[front cover] NOVEMBER 30, 1998
ANNUAL REPORT
- ----------------
AMERICAN CENTURY
[graphic of spinning globe, currency, and Kevin Lewis
and Cindy Brown, of American Century, pointing at a computer monitor]
TWENTIETH CENTURY GROUP
- ------------------------
INTERNATIONAL GROWTH
INTERNATIONAL DISCOVERY
EMERGING MARKETS
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY BROKERAGE
- --------------------------------------------------------------------------------
We're pleased to introduce American Century's new brokerage service, which
offers a wide range of investment options and features:
* FundChoice Service--Invest in over 8,000 no-load and load mutual funds from
hundreds of different fund companies, many with no transaction fees
* Buy individual stocks and bonds
* 24-hour Internet and automated phone trades are just $24.95 for up to 1,000
shares of stock, and 2 cents per share thereafter
* Strong research capability
* Build and track model portfolios
* Get news, quotes and charts
* Check free Standard & Poor's stock reports
* Access Wall Street on Demand(tm), a research service with more than
500,000 reports on industry trends, corporate earnings, and mutual fund
analysis
* Track your brokerage account on one easy-to-read statement
* Unlimited check writing and a Gold MasterCard(reg.tm) ATM/debit card with an
American Century Brokerage Access AccountSM (minimum $10,000)
To talk with a Brokerage Associate, call 1-888-345-2071.
WHAT'S NEW . . .
AMERICAN CENTURY CATALOG OF TOOLS & SERVICES lists all the free
educational materials available to investors.
We now have FOUR-PAGE PROFILES of many of our funds. The profiles
follow a standard SEC format and are intended to allow investors to
compare funds easily. You can request a profile or the full
prospectus. Full prospectuses contain more detailed fund information
and you will continue to receive one after investing.
In 1999, we will provide SIMPLIFIED PROSPECTUSES that highlight
important information about our funds, including fees and expenses.
More detailed data will be in the Statement of Additional
Information.
To order any of these materials, please call 1-800-345-2021.
On the Cover:
Kevin Lewis and Cindy Brown are part of the investment group at American
Century.
[left margin]
TWENTIETH CENTURY GROUP
INTERNATIONAL GROWTH
(TWIEX)
- -------------------------------------------------------------------------------
TWENTIETH CENTURY GROUP
INTERNATIONAL DISCOVERY
(TWEGX)
- -------------------------------------------------------------------------------
TWENTIETH CENTURY GROUP
EMERGING MARKETS
(TWMIX)
- -------------------------------------------------------------------------------
Our Message to You
- --------------------------------------------------------------------------------
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The twelve months ended November 30, 1998, was an eventful period in global
equity markets. Weakening financial conditions brought on by problems in Asia,
Russia, and Latin America threatened to apply the brakes to global economic
growth. This led to significant stock market volatility and a dramatic decline
in interest rates in industrialized countries. Once again, the more-established
markets of Europe outperformed the less-established emerging markets.
American Century's international funds performed well in this difficult
environment, either beating or nearly matching their benchmark indices. Our
disciplined focus on earnings growth continued to direct our international
investment team toward companies with strong competitive prospects in stable
markets.
Even in the uncertain markets of emerging economies, our team was able to
find individual companies that we believe have sustainable earnings growth.
Their stock was often available at very attractive prices. As emerging markets
recover, we believe these companies should be positioned for a vigorous rebound.
The psychology of many international investors is still very skittish,
however. Given the gains in both foreign and domestic equity markets over the
last several years, it is understandable that investors--especially those who
are new to foreign markets--might find the broad price swings we've seen in 1998
stressful. In our experience, these fluctuations are an inevitable, even
necessary, part of the investment process. They often set the stage for further
advances. But whatever a market's direction, it does not pay to get caught up in
its excesses, whether overly optimistic or overly pessimistic. If you have an
investment plan, stay with it. If you don't have a plan, this might be a good
time to develop one.
Another situation we've been watching closely is preparation of the world's
computer systems for the year 2000. At American Century, we're devoting
substantial resources to this endeavor. Throughout 1999, our technology team
will be extensively testing our systems, including those involved with fund
performance and dividend payments.
As we close 1998, the year that marks our 40th anniversary, we wish to
thank you for your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ............ 2
Market Perspective ........... 3
INTERNATIONAL GROWTH
Performance Information ...... 5
Management Q&A ............... 6
Schedule of Investments ...... 9
Financial Highlights ......... 39
INTERNATIONAL DISCOVERY
Performance Information ...... 14
Management Q&A ............... 15
Schedule of Investments ...... 18
Financial Highlights ......... 42
EMERGING MARKETS
Performance Information ...... 23
Management Q&A ............... 24
Schedule of Investments ...... 27
Financial Highlights ......... 45
FINANCIAL STATEMENTS
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 ....................... 46
OTHER INFORMATION
Share Class and Retirement
Account Information .......... 47
Background Information
Investment Philosophy
and Policies ................. 48
How Currency Returns Affect
Fund Performance ............. 48
Comparative Indices ....... 48
Portfolio Managers ........ 48
Glossary ..................... 49
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
* During our international funds' fiscal year, which ended November 30, 1998,
financial markets in emerging economies continued to underperform the
markets of large, mature economies.
* As a result of huge loans to troubled emerging economies, Europe and the
United States still appeared vulnerable to the "Asian contagion."
* There is currently too much excess manufacturing capacity globally. Even
when overcapacity dissipates as the world's depressed economies begin to
grow again, it is unlikely global financial markets will move in lockstep.
The world's geopolitics are simply too diverse.
* Europe is now the headquarters of some unique industry
franchises--high-quality companies with products and market share
unavailable here in the United States.
INTERNATIONAL GROWTH
* International Growth's Investor Class shares posted a healthy return for
the year ended November 30, 1998. The fund outperformed its benchmark, the
Morgan Stanley Capital International EAFE Index, as well as most foreign
stock funds.
* Fund performance benefited from holdings in pharmaceutical companies, banks
and financial services firms, machinery and equipment companies, and
software and insurance firms. Many of these top-performing companies were
located in Europe.
* Other top-performers included communications-related companies Nokia,
Vodafone Group, Telefonica SA and Telecom Italia SPA. All are benefiting
from the rapid expansion of and demand for telecommunications services
taking place across Europe.
* International Growth's worst-performing sectors for the year were
electronic components, autos and auto parts businesses, airlines, and
energy services and exploration companies.
INTERNATIONAL DISCOVERY
* International Discovery trailed its benchmark, but outperformed most of its
peers.
* Fund performance was constrained by holdings in Brazil, Thailand, Israel,
Sweden and Japan.
* Most of the fund's worst-performing companies suffered as a result of global
economic turmoil rather than weaknesses in their fundamental operations or
business.
* Financial services stocks were among the fund's largest holdings and also
its top contributors to performance.
* The third-quarter correction provided an opportunity to add to our fastest
and most consistently growing holdings and to diversify slightly more into
Asian companies.
EMERGING MARKETS
* Emerging Markets had a loss for its fiscal year, but performed much better
than its benchmark index.
* The fund's strong relative performance was largely the result of our
bottom-up investment approach and disciplined focus on earnings growth.
* Performance was helped by holdings in banks, computer software companies and
electronic components manufacturers.
* We increased positions in several countries in Southeast Asia, where the
investing environment has improved. Holdings in Israel and Mexico were
reduced.
[left margin]
INTERNATIONAL GROWTH (TWIEX)(1)
TOTAL RETURNS: AS OF 11/30/98
6 Months -9.22%(2)
1 Year 16.74%
NET ASSETS: $2.4 billion
INCEPTION DATE: 5/9/91
INTERNATIONAL DISCOVERY (TWEGX)(1)
TOTAL RETURNS: AS OF 11/30/98
6 Months -14.29%(2)
1 Year 14.79%
NET ASSETS: $781.6 million
INCEPTION DATE: 4/1/94
EMERGING MARKETS (TWMIX)
TOTAL RETURNS: AS OF 11/30/98
6 Months -17.88%(2)
1 Year -15.90%
NET ASSETS: $21.1 million
INCEPTION DATE: 9/30/97
(1) Investor Class.
(2) Not annualized.
Investment terms are defined in the Glossary on page 49.
2 1-800-345-2021
Market Perspective from Robert C. Puff, Jr.
- --------------------------------------------------------------------------------
[photo of Robert C. Puff, Jr.]
Robert C. Puff, Jr., Chief Investment Officer of American Century Investment
Management
HOW THE MARKETS PERFORMED
During our international funds' fiscal year, which ended November 30, 1998,
financial markets in emerging economies continued to underperform. However, the
equity markets of large, mature foreign economies tended to track our domestic
markets. The S&P 500 Index, a benchmark for large stocks here in the United
States, peaked July 17 and then dropped nearly 20% over the next six weeks. The
Morgan Stanley Capital International EAFE Index (EAFE), which represents world
markets outside the U.S. and Latin America, peaked in July as well, and was also
down almost 20% at the end of September.
EAFE bounced back in October and November and finished the November year
with a gain of 16.45%. In contrast, the Morgan Stanley Emerging Markets Free
Index lost 22.42% for the year. This performance disparity was also evident in
the second half of the year (June-November). Despite the extreme volatility that
characterized the last six months, EAFE managed a slight gain of 0.34%, but the
Emerging Markets Free Index lost 16.42%. This index suffered from weakness in
Russia and the developing economies of Eastern Europe and Latin America. EAFE
was buoyed by European markets which rallied along with the U.S. The chart on
this page provides results from the various regions.
PUSHING ON A STRING
One irony of global commerce is that competitors are also customers. In
fact, unprecedented efforts by the International Monetary Fund (IMF) and
governments in Europe, the Americas, and Asia to bail out their flagging
competitors were, as well, attempts to keep the global consumer base intact. By
lending generously to their global neighbors, healthy economies hoped to
inoculate themselves against the Asian, and later the Russian and Brazilian,
"flu."
Despite huge loans to these troubled economies, Europe and the United
States still appeared vulnerable to the "Asian contagion." The United Kingdom
has, in fact, slipped into a recession, even though it reduced interest rates
and is benefiting from the orchestrated decline of rates throughout Europe,
where the European Monetary Union kicked off January 1. In the U.S., the Federal
Reserve Board lowered rates three times beginning September 30 -- its first such
moves since 1995 -- and many foreign markets rallied as a result. But it is
still uncertain how much effect these rate reductions will have.
There is, quite frankly, too much of almost everything. For example, the
global production capacity for automobiles is roughly 28-29 million per year, or
about 50% higher than demand. Much the same is true for key commodities,
including basic foodstuffs, steel, petrochemicals, and energy. Too much
manufacturing capacity, combined with global competition, has eliminated pricing
flexibility from the marketplace and contributed to low inflation worldwide.
Lower interest rates may help the situation, but it is questionable
[right margin]
"One irony of global commerce is that competitors are also customers."
MARKET RETURNS
FOR THE YEAR ENDED NOVEMBER 30, 1998
MSCI EUROPE 27.65%
MSCI FAR EAST -5.76%
S&P 500 23.66%
Source: Lipper, Inc.
MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE YEAR ENDED NOVEMBER 30, 1998
[mountain chart -- data below]
S&P 500 Index MSCI Europe Index MSCI Far East Index
11/30/97 $1.00 $1.00 $1.00
12/31/97 $1.02 $1.04 $0.95
1/31/98 $1.03 $1.08 $1.00
2/28/98 $1.10 $1.16 $1.04
3/31/98 $1.16 $1.25 $0.98
4/30/98 $1.17 $1.27 $0.96
5/31/98 $1.15 $1.30 $0.89
6/30/98 $1.20 $1.31 $0.89
7/31/98 $1.18 $1.34 $0.87
8/31/98 $1.01 $1.17 $0.77
9/30/98 $1.08 $1.12 $0.76
10/31/98 $1.17 $1.21 $0.90
11/30/98 $1.24 $1.28 $0.94
www.americancentury.com 3
Market Perspective from Robert C. Puff, Jr.
- --------------------------------------------------------------------------------
(Continued)
as to whether they will have much impact on demand in the near future.
Lowering rates at this stage is, in effect, like pushing on a string. In
mature economies, many consumers already have all they need; lower rates won't
necessarily induce them to buy more.
At some point, of course, overcapacity will dissipate as the world's
depressed economies begin to grow again. There are already signs, for example,
of a more responsible approach to the Japanese banking and economic crises, as
well as indications of renewed growth in Korea and Thailand. But in the current
environment, deflation remains a threat, and countries including the United
States may be tempted to fall into the trap of protectionism. U.S. manufacturers
have already petitioned for tariffs to counteract the dumping of steel and wheat
by foreign producers. Globally, trade with Asia is largely one-way; ships arrive
full from the Far East, but travel empty on the return trip. For now, most Asian
consumers aren't buying.
CONTRAST AND CONVERGENCE
In many respects, global citizens have more and more in common with each
other and are more economically interdependent. Increasingly, we have the same
media exposure. More of the world's economic activities are orchestrated, as
evidenced in the current crises, where larger, more-established governments have
stepped in to provide loans to ailing financial systems. Before it defaulted on
its debt, even Russia borrowed money from the IMF and Japan.
There is, as well, the bipartisan effort on the part of Europe and the
United States to help solve Japan's economic problems so that Asia, in turn, can
recover. Many Japanese banks are buried under non-performing loans, many of
which were taken out over a decade ago to purchase real estate and stocks at
inflated prices. The Japanese government has been subsidizing these loan
portfolios for years, which has served to prolong the country's recession. The
Japanese tend to be gradualists, however, so it will probably still take time to
get the economy moving again. Japan's recent tax cuts and its efforts to
stabilize the banking system are steps in the right direction.
A NEW DISCIPLINE IN EUROPE
The European Monetary Union will bring together an unusual collection of
countries. Only a few years ago, Italian inflation was in double digits, while
German tax rates were so high that companies were loath to show a profit. Now
merger and acquisition activity in Europe is rolling right along as companies
seek to broaden their base, take advantage of economies of scale, and compete
globally. The environment is similar to that of the United States in the late '
80s.
Europe is also the headquarters of some unique industry
franchises--high-quality companies with products and market share unavailable
here in the United States -- for example, companies like Daimler-Chrysler and
SAP, the premiere provider of business management software. Not so long ago, it
was difficult to buy stock in European companies of this quality. Now it is
relatively easy.
From that perspective, economic convergence is a highly desirable trend.
[left margin]
"At some point, of course, overcapacity will dissipate as the world's depressed
economies begin to grow again."
"In many respects, global citizens have more and more in common with each other
and are more economically interdependent."
4 1-800-345-2021
International Growth--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF NOVEMBER 30, 1998
INVESTOR CLASS (INCEPTION 5/9/91) ADVISOR CLASS (INCEPTION 10/2/96) INSTITUTIONAL CLASS (INCEPTION 11/20/97)
INTERNATIONAL GROWTH MSCI EAFE(reg.tm) INTERNATIONAL GROWTH MSCI EAFE(reg.tm) INTERNATIONAL GROWTH MSCI AFE(reg.tm)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1)...-9.22% 0.34% -9.23% 0.34% -9.02% 0.34%
1 YEAR .......16.74% 16.45% 16.58% 16.45% 17.14% 16.45%
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
- -----------------------------------------------------------------------------------------------------------------------------
3 YEARS ......17.07% 9.03% -- -- -- --
5 YEARS ......12.76% 9.87% -- -- -- --
LIFE OF FUND..14.13% 7.98%(2) 17.84% 9.41%(3) 16.15% 16.45%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Return from 5/31/91, the nearest date for which data are available.
(3) Return from 10/31/96, the nearest date for which data are available.
(4) Return from 11/30/97, the nearest date for which data are available.
See pages 47, 48 and 49 for information about share classes, MSCI EAFE(reg.tm)
and returns.
GROWTH OF $10,000 OVER LIFE OF FUND
[mountain chart -- data below]
Value on 11/30/98
Int'l Growth $26,638
MSCI EAFE $17,784
Int'l Growth MSCI EAFE
Date Value Value
5/31/91 $10,000 $10,000
6/30/91 $9,596 $9,265
9/30/91 $10,230 $10,059
12/31/91 $10,802 $10,228
3/31/92 $11,418 $9,014
6/30/92 $12,111 $9,204
9/30/92 $11,611 $9,343
12/31/92 $11,325 $8,982
3/31/93 $12,300 $10,059
6/30/93 $12,818 $11,071
9/30/93 $13,654 $11,805
12/31/93 $16,155 $11,907
3/31/94 $15,567 $12,324
6/30/94 $15,777 $12,954
9/30/94 $16,344 $12,966
12/31/94 $15,386 $12,834
3/31/95 $14,878 $13,073
6/30/95 $15,740 $13,168
9/30/95 $16,580 $13,717
12/31/95 $17,215 $14,273
3/31/96 $17,613 $14,686
6/30/96 $18,453 $14,918
9/30/96 $18,497 $14,898
12/31/96 $19,698 $15,135
3/31/97 $20,787 $14,897
6/30/97 $23,608 $16,831
9/30/97 $24,498 $16,713
12/31/97 $23,582 $15,405
3/31/98 $27,815 $17,671
6/30/98 $29,686 $17,858
9/30/98 $24,361 $15,320
11/30/98 $26,638 $17,784
*Date nearest inception for which data are available.
