SEMIANNUAL REPORT
[american century logo]
American
Century(sm)
May 31, 1997
AMERICAN
CENTURY
GROUP
Capital Manager
[front cover]
TABLE OF CONTENTS
Report Highlights........................................... 1
Our Message to You.......................................... 2
Period Overview............................................. 3
Performance & Portfolio Information......................... 5
Management Q & A............................................ 6
Schedule of Investments..................................... 9
Statement of Assets and Liabilities.........................15
Statement of Operations.....................................16
Statements of Changes in Net Assets.........................17
Notes to Financial Statements...............................18
Financial Highlights........................................21
Retirement Account Information..............................22
Background Information
Investment Philosophy & Policies.......................24
Comparative Indices....................................24
Lipper Rankings........................................24
Portfolio Management Team..............................24
Neutral Asset Mix......................................24
Glossary....................................................25
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your needs, we have divided American Century funds
into three groups based on investment style and objectives. These groups, which
appear below, are designed to help simplify your fund decisions.
American Century Investments -- Family of Funds
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS U.S. GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Capital Manager
We welcome your comments or questions about this report.
See the back cover for ways to contact us by mail, phone or e-mail.
Twentieth Century and the Benham Group are registered marks of American Century
Services Corporation and Benham Management Corporation, respectively. American
Century is a service mark of American Century Services Corporation.
American Century Investments
REPORT HIGHLIGHTS
Period Overview
o U.S. stocks continued to produce healthy gains during the six months ended
May 31, 1997. However, the market experienced significant price volatility.
o U.S. bond performance was mixed but relatively flat overall. Strong
economic growth in the first quarter of 1997 led to rising interest rates.
o Among foreign stock markets, Europe had the strongest returns of any
region, while Asian markets suffered sizable losses.
o Foreign bond markets produced favorable returns as interest rates declined
around the globe.
o The U.S. dollar strengthened against most major foreign currencies,
reducing returns from foreign investments.
Capital Manager
o Because of its more conservative asset allocation structure, the fund
underperformed its Lipper peer group average during the six months ended
May 31, 1997.
o For most of the six-month period, the fund maintained a neutral position in
U.S. stocks and bonds, an overweighting in foreign stocks and bonds, and an
underweighting in cash.
o The fund also underweighted natural resources stocks during the period
because of poor performance, especially among gold stocks.
o The fund hedged a portion of its investments in Europe and Japan to reduce
the negative effects of the strengthening dollar.
o Going forward, we plan to continue overweighting the fund's foreign stock
holdings, especially in Europe, while underweighting cash and natural
resources stocks.
o Pending shareholder approval, the fund will be merged into the American
Century Strategic: Conservative fund, a very similar fund managed by the
same team.
CAPITAL MANAGER
Total Returns: AS OF 5/31/97
6 Months 4.02%*
1 Year 13.19%
Net Assets: $85.0 million
(AS of 5/31/97)
Inception Date: 12/1/94
Ticker Symbol: BCMFX
* Not annualized.
Many of the investment terms in this report are
defined in the Glossary on page 25.
Semiannual Report Report Highlights 1
OUR MESSAGE TO YOU
[photo of James E. Stowers III and James M. Benham]
The widely divergent performance of the world's financial markets during the six
months ended May 31, 1997, underscored the importance of diversified investing.
European and American stock markets produced strong returns, but Far Eastern
stock markets suffered losses. Domestic bond returns were mixed, while the
stronger U.S. dollar hurt foreign bond returns.
Within this environment, the diversified portfolio of the Capital Manager fund
produced a positive return consistent with its asset allocation strategy. In the
following pages, our investment management team discusses the performance of the
global financial markets in more detail and describes how your fund was managed
during the period.
The Capital Manager fund's management team, headed by Jeff Tyler and Brian
Howell, includes some of American Century's most experienced investment
professionals. Recently, our international investment team, which manages the
foreign stock portion of the fund, welcomed Mark Kopinski back after a two-year
stint with another investment company. Kopinski helped create American Century's
international management team in 1991, and his years of experience and expertise
in Asia will be invaluable to the management of our international stock funds,
as well as the Capital Manager fund.
We also strengthened our corporate team. In June, Bill Lyons, American Century's
chief operating officer, was named president, assuming full responsibility for
the company's day-to-day operations. With this change, Jim Stowers III will be
able to focus more time on developing and refining new investment technologies
and tools that build on and leverage the proprietary system his father pioneered
25 years ago. One of our goals is to ensure that we continue to evolve and
innovate--building the investment tools today that will help lead us and our
investors to success in the next century.
