ANNUAL
REPORT
[american century logo]
American
Century(reg.sm)
NOVEMBER 30, 1997
TWENTIETH
CENTURY
GROUP
International Growth
International Discovery
Emerging Markets
TABLE OF CONTENTS
Report Highlights ......................................................... 1
Our Message to You ........................................................ 2
Market Perspective ........................................................ 3
International Growth
Performance & Portfolio Information ............................ 4
Management Q & A ............................................... 5
Schedule of Investments ........................................ 8
Financial Highlights ........................................... 38
International Discovery
Performance & Portfolio Information ............................ 13
Management Q & A ............................................... 14
Schedule of Investments ........................................ 17
Financial Highlights ........................................... 41
Emerging Markets
Performance & Portfolio Information ............................ 23
Management Q & A ............................................... 24
Schedule of Investments ........................................ 26
Financial Highlights ........................................... 42
Statements of Assets and Liabilities ...................................... 31
Statements of Operations .................................................. 32
Statements of Changes in Net Assets ....................................... 33
Notes to Financial Statements ............................................. 34
Independent Auditors' Report .............................................. 43
Proxy Voting Results ...................................................... 44
Share Class and Retirement
Account Information ....................................................... 47
Background Information
Investment Philosophy and Policies ............................. 48
Comparative Indices ............................................ 48
Glossary .................................................................. 49
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios.
We've organized our funds into three distinct groups, based on investment style
and objectives, to help simplify your fund decisions. These groups appear below.
AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century
Group(reg. tm) Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
International Growth
International Discovery
Emerging Markets
We welcome your comments or questions about this report.
See the back cover for ways to contact us by mail, phone or e-mail.
Twentieth Century and American Century are registered marks of American Century
Services Corporation. Benham Group is a registered mark of Benham Management
Corporation.
AMERICAN CENTURY INVESTMENTS
REPORT HIGHLIGHTS
MARKET PERSPECTIVE
* The Morgan Stanley Capital Inter-national EAFE(reg.tm) Index, the standard
investment performance measure of international stock markets, was
essentially flat for the year ended November 30, 1997. Specifically, the
EAFE Index lost 0.40% during the period.
* Currency devaluations in Southeast Asia precipitated steep market declines
throughout the region. Japan, which accounts for a large portion of EAFE's
value, finished the year sharply lower.
* Strong gains in European markets offset losses in Asia. Investors in
Europe are benefiting from the region's increased focus on profitability
and stock performance.
INTERNATIONAL GROWTH
* International Growth performed strongly, with a return of 18.12% for the
year. Our focus on the earnings strength of individual companies
identified problems in Southeast Asia, prompting an early exit from the
region.
* The fund's strong performance relative to its peers garnered top industry
rankings among international funds.
* Fund returns were boosted by holdings in European financial services firms
that continued to benefit from liberalization and restructuring of the
financial sector in Europe.
INTERNATIONAL DISCOVERY
* International Discovery had a total return of 17.76% for the year ended
November 30, 1997. Its strong performance relative to its peers and
benchmark can be explained by our early research and avoidance of
Southeast Asian companies as well as good performance by a number of our
European holdings.
* Financial stocks contributed significantly to returns. Profits were up at
European banking and financial service providers as employers and workers
pursue the U.S. model of retirement planning, which increasingly relies on
equity investing.
* During the final six months of the year, the fund's weighting in Canadian
companies doubled as we discovered some exciting opportunities in
financial services, technology and energy.
EMERGING MARKETS
* Emerging Markets opened at a time when developing countries struggled with
the effects of the economic woes in Southeast Asia. The fund's return was
-17.00% during its first two months compared to a return of -19.60% for
its benchmark index, the MSCI Emerging Markets Free Index. It beat its
benchmark because fewer assets were invested in Asia.
* Southeast Asian companies that export goods to developed economies were
primary fund holdings. These corporations tend to benefit if their local
currency is devalued.
* Holdings in the financial sector hurt returns. Many emerging countries
raised interest rates dramatically to protect their own currencies,
impacting bank and other financial services companies' profits in these
countries.
INTERNATIONAL GROWTH
INVESTOR CLASS(1)
TOTAL RETURNS: AS OF 11/30/97
6 Months 1.32%(2)
1 Year 18.12%
NET ASSETS: $1.7 billion
(AS OF 11/30/97)
INCEPTION DATE: 5/9/91
TICKER SYMBOL: TWIEX
INTERNATIONAL DISCOVERY
TOTAL RETURNS: AS OF 11/30/97
6 Months 2.28%(2)
1 Year 17.76%
NET ASSETS: $626.3 million
(AS OF 11/30/97)
INCEPTION DATE: 4/1/94
TICKER SYMBOL: TWEGX
EMERGING MARKETS
TOTAL RETURN: AS OF 11/30/97
Since Inception -17.00%(2)
NET ASSETS: $11.8 million
(AS OF 11/30/97)
INCEPTION DATE: 9/30/97
TICKER SYMBOL: N/A
(1) See Share Classes, page 47.
(2) Not annualized.
Many of the investment terms in this report are defined in the
Glossary on page 49.
ANNUAL REPORT REPORT HIGHLIGHTS 1
OUR MESSAGE TO YOU
[photo of James E. Stowers, Jr. and James E. Stowers III]
Our international funds did a very good job of navigating the strong
crosscurrents in foreign markets this year. Both Inter- national Growth and
International Discovery finished their fiscal year far ahead of their
performance benchmark. Once again, investment discipline and attention to
business fundamentals made the difference. Our management team focuses on
individual companies and looks for sound, fast-growing businesses worldwide.
They build portfolios according to the earnings growth and quality of each
company, not by countries or geographic regions.
Although foreign markets were volatile this year, 1997 served as a good
example of the diversification that international returns can offer investors,
even in times of crisis. Over the long term, global markets in fact tend to
perform independently. But when a crisis occurs, as it did in Southeast Asia
later in the year, they often move together. Once the downward adjustments
subside and investors regain perspective, markets decouple and go their separate
ways again. Regional volatility notwithstanding, 1997 saw a wide variation in
returns.
Both International Growth and International Discovery were able to take
advantage of this performance variation, and invested in some very attractive
opportunities, especially in Europe. We also avoided much--though not all--of
the turbulence afflicting the economies of Southeast Asia. Our newest fund,
Emerging Markets, was just two months old when the fiscal year ended, and opened
directly into a very difficult environment. Southeast Asia's troubles had
already spread to Latin America, Eastern Europe, and Russia, so the fund's
opportunities were limited. In spite of these conditions, our management team
found individual companies we think have the fundamentals not only to come
through the tough times in good shape, but also to make rapid progress once the
present troubles abate. This approach has helped International Growth and
International Discovery produce strong returns over the years, and we believe it
will do the same for Emerging Markets.
In 1997, we were active globally on more than one front. In July, J.P.
Morgan agreed to become a significant minority shareholder in our company. J.P.
Morgan has been in business over 150 years, serving institutions, governments
and individuals with complex financial needs. In the proposed relationship,
American Century will continue to operate as an independent company. Our
corporate management team will remain the same, and the Stowers family will
retain voting control of the company.
On a more personal note, 1998 also marks the 40th year since we launched our
first mutual funds. Not many fund companies can claim a 40-year track record, or
a fund family that includes nearly 70 stock, bond, and money market funds that
provide investors with such a wide range of choice and flexibility.
Whatever your financial goals, we believe we have an outstanding lineup of
funds to help you pursue them.
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
American Century Investment Management, Inc.
2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS
MARKET PERSPECTIVE
CHALLENGE AND OPPORTUNITY
Foreign markets were unusually volatile during the fiscal year ended
November 30, 1997. Stocks were buffeted by broad and dramatic economic changes
that made for some very sharp contrasts among returns.
The Morgan Stanley Capital International EAFE Index was essentially flat for
the twelve months, declining 0.40%. Good performance in Europe saved the Index
from a larger deficit, as the chart on this page suggests. Japan, which is the
second largest economy in the world (behind the U.S.) and accounts for a large
portion of EAFE's value, finished the year sharply lower.
The contrast in performance between Asia and Europe was even more pronounced
when one looks at individual countries. Some Asian markets, such as Thailand,
were down over 70% (measured in local currencies), while selected markets in
Europe and Latin America were up 40% or more. The declines in Southeast Asia
were even more extreme when measured in U.S. dollars. Many Asian currencies,
such as the Thai baht, were allowed to "float"--to find their real value in the
marketplace instead of being artificially pegged to the value of more stable
currencies, such as the U.S. dollar. Unfortunately, but not unexpectedly, the
real market value of these currencies was much lower than their artificial, or
pegged, value. By the end of November, the baht was the weakest it had been in
almost 30 years, compared to the dollar.
Markets in countries such as Germany, Switzerland, and Mexico were hitting
new records until the depth and reach of the Asian crises became clearer late in
the year. When the more mature--and presumably more stable--economy of Hong Kong
came under pressure, other developing economies, such as Brazil, appeared
vulnerable. It was also feared (correctly in many cases) that the earnings of
European and U.S. multinational companies would be hurt.
HARD TIMES IN THE FAR EAST
What caused the implosion of so many Asian markets this year? One reason was
Asia's belief in growth for growth's sake. This served the region well for much
of the 90s, but Asian manufacturing capacity eventually became dangerously
overbuilt. Yet Japanese and European investors were still more than willing to
finance the building boom. As a result, too much cash began chasing too few
opportunities.
Speculation was rampant. Awash in cash, local and foreign speculators alike
pushed stock and real estate prices into the stratosphere (often by pledging one
inflated investment as collateral for another). This created a credit vacuum
under many Far Eastern economies.
Will Southeast Asia recover? We believe that it will, but it may take a
while and involve extensive economic reforms.
THE TRANSFORMATION OF EUROPE
While Asia struggled, European commerce continued to undergo fundamental
transformation. Many companies that used to be government-operated have been
privatized (shares have been sold to individuals and the public). Many more have
now begun to "Americanize," making changes that U.S. business effected early in
the decade. European corporations are now emphasizing earnings growth,
streamlining operations to become more efficient and productive, and
consolidating--through mergers and acquisitions--to take advantage of corporate
synergies and increase global clout. Management compensation is increasingly
linked to profitability and share price performance, which has the effect of
aligning the interests of European managers with those of shareholders like the
funds.
The coming European Monetary Union is driving many of these changes, but so
is the success of the American business model, which focuses on profitability
and often uses a company's stock price to grade the quality of its management.
The European transformation has momentum and should be hard to derail, even if
the Asian crises intensify. Europe could stumble, but we believe its long-term
potential is real.
[line graph - data below]
MARKET PERFORMANCE MEASUREMENTS
Comparative Growth of $1.00 for the year ended November 30, 1997
MSCI EAFE IX ND MSCI Europe IX ND MSCI Japan IX ND
11/30/96 $1.00 $1.00 $1.00
12/31/96 $0.99 $1.02 $0.93
01/31/97 $0.95 $1.02 $0.83
02/28/97 $0.97 $1.04 $0.85
03/31/97 $0.97 $1.07 $0.82
04/30/97 $0.98 $1.06 $0.85
05/31/97 $1.04 $1.11 $0.94
06/30/97 $1.10 $1.16 $1.02
07/31/97 $1.12 $1.22 $0.98
08/31/97 $1.03 $1.15 $0.90
09/30/97 $1.09 $1.26 $0.89
10/31/97 $1.01 $1.20 $0.80
11/30/97 $1.00 $1.22 $0.75
Value on 11/30/97
MSCI Europe Index $1.22
MSCI EAFE (reg. tm) Index $1.00
MSCI Japan Index $0.75
Comparative One-Year Returns for the year ended November 30, 1997
MSCI Europe Index .................... 21.75%
MSCI EAFE(reg.tm) Index .............. -.40%
MSCI Japan Index ..................... -24.64%
ANNUAL REPORT MARKET PERSPECTIVE 3
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH
TOTAL RETURNS AS OF NOVEMBER 30, 1997(1)
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
INVESTOR CLASS
(inception 5/9/91)
<S> <C> <C> <C> <C> <C>
International Growth 1.32% 18.12% 13.36% 15.42% 13.75%
MSCI EAFE(reg.tm) Index -4.27% -0.40% 6.19% 11.31% 6.73%(2)
ADVISOR CLASS
(inception 10/2/96)
International Growth 1.21% 17.97% ....................................... 19.04%
MSCI EAFE(reg.tm) Index -4.27% -0.40% ....................................... 2.50%
INSTITUTIONAL CLASS
(inception 11/20/97)
International Growth ....................................................................... -0.43%
MSCI EAFE(reg.tm) Index .................................................................... N/A(3)
(1) Returns for periods less than one year are not annualized.
(2) For the period from 5/31/91 (the date nearest the class's inception for
which data are available) to 11/30/97.
(3) A return for less than one month is not available.
</TABLE>
See pages 47, 48 and 49 for more information about share classes, the
comparative index and returns.
[line graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND (Investor Class)
VALUE ON 11/30/97
International Growth $22,819
MSCI EAFE $15,272
INTERNATIONAL GROWTH MSCI EAFE INDEX
DATE ACCT VALUE RETURN ACCT VALUE RETURN
5/31/91 $10,000 $10,000
6/30/91 $9,596 -4.04% $9,265 -7.35%
9/30/91 $10,231 2.31% $10,060 0.60%
12/31/91 $10,802 8.02% $10,228 2.28%
3/31/92 $11,418 14.18% $9,014 -9.86%
6/30/92 $12,112 21.12% $9,205 -7.95%
9/30/92 $11,611 16.11% $9,344 -6.56%
12/31/92 $11,325 13.25% $8,983 -10.17%
3/31/93 $12,301 23.01% $10,060 0.60%
6/30/93 $12,818 28.18% $11,072 10.72%
9/30/93 $13,654 36.54% $11,806 18.06%
12/31/93 $16,155 61.55% $11,908 19.08%
3/31/94 $15,568 55.68% $12,324 23.24%
6/30/94 $15,778 57.78% $12,954 29.54%
9/30/94 $16,344 63.44% $12,967 29.67%
12/31/94 $15,387 53.87% $12,83 28.34%
3/31/95 $14,879 48.79% $13,073 30.73%
6/30/95 $15,741 57.41% $13,168 31.68%
9/30/95 $16,581 65.81% $13,717 37.17%
12/31/95 $17,216 72.16% $14,273 42.73%
3/31/96 $17,614 76.14% $14,685 46.85%
6/30/96 $18,455 84.55%. $14,917 49.17%
9/30/96 $18,500 85.00% $14,899 48.99%
12/31/96 $19,700 97.00% $15,136 51.36%
3/31/97 $20,789 107.89% $14,899 48.99%
6/30/97 $23,610 136.10% $16,832 68.32%
9/30/97 $24,501 145.01% $16,714 67.14%
11/30/97 $22,819 128.19% $15,272 52.72%
$10,000 investment made 5/31/97
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. Data quoted is for Investor Class only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above).