These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). The chart at left shows the growth of a $10,000 investment in the
fund since the end of the month after inception, while the chart below shows the
fund's year-by-year performance. The MSCI EAFE(reg.tm) Index is provided for
comparison in each chart. Past performance does not guarantee future results.
Investment return and principal value will fluctuate, and redemption value may
be more or less than original cost. International Growth's total returns include
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the MSCI EAFE(reg.tm) do not.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING NOVEMBER 30)
[bar chart -- data below]
Int'l Growth MSCI EAFE Index
Date Return. Return
11/30/91 2.50 -2.74
11/30/92 8.77 -8.11
11/30/93 31.04 24.27
11/30/94 7.28 14.84
11/30/95 5.93 7.57
11/30/96 16.35 11.76
11/30/97 18.12 -0.40
11/30/98 16.74 16.45
*Return from 5/9/91, fund's inception date, to 11/30/91.
www.americancentury.com 5
International Growth--Q&A
- --------------------------------------------------------------------------------
[photo of Mark Kopinski and Henrik Strabo]
Mark Kopinski and Henrik Strabo, portfolio managers on the International Growth
Fund
An interview with Henrik Strabo and Mark Kopinski, portfolio managers on
the International Growth team
HOW DID INTERNATIONAL GROWTH PERFORM DURING ITS FISCAL YEAR?
International Growth posted a healthy 16.74%* return for the 12 months
ended November 30, 1998, a year that included one of the most volatile periods
on record for global equity markets. International Growth outperformed its
benchmark, the Morgan Stanley Capital International EAFE Index (EAFE), which
gained 16.45%, and also outperformed most foreign stock funds. According to
Lipper, Inc. (formerly Lipper Analytical Services), a mutual fund research firm,
the fund finished the year in the top 15% of 511 international funds.(+)
Although we are pleased that International Growth produced such strong
relative performance, we wish to stress that we use the EAFE Index only to
relate investment performance to a publicly available index. Because we use a
bottom-up style, evaluating individual companies, we tend to own a number of
stocks that are not represented in EAFE. As a result, the fund's performance may
or may not resemble that of the index.
ALONG WITH INCREASED MARKET VOLATILITY, WHAT OTHER FACTORS INFLUENCED
PERFORMANCE THIS YEAR?
The year was one of the most turbulent on record for foreign stock
investments. The fertile investment environment and healthy gains in growth
stocks during the first half of the year turned negative in the summer of 1998
and gathered steam in the fall. This was followed by a gradual recovery during
the final quarter of the year.
The collapse of the Russian economy and the worst Japanese recession since
World War II roiled world markets. The situation was compounded by concerns
about Brazil, where economic uncertainty threatened to spread throughout Latin
America. Market psychology was further dampened by the near collapse of a major
global hedge fund, increasing the fear of instability throughout the global
financial system.
The third calendar quarter was the worst in eight years for the EAFE Index.
Price swings in market averages were often irrational and driven more by the
sudden illiquidity and uncertainty of the markets than by fundamentals.
During the last two years, our discipline led us to many rapidly growing
European companies. The portfolio was structured to take advantage of this and
we were able to invest in numerous companies with growing earnings and revenues.
For most of the year, European markets performed exceptionally well.
As market conditions deteriorated worldwide, Europe experienced a painful
selloff; liquidity all but dried up for a time. We were not well positioned for
the movement against European growth stocks and our performance suffered as a
result.
*All fund returns referenced in this interview are for Investor Class shares.
(+)According to Lipper, for the periods ending November 30, 1998, International
Growth was ranked 13 out of 304 international funds for three years and was
ranked 16 out of 147 international funds for five years. Past performance is no
guarantee of future results.
[left margin]
"During the last two years, our discipline led us to many rapidly growing
European companies. The portfolio was structured to take advantage of this, and
we were able to invest in numerous companies with growing earnings and revenues.
For most of the year, European markets performed exceptionally well."
PORTFOLIO AT A GLANCE
11/30/98 11/30/97
NO. OF COMPANIES 155 122
MEDIAN MARKET $6.31 $5.40
CAPITALIZATION BILLION BILLION
PORTFOLIO TURNOVER 190% 163%
EXPENSE RATIO 1.33% 1.38%
Investment terms are defined in the Glossary on page 49.
6 1-800-345-2021
International Growth--Q&A
- --------------------------------------------------------------------------------
(Continued)
Global equity markets have since stabilized and have started to make up
some of the ground lost during the early fall downturn. We believe a sense of
balance has returned to many of these markets. We are building on these events
to make refinements in the portfolio, which we will explain later.
WHICH SECTORS OR STOCKS CONTRIBUTED TO INTERNATIONAL GROWTH'S PERFORMANCE THIS
YEAR?
We found earnings growth in several industry groups, including financial
services, pharmaceuticals, banking, machinery and equipment, software, and
insurance companies. Many of the individual companies in these groups were
located in Europe.
Characteristic of a new style of corporate management emerging in Europe is
Vivendi. This was formerly a state-run French water utility, but new management
transformed the company into a broad-based communications, publishing,
multimedia and construction conglomerate. The company recently acquired Cendant
Software, one of the world's leading producers of computer games and educational
software.
Vivendi has much in common with Mannesmann AG, one of our largest holdings
and best-performing stocks. Mannesmann, a German telecommuni-cation and
engineering firm, is a leading provider of cellular telephone service in
Germany.
The competitive environment in the European telecommunications industry is
changing rapidly. Mannesmann is one of the principal purveyors of alternative
access and is pushing ahead in its efforts to become a leading provider of
electronic commerce services and high-speed data communications. The company's
telecommunications unit posted 38% sales growth in the first nine months of
1998, and its customer base is growing rapidly. Mannesmann is one of the first
companies to compete with Deutsche Telekom AG, the former German telephone
monopoly, in the field of local networks.
We also had success with several other communications-related stocks,
including Nokia, Vodafone Group, Telefonica SA and Telecom Italia SPA.
Nokia, a Finnish company, continues to confound the skeptics. Reported
earnings growth is always well above target rates, despite the market's general
disbelief in rapid and greater cellular phone penetration. Nokia's earnings have
been buoyed by high demand for its innovative wireless communications equipment,
and the company has been especially successful at winning market share in the
handset arena. The other companies in this group are cellular network providers,
which are benefiting from rising rates of penetration in a rapidly expanding
market.
Financial services and banking stocks combine to represent the
second-largest industry group in the portfolio. Baer Holding AG, Axa-UAP, and
ING Group were some of our better-performing bank and financial stocks. Earnings
growth is increasingly evident in companies engaged in asset manage-ment and
banking. Pension reform and Europe's changing attitude toward the investment of
personal savings, with an increasing appetite for equities, has lifted the
performance of several asset-manage-ment firms or the asset-management divisions
within much larger financial services organizations. We believe growth
possibilities in Europe remain healthy for these companies given the upsurge in
deregulation and the start of the European Monetary Union in 1999.
During the market downturn, pharma-ceutical companies tended to perform
better than many other groups. Novartis remains a workhorse within the broader
portfolio and continues to be one of our best-performing stocks. The Swiss
[right margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
MANNESMANN AG 2.3% 2.6%
NOVARTIS AG 2.0% 1.4%
VIVENDI 1.7% 1.3%
AXA-UAP 1.6% 2.0%
PINAULT-PRINTEMPS-
REDOUTE SA 1.6% 1.3%
JULIUS BAER
HOLDING AG 1.6% 2.1%
UBS AG 1.4% 1.5%
TELEFONICA DE ESPANA 1.4% 1.6%
NOKIA CORP. CL A ADR 1.4% 1.1%
GROUPE DANONE 1.4% 1.3%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
TELEPHONE
COMMUNICATIONS 13.3% 6.8%
FINANCIAL SERVICES 11.7% 12.1%
BANKING 7.0% 9.8%
PHARMACEUTICALS 6.5% 4.7%
COMPUTER SOFTWARE
& SERVICES 5.2% 10.2%
www.americancentury.com 7
International Growth--Q&A
- --------------------------------------------------------------------------------
(Continued)
pharmaceutical giant formed by the merger of Sandoz and Ciba has pro-duced
steady earnings growth and has an attractive product pipeline. It continues to
realize cost savings and from the merger.
WHICH SECTORS OR STOCKS DAMPENED PERFORMANCE?
International Growth's worst-perform-ing sectors for the year were
electronic components, autos and auto parts, airlines, energy services,
chemicals, and exploration companies.
The energy sector underperformed this year as commodity prices skidded.
Several energy-related companies were reduced or eliminated when it became
apparent that oil prices were headed lower with slim prospects for a near-term
recovery. Companies such as Transocean Offshore, British-Borneo Petroleum,
Woodside Petroleum and Petroleum Geo Services were among portfolio holdings
affected by the downturn in energy prices.
In any portfolio, there will be winners and losers. By following our
disciplined style of focusing on companies whose earnings are growing, we were
able to minimize the damage from underperforming stocks. Performance was
hindered primarily by companies that experienced earnings disappointments,
including Shiseido, Alcatel, Electrolux AB and Next PLC.
DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO DURING THE LAST SIX
MONTHS?
International Growth was hard hit during the downturn because of its
concentrations in specific sectors and regions. We became somewhat defensive
when the markets grew increasingly volatile in the summer by broadening the
portfolio accordingly. When the environment began to stabilize, we added to
positions in some of our longer-term winners, such as Nokia, Novartis, Vodaphone
and Vivendi, all of which moved higher.
Heading into the third-quarter meltdown, we felt the portfolio may have
been overweighted in certain business service and financial stocks. We also had
been too heavily focused in Europe. Consequently, we broadened the portfolio to
include stocks in sectors or countries not well represented before. For example,
we added Imperial Tobacco, a U.K.-based tobacco company, and we added to our
position in Takeda Chemical, a pharmaceutical firm in Japan. We also began
selectively adding companies with earnings in turnaround situations in Asia,
where we had only a small allocation for several quarters because of the
region's severe economic problems. Over the last six months, we felt conditions
were beginning to warrant a second look at some Asian stocks. As the
semiconductor technology cycle again started to turn positive, for example, we
added shares of South Korea-based Samsung Electronics and Japan-based
semiconductor-manufacturing stocks.
We feel confident these steps to further diversify the portfolio will help
continue International Growth's good performance record over the long term.
[left margin]
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF NOVEMBER 30, 1998
[pie chart - data below]
Temporary Cash Investments 0.9%
Preferred Stocks 1.0%
Common Stocks & Rights 98.1%
AS OF MAY 31, 1998
[pie chart - data below]
Temporary Cash Investments 3.8%
Preferred Stocks 1.9%
Common Stocks & Rights 94.3%
INTERNATIONAL GROWTH'S INVESTMENTS BY COUNTRY
[bar chart - data below]
11/30/98 5/31/98
U.K. 18.0% 13.7%
France 13.2% 14.3%
Japan 10.3% 4.6%
Germany 9.5% 12.4%
Netherlands 8.7% 9.8%
Switzerland 8.0% 8.9%
Italy 5.3% 4.6%
Sweden 4.3% 4.9%
Other 22.7% 26.8%
8 1-800-345-2021
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS & RIGHTS--98.1%
AUSTRALIA--2.6%
2,132,765 AMP Limited
(Acquired 6/15/98-6/18/98,
Cost $24,811,343)(1)(2) $27,592,416
(financial services)
2,466,262 Australia & New Zealand Banking
Group Ltd. 16,263,764
(banking)
271,000 Brambles Industries Limited 6,632,539
(diversified companies)
4,825,363 Cable & Wireless Optus Limited(2) 9,022,469
(telephone communications)
1,054,000 Woodside Petroleum Limited 5,356,792
----------------
(energy--production & marketing)
64,867,980
----------------
BELGIUM--0.6%
2,820 UCB SA 15,757,163
----------------
(pharmaceuticals)
BRAZIL--0.3%
56,870,000 Companhia de Saneamento
Basico do Estado de Sao Paulo 6,247,890
----------------
(utilities)
CANADA--3.5%
1,390,000 Bombardier Inc. Cl B 18,094,943
(aerospace & defense)
320,000 Geac Computer Corp. Ltd.(2) 8,394,127
(computer software & services)
610,625 Newcourt Credit Group Inc.
(Acquired 9/8/97-10/21/98,
Cost $17,671,209)(1) 21,655,771
(financial services)
396,000 Northern Telecom Ltd. 18,488,250
(communications equipment)
785,000 Teleglobe Inc. 21,385,808
----------------
(telephone communications)
88,018,899
----------------
CHILE--0.4%
426,000 Companhia de Telecomunicaciones
de Chile S.A. ADR 9,877,875
----------------
(telephone communications)
DENMARK--1.3%
299,900 Tele Danmark A/S 33,526,590
----------------
(telephone communications)
FINLAND--2.0%
346,200 Nokia Corp. Cl A ADR 33,927,600
(communications equipment)
273,000 Sampo Insurance Company Ltd. 9,379,986
(insurance)
369,682 Sonera Group Oyj(2) 5,310,389
----------------
(telephone communications)
48,617,975
----------------
Shares Value
- --------------------------------------------------------------------------------
FRANCE--13.2%
34,000 Accor SA $7,480,024
(leisure)
61,174 Altran Technologies SA 14,222,756
(business services & supplies)
56,800 Atos SA(2) 12,196,135
(computer software & services)
312,623 Axa-UAP 40,441,041
(insurance)
198,851 Cap Gemini SA 29,118,243
(computer software & services)
17,000 Carrefour SA 12,042,839
(retail--general merchandise)
203,000 Elf Aquitaine SA 25,331,233
(energy--production & marketing)
183,300 Equant NV-New York Shares(2) 10,344,994
(computer software & services)
116,000 Groupe Danone 33,890,668
(food & beverage)
107,000 Lafarge SA 10,093,984
(construction & property
development)
236,000 Pinault-Printemps-Redoute SA 40,290,049
(retail--general merchandise)
105,000 Sidel SA 7,964,905
(machinery & equipment)
143,400 Societe Generale Cl A 22,613,679
(banking)
76,300 Societe Television Francaise 1 13,361,699
(broadcasting & media)
127,000 STMicroelectronics N.V.
