is Bankasi(1) 117,247
(banking)
1,923,000 Turkiye Is Bankasi Cl C 78,165
(banking)
2,370,000 Yapi Kredi Yatirim Ortaligi A.S.(1) 45,873
(financial services)
3,000,000 Yapi ve Kredi Bankasi A.S. 58,067
(financial services) -------------------------
818,262
-------------------------
TOTAL COMMON STOCKS & RIGHTS--87.9% 18,219,748
(Cost $17,368,716) -------------------------
PREFERRED STOCKS
BRAZIL--8.2%
10,000,000 Banco Bradesco S.A. 81,721
(financial services)
350,000 Banco Itau S.A. 208,436
(banking)
3,671,310 Cia Energetica de Minas Gerais 121,287
(utilities)
400,000 Companhia de Tecidos
Norte de Minas 67,811
(textiles & apparel)
12,000 Globex Utilidades S.A. 93,893
(retail-general merchandise)
700,000 Petroleo Brasileiro S/A 135,101
(energy-production & marketing)
2,750,000 Telecomunicacoes de Minas Gerais 277,331
(communications services)
2,800,000 Telecomunicacoes do
Rio de Janeiro S.A. 233,688
(communications services)
460,000 Telecomunicacoes de Sao Paulo S.A. 98,379
(communications services)
2,750,000 Telemig Celular S.A. Cl C (1) 129,341
(communications equipment)
2,300,000 Telerj Celular S.A. Cl B (1) 167,963
(communications equipment)
900,000 Telesp Celular S.A. Cl B(1) 82,938
(communications equipment) -------------------------
TOTAL PREFERRED STOCKS--8.2% 1,697,889
(Cost $1,167,318) -------------------------
See Notes to Financial Statements
28 1-800-345-2021
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MAY 31, 1998 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS--3.9%
Repurchase Agreement, State Street Bank
& Trust Co., 5.48%, due 6/1/98, collateralized
by $800,000 par value U.S. Treasury
Notes, 5.625%, due 12/31/02
(Delivery value $800,365) $ 800,000
(Cost $800,000) -------------------------
TOTAL INVESTMENT SECURITIES--100.0% $20,717,637
(Cost $19,336,034) =========================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
(1) Non-income producing.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 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 May 31, 1998 was $204,600 which represented 0.9% of net assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* the percentage of total investments in each country
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 29
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
MAY 31, 1998 (UNAUDITED)
ASSETS
<S> <C> <C> <C>
Investment securities, at value (identified cost of $1,833,064,370,
$623,138,379 and $19,336,034, respectively) (Note 3) ............ $2,454,994,159 $912,604,264 $20,717,637
Foreign currency holdings, at value (identified cost
of $0, $3,078,005, and $555,219, respectively) .................. -- 3,048,323 551,980
Cash .............................................................. 1,204,945 868,371 111,377
Receivable for forward foreign currency exchange contracts ........ 1,173,591 404,408 --
Receivable for investments sold ................................... 14,312,145 18,029,311 882,361
Receivable for capital shares sold ................................ 16,738,201 -- --
Dividends and interest receivable ................................. 9,704,087 1,526,707 113,910
------------- ----------- ----------
2,498,127,128 936,481,384 22,377,265
------------- ----------- ----------
LIABILITIES
Disbursements in excess of demand deposit cash .................... 1,178,733 526,029 --
Payable for investments purchased ................................. 52,686,924 23,835,591 767,610
Payable for capital shares redeemed ............................... 14,890,096 178,065 --
Accrued management fees (Note 2) .................................. 2,650,914 1,187,446 40,075
Distribution fees payable (Note 2) ................................ 2,974 2 --
Service fees payable (Note 2) ..................................... 2,974 2 --
Other liabilities ................................................. 2,775 707 20
------------- ----------- ----------
71,415,390 25,727,842 807,705
------------- ----------- ----------
Net Assets ........................................................ $2,426,711,738 $ 910,753,542 $ 21,569,560
============== ============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) ........................... $1,758,786,953 $ 607,660,834 $ 22,513,267
Undistributed net investment income (loss) ........................ 7,450,223 (606,003) 29,138
Accumulated undistributed net realized gain (loss) from
investments and foreign currency transactions ..................... 37,403,660 14,421,350 (2,169,599)
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies (Note 3) ........ 623,070,902 289,277,361 1,196,754
------------- ----------- ----------
$2,426,711,738 $ 910,753,542 $ 21,569,560
============== ============== ==============
Investor Class, $0.01 Par Value
Net assets ........................................................ $2,387,496,813 $ 848,554,430 $ 21,569,560
Shares outstanding ................................................ 234,236,583 78,682,502 5,070,418
Net asset value per share ......................................... $ 10.19 $ 10.78 $ 4.25
Advisor Class, $0.01 Par Value
Net assets ........................................................ $ 14,912,540 $ 10,719 N/A
Shares outstanding ................................................ 1,464,535 994 N/A
Net asset value per share ......................................... $ 10.18 $ 10.78 N/A
Institutional Class, $0.01 Par Value
Net assets ........................................................ $ 24,302,385 $ 62,188,393 N/A
Shares outstanding ................................................ 2,381,464 5,766,193 N/A
Net asset value per share ......................................... $ 10.20 $ 10.79 N/A
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.