The line representing International Growth's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the MSCI EAFE(reg.tm) index does not.
PORTFOLIO AT A GLANCE
11/30/97 11/30/96
Number of Companies 122 101
Portfolio Turnover 163% 158%
Expense Ratio (for Investor Class) 1.38%(1) 1.65%(1)
(1) Management voluntarily lowered fees beginning in August 1996. The lower fees
became permanent in August 1997 following a proxy vote. For more information see
Note 2 on page 35.
4 INTERNATIONAL GROWTH AMERICAN CENTURY INVESTMENTS
INTERNATIONAL GROWTH
MANAGEMENT Q & A
An interview with Henrik Strabo and Mark Kopinski, portfolio managers on the
International Growth investment team.
INTERNATIONAL GROWTH PERFORMED VERY WELL THIS YEAR. WHAT EXPLAINS ITS
OUTSTANDING RETURNS?
This was a difficult year in foreign markets. The fund's benchmark, the
Morgan Stanley Capital International EAFE Index, was slightly negative, down
- -0.40% for the twelve months ended November 30, 1997. The markets of Southeast
Asia and Japan were much weaker. We think this serves to highlight just how well
International Growth performed, returning 18.12%.
International Growth also did well versus other foreign stock funds.
Morningstar, a large mutual fund rating service, ranked International Growth in
the top 3% out of 413 foreign stock funds for the twelve months ended November
30. International Growth also ranked in the top 10% out of 253 funds for the
three-year period and 14% out of 108 for five years.*
We're both pleased and proud of International Growth's performance record,
but we're also aware that it sets a very high hurdle going forward. Our
challenge is to keep returns ahead of the competition.
Our investment methodology is largely responsible for the good results to
date. This year, the "bottom up" approach, which focuses on the earnings growth
of individual companies, led us to faster-growing European companies and away
from slower-growing companies in troubled areas, such as Southeast Asia and
Japan. In Europe, many companies continued the robust growth they have enjoyed
for more than two years. Low interest rates and optimism that low rates will
continue enabled businesses to restructure and re-engineer their operations,
resulting in greater efficiencies and profitability. Fund returns were boosted
by holdings
* Morningstar rankings are based on average annual total returns.
Past performance is no guarantee of future results.
[bar chart - data below]
INTERNATIONAL GROWTH'S ONE-YEAR RETURNS(1) (Periods ended November 30)
INTL GROWTH EAFE(reg.tm)
1991(2) 2.50% -2.74%
1992 8.77% -8.11%
1993 31.04% 24.27%
1994 7.28% 14.84%
1995 5.93% 7.57%
1996 16.35% 11.76%
1997 18.12% -0.40%
This chart illustrates the fund's returns over the past six years and compares
them with EAFE(reg.tm)'s returns. International Growth's total returns include
operating expenses, while the index's returns do not. See page 48 for a
description of EAFE(reg.tm). Past performance is no guarantee of future results.
Investment return and principal value will fluctuate and redemption value may be
more or less than original cost.
(1) Investor Class.
(2) Returns from 5/31/91(the date closest to fund's inception for which data
were available) to 11/30/91.
ANNUAL REPORT INTERNATIONAL GROWTH 5
INTERNATIONAL GROWTH
in financial service firms that continued to benefit from the boom brought on by
the liberalization and restructuring of the financial sector in Europe.
WHICH EUROPEAN HOLDINGS CONTRIBUTED TO PERFORMANCE THIS YEAR?
Some of the year's top performers include Credit Suisse Group, one of the
fund's larger positions, Skandia, an insurance company located in Sweden, and
Credito Italiano, an Italian bank. Credit Suisse is a very large,
well-capitalized banking, brokerage, and insurance company based in Switzerland.
Skandia is benefiting from higher demand for its expanded product line in
Europe, the United States and Japan. Credito Italiano is under-going a major
transformation which is typical of the better growth companies in Europe. Unlike
its competitors, Credito Italiano has restructured to focus on high-profit
growth areas, such as asset management and mutual funds. We are pleased with
Credito Italiano's performance and expect it and Inter-national Growth's other
bank holdings to benefit from improving internal efficiencies as well as from
changes in European economic structure.
In general, fund performance benefited from a significant stake in European
bank stocks. Strong growth in the banking and financial sector is being driven
by several important catalysts, most notably the trend toward consolidation
currently taking place in the industry, labor reforms that will tighten the
region's work forces and the decline in interest rates as European countries
prepare for EMU (European Monetary Union).
The fund's best stock this year was Phillips Electronics N.V., the largest
electronics manufacturer in Europe. Phillips dramatically improved its bottom
line with several recently implemented cost-cutting measures, including a
smaller and more productive work force and the sale or turnaround of less
profitable operations. SAP, a German software company, also ranked among the
best performers. SAP, the largest supplier of business application software in
the world, is experiencing booming demand globally as companies focus on
productivity and business efficiency. SAP's software products can help manage
operations as diverse as personnel and production.
Finally, telecommunications equipment stocks, such as Nokia, added
significantly to performance.
WHAT SIGNIFICANT CHANGES DID YOU MAKE TO THE PORTFOLIO SINCE THE SEMIANNUAL
REPORT?
Obviously the greatest change has been the shift from Japanese companies to
companies in Europe. A number of disappointing earnings announcements caused us
to sell many Japanese holdings. Our earnings momentum strategy led us to begin
TOP TEN HOLDINGS % of fund investments
As of As of
11/30/97 5/31/97
Novartis AG 4.7% 3.8%
British Aerospace PLC 2.3% 2.1%
ING Groep N.V. 2.1% 2.8%
Novo Nordisk A/S Cl B 1.9% -
Misys plc 1.8% 1.5%
Credito Italiano 1.8% 0.5%
Credit Suisse Group 1.7% 2.4%
Axa-UAP 1.7% 1.0%
Pearson plc 1.7% -
Roche Holding AG 1.6% 1.5%
See the Schedule of Investments for company nationalities and descriptions.
TOP FIVE INDUSTRIES
% of fund investments
As of As of
11/30/97 5/31/97
Financial Services 12.6% 6.9%
Banking 12.2% 6.2%
Pharmaceuticals 10.8% 7.2%
Computer Software &
Services 7.8% 3.3%
Electrical & Electronic
Components 5.3% 11.3%
6 INTERNATIONAL GROWTH AMERICAN CENTURY INVESTMENTS
INTERNATIONAL GROWTH
decreasing these positions way back in April. We also pay attention to
macroeconomic events, and when the growth of Japan's gross domestic product
slowed significantly, it confirmed what we were seeing in individual companies,
so we reacted quickly.
On a sector and industry basis, our greatest shifts were in the electrical
and electronic components industry, where we reduced the fund's holdings by more
than half in response to Asia's negative impact on earnings. In the banking and
financial services sectors, we increased weightings from 13.1% of total
portfolio assets to 24.8%. The fund maintains meaningful positions in computer
software and services companies as well as in pharmaceuticals, both of which
continue to demonstrate accelerating growth.
WHICH STOCKS WERE DISAPPOINTING?
Asian companies tended to dominate this list. Examples include Shanghai
Industrial, a Hong Kong-based conglomerate that had been growing well in the
flourishing economy that China has enjoyed, and Standard Chartered, a U.K.-based
bank with offices throughout Asia. Standard Chartered's fundamental business
remains sound, but its earnings outlook has become slightly clouded, again due
to its Asian exposure. But we believe the company is well-positioned to benefit
from the expected "flight to quality," as investors look for more stable
companies, so we continue to watch it closely.
Another disappointing performer was Fujikura, a Japanese manufacturer of
fiber optics, which suffered a significant price decline when it announced a
drop in order growth. This followed a similar announcement by Corning, Inc., the
global leader in fiber optics production. Both firms had built up inventories in
response to demand from customers who, fearing future shortages in the supply of
fiber optic cable, double- and triple-ordered. Demand slowed significantly in
the third quarter, however, leaving the companies with excess inventories.
GIVEN THE VOLATILITY WE SAW THIS YEAR, WHAT IS YOUR OUTLOOK FOR INTERNATIONAL
MARKETS?
We firmly believe that there will continue to be very significant investment
opportunities internationally. The world is changing at a tremendous pace. As
American-style capitalism makes its way into almost every corner of the globe,
it is creating an unprecedented number of attractive businesses. Despite the
setbacks in Asia, there are many excellent companies in other parts of the
world. Europe continues to benefit from the introduction of market-oriented
policies, corporate restructuring, lower taxes, and the introduction of a common
currency in 1999. Longer-term, we are confident that pockets of Asia will
recover and once again provide significant returns. We are, as always, watching
company earnings very carefully.
[bar chart - data below]
INTERNATIONAL GROWTH'S INVESTMENTS BY COUNTRY
11/30/97 5/31/97
United Kingdom 19% 11%
Switzerland 13% 13%
Netherlands 10% 10%
France 10% 10%
Japan 9% 9%
Germany 9% 9%
Canada 7% 7%
Sweden 4% 4%
Other 19%* 19%
*No other country represented more than 4% of investments as of 11/30/97.
ANNUAL REPORT INTERNATIONAL GROWTH 7
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
INTERNATIONAL GROWTH
NOVEMBER 30, 1997
Shares Value
- -------------------------------------------------------------------------------------------
COMMON STOCKS & RIGHTS
<S> <C> <C>
ARGENTINA--0.8%
386,000 YPF Sociedad Anonima ADR $ 12,955,125
-----------------------
(energy - production and marketing)
AUSTRALIA--0.8%
1,945,000 Woodside Petroleum Limited 13,957,449
-----------------------
(energy - production and marketing)
AUSTRIA--1.0%
112,900 VA Technologie AG 17,003,916
-----------------------
(business services and supplies)
BRAZIL--0.3%
11,568,000 Centrais Eletricas Brasileiras S/A 5,391,378
-----------------------
(energy - production and marketing)
CANADA--6.7%
399,700 Bank of Nova Scotia 17,348,358
(banking)
258,100 Canadian National Railway Company 13,323,278
(railroad)
682,000 Geac Computer Corp. Ltd. 17,291,288
(computer software and services)
497,700 Investor's Group, Inc. 13,702,174
(financial services)
289,000 Newbridge Networks Corp.(1) 12,174,125
(communications equipment)
483,000 Newcourt Credit Group Inc. 15,247,990
(financial services)
131,220 Newcourt Credit Group Inc.
Subscription Receipts(1) 4,101,057
(financial services)
148,000 Northern Telecom Ltd. 13,304,772
(communications equipment)
250,000 QLT PhotoTherapeutics, Inc.(1) 3,072,655
(biotechnology)
244,200 Talisman Energy, Inc.(1) 7,177,561
-----------------------
(energy - production and marketing)
116,743,258
-----------------------
COLOMBIA--0.1%
200,000 Banco de Bogota 992,177
-----------------------
(banking)
DENMARK--1.9%
268,000 Novo Nordisk A/S Cl B 32,808,018
-----------------------
(pharmaceuticals)
Shares Value
- -------------------------------------------------------------------------------------------
FINLAND--2.7%
2,475,400 Merita OY Ltd. Cl A $ 12,536,375
(banking)
104,000 Nokia Corp. Cl A ADR 8,645,000
(communications equipment)
58,200 Raisio Group plc 6,691,851
(food and beverage)
600,000 Sampo Insurance Company Ltd. 18,907,031
-----------------------
(insurance)
46,780,257
-----------------------
FRANCE--9.9%
142,000 Accor SA 26,844,646
(leisure)
71,675 Alcatel Alsthom Compagnie Generale 8,984,720
(communications services)
415,000 Axa-UAP 30,116,376
(insurance)
214,000 Cap Gemini SA 18,234,208
(computer software and services)
103,000 Compagnie Francaise d'Etudes et de
Construction Technip 10,678,095
(chemicals and resins)
240,000 Dassault Systemes S.A. ADR 6,300,000
(computer software and services)
73,000 Elf Aquitaine SA 8,470,686
(energy)
301,100 France Telecom S.A. ADR(1) 10,914,875
(communications services)
32,000 Pinault-Printemps-Redoute SA 16,370,505
(retail - general merchandise)
251,000 Rhone-Poulenc CI A 11,284,434
(chemicals and resins)
175,100 Societe Generale CI A 23,017,228
-----------------------
(banking)
171,215,773
-----------------------
GERMANY--6.3%
269,000 Bayerische Hypotheken-und
Wechsel-Bank AG 11,669,124
(banking)
212,000 Bayerische Vereinsbank AG 12,592,572
(financial services)
333,000 Deutsche Bank AG 21,356,564
(financial services)
338,600 Deutsche Pfandbrief-und
Hypothekenbank AG 19,200,454
(banking)
See Notes to Financial Statements
8 INTERNATIONAL GROWTH AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
INTERNATIONAL GROWTH
NOVEMBER 30, 1997
Shares Value
- -------------------------------------------------------------------------------------------
40,000 Mannesmann AG $ 18,622,058
(industrial equipment and machinery)
149,000 Siemens AG 8,749,050
(electrical and electronic components)
295,000 VEBA AG 17,531,046
---------------------
(utilities)
109,720,868
---------------------
HONG KONG--1.0%
550,000 HSBC Holdings plc 13,269,213
(banking)
686,000 Hutchison Whampoa Limited 4,570,198
---------------------
(construction and property
development)
17,839,411
---------------------
INDONESIA--0.1%
1,171,600 PT Gudang Garam 2,489,349
---------------------
(tobacco)
IRELAND--0.6%
159,000 CBT Group Plc ADR(1) 11,259,187
---------------------
(computer software and services)
ISRAEL--0.5%
196,000 Check Point Software
Technologies Ltd.(1) 8,856,750
---------------------
(computer software and services)
ITALY--3.0%
140,390 Banca Popolare di Bergamo Credito
Varesino SpA 2,246,975
(banking)
1,266,200 Banco Ambrosiano Veneto S.p.A. 4,148,447
(financial services)
1,266,200 Banco Ambrosiano Veneto S.p.A.
Rights for Bonds(1) 666,977
(financial services)
1,266,200 Banco Ambrosiano Veneto S.p.A.