New York Shares(2) 8,524,875
(electrical & electronic
components)
191,700 Vivendi 43,388,750
-----------------
(diversified companies)
331,305,874
-----------------
GERMANY--9.5%
49,076 Allianz AG 17,684,915
(insurance)
128,000 Bayerische Vereinsbank AG 11,091,344
(financial services)
175,600 Berliner Kraft-und Licht-
Aktiengesellschaft 9,722,445
(utilities)
210,000 DaimlerChrysler AG 19,746,185
(automobiles & auto parts)
335,730 Deutsche Pfandbrief-und
Hypothekenbank AG 27,743,824
(banking)
293,000 Douglas Holding AG 18,332,497
(retail--general merchandise)
280,000 Dresdner Bank AG 12,560,871
(financial services)
103,000 Gehe AG 6,596,523
(healthcare)
See Notes to Financial Statements
www.americancentury.com 9
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
522,680 Mannesmann AG $56,605,528
(industrial equipment & machinery)
212,400 Metro AG 13,258,153
(retail--general merchandise)
91,000 Siemens AG 6,338,282
(electrical & electronic
components)
399,671 Volkswagen AG 32,555,912
(automobiles & auto parts)
7,000 Wella Aktiengesellschaft 6,197,798
-----------------
(consumer products)
238,434,277
-----------------
GREECE--0.3%
321,111 Hellenic Telecommunication
Organization SA (OTE) 8,018,458
-----------------
(telephone communications)
HONG KONG--0.7%
974,300 Cheung Kong (Holdings) Ltd. 7,015,463
(real estate)
157,000 China Telecom (Hong Kong)
Limited ADR(2) 6,211,313
(wireless communications)
86,000 Tommy Hilfiger Corp.(2) 5,203,000
-----------------
(textiles & apparel)
18,429,776
-----------------
IRELAND--2.2%
1,204,926 Bank of Ireland 24,956,298
(financial services)
595,027 CRH plc 8,946,046
(construction & property
development)
235,000 Elan Corp., plc ADR(2) 16,009,375
(pharmaceuticals)
435,000 Kerry Group Plc Cl A 6,061,138
-----------------
(food & beverage)
55,972,857
-----------------
ITALY--5.3%
634,500 Assicurazioni Generali 23,708,671
(insurance)
6,706,900 Banca di Roma(2) 11,611,171
(banking)
3,572,700 Banca Intesa SpA 19,960,704
(financial services)
1,039,000 Mediaset SpA 7,337,396
(broadcasting & media)
479,400 Mediolanum SpA 2,885,542
(insurance)
1,417,300 Mondadori (Arnoldo) Editore SpA 17,821,829
(printing & publishing)
4,446,000 Telecom Italia Mobile (TIM) SpA 18,732,550
(wireless communications)
3,647,300 Telecom Italia SpA 29,571,821
-----------------
(telephone communications)
131,629,684
-----------------
Shares Value
- --------------------------------------------------------------------------------
JAPAN--10.3%
150,000 Advantest Corp. $10,012,587
(electrical & electronic
components)
860,000 Bank of Tokyo-Mitsubishi, Ltd. (The) 9,358,074
(banking)
1,298,000 Dai-Ichi Kangyo Bank Ltd. 8,643,144
(banking)
1,144,000 Daiwa House Industry Co., Ltd. 12,123,269
(construction & property
development)
1,207,000 Fuji Heavy Industries Ltd. 6,027,894
(automobiles & auto parts)
1,352,000 Fujikura Ltd. 7,542,523
(electrical & electronic
components)
1,324,000 Fujitsu Ltd. 15,288,708
(computer systems)
165,000 Honda Motor Co., Ltd. 5,922,287
(automobiles & auto parts)
649,000 JUSCO Co., Ltd. 12,358,642
(retail--general merchandise)
1,394,000 Kao Corporation 26,375,574
(consumer products)
884,000 Kirin Brewery Company, Ltd. 9,174,161
(food & beverage)
211,000 Murata Manufacturing Co., Ltd. 8,258,719
(electrical & electronic
components)
816,000 Nikon Corporation 7,819,075
(diversified companies)
1,572 Nippon Telegraph & Telephone 11,744,204
(telephone communications)
666,000 Nomura Securities Co., Ltd. 6,473,685
(financial services)
3,200 NTT Data Corp. 13,980,267
(business services & supplies)
643,000 Olympus Optical Co., Ltd. 7,038,564
(leisure)
181,000 Sony Corp. 13,243,006
(electrical & electronic
components)
783,000 Takeda Chemical Inds. 26,387,186
(pharmaceuticals)
661,000 Terumo Corporation 14,680,539
(medical equipment & supplies)
555,000 Tokyo Electron Ltd. 20,731,658
(electrical & electronic
components)
303,000 Toppan Forms Co., Ltd. 4,736,490
-----------------
(printing & publishing)
257,920,256
-----------------
NETHERLANDS--8.7%
251,277 ASR Verzekeringsgroep N.V. 20,454,691
(insurance)
218,255 Cap Gemini N.V. 15,607,189
(computer software & services)
See Notes to Financial Statements
10 1-800-345-2021
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
500,500 Getronics N.V. $21,903,835
(computer software & services)
348,000 Heineken NV 17,689,203
(food & beverage)
569,813 ING Groep N.V. 32,663,015
(financial services)
869,812 Koninklijke Ahold NV 30,188,999
(retail--food & drug)
224,300 Stork N.V. 5,718,314
(business services & supplies)
341,000 Unilever N.V. New York Shares 26,363,563
(diversified companies)
423,300 Vedior NV
(Acquired 1/27/98-11/3/98,
Cost $9,717,891)(1) 8,642,167
(business services & supplies)
698,400 VNU N.V. 24,020,353
(printing & publishing)
76,000 Wolters Kluwer NV 14,501,767
-----------------
(printing & publishing)
217,753,096
-----------------
POLAND--0.2%
443,341 Elektrim Spolka Akcyjna S.A. 3,728,442
-----------------
(electrical & electronic components)
PORTUGAL--1.4%
237,077 Banco Espirito Santo e Comercial
de Lisboa, SA 7,355,751
(banking)
199,000 Brisa-Auto Estradas de
Portugal, S.A.(2) 10,763,875
(construction & property development)
80,588 Telecel-Comunicacaoes
Pessoais, SA 15,766,562
-----------------
(wireless communications)
33,886,188
-----------------
SINGAPORE--1.1%
1,567,900 City Developments Limited 7,468,456
(real estate)
1,151,300 Singapore Press Holdings Ltd. 12,225,576
(printing & publishing)
7,315,000 Singapore Technologies
Engineering Ltd. 7,989,684
-----------------
(business services & supplies)
27,683,716
-----------------
SOUTH KOREA--0.6%
162,000 Samsung Electronics 8,659,069
(leisure)
694,000 SK Telecom Co. Ltd. ADR 7,156,875
-----------------
(telephone communications)
15,815,944
-----------------
Shares Value
- --------------------------------------------------------------------------------
SPAIN--2.6%
809,000 Corporacion Bancaria de Espana SA $18,854,408
(banking)
729,000 Telefonica de Espana 34,283,277
(telephone communications)
1,287,000 TelePizza, S.A.(2) 11,069,432
(restaurants) -----------------
64,207,117
-----------------
SWEDEN--4.3%
190,000 Assa Abloy AB Cl B 7,597,662
(construction & property
development)
674,000 Ericsson (L.M.) Telephone Co. ADR 18,598,188
(communications equipment)
154,600 Europolitan Holdings AB 14,228,336
(communications equipment)
386,900 Hennes & Mauritz AB Cl B 28,609,892
(retail--apparel)
275,000 NetCom Systems AB Cl B(2) 10,624,423
(telephone communications)
1,958,900 Skandia Forsakrings AB 27,837,951
-----------------
(financial services)
107,496,452
-----------------
SWITZERLAND--8.0%
95,000 Credit Suisse Group 16,339,401
(financial services)
12,216 Julius Baer Holding AG 39,657,790
(financial services)
12,300 Nestle S.A. 25,562,563
(food & beverage)
26,755 Novartis AG 50,235,130
(pharmaceuticals)
1,000 Roche Holding AG 11,752,902
(pharmaceuticals)
3,000 Schweizerische Rueckversicherungs-
Gesellschaft 7,584,922
(insurance)
41,798 Swisscom AG(2) 14,078,443
(telephone communications)
117,000 UBS AG 35,215,709
-----------------
(banking)
200,426,860
-----------------
UNITED KINGDOM--18.0%
2,553,238 Amvescap Plc 20,794,789
(financial services)
1,787,000 BBA Group plc 9,850,246
(diversified companies)
1,511,450 British Aerospace PLC 12,995,936
(aerospace & defense)
1,789,000 British Telecommunications plc 24,520,314
(telephone communications)
3,054,000 Cable & Wireless
Communications plc(2) 27,216,912
(telephone communications)
See Notes to Financial Statements
www.americancentury.com 11
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
1,067,700 Capita Group Plc $10,079,090
(business services & supplies)
385,700 CMG plc 9,560,831
(computer software & services)
2,501,190 COLT Telecom Group plc(2) 32,692,484
(telephone communications)
914,000 Compass Group PLC 9,638,803
(business services & supplies)
1,835,000 Diageo plc 20,562,783
(food & beverage)
1,381,000 Energis plc(2) 24,956,510
(telephone communications)
391,000 Glaxo Wellcome plc 12,370,149
(pharmaceuticals)
1,055,600 Hays plc 8,919,600
(business services & supplies)
1,304,000 Imperial Tobacco Group plc 14,031,408
(tobacco)
1,828,200 Lloyds TSB Group plc 25,419,656
(financial services)
1,532,000 Logica plc 11,124,679
(computer software & services)
1,834,945 Misys plc 12,930,847
(computer software & services)
1,404,514 Orange plc(2) 14,371,226
(wireless communications)
446,754 Provident Financial plc 6,709,434
(financial services)
1,042,900 Rentokil Initial PLC 6,712,485
(environmental services)
2,918,000 Siebe plc 10,498,272
(industrial)
2,028,900 Somerfield plc 15,251,940
(retail--food & drug)
463,200 Spring Group PLC 1,108,441
(business services & supplies)
3,805,000 Stagecoach Holdings plc 14,254,651
(transportation)
1,744,000 Standard Chartered plc 18,535,675
(banking)
2,147,200 Vodafone Group plc 31,715,502
(wireless communications)
2,242,200 WPP Group plc 12,359,385
(business services & supplies)
739,000 Zeneca Group plc 30,734,138
(pharmaceuticals) -----------------
449,916,186
-----------------
UNITED STATES--1.0%
228,000 AirTouch Communications, Inc.(2) 13,038,750
(wireless communications)
299,500 Global TeleSystems Group, Inc.(2) 13,000,172
-----------------
(telephone communications)
26,038,922
-----------------
TOTAL COMMON STOCKS & RIGHTS 2,455,578,477
-----------------
(Cost $2,000,804,339)
Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS--1.0%
BRAZIL
260,818,000 Centrais Electricas
Brasileiras S.A. Cl B $7,380,618
(utilities)
362,900,000 Embratel Participacoes S.A.(2) 5,889,763
(telephone communications)
24,104,000 Petroleo Brasileiro S.A. 3,430,532
(energy--production & marketing)
323,700,000 Telesp Participacoes S.A.(2) 9,079,226
-----------------
(telephone communications)
TOTAL PREFERRED STOCKS 25,780,139
-----------------
(Cost $23,387,991)
TEMPORARY CASH INVESTMENTS--0.9%
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury Obligations), in a joint
trading account at 5.23%, dated 11/30/98,
due 12/1/98 (Delivery Value $23,103,356) 23,100,000
-----------------
(Cost $23,100,000)
TOTAL INVESTMENT SECURITIES--100.0% $2,504,458,616
=================
(Cost $2,047,292,330)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain (Loss)
- ----------------------------------------------------------------------------
29,729,495 CHF 12/30/98 $ 21,375,623 $(188,999)
38,888,590 DEM 12/30/98 22,991,423 (178,049)
188,233,872 FRF 12/30/98 33,186,233 (226,642)
29,790,297 GBP 12/30/98 49,111,450 234,390
6,213,429,000 JPY 12/30/98 50,696,349 969,423
43,594,210 NLG 12/30/98 22,866,623 (179,030)
89,508,883 SEK 12/30/98 11,033,171 76,974
-------------------------------
$211,260,872 $ 508,067
===============================
(Value on Settlement Date $211,768,939)
See Notes to Financial Statements
12 1-800-345-2021
International Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
CHF = Swiss Franc
DEM = German Mark
FRF = French Franc
GBP = British Pound
JPY = Japanese Yen
NLG = Netherlands Guilder
SEK = Swedish Krona
(1) Security was purchased under Rule 144A of the Securities Act of 1933 or is a
private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at November 30, 1998, was $57,890,354,
which represented 2.3% of net assets.
(2) Non-income producing.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* the percentage of total investments in each country
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 13
International Discovery--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF NOVEMBER 30, 1998
INVESTOR CLASS (INCEPTION 4/1/94) ADVISOR CLASS (INCEPTION 4/28/98) INSTITUTIONAL CLASS (INCEPTION 1/2/98)
INTERNATIONAL DISCOVERY MSCI EAFE(reg.tm) INTERNATIONAL DISCOVERY MSCI EAFE(reg.tm) INTERNATIONAL DISCOVERY MSCI EAFE(reg.tm)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1)..-14.29% 0.34% -14.47% 0.34% -14.27% 0.34%
1 YEAR ...... 14.79% 16.45% -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
- ------------------------------------------------------------------------------------------------------------------------------
3 YEARS ..... 21.92% 9.03% -- -- -- --
LIFE OF FUND. 16.86% 8.18% -8.71% -0.15%(2) 13.08% 16.96%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Return from 4/30/98, the nearest date for which data are available.
See pages 47, 48 and 49 for information about share classes, MSCI EAFE(reg.tm)
and returns.
GROWTH OF $10,000 OVER LIFE OF FUND [mountain chart - data below]
Value on 11/30/98
Int'l Discovery $20,660
MSCI EAFE $14,430
Int'l Discovery MSCI EAFE
Date Value Value
4/1/94 $10,000 $10,000
6/30/94 $10,760 $10,511
9/30/94 $11,420 $10,522
12/31/94 $10,760 $10,414
3/31/95 $10,100 $10,608
6/30/95 $11,020 $10,685
9/30/95 $11,800 $11,131
12/31/95 $11,825 $11,582
3/31/96 $12,931 $11,916
6/30/96 $14,480 $12,105
9/30/96 $14,561 $12,089
12/31/96 $15,513 $12,281
3/31/97 $16,714 $12,088
6/30/97 $18,295 $13,657
9/30/97 $19,792 $13,562
12/31/97 $18,224 $12,500
3/31/98 $21,958 $14,339
6/30/98 $23,590 $14,491
9/30/98 $18,893 $12,432
11/30/98 $20,660 $14,430
These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). The chart at left shows the growth of a $10,000 investment in the
fund since inception, while the chart below shows the fund's year-by-year
performance. The MSCI EAFE(reg.tm) Index is provided for comparison in each
chart. Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. International Discovery's total returns include operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the MSCI EAFE(reg.tm) do not.
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDING NOVEMBER 30)
[bar chart - data below]
Int'l Discovery MSCI EAFE Index
Date Return. Return
11/30/94 7.80 3.49
11/30/95 5.75 7.57
11/30/96 34.06 11.76
11/30/97 17.76 -0.40
11/30/98 14.79 16.45
*Returns from 4/1/94, fund's inception date, to 11/30/94.
14 1-800-345-2021
International Discovery--Q&A
- --------------------------------------------------------------------------------
[photo of Brian Brady, Henrik Strabo and Mark Kopinski]
Brian Brady, Henrik Strabo and Mark Kopinski, portfolio managers on the
International Discovery Fund
An interview with Henrik Strabo, Mark Kopinski and Brian Brady, portfolio
managers on the International Discovery investment team
HOW DID INTERNATIONAL DISCOVERY PERFORM FOR THE FISCAL YEAR ENDED NOVEMBER 30,
1998?
International Discovery posted a very respectable 14.79%* return for its
fiscal year, which proved to be one of the most volatile periods on record for
international investors. The fund trailed its benchmark, the Morgan Stanley
Capital International EAFE Index, which gained 16.45%, but performed better than
most of its peers. According to Lipper, Inc., an independent company that ranks
mutual funds, the fund ranked 16th out of the 57 small-company international
funds tracked by Lipper for the year ended November 30, 1998. The fund's
longer-term performance has also been strong. Lipper ranked International
Discovery first out of 19 small-company international funds for three years
ended November 30, 1998.(+)
One important factor to note is that the EAFE Index is comprised primarily
of large-capitalization stocks, whereas International Discovery invests in much
smaller companies. As a result, the fund's performance will frequently be
different than that of the index.
Although we use the EAFE as a performance benchmark, we wish to stress that
we employ a bottom-up approach in selecting stocks for International Discovery's
portfolio, and we do not attempt to match or outperform any comparative
benchmark during short time frames. Our search for earnings and revenue growth
leads us to fast-growing companies in a variety of sectors and regions, and our
sector and country allocations are purely a residual of the individual security
selection process. This bottom-up approach helped the fund perform better than
many of its peers.
WHICH FACTORS HAD THE GREATEST INFLUENCE ON PERFORMANCE DURING THE YEAR?
International markets were robust during the first half of International
Discovery's fiscal year but unwound dramatically in the third quarter of 1998
when the Russian economy collapsed and economic uncertainty in Brazil threatened
to spread throughout Latin America. The markets were also shaken by the near
collapse of a large global hedge fund, which sent many investors scurrying for
safer investment havens. Moreover, small stocks in general suffered more than
their larger counterparts. This explains, in part, why International Discovery
underperformed its benchmark. However, in late October, we began to see signs of
stabilization in many markets. We believe we are well-positioned to take
advantage of the investment opportunities the third-quarter market correction
has made possible.
WHICH STOCKS OR SECTORS HURT PERFORMANCE THE MOST?
Our holdings in Israel, Sweden and Japan dampened performance. It's
important to note, however, that
*All fund returns referenced in this interview are for Investor Class shares.
(+)Past performance is no guarantee of future results.
[right margin]
"International markets were robust during the first half of International
Discovery's fiscal year but unwound dramatically in the third quarter of 1998,
when the Russian economy collapsed and economic uncertainty in Brazil threatened
to spread throughout Latin America."