The proposed merger of the American Century Capital Manager fund with the
American Century Strategic Allocation: Conservative fund is another opportunity
for us to improve the way we serve you. Our aim is to reduce the number of
overlapping funds that resulted when Benham merged with Twentieth Century.
Combining similar funds not only creates greater efficiencies, but also allows
fund managers to focus more of their attention on each individual fund.
We appreciate your confidence in American Century and look forward to continuing
to serve you.
Sincerely,
/s/James E. Stowers III /s/James M. Benham
James E. Stowers III James M. Benham
Chief Executive Officer Vice Chairman
American Century Companies American Century Companies
2 Our Message to You American Century Investments
PERIOD OVERVIEW
U.S. Stocks
The U.S. stock market, which has been rising steadily since the beginning of
1995, produced healthy gains during the six months ended May 31, 1997. The major
U.S. stock indexes (such as the Dow Jones Industrials and the S&P 500) reached
record highs on their way to returns of more than 10% for the six-month period.
Despite solidly positive returns, U.S. stocks experienced substantial price
volatility, especially among the stocks of smaller companies. Uncertainty about
the economy and corporate earnings growth led to a significant amount of
day-to-day volatility early in the six-month period.
In February and March, concerns about rising interest rates and declining
corporate profits took their toll, and stock prices began to slide. Technology
companies and other "aggressive growth" stocks--so called because of their
propensity for sharp price swings--suffered the biggest losses, falling as much
as 25% as a group.
But the downward trend reversed in May, when interest rate expectations leveled
off and first-quarter corporate earnings reports showed surprisingly strong
growth. Aggressive growth stocks produced the strongest rebound, retracing most
of their earlier losses in just a few weeks.
As the accompanying table shows, small-capitalization stocks (such as those in
the Russell 2000) underperformed large-capitalization stocks (such as those in
the S&P 500) during the period. This was a continuation of a trend that began in
early 1996, when uncertain investors fled from smaller-company stocks and
flocked to the largest, most-liquid stocks.
The greater volatility of small-cap stocks compounded this disparity. The
small-cap stock universe includes many aggressive growth stocks, whose inherent
volatility hurt their performance during the period.
However, the more extreme price swings of small-cap stocks worked in their favor
toward the end of the period. Renewed optimism and relatively attractive prices
brought investors back into small-cap stocks in late April. After reaching its
lowest point of the period on April 25, the Russell 2000 returned nearly 14%
through the end of May. By comparison, the S&P 500 posted a return of about 11%
during the same period.
U.S. Bonds
U.S. bonds produced mixed returns during the six months ended May 31. Rising
yields caused bond prices to fall, but the interest paid out to bondholders
offset the price declines to a large degree. Short-term securities, which
usually suffer less price depreciation than longer-term securities when interest
rates rise, were the best performers. For example, the two-year Treasury note
posted a 2.2% return for the six-month period, while the 30-year Treasury bond
returned -3.6%.
Bond yields fell (and bond prices rose) at the beginning of the period in
response to evidence of moderating U.S. economic growth and low inflation. But
by the beginning of 1997, stronger economic growth and rising wage pressures
rekindled concerns about inflation. In an effort to head off potential
inflation, the Federal Reserve raised short-term interest rates in March.
As a result, bond yields soared throughout the first quarter of 1997. The
30-year Treasury bond yield, which had fallen as low as 6.35% in December,
climbed to 7.10% by the end of March. The bond market settled down in April and
May, rallying slightly as inflation remained subdued and economic growth began
to slow.
U.S. STOCK MARKET PERFORMANCE
For the six-month period ended May 31, 1997
S&P 500 13.17%
Russell 2000 8.40%
U.S. BOND MARKET PERFORMANCE
For the six-month period ended May 31, 1997
Salomon Brothers Broad
Investment Grade Bond Index 0.96%
Lehman Aggregate Bond Index 0.94%
Semiannual Report Period Overview 3
PERIOD OVERVIEW
Mortgage-backed securities were the top performers among U.S. bonds during the
six-month period, followed by corporate bonds. With bond prices declining
slightly overall, yield was the most significant contributor to bond returns.
Mortgage-backed and corporate securities tend to have higher yields than other
domestic bonds. Treasury bonds, which typically offer the lowest yields among
U.S. fixed-income securities, produced the weakest returns.