Rights for Stock(1) 4,602,871
(financial services)
11,221,000 Credito Italiano 30,722,713
(banking)
1,236,600 Mondadori (Arnoldo) Editore SpA 9,806,559
---------------------
(printing and publishing)
52,194,542
---------------------
Shares Value
- -------------------------------------------------------------------------------------------
JAPAN--9.5%
137,000 Circle K Japan Co., Ltd. $ 6,880,862
(retail - food and drug)
1,372,000 Dainippon Ink & Chemicals Inc. 4,837,610
(chemicals and resins)
674,000 Fujikura Ltd. 4,853,328
(electrical and electronic components)
129,000 Keyence Corporation 18,800,392
(control and measurement)
2,243,000 Long-Term Credit Bank of Japan,
Ltd. (The) 3,778,609
(banking)
1,651,000 Minebea Company Ltd. 18,369,598
(electrical and electronic components)
196 NTT Data Corp. 9,521,645
(communications services)
74,000 Nintendo Co., Ltd. 7,653,673
(electrical and electronic components)
122,000 Orix Corp. 8,192,282
(financial services)
234,000 Promise Co., Ltd. 12,926,151
(financial services)
84,000 Rohm Co. Ltd. 8,293,046
(electrical and electronic components)
764,000 Shiseido Co., Ltd. 10,356,278
(consumer products)
295,000 Sony Corp. 25,194,907
(electrical and electronic components)
643,000 Takeda Chemical Inds. 18,792,478
(pharmaceuticals)
385,000 Terumo Corporation 6,033,301
---------------------
(medical equipment and supplies)
164,484,160
---------------------
MEXICO--1.1%
130,700 Desc S.A. de C.V. 4,909,419
(chemicals and resins)
2,251,600 Grupo Financiero Banamex Accival,
SA de CV Cl B(1) 4,945,378
(financial services)
265,000 Panamerican Beverages Inc. Cl A 9,076,250
---------------------
(food and beverage)
18,931,047
---------------------
See Notes to Financial Statements
ANNUAL REPORT INTERNATIONAL GROWTH 9
SCHEDULE OF INVESTMENTS
INTERNATIONAL GROWTH
NOVEMBER 30, 1997
Shares Value
- -------------------------------------------------------------------------------------------
NETHERLANDS--10.3%
294,898 Assurantieconcern Stad Rotterdam $ 15,164,063
(insurance)
550,000 Getronics N.V. 18,900,629
(computer software and services)
901,601 ING Groep N.V. 36,653,766
(financial services)
138,300 KLM Royal Dutch Air Lines NV 4,975,321
(airlines)
884,026 Koninklijke Ahold NV 23,574,027
(retail - food and drug)
130,000 Phillips Electronics N.V. 8,710,000
(electrical and electronic components)
306,000 Randstad Holdings N.V. 11,362,415
(business services and supplies)
314,500 Stork N.V. 11,519,799
(business services and supplies)
352,000 Unilever N.V. 20,438,000
(diversified companies)
1,158,400 VNU Tijdschriftengroep Nederland 27,743,316
---------------------
(printing and publishing)
179,041,336
---------------------
NORWAY--0.6%
65,700 Petroleum Geo-Services ASA(1) 4,229,927
(energy - services)
182,000 Smedvig ASA Cl A 4,859,137
(energy - services)
31,875 Smedvig ASA Cl B 806,693
---------------------
(energy - services)
9,895,757
---------------------
PORTUGAL--0.5%
198,500 Portugal Telecom SA 9,142,897
---------------------
(communications services)
RUSSIAN FEDERATION--0.5%
60,000 Lukoil Holding ADR 4,575,000
(energy - services)
188,305 Unified Energy Systems GDR(1) 4,307,477
---------------------
(utilities)
8,882,477
---------------------
Shares Value
- -------------------------------------------------------------------------------------------
SOUTH AFRICA--0.7%
846,900 Amalgamated Banks of South Africa 5,211,961
(banking)
263,434 Liberty Life Association of Africa Ltd. 6,669,215
---------------------
(insurance)
11,881,176
---------------------
SWEDEN--3.8%
174,000 Electrolux AB Cl B 13,700,965
(consumer products)
237,200 Ericsson (L.M.) Telephone Co. ADR 9,584,362
(communications equipment)
216,000 Hennes & Mauritz AB Cl B 9,986,661
(retail - apparel)
400,000 Skandia Forsakrings AB 21,083,986
(financial services)
984,100 Skandinaviska Enskilda Banken 11,597,889
---------------------
(banking)
65,953,863
---------------------
SWITZERLAND--12.7%
7,000 ABB AG 9,311,409
(electrical and electronic components)
206,000 Credit Suisse Group 30,117,804
(banking)
14,000 Julius Baer Holding AG 22,824,486
(financial services)
18,000 Nestle S.A. 26,480,611
(food and beverage)
50,600 Novartis AG 80,822,497
(pharmaceuticals)
3,136 Roche Holding AG 28,059,295
(pharmaceuticals)
18,000 Union Bank of Switzerland 22,908,632
---------------------
(banking)
220,524,734
---------------------
UNITED KINGDOM--19.1%
1,613,200 Amvescap Plc 11,661,003
(financial services)
1,441,720 British Aerospace PLC 39,348,322
(aerospace and defense)
2,213,565 British-Borneo Petroleum Syndicate plc 16,580,203
(energy - production and marketing)
277,800 British Petroleum Co. plc 3,800,329
(energy - production and marketing)
See Notes to Financial Statements
10 INTERNATIONAL GROWTH AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
INTERNATIONAL GROWTH
NOVEMBER 30, 1997
Shares Value
- -------------------------------------------------------------------------------------------
1,046,000 Cable & Wireless plc $ 9,504,251
(communications equipment)
36,300 Cairn Energy plc(1) 288,450
(energy - production and marketing)
309,167 COLT Telecom Group plc(1) 3,360,049
(communications services)
904,000 Compass Group PLC 10,778,965
(restaurants)
411,200 Flextech plc(1) 3,906,426
(broadcasting and media)
3,245,500 General Electric Company plc 21,130,508
(diversified companies)
385,000 Glaxo Wellcome plc ADR 17,589,687
(pharmaceuticals)
1,186,000 Hays plc 14,622,158
(business services and supplies)
210,000 Johnson Matthey PLC 1,945,359
(metals and mining)
4,275,223 Ladbroke Group plc 19,422,941
(leisure)
2,155,000 Lloyds TSB Group plc 24,567,162
(financial services)
1,098,979 Misys plc 30,996,296
(computer software and services)
2,218,000 Next Plc 27,720,253
(retail - general merchandise)
2,064,700 Pearson plc 28,768,343
(printing and publishing)
3,050,000 Pilkington plc 6,593,466
(building and home improvements)
534,000 Railtrack Group PLC 8,973,632
(railroad)
682,904 Siebe plc 12,421,650
(diversified companies)
671,472 Standard Chartered plc 7,456,373
(banking)
295,000 Zeneca Group plc 9,416,462
---------------------
(pharmaceuticals)
330,852,288
---------------------
UNITED STATES--0.5%
177,000 Transocean Offshore 8,396,438
---------------------
(energy - services)
Shares Value
- -------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS & RIGHTS--95.0% $1,648,193,631
---------------------
(Cost $1,489,549,627)
PREFERRED STOCKS
BRAZIL--0.8%
20,447,000 Petroleo Brasileiro S/A 4,442,195
(energy - production and marketing)
80,000 Telecomunicacoes Brasileiras S.A. ADR 8,350,000
---------------------
(communications services)
12,792,195
---------------------
GERMANY--2.9%
281,700 Henkel KGaA 17,315,725
(chemicals and resins)
77,000 SAP AG 23,709,101
(computer software and services)
13,000 Wella Aktiengesellschaft 9,362,064
---------------------
(consumer products)
50,386,890
---------------------
TOTAL PREFERRED STOCKS--3.7% 63,179,085
---------------------
(Cost $53,876,443)
TEMPORARY CASH INVESTMENTS--1.3%
Repurchase Agreement, J.P. Morgan Securities, Inc.,
5.64%, due 12/1/97, collateralized by
$22,124,000 par value U.S. Treasury Notes,
7.75%, due 1/31/00
(Delivery value $23,110,857)
(Cost $23,100,000) 23,100,000
---------------------
TOTAL INVESTMENT SECURITIES--100.0% $1,734,472,716
=====================
(Cost $1,566,526,070)
</TABLE>
See Notes to Financial Statements
ANNUAL REPORT INTERNATIONAL GROWTH 11
SCHEDULE OF INVESTMENTS
INTERNATIONAL GROWTH
NOVEMBER 30, 1997
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Dates Value Gain (Loss)
- --------------------------------------------------------------------------------
44,022,121 CHF 1/28/98 $ 31,287,932 $215,283
42,332,147 DEM 1/28/98 24,173,360 161,613
147,659,373 FRF 1/28/98 25,200,382 198,574
29,649,296 GBP 1/28/98 49,801,330 (83,908)
4,698,655,511 JPY 1/28/98 37,518,484 (310,997)
53,135,657 NLG 1/28/98 26,933,177 177,682
79,020,596 SEK 1/28/98 10,275,947 142,611
------------ ---------
$ 205,190,612 $500,858
============ =========
(Value on Settlement Date $205,691,470)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
CHF = Swiss Franc
DEM = German Mark
FRF = French Franc
GBP = British Pound
GDR = Global Depositary Receipt
JPY = Japanese Yen
NLG = Netherlands Guilder
SEK = Swedish Krona
(1) Non-income producing.
12 INTERNATIONAL GROWTH AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
INTERNATIONAL DISCOVERY
TOTAL RETURNS AS OF NOVEMBER 30, 1997(1)
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS LIFE OF FUND(2)
<S> <C> <C> <C> <C>
International Discovery ...... 2.28% 17.76% 18.67% 17.46%
MSCI EAFE(reg.tm) Index ...... -4.27% -0.40% 6.19% 6.02%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) The fund's inception was 4/1/94.
See pages 48 and 49 for more information about the comparative index and
returns.
PORTFOLIO AT A GLANCE
11/30/97 11/30/96
Number of Companies 154 183
Portfolio Turnover 146% 130%
Expense Ratio 1.70%(1) 1.88%(1)
(1) Management voluntarily lowered fees beginning in August 1996. The lower fees
became permanent in August 1997 following a proxy vote. For more information see
Note 2 on page 35.
[line graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
VALUE ON 11/30/97
International Discovery $17,998
MSCI EAFE Index $12,391
INTERNATIONAL DISCOVERY EAFE
DATE ACCT VALUE RETURN ACCT VALUE RETURN
4/1/94 $10,000 $10,000
6/30/94 $10,760 7.60% $10,511 5.11%
9/30/94 $11,420 14.20% $10,521 5.21%
12/31/94 $10,760 7.60% $10,414 4.14%
3/31/95 $10,100 1.00% $10,608 6.08%
6/30/95 $11,020 10.20% $10,685 6.85%
9/30/95 $11,800 18.00% $11,130 11.30%
12/31/95 $11,825 18.25% $11,581 15.81%
3/31/96 $12,931 29.31% $11,916 19.16%
6/30/96 $14,479 44.79% $12,104 21.04%
9/30/96 $14,559 45.59% $12,089 20.89%
12/31/96 $15,511 55.11% $12,281 22.81%
3/31/97 $16,712 67.12% $12,089 20.89%
6/30/97 $18,293 82.93% $13,658 36.58%
9/30/97 $19,789 97.89% $13,562 35.62%
11/30/97 $17,998 79.98% $12,391 23.91%
$10,000 investment made 3/31/94
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.
The line representing International Discovery's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return line of the MSCI EAFE(reg.tm) Index does not.
ANNUAL REPORT INTERNATIONAL DISCOVERY 13
INTERNATIONAL DISCOVERY
MANAGEMENT Q & A
An interview with Henrik Strabo and Mark Kopinski, portfolio managers on the
International Discovery investment team.
HOW DID THE FUND PERFORM THIS YEAR?
The fund continued to produce strong returns. We're especially pleased with
performance in light of the volatility in foreign markets. International
Discovery had a total return of 17.76% for the twelve months ended November 30,
1997. By comparison, the Morgan Stanley Capital International EAFE Index
returned -0.40%. The fund has repeatedly outdistanced its benchmark, as the
chart just below indicates. Our strategy is to invest in fast-growing companies.
As a result, we have owned companies with strong earnings streams, and that has
helped us outperform the Index. This year our approach also helped avoid the
turbulent markets of Southeast Asia and Japan.
HOW HAS INTERNATIONAL DISCOVERY PERFORMED COMPARED TO OTHER INTERNATIONAL EQUITY
FUNDS?
We're very proud of our rating. Morningstar, a large mutual fund rating
service, awarded Discovery five stars, its highest rating, for the fund's
consistent ability to produce outstanding returns for investors relative to
other international equity funds--while taking substantially less risk. The
Morningstar rating covers the three-year period ended November 30, 1997.
Morningstar also ranked Discovery in the top 4% out of 413 foreign equity funds
for the twelve months ended November 30, and 1% out of 253 funds for the
three-year period.*
THIS HAS BEEN A VOLATILE YEAR FOR THOSE WHO INVEST ABROAD. HOW DID YOU MINIMIZE
RISK?
International Discovery's portfolio is built on a stock-by-stock basis. The
focus is on individual companies that demonstrate accelerating earnings growth.
We visit and get to know these companies firsthand. We want to understand each
business in detail. This helped us miss many of the big declines in countries
like Thailand, Indonesia, the Philippines and South Korea because we saw
earnings slowing and exited the stocks relatively early. By looking at
individual companies on a fundamental basis, we can often avoid being heavily
exposed in the wrong country at the wrong time. At fiscal year end, Discovery's
holdings in emerging market countries stood at 15.8%, compared to 26.5% a year
earlier.
We were also concerned about the big picture. We monitor important macro
developments such as inflation trends, budget deficits, interest rates,
[bar chart - data below]
INTERNATIONAL DISCOVERY'S ONE-YEAR RETURNS
(Periods ended November 30)
INTL DISCOVERY EAFE
1994 * 7.80% 3.49%
1995 5.75% 7.57%
1996 34.06% 11.76%
1997 17.76% -0.40%
This chart illustrates the fund's returns over the past four years and compares
them with EAFE(reg.tm)'s returns. International Discovery's total returns
include operating expenses, while the index's returns do not. See page 48 for a
description of EAFE(reg.tm). Past performance is no guarantee of future results.
Investment return and principal value will fluctuate and redemption value may be
more or less than original cost.
* Return from 4/1/94 inception date to 11/30/94.
* Morningstar rankings are based on average annual total returns. Morningstar
proprietary star ratings, which may change monthly, reflect historical
risk-adjusted performance as of November 30, 1997. The ratings are calculated
from the fund's 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. The top ten percent of the funds
in an investment category receive five stars and the next 22.5% receive four
stars. Past performance is no guarantee of future results.