PORTFOLIO AT A GLANCE
11/30/98 11/30/97
NO. OF COMPANIES 176 154
MEDIAN MARKET $593 $451
CAPITALIZATION MILLION MILLION
PORTFOLIO TURNOVER 178% 146%
EXPENSE RATIO 1.64% 1.70%
Investment terms are defined in the Glossary on page 49.
www.americancentury.com 15
International Discovery--Q&A
- --------------------------------------------------------------------------------
(Continued)
International Discovery's worst-performing companies, for the most part,
suffered as a result of global economic turmoil rather than due to weaknesses in
their fundamental operations or business. The fund's worst-performing stock, for
example, was Admiral, which is located in the United Kingdom. Admiral provides
information technology systems and training for a broad range of clients
worldwide. Admiral is well-managed and is known for both its high-quality
products and services and its ability to provide its clients with cost-effective
solutions on time and within budget. The company's growth has been driven by
robust spending as corporations upgrade their computer systems to become Year
2000-compliant. However, market turmoil in the third quarter raised investor
concerns that in a financial crunch, businesses would limit spending on
information technology, and the stock fell substantially.
Elektrim Spolka Akcyjna, a Polish holding, also hurt performance. However,
in this case, the company's problems were not connected to Poland's economic or
political situation. Elektrim is a diversified industrial and telecommunications
holding company that had been enjoying very dramatic growth. The company was
well-positioned to benefit from the modernization of Poland's
electricity-generating assets and increasing demand for cellular and
communications services in Europe. Elektrim's management had not properly
disclosed, however, that it had entered into a contract in 1996 to sell part of
its stake in a subsidiary, a cellular network service called Polska Telefonia
Cyfrowa (PTC), for a nominal price. PTC's market value had increased since the
contract was signed, and it was worth substantially more than the agreed-upon
selling price. News of the past agreement broke on Thanksgiving Day and
Elektrim's stock plummeted 27% in two days.
On the other hand, JBA Holdings, a London-based computer software supplier,
disappointed us on an earnings basis. Although the company's growth in recent
years has been vigorous, high expenditures on software development collided with
lower-than-expected sales in the second quarter, and its stock price tumbled
when the company announced disappointing earnings. We removed this stock from
the portfolio.
WHICH STOCKS OR SECTORS ADDED TO PERFORMANCE?
Our earnings focus led us to several industry groups, including banks and
financial services companies and general retailers. Most of these companies are
located in Europe.
Banking and financial services stocks were among the fund's largest
holdings and were also its top contributors. Pension reform and falling interest
rates across Europe are changing Europeans' attitudes toward investing and
personal savings. This is resulting in a shift of assets from
low-interest-bearing savings accounts to mutual funds and insurance products.
For example, the top contributor to performance was Marschollek, Lautenschlaeger
und Partner, a German financial services company that added significantly to
returns in past periods. The company's success is being boosted by growth in its
life insurance and asset-management segments. CGI Group is another example of
success related to the financial services group. CGI is a large information
technology consulting firm in Canada. This company is enjoying rapid growth
fueled by its recent acquisition of another information technology firm as well
as by increasing demand from financial services companies eager to streamline
their businesses by outsourcing non-core, back-office operations. The evolution
taking place in the financial services industry is still
[left margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
MARSCHOLLEK,
LAUTENSCHLAEGER
UND PARTNER AG 4.5% 3.9%
GALERIES LAFAYETTE 2.2% 1.4%
CGI GROUP, INC. 2.1% 2.1%
ESAT TELECOM
GROUP
PLC ADR 1.8% --
CORPORACION
FINANCIERA
REUNIDA, S.A. 1.7% 1.7%
HAVAS ADVERTISING SA 1.7% 2.5%
KEMPEN &
COMPANY NV 1.4% 2.5%
VONTOBEL HOLDING
AG CL B 1.3% 1.6%
COMPANHIA DE
SEGUROS MUNDIAL
CONFIANCA, SA 1.1% 1.1%
UNIQUE
INTERNATIONAL NV 1.1% 1.2%
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
FINANCIAL SERVICES 12.1% 15.9%
BANKING 9.8% 8.5%
BUSINESS
SERVICES
& SUPPLIES 9.3% 12.9%
COMPUTER SOFTWARE
& SERVICES 8.2% 12.8%
ELECTRICAL & ELECTRONIC
COMPONENTS 4.9% 4.3%
16 1-800-345-2021
International Discovery--Q&A
- --------------------------------------------------------------------------------
(Continued)
in an early growth stage, and we expect this group to continue demonstrating
outperformance going forward.
Outside of the financial services sector, we found excellent growth in
Galeries Lafayette, a large retailer in France. Galeries is a sound,
well-managed operation that is benefiting from the increased consumer spending
taking place in France. Corporation Financiera, a wine and hotel business in
Spain, has also fared well as a result of a pickup in its hotel operations and
healthy demand for its wines.
WHAT SIGNIFICANT CHANGES DID YOU MAKE TO THE PORTFOLIO IN THE LAST SIX MONTHS?
The third-quarter market correction gave us an opportunity to re-examine
our industry and country concentrations. Many of the faster-growing sectors --
and consequently stocks -- in the portfolio were hard hit by the downturn. We
elected to add to the fastest and most consistent growers and diversify the
portfolio slightly more into Asia, where we took advantage of some attractive
restructuring candidates.
We added selectively to Anglo Irish Bank, which concentrates on niche
banking to middle- and small-sized companies in Ireland. This niche strategy has
benefited from the extraordinarily strong growth of the local economy, as well
as the favorable interest rate environment in the European Monetary Union. A new
addition in Asia was Housing and Commericial Bank of South Korea. Housing and
Commercial Bank is led by very progressive and active management. The bank was
quick to recognize and deal with its problem loan portfolio and has set sound
standards in order to effect a rapid return to profitability.
HAVE THERE BEEN ANY CHANGES TO INTERNATIONAL DISCOVERY'S MANAGEMENT TEAM?
Yes. Brian Brady was named portfolio manager. Brian has focused primarily
on companies with a market capitalization in Europe, Latin America, Canada and
Israel. He joined American Century in 1994 and has served as an investment
analyst on the International Discovery team since that time.
WHAT IS YOUR OUTLOOK FOR INTERNATIONAL INVESTING GOING FORWARD?
Despite the difficulty of the last year, we remain very excited about the
long-term opportunities we see in markets around the world. Factors at work in
Europe -- including the arrival of American-style capitalism, the prospect of a
common currency, a strong economic recovery and pension reform--bode well for
investing there. We're also seeing positive signs of recovery in a number of
emerging markets. We believe our bottom-up approach and earnings growth focus
should continue to lead us to individual companies with excellent long- term
potential.
[right margin]
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF NOVEMBER 30, 1998
[pie chart - data below]
Temporary Cash Investments 7.7%
Preferred Stocks 8.0%
Common Stocks 84.3%
AS OF MAY 31, 1998
[pie chart - data below]
Temporary Cash Investments 0.7%
Preferred Stocks 5.9%
Common Stocks 93.4%
INTERNATIONAL DISCOVERY'S INVESTMENTS BY COUNTRY
[bar chart - data below]
11/30/98 5/31/98
U.K. 11.3% 13.4%
Netherlands 10.5% 14.1%
Germany 8.3% 10.1%
France 7.3% 8.6%
Switzerland 6.8% 5.5%
Japan 5.4% 2.4%
Canada 4.9% 9.0%
Spain 4.4% 4.2%
Other 41.1% 32.7%
www.americancentury.com 17
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS-84.3%
AUSTRALIA-0.4%
1,367,550 Reinsurance
Australia
Corporation Ltd. $3,089,049
-----------------
(insurance)
BELGIUM--0.9%
7,055 Creyf's NV 2,804,274
(business services & supplies)
43,635 Telinfo NV 5,178,303
-----------------
(telephone communications)
7,982,577
-----------------
BRAZIL--0.6%
3,558,000 Centrais Eletricas de Santa
Catarina S.A. 2,250,587
(utilities)
28,479,000 Companhia de Saneamento Basico
do Estado de Sao Paulo 3,128,779
-----------------
(utilities)
5,379,366
-----------------
CANADA--4.9%
286,300 Architel Systems Corp.(1) 3,362,741
(computer peripherals)
296,000 ATS Automation Tooling
Systems, Inc.(1) 3,515,302
(machinery & equipment)
447,100 Berkley Petroleum Corp.(1) 3,004,979
(energy--production & marketing)
1,241,000 Canadian 88 Energy Corp.(1) 4,129,918
(energy--production & marketing)
1,014,600 CGI Group, Inc.(1) 17,378,359
(business services & supplies)
341,000 Dorel Industries Inc. Cl B(1) 5,173,409
(furniture & furnishings)
293,000 Kingsway Financial Services(1) 2,198,695
(insurance)
106,000 Leitch Technology Corp.(1) 2,424,339
-----------------
(electrical & electronic
components)
41,187,742
-----------------
CROATIA--0.4%
224,000 Pliva d.d. GDR 3,500,000
-----------------
(pharmaceuticals)
DENMARK--0.3%
48,000 Vestas Wind Systems A/S(1) 2,312,019
-----------------
(utilities)
EGYPT--0.3%
447,000 Egyptian Mobile Phone Network(1) 2,664,016
-----------------
(wireless communications)
Shares Value
- --------------------------------------------------------------------------------
FINLAND--1.3%
71,000 Pohjola Insurance Group Cl B 3,321,557
(insurance)
220,160 Tieto Corp. Cl B(2) 7,991,832
-----------------
(computer software & services)
11,313,389
-----------------
FRANCE--7.3%
27,000 Altran Technologies SA 6,277,412
(business services & supplies)
9,800 Bouygues Offshore S.A. ADR 118,825
(energy--services)
73,000 Cie des Signaux SA 5,807,315
(aerospace & defense)
16,000 Galeries Lafayette 18,247,738
(retail--general merchandise)
27,000 Genset SA(1) 2,366,504
(biotechnology)
54,000 GFI Informatique(1) 5,816,467
(financial services)
82,624 Havas Advertising SA 14,323,742
(broadcasting & media)
14,000 ISIS 1,012,707
(energy-services)
10,263 Jet Multimedia 1,656,371
(computer software & services)
28,950 Omnicom SA(1) 3,077,511
(telephone communications)
46,550 Strafor-Facom SA 3,174,720
-----------------
(office equipment & supplies)
61,879,312
-----------------
GERMANY--0.9%
70,411 DIS Deutscher Industrie Service AG 3,158,655
(business services & supplies)
20,000 Sixt AG 4,663,105
-----------------
(business services & supplies)
7,821,760
-----------------
GREECE--2.0%
182,790 Ethniki General Insurance Co. 5,175,182
(insurance)
27,789 National Bank of Greece S.A. 4,973,735
(banking)
138,336 Panafon SA(1) 2,481,320
(wireless communications)
71,000 Piraeus Bank S.A. 3,384,567
(banking)
14,700 STET Hellas Telecommunications
S.A. ADR(1) 511,744
-----------------
(wireless communications)
16,526,548
-----------------
HONG KONG--1.1%
3,114,000 Guangdong Kelon Elec Holding 2,714,821
(consumer products)
852,800 HKR International Ltd. 572,756
(real estate)
See Notes to Financial Statements
18 1-800-345-2021
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
2,342,000 Ng Fung Hong Limited 2,087,155
(food & beverage)
1,352,000 Wing Hang Bank Ltd. 3,754,343
-----------------
(banking)
9,129,075
-----------------
HUNGARY--0.2%
71,000 Pannonplast Rt. 1,962,523
-----------------
(chemicals & resins)
INDIA--1.0%
10,000 Corporation Bank 19,342
(banking)
218,053 Hero Honda Motors Ltd. 2,795,124
(leisure)
550 Indian Hotels Company Limited 5,371
(leisure)
266 Larsen & Toubro Ltd. 912
(diversified companies)
32,850 NIIT Limited 1,058,607
(computer software & services)
156,000 Pentafour Software & Exports Ltd. 1,782,595
(computer software & services)
242,000 Satyam Computer 2,985,567
-----------------
(computer software & services)
8,647,518
-----------------
IRELAND--3.5%
3,544,600 Anglo Irish Bank Corp. plc 9,008,739
(banking)
355,000 DCC plc 3,019,935
(diversified companies)
442,900 Esat Telecom Group plc ADR(1) 15,612,225
(telephone communications)
68,000 IONA Technologies PLC ADR(1) 1,831,750
-----------------
(computer software & services)
29,472,649
-----------------
ISRAEL--0.7%
77,200 Orbotech Ltd.(1) 2,981,850
(control & measurement)
191,000 Technomatix Technologies Ltd.(1) 2,632,219
-----------------
(computer software & services)
5,614,069
-----------------
ITALY--4.1%
1,951,000 Banca Nazionale del Lavoro(1) 5,487,914
(banking)
452,174 Banca Popolare
Commercio e Industria 9,310,257
(banking)
326,341 Banca Popolare di Brescia 7,584,803
(banking)
2,548,000 Ciga Spa(1) 2,230,639
(leisure)
668,000 Gruppo Editoriale L'Espresso 5,573,301
(printing & publishing)
Shares Value
- -------------------------------------------------------------------------------
5,074,000 Premafin Finanziaria S.p.A.(1) $4,339,207
-----------------
(insurance)
34,526,121
-----------------
JAPAN--5.4%
46,000 Aeon Credit Service Ltd. 2,607,333
(financial services)
13,200 Bellsystem 24, Inc. 2,529,701
(business services & supplies)
66,000 Benesse Corporation 3,306,833
(education)
114,000 Data Communication System Co. 2,050,510
(computer software & services)
52,000 Fuji Soft ABC, Inc. 2,132,445
(computer software & services)
160,000 Fujicco Co., Ltd. 2,299,728
(food & beverage)
145,000 Homac Corp. 2,378,497
(retail--general merchandise)
142,000 Hosiden Corporation 2,461,895
(electrical & electronic
components)
302,000 Keiyo Company Ltd. 1,483,698
(retail--general merchandise)
113,000 Mycal Card Inc.(1) 2,752,852
(financial services)
55,000 Nippon System Development 1,429,209
(computer software & services)
15,600 Ryohin Keikaku Company Limited 1,773,519
(retail--general merchandise)
122,000 Softbank S.A. GDR 2,696,200
(electrical & electronic
components)
122,000 Sony Chemicals Corp. 4,398,717
(chemicals & resins)
86,000 Sumisho Computer Systems Corp. 1,812,254
(computer software & services)
192,000 Toyo Information Systems Co., Ltd. 3,430,103
(business services & supplies)
104,000 UNION TOOL CO. 4,602,704
(machinery & equipment)
49,700 World Co., Ltd. 1,695,075
-----------------
(consumer products)
45,841,273
-----------------
LIECHTENSTEIN--0.8%
1,830 Verwaltungs-und Privat-Bank AG 6,753,977
-----------------
(banking)
MEXICO--0.9%
1,536,000 Corporacion Interamericana de
Entretenimiento S.A. Cl B(1) 3,521,137
(leisure)
636,000 Grupo Continental, S.A. 1,470,704
(food & beverage)
556,000 Grupo Elektra, S.A. de C.V. GDR 2,953,750
-----------------
(retail--general merchandise)
7,945,591
-----------------
See Notes to Financial Statements
www.americancentury.com 19
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
NETHERLANDS--10.5%
361,027 Aalberts Industries N.V. $8,523,658
(metals & mining)
91,200 Airspray NV(1) 2,621,060
(packaging & containers)
113,000 AOT NV 1,330,978
(financial services)
317,000 Athlon Groep N.V. 8,679,021
(business services & supplies)
56,900 Draka Holding N.V. 1,638,267
(electrical & electronic
components)
86,000 Endemol Entertainment Holding NV 2,768,748
(entertainment)
69,000 IHC Caland N.V. 2,925,795
(energy--services)
238,400 Internatio-Muller NV 5,466,258
(transportation)
214,873 Kempen & Company NV 12,024,564
(financial services)
165,164 Ordina N.V.(1) 4,547,900
(computer software & services)
106,000 QIAGEN N.V.(1) 6,466,000
(biotechnology)
49,962 Simac Techniek N.V. 6,405,284
(computer software & services)
437,512 Tas Groep NV(1) 1,992,595
(financial services)
378,971 Unique International NV 9,621,826
(business services & supplies)
250,306 Unit 4(1) 6,839,928
(computer software & services)
106,566 Van der Moolen Holding N.V. 7,246,655
-----------------
(banking)
89,098,537
-----------------
NORWAY--0.4%
417,000 Tandberg ASA 3,178,949
-----------------
(communications equipment)
PHILIPPINES--0.3%
356,000 Metropolitan Bank & Trust Co. 2,507,360
-----------------
(banking)
POLAND--0.8%
147,025 Bank Rozwoju Eksportu S.A. 3,333,805
(banking)
425,946 Elektrim Spolka Akcyjna S.A. 3,582,152
-----------------
(electrical & electronic
components)
6,915,957
-----------------
PORTUGAL--1.9%
541,051 Banco Mello, S.A. 6,538,004
(banking)
Shares Value
- --------------------------------------------------------------------------------
294,000 Companhia de Seguros
Mundial
Confianca, SA(1) $9,626,032
-----------------
(insurance)
16,164,036
-----------------
RUSSIAN FEDERATION--0.4%
200,400 Vimpel-Communications ADR(1) 3,632,250
-----------------
(wireless communications)
SINGAPORE--1.4%
1,859,000 Datacraft Asia Limited 3,048,760
(wireless communications)
1,319,000 Keppel Bank 2,104,958
(banking)
2,252,000 Keppel Land Ltd. 2,664,684
(real estate)
793,000 Natsteel Electronics Ltd. 1,713,034
(electrical & electronic
components)