Foreign Stocks
Global stock returns varied dramatically by region during the six months ended
May 31. Europe's stock markets produced the strongest returns of any region in
the world, while Asian markets suffered sizable losses. The Morgan Stanley
EAFE(R) Index--a broad measure of international stock performance--returned
4.04% (in U.S. dollar terms) during the six-month period.
The continued strength of the U.S. dollar weighed heavily on foreign stock
returns for U.S. investors. The dollar rose by 11% against the German mark and
2% against the Japanese yen during the period. As the accompanying table shows,
the EAFE(R)'s return in local currencies was substantially higher than its
return in dollars.
European stock markets excelled during the period because of favorable economic
conditions, falling interest rates and low inflation. Corporate restructuring
also boosted the performance of European equities. Although Spain and
Switzerland were the top-performing stock markets in Europe--with returns of
more than 30% (in local currencies) during the period--nearly all of the
continent's markets returned 20% or more.
The Japanese stock market continued to languish. Although the Japanese economy
showed signs of life after seven years of recession, most of the growth was
driven by export industries. The rest of Southeast Asia--including Thailand, the
Philippines and Singapore--struggled as economic growth in the region slowed.
Collapsing speculative investments and a failure to invest in infrastructure
during the good times dragged down stock prices in these countries. Hong Kong
was a notable exception, producing strong stock market performance thanks to a
thriving economy.
Latin America replaced Asia as the hottest region for growth. Political changes,
increased privatization and economic reform have improved the global credibility
of the Latin equity markets.
Foreign Bonds
Foreign bond markets produced favorable returns during the six months ended May
31 as global interest rates continued to decline. However, the strengthening
U.S. dollar hurt foreign bond returns for U.S. investors.
As the index returns in the tables on this page and the previous page
illustrate, foreign bonds outperformed U.S. bonds in local currencies during the
six-month period. But when the foreign bond index's return is translated into
dollars, U.S. bonds win out by a substantial margin.
Interest rates generally declined as the world's central banks made a concerted
effort to revitalize economic growth. In Europe, preparation for Economic and
Monetary Union in 1999 held interest rates down across the continent. Japanese
rates remained at historic lows as the country tried to end its lengthy economic
downturn.
The exception is Latin America, where interest rates have remained relatively
high. Many Latin American countries are experiencing explosive levels of
economic growth, and the potential for rising inflation has propped up interest
rates.
FOREIGN STOCK MARKET PERFORMANCE
For the six-month period ended May 31, 1997
Morgan Stanley EAFE(R) Index (in U.S. dollars) 4.04%
Morgan Stanley EAFE(R) Index (in local currencies) 8.96%
FOREIGN BOND MARKET PERFORMANCE
For the six-month period ended May 31, 1997
Salomon Brothers Non-U.S. World Government
Bond Index (in U.S. dollars) - 4.98%
Salomon Brothers Non-U.S. World Government
Bond Index (in local currencies) 2.01%
4 Period Overview American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE & PORTFOLIO INFORMATION
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR LIFE OF FUND(1)
TOTAL RETURNS AS OF MAY 31, 1997
<S> <C> <C> <C>
Capital Manager ........................................................ 4.02% 13.19% 15.86%
S&P 500 ................................................................ 13.17% 29.48% 32.13%
Lehman Aggregate Bond Index ............................................ 0.94% 8.32% 9.67%
Three-Month Treasury Bill .............................................. 2.56% 5.17% 5.36%
Average Flexible Portfolio Fund(2) ..................................... 5.94% 14.88% 18.94%
Fund's Ranking Among Flexible Portfolio Funds(2) ....................... -- 141 out of 206 113 out of 142
(1) Inception date was December 1, 1994.
(2) According to Lipper Analytical Services.
</TABLE>
See pages 24-25 for more information about returns, the comparative indices and
Lipper fund rankings.