14 INTERNATIONAL DISCOVERY AMERICAN CENTURY INVESTMENTS
INTERNATIONAL DISCOVERY
export-import balances, political developments and government policies--anything
that may impact the earnings progression of the companies we are researching.
Clearly, the trends in Southeast Asia were not encouraging.
WHICH STOCKS CONTRIBUTED TO FUND PERFORMANCE THIS YEAR?
At year end, the fund's top three holdings were also among the most
significant contributors. Long-time holding Marschollek, Lautenschlaeger und
Partner was our largest position and also proved to be our best performer.
Marschollek is a German financial services company that benefited from expansion
on two fronts. It increased its traditional product lines to include a broader
range of insurance products and mutual funds, and entered new markets in Austria
and northern Italy. Both are enhancing its long-term profit outlook.
Marschollek is also benefiting from trends affecting European banking and
financial service companies. These sectors are increasing profits as European
demographics and financial markets change. For example, Europeans are aging
faster than pension funds are growing, similar to the U.S. Retirement funds are
lower than they should be. So workers and employers are increasingly turning to
financial service providers for help with retirement planning. At the same time,
foreign stock markets are becoming more investor-friendly. These trends help
explain the strong performance of the financial services sector, including Dutch
investment bank Kempen & Company and Newcourt Credit Group Inc., a Canadian firm
that provides financing to businesses for equipment and other assets.
Besides financial services, the fund was successful with investments in
Porsche and information technology service companies like TT Tieto in Finland
and Parity PLC in the U.K. Porsche has seen a huge earnings acceleration after
introducing the Boxster sports convertible and re-engineering its assembly
platforms to produce cars more profitably. TT Tieto installs, builds and tests
computer networks. The Finnish government and the banking sector are among its
largest clients. Demand for TT Tieto's products is being driven by Europe's
conversion to a single currency, which will require vast new computer systems.
The need to help computers differentiate the year 2000 from 1900 is also
creating demand for TT Tieto's products. Parity PLC is another premier
information technology services company whose product line addresses these same
markets. Parity is experiencing significant demand from customers in the U.K.
and continental Europe.
WERE THERE ANY DISAPPOINTMENTS IN EUROPE?
MAID PLC (now called Dialog Corp.) did not perform well. Based in Britain,
MAID provides on-line database services. It acquired Knight Ridder Information
Services and has seen rapid growth, but the stock has not benefited. Industry
TOP TEN HOLDINGS % of fund investments
As of As of
11/30/97 5/31/97
Marschollek, Lautenschlaeger
und Partner AG 2.8% 3.3%
Kempen & Company NV 1.9% 1.7%
Newcourt Credit Group Inc. 1.9% 1.6%
TT Tieto OY 1.9% 1.2%
Internatio-Muller NV 1.8% 2.3%
Havas Advertising SA 1.6% 1.1%
Corporacion Financiera
Reunida, S.A. 1.4% -
Technomatix Technologies
Ltd. ADR 1.4% 1.2%
Porsche AG 1.4% 1.9%
Aalberts Industries N.V. 1.3% 0.2%
See the Schedule of Investments for company nationalities and descriptions.
TOP FIVE INDUSTRIES
% of fund investments
As of As of
11/30/97 5/31/97
Financial Services 12.5% 9.5%
Computer Software & Services 12.5% 8.5%
Business Services & Supplies 5.9% 7.3%
Machinery & Equipment 5.5% 4.4%
Energy (Services) 5.0% 2.5%
ANNUAL REPORT INTERNATIONAL DISCOVERY 15
INTERNATIONAL DISCOVERY
competition cast doubt on the sustainability of MAID's profit margins and we
exited the position. Nera was another disappointment. Nera is a Norwegian
telecommunications equipment maker whose stock fell after it announced poor
first quarter results. This was due primarily to delayed deliveries in the data
transmission division. We sold the shares because the underlying earnings growth
was clearly weaker than expected and any earnings recovery based on our analysis
would be patchy at best. There were more promising ideas out there, companies
with a more sustainable earnings outlook.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE FINAL SIX MONTHS OF THE
YEAR?
As mentioned earlier, we continued to build our holdings in European
companies at the expense of those in emerging markets and Japan. We selectively
added to existing positions and established new holdings in the areas of
financial services, software and specialty chemicals. One of the largest changes
in our country weightings occurred in Canada, where we continued to discover
some exciting opportunities in financial services, technology and energy. The
portfolio's holdings in Canada doubled to 10% during the final six months.
SIX MONTHS AGO, YOU WERE VERY EXCITED ABOUT THE POTENTIAL RETURNS OF FOREIGN
INVESTING. HAS THE TURMOIL IN SOUTHEAST ASIA CHANGED YOUR OUTLOOK?
No, but we have to be a bit more cautious because this crisis has developed
with such speed and intensity that it's currently difficult to predict when it
will end and what the full implications will be. We remain excited about newly
opened markets in Eastern Europe, which present tremendous opportunities as
entrepreneurs capitalize on a well-educated, but underemployed workforce.
Foreign companies are increasingly willing to focus on shareholder value as they
implement far-reaching restructurings, consider share buy-backs, reward
management with stock incentives and generally "get fit" for intense global
competition. These are all reasons to diversify investments outside the United
States. We believe anyone stepping back from foreign investments may be missing
the chance to participate in some of the most exciting growth opportunities in
the world.
[bar chart - data below]
INTERNATIONAL DISCOVERY'S INVESTMENTS BY COUNTRY
11/30/97 5/31/97
United Kingdom 13% 12%
Netherlands 12% 16%
Canada 10% 5%
Switzerland 7% 8%
Sweden 7% 7%
Germany 6% 9%
Finland 6% 4%
France 6% 3%
Other 33%* 36%
*No other country represented more than 6% of investments as of 11/30/97.
16 INTERNATIONAL DISCOVERY AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
INTERNATIONAL DISCOVERY
NOVEMBER 30, 1997
Shares Value
- ----------------------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS
<S> <C> <C>
AUSTRIA--0.3%
16,100 Schoeller-Bleckmann Oilfield
Equipment AG(1) $ 1,790,403
-----------------------
(energy - services)
BRAZIL--0.9%
19,173,287 Companhia de Saneamento Basico
do Estado de Sao Paulo 4,458,890
(utilities)
4,209,000 Telecomunicacoes do Parana S.A. 1,498,742
-----------------------
(communications services)
5,957,632
-----------------------
CANADA--9.6%
230,000 ATS Automation Tooling
Systems, Inc.(1) 7,640,552
(machinery and equipment)
287,000 Bell Canada International Inc.(1) 4,161,500
(communications services)
450,000 Berkley Petroleum Corp. 4,155,986
(energy - services)
800,000 Bracknell Corp.(1) 2,331,706
(business services and supplies)
177,000 CGI Group, Inc.(1) 4,972,434
(business services and supplies)
250,000 Cambridge Shopping Centres Ltd.
(Acquired 7/30/97 through 9/3/97,
Cost $2,471,321)(2) 2,660,041
(real estate)
110,000 Canadian Fracmaster Ltd. 1,603,048
(energy - services)
339,200 Canadian Hotel Income Properties
REIT Installment Receipts 2,286,982
(real estate)
40,000 Canadian Hotel REIT Warrants(1) 251,431
(real estate)
208,000 JetForm Corp.(1) 3,198,000
(computer software and services)
95,000 Leitch Technology Corp.(1) 2,502,019
(electrical and electronic components)
370,000 Newcourt Credit Group Inc. 11,680,655
(financial services)
Shares Value
- ----------------------------------------------------------------------------------------------
125,000 Remington Energy Ltd.(1) $ 2,089,406
(energy - production and marketing)
250,000 Royal Group Technologies Ltd.(1) 6,022,404
(building and home improvements)
200,000 Shermag, Inc.(1) 2,387,892
(furniture and furnishings)
440,000 Westaim Corporation (The)(1) 2,425,817
-----------------------
(chemicals and resins)
60,369,873
-----------------------
DENMARK--2.7%
15,540 Christian Hansen Holding A/S Cl B 1,770,459
(pharmaceuticals)
27,900 Jyske Bank A/S 2,947,560
(banking)
100,000 Sondagsavisen A/S 4,467,809
(printing and publishing)
140,000 Sydbank A/S 7,505,920
-----------------------
(banking)
16,691,748
-----------------------
EGYPT--0.4%
30,000 Egypt International Pharmaceuticals 2,046,758
(pharmaceuticals)
17,090 HELWAN FOR CEMENT 332,955
-----------------------
(building and home improvements)
2,379,713
-----------------------
ESTONIA--0.4%
309,400 Hansabank Ltd. 2,356,184
-----------------------
(banking)
FINLAND--6.4%
243,385 Asko Oyj Cl A 4,656,470
(diversified company)
104,488 Elcoteq Network Corp. Cl A(1) 1,391,514
(electrical and electronic components)
20,000 Finnlines OY 795,296
(transportation)
35,000 Fiskars Oyj AB Cl A 3,758,429
(diversified company)
48,000 OY Hartwall AB 3,997,486
(food and beverage)
355,000 Partek Oyj Abp 6,585,480
(industrial)
See Notes to Financial Statements
ANNUAL REPORT INTERNATIONAL DISCOVERY 17
SCHEDULE OF INVESTMENTS
INTERNATIONAL DISCOVERY
NOVEMBER 30, 1997
Shares Value
- ----------------------------------------------------------------------------------------------
205,000 Pohjola Insurance Group Cl B $ 7,690,360
(insurance)
110,000 TT Tieto OY 11,657,460
-----------------------
(computer software and services)
40,532,495
-----------------------
FRANCE--5.5%
89,000 Bertrand Faure SA 6,060,678
(automobiles and auto parts)
220,000 Companie Generale de Geophysique
SA ADR(1) 4,757,500
(energy - services)
11,536 Galeries Lafayette 5,002,653
(retail - general merchandise)
81,742 Havas Advertising SA 10,177,421
(broadcasting and media)
10,904 LVL Medical 1,123,038
(medical equipment and supplies)
8,000 Labinal SA 2,013,789
(aerospace and defense)
93,458 Vallourec SA 5,647,090
-----------------------
(steel)
34,782,169
-----------------------
GERMANY--1.4%
9,200 BETA Systems Software AG 881,656
(computer software and services)
50,000 DIS Deutscher Industrie Service AG(1) 1,984,690
(business services and supplies)
195,100 Pfeiffer Vacuum Technology
AG ADR(1) 5,755,450
-----------------------
(industrial equipment
and machinery)
8,621,796
-----------------------
HONG KONG--1.6%
952,000 Beijing Enterprises Holdings
Limited(1) 2,506,138
(diversified company)
2,700,000 Founder Hong Kong Limited 2,095,650
(computer software and services)
1,370,000 Guangdong Kelon Elec Holding 1,524,132
(consumer products)
Shares Value
- ----------------------------------------------------------------------------------------------
6,542,000 Guangzhou Investments Company Ltd. $ 1,277,883
(diversified company)
2,667,000 Peregrine Investments Holdings
Limited 2,622,046
-----------------------
(financial services)
10,025,849
-----------------------
HUNGARY--1.3%
45,805 Danubius Hotel and Spa Rt.(1) 1,375,653
(leisure)
45,347 Pannonplast Rt. 1,874,172
(chemicals and resins)
50,000 Richter Gedeon Rt. 4,721,589
-----------------------
(pharmaceuticals)
7,971,414
-----------------------
INDIA--0.4%
1,000 Gujarat Ambuja Cements Ltd. 6,914
(building and home improvements)
550 Indian Hotels Company Limited 8,704
(leisure)
8,000 Larsen & Toubro Ltd. 38,453
(diversified company)
17,600 Mahindra & Mahindra Ltd. 152,639
(automobiles and auto parts)
130,000 NIIT Limited 2,138,466
(computer software and services)
200 Oriental Bank of Commerce 271
-----------------------
(banking)
2,345,447
-----------------------
IRELAND--0.7%
163,000 Ryanair Holdings plc ADR(1) 4,329,688
-----------------------
(airlines)
ISRAEL--4.6%
190,000 Crystal Systems Solutions(1) 3,716,875
(computer software and services)
150,000 Formula Systems (1985) Ltd.(1) 4,958,327
(computer software and services)
84,200 MEMCO Software Ltd.(1) 1,926,075
(computer software and services)
200,000 Orckit Communications Ltd.(1) 4,118,750
(communications equipment)
610,000 Oshap Technologies, Ltd.(1) 5,318,438
(computer software and services)
See Notes to Financial Statements
18 INTERNATIONAL DISCOVERY AMERICAN CENTURY INVESTMENT
SCHEDULE OF INVESTMENTS
INTERNATIONAL DISCOVERY
NOVEMBER 30, 1997
Shares Value
- ----------------------------------------------------------------------------------------------
270,500 Technomatix Technologies Ltd.(1) $ 8,808,156
-----------------------
(computer software and services)
28,846,621
-----------------------
ITALY--1.7%
1,100,000 Banca Popolare di Brescia 8,277,571
(banking)
300,000 Simint S.p.A.(1) 2,248,836
-----------------------
(textiles and apparel)
10,526,407
-----------------------
JAPAN--1.8%
15,000 Bellsystem 24, Inc. 1,798,237
(business services and supplies)
54,000 Diamond Computer Service Co. 833,536
(computer software and services)
16,000 Fuji Soft ABC, Inc. 559,138
(computer software and services)
50,000 Meitec 1,547,502
(computer software and services)
69,800 Ministop Co., Ltd. 1,799,350
(retail - food and drug)
175 Net One Systems Co., Ltd.(1) 588,066
(computer software and services)
43,000 Nichii Gakkan Company 1,398,237
(healthcare)
113,000 Nippon System Development 2,346,327
(computer software and services)
94,000 Shindengen Electric Manufacturing 725,485
-----------------------
(electrical and electronic components)
11,595,878
-----------------------
LITHUANIA--0.4%
38,900 Vilniaus Bankas AB GDR 2,431,250
-----------------------
(banking)
MEXICO--1.6%
337,000 ARA, S.A. de C.V.(1) 1,477,080
(construction and property
development)
400,000 Corporacion Interamericana de
Entretenimiento S.A.(1) 2,736,957
(leisure)
1,116,000 Grupo Financiero Banorte S.A. de C.V. 1,548,962
(financial services)
Shares Value
- ----------------------------------------------------------------------------------------------
287,100 Grupo Radio Centro S.A. de
C.V. ADR $ 4,270,613
-----------------------
(broadcasting and media)
10,033,612