671,000 Singapore Land Limited 1,604,211
(real estate)
134,176 Total Access Communication
Public Co. Limited(1) 300,554
-----------------
(wireless communications)
11,436,201
-----------------
SOUTH AFRICA--0.1%
2,158,000 Woolworths Holdings Limited(1) 1,080,849
-----------------
(retail--general merchandise)
SOUTH KOREA--0.9%
39,870 Dae Duck Electronics Co.(1) 3,199,839
(electrical & electronic
components)
639,000 Housing & Commercial Bank, Korea 4,364,278
-----------------
(banking)
7,564,117
-----------------
SPAIN--4.4%
100,000 Azkoyen SA 3,502,809
(financial services)
1,087,000 Corporacion Financiera
Reunida, S.A.(1) 14,589,339
(financial services)
180,000 Grupo Acciona SA 9,101,755
(construction & property
development)
98,000 Radiotronica SA(1) 7,157,800
(communications equipment)
64,000 Sol Melia, SA 2,499,272
-----------------
(hotels)
36,850,975
-----------------
SWEDEN--2.6%
130,000 Elanders AB Cl B 2,463,242
(printing & publishing)
160,000 Enea Data AB 3,228,545
(computer software & services)
See Notes to Financial Statements
20 1-800-345-2021
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
138,800 Know IT AB $2,527,518
(computer software & services)
736,891 Mandator AB 6,210,647
(computer software & services)
136,200 Scandic Hotels AB 4,759,249
(leisure)
74,804 Sigma AB Cl B(1) 2,604,679
-----------------
(computer software & services)
21,793,880
-----------------
SWITZERLAND--6.8%
5,000 Banca del Gottardo Cl B 4,145,765
(financial services)
3,750 Bank Sarasin & Cie Cl B 6,906,622
(banking)
15,200 Danzas Holding AG 4,618,604
(transportation)
13,125 Georg Fischer AG 4,477,211
(machinery & equipment)
2,280 Kudelski SA(1) 6,535,760
(electrical & electronic
components)
9,000 Moevenpick Holding AG Bearer 4,643,830
(leisure)
7,712 Phoenix Mecano AG 4,891,157
(electrical & electronic
components)
19,590 PubliGroupe S.A.(2) 5,559,438
(business services & supplies)
50,000 Swisslog Holding AG 4,837,323
(machinery & equipment)
6,630 Vontobel Holding AG Cl B 11,165,616
-----------------
(financial services)
57,781,326
-----------------
THAILAND--1.4%
334,000 Advanced Info Service Public
Co. Limited(1) 1,940,249
(wireless communications)
562,000 BEC World Public Co., Ltd. 3,513,472
(broadcasting & media)
5,963,900 Cogeneration Public Co., Ltd. (The)(1) 4,619,342
(utilities)
927,400 Industrial Finance Corporation
of Thailand (The) 404,054
(financial services)
3,848,000 National Finance and
Securities Public Co., Ltd. Cl F(1) 1,277,344
-----------------
(financial services)
11,754,461
-----------------
UNITED KINGDOM--11.3%
222,123 Admiral plc 3,583,326
(business services & supplies)
529,491 Bodycote International plc 7,777,225
(diversified companies)
420,000 British-Borneo Petroleum
Syndicate plc 1,022,392
(energy--production & marketing)
Shares Value
- --------------------------------------------------------------------------------
264,100 Close Brothers Group plc $2,451,698
(financial services)
275,000 Cobham PLC 3,857,693
(aerospace & defense)
14,900 ECSoft Group PLC ADR(1) 374,363
(computer software & services)
1,901,000 Electronics Boutique plc 2,666,718
(retail--general merchandise)
580,000 Go-Ahead Group PLC (The) 6,508,980
(transportation)
1,599,000 J.D. Wetherspoon plc 5,475,738
(food & beverage)
220,811 Jarvis plc 2,408,786
(construction & property
development)
701,000 Johnson Matthey PLC 4,772,193
(metals & mining)
796,000 Kwik-Fit Holdings plc 7,107,001
(automobiles & auto parts)
262,000 London Bridge Software
Holdings plc 5,123,842
(computer software & services)
1,013,000 London International Group plc 3,201,506
(pharmaceuticals)
600,050 Parity plc 4,802,919
(business services & supplies)
518,000 PizzaExpress plc 7,309,235
(restaurants)
596,000 Psion plc 4,647,551
(computer peripherals)
190,000 Sage Group plc (The) 4,546,714
(computer software & services)
365,000 Select Appointments Holdings plc 3,788,956
(business services & supplies)
6,793,100 SkyePharma plc(1) 9,193,014
(pharmaceuticals)
364,600 Triad Group PLC 2,587,386
(business services & supplies)
256,000 WS Atkins plc 2,222,295
-----------------
(textiles & apparel)
95,429,531
-----------------
UNITED STATES--4.1%
304,000 Amdocs Ltd.(1) 4,674,000
(computer software & services)
456,200 Celestica Inc.(1) 9,266,563
(electrical & electronic
components)
110,000 Cellular Communications
International, Inc.(1) 6,881,875
(wireless communications)
203,200 Global TeleSystems Group, Inc.(1) 8,820,150
(telephone communications)
363,000 Viatel, Inc.(1) 5,399,625
-----------------
(telephone communications)
35,042,213
-----------------
See Notes to Financial Statements
www.americancentury.com 21
International Discovery--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $713,779,216
-----------------
(Cost $582,428,879)
PREFERRED STOCKS--8.0%
BRAZIL--0.6%
135,940,000 Companhia Paranaense de
Energia-Copel 1,306,789
(utilities)
661,700,000 Tele Sudeste Celular
Participacoes S.A. (1) 3,579,734
-----------------
(wireless communications)
4,886,523
-----------------
GERMANY--7.4%
179,000 Fielmann AG 8,082,814
(retail--specialty)
5,687 Jil Sander AG 2,051,033
(textiles & apparel)
77,484 Krones AG 2,492,623
(machinery & equipment)
63,711 Marschollek, Lautenschlaeger
und Partner AG 38,358,599
(financial services)
3,500 Porsche AG 7,788,567
(automobiles & auto parts)
16,976 Sartorius AG 4,058,248
-----------------
(electrical & electronic
components)
62,831,884
-----------------
TOTAL PREFERRED STOCKS 67,718,407
-----------------
(Cost $26,883,467)
Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS--7.7%
Repurchase Agreement, BA Securities Services,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.25%, dated 11/30/98,
due 12/1/98 (Delivery value $42,306,169) $42,300,000
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.23%, dated 11/30/98,
due 12/1/98 (Delivery value $22,503,269) 22,500,000
-----------------
TOTAL TEMPORARY CASH INVESTMENTS 64,800,000
-----------------
(Cost $64,800,000)
TOTAL INVESTMENT SECURITIES--100% $846,297,623
=================
(Cost $674,112,346)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain (Loss)
- -----------------------------------------------------------------------------
8,886,365 CHF 12/30/98 $6,389,331 $(56,493)
11,516,672 DEM 12/30/98 6,808,801 (52,729)
35,516,498 FRF 12/30/98 6,261,672 (42,763)
6,030,545 GBP 12/30/98 9,941,788 39,006
1,021,846,800 JPY 12/30/98 8,337,409 143,989
18,399,460 NLG 12/30/98 9,651,133 (75,562)
14,952,109 SEK 12/30/98 1,843,048 12,858
----------------------------------
$49,233,182 $(31,694)
==================================
(Value on Settlement Date $49,201,488)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
CHF = Swiss Franc
JPY = Japanese Yen
DEM = German Mark
NLG = Netherlands Guilder
FRF = French Franc
SEK = Swedish Krona
GBP = British Pound
(1) Non-income producing.
(2) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements
for a summary of transactions for each issuer which is or was an affiliate
at or during the year ended November 30, 1998.)
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* the percentage of total investments in each country
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
22 1-800-345-2021
Emerging Markets--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF NOVEMBER 30, 1998
INVESTOR CLASS (INCEPTION 9/30/97)
EMERGING MARKETS MSCI EMERGING MARKETS FREE INDEX
6 MONTHS* ............ -17.88% -16.42%
1 YEAR ............... -15.90% -22.42%
LIFE OF FUND ......... -26.51% -33.17%
* Returns for periods less than one year are not annualized.
See pages 48 and 49 for information about MSCI Emerging Markets Free Index and
returns.
PERFORMANCE OF $10,000 OVER LIFE OF FUND [mountain chart - data below]
Value as of 11/30/98
Int'l Discovery $20,660
MSCI EAFE $14,430
Int'l Discovery MSCI EAFE
Date Value Value
4/1/94 $10,000 $10,000
6/30/94 $10,760 $10,511
9/30/94 $11,420 $10,522
12/31/94 $10,760 $10,414
3/31/95 $10,100 $10,608
6/30/95 $11,020 $10,685
9/30/95 $11,800 $11,131
12/31/95 $11,825 $11,582
3/31/96 $12,931 $11,916
6/30/96 $14,480 $12,105
9/30/96 $14,561 $12,089
12/31/96 $15,513 $12,281
3/31/97 $16,714 $12,088
6/30/97 $18,295 $13,657
9/30/97 $19,792 $13,562
12/31/97 $18,224 $12,500
3/31/98 $21,958 $14,339
6/30/98 $23,590 $14,491
9/30/98 $18,893 $12,432
11/30/98 $20,660 $14,430
The chart at left shows the performance of a $10,000 investment in the fund
since inception. The MSCI Emerging Markets Free Index is provided for
comparison. Past performance does not guarantee future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost. Emerging Markets' total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total return of the MSCI Emerging Markets Free Index does not.
www.americancentury.com 23
Emerging Markets--Q&A
- --------------------------------------------------------------------------------
[photo of Mark Kopinski and Michael Donnelly]
Mark Kopinski and Michael Donnelly, portfolio managers on the Emerging Markets
Fund
An interview with Mark Kopinski and Michael Donnelly, portfolio managers on
the Emerging Markets investment team
HOW DID EMERGING MARKETS PERFORM FOR THE YEAR ENDED NOVEMBER 30, 1998?
The fund persevered in what proved to be an extremely difficult investment
climate. Many emerging markets continued to suffer in the wake of the global
economic problems in the second half of 1998. Although Emerging Markets'
absolute return for the year was negative, the fund performed much better than
its benchmark, the Morgan Stanley Emerging Markets Free Index, and many other
emerging markets funds. The Emerging Markets fund declined 15.90%*,
significantly less than the 22.42% decline posted by the index. According to
Lipper, Inc. (formerly Lipper Analytical Services), an independent company that
ranks mutual funds, Emerging Markets was in the top 10% of its peer group for
the year ended November 30, ranking 13th out of the 152 emerging markets funds
tracked by Lipper.(+)
WHAT HELPED EMERGING MARKETS PERFORM BETTER THAN ITS BENCHMARK AND PEER GROUP?
Emerging Markets' stronger relative performance was largely the result of
our bottom-up investment approach and disciplined focus on earnings growth.
Although we pay attention to the economic and political factors affecting a
market sector or a country's fiscal health and stability, we focus primarily on
company fundamentals in picking stocks for the Emerging Markets portfolio. This
led us toward attractive companies in stable countries and away from countries
and sectors of the market that were struggling or out of favor. Our
stock-specific process often leads us to names that are not in the index. This
has been particularly true during the last year. In fact, several of the fund's
best-performing holdings were not represented in the index. These
top-contributing positions account for much of the fund's better relative
performance.
IN WHICH COUNTRIES AND SECTORS HAVE YOU FOUND THE BEST GROWTH OPPORTUNITIES?
The global proliferation and spread of information technology is serving as
the catalyst for growth in a number of industries and regions of the world. We
discovered growing earnings in banks, computer software companies, and
electronic components manufacturers in many developing markets. This is
especially true in India, Taiwan, and Singapore, which are home to many computer
software and service companies, and in Greece and Poland, where banking systems
are coming under reform. We've also continued to see dramatic growth in the
cellular and communications services industries. This group has enjoyed nearly a
decade of robust growth worldwide, and is also continuing to do very well in
many emerging markets--particularly Brazil, where prices are coming down and
subscriber growth is exploding.
*All fund returns referenced in this interview are for Investor Class shares.
(+)Past performance is no guarantee of future results.
[left margin]
"The global proliferation and spread of information technology is serving as
the catalyst for growth in a number of industries and regions of the world."
PORTFOLIO AT A GLANCE
11/30/98 11/30/97
NO. OF COMPANIES 121 113
MEDIAN MARKET $658 $894
CAPITALIZATION MILLION MILLION
PORTFOLIO TURNOVER 270% 36%(1)
EXPENSE RATIO 2.00% 2.00%(2)
(1) For the period from 9/30/97 to 11/30/97.
(2) Annualized.
Investment terms are defined in the Glossary on page 49.
24 1-800-345-2021
Emerging Markets--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHICH STOCKS CONTRIBUTED THE MOST TO RETURNS?
Two of Emerging Markets' top-performing stocks, Wipro Ltd. and Softbank,
are computer software manufacturers whose growth is being driven by their unique
competitive advantages. Wipro, which we discussed in our semiannual report, has
been a major contributor to returns. Softbank is a Polish company that provides
software for the Polish financial services industry.
Until recently, Poland's banking system was much like that in the United
States in the 1970s. The country's telecommunications and information technology
infrastructures limited its banking industry to small branch banks. Now large
regional banks are becoming more national in scope and, with improved
telecommunications, are interconnecting their scattered operations, which has
resulted in greater need for the types of integrated software and services that
Softbank provides.
One distinct advantage this company has over foreign software and service
providers is that it has no language barrier to contend with in Poland. The
company is also providing software for Poland's pension fund industry, which is
undergoing reform as well. Poland is in the early stages of both efforts, and we
believe Softbank is ideally positioned to benefit from that growth going
forward.
Another top contributor was MMI Holdings, a small electronics parts company
in Singapore. It manufactures essential parts for hard disk drives, and its
largest clients are Japanese computer manufacturers. The company is benefiting
from robust industry growth and demand for product in the ultra-thin notebook
segment.
Chipita was another large holding that performed well. Chipita is a Greek
manufacturer of packaged foods. Its core products are packaged croissants, which
are very popular across Europe, especially in Spain and Greece. Chipita's
management is very aggressive and the company is expanding rapidly through
acquisitions in other parts of Europe. We are very pleased with Chipita's
performance, and we believe it has excellent potential for continued rapid
growth in earnings and revenues.
WHICH REGIONS OR SECTORS HURT PERFORMANCE?
The global economic problems that began in Southeast Asia in late 1997
spread to a number of emerging markets, including Russia and Brazil, and that's
where we felt the most pain. In late August, Russia defaulted on its sovereign
debt and, shortly thereafter, Brazil came under pressure due to emerging
markets' contagion and real concerns about its fiscal situation. If there was a
theme or common thread among the fund's underperforming stocks, it was that, in
nearly each case, the companies suffered due to their country's economic
problems rather than any weaknesses in their fundamental operations.
This was the case with our Brazilian holdings. Concerns about whether
Brazil would have to devalue its currency and how it would address its budgetary
and pension system problems hammered stock prices across the board, without
regard to a company's industry, sector or fundamental health. Telemig is a good
example. We believed that the cellular services industry would continue to
thrive, but the stock was punished when the country's larger economic problems
became an issue. However, the IMF developed a $40 billion package to shore up
Brazil in the third quarter, and we saw the market begin to turn around. We
stuck to our growth philos-
[right margin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
MMI HOLDINGS LIMITED 2.0% --
FOLLI-FOLLIE ABEE 1.9% 2.1%
CHIPITA INTERNATIONAL
S.A. 1.9% 1.4%
SOFTBANK S.A. GDR 1.8% 1.2%
TELE CELULAR SUL
PARTICIPACOES S.A. 1.8% --
COMPANHIA DE
SANEAMENTO BASICO
DO ESTADO DE
SAO PAULO 1.7% 0.6%
EMBRATEL
PARTICIPACOES S.A. 1.6% --
OY HARTWALL AB 1.6% 1.8%
PHILIPPINE LONG
DISTANCE TELEPHONE
COMPANY ADR 1.5% 1.2%
TELE SUDESTE CELULAR
PARTICIPACOES S.A. 1.4% --
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
11/30/98 5/31/98
WIRELESS
COMMUNICATIONS 11.1% 2.6%
BANKING 11.0% 12.3%
UTILITIES 10.1% 5.3%
TELEPHONE
COMMUNICATIONS 9.7% 10.8%
ELECTRICAL & ELECTRONIC
COMPONENTS 9.0% 5.7%
www.americancentury.com 25
Emerging Markets--Q&A
- --------------------------------------------------------------------------------
(Continued)
ophy throughout the darkest times, and that enabled us to bounce back
substantially in October and November.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE LAST SIX MONTHS?