[mountain graph - data below]
<TABLE>
GROWTH OF $10,000 OVER THE LIFE OF THE FUND
Value on 5/31/97
$10,000 investment made 12/1/94
Capital Manager S&P 500 Lehman Aggregate 3-Month T-Bill Index
$14,434 $20,029 $12,595 $11,394
Capital Manager S&P 500 Lehman Aggregate 3-Month T-Bill Index
<S> <C> <C> <C> <C>
12/1/94 $10,000 $10,000 $10,000 $10,000
12/31/94 $10,164 $10,305 $10,069 $10,047
1/31/95 $10,264 $10,555 $10,268 $10,095
2/28/95 $10,505 $10,936 $10,512 $10,144
3/31/95 $10,746 $11,305 $10,577 $10,192
4/30/95 $10,938 $11,621 $10,725 $10,240
5/31/95 $11,281 $12,043 $11,140 $10,288
6/30/95 $11,362 $12,381 $11,221 $10,336
7/31/95 $11,545 $12,774 $11,196 $10,382
8/31/95 $11,535 $12,770 $11,331 $10,429
9/30/95 $11,739 $13,362 $11,442 $10,475
10/31/95 $11,698 $13,295 $11,590 $10,521
11/30/95 $12,006 $13,841 $11,764 $10,568
12/31/95 $12,177 $14,164 $11,929 $10,614
1/31/96 $12,440 $14,625 $12,008 $10,658
2/29/96 $12,514 $14,727 $11,800 $10,701
3/31/96 $12,539 $14,923 $11,718 $10,745
4/30/96 $12,678 $15,123 $11,652 $10,789
5/31/96 $12,752 $15,469 $11,628 $10,834
6/30/96 $12,756 $15,590 $11,784 $10,880
7/31/96 $12,607 $14,878 $11,817 $10,926
8/31/96 $12,746 $15,158 $11,797 $10,972
9/30/96 $13,048 $16,069 $12,002 $11,018
10/31/96 $13,306 $16,490 $12,268 $11,064
11/30/96 $13,876 $17,699 $12,478 $11,110
12/31/96 $13,761 $17,411 $12,362 $11,156
1/31/97 $14,001 $18,474 $12,400 $11,202
2/28/97 $14,059 $18,584 $12,431 $11,250
3/31/97 $13,706 $17,881 $12,293 $11,298
4/30/97 $14,006 $18,919 $12,477 $11,346
5/31/97 $14,434 $20,029 $12,595 $11,394
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the total
return lines of the indices do not.
</TABLE>
[pie chart]
ASSET ALLOCATION AS OF MAY 31, 1997
Percent of Fund Investments
U.S. Stocks 35%
Foreign Stocks 7%
U.S. Bonds 35%
Foreign Bonds 7%
Money Market
Securities 14%
Natural Resources--
Linked Investments 2%
See page 24 for the fund's neutral asset mix.
Semiannual Report Performance & Portfolio Information 5
MANAGEMENT Q & A
Management Q & A
An interview with Jeff Tyler and Brian Howell, lead portfolio managers on the
American Century Capital Manager fund management team.
How did the fund perform?
For the six-month period ended May 31, 1997, the fund posted a total return of
4.02%, compared with the 5.94% average return of the 215 "Flexible Portfolio
Funds" tracked by Lipper Analytical Services. (See the Total Returns table on
the previous page for other fund performance comparisons.)
The fund's more conservative asset mix caused it to underperform its Lipper
category average during the period. However, the fund's longer-term returns
reflect the general strength of the global financial markets since the fund's
inception.
How did the fund's asset mix change over the past six months?
We maintained a neutral position in domestic stocks and bonds, an overweighting
in foreign securities and a corresponding underweighting in cash. The most
significant adjustment we made was to expand the fund's holdings of European
stocks, which provided the best equity returns of any region in the world during
the period.
But weren't those returns reduced by the stronger U.S. dollar?
That's true, but even after you account for the currency losses, European stock
returns were still on par with U.S. stock returns and better than returns in
other regions of the world. In addition, we mitigated some of the currency
losses by hedging a portion of the fund's foreign investments against European
currencies.
What is currency hedging?
It's a strategy designed to reduce or eliminate the negative effects of currency
fluctuations on foreign investment returns. When the U.S. dollar strengthens
against foreign currencies, gains earned on investments denominated in those
currencies translate into fewer dollars; hedging is intended to offset these
currency losses.
For the fund, currency hedges typically involve forward currency contracts that
allow the fund to lock in a specific exchange rate. This approach removes the
effect of currency exchange rates and creates a "pure play" on the foreign
securities.
Did you hedge all of the fund's European investments?
No. Although the fund can hedge as much as 100% of its foreign assets, we only
hedged about 35% of the fund's European holdings. We felt this was a prudent
amount that would help mitigate currency losses while retaining the fund's
exposure to non-dollar-denominated investments.
We also hedged a portion of the fund's Japanese holdings early in the period. We
removed the hedge in April, when the dollar reached a four-year high against the
Japanese yen and Japanese finance ministry officials publicly expressed their
desire for a weaker dollar.
You reduced the fund's small (typically 3%) weighting in natural resources
stocks by half. Why?