-----------------------
NETHERLANDS--12.5%
333,000 Aalberts Industries N.V. 8,461,132
(metals and mining)
23,000 Athlon Groep N.V. 1,967,296
(automobiles and auto parts)
172,136 Draka Holding N.V. 7,664,924
(electrical and electronic components)
150,000 Fugro N.V. 5,132,075
(business services and supplies)
100,000 IHC Caland N.V. 5,328,302
(energy - services)
374,500 Internatio-Muller NV 11,512,931
(transportation)
300,837 Kempen & Company NV 11,882,115
(financial services)
178,194 Nagron Nationaal Grondbezit N.V. 4,213,896
(construction and property
development)
68,500 Nedcon Groep NV 3,601,635
(machinery and equipment)
305,600 Ordina Beheer N.V. 4,612,830
(computer software and services)
40,000 Simac Techniek N.V. 4,558,490
(computer software and services)
221,000 Smit Internationale NV 6,282,516
(transportation)
140,000 Unique International NV 3,014,843
-----------------------
(business services and supplies)
78,232,985
-----------------------
NORWAY--1.7%
71,076 Det Sondenfjelds-Norske
Dampskibsselskab Cl A 1,393,570
(energy - services)
112,950 Fred Olsen Energy ASA(1) 2,403,058
(energy - services)
150,000 Seateam Technology AS 2,659,426
(energy - services)
170,000 Tomra Systems ASA 4,373,279
-----------------------
(environmental services)
10,829,333
-----------------------
See Notes to Financial Statements
ANNUAL REPORT INTERNATIONAL DISCOVERY 19
SCHEDULE OF INVESTMENTS
INTERNATIONAL DISCOVERY
NOVEMBER 30, 1997
Shares Value
- ----------------------------------------------------------------------------------------------
PORTUGAL--1.3%
300,000 Companhia de Seguros Mundial
Confianca, SA(1) $ 5,019,423
(insurance)
34,000 Telecel-Comunicacaoes
Pessoais, SA(1) 3,113,207
-----------------------
(communications services)
8,132,630
-----------------------
RUSSIAN FEDERATION--1.1%
11,100 AO Tatneft ADR 1,404,150
(energy - services)
13,900 AO Tatneft ADR (Acquired
8/11/97 through 9/11/97,
Cost $2,044,150)(2) 1,758,350
(energy - services)
100,000 Irkutskenergo ADR 1,047,500
(utilities)
55,900 Trade House GUM ADR 440,213
(retail - general merchandise)
74,300 Vimpel-Communications ADR(1) 2,266,150
-----------------------
(communications services)
6,916,363
-----------------------
SOUTH AFRICA--1.7%
858,268 Dimension Data Holdings Ltd.(1) 3,709,710
(computer systems)
358,600 Ellerine Holdings Limited 2,494,737
(retail - general merchandise)
68,500 Investec Holdings Limited 2,695,729
(financial services)
1,814,800 Metro Cash & Carry Limited 1,699,566
-----------------------
(retail - food and drug)
10,599,742
-----------------------
SPAIN--2.6%
1,700,000 Corporacion Financiera
Reunida, S.A.(1) 9,007,982
(financial services)
42,836 Grupo Acciona SA 7,585,152
-----------------------
(construction and property
development)
16,593,134
-----------------------
SWEDEN--6.7%
275,000 BT Industries AB 5,270,997
(machinery and equipment)
Shares Value
- ----------------------------------------------------------------------------------------------
600,000 Castellum AB $ 5,633,620
(real estate)
250,000 Hagstromer & Qviberg AG 2,638,736
(financial services)
110,000 Hexagon AB 3,134,106
(diversified company)
230,000 Industri-Matematik International Corp.(1) 6,253,125
(computer software and services)
100,000 Nolato AB Cl B 3,147,057
(rubber and plastics)
211,700 OM Gruppen AB 7,978,333
(financial services)
110,000 Ortivus AB Cl B 3,946,124
(medical equipment and supplies)
155,000 Spectra-Physics AB 3,944,506
-----------------------
(medical equipment and supplies)
41,946,604
-----------------------
SWITZERLAND--7.1%
5,000 Georg Fischer AG 6,871,888
(automobiles and auto parts)
1,500 Gurit-Heberlein AG 4,712,152
(chemicals and resins)
1,600 Moevenpick Holding AG Bearer 611,458
(leisure)
15,000 Rieter Holdings Ltd. 6,542,318
(machinery and equipment)
5,000 Siegfried AG 6,556,342
(chemicals and resins)
105,000 Swisslog Holding AG 8,043,791
(machinery and equipment)
2,000 Verwaltungs-und Privat-Bank AG 3,513,078
(banking)
10,500 Vontobel Holding AG Cl B 7,951,757
-----------------------
(financial services)
44,802,784
-----------------------
UNITED KINGDOM--12.6%
1,200,000 Ashtead Group plc 3,465,623
(industrial equipment and machinery)
497,033 Bodycote International plc 7,995,657
(diversified company)
1,372,000 Britax International plc 2,861,706
(automobiles and auto parts)
255,000 Close Brothers Group plc 2,121,047
(financial services)
See Notes to Financial Statements
20 INTERNATIONAL DISCOVERY AMERICAN CENTURY INVESTMENT
SCHEDULE OF INVESTMENTS
INTERNATIONAL DISCOVERY
NOVEMBER 30, 1997
Shares Value
- ----------------------------------------------------------------------------------------------
516,000 Cobham PLC $ 6,936,920
(aerospace and defense)
409,300 Expro International Group plc 4,068,105
(energy - services)
491,000 Filtronic Comtek plc 3,499,435
(communications equipment)
370,000 Goode Durrant plc 3,080,723
(business services and supplies)
1,350,000 Guinness Peat Group plc 682,964
(financial services)
310,000 JBA Holdings Plc 5,130,878
(computer software and services)
1,125,000 J.D. Wetherspoon plc 5,852,039
(food and beverage)
157,000 More Group plc 1,966,141
(broadcasting and media)
596,250 Parity plc 6,303,861
(business services and supplies)
417,500 PizzaExpress plc 5,919,447
(restaurants)
400,100 Powerscreen International plc 4,449,675
(industrial equipment and
machinery)
302,237 Robert Walters plc 2,074,971
(business services and supplies)
380,000 Sage Group plc (The) 4,887,170
(computer software and services)
621,000 Select Appointments Holdings plc 6,083,080
(business services and supplies)
100,000 Virgin Express Holdings plc ADR(1) 1,662,500
-----------------------
(airlines)
79,041,942
-----------------------
UNITED STATES--0.6%
168,500 Viatel, Inc.(1) 1,074,188
(communications services)
145,000 Zoran Corporation(1) 2,474,062
-----------------------
(computer software and services)
3,548,250
-----------------------
TOTAL COMMON STOCKS
& WARRANTS--89.6% 562,231,946
-----------------------
(Cost $483,724,149)
Shares Value
- ----------------------------------------------------------------------------------------------
PREFERRED STOCKS
BRAZIL--0.5%
94,800,000 Ericsson Telecomunicacoes S.A. $ 3,290,183
(communications equipment)
53,427 Rio Grand de Telecom Cl A(1) 66,634
(communications equipment)
4,100,000 Telecomunicacoes do Parana
S.A. Rights(1) --
-----------------------
(communications services)
3,356,817
-----------------------
GERMANY--5.2%
13,000 KSB AG 3,214,063
(machinery and equipment)
72,000 Marschollek, Lautenschlaeger
und Partner AG 17,800,964
(financial services)
5,600 Porsche AG 8,700,879
(automobiles and auto parts)
10,000 Sartorius AG 2,778,565
-----------------------
(electrical and electronic components)
32,494,471
-----------------------
TOTAL PREFERRED STOCKS--5.7% 35,851,288
-----------------------
(Cost $19,498,606)
TEMPORARY CASH INVESTMENTS--4.7%
Repurchase Agreement, Merrill Lynch & Co. Inc.,
5.70%, due 12/1/97, collateralized by
$29,235,000 par value U.S. Treasury Notes,
5.125%, due 6/30/98
(Delivery value $29,213,870) 29,200,000
-----------------------
(Cost $29,200,000)
TOTAL INVESTMENT SECURITIES--100.0% $627,283,234
=======================
(Cost $532,422,755)
</TABLE>
See Notes to Financial Statements
ANNUAL REPORT INTERNATIONAL DISCOVERY 21
SCHEDULE OF INVESTMENTS
INTERNATIONAL DISCOVERY
NOVEMBER 30, 1997
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Dates Value Gain(Loss)
- --------------------------------------------------------------------------------
9,346,514 CHF 1/28/98 $6,642,867 $45,708
10,315,388 DEM 1/28/98 5,890,502 39,382
32,287,884 FRF 1/28/98 5,510,433 43,421
6,819,478 GBP 1/28/98 11,454,541 (19,299)
363,554,371 JPY 1/28/98 2,902,960 (22,836)
23,277,527 NLG 1/28/98 11,798,814 77,838
46,449,236 SEK 1/28/98 6,040,323 83,828
----------- --------
$50,240,440 $248,042
=========== ========
(Value on Settlement Date $50,488,482)
NOTES TO SCHEDULES OF INVESTMENTS
ADR = American Depositary Receipt
CHF = Swiss Franc
DEM = German Mark
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 November 30, 1997, was $4,418,391, which
represented 0.7% of net assets.
See Notes to Financial Statements
22 INTERNATIONAL DISCOVERY AMERICAN CENTURY INVESTMENTS
EMERGING MARKETS
LIFE OF FUND(2)
TOTAL RETURNS AS OF
NOVEMBER 30, 1997(1)
Emerging Markets ................................................. -17.00%
MSCI Emerging Markets
Free Index ....................................................... -19.60%
(1) Not annualized.
(2) The fund's inception was 9/30/97.
See pages 48 and 49 for more information about the comparative index and
returns.
PORTFOLIO AT A GLANCE
11/30/97
Number of Companies 113
Portfolio Turnover 36%(1)
Expense Ratio 2.00%
(1) From inception date 9/30/97
[line graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
VALUE ON 11/30/97
International Emerging Markets $8,300
MSCI Emerging Markets Free Index $9,137
International Emerging Markets MSCI Emerging Markets Free Index
DATE ACCT VALUE RETURN ACCT VALUE RETURN
9/30/97 $10,000 $10,000
10/31/97 $8,480 -15.20% $9,231 -7.69%
11/30/97 $8,300 -17.00% $9,137 -8.63%
$10,000 investment made 9/30/97
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.
The line representing Emerging Market's total return includes operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total return line of the MSCI Emerging Markets Free Index does not.
ANNUAL REPORT EMERGING MARKETS 23
EMERGING MARKETS
MANAGEMENT Q & A
An interview with Mark Kopinski and Michael Donnelly, portfolio managers on
the Emerging Markets fund.
EMERGING MARKETS OPENED ON SEPTEMBER 30, 1997. HOW DID IT PERFORM DURING ITS
FIRST TWO MONTHS?
Many emerging markets were in disarray when the fund opened. The economic
and currency crises of Southeast Asia were reverberating through the markets of
Brazil, Poland and Russia, among others. It was a tough environment. As a
result, returns were negative during the first two months, September 30 through
November 30. Emerging Markets posted a -17.00% total return. However, we still
beat our benchmark, the Morgan Stanley Emerging Markets Free Index, which
declined 19.60%. We fared better than the Index because we had fewer assets
invested in Asia. The Index represents the performance of stocks in 26 emerging
market countries in the Pacific Basin, Europe, and Latin America.
We would have liked to welcome new investors into the fund with better
results, but we were caught in a broad market downturn that has not yet run its
course.
GIVEN THE TOUGH ENVIRONMENT, WHAT'S YOUR INVESTMENT STRATEGY?
We believe the current declines will produce some very attractive
opportunities over the intermediate and long term. Our overall strategy is to
buy individual companies based on their business fundamentals and earnings
growth. We intend to use the current market volatility as an ally to add good
stock ideas to the portfolio at substantially lower prices than we could have a
year or even a few months ago. There are many excellent companies that have been
swept up in macro concerns over currency and market stability. We're focusing on
those that are positioned for a rebound when the clouds clear.
HOW MUCH WEIGHT DO YOU GIVE TO THE POLITICAL AND ECONOMIC STABILITY OF THE
COUNTRIES IN WHICH YOUR COMPANIES ARE LOCATED?
We watch this very closely. If the political or economic risk is too great,
even the best stocks will have trouble performing. From a political standpoint,
it is important that the leaders of the countries where we invest have a solid
base of local support. Economically, it is important that they pursue liberal
economic policies that promote long-term stability. We are looking for countries
that have low deficits and a robust export effort. If a country is importing
more than it exports--if it is running what is called a current account
deficit--then the deficit should not be too large relative to the country's
gross domestic product (the sum of all the goods and services the country
produces). We also want to see anti-inflationary policies, lower barriers to
trade and, most importantly, a general reduction of governmental involvement in
the economy. Such policies will support economic stability and, in turn,
political stability.
TOP TEN HOLDINGS % of fund investments
As of
11/30/97
Ericsson Telecomunicacoes S.A. 2.2%
Portugal Telecom SA 1.7%
Telecom Argentina STET -
France Telecom S.A. Cl B ADR 1.6%
Corporacion Interamericana
de Entretenimiento S.A. 1.5%
Telecomunicacoes Brasileiras S.A. ADR 1.5%
Telefonos de Mexico, S.A. ADR 1.4%
OY Hartwall AB 1.4%
YPF Sociedad Anonima ADR 1.4%
Nokian Renkaat Oyj 1.3%
Danubius Hotel and Spa Rt. 1.3%
See the Schedule of Investments for company nationalities and descriptions.
TOP FIVE INDUSTRIES
% of fund investments
As of
11/30/97
Communications Services 14.7%
Utilities 11.6%
Food & Beverage 8.2%
Banking 5.7%
Energy (Production & Marketing) 5.4%
24 EMERGING MARKETS AMERICAN CENTURY INVESTMENTS
EMERGING MARKETS
WHAT TYPES OF COMPANIES DO YOU FIND ATTRACTIVE IN THIS ENVIRONMENT?
With so many foreign currencies turning down, we're looking for companies
with a healthy export business that sell goods to developed economies. These
corporations tend to benefit if their local currency is devalued. For example, a
Mexican company that is getting paid in U.S. dollars fares better than one paid
in pesos if the value of the peso drops.
CAN YOU GIVE US A SPECIFIC EXAMPLE?
Yes, Sedna Geotech. Sedna is listed on the Canadian stock exchange but its
operations are primarily in Peru. The company rents drilling equipment for hard
mineral mines, such as copper, iron ore and zinc. Revenues are in U.S. dollars
because most of its products are exported to developed countries, but costs for
the most part are denominated in local currencies. This mix is a growing benefit
to the company and, especially in times of currency volitility, has defensive
characteristics. Sedna led the list of the fund's top-performing stocks for the
period.