NET ASSETS are also broken out by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses; net
gains earned on investments not yet paid to shareholders or net losses from
investments (known as realized gains or losses), and finally, gains or losses on
securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakout tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
30 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Operations
- --------------------------------------------------------------------------------
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME (LOSS)
Income:
<S> <C> <C> <C>
Dividends (net of foreign taxes withheld of
$2,893,442, $726,903, and $30,713, respectively) ............ $ 18,966,297 $ 4,915,748 $ 205,180
Interest ...................................................... 2,290,040 462,780 16,076
---------- --------- -------
21,256,337 5,378,528 221,256
---------- --------- -------
Expenses (Note 2):
Management fees ............................................... 13,710,211 5,893,431 192,020
Distribution fees -- Advisor Class ............................ 14,204 2 --
Service fees -- Advisor Class ................................. 14,204 2 --
Directors' fees and expenses .................................. 10,780 3,746 98
---------- --------- -------
13,749,399 5,897,181 192,118
---------- --------- -------
Net investment income (loss) .................................. 7,506,938 (518,653) 29,138
---------- --------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 3)
Net realized gain (loss) on:
Investments ................................................... 81,526,308 27,176,527 (938,311)
Foreign currency transactions ................................. (26,085,585) (7,536,863) (483,718)
---------- --------- -------
55,440,723 19,639,664 (1,422,029)
---------- --------- -------
Change in net unrealized appreciation (depreciation) on:
Investments ................................................... 461,177,043 197,001,956 2,348,634
Translation of assets and liabilities in foreign currencies ... (6,722,544) (2,827,968) (153,190)
---------- --------- -------
454,454,499 194,173,988 2,195,444
----------- ----------- ---------
Net realized and unrealized gain
on investments and foreign currency ......................... 509,895,222 213,813,652 773,415
----------- ----------- -------
Net Increase in Net Assets Resulting from Operations .......... $ 517,402,160 $ 213,294,999 $ 802,553
============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks out how each
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses.
It does not include shareholder transactions and distributions.
Fund OPERATIONS include:
* income earned by investments (dividends and interest)
* management fees and expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
www.americancentury.com 31
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED) AND THE YEAR ENDED NOVEMBER 30, 1997
INTERNATIONAL GROWTH INTERNATIONAL DISCOVERY EMERGING MARKETS
1998 1997 1998 1997 1998 1997(1)
Increase in Net Assets
OPERATIONS
Net investment
<S> <C> <C> <C> <C> <C> <C>
income (loss) .............. $ 7,506,938 $ 468,044 $ (518,653) $ (2,060,141) $ 29,138 $ (12,297)
Net realized gain
(loss) on investments
and foreign currency
transactions ............... 55,440,723 229,010,260 19,639,664 32,550,517 (1,422,029) (758,197)
Change in net unrealized
appreciation (depreciation)
on investments and
translation of assets
and liabilities
in foreign currencies ...... 454,454,499 18,520,872 194,173,988 47,358,619 2,195,444 (998,690)
----------- ---------- ----------- ---------- --------- --------
Net increase (decrease)
in net assets
resulting from
operations ................. 517,402,160 247,999,176 213,294,999 77,848,995 802,553 (1,769,184)
----------- ----------- ----------- ---------- ------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ............. (5,226,555) (5,636) (1,491,375) (862,734) -- --
Advisor Class .............. (5,388) -- -- -- -- --
Institutional Class ........ (57,980) -- -- -- -- --
From net realized gains
on investment
transactions:
Investor Class ............. (237,084,033) (140,384,782) (33,708,327) (16,063,439) -- --
Advisor Class .............. (1,325,086) (405,850) -- -- -- --
Institutional Class ........ (2,488,279) -- -- -- -- --
----------- ----------- ----------- ---------- ------- ----------
Decrease in net
assets from distributions .. (246,187,321) (140,796,268) (35,199,702) (16,926,173) -- --
----------- ----------- ----------- ---------- ------- ----------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net
assets from
capital share
transactions ............... 398,922,550 302,960,946 106,331,645 188,275,387 8,937,492 13,598,699
----------- ----------- ----------- ----------- --------- ----------
Net increase
in net assets .............. 670,137,389 410,163,854 284,426,942 249,198,209 9,740,045 11,829,515
NET ASSETS
Beginning of period .......... 1,756,574,349 1,346,410,495 626,326,600 377,128,391 11,829,515 --
------------- ------------- ----------- ----------- ---------- ----------
End of period ................ $ 2,426,711,738 $ 1,756,574,349 $ 910,753,542 $ 626,326,600 $ 21,569,560 $ 11,829,515
=============== =============== =============== =============== =============== ===============
Undistributed net
investment income (loss) ..... $ 7,450,233 $ 5,233,208 $ (606,003) $ 1,404,025 $ 29,138 --
=============== =============== =============== =============== =============== ===============
</TABLE>
(1) September 30, 1997 (inception) through November 30, 1997.