We increased holdings in several countries in Southeast Asia, where the
investing environment in general has improved as interest rates have come down,
borrowing costs have eased, and money is once again coming back into the
economy. Specifically, we increased weightings in Thailand and South Korea,
whose governments are changing laws that should encourage and enable healthy and
needed reform in those countries' financial systems. South Korea also is
rationalizing its corporate structure and making the chaebols--their big
corporate conglomerates--focus on core operations, which in some cases means
specific industries. This should reduce capacity and rationalize several
industries and, over the long run, stimulate growth. Both countries are also
beginning to benefit from the devaluation of their currencies in 1998.
On the sell side, we reduced holdings in Israel, particularly in the
banking sector, following that country's interest-rate hikes. We also reduced
the fund's position in Mexico because we don't anticipate much near-term growth
there soon, given the country's rather serious economic problems. Money flows
into Mexico are based on commodity prices, and oil prices are at a record low.
This does not bode well for stock prices going forward. We have limited our
holdings there to consumer-based companies, such as CIE, which is Mexico's
equivalent of Ticket Master here in the United States, and Femsa, a beer company
whose exports are very strong. We believe these consumer-based companies will
continue to demonstrate growth in earnings because consumers in Mexico, like
those here in the States, are continuing to spend.
WHAT IS YOUR OUTLOOK FOR EMERGING MARKETS?
We believe the emerging marketplace has changed dramatically, and for the
better, over the course of the last year. Not only has the investment community
of emerging markets learned hard lessons about risk and reward, but so have the
countries and companies themselves. The turmoil of the last six months has
forced companies to restructure their operations and practice better corporate
governance. A fine example is a large Polish company that had recently removed
management that deceived shareholders after concerted pressure was put on them
to do so. The company's stock price rebounded significantly in response to these
actions. In addition, many excesses have been worked out of the system, and more
rational thought processes appear to be in place. We will very likely see
investment decisions that are based more on fundamental logic rather than
excessive, speculative trading driven by unfounded fears.
[left margin]
TYPES OF INVESTMENTS IN THE PORTFOLIO
AS OF NOVEMBER 30, 1998
[pie chart - data below]
Temporary Cash Investments 4.7%
Preferred Stocks 13.2%
Common Stocks, Rights & Warrants 82.1%
AS OF MAY 31, 1998
[pie chart - data below]
Temporary Cash Investments 3.9%
Preferred Stocks 8.2%
Common Stocks, Rights & Warrants 87.9%
EMERGING MARKET'S INVESTMENTS BY COUNTRY
[bar chart - data below]
11/30/98 5/31/98
Brazil 15.9% 11.2%
Greece 7.5% 9.6%
South Africa 6.8% 9.2%
Poland 5.9% 5.4%
Hong Kong 5.6% 1.5%
Singapore 5.1% 0.0%
South Korea 4.2% 0.4%
Hungary 4.1% 1.8%
Mexico 4.1% 4.4%
Other 40.8% 56.5%
26 1-800-345-2021
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS, RIGHTS & WARRANTS-82.1%
ARGENTINA-3.6%
10,500 Banco de Galicia y Buenos
Aires S.A. de C.V. ADR $225,094
(banking)
100,000 Banco del Suquia S.A. 146,021
(banking)
6,000 Mirgor S.A.C.I.F.I.A. Cl C 88,813
(automobiles & auto parts)
10,000 YPF Sociedad Anonima ADR 295,000
-----------------
(energy-production & marketing)
754,928
-----------------
BRAZIL-2.7%
330,000 Centrais Eletricas de
Santa Catarina S.A. 208,739
(utilities)
3,330,000 Companhia de Saneamento Basico
do Estado de Sao Paulo 365,844
-----------------
(utilities)
574,583
-----------------
CANADA(2)
29,297 Sedna Geotech, Inc. Warrants(1) 0
-----------------
(metals & mining)
CHILE-1.9%
8,000 Companhia de Telecomunicaciones
de Chile S.A. ADR 185,500
(telephone communications)
9,000 Enersis S.A. ADR 210,375
-----------------
(utilities)
395,875
-----------------
CROATIA-1.4%
19,000 Pliva d.d. GDR 296,875
-----------------
(pharmaceuticals)
CZECH REPUBLIC-1.9%
7,000 Ceske Radiokomunikace(1) 203,951
(business services & supplies)
1,573 Prazska Energetika a.s. 66,025
(utilities)
1,668 Stredoceska Energetika a.s.(1) 73,568
(utilities)
1,605 Vychodoceska Energetika (VCE)(1) 59,895
-----------------
(utilities)
403,439
-----------------
EGYPT-3.1%
7,000 A-Ahram Beverages Co. GDR 201,075
(food & beverage)
13,000 EFG-Hermes Holding, S.A.E. GDR(1) 138,125
(financial services)
51,666 Egyptian Mobile Phone Network(1) 307,918
-----------------
(wireless communications)
647,118
-----------------
Shares Value
- --------------------------------------------------------------------------------
FINLAND-1.6%
15,000 OY Hartwall AB $334,854
-----------------
(food & beverage)
GREECE-7.5%
13,333 Chipita International S.A. 401,636
(food & beverage)
3,730 Ethniki General Insurance Co. 105,604
(insurance)
27,500 Folli-Follie Abee 402,349
(retail-general merchandise)
4,000 Hellenic Telecommunication
Organization SA (OTE) 99,884
(telephone communications)
500 National Bank of Greece S.A. 89,491
(banking)
8,225 Panafon SA(1) 147,531
(wireless communications)
3,000 Piraeus Bank S.A. 143,010
(banking)
5,000 Sarantis S.A. 63,834
(retail-general merchandise)
1,600 STET Hellas Telecommunications
S.A. ADR(1) 55,700
(wireless communications)
1,000 Titan Cement Company S.A. 73,858
-----------------
(construction & property
development)
1,582,897
-----------------
HONG KONG-5.6%
1,500,000 Anhui Conch Cement Co.
LTD Cl H(1) 182,112
(construction & property
development)
600,000 Beijing Datang Power Generation
Company Ltd. (Acquired
9/17/98 - 9/24/98,
Cost $139,551)(3) 193,736
(utilities)
550,000 Cafe De Coral Holdings 177,591
(food & beverage)
70,000 Cheung Kong Infrastructure Holdings 167,711
(construction & property
development)
5,000 China Telecom (Hong Kong)
Limited ADR(1) 197,813
(wireless communications)
110,000 Ng Fung Hong Limited 98,030
(food & beverage)
60,000 Wing Hang Bank Ltd. 166,613
-----------------
(banking)
1,183,606
-----------------
See Notes to Financial Statements
www.americancentury.com 27
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
HUNGARY-4.1%
7,000 BorsodChem Rt. $184,244
(chemicals & resins)
8,000 Magyar Tavkozlesi Rt. ADR 218,500
(telephone communications)
12,000 Mezogazdasagi Gepgyarto
Reszvenytarsasag(1) 156,284
(automobiles & auto parts)
5,000 MOL Magyar Olaj-es Gazipari Rt. 116,462
(energy-services)
7,000 Pannonplast Rt. 193,488
-----------------
(chemicals & resins)
868,978
-----------------
INDIA-3.3%
7,117 Hero Honda Motors Ltd. 91,230
(leisure)
4,000 Hindalco Industries Ltd. GDR 45,900
(metals & mining)
3,000 Infosys Technologies Ltd. 164,533
(electrical & electronic
components)
2,005 Larsen & Toubro Ltd. 6,876
(diversified companies)
2,000 NIIT Limited 64,451
(computer software & services)
12,000 Pentafour Software & Exports Ltd. 137,123
(computer software & services)
50 SmithKline Beecham Consumer
Healthcare Ltd. 588
(pharmaceuticals)
4,600 Wipro Limited 181,515
-----------------
(computer peripherals)
692,216
-----------------
LITHUANIA-0.6%
18,000 Vilniaus Bankas AB GDR(1) 134,965
-----------------
(banking)
MEXICO-4.1%
110,000 Corporacion Interamericana
de Entretenimiento S.A. Cl B(1) 252,165
(leisure)
80,000 Fomento Economico Mexica UBD 185,395
(food & beverage)
40,000 Grupo Elektra, S.A. de C.V. GDR 212,500
(retail-general merchandise)
25,000 Grupo Iusacell S.A. de C.V.
Series L ADR(1) 206,250
-----------------
(wireless communications)
856,310
-----------------
PERU-1.6%
11,000 Cementos Lima, S.A. 161,868
(building & home improvements)
170,000 Ferreyros S.A. 166,955
-----------------
(machinery &
equipment)
328,823
-----------------
Shares Value
- --------------------------------------------------------------------------------
PHILIPPINES-2.6%
1,000,000 International Container Terminal
Services, Inc.(1) $88,832
(transportation)
20,000 Metropolitan Bank & Trust Co. 140,863
(banking)
12,000 Philippine Long Distance
Telephone Company ADR 314,250
-----------------
(telephone communications)
543,945
-----------------
POLAND-5.9%
4,000 Bank Polska Kasa Opieke Grupa
Pekao S.A.(1) 44,202
(banking)
1,800 Bank Przemyslowo-Handlowy S.A. 95,321
(banking)
175,000 BIG Bank Gdanski SA 185,850
(banking)
21,131 Elektrim Spolka Akcyjna S.A. 177,709
(electrical & electronic
components)
20,000 Mostostal-Warszawa S.A.(1) 86,108
(construction & property
development)
22,000 Orbis S.A.(1) 167,336
(hotels)
17,000 Softbank S.A. GDR 375,700
(electrical & electronic
components)
24,000 Telekomunikacja Polska S.A.(1) 112,200
-----------------
(telephone communications)
1,244,426
-----------------
PORTUGAL-3.3%
2,050 Banco Espirito Santo e Comercial
de Lisboa, SA 63,605
(banking)
4,200 Banco Portugues do Atlantico(1) 83,234
(banking)
4,000 Brisa-Auto Estradas de Portugal, S.A. 216,359
(construction & property
development)
2,000 Portugal Telecom S.A. 86,935
(telephone communications)
1,200 Telecel-Comunicacaoes Pessoais, SA 234,773
-----------------
(wireless communications)
684,906
-----------------
RUSSIAN FEDERATION-3.0%
3,000 Lukoil Holding ADR 62,250
(energy-services)
36,000 Rostelecom ADR 229,500
(telephone communications)
15,000 SUN Brewing Ltd. GDR(1) 48,697
(food & beverage)
15,000 Unified Energy Systems ADR 68,438
(utilities)
See Notes to Financial Statements
28 1-800-345-2021
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
12,000 Vimpel-Communications ADR(1) $217,500
-----------------
(wireless communications)
626,385
-----------------
SINGAPORE-5.1%
55,000 City Developments Limited 261,984
(real estate)
3,000 Creative Technology Limited(1) 55,158
(computer peripherals)
140,000 Datacraft Asia Limited 229,600
(electrical & electronic components)
600,000 MMI Holdings Limited(1) 429,612
(electrical & electronic
components)
46,000 Natsteel Electronics Ltd. 99,369
-----------------
(electrical & electronic
components)
1,075,723
-----------------
SOUTH AFRICA-6.8%
16,000 Anglo American Platinum
Corp. Limited 258,688
(metals & mining)
25,000 Comparex Holdings Limited 232,854
(computer software & services)
4,000 DataTec Limited 44,146
(computer peripherals)
35,350 Foschini Limited(1) 55,290
(retail-general merchandise)
3,000 Investec Holdings Limited 104,811
(financial services)
9,000 Liberty Life Association of Africa Ltd. 153,895
(insurance)
100,000 M-Cell Limited 127,762
(electrical & electronic components)
30,000 Primedia Limited Cl N 69,593
(diversified companies)
4,411 Primedia Limited Rights(1) 116
(diversified companies)
60,000 Real Africa Holdings Limited(1) 168,710
(insurance)
45,000 Softline Limited(1) 47,608
(computer software & services)
10,000 South African Breweries Ltd. 169,237
-----------------
(food & beverage)
1,432,710
-----------------
SOUTH KOREA-4.2%
2,200 Dae Duck Electronics Co.(1) 176,565
(electrical & electronic
components)
18,000 Housing & Commercial Bank, Korea 122,937
(banking)
10,000 Korea Electric Power Corp. 192,616
(utilities)
Shares Value
- --------------------------------------------------------------------------------
15,000 Medison Co. $177,568
(medical equipment & supplies)
20,000 SK Telecom Co. Ltd. ADR 206,250
-----------------
(telephone communications)
875,936
-----------------
SPAIN-1.8%
6,500 Melia Inversiones Americanas, N.V.(1) 202,660
(hotels)
2,500 Radiotronica SA(1) 182,597
-----------------
(communications equipment)
385,257
-----------------
TAIWAN (PEOPLE'S REPUBLIC
OF CHINA)-2.3%
17,000 Asustek Computer Inc.(1) 149,600
(computer peripherals)
40,000 Compal Electronics Inc.(1) 134,998
(computer peripherals)
21,000 Hon Hai Precision Industry(1) 113,916
(electrical & electronic
components)
40,000 Lee Chi Enterprises Co., Ltd.(1) 90,615
-----------------
(leisure)
489,129
-----------------
THAILAND-3.7%
20,000 Advanced Info Service
Public Co. Limited(1) 116,183
(wireless communications)
300,000 Cogeneration Public Co., Ltd. (The)(1) 232,365
(utilities)
32,000 Compass East Industry (Thailand)
Public Co. Limited 185,892
(consumer products)
513,000 National Finance and Securities
Public Co., Ltd. Cl F(1) 170,290
(financial services)
40,000 Siam Makro Public Co. Limited 82,988
-----------------
(retail-general merchandise)
787,718
-----------------
TUNISIA-0.4%
10,000 Banque Internationale Arabe
Tunisie GDR(1) 93,750
-----------------
(banking)
TURKEY(2)
568,800 Yapi ve Kredi Bankasi A.S.(1) 6,930
-----------------
(banking)
TOTAL COMMON STOCKS,
RIGHTS & WARRANTS 17,302,282
-----------------
(Cost $15,326,365)
See Notes to Financial Statements
www.americancentury.com 29
Emerging Markets--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
Shares Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS-13.2%
BRAZIL
6,000,000 Banco do Estado de Sao
Paulo S.A.-Banespa $290,137
(banking)
530,000 Banco Itau S.A. 295,547
(banking)
10,070,000 Centrais Electricas
Brasileiras S.A. Cl B 284,960
(utilities)
18,000,000 Companhia Paranaense de
Energia-Copel 173,034
(utilities)
21,000,000 Embratel Participacoes S.A.(1) 340,824
(telephone communications)
1,990,000 Petroleo Brasileiro S.A. 283,221
(energy-production & marketing)
165,000,000 Tele Celular Sul Participacoes S.A.(1) 370,787
(wireless communications)
55,000,000 Tele Sudeste Celular
Participacoes S.A.(1) 297,545
(wireless communications)
19,000,000 Telesp Celular Participacoes S.A.(1) 196,088
(wireless communications)
9,000,000 Telesp Participacoes S.A.(1) 252,434
-----------------
(telephone communications)
TOTAL PREFERRED STOCKS 2,784,577
-----------------
(Cost $2,187,376)
Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS-4.7%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.18%, dated 11/30/98,
due 12/1/98 (Delivery value $1,000,144) $1,000,000
-----------------
(Cost $1,000,000)
TOTAL INVESTMENT SECURITIES-100.0% $21,086,859
=================
(Cost $18,513,741)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
(1) Non-income producing.
(2) Investments in country were less than 0.05% of the total investment
securities.