WHAT ARE SOME OF THE OTHER OPPORTUNITIES YOU SEE OUT THERE?
Two Brazilian companies, CEMIG and SABESP, illustrate some other types of
ideas we like. They were also among the fund's better performers. CEMIG is an
integrated electric utility that is being privatized. The Brazilian government
used to own the company, but it has been selling shares to the public and has
decided to cut back its ownership to 50%. CEMIG is streamlining operations and
improving bottom line growth. Two U.S. energy companies recently bought a 33%
stake and are leading the restructuring effort. CEMIG also benefits from the
strong growth in industrial production in its franchise area. SABESP is a
similar story. It is a water utility that is undergoing fundamental changes to
improve profitability and cut losses. SABESP is making such basic improvements
as fixing leaky pipes. Like CEMIG, government ownership is decreasing, which
should increase the company's efficiency and help improve earnings growth.
WHAT STOCKS OR SECTORS HURT FUND PERFORMANCE?
The financial services industry was weak. This sector suffered globally in
the wake of the currency devaluation in Southeast Asia. Many emerging countries
raised interest rates dramatically to protect their own currencies. Higher rates
slow banks' earnings growth because loan volumes drop when the cost of borrowing
goes up. Grupo Financiero Banorte in Mexico, Banco Bradesco in Brazil and
Hansapank in Estonia were all hard hit. These are good companies with real
potential, but they will find it difficult to grow their earnings under such
adverse economic conditions.
GOING FORWARD, WHAT'S YOUR OUTLOOK FOR EMERGING MARKETS?
Like other mutual funds, emerging market funds should be viewed as long-term
opportunities to build capital. Two months is not enough time to give a true
indication of how any fund or any marketplace will perform. We believe this is
absolutely a good time to gain exposure to emerging markets as the structural
adjustments in their economies make companies more competitive and profitable.
We also believe the trends of privatization and improving business fundamentals,
combined with the increasing popularity of stock investments and Western-style
capitalism, bode well for long-term price appreciation in many emerging market
stocks.
[bar chart - data below]
EMERGING MARKET'S INVESTMENTS BY COUNTRY
11/30/97
Brazil 12%
Mexico 7%
Portugal 6%
Argentina 6%
Hong Kong 5%
Hungary 5%
South Africa 5%
Israel 4%
Other 50%*
*No other emerging market country represented more than 4% of investments as of
11/30/97.
ANNUAL REPORT EMERGING MARKETS 25
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
EMERGING MARKETS
NOVEMBER 30, 1997
Shares Value
- ----------------------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS
<S> <C> <C>
ARGENTINA--5.5%
4,000 Banco de Galicia y Buenos Aires
S.A. de C.V. ADR $ 93,375
(banking)
20,000 CEI Citicorp Holdings S.A. 80,029
(banking)
40,000 Central Costanera S.A. Cl B 104,038
(utilities)
5,300 S.A. Importadora y Exportadora
Patagonia Cl B 77,408
(retail - food and drug)
7,000 Telecom Argentina STET - France
Telecom S.A. Cl B ADR 214,813
(communications services)
5,500 YPF Sociedad Anonima ADR 184,594
------------------------
(energy - production and marketing)
754,257
------------------------
BOTSWANA--0.7%
95,000 Sechaba Breweries Ltd.(1) 101,478
------------------------
(food and beverage)
BRAZIL--1.9%
620,000 Companhia de Saneamento Basico
do Estado de Sao Paulo 144,199
(utilities)
400,000 Light Participacoes S.A. 109,979
------------------------
(utilities)
254,178
------------------------
CANADA--3.2%
10,000 Bell Canada International Inc.(1) 145,000
(communications services)
40,997 Sedna Geotech, Inc.(1) 79,181
(metals and mining)
58,594 Sedna Geotech, Inc. Special
Warrants(1) 113,167
(metals and mining)
9,000 YBM Magnex International Inc.(1) 97,658
------------------------
(steel)
435,006
------------------------
Shares Value
- --------------------------------------------------------------------------------------------------
CHILE--2.3%
4,000 Compania Cervecerias
Unidas S.A. ADR $ 107,250
(food and beverage)
4,500 Embotelladora Andina S.A. ADR 105,469
(food and beverage)
4,000 Vina Concha Y Toro S.A. ADR 100,500
------------------------
(food and beverage)
313,219
------------------------
CZECH REPUBLIC--3.9%
4,700 Czeske energeticke zavody a.s.(1) 138,644
(utilities)
900 Prazska Energetika a.s.(1) 49,626
(utilities)
1,200 SPT Telecom a.s.(1) 126,349
(communications services)
968 Stredoceska Energetika a.s.(1) 47,451
(utilities)
40,000 Unipetrol a.s.(1) 116,545
(energy - production and marketing)
905 Vychodoceska Energetika (VCE)(1) 53,734
------------------------
(utilities)
532,349
------------------------
EGYPT--2.1%
1,725 A-Ahram Beverages Co. S.A.E.(1) 98,351
(food and beverage)
1,700 Egyptian Financial & Industrial(1) 96,986
(financial services)
5,000 HELWAN FOR CEMENT 97,412
------------------------
(building and home improvements)
292,749
------------------------
FINLAND--3.0%
2,612 Elcoteq Network Corp. Cl A(1) 34,785
(electrical and electronic
components)
6,100 Nokian Renkaat Oyj 177,347
(rubber and plastics)
2,300 OY Hartwall AB 191,546
------------------------
(food and beverage)
403,678
------------------------
See Notes to Financial Statements
26 EMERGING MARKETS AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
EMERGING MARKETS
NOVEMBER 30, 1997
Shares Value
- --------------------------------------------------------------------------------------------------
GREECE--1.9%
10,000 Athens Medical Care S.A. $ 129,948
(healthcare)
5,400 Hellenic Bottling Company SA 127,265
------------------------
(food and beverage)
257,213
------------------------
HONG KONG--5.4%
200,000 Beijing Datang Power Generation
Company Ltd. (Acquired 11/4/97
through 11/20/97, Cost
$102,778)(1)(2) 92,493
(utilities)
34,000 Beijing Enterprises Holdings
Limited(1) 89,505
(diversified company)
130,000 Founder Hong Kong Limited 100,902
(computer software and services)
30,000 Guangdong Kelon Elec Holding 33,375
(consumer products)
4,400 HSBC Holdings plc 106,154
(banking)
50,000 Hong Kong and China Gas
Company Ltd. 89,906
(utilities)
110,000 Lippo China Resources Ltd. 22,198
(real estate)
5,000 Peak International Ltd.(1) 110,313
(packaging and containers)
100,000 Peregrine Investments Holdings
Limited 98,314
------------------------
(financial services)
743,160
------------------------
HUNGARY--4.7%
5,900 Danubius Hotel and Spa Rt.(1) 177,194
(leisure)
6,000 Magyar Tavkozlesi Rt. ADR(1) 121,500
(communications services)
6,000 Mezogazdasagi Gepgyarto
Reszvenytarsasag(1) 135,260
(automobiles and auto parts)
2,400 Pannonplast Rt. 99,191
(chemicals and resins)
Shares Value
- --------------------------------------------------------------------------------------------------
1,200 Richter Gedeon Rt. $ 113,318
------------------------
(pharmaceuticals)
646,463
------------------------
INDONESIA--3.2%
5,000 Gulf Indonesia Resources Ltd.(1) 112,813
(energy - production and
marketing)
29,800 PT Gudang Garam 63,317
(tobacco)
300,000 PT Indah Kiat Pulp & Paper
Corporation Tbk 69,911
(paper and forest products)
50,000 PT Indosat 113,434
(communications services)
80,000 PT Medco Energi Corporation 82,248
------------------------
(energy - production and
marketing)
441,723
------------------------
ISRAEL--4.0%
2,000 ECI Telecommunications Limited 54,625
(communications equipment)
4,000 Formula Systems (1985) Ltd.(1) 132,222
(computer software and services)
2,500 MEMCO Software Ltd.(1) 57,188
(computer software and services)
3,500 Orckit Communications Ltd.(1) 72,078
(communications equipment)
12,000 Oshap Technologies, Ltd.(1) 104,625
(computer software and services)
4,000 Technomatix Technologies
Ltd. ADR(1) 130,250
------------------------
(computer software and services)
550,988
------------------------
JORDAN--0.8%
25,000 Jordan Cement Factory 109,270
------------------------
(building and home improvements)
LITHUANIA--0.5%
1,100 Vilniaus Bankas AB GDR
(banking) 68,750
------------------------
See Notes to Financial Statements
ANNUAL REPORT EMERGING MARKETS 27
SCHEDULE OF INVESTMENTS
EMERGING MARKETS
NOVEMBER 30, 1997
Shares Value
- --------------------------------------------------------------------------------------------------
MEXICO--6.9%
32,000 ARA, S.A. de C.V.(1) $ 140,257
(construction and property
development)
30,000 Corporacion Interamericana de
Entretenimiento S.A.(1) 205,272
(leisure)
17,000 Desc S.A. de C.V. Cl B 160,406
(chemicals and resins)
4,600 Grupo Elektra, S.A. de C.V. GDR 142,600
(retail - general merchandise)
30,000 Grupo Financiero Banorte
S.A. de C.V. 41,639
(financial services)
1,500 Panamerican Beverages Inc. Cl A 51,375
(food and beverage)
4,000 Telefonos de Mexico, S.A. ADR 198,000
------------------------
(communications services)
939,549
------------------------
PERU--1.0%
50,000 Cementos Norte Pacasmayo S.A. 67,022
(construction and property
development)
3,200 Telefonica del Peru S.A. ADR 67,200
------------------------
(communications services)
134,222
------------------------
PHILIPPINES--2.3%
320,000 International Container Terminal
Services, Inc. 52,189
(transportation)
100,000 Ionics Circuit Inc. 57,940
(electrical and electronic components)
150,500 Music Corporation 60,286
(computer peripherals)
6,000 Philippine Long Distance Telephone
Company ADR 148,500
------------------------
(communications services)
318,915
------------------------
POLAND--3.4%
8,000 Bank Ochrony Srodowiska S.A. 89,254
(banking)
2,000 Materialy Izolacyjne IZOLACJA S.A.(1) 124,027
(construction and property
development)
Shares Value
- --------------------------------------------------------------------------------------------------
38,000 Polifarb Cieszyn-Wroclaw S.A. $ 156,024
(chemicals and resins)
4,300 Przedsiebiorstwo Farmaceutyczne
JELFA S.A.(1) 92,538
------------------------
(pharmaceuticals)
461,843
------------------------
PORTUGAL--5.6%
6,000 Banco Totta & Acores, SA Cl B 113,207
(banking)
4,000 Cimpor-Cimentos de Portugal,
SGPS, SA 101,310
(building and home improvements)
7,000 EDP-Electricidade de
Portugal, S.A.(1) 126,520
(utilities)
5,000 Portugal Telecom S.A. 230,300
(communications services)
1,000 Portugal Telecom S.A. ADR 45,875
(communications services)
5,400 Somague-Sociedade Gestora de
Participacoes, SA 60,683
(construction and property
development)
1,000 Telecel-Comunicacaoes
Pessoais, SA(1) 91,565
------------------------
(communications services)
769,460
------------------------
RUSSIAN FEDERATION--3.6%
300 AO Tatneft ADR 37,950
(energy - services)
3,000 Irkutskenergo ADR 31,425
(utilities)
1,300 Lukoil Holding ADR 99,125
(energy - services)
10,000 SUN Brewing Ltd. GDR(1) 119,081
(food and beverage)
2,000 Unified Energy Systems GDR(1) 45,750
(utilities)
5,000 Vimpel-Communications ADR(1) 152,500
------------------------
(communications services)
485,831
------------------------
SINGAPORE--3.0%
14,000 Elec & Eltek International
Company Ltd. 102,900
(electrical and electronic components)
See Notes to Financial Statements
28 EMERGING MARKETS AMERICAN CENTURY INVESTMENTS
SCHEDULE OF INVESTMENTS
EMERGING MARKETS
NOVEMBER 30, 1997
Shares Value
- --------------------------------------------------------------------------------------------------
90,000 Keppel Bank $ 147,907
(banking)
61,000 Natsteel Broadway Limited 89,365
(electrical and electronic components)
13,000 Rothmans Industries Limited 68,496
------------------------
(tobacco)
408,668
------------------------
SOUTH AFRICA--4.7%
14,000 Dimension Data Holdings Ltd. 60,513
(computer systems)
13,000 Ellerine Holdings Limited 90,439
(retail - general merchandise)
11,000 Fedsure Holdings Limited 127,241
(insurance)
2,500 Investec Holdings Limited 98,384
(financial services)
4,500 Liberty Life Association of Africa Ltd. 113,924
(insurance)
3,500 Nedcor Limited 79,243
(banking)
7,000 Sasol Ltd. 70,526
------------------------
(basic materials)
640,270
------------------------
TAIWAN--1.5%
12,000 Standard Foods Taiwan
Limited GDR(1) 118,800
(food and beverage)
4,500 Synnex Technology International
Corp. GDR(1) 90,788
------------------------
(computer systems)
209,588
------------------------
THAILAND--1.2%
14,000 BEC World Public Co., Ltd. 68,368
(broadcasting and media)
9,000 PTT Exploration and Production
Public Company Ltd. 98,503
------------------------
(energy - production and marketing)
166,871
------------------------
TURKEY--1.7%
1,421,000 Eczacibasi Ilac Sanayi ve Ticaret AS 66,078
(pharmaceuticals)
100,000 Ford Otomotive Sanayi A.S. 77,927
(automobiles and auto parts)
Shares/Principal Amount Value
- -------------------------------------------------------------------------------------------------
1,300,000 Trakya Cam Sanayii A.S. $ 89,680
------------------------
(automobiles and auto parts)
233,685
------------------------
VENEZUELA--1.2%
4,000 Compania Anonima Nacional
Telefonos de Venezuela ADR 158,000
------------------------
(communications services)
TOTAL COMMON STOCKS
& WARRANTS--79.2% 10,831,383
------------------------
(Cost $11,656,031)
PREFERRED STOCKS--9.8%
BRAZIL
325,000 Centrais Eletricas Brasileiras
S/A Cl B(1) 159,087
(utilities)
3,000,000 Cia Energetica de Minas Gerais 144,686
(utilities)
1,759,949 Companhia de Gas de Sao Paulo(1) 126,923
(utilities)
2,400 Companhia Vale do Rio Doce 42,989
(metals and mining)
700,000 Eletropaulo-Eletricidade de
Sao Paulo SA 126,837
(utilities)
8,500,000 Ericsson Telecomunicacoes S.A. 295,006
(communications equipment)
650,000 Petroleo Brasileiro S/A 141,215
(energy - production and marketing)
4,000,000 SA Mineracao da Trinidade-Samitri 104,570
(metals and mining)
1,900 Telecomunicacoes Brasileiras
S.A. ADR 198,313
------------------------
(communications services)
1,339,626
------------------------
(Cost $1,514,296)
TEMPORARY CASH INVESTMENTS--11.0%
$1,500,000 par value FHLMC Discount
Notes, 5.63%, 12/1/97(3) 1,500,000
------------------------
(Cost $1,500,000)
TOTAL INVESTMENT SECURITIES--100.0% $13,671,009
========================
(Cost $14,670,327)
See Notes to Financial Statements
ANNUAL REPORT EMERGING MARKETS 29
SCHEDULE OF INVESTMENTS
EMERGING MARKETS
NOTES TO SCHEDULES OF INVESTMENTS
ADR = American Depositary Receipt
FHLMC = Federal Home Loan Mortgage Corporation
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 November 30, 1997, was $92,493, which represented 0.8% of net
assets.