Natural resources investments, especially gold stocks, were among the worst
performers during the six-month period. These investments are traditionally used
as a hedge against rapidly rising inflation, but global inflation has remained
low for the past
6 Management Q & A American Century Investments
MANAGEMENT Q & A
several years. In addition, many of the world's central banks have been selling
a portion of their gold reserves, leading to further declines in the price of
gold. Add a couple of fraudulent claims that have undermined the credibility of
the gold mining industry, and you can see why these stocks have languished.
What are your plans for the fund's asset allocation structure going forward?
We will likely continue its current positioning--neutral in domestic stocks and
bonds, overweighted in foreign stocks and bonds, underweighted in cash and
natural resources stocks. We still think the most attractive opportunities are
in the stock markets of Europe, where we see parallels with the U.S. in the
early 1990s.
Coming out of a recession, U.S. corporations used technological innovation and
downsizing to cut costs, improve efficiency and increase productivity. In
addition, the rise of temporary employment services and outsourcing changed the
nature of the U.S. labor market and lowered the unemployment rate.
Much of Europe is now in the same situation--a weak economic environment and
high levels of unemployment are leading to changing labor markets and corporate
restructuring. We expect these changes to boost corporate profits in Europe
going forward.
What about the U.S. stock market?
We continue to marvel at the resiliency of the U.S. stock market. We've stated
our reservations about the market's stretched valuations, but stock prices have
FUND'S U.S. STOCKS AS OF MAY 31, 1997
Number of Companies 119
Dividend Yield 1.98%
Price/Earnings Ratio 20.7
% of Fund's % of
U.S. Stocks Fund
Top 5 U.S. Stocks
BankAmerica Corp. 3.2% 1.2%
General Re Corp. 3.1% 1.1%
Travelers Group, Inc. 2.8% 1.0%
Intel Corp. 2.7% 1.0%
Compaq Computer Corp. 2.4% 0.8%
FUND'S FOREIGN STOCKS AS OF MAY 31, 1997
Number of Companies 56
Dividend Yield 1.85%
% of Fund's % of
Country Foreign Stocks Fund
Top 5 Foreign Stocks
Royal Dutch Petroleum Co.Netherlands 3.3% 0.3%
Toyota Motor Corp. Japan 3.2% 0.3%
Nestle S.A. Switzerland 3.2% 0.3%
Aber Resources, Ltd. Canada 3.1% 0.3%
SmithKline Beecham Plc U.K. 2.9% 0.2%
[pie chart]
Percent of Fund's Foreign Stocks
Europe 48%
Asia/Pacific 36%
Americas
(excluding U.S.) 16%
Semiannual Report Management Q & A 7
MANAGEMENT Q & A
continued to climb. Despite our concerns, we followed our asset allocation model
and maintained the fund's neutral weighting in domestic stocks.
The danger to U.S. stocks in the second half of 1997 is stronger economic
growth, which would likely result in rising inflation and higher interest rates.
Higher rates could squeeze corporate earnings, and weaker earnings growth has
been responsible for much of the punishment and volatility in the U.S. stock
market recently.
What's your outlook for the bond market?
We feel that interest rates have bottomed worldwide, and we expect
stable-to-rising interest rates going forward. The Federal Reserve has already
raised rates in the U.S., and economic growth is likely to pick up in Europe and
Japan by the end of the year.
As a result, our outlook is neutral to somewhat negative for bonds, and we may
look to reduce the fund's bond position later this year. We could see fairly
flat bond performance worldwide over the next six months, much like the past six
months.
In July, fund shareholders will vote on a proposal to merge the fund into the
American Century Strategic Allocation: Conservative fund. If this merger is
approved, how will it affect the fund's management?
The Strategic Conservative fund's investment policies and asset mix are very
similar to those of the Capital Manager fund--a fairly equal balance between
stocks and bonds, the same percentage of assets devoted to foreign investments,
the same 15% weighting in cash, and the same fund management team.
However, there are some differences, most notably that the Strategic
Conservative fund holds a higher percentage of bonds (45%, compared to Capital
Manager's 41%) and has no specific portion set aside for natural resources
stocks.