(3) 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 1998, was $193,736, which represented 0.9% of net
assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* the percentage of total investments in each country
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
30 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
NOVEMBER 30, 1998
ASSETS
<S> <C> <C> <C>
Investment securities, at value (identified cost of $2,047,292,330,
$674,112,346 and $18,513,741, respectively) (Note 3) ............ $ 2,504,458,616 $ 846,297,623 $ 21,086,859
Foreign currency holdings, at value (identified cost
of $502,754, $2,332,699, and $548,567, respectively) ............ 502,294 2,330,832 546,827
Cash .............................................................. 12,397,306 1,838,321 36,251
Receivable for forward foreign currency exchange contracts ........ 1,280,787 195,853 --
Receivable for investments sold ................................... 43,797,263 14,850,691 160,848
Dividends and interest receivable ................................. 4,478,959 1,252,362 67,945
--------- --------- ------
2,566,915,225 866,765,682 21,898,730
============= =========== ==========
LIABILITIES
Disbursements in excess of demand deposit cash .................... 9,385,319 599,522 179,131
Payable for forward foreign currency exchange contracts ........... 772,720 227,547 --
Payable for investments purchased ................................. 40,213,301 19,757,176 520,721
Payable for capital shares redeemed ............................... 30,536,974 2,616,245 40,694
Accrued management fees (Note 2) .................................. 2,637,007 1,083,817 34,040
Distribution fees payable (Note 2) ................................ 4,248 2 --
Service fees payable (Note 2) ..................................... 4,248 2 --
Accrued directors' fees and expenses .............................. 2,505 824 21
--------- --------- ------
83,556,322 24,285,135 774,607
---------- ---------- -------
Net Assets ........................................................ $ 2,483,358,903 $ 842,480,547 $ 21,124,123
=============== =============== ===============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) ........................... $ 2,026,539,731 $ 677,027,718 $ 25,742,334
Undistributed net investment income (loss) ........................ 4,639,770 (142,872) (41,813)
Accumulated undistributed net realized loss from investments
and foreign currency transactions ............................... (5,542,639) (6,639,430) (7,150,338)
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies (Note 3) ........ 457,722,041 172,235,131 2,573,940
- ----------- ----------- ---------
$ 2,483,358,903 $ 842,480,547 $ 21,124,123
=============== =============== ===============
Investor Class, $0.01 Par Value
Net assets ........................................................ $ 2,448,162,288 $ 781,551,408 $ 21,124,123
Shares outstanding ................................................ 264,564,244 84,567,310 6,049,600
Net asset value per share ......................................... $ 9.25 $ 9.24 $ 3.49
Advisor Class, $0.01 Par Value
Net assets ........................................................ $ 21,634,702 $ 10,708 N/A
Shares outstanding ................................................ 2,341,926 1,162 N/A
Net asset value per share ......................................... $ 9.24 $ 9.22 N/A
Institutional Class, $0.01 Par Value
Net assets ........................................................ $ 13,561,913 $ 60,918,431 N/A
Shares outstanding ................................................ 1,462,182 6,589,252 N/A
Net asset value per share ......................................... $ 9.28 $ 9.25 N/A
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the Fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses; net
gains earned on investments but not yet paid to shareholders or net losses on
investments (known as realized gains or losses); and finally, gains or losses on
securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
www.americancentury.com 31
<TABLE>
<CAPTION>
Statements of Operations
- --------------------------------------------------------------------------------
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
YEAR ENDED NOVEMBER 30, 1998
INVESTMENT INCOME (LOSS)
<S> <C> <C> <C>
Income:
Dividends (net of foreign taxes withheld of
$4,348,895, $1,030,663, and $39,665, respectively) ........................... $ 31,719,553 $ 8,311,152 $ 377,984
Interest ....................................................................... 5,252,502 1,729,438 2,972
--------- --------- -----
36,972,055 10,040,590 380,956
---------- ---------- -------
Expenses (Note 2):
Management fees ................................................................ 29,603,086 12,770,008 387,349
Distribution fees -- Advisor Class ............................................. 36,305 16 --
Service fees -- Advisor Class .................................................. 36,305 16 --
Directors' fees and expenses ................................................... 21,283 7,414 182
---------- ---------- -------
29,696,979 12,777,454 387,531
---------- ---------- -------
Net investment income (loss) ................................................... 7,275,076 (2,736,864) (6,575)
---------- ---------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 3)
Net realized gain (loss) on:
Investments .................................................................... 16,889,199 1,070,566 (5,353,154)
Foreign currency transactions .................................................. (6,972,706) (4,527,226) (1,145,696)
---------- ---------- -------
9,916,493 (3,456,660) (6,498,850)
---------- ---------- -------
Change in net unrealized appreciation (depreciation) on:
Investments .................................................................... 260,593,326 65,047,554 3,306,542
Translation of assets and liabilities in foreign currencies .................... 28,512,312 12,084,204 266,088
---------- ---------- -------
289,105,638 77,131,758 3,572,630
----------- ---------- ---------
Net realized and unrealized gain(loss)
on investments and foreign currency ............................................ 299,022,131 73,675,098 (2,926,220)
----------- ---------- ----------
Net Increase (Decrease) in Net Assets Resulting from Operations ................ $ 306,297,207 $ 70,938,234 $ (2,932,795)
============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* income earned from investments (dividend and interest)
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
32 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEARS ENDED NOVEMBER 30, 1998 AND NOVEMBER 30, 1997 Increase in Net Assets
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
1998 1997 1998 1997 1998 1997(1)
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ...... $ 7,275,076 $ 468,044 $ (2,736,864) $ (2,060,141) $ (6,575) $ (12,297)
Net realized gain (loss)
on investments and
foreign currency transactions ... 9,916,493 229,010,260 (3,456,660) 32,550,517 (6,498,850) (758,197)
Change in net unrealized
appreciation (depreciation)
on investments and translation
of assets and liabilities
in foreign currencies ........... 289,105,638 18,520,872 77,131,758 47,358,619 3,572,630 (998,690)
----------- ---------- ---------- ---------- --------- --------
Net increase (decrease) in net
assets
resulting from operations ....... 306,297,207 247,999,176 70,938,234 77,848,995 (2,932,795) (1,769,184)
----------- ---------- ---------- ---------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .................. (5,227,590) (5,636) (1,491,376) (862,734) -- --
Advisor Class ................... (5,388) -- -- -- -- --
Institutional Class ............. (57,980) -- -- -- -- --
From net realized gains on
investment
transactions:
Investor Class .................. (237,083,658) (140,384,782) (33,708,327) (16,063,439) -- --
Advisor Class ................... (1,325,086) (405,850) -- -- -- --
Institutional Class ............. (2,488,279) -- -- -- -- --
----------- ---------- ---------- ---------- --------- --------
Decrease in net assets
from distributions ............. (246,187,981) (140,796,268) (35,199,703) (16,926,173) -- --
----------- ---------- ---------- ---------- --------- --------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets from
capital share transactions ...... 666,675,328 302,960,946 180,415,416 188,275,387 12,227,403 13,598,699
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets ........ 726,784,554 410,163,854 216,153,947 249,198,209 9,294,608 11,829,515
NET ASSETS
Beginning of period ............... 1,756,574,349 1,346,410,495 626,326,600 377,128,391 11,829,515 --
------------- ------------- ----------- ----------- ----------
End of period ..................... $ 2,483,358,903 $ 1,756,574,349 $ 842,480,547 $ 626,326,600 $ 21,124,123 $ 11,829,515
=============== =============== ============= ============= ============ ============
Undistributed net
investment income (loss) ....... $ 4,639,770 $ 5,233,208 $ (142,872) $ 1,404,025 $ (41,813) --
=============== =============== ============= ============= ============ ============
</TABLE>
(1) September 30, 1997 (inception) through November 30, 1997.
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 33
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOVEMBER 30, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century World Mutual Funds, Inc. (the Corporation)
is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Three series of funds are currently
issued as American Century - Twentieth Century International Growth Fund
(International Growth), American Century - Twentieth Century International
Discovery Fund (International Discovery), and American Century - Twentieth
Century Emerging Markets Fund (Emerging Markets) (the Funds). The Funds'
investment objective is to seek capital growth by investing primarily in equity
securities. International Growth seeks to achieve its investment objective by
investing in securities of issuers in developed markets. International Discovery
seeks to achieve its investment objective by investing in issuers having
comparatively smaller market capitalizations. Emerging Markets seeks to achieve
its investment objective by investing in issuers in emerging market countries.
Each Fund is authorized to issue three classes of shares: the Investor Class,
the Advisor Class and the Institutional Class. The three classes of shares
differ principally in their respective shareholder servicing and distribution
expenses and arrangements. All shares of each Fund represent an equal pro rata
interest in the net assets of the class to which such shares belong, and have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except for class specific expenses and exclusive rights to vote on
matters affecting only individual classes. Sale of the Advisor Class and
Institutional Class for International Discovery commenced on April 28, 1998 and
January 2, 1998, respectively. Sale of the Advisor Class and Institutional Class
for Emerging Markets had not commenced as of November 30, 1998. The following
significant accounting policies are in accordance with generally accepted
accounting principles.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or the mean of
the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any)
is recorded as of the ex-dividend date. Interest income is recorded on the
accrual basis and includes accretion of discounts and amortization of premiums.
FOREIGN CURRENCY TRANSACTIONS -- The accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities initially expressed in
foreign currencies are translated 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,
34 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
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, purchased in a repurchase transaction be transferred
to the custodian in a manner sufficient to enable the Funds to obtain those
securities in the event of a default under the repurchase agreement. ACIM
monitors, on a daily basis, the value of the securities transferred to ensure
the value, including accrued interest, of the securities under each repurchase
agreement is greater than amounts owed to the Funds under each repurchase
agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, each Fund along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
INCOME TAX STATUS -- It is the 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 reflect the differing character
of certain income items and net capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.
On December 18, 1998, International Growth and International Discovery
declared and paid a distribution to shareholders of record on that date. The
distributions from net investment income in International Growth were $0.0166,
$0.0045, and $0.0374 for the Investor, Advisor, and Institutional Classes,
respectively. The distribution from net realized gain on investments was $0.1445
for all classes of International Growth. The distribution from net realized gain
on investments was $0.0343 for all classes of International Discovery.
At November 30, 1998, Emerging Markets had accumulated net realized capital
loss carryovers for federal income tax purposes of $6,440,968 (expiring in 2005
through 2006) which may be used to offset future taxable gains.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the
Corporation's distributor. Certain officers of FDI are also officers of the
Corporation.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The Corporation has entered into Management Agreements with ACIM that
provide each Fund with investment advisory and management services in exchange
for a single, unified management fee per class. The Agreements provide that all
expenses of the Funds, except brokerage commissions, taxes, interest, expenses
of those directors who are not considered "interested persons" as defined in the
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on each class's average daily closing net assets during the previous month.
The annual management fee for each class of International Growth is as
follows:
INVESTOR ADVISOR INSTITUTIONAL
CLASS CLASS CLASS
AVERAGE NET ASSETS
First $1 billion ......... 1.50% 1.25% 1.30%
Of the next $1 billion ... 1.20% 0.95% 1.00%
Over $2 billion .......... 1.10% 0.85% 0.90%
www.americancentury.com 35
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
The annual management fee for each class of International Discovery is as
follows:
INVESTOR ADVISOR INSTITUTIONAL
CLASS CLASS CLASS
AVERAGE NET ASSETS
First $500 million ........1.75% 1.50% 1.55%
Of the next $500 million ..1.40% 1.15% 1.20%
Over $1 billion ...........1.20% 0.95% 1.00%
The annual management fee for the Investor Class of Emerging Markets is as
follows:
INVESTOR
CLASS
AVERAGE NET ASSETS
First $500 million ............................................... 2.00%
Of the next $500 million ......................................... 1.50%
Over $1 billion .................................................. 1.25%
The Board of Directors has adopted the Advisor Class Master Distribution
and Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Plan provides that the Funds will pay ACIM
an annual distribution fee equal to 0.25% and service fee equal to 0.25%. The
fees are computed daily and paid monthly based on the Advisor Class's average
daily closing net assets during the previous month. The distribution fee
provides compensation for distribution expenses incurred by financial
intermediaries in connection with distributing shares of the Advisor Class
including, but not limited to, payments to brokers, dealers, and financial
institutions that have entered into sales agreements with respect to shares of
the Funds. The service fee provides compensation for shareholder and
administrative services rendered by ACIM, its affiliates or independent third
party providers. Fees incurred under the Plan during the period ended November
30, 1998, were $72,610 and $32 for International Growth and International
Discovery, respectively.
Certain officers and directors of the Corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Corporation's investment manager, ACIM, and
the Corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
November 30, 1998, were as follows:
INNTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
Purchases ............. $4,551,667,777 $1,455,608,255 $59,539,153
Proceeds From Sales ... $4,085,523,801 $1,347,982,400 $48,501,068
36 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS (CONTINUED)
On November 30, 1998, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
Appreciation ............ $ 439,783,099 $ 183,149,040 $ 3,215,300
Depreciation ............ (26,886,261) (20,677,685) (1,351,553)
----------- ----------- ----------
Net ..................... $ 412,896,838 $ 162,471,355 $ 1,863,747
=============== ============= ============
Federal Tax Cost ........ $ 2,091,561,778 $ 683,826,268 $ 19,223,112
=============== ============= ============
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C> <C> <C>
Authorized shares ................. 400,000,000 220,000,000 50,000,000
=========== =========== ==========
Year ended November 30, 1998
Sold .............................. 338,695,442 $3,150,048,946 39,468,455 $378,281,301 11,437,641 $43,805,177
Issued in reinvestment of
distributions .................. 29,659,031 237,081,794 4,246,933 33,877,525 -- --
Redeemed .......................... (291,295,313) (2,728,685,938) (32,494,579) (295,297,992) (8,239,183) (31,577,774)
------------ -------------- ----------- ------------ ---------- -----------
Net increase ...................... 77,059,160 $658,444,802 11,220,809 $116,860,834 3,198,458 $12,227,403
========== ============ ========== ============ ========= ===========
Year ended November 30, 1997(1)
Sold .............................. 139,809,145 $1,274,757,814 39,820,482 $327,139,130 3,580,134 $16,726,066
Issued in reinvestment
of distributions ............... 17,809,533 137,887,292 2,369,407 16,757,464 -- --
Redeemed .......................... (123,985,637) (1,133,838,821) (18,446,269) (155,621,207) (728,992) (3,127,367)
------------ -------------- ----------- ------------ -------- ----------
Net increase ...................... 33,633,041 $ 278,806,285 23,743,620 $188,275,387 2,851,142 $13,598,699
========== ============== ========== ============ ========= ===========
ADVISOR CLASS
Authorized shares ................. 50,000,000 10,000,000
========== ==========
Year ended November 30, 1998(2)
Sold .............................. 1,970,051 $18,561,418 1,162 $11,728
Issued in reinvestment
of distributions ............... 166,517 1,330,469 -- 6
Redeemed .......................... (785,223) (7,325,105) -- --
---------- ---------- ---------- ----------
Net increase ...................... 1,351,345 $12,566,782 1,162 $11,734
========== ============== ========== ============
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
======= ==========
www.americancentury.com 37
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
NOVEMBER 30, 1998
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in shares of the Funds were as follows:
INTERNATIONAL INTERNATIONAL EMERGING
GROWTH DISCOVERY MARKETS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INSTITUTIONAL CLASS
Authorized shares ................... 50,000,000 25,000,000
========== ==========
Year ended November 30, 1998(3)
Sold ................................ 4,437,498 $42,547,908 8,496,060 $81,509,088
Issued in reinvestment
of distributions ................. 318,681 2,546,259 -- --
Redeemed ............................ (5,337,650) (49,430,423) (1,906,808) (17,966,240)
---------- ----------- ---------- -----------
Net increase (decrease) ............. (581,471) $(4,336,256) 6,589,252 $63,542,848
======== =========== ========= ===========
Period ended November 30, 1997(4)
Sold ................................ 2,043,653 $19,065,399
========= ===========
</TABLE>
(1) September 30, 1997 (inception) through November 30, 1997 for Emerging
Markets.
(2) April 28, 1998 (commencement of sale) through November 30, 1998 for
International Discovery.
(3) January 2, 1998 (commencement of sale) through November 30, 1998 for
International Discovery.
(4) November 20, 1997 (commencement of sale) through November 30, 1997.
- --------------------------------------------------------------------------------
5. AFFILIATED COMPANY TRANSACTIONS
A summary of transactions for each issuer which is or was an affiliate at or
during the year ended November 30, 1998, follows:
<TABLE>
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND
FUND/ISSUER NOV. 30, 1997 COST COST GAIN INCOME SHARE BALANCE MARKET VALUE
INTERNATIONAL DISCOVERY
<S> <C> <C> <C> <C> <C> <C> <C>
Oshap Technologies, Ltd. ..... 610,000 $323,421 $3,822,191 $272,206 -- -- --
PubliGroupe S.A. ............. -- 9,146,323 -- -- $80,069 19,590 $5,559,438
Tieto Corp. Cl B(1) .......... 110,000 -- 5,621,423 4,585,052 165,429 220,160(2) 7,991,832
--------- --------- --------- ------- ---------
$9,469,744 $9,443,614 $4,857,258 $245,498 $13,551,270
========== ========== ========== ======== ===========
</TABLE>
(1) Formerly known as TT Tieto OY.