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF CHANGES IN NET ASSETS--This statement shows how
each 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--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* share transactions--shareholders' purchases, reinvestment of distributions
and redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
32 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century World Mutual Funds, Inc. (the Corporation)
is registered under the Investment Company Act of 1940 as an open-end
diversified management company. Three series of funds are currently issued as
American Century--Twentieth Century International Growth Fund (International
Growth), American Century--Twentieth Century International Discovery Fund
(International Discovery), and American Century--Twentieth Century Emerging
Markets Fund (Emerging Markets) (the Funds). The Funds' investment objective is
to seek capital growth by investing primarily in equity securities.
International Growth seeks to achieve its investment objective by investing in
securities of issuers in developed markets. International Discovery seeks to
achieve its investment objective by investing in issuers having comparatively
smaller market capitalizations. Emerging Markets seeks to achieve its investment
objective by investing in issuers in emerging market countries. Each 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 each Fund represent an equal pro rata interest
in the net 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 for International Discovery commenced on April 28, 1998 and
January 2, 1998, respectively. Sale of the Advisor Class and Institutional Class
for Emerging Markets had not commenced as of May 31, 1998. The following
significant accounting policies, related to all classes of the Funds, are in
accordance with accounting policies generally accepted in the investment company
industry.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or 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.
FOREIGN CURRENCY TRANSACTIONS -- The accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities initially expressed in
foreign currencies are converted into U.S. dollars at prevailing exchange rates.
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.
Net realized foreign currency exchange gains or losses arise from sales of
investment securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains or losses arise from changes in the value of investment
securities and other assets and liabilities resulting from changes in the
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 foreign currency transactions and unrealized
appreciation (depreciation) on translation of assets and liabilities in foreign
currencies, respectively.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into
forward foreign currency exchange contracts for the purpose of settling specific
purchases or sales of securities denominated in a foreign currency or to hedge
the Fund's exposure to foreign currency exchange rate fluctuations. When
required, the Funds will segregate assets in an amount sufficient to cover their
obligations under the hedge contracts. 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. Forward contracts involve elements of market risk in
excess of the amount reflected in the Statements of Assets and Liabilities. 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 advisor, American Century
Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to
www.americancentury.com 33
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
criteria adopted by the Board of Directors. Each repurchase agreement is
recorded at cost. The Funds require that the collateral, represented by
securities, purchased 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 value of the securities transferred to ensure the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Funds under each repurchase agreement.
INCOME TAX STATUS -- It is the policy of the Funds to distribute all net
investment income and net realized capital 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 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 capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
At November 30, 1997, Emerging Markets had accumulated net realized capital
loss carryovers for federal income tax purposes of $591,349 (expiring in 2005)
which may be used to offset future taxable gains.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the period. Actual results could differ from
these estimates.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the
Corporation's distributor. Certain officers of FDI are also officers of the
Corporation.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Corporation has entered into Management Agreements with ACIM that
provide each Fund with investment advisory and management services in exchange
for a single, unified management fee per class. The Agreements provide 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
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on each class's average daily closing net assets during the previous month.