(3) Rate disclosed is the yield to maturity at purchase.
</TABLE>
See Notes to Financial Statements
30 EMERGING MARKETS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $1,566,526,070,
$532,422,755, and $14,670,327,
respectively) (Note 3) ............. $1,734,472,716 $ 627,283,234 $ 13,671,009
Foreign currency holdings,
at value (identified cost
of $4,206,899, $212,087,
and $36,511, respectively) ......... 4,206,898 210,102 36,521
Cash ............................... 122,945 -- --
Receivable for forward foreign
currency exchange contracts ........ 895,763 290,177 --
Receivable for investments sold .... 67,018,343 14,170,481 191,729
Receivable for capital
shares sold ........................ 8,022,185 -- --
Dividends and interest
receivable ......................... 2,962,349 495,977 2,411
-------------- -------------- --------------
1,817,701,199 642,449,971 13,901,670
-------------- -------------- --------------
LIABILITIES
Disbursements in excess
of demand deposit cash ............. 1,382,300 356,000 1,357,550
Payable for forward foreign
currency exchange contracts ........ 394,905 42,135 --
Payable for investments purchased .. 56,566,641 14,741,600 689,952
Payable for capital
shares redeemed .................... 795,947 106,948 1,767
Accrued management
fees (Note 2) ...................... 1,980,322 875,982 18,648
Distribution fees payable
(Note 2) ........................... 1,867 -- --
Service fees payable
(Note 2) ........................... 1,867 -- --
Other liabilities .................. 3,001 706 4,238
-------------- -------------- --------------
61,126,850 16,123,371 2,072,155
-------------- -------------- --------------
NET ASSETS ......................... $1,756,574,349 $ 626,326,600 $ 11,829,515
============== ============== ==============
NET ASSETS CONSIST OF:
Capital (par value and
paid-in surplus) ................... $1,359,864,403 $ 501,329,189 $ 13,575,775
Undistributed net
investment income .................. 5,233,208 1,404,025 --
Accumulated undistributed
net realized gain (loss)
from investment and
foreign currency transactions ..... 222,860,335 28,490,013 (747,570)
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities in foreign
currencies (Note 3) ............... 168,616,403 95,103,373 (998,690)
-------------- -------------- --------------
$1,756,574,349 $ 626,326,600 $ 11,829,515
============== ============== ==============
Investor Class, $0.01 Par Value
Net assets ......................... $1,728,617,366 $ 626,326,600 $ 11,829,515
Shares outstanding ................. 187,505,084 73,346,501 2,851,142
Net asset value per share .......... $ 9.22 $ 8.54 $ 4.15
Advisor Class, $0.01 Par Value
Net assets ......................... $ 9,110,781 N/A N/A
Shares outstanding ................. 990,581 N/A N/A
Net asset value per share .......... $ 9.20 N/A N/A
Institutional Class, $0.01 Par Value
Net assets ......................... $ 18,846,202 N/A N/A
Shares outstanding ................. 2,043,653 N/A N/A
Net asset value per share .......... $ 9.22 N/A N/A
</TABLE>
See Notes to Financial Statements
ANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES 31
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS(1)
INVESTMENT INCOME (LOSS)
<S> <C> <C> <C>
Income:
Dividends (net of foreign
taxes withheld
of $2,988,149, $814,896,
and $1,089, respectively) .......... $ 20,225,691 $ 6,831,213 $ 9,188
Interest ............................ 2,978,771 716,059 11,580
------------- ------------- -------------
23,204,462 7,547,272 20,768
------------- ------------- -------------
Expenses (Note 2):
Management fees ..................... 25,562,932 10,542,265 33,056
Distribution fees - Advisor Class ... 16,188 -- --
Shareholder services
fees - Advisor Class ................ 16,188 -- --
Directors' fees and expenses ........ 14,064 4,777 9
------------- ------------- -------------
25,609,372 10,547,042 33,065
Fees waived by manager .............. (2,872,954) (939,629) --
------------- ------------- -------------
Net expenses ....................... 22,736,418 9,607,413 33,065
------------- ------------- -------------
Net investment
income (loss) ....................... 468,044 (2,060,141) (12,297)
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND
FOREIGN CURRENCY (NOTE 3)
Net realized gain (loss) on:
Investments ......................... 273,860,695 53,072,728 (707,173)
Foreign currency transactions ....... (44,850,435) (20,522,211) (51,024)
------------- ------------- -------------
229,010,260 32,550,517 (758,197)
------------- ------------- -------------
Change in net unrealized appreciation
(depreciation) on:
Investments ......................... 33,401,152 54,021,874 (819,363)
Translation of assets and
liabilities in foreign currencies ... (14,880,280) (6,663,255) (179,327)
------------- ------------- -------------
18,520,872 47,358,619 (998,690)
------------- ------------- -------------
Net realized and unrealized
gain (loss) on
investments and
foreign currency .................... 247,531,132 79,909,136 (1,756,887)
------------- ------------- -------------
Net Increase (Decrease)
in Net Assets
Resulting from Operations ........... $ 247,999,176 $ 77,848,995 $ (1,769,184)
============= ============= =============
- ----------
(1) September 30, 1997 (inception) through November 30, 1997.
</TABLE>
See Notes to Financial Statements
32 STATEMENTS OF OPERATIONS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED NOVEMBER 30, 1997
AND NOVEMBER 30, 1996
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
Increase in Net Assets 1997 1996 1997 1996 1997(1)
OPERATIONS
<S> <C> <C> <C> <C> <C>
Net investment
income (loss) ..................... $ 468,044 $ (939,679) $ (2,060,141) $ (728,664) $ (12,297)
Net realized gain (loss)
on investments and
foreign currency transactions .... 229,010,260 149,229,474 32,550,517 24,627,872 (758,197)
Change in net unrealized
appreciation (depreciation) on
investments and translation
of assets and liabilites
in foreign currencies ............ 18,520,872 44,073,881 47,358,619 36,489,864 (998,690)
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from operations ........ 247,999,176 192,363,676 77,848,995 60,389,072 (1,769,184)
--------------- --------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ................... (5,636) (1,160,402) (862,734) (304,720) --
In excess of net investment income:
Investor Class .................... -- -- -- (344,800) --
From net realized gains on
investment transactions:
Investor Class ................... (140,384,782) -- (16,063,439) -- --
Advisor Class .................... (405,850) -- -- -- --
--------------- --------------- --------------- --------------- ---------------
Decrease in net
assets from distributions ......... (140,796,268) (1,160,402) (16,926,173) (649,520) --
--------------- --------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4)
Net increase (decrease)
in net assets from
capital share transactions ........ 302,960,946 (55,234,332) 188,275,387 202,809,697 13,598,699
--------------- --------------- --------------- --------------- ---------------
Net increase in net assets ........ 410,163,854 135,968,942 249,198,209 262,549,249 11,829,515
NET ASSETS
Beginning of period ............... 1,346,410,495 1,210,441,553 377,128,391 114,579,142 --
--------------- --------------- --------------- --------------- ---------------
End of period ..................... $ 1,756,574,349 $ 1,346,410,495 $ 626,326,600 $ 377,128,391 $ 11,829,515
=============== =============== =============== =============== ===============
Undistributed net
investment income ................. $ 5,233,208 $ 273,167 $ 1,404,025 $ 739,552 --
=============== =============== =============== =============== ===============
</TABLE>
(1) September 30, 1997 (inception) through November 30, 1997.
See Notes to Financial Statements
ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS 33
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--American Century World Mutual Funds, Inc. (the Corporation)
(formerly Twentieth Century World Investors, Inc.) is registered under the
Investment Company Act of 1940 as an open-end diversified management investment
company. Three series of funds are currently issued as American Century
Twentieth Century International Growth Fund (Growth), American Century Twentieth
Century International Discovery Fund (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. 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 Discovery and Emerging Markets had not commenced as of
November 30, 1997. 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 on the date
purchased or sold. 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 criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The Funds require that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the Funds to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
value of the securities transferred to ensure the value, including accrued
interest, of the securities under each repur-
34 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
chase 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
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 are primarily due to differing
treatments for foreign currency transactions and wash sales.
On December 19, 1997, Growth and Discovery declared and paid a distribution
to shareholders of record on that date. The distributions from net investment
income in Growth were $0.0282, $0.0052, and $0.0298 for the Investor, Advisor,
and Institutional Classes, respectively. The distribution from net realized gain
on investments was $1.2789 for all classes of Growth. The distribution from
Discovery consisted of $0.0206 from net investment income and $0.4652 from net
realized gain on investments.
At November 30, 1997, Emerging Markets had accumulated net realized capital
loss carryovers for federal income tax purposes of approximately $600,000
(expiring 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.
- --------------------------------------------------------------------------------
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.
Effective August 1, 1996 through July 31, 1997, ACIM voluntarily waived a
portion of its annual management fee for Growth and Discovery. A new management
agreement was approved on July 30, 1997, effective August 1, 1997, which
replaced the previously existing contracts between the Funds and ACIM. For the
year ended November 30, 1997, the management fees voluntarily absorbed by ACIM
for Growth and Discovery were $2,872,954 and $939,629, respectively.
The new annual management fee for each class of 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 new annual management fee for the Investor Class of Discovery is as
follows:
Investor Class
AVERAGE NET ASSETS
First $500 million .............................................. 1.75%
Of the next $500 million ........................................ 1.40%
Over $1 billion ................................................. 1.20%
ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 35
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
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 year ended November 30, 1997, were $32,376 for Growth.
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, the
Corporation's transfer agent, American Century Services Corporation, and the
registered broker dealer, American Century Investment Services, Inc.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period
ended November 30, 1997 were as follows:
Emerging
Growth Discovery Markets
Purchases ................. $2,761,315,621 $944,533,630 $16,620,026
Proceeds from Sales ....... $2,552,357,908 $794,439,661 $2,698,976
On November 30, 1997, 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:
Emerging
Growth Discovery Markets
Appreciation ............. $213,901,789 $113,757,115 $180,288
Depreciation ............. (63,756,522) (24,090,347) (1,335,827)
------------- ------------- -------------
Net ...................... $150,145,267 $89,666,768 $(1,155,539)
============== ============= =============
Federal Tax Cost ......... 1,584,327,449 $537,616,466 $14,826,548
============== ============= =============
36 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
4. CAPITAL SHARE TRANSACTIONS
There are 400,000,000, 100,000,000, and 50,000,000 shares of the Investor
Class authorized for issuance for Growth, Discovery, and Emerging Markets,
respectively. There are 170,000,000 and 60,000,000 shares of the Advisor Class
and Institutional Class, respectively, authorized for issuance for Growth.
Transactions in shares of the Funds were as follows:
<TABLE>
GROWTH DISCOVERY EMERGING MARKETS(1)
Shares Amount Shares Amount Shares Amount
INVESTOR CLASS
Year ended November 30, 1997:
<S> <C> <C> <C> <C> <C> <C>
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
============ =============== =========== ============= ========== ============
Year ended November 30, 1996:
Sold ........................ 49,156,430 $ 396,490,732 34,313,861 $ 235,537,402
Issued in reinvestment
of distributions ............ 149,517 1,139,329 109,339 639,633
Redeemed .................... (56,541,549) (456,529,640) (4,907,884) (33,367,338)
----------- ------------- ---------- ------------
Net increase (decrease) ..... (7,235,602) $ (58,899,579) 29,515,316 $ 202,809,697
=========== ============= ========== ============
ADVISOR CLASS
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
========== ============
October 2, 1996(2)
through November 30, 1996
Sold ........................ 441,628 $ 3,713,387
Redeemed .................... (5,653) (48,140)
---------- ------------
Net increase ................ 435,975 $ 3,665,247
========== ============
INSTITUTIONAL CLASS
November 20, 1997(3)
through November 30, 1997
Sold ........................ 2,043,653 $ 19,065,399
========== ============
- ----------
(1) September 30, 1997 (inception) through November 30, 1997.
(2) Sale of the Advisor Class in Growth commenced on October 2, 1996.
(3) Sale of the Institutional Class in Growth commenced on November 20, 1997.
</TABLE>
ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 37
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH
For a Share Outstanding Throughout the Years Ended November 30
Investor Class
1997 1996 1995 1994 1993
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ................... $ 8.73 $ 7.51 $ 7.47 $ 7.34 $ 5.79
--------------- --------------- --------------- ------------- -----------
Income From
Investment Operations
Net Investment Income (Loss) ...... -- (0.01)(1) 0.01 (0.04) (0.04)
Net Realized and Unrealized
Gain on Investment Transactions ... 1.41 1.24 0.40 0.57 1.78
--------------- --------------- --------------- ------------- -----------
Total From Investment Operations .. 1.41 1.23 0.41 0.53 1.74
--------------- --------------- --------------- ------------- -----------
Distributions
From Net Investment Income ........ -- (0.01) -- -- (0.04)
In Excess of Net
Investment Income ................. -- -- -- -- (0.15)
From Net Realized Gains
on Investment Transactions ........ (0.92) -- (0.37) (0.40) --
--------------- --------------- --------------- ------------- -----------
Total Distributions ............... (0.92) (0.01) (0.37) (0.40) (0.19)
--------------- --------------- --------------- ------------- -----------
Net Asset Value, End of Year ........ $ 9.22 $ 8.73 $ 7.51 $ 7.47 $ 7.34
=============== =============== =============== ============= ===========
Total Return(2) ................... 18.12% 16.35% 5.93% 7.28% 31.04%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 1.38%(3) 1.65%(3) 1.77% 1.84% 1.90%
Ratio of Net Investment Income
(Loss) to Average Net Assets ........ 0.04% (0.07)% 0.25% (0.53)% (0.34)%
Portfolio Turnover Rate ............. 163% 158% 169% 242% 255%
Average Commission Paid per
Share of Equity Security Traded ..... $ 0.0069 $ 0.0195 $ 0.0020 --(4) --(4)
Net Assets, End of
Year (in thousands) ................. $ 1,728,617 $ 1,342,608 $ 1,210,442 $ 1,316,642 $ 759,238
</TABLE>
- ----------
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) American Century Investment Manangement, Inc. voluntarily waived a portion
of its management fee effective August 1, 1996 through July 31, 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.