(2) Includes adjustments for shares received from a stock split and/or stock
spinoff during the period.
- --------------------------------------------------------------------------------
6. BANK LOANS
Effective December 18, 1998, the Funds, along with certain other funds managed
by ACIM, have entered into an unsecured $570,000,000 bank line of credit
agreement with Chase Manhattan. Borrowings under the agreement bear interest at
the Federal Funds rate plus 0.40%.
38 1-800-345-2021
<TABLE>
<CAPTION>
International Growth--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30
Investor Class
1998 1997 1996 1995 1994
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ... $ 9.22 $ 8.73 $ 7.51 $ 7.47 $ 7.34
------------- ------------- ------------- ------------- -------------
Income From Investment Operations
Net Investment Income (Loss) ....... 0.03(1) -- (0.01)(1) 0.01 (0.04)
Net Realized and Unrealized Gain
on Investment Transactions ......... 1.31 1.41 1.24 0.40 0.57
------------- ------------- ------------- ------------- -------------
Total From Investment Operations ... 1.34 1.41 1.23 0.41 0.53
------------- ------------- ------------- ------------- -------------
Distributions
From Net Investment Income ......... (0.03) -- (0.01) -- --
From Net Realized Gains
on Investment Transactions ....... (1.28) (0.92) -- (0.37) (0.40)
------------- ------------- ------------- ------------- -------------
Total Distributions ................ (1.31) (0.92) (0.01) (0.37) (0.40)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Year ......... $ 9.25 $ 9.22 $ 8.73 $ 7.51 $ 7.47
============= ============= ============= ============= =============
Total Return(2) .................... 16.74% 18.12% 16.35% 5.93% 7.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............. 1.33% 1.38%(3) 1.65%(3) 1.77% 1.84%
Ratio of Net
Investment
Income (Loss) to Average
Net Assets ........................ 0.33% 0.04% (0.07)% 0.25% (0.53)%
Portfolio Turnover Rate .............. 190% 163% 158% 169% 242%
Net Assets, End of Year (in thousands) $ 2,448,162 $ 1,728,617 $ 1,342,608 $ 1,210,442 $ 1,316,642
</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 Management, Inc. voluntarily waived a portion of
its management fee effective August 1, 1996 through July 30, 1997. In
absence of the management fee waiver, the ratio of operating expenses to
average net assets would have been 1.56% and 1.76% for the years ended
November 30, 1997 and November 30, 1996, respectively.
- --------------------------------------------------------------------------------
UNDERSTANDNG THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 39
International Growth--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Advisor Class
1998 1997 1996(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 9.20 $ 8.72 $ 8.41
---------- ---------- ----------
Income From Investment Operations
Net Investment Loss .................. -- (0.03) (0.01)(2)
Net Realized and Unrealized Gain
on Investment Transactions ........ 1.33 1.43 0.32
---------- ---------- ----------
Total From Investment Operations ..... 1.33 1.40 0.31
---------- ---------- ----------
Distributions
From Net Investment Income ........... (0.01) -- --
From Net Realized Gains on
Investment Transactions ........... (1.28) (0.92) --
---------- ---------- ----------
Total Distributions .................. (1.29) (0.92) --
---------- ---------- ----------
Net Asset Value, End of Period ......... $ 9.24 $ 9.20 $ 8.72
========== ========== ==========
Total Return(3) ........................ 16.58% 17.97% 3.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 1.58% 1.63% 1.67%(4)
Ratio of Net Investment Income
(Loss) to Average Net Assets ........ 0.08% (0.21)% (0.76)%(4)
Portfolio Turnover Rate ................ 190% 163% 158%
Net Assets, End of Period (in thousands) $ 21,635 $ 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
40 1-800-345-2021
International Growth--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Institutional Class
1998 1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .............. $9.22 $9.26
----- -----
Income From Investment
Operations
Net Investment Income ........................... 0.05(2) --
Net Realized and Unrealized Loss
on Investment Transactions ................... 1.32 (0.04)
----- -----
Total From Investment Operations ................ 1.37 (0.04)
----- -----
Distributions
From Net Investment Income ...................... (0.03) --
From Net Realized Gains on
Investment Transactions ..................... (1.28) --
----- -----
Total Distributions ............................. (1.31) --
----- -----
Net Asset Value, End of Period .................... $9.28 $9.22
===== =====
Total Return(3) ................................. 17.14% (0.43)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .......................... 1.13% 1.18%(4)
Ratio of Net Investment Income (Loss)
to Average Net Assets .......................... 0.53% (0.53)%(4)
Portfolio Turnover Rate ........................... 190% 163%
Net Assets, End of Period (in thousands) .......... $13,562 $18,846
(1) November 20, 1997 (commencement of sale) through November 30, 1997.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
www.americancentury.com 41
International Discovery--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Investor Class
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............$ 8.54 $ 7.60 $ 5.70 $ 5.39 $ 5.00
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income (Loss) .................. (0.03)(2) (0.03) (0.02)(2) 0.03 (0.02)
Net Realized and Unrealized Gain on
Investment Transactions .................... 1.22 1.31 1.95 0.28 0.41
----------- ----------- ----------- ----------- -----------
Total From Investment Operations .............. 1.19 1.28 1.93 0.31 0.39
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income .................... (0.02) (0.02) (0.01) -- --
In Excess of Net Investment Income ............ -- -- (0.02) -- --
From Net Realized Gains
on Investment Transactions ................. (0.47) (0.32)
----------- ----------- ----------- ----------- -----------
Total Distributions ........................... (0.49) (0.34) (0.03) -- --
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................$ 9.24 $ 8.54 $ 7.60 $ 5.70 $ 5.39
=========== =========== =========== =========== ===========
Total Return(3) ............................... 14.79% 17.76% 34.06% 5.75% 7.80%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................ 1.64% 1.70%(4) 1.88%(4) 2.00% 2.00%(5)
Ratio of Net Investment
Income (Loss) to Average Net Assets .......... (0.36)% (0.37)% (0.31)% 0.27% (0.48)%(5)
Portfolio Turnover Rate ......................... 178% 146% 130% 168% 56%
Net Assets, End of Period (in thousands) $ 781,551 $ 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 Management, Inc. voluntarily waived a portion of
its management fee effective August 1, 1996 through July 30, 1997. In
absence of the management fee waiver, the ratio of operating expenses to
average net assets would have been 1.87% and 1.99% for the years ended
November 30, 1997 and November 30, 1996, respectively.
(5) Annualized.
- --------------------------------------------------------------------------------
UNDERSTANDNG THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
42 1-800-345-2021
International Discovery--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED NOVEMBER 30, 1998
Advisor Class
1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........................... $ 10.10
-------
Income From Investment Operations
Net Investment Income(2) ..................................... (0.02)
Net Realized and Unrealized Loss on Investment Transactions .. (0.86)
-------
Total From Investment Operations ............................. (0.88)
-------
Net Asset Value, End of Period ................................. $ 9.22
=======
Total Return(3) .............................................. (8.71)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets .............. 1.89%(4)
Ratio of Net Investment Loss to Average Net Assets ............. (0.60)%(4)
Portfolio Turnover Rate ........................................ 178%
Net Assets, End of Period ...................................... $10,708
(1) April 28, 1998 (commencement of sale) through November 30, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
www.americancentury.com 43
International Discovery--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED NOVEMBER 30, 1998
Institutional Class
1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .......................... $ 8.18
----------
Income From Investment Operations
Net Realized and Unrealized Gain on Investment Transactions . 1.07
----------
Total From Investment Operations ............................ 1.07
----------
Net Asset Value, End of Period ................................ $ 9.25
==========
Total Return(2) ............................................. 13.08%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ............. 1.44%(3)
Ratio of Net Investment Income to Average Net Assets .......... 0.00%(3)
Portfolio Turnover Rate ....................................... 178%
Net Assets, End of Period (in thousands) ...................... $ 60,918
(1) January 2, 1998 (commencement of sale) through November 30, 1998.
(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
44 1-800-345-2021
Emerging Markets--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED)
Investor Class
1998 1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ............. $ 4.15 $ 5.00
---------- ----------
Income From Investment Operations
Net Investment Loss(2) ......................... -- (0.01)
Net Realized and Unrealized Loss
on Investment Transactions .................. (0.66) (0.84)
---------- ----------
Total From Investment Operations ............... (0.66) (0.85)
---------- ----------
Net Asset Value, End of Period ................... $ 3.49 $ 4.15
========== ==========
Total Return(3) ................................ (15.90)% (17.00)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.00% 2.00%(4)
Ratio of Net Investment Loss to Average Net Assets (0.03)% (0.74)%(4)
Portfolio Turnover Rate .......................... 270% 36%
Net Assets, End of Period (in thousands) ......... $ 21,124 $ 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.
- --------------------------------------------------------------------------------
UNDERSTANDNG THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the fund is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 45
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
American Century 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., as of
November 30, 1998, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two periods in
the period then ended, and the financial highlights for the periods presented.
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.
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, 1998 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other 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 positions 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, 1998, the results of their operations
for the year then ended, the changes in their net assets for each of the two
periods in the period then ended, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Kansas City, Missouri
January 19, 1999
46 1-800-345-2021
Share Class and Retirement Account Information
- --------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the funds: INVESTOR
CLASS, ADVISOR CLASS, and INSTITUTIONAL CLASS. INVESTOR CLASS shareholders do
not pay any commissions or other fees for purchase of fund shares directly from
American Century. Investors who buy Investor Class shares through a
broker-dealer may be required to pay the broker-dealer a transaction fee. THE
PRICE AND PERFORMANCE OF THE INVESTOR CLASS SHARES ARE LISTED IN NEWSPAPERS. NO
OTHER CLASS IS CURRENTLY LISTED.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
INSTITUTIONAL CLASS shares are available to endowments, foundations,
defined benefit pension plans or financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million in an American
Century fund or at least $10 million in multiple funds. In recognition of the
larger investments and account balances and comparatively lower transaction
costs, the total expense ratio of the Institutional Class shares is 0.20% less
than the total expense ratio of the Investor Class shares.
The Advisor and Institutional Classes of shares for Emerging Markets had
not commenced as of November 30, 1998.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid for six
months from the date of receipt at American Century. Even if you plan to roll
over the amount you withdraw to another tax-deferred account, the withholding
rate still applies to the withdrawn amount unless we have received a written
notice not to withhold federal income tax within six months prior to the
withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 47
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
The Twentieth Century Group offers 11 equity funds that invest in the
stocks of growing companies, both domestically and internationally, using a
growth investment strategy developed by American Century. This philosophy
focuses on three important principles. Ideally, we seek to own companies whose
earnings and revenues are not only growing, but growing at a successfully
faster, or accelerating pace. Second, we attempt to keep the funds fully
invested, regardless of short-term market activity. Experience has shown that
market gains can occur in unpredictable spurts and that missing those
opportunities can significantly limit the potential for gain. Third, the funds
are managed by teams, rather than by one "star" manager. We believe this allows
us to make better, more consistent management decisions.
In addition to these principles, each fund has its own investment policies
INTERNATIONAL GROWTH invests primarily in the equity securities of foreign
companies. These companies will be located primarily in developed countries.
INTERNATIONAL DISCOVERY invests primarily in the equity securities of
smaller foreign companies. Smaller foreign companies are considered to be those
that have at the time of investment a market capitalization of less than the
U.S. $1.5 billion or less than U.S. $500 million in freely tradable securities.
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. The companies may be located or principally traded in
emerging market countries, and also may derive a significant portion of their
business from emerging market countries. This fund may experience greater share
price fluctuation and short-term risk than either International Growth or
International Discovery.
International investing involves special risks, including political
instability and economic risk. Investing in emerging markets may accentuate
these risks. Historically, share prices of small companies have been more
volatile than those of large companies.
HOW CURRENCY RETURNS AFFECT FUND PERFORMANCE
For U.S. investors, the total return from international stocks includes the
effects of currency fluctuations--the movement of international currency values
in relation to the value of the U.S. dollar. Currency exchange rates come into
play when international stock income, gains and losses are converted into U.S.
dollars.
Changing currency values may have a significant impact on the total returns
of international stock funds. The value of the foreign investments held by
international stock funds may be reduced or increased by changes in currency
exchange rates. As a result, the value of your investment could change based
solely upon changes in the exchange rates between foreign currencies and the
U.S. dollar. The dollar value of a foreign security generally decreases when the
value of the dollar rises against the foreign currency in which the security is
denominated. (The weakened foreign currency buys fewer dollars.) Conversely, the
dollar value of a foreign security tends to increase when the value of the
dollar falls against the foreign currency. (The stronger foreign currency buys
more dollars.) In addition, the value of fund assets may be affected by losses
and other expenses incurred in converting between various currencies in order to
purchase and sell foreign securities and by currency restrictions, exchange
control regulations, currency devaluations and political developments.
COMPARATIVE INDICES
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) has developed several indices
that measure the performance of foreign stock markets. The best known is the
EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE(reg.tm)), which is a widely followed
group of stocks from 20 countries. Within this index are two narrower indices,
MSCI EUROPE and MSCI FAR EAST, which measure stock performance in 14 European
countries and four Asian countries, respectively.
The MORGAN STANLEY EMERGING MARKETS FREE INDEX (EMF(reg.tm)) represents the
performance of stocks in 26 emerging market countries in Europe, Latin America
and the Pacific Basin.
[left margin]
PORTFOLIO MANAGERS
INTERNATIONAL GROWTH
HENRIK STRABO
MARK KOPINSKI
INTERNATIONAL DISCOVERY
HENRIK STRABO
MARK KOPINSKI
BRIAN BRADY
EMERGING MARKETS
MARK KOPINSKI
MIKE DONNELLY, CFA
48 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 39-45.
INVESTMENT TERMS
* EXPENSE RATIO-- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
* MEDIAN MARKET CAPITALIZATION-- Market capitalization (market cap) is the total
value of a company's stock and is calculated by multiplying the number of
outstanding common shares by the current share price. The company whose market
cap is in the middle of the portfolio is the median market cap. Half the
companies in the portfolio have values greater than the median, and half have
values that are less. If there is an even number of companies, then the median
is the average of the two companies in the middle.
* NUMBER OF COMPANIES-- the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER-- the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
TYPES OF STOCKS
* CYCLICAL STOCKS-- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers and textile
operators.
* GROWTH STOCKS-- stocks of companies that have experienced above-average
earnings growth and are expected to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare and consumer staples companies.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS-- generally considered to be stocks
of companies with a market capitalization (the total value of a company's
outstanding stock) of more than $5 billion. These tend to be the stocks that
make up the Dow Jones Industrial Average and the S&P 500.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS--generally considered to be stocks of
companies with a market capitalization (the total value of a company's
outstanding stock) of between $1 billion and $5 billion. These tend to be the
stocks that make up the S&P 400.
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS-- generally considered to be stocks
of companies with a market capitalization (the total value of a company's
outstanding stock) of less than $1 billion. These tend to be the stocks that
make up the Russell 2000 Index.
www.americancentury.com 49
Notes
- --------------------------------------------------------------------------------
50 1-800-345-2021
Notes
- --------------------------------------------------------------------------------
www.americancentury.com 51
Notes
- --------------------------------------------------------------------------------
52 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
- -------------------------------------------------------------------------------
BENHAM GROUP(reg.sm)
TAXABLE BOND FUNDS
U.S. TREASURY & GOVERNMENT
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
CORPORATE & DIVERSIFIED
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
INTERNATIONAL
International Bond
TAX-FREE & MUNICIPAL BOND FUNDS
MULTIPLE-STATE
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
SINGLE-STATE
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal
MONEY MARKET FUNDS
TAXABLE
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
TAX-FREE & MUNICIPAL
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market
AMERICAN CENTURY(reg.sm) GROUP
ASSET ALLOCATION
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
BALANCED
Balanced
CONSERVATIVE EQUITY
Income and Growth
Equity Income
Value
Equity Growth
SPECIALTY
Utilities
Real Estate
Global Natural Resources
Global Gold
SMALL CAP
Small Cap Quantitative
Small Cap Value
TWENTIETH CENTURY GROUP
GROWTH
Select
Heritage
Growth
Ultra
AGGRESSIVE GROWTH
Vista
Giftrust
New Opportunities
INTERNATIONAL GROWTH
International Growth
International Discovery
Emerging Markets
GLOBAL
Global Growth
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[right margin]
[american century logo(reg.sm)]
American
Century
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 STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
FUNDS DISTRIBUTOR, INC.
(c) 1999 AMERICAN CENTURY SERVICES CORPORATION
[back cover]
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
www.americancentury.com
BULK RATE
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
9901 Funds Distributor, Inc.
SH-BKT-14765 (c)1999 American Century Services Corporation