[pie charts]
FUND'S U.S. BONDS AS OF MAY 31, 1997
Number of Securities 36
Weighted Average Maturity 12.46 years
Average Duration 4.60 years
[pie chart]
Percent of Fund's U.S. Bonds
U.S. Treasury Notes 32%
Mortgage-Backed
Securities 26%
Corporate Bonds 20%
U.S. Government Agency
Securities 12%
U.S. Treasury Bonds 10%
FUND'S FOREIGN BONDS AS OF MAY 31, 1997
Number of Securities 16
Weighted Average Maturity 5.11 years
Average Duration 4.33 years
[pie chart]
Percent of Fund's Foreign Bonds
Europe 62%
Asia/Pacific 31%
Americas
(excluding U.S.) 7%
8 Management Q & A American Century Investments
SCHEDULE OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS
AEROSPACE & DEFENSE--1.3%
3,900 Boeing Co. $ 410,475
3,800 General Dynamics Corp. 284,525
6,500 Litton Industries, Inc.(1) 294,125
1,400 United Technologies Corp. 112,525
---------
1,101,650
---------
AIRLINES--0.5%
3,300 AMR Corp.(1) 327,938
12,000 Singapore Airlines Ltd. ORD 102,342
---------
430,280
---------
AUTOMOBILES & AUTO PARTS--1.8%
3,000 Bridgestone Corp. ORD 67,903
8,800 Chrysler Corp. 279,400
8,700 Ford Motor Co. 326,250
5,100 General Motors Corp. 291,975
30,000 Pirelli S.p.A. ORD 65,504
1,800 TRW Inc. 96,300
8,000 Toyota Motor Corporation ORD 229,958
200 Volkswagen AG ORD 129,464
---------
1,486,754
---------
BANKING--4.1%
6,000 ABN Amro Holding N.V. ORD 111,018
25,100 Australia & New Zealand Banking
Group Ltd. ORD 171,685
2,100 Banco Bilbao Vizcaya, S.A. ORD 148,920
8,400 BankAmerica Corp. 981,750
5,500 Bankers Trust New York Corp. 465,437
2,812 Chase Manhattan Corp. 265,734
5,700 First Union Corp. 489,487
6,000 HSBC Holdings plc ORD 181,971
5,600 Morgan (J.P.) & Co. 602,000
6,000 Sanwa Bank Ltd. ORD 76,940
---------
3,494,942
---------
BIOTECHNOLOGY--0.4%
5,100 Amgen Inc. 341,381
---------
BROADCASTING & MEDIA--0.1%
10,000 Carlton Communications plc ORD 86,074
---------
Shares Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES & SUPPLIES--0.3%
3,500 Omnicom Group Inc. $ 203,000
7,000 United Engineers (Malaysia) Ltd.
ORD(1) 56,546
---------
259,546
---------
CHEMICALS & RESINS--0.5%
400 Dow Chemical Co. 33,350
1,900 du Pont (E.I.) de Nemours & Co. 206,862
1,500 Raychem Corp. 111,188
3,800 Wynn's International, Inc. 94,050
---------
445,450
---------
COMMUNICATIONS EQUIPMENT--0.3%
10,000 Allen Group Inc. (The)(1) 232,500
---------
COMMUNICATIONS SERVICES--1.8%
5,500 Ameritech Corp. 360,250
5,000 Bell Atlantic Corp. 350,000
1,900 BellSouth Corp. 86,213
5,000 MCI Communications Corp. 192,187
3,900 SBC Communications Inc. 228,150
20,000 Telecom Corporation of New
Zealand Limited ORD 96,095
25,000 Telecom Italia Mobile SpA ORD 73,522
6,000 Telefonica de Espana ORD 173,269
---------
1,559,686
---------
COMPUTER PERIPHERALS--0.2%
2,000 Adaptec, Inc.(1) 73,625
2,000 Quantum Corp.(1) 77,875
---------
151,500
---------
COMPUTER SOFTWARE & SERVICES--1.2%
8,500 Cadence Design Systems, Inc.(1) 282,625
11,800 Ceridian Corp.(1) 433,650
3,500 Medic Computer Systems, Inc.(1) 60,594
2,000 Parametric Technology Corp.(1) 89,875
700 SAP AG ORD 125,101
---------
991,845
---------
COMPUTER SYSTEMS--1.4%
6,600 Compaq Computer Corp.(1) 714,450
1,500 Gateway 2000, Inc.(1) 99,562
6,900 Hewlett-Packard Co. 355,350
---------
1,169,362
---------
See Notes to Financial Statements
Semiannual Report Schedule of Investments 9
SCHEDULE OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
CONSTRUCTION & PROPERTY
DEVELOPMENT--0.5%
5,000 Centex Corp. $ 199,375
3,000 Harsco Corp. 117,000
20,000 Marubeni Corporation ORD 85,202
---------
401,577
---------
CONSUMER PRODUCTS--0.2%
6,000 Canon, Inc. ORD 152,330
2,100 Hasbro, Inc. 60,900
---------
213,230
---------