(4) 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
38 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH
For a Share Outstanding Throughout the Years Ended November 30 (except as noted)
Advisor Class
1997 1996(1)
PER-SHARE DATA
<S> <C> <C>
Net Asset Value,
Beginning of Period ..................... $ 8.72 $ 8.41
----------- -----------
Income From
Investment Operations
Net Investment Loss ................... (0.03) (0.01)(2)
Net Realized and
Unrealized Gain on
Investment Transactions ............... 1.43 0.32
----------- -----------
Total From Investment
Operations ............................ 1.40 0.31
----------- -----------
Distributions
From Net Realized Gains
on Investment Transactions ............ (0.92) --
----------- -----------
Net Asset Value,
End of Period ........................... $ 9.20 $ 8.72
=========== ===========
Total Return(3) ....................... 17.97% 3.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 1.63% 1.67%(4)
Ratio of Net Investment
Loss to Average Net Assets .............. (0.21)% (0.76)%(4)
Portfolio Turnover Rate ................. 163% 158%
Average Commission Paid per
Share of Equity Security Traded ......... $ 0.0069 $ 0.0195
Net Assets, End of
Period (in thousands) ................... $ 9,111 $ 3,803
</TABLE>
- ----------
(1) October 2, 1996 (commencement of sale) through November 30, 1996.
(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
ANNUAL REPORT FINANCIAL HIGHLIGHTS 39
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH
For a Share Outstanding Throughout the Period Ended November 30, 1997
Institutional Class
1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........................ $ 9.26
------------
Loss From Investment Operations
Net Realized and Unrealized Loss on Investment Transactions (0.04)
------------
Net Asset Value, End of Period .............................. $ 9.22
============
Total Return(2) ............................................ (0.43)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ........... 1.18%(3)
Ratio of Net Investment Loss to Average Net Assets .......... (0.53)%(3)
Portfolio Turnover Rate ..................................... 163%
Average Commission Paid per Share
of Equity Security Traded ................................... $ 0.0069
Net Assets, End of Period (in thousands) .................... $ 18,846
- ----------
(1) November 20, 1997 (commencement of sale) through November 30, 1997.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements
40 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERNATIONAL DISCOVERY
or a Share Outstanding Throughout the Years Ended November 30 (except as noted)
Investor Class
1997 1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ........................... $7.60 $5.70 $5.39 $5.00
-------- --------- --------- ----------
Income From Investment Operations
Net Investment Income (Loss) ................ (0.03) (0.02)(2) 0.03 (0.02)
Net Realized and Unrealized
Gain on Investment Transactions ............. 1.31 1.95 0.28 0.41
-------- --------- --------- ----------
Total From Investment Operations ............ 1.28 1.93 0.31 0.39
-------- --------- --------- ----------
Distributions
From Net Investment Income. ................. (0.02) (0.01) - -
In Excess of Net
Investment Income ........................... - (0.02) - -
From Net Realized Gains
In Investment Transactions .................. (0.32) - - -
-------- --------- --------- ----------
Total Distributions ......................... (0.34) (0.03) - -
-------- --------- --------- ----------
Net Asset Value, End of Period ................ $8.54 $7.60 $5.70 $5.39
======== ========= ========== ==========
Total Return(3) ............................. 17.76% 34.06% 5.75% 7.80%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ......................... 1.70%(4) 1.88%(4) 2.00% 2.00%(5)
Ratio of Net Investment Income
(Loss) to Average Net Assets .................. (0.37)% (0.31)% 0.27% (0.48)%(5)
Portfolio Turnover Rate ....................... 146% 130% 168% 56%
Average Commission Paid per
Share of Equity Security Traded ............... $0.0054 $.0054 $.0040 --(6)
Net Assets, End of Period (in thousands) ...... $626,327 $377,128 $114,579 $111,202
</TABLE>
- ----------
(1) April 1, 1994 (inception) through November 30, 1994.
(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) American Century Investment Manangement, Inc. voluntarily waived a portion
of its management fee effective August 1, 1996 through July 31, 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.
(5) Annualized.
(6) 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
ANNUAL REPORT FINANCIAL HIGHLIGHTS 41
FINANCIAL HIGHLIGHTS
EMERGING MARKETS
For a Share Outstanding Throughout the Period Ended November 30, 1997
Investor Class
1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ............................. $5.00
---------
Loss From Investment Operations
Net Investment Loss(2) ......................................... (0.01)
Net Realized and Unrealized
Loss on Investment Transactions ................................ (0.84)
---------
Total From Investment Operations ................................. (0.85)
. ---------
Net Asset Value End of Period .................................... $4.15
=========
Total Return(3) ................................................ (17.00)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............................................ 2.00%(4)
Ratio of Net Investment Loss
to Average Net Assets ............................................ (0.74)%(4)
Portfolio Turnover Rate .......................................... 36%
Average Commission Paid per
Share of Equity Security Traded .................................. $0.0012
Net Assets, End of Period
(in thousands). .................................................. $11,830
- ----------
(1) September 30, 1997 (inception) through November 30, 1997.
(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 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
American Century World Mutual Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of American Century - Twentieth Century
International Growth Fund, American Century - Twentieth Century International
Discovery Fund and American Century - Twentieth Century Emerging Markets Fund
(the "Funds"), comprising American Century World Mutual Funds, Inc. (formerly
Twentieth Century World Investors, Inc.), as of November 30, 1997, and the
related statements of operations and changes in net assets for the year then
ended (September 30, 1997, inception, through November 30, 1997 for American
Century - Twentieth Century Emerging Markets Fund), and the financial highlights
for the year then ended (September 30, 1997, inception, through November 30,
1997 for American Century - Twentieth Century Emerging Markets Fund). These
financial statements and the financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits. The
financial statements and the financial highlights of American Century Twentieth
Century International Growth Fund and American Century - Twentieth Century
International Discovery Fund for each of the periods in the four-year period
ended November 30, 1996 were audited by other auditors whose report, dated
January 3, 1997, expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1997 by correspondence with the custodian, brokers and, when replies were
not received, other alternate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of American Century
Twentieth Century International Growth Fund, American Century - Twentieth
Century International Discovery Fund and American Century - Twentieth Century
Emerging Markets Fund as of November 30, 1997, the results of their operations,
the changes in their net assets, and the financial highlights for the period
then ended in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
January 13, 1998
ANNUAL REPORT INDEPENDENT AUDITORS' REPORT 43
PROXY VOTING RESULTS
An annual meeting of shareholders was held on July 30, 1997, to vote on the
following proposals. All of the proposals received the required majority of
votes and were adopted.
A summary of voting results is listed below each proposal.
PROPOSAL 1:
To elect a Board of Directors of nine members to hold office for the ensuing
year or until their successors are elected and qualified.
GROWTH DISCOVERY
James E. Stowers, Jr.
For: 102,975,482 48,046,640
Withheld: 1,719,684 813,599
James E. Stowers III
For: 102,969,843 48,021,509
Withheld: 1,725,323 838,730
Thomas A. Brown
For: 103,022,896 48,085,302
Withheld: 1,672,270 774,937
Robert W. Doering, M.D.
For: 102,899,552 48,026,577
Withheld: 1,795,614 833,662
D.D. (Del) Hock
For: 102,991,231 48,059,508
Withheld: 1,703,935 800,731
Linsley L. Lundgaard
For: 102,882,241 47,990,246
Withheld: 1,812,925 869,993
Donald H. Pratt
For: 103,015,556 48,080,423
Withheld: 1,679,610 779,816
Lloyd T. Silver, Jr.
For: 102,968,436 48,059,057
Withheld: 1,726,730 801,182
M. Jeannine Strandjord
For: 102,974,461 48,073,878
Withheld: 1,720,705 786,361
PROPOSAL 2:
To vote on approval of a Management Agreement with American Century
Investment Management, Inc.
GROWTH DISCOVERY
INVESTOR ADVISOR INVESTOR
For: 98,930,078 586,501 47,314,963
Against: 2,109,181 0 1,067,714
Abstain: 786,726 0 165,074
Broker
Non-Vote: 2,282,680 - 312,488
PROPOSAL 3:
To vote on the selection by the Board of Directors of Deloitte & Touche LLP
as independent auditors for the Corporation.
GROWTH DISCOVERY
For: 102,420,407 47,915,390
Against: 1,604,933 821,140
Abstain: 669,826 123,709
44 PROXY VOTING RESULTS AMERICAN CENTURY INVESTMENTS
PROXY VOTING RESULTS
PROPOSAL 4:
To vote on the adoption of standardized investment limitations for the
following items:
* Eliminate the fundamental investment limitation concerning diversification of
investments.
GROWTH DISCOVERY
For: 92,241,464 46,407,153
Against: 9,080,236 1,852,106
Abstain: 1,090,786 288,492
Broker Non-Vote: 2,282,680 312,488
* Amend the fundamental investment limitation concerning the issuance of senior
securities.
GROWTH DISCOVERY
For: 94,145,350 46,374,796
Against: 7,165,336 1,886,348
Abstain: 1,101,800 286,607
Broker Non-Vote: 2,282,680 312,488
* Amend the fundamental investment limitation concerning borrowing.
GROWTH DISCOVERY
For: 91,596,563 46,232,886
Against: 9,738,901 2,028,258
Abstain: 1,077,022 286,607
Broker Non-Vote: 2,282,680 312,488
* Amend the fundamental investment limitation concerning lending.
GROWTH DISCOVERY
For: 91,724,614 46,312,563
Against: 9,605,504 1,946,696
Abstain: 1,082,368 288,492
Broker Non-Vote: 2,282,680 312,488
* Amend the fundamental investment limitation concerning concentration of
investments in a particular industry.
GROWTH DISCOVERY
For: 92,101,709 46,371,034
Against: 9,255,222 1,890,110
Abstain: 1,055,555 286,607
Broker Non-Vote: 2,282,680 312,488
* Eliminate the fundamental investment limitation regarding investments in
illiquid securities.
GROWTH DISCOVERY
For: 93,907,349 46,345,470
Against: 7,413,483 1,915,674
Abstain: 1,091,654 286,607
Broker Non-Vote: 2,282,680 312,488
* Eliminate the fundamental limitation concerning investment in other investment
companies.
GROWTH DISCOVERY
For: 94,305,273 46,410,240
Against: 7,035,543 1,844,788
Abstain: 1,071,670 292,723
Broker Non-Vote: 2,282,680 312,488
* Amend the fundamental investment limitation concerning investments in real
estate.
GROWTH DISCOVERY
For: 94,417,726 46,410,824
Against: 6,953,395 1,850,320
Abstain: 1,041,365 286,607
Broker Non-Vote: 2,282,680 312,488
ANNUAL REPORT PROXY VOTING RESULTS 45
PROXY VOTING RESULTS
* Amend the fundamental investment limitation concerning underwriting.
GROWTH DISCOVERY
For: 94,233,971 46,442,819
Against: 7,040,110 1,818,425
Abstain: 1,138,405 286,507
Broker Non-Vote: 2,282,680 312,488
* Amend the fundamental investment limitation concerning commodities.
GROWTH DISCOVERY
For: 93,649,852 46,272,141
Against: 7,653,642 1,989,003
Abstain: 1,108,992 286,607
Broker Non-Vote: 2,282,680 312,488
* Eliminate the fundamental limitation concerning investments in issuers with
less than three years of continuous operations.
GROWTH DISCOVERY
For: 94,207,994 46,445,140
Against: 7,103,772 1,816,004
Abstain: 1,100,720 286,607
Broker Non-Vote: 2,282,680 312,488
* Eliminate the fundamental limitation concerning short sales.
GROWTH DISCOVERY
For: 93,766,081 46,249,850
Against: 7,551,349 2,011,294
Abstain: 1,095,056 286,607
Broker Non-Vote: 2,282,680 312,488
* Eliminate the fundamental investment limitation concerning margin purchases of
securities.
GROWTH DISCOVERY
For: 93,651,220 46,255,019
Against: 7,644,015 2,006,125
Abstain: 1,117,251 286,607
Broker Non-Vote: 2,282,680 312,488
46 PROXY VOTING RESULTS AMERICAN CENTURY INVESTMENTS
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 International Discovery
and Emerging Markets had not commenced as of November 30, 1997.
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, 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.
ANNUAL REPORT SHARE CLASS AND RETIREMENT ACCOUNT INFORMATION 47
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. The philosophy
behind these growth funds focuses on three important principles. First, the
funds seek to own successful companies, which we define as those with growing
earnings and revenues. Second, we attempt to keep the funds fully invested,
regardless of short-term market activity. Experience has shown that market gains
can occur in unpredictable spurts and that missing those opportunities can
significantly limit the potential for gain. Third, the funds are managed by
teams, rather than by one "star." We believe this allows us to make better, more
consistent management decisions.
In addition to these principles, each fund has its own investment policies:
INTERNATIONAL GROWTH invests primarily in the equity securities of foreign
companies that exhibit accelerating growth. These companies will be located
primarily in developed countries. The fund will typically have significant share
price fluctuations.
INTERNATIONAL DISCOVERY invests primarily in the equity securities of
smaller foreign companies that exhibit accelerating growth. Up to one-half of
these companies can be based in emerging market countries, with the rest of the
portfolio invested in smaller companies 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 are considered by the investment manager to have
prospects for appreciation. 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.
International investing involves special risks, including political
instability and economic risk. Investing in emerging markets may accentuate
these risks.
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. 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. This tended to be the case in 1997, when the dollar increased in
value against most major foreign currencies. (The weakened foreign currencies
bought 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), which is a widely followed group of
stocks from 20 countries. Within this Index are two narrower indices, MSCI
EUROPE which measures stock performance in 14 European countries, and MSCI JAPAN
which is restricted to Japanese stocks.
The MORGAN STANLEY EMERGING MARKETS FREE INDEX represents the performance of
stocks in 26 emerging market countries in Europe, Latin America and the Pacific
Basin.
48 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS
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 42.
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.
ANNUAL REPORT GLOSSARY 49
[american century logo]
American
Century(reg.sm)
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 WORLD MUTUAL FUNDS, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN 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.
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