The annual management fee for each class of International Growth is as
follows:
INVESTOR ADVISOR INSTITUTIONAL
CLASS CLASS CLASS
AVERAGE NET ASSETS
First $1 billion ............. 1.50% 1.25% 1.30%
Of the next $1 billion ....... 1.20% 0.95% 1.00%
Over $2 billion .............. 1.10% 0.85% 0.90%
The annual management fee for each class of International Discovery is as
follows:
INVESTOR ADVISOR INSTITUTIONAL
CLASS CLASS CLASS
AVERAGE NET ASSETS
First $500 million ........... 1.75% 1.50% 1.55%
Of the next $500 million ..... 1.40% 1.15% 1.20%
Over $1 billion .............. 1.20% 0.95% 1.00%
34 1-800-345-2021
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The annual management fee for the Investor Class of Emerging Markets is as
follows:
INVESTOR CLASS
AVERAGE NET ASSETS
First $500 million ............................................ 2.00%
Of the next $500 million ...................................... 1.50%
Over $1 billion ............................................... 1.25%
The Board of Directors has adopted the Advisor Class Master Distribution
and Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the
Investment Company Act of 1940. 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 period ended May 31,
1998, were $28,408 and $4 for International Growth and International Discovery,
respectively.
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, and
the Corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended May 31, 1998, were as follows:
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
Purchases ................ $2,026,436,229 $711,484,059 $32,883,077
Proceeds From Sales ...... $1,880,814,861 $616,910,777 $25,992,419
On May 31, 1998, 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:
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
Appreciation ............. $ 637,790,549 $296,863,328 $ 2,336,358
Depreciation ............. (33,662,139) (13,219,652) (1,291,563)
-----------------------------------------------------
Net ...................... $ 604,128,410 $283,643,676 $ 1,044,795
=====================================================
Federal Tax Cost ......... $1,850,865,749 $628,960,588 $19,672,842
=====================================================
www.americancentury.com 35
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds were as follows:
<TABLE>
INTERNATIONAL GROWTH INTERNATIONAL DISCOVERY EMERGING MARKETS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C> <C> <C>
Authorized shares ...............400,000,000 100,000,000 50,000,000
=========== =========== ==========
Six months ended May 31, 1998
Sold ............................131,920,692 $1,221,036,075 16,797,468 $160,399,970 6,752,783 $ 28,226,286
Issued in reinvestment
of distributions .............. 29,658,365 237,075,589 4,246,933 33,877,525 - -
Redeemed .......................(114,847,558) (1,066,202,708) (15,708,400) (141,548,602) (4,533,507) (19,288,794)
------------ -------------- ----------- ------------ ---------- -----------
Net increase .................... 46,731,499 $ 391,908,956 5,336,001 $ 52,728,893 2,219,276 $ 8,937,492
========== ============= ========= ============ ========= ============
Year ended November 30, 1997(1)
Sold ............................139,809,145 $1,274,757,814 39,820,482 $327,139,130 3,580,134 $ 16,726,066
Issued in reinvestment
of distributions .............. 17,809,533 137,887,292 2,369,407 16,757,464 - -
Redeemed .......................(123,985,637) (1,133,838,821) (18,446,269) (155,621,207) (728,992) (3,127,367)
------------ -------------- ----------- ------------ -------- ----------
Net increase .................... 33,633,041 $ 278,806,285 23,743,620 $188,275,387 2,851,142 $ 13,598,699
========== ============= ========== ============ ========= ============
ADVISOR CLASS
Authorized shares ............... 170,000,000 42,000,000
=========== ==========
Period ended May 31, 1998(2)
Sold ............................ 496,003 $4,715,742 994 $10,048
Issued in reinvestment
of distributions .............. 166,517 1,330,469 - -
Redeemed ........................ (188,566) (1,687,771) - -
--------- ----------- ---------- -----------
Net increase .................... 473,954 $4,358,440 994 $10,048
======= ========== === =======
Year ended November 30, 1997
Sold ............................ 1,008,880 $9,379,963
Issued in reinvestment
of distributions .............. 52,435 405,850
Redeemed ........................ (506,709) (4,696,551)
-------- ----------
Net increase .................... 554,606 $5,089,262
======= ==========
INSTITUTIONAL CLASS
Authorized shares ............... 60,000,000 16,000,000
========== ==========
Period ended May 31, 1998(3)
Sold ............................ 1,762,423 $16,324,256 5,951,525 $55,573,193
Issued in reinvestment
of distributions .............. 318,681 2,546,259 - -
Redeemed ........................ (1,743,293) (16,215,361) (185,332) (1,980,489)
---------- ----------- -------- ----------
Net increase .................... 337,811 $ 2,655,154 5,766,193 $53,592,704
======= =========== ========= ===========
Period November 30, 1997(4)
Sold ............................ 2,043,653 $19,065,399
========= ===========
(1) September 30, 1997 (inception) through November 30, 1997 for Emerging
Markets.