CONTROL & MEASUREMENT--0.3%
3,600 Coherent, Inc.(1) 156,150
2,500 Fluke Corp. 124,687
---------
280,837
---------
DIVERSIFIED COMPANIES--0.8%
7,800 General Electric Co. 470,925
12,000 Hutchison Whampoa Limited ORD 99,890
2,500 VEBA AG ORD 141,601
---------
712,416
---------
ELECTRICAL & ELECTRONIC
COMPONENTS--1.7%
5,300 Intel Corp. 802,619
4,300 SCI Systems, Inc.(1) 279,500
2,000 Sony Corp. ORD 168,854
2,000 TDK Corp. ORD 153,879
---------
1,404,852
---------
ENERGY (PRODUCTION & MARKETING)--3.4%
2,800 Atlantic Richfield Co. 407,400
9,700 Chevron Corp. 679,000
13,000 ENI SpA ORD(1) 65,001
7,000 Imperial Oil Ltd. 340,812
700 Indiana Energy Inc. 16,713
16,000 Quaker Chemical Corp. 262,000
1,000 Royal Dutch Petroleum Co. 195,250
1,200 Royal Dutch Petroleum Co. ORD 232,107
3,600 Texaco Inc. 392,850
1,329 Total-Cie Franc Des ORD 121,810
2,800 USX-Marathon Group 83,300
3,000 Union Texas Petroleum Holdings, Inc. 60,375
---------
2,856,618
---------
Shares Value
- --------------------------------------------------------------------------------
ENERGY (SERVICES)--0.9%
4,100 Schlumberger Ltd. $ 488,413
5,700 Tidewater Inc. 240,112
---------
728,525
---------
FINANCIAL SERVICES--2.9%
1,000 Edwards (A.G.), Inc. 37,125
7,297 Bear Stearns Companies Inc. 237,152
800 Compagnie Bancaire SA ORD 88,739
1,000 Credit Suisse Group ORD(1) 125,796
9,000 Development Bank of Singapore
Limited ORD 112,618
3,100 Equitable of Iowa Companies 97,650
4,400 Federal National Mortgage
Association 191,950
3,200 Green Tree Financial Corp. 112,000
2,900 Lehman Brothers Holdings, Inc. 117,088
3,700 Merrill Lynch & Co., Inc. 392,200
5,600 Morgan Stanley Group, Inc. 378,000
3,800 Paine Webber Group, Inc. 134,900
3,100 Salomon Inc. 166,238
2,500 Student Loan Marketing
Association 304,062
---------
2,495,518
---------
FOOD & BEVERAGE--0.4%
180 Nestle S.A. ORD 224,204
7,000 Whitebread plc ORD 91,123
---------
315,327
---------
GOLD & NATURAL RESOURCE
LINKED INVESTMENTS--2.1%
10,000 Barrick Gold Corp. 252,500
12,000 Cambior, Inc. ORD 156,840
5,000 Francisco Gold Corporation ORD(1) 93,490
5,900 Freeport McMoran Copper & Gold 163,725
5,000 Getchell Gold Corp.(1) 199,375
25,000 Indochina Goldfields, Ltd. ORD(1) 169,735
30,000 Metallica Resources, Inc. ORD(1) 79,512
20,000 Nevsun Resources Ltd. ORD(1) 79,149
5,100 Newmont Mining Corporation 199,537
25,000 Romarco Minerals, Inc. ORD(1) 75,337
See Notes to Financial Statements
10 Schedule of Investments American Century Investments
SCHEDULE OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
50,000 South Pacific Resources
Corporation ORD(1) $ 36,307
25,000 TVX Gold, Inc. ORD(1) 161,570
100,000 William Resources, Inc. ORD(1) 84,232
---------
1,751,309
---------
HEALTHCARE--0.2%
1,500 Sanofi SA ORD(1) 130,453
1,300 Wellpoint Health Networks Inc.(1) 62,075
---------
192,528
---------
INDUSTRIAL EQUIPMENT & MACHINERY--1.3%
5,200 Caterpillar Inc. 507,650
9,100 Ingersoll-Rand Co. 495,950
200 Mannesmann AG ORD 81,384
---------
1,084,984
---------
INSURANCE--4.0%
1,000 Axa-UAP ORD 59,975
2,800 CIGNA Corp. 486,500
5,400 General Re Corp. 946,350
1,700 ITT Hartford Group, Inc. 132,600
600 Loews Corp. 58,350
9,000 Old Rep International Corp. 271,125
3,000 Orion Capital Corp. 200,625
10,209 Prudential Corporation PLC ORD 102,769
7,800 Reliance Group Holdings, Inc. 95,550
15,600 Travelers Group, Inc. 856,050
500 Zurich Versicherungsgesellschaft
ORD(1) 184,006
---------
3,393,900
---------
LEISURE--0.4%
8,000 King World Productions, Inc. 301,000
---------
MACHINERY & EQUIPMENT--1.6%
9,800 Dover Corp. 561,050
5,400 Duriron Company, Inc. (The) 151,538
8,000 Minebea Company Ltd. ORD 78,489
20,000 Mitsubishi Heavy Industries Ltd.