(2) December 1, 1997 through May 31, 1998 for International Growth and April
28, 1998 (commencement of sale) through May 31, 1998 for International
Discovery.
(3) December 1, 1997 through May 31, 1998 for International Growth and January
2, 1998 (commencement of sale) through May 31, 1998 for International
Discovery.
(4) November 20, 1997 (commencement of sale) through November 30, 1998.
36 1-800-345-2021
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
MAY 31, 1998 (UNAUDITED)
5. AFFILIATED COMPANY TRANSACTIONS
A summary of transactions for each issuer which is or was an affiliate at or
during the six months ended May 31, 1998, follows:
SHARE BALANCE PURCHASE SALES REALIZED MAY 31, 1998
FUND/ISSUER NOV. 30, 1997 COST COST LOSS SHARE BALANCE MARKET VALUE
INTERNATIONAL DISCOVERY
Oshap Technologies, Ltd.(1) 610,000 $323,421 $43,700 $(11,635) 636,200 $5,308,294
====================================== ===============
(1) Security did not produce income during the period.
</TABLE>
www.americancentury.com 37
<TABLE>
<CAPTION>
International Growth--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Investor Class
1998(1) 1997 1996 1995 1994 1993
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................. $ 9.22 $ 8.73 $ 7.51 $ 7.47 $ 7.34 $ 5.79
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income (Loss) ...... 0.03(2) -- (0.01)(2) 0.01 (0.04) (0.04)
Net Realized and Unrealized Gain
on Investment Transactions ........ 2.25 1.41 1.24 0.40 0.57 1.78
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment Operations .. 2.28 1.41 1.23 0.41 0.53 1.74
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ........ (0.03) -- (0.01) -- -- (0.04)
In Excess of Net
Investment Income ............... -- -- -- -- -- (0.15)
From Net Realized Gains
on Investment Transactions ........ (1.28) (0.92) -- (0.37) (0.40) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ............... (1.31) (0.92) (0.01) (0.37) (0.40) (0.19)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ...... $ 10.19 $ 9.22 $ 8.73 $ 7.51 $ 7.47 $ 7.34
=========== =========== =========== =========== =========== ===========
Total Return(3) ................... 28.60% 18.12% 16.35% 5.93% 7.28% 31.04%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 1.35%(4) 1.38%(5) 1.65%(5) 1.77% 1.84% 1.90%
Ratio of Net Investment
Income (Loss) to
Average Net Assets .................. 0.72%(4) 0.04% (0.07)% 0.25% (0.53)% (0.34)%
Portfolio Turnover Rate ............. 94% 163% 158% 169% 242% 255%
Average Commission Paid
per Share
of Equity Security Traded ........... $ 0.0137 $ 0.0069 $ 0.0195 $ 0.0020 --(6) --(6)
Net Assets, End of Period
(in thousands) ...................... $ 2,387,497 $ 1,728,617 $ 1,342,608 $ 1,210,442 $ 1,316,642 $ 759,238
</TABLE>
(1) Six months ended May 31, 1998 (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.
(5) American Century Investment Management, Inc. voluntarily waived a portion
of its management fee effective August 1, 1996 through July 30, 1997. In
absence of the management fee waiver, the ratio of operating expenses to
average net assets would have been 1.56% and 1.76% for the years ended
November 30, 1997 and November 30, 1996, respectively.
(6) Disclosure of average commission paid per share of equity security traded
was not required prior to the year ended November 30, 1995.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This page itemizes what contributed to
the class's change in share price during the period, and compares this to
changes over the last five fiscal years (or less, if the class is not five years
old).
On a per-share basis, it includes:
* share price at the beginning of the period
* portfolio income and capital gains or losses
* distributions of income and capital gains paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses, expressed as a percentage of average net
assets
* net income ratio--investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced
See Notes to Financial Statements
38 1-800-345-2021
<TABLE>
<CAPTION>
International Growth--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Advisor Class
1998(1) 1997 1996(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................ $ 9.20 $ 8.72 $ 8.41
------------ ------------ ------------
Income From Investment Operations
Net Investment Gain (Loss) .................................... 0.02(3) (0.03) (0.01)(3)
Net Realized and Unrealized Gain on Investment Transactions ... 2.25 1.43 0.32
------------ ------------ ------------
Total From Investment Operations .............................. 2.27 1.40 0.31
------------ ------------ ------------
Distributions
From Net Investment Income .................................... (0.01) -- --
From Net Realized Gains on Investment Transactions ............ (1.28) (0.92) --
------------ ------------ ------------
Total Distributions ........................................... (1.29) (0.92) --
------------ ------------ ------------
Net Asset Value, End of Period .................................. $ 10.18 $ 9.20 $ 8.72
============ ============ ============
Total Return(4) ............................................... 28.44% 17.97% 3.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ............... 1.60%(5) 1.63% 1.67%(5)
Ratio of Net Investment Income (Loss) to Average Net Assets ..... 0.47%(5) (0.21)% (0.76)%(5)
Portfolio Turnover Rate ......................................... 94% 163% 158%
Average Commission Paid per Share of Equity Security Traded ..... $ 0.0137 $ 0.0069 $ 0.0195
Net Assets, End of Period (in thousands) ........................ $ 14,913 $ 9,111 $ 3,803
</TABLE>
(1) Six months ended May 31, 1998 (unaudited).
(2) October 2, 1996 (commencement of sale) through November 30, 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 39
<TABLE>
<CAPTION>
International Growth--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED AS INDICATED
Institutional Class
1998(1) 1997(2)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period ................................... $ 9.22 $ 9.26
------------ ------------
Income From Investment Operations
Net Investment Income ................................................ 0.04(3) --
Net Realized and Unrealized Gain (Loss) on Investment Transactions ... 2.25 (0.04)
------------ ------------
Total From Investment Operations ..................................... 2.29 (0.04)
------------ ------------
Distributions
From Net Investment Income ........................................... (0.03) --
From Net Realized Gains on Investment Transactions ................... (1.28) --
------------ ------------
Total Distributions .................................................. (1.31) --
------------ ------------
Net Asset Value, End of Period ......................................... $ 10.20 $ 9.22
============ ============
Total Return(4) ...................................................... 28.75% (0.43)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ...................... 1.15%(5) 1.18%(5)
Ratio of Net Investment Income (Loss) to Average Net Assets ............ 0.92%(5) (0.53)%(5)
Portfolio Turnover Rate ................................................ 94% 163%
Average Commission Paid per Share of Equity Security Traded ............ $ 0.0137 $ 0.0069
Net Assets, End of Period (in thousands) ............................... $ 24,302 $ 18,846
</TABLE>
(1) Six months ended May 31, 1998 (unaudited).
(2) November 20, 1997 (commencement of sale) through November 30, 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
40 1-800-345-2021
<TABLE>
<CAPTION>
International Discovery--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Investor Class
1998(1) 1997 1996 1995 1994(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 8.54 $ 7.60 $ 5.70 $ 5.39 $ 5.00
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income (Loss) ............. (0.01)(3) (0.03) (0.02)(3) 0.03 (0.02)
Net Realized and Unrealized Gain
on Investment Transactions ............... 2.74 1.31 1.95 0.28 0.41
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ......... 2.73 1.28 1.93 0.31 0.39
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ............... (0.02) (0.02) (0.01) -- --
In Excess of Net Realized Gains .......... -- -- (0.02) -- --
From Net Realized Gains
on Investment Transactions ............... (0.47) (0.32) -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions ...................... (0.49) (0.34) (0.03) -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ............. $ 10.78 $ 8.54 $ 7.60 $ 5.70 $ 5.39
=========== =========== =========== =========== ===========
Total Return(4) .......................... 33.92% 17.76% 34.06% 5.75% 7.80%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 1.66%(5) 1.70%(6) 1.88%(6) 2.00% 2.00%(5)
Ratio of Net Investment
Income (Loss) to Average Net Assets ........ (0.18)%(5) (0.37)% (0.31)% 0.27% (0.48)%(5)
Portfolio Turnover Rate .................... 86% 146% 130% 168% 56%
Average Commission Paid per Share
of Equity Security Traded .................. $ 0.0039 $ 0.0054 $ 0.0054 $ 0.0040 --(7)
Net Assets, End of Period (in thousands) ... $ 848,554 $ 626,327 $ 377,128 $ 114,579 $ 111,202
</TABLE>
(1) Six months ended May 31, 1998 (unaudited).
(2) April 1, 1994 (inception) through November 30, 1994.
(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.
(6) American Century Investment Management, Inc. voluntarily waived a portion
of its management fee effective August 1, 1996 through July 30, 1997. In
absence of the management fee waiver, the ratio of operating expenses to
average net assets would have been 1.87% and 1.99% for the years ended
November 30, 1997 and November 30, 1996, respectively.
(7) Disclosure of average commission paid per share of equity security traded
was not required prior to the year ended November 30, 1995.
See Notes to Financial Statements
www.americancentury.com 41
<TABLE>
<CAPTION>
International Discovery--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED AS INDICATED
Advisor Class
1998(1)
PER-SHARE DATA
<S> <C>
Net Asset Value, Beginning of Period .............................. $ 10.10
------------
Income From Investment Operations
Net Investment Income(2) ........................................ 0.02
Net Realized and Unrealized Gain on Investment Transactions ..... 0.66
------------
Total From Investment Operations ................................ 0.68
------------
Net Asset Value, End of Period .................................... $ 10.78
============
Total Return(3) ................................................. 6.73%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ................. 1.91%(4)
Ratio of Net Investment Income to Average Net Assets .............. 1.74%(4)
Portfolio Turnover Rate ........................................... 86%
Average Commission Paid per Share of Equity Security Traded ....... $ 0.0039
Net Assets, End of Period (in thousands) .......................... $ 10,719
</TABLE>
(1) April 28, 1998 (commencement of sale) through May 31, 1998 (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
42 1-800-345-2021
<TABLE>
<CAPTION>
International Discovery--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED AS INDICATED
Institutional Class
1998(1)
PER-SHARE DATA
<S> <C>
Net Asset Value, Beginning of Period ............................ $ 8.18
------------
Income From Investment Operations
Net Investment Income(2) ...................................... 0.04
Net Realized and Unrealized Gain on Investment Transactions ... 2.57
------------
Total From Investment Operations .............................. 2.61
------------
Net Asset Value, End of Period .................................. $ 10.79
============
Total Return(3) ............................................... 31.91%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ............... 1.46%(4)
Ratio of Net Investment Income to Average Net Assets ............ 0.86%(4)
Portfolio Turnover Rate ......................................... 86%
Average Commission Paid per Share of Equity Security Traded ..... $ 0.0039
Net Assets, End of Period (in thousands) ........................ $ 62,188
</TABLE>
(1) January 2, 1998 (commencement of sale) through May 31, 1998 (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 43
<TABLE>
<CAPTION>
Emerging Markets--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED AS INDICATED
Investor Class
1998(1) 1997(2)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period ................................... $ 4.15 $ 5.00
Income From Investment Operations
Net Investment Gain (Loss)(3) ........................................ 0.01 (0.01)
Net Realized and Unrealized Gain (Loss) on Investment Transactions ... 0.09 (0.84)
Total From Investment Operations ..................................... 0.10 (0.85)
Net Asset Value, End of Period ......................................... $ 4.25 $ 4.15
Total Return(4) ...................................................... 2.41% (17.00)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ...................... 2.00%(5) 2.00%(5)
Ratio of Net Investment Income (Loss) to Average Net Assets ............ 0.30%(5) (0.74)%(5)
Portfolio Turnover Rate ................................................ 143% 36%
Average Commission Paid per Share of Equity Security Traded ............ $ 0.0006 $ 0.0012
Net Assets, End of Period (in thousands) ............................... $ 21,570 $ 11,830
</TABLE>
(1) Six months ended May 31, 1998 (unaudited).
(2) September 30, 1997 (inception) through November 30, 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
44 1-800-345-2021
Share Class and Retirement Account Information
- --------------------------------------------------------------------------------
SHARE CLASSES
Until September 3, 1996, International Growth and International Discovery
issued one class of fund shares, reflecting the fact that most investors bought
their shares directly from American Century. All investors paid the same annual
unified management fee and did not pay any commissions or other fees to purchase
shares from American Century.
Now more share purchases are made by investors through financial
intermediaries (who ordinarily are compensated for the additional services they
provide), or by very large institutional investors who expect lower costs
because of their size. In September 1996, American Century began to offer three
classes of shares for International Growth and International Discovery. American
Century also offers three classes of shares for Emerging Markets. One class is
for investors who still buy directly from American Century, one is for investors
who buy through financial intermediaries, and the third is for large
institutional customers.
The original class of shares is called the INVESTOR CLASS. All shares
issued and outstanding before September 3, 1996 have been designated as Investor
Class shares. Investor Class shares may also be purchased after September 3,
1996. 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. THE PRICE AND PERFORMANCE OF THE INVESTOR CLASS
SHARES ARE LISTED IN NEWSPAPERS. NO OTHER CLASS IS CURRENTLY LISTED.
In addition, there is an ADVISOR CLASS, which is 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.
There is also an INSTITUTIONAL CLASS, which is 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
comparatively lower transaction costs on large accounts, the total expense ratio
of the Institutional Class shares is 0.20% less than the Investor Class shares.
The Advisor and Institutional Classes of shares for Emerging Markets had
not commenced as of May 31, 1998.
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)]
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 for six months
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 within six months 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 for only six months 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 45
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
The Twentieth Century Group offers 10 equity funds that invest in the
stocks of growing companies, both domestically and internationally, using our
accelerating growth philosophy. This philosophy 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" manager. We believe this allows
us to make better, more consistent management decisions.
In addition to these principles, each fund has its own investment policies:
INTERNATIONAL GROWTH invests primarily in the equity securities of foreign
companies that exhibit accelerating growth. These companies will be located
primarily in developed countries.
INTERNATIONAL DISCOVERY invests primarily in the equity securities of
smaller foreign companies that exhibit accelerating growth. Up to one-half of
the fund's assets can be in securities of issuers in emerging market countries,
with the rest of the portfolio invested in developed economies. The fund may
experience greater share price fluctuation and short-term risk than
International Growth.
EMERGING MARKETS invests primarily in the equity securities of companies in
emerging market countries that exhibit accelerating growth. The companies may be
located or principally traded in emerging market countries, and also may derive
a significant portion of their business from emerging market countries. This
fund may experience greater share price fluctuation and short-term risk than
either International Growth or International Discovery.
International investing involves special risks, including political
instability and economic risk. Investing in emerging markets may accentuate
these risks. Historically, share prices of small companies have been more
volatile than those of large companies.
HOW CURRENCY RETURNS AFFECT FUND PERFORMANCE
For U.S. investors, the total return from international stocks includes the
effects of currency fluctuations--the movement of international currency values
in relation to the value of the U.S. dollar. Currency exchange rates come into
play when international stock income, gains and losses are converted into U.S.
dollars.
Changing currency values may have a significant impact on the total returns
of international stock funds. The value of the foreign investments held by
international stock funds may be reduced or increased by changes in currency
exchange rates. As a result, the value of your investment could change based
solely upon changes in the exchange rates between foreign currencies and the
U.S. dollar. The dollar value of a foreign security generally decreases when the
value of the dollar rises against the foreign currency in which the security is
denominated. (The weakened foreign currencies buys fewer dollars.) Conversely,
the dollar value of a foreign security tends to increase when the value of the
dollar falls against the foreign currency. (The stronger foreign currency buys
more dollars.) In addition, the value of fund assets may be affected by losses
and other expenses incurred in converting between various currencies in order to
purchase and sell foreign securities and by currency restrictions, exchange
control regulations, currency devaluations and political developments.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) has developed several indices
that measure the performance of foreign stock markets. The best known is the
EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE(reg.tm)), which is a widely followed
group of stocks from 20 countries. Within this index are two narrower indices,
MSCI EUROPE and MSCI FAR EAST, which measure stock performance in 14 European
countries and four Asian countries, respectively.
The MORGAN STANLEY EMERGING MARKETS FREE INDEX (EMF(reg.tm)) represents the
performance of stocks in 26 emerging market countries in Europe, Latin America
and the Pacific Basin.
[left margin]
PORTFOLIO MANAGERS
INTERNATIONAL GROWTH
PORTFOLIO MANAGER: HENRIK STRABO
PORTFOLIO MANAGER: MARK KOPINSKI
INTERNATIONAL DISCOVERY
PORTFOLIO MANAGER: HENRIK STRABO
PORTFOLIO MANAGER: MARK KOPINSKI
EMERGING MARKETS
PORTFOLIO MANAGER: MARK KOPINSKI
PORTFOLIO MANAGER: MIKE DONNELLY, CFA
46 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 year-by-year results.
For fiscal year-by-year total returns, please refer to the Financial Highlights
on pages 38 through 44.
PORTFOLIO STATISTICS
* 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.)
* 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.
www.americancentury.com 47
Notes
- --------------------------------------------------------------------------------
48 1-800-345-2021
[inside back cover]
[american century logo(reg.sm)]
American
Century(reg.tm)
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES: 1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
INTERNET: WWW.AMERICANCENTURY.COM
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.
(c) 1998 AMERICAN CENTURY SERVICES CORPORATION
FUNDS DISTRIBUTOR, INC.
[recycled logo]
Recycled
[back cover]
[40 Years Logo]
Four Decades of Serving Investors
40 Years
American Century
1958-1998
American Century Investments BULK RATE
P.O.Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9807 (c)1998 American Century Services Corporation
SH-BKT-12814