ORD 144,240
5,600 Timken Co. 384,300
---------
1,319,617
---------
Shares Value
- --------------------------------------------------------------------------------
MEDICAL EQUIPMENT & SUPPLIES--1.8%
3,000 Bayer AG ORD $ 116,535
14,800 Hillenbrand Industries, Inc. 697,450
4,400 Hologic, Inc.(1) 104,775
4,000 Physician Sales & Service, Inc.(1) 57,500
7,000 Thermo Electron Corp.(1) 241,500
3,500 Thermo Instrument Systems Inc.(1) 119,875
4,500 US Surgical Corp. 151,875
---------
1,489,510
---------
METALS & MINING--0.8%
15,000 Aber Resources, Ltd. ORD(1) 219,475
2,200 Cleveland-Cliffs Inc. 92,950
4,500 Oregon Metallurgical Corp.(1) 115,875
2,200 Vulcan Materials Co. 160,600
3,000 Zeigler Coal Holding Co. 69,750
---------
658,650
---------
OFFICE EQUIPMENT & SUPPLIES--0.1%
25,000 Sanyo Electric Company Ltd. ORD 105,641
---------
PAPER & FOREST PRODUCTS--0.2%
4,000 Crane Co. 164,000
---------
PHARMACEUTICALS--2.7%
8,000 Astra AB Cl A ORD 129,207
6,800 Bristol-Myers Squibb Co. 498,950
1,700 Dura Pharmaceuticals, Inc.(1) 67,894
3,300 Genzyme Corp.(1) 78,581
6,000 Johnson & Johnson 359,250
5,900 Merck & Co., Inc. 530,263
150 Novartis AG ORD 204,352
1,500 Pharmacia & Upjohn Inc. 51,938
5,000 Sankyo Company Ltd. ORD 158,785
12,000 SmithKline Beecham Plc ORD 206,872
---------
2,286,092
---------
PRINTING & PUBLISHING--0.5%
15,000 Moore Corporation Ltd. 333,750
200 Washington Post Co. (The) 77,125
---------
410,875
---------
See Notes to Financial Statements
Semiannual Report Schedule of Investments 11
SCHEDULE OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
REAL ESTATE--0.3%
4,500 Gemstar International Group
Limited(1) $ 93,375
13,000 Henderson Land Development
Company Ltd. ORD 126,670
---------
220,045
---------
RESTAURANTS--0.3%
5,700 Applebee's International Inc.(1) 140,719
3,500 Boston Chicken, Inc.(1) 63,219
3,600 Lone Star Steakhouse &
Saloon, Inc.(1) 82,575
---------
286,513
---------
RETAIL (APPAREL)--0.3%
3,800 Liz Claiborne, Inc. 173,375
2,000 TJX Companies, Inc. (The) 96,000
---------
269,375
---------
RETAIL (FOOD & DRUG)--0.3%
15,000 Boots Company plc ORD 174,238
3,000 Universal Corp. 109,125
---------
283,363
---------
RETAIL (GENERAL MERCHANDISE)--0.3%
5,400 Sears, Roebuck & Co. 265,275
---------
TEXTILES & APPAREL--0.2%
7,000 Dexter Corp. (The) 210,875
---------
TOBACCO--0.6%
9,900 American Brands, Inc.(1) 485,100
---------
UTILITIES (ELECTRIC)--0.8%
4,000 Enova Corp. 94,500
12,000 Entergy Corp. 316,500
3,000 Houston Industries Inc. 62,250
9,000 Tokyo Electric Power Co. ORD 171,952
---------
645,202
---------
UTILITIES--0.4%
3,000 General Public Utilities Corp. 105,000
1,000 People's Energy Corp. 35,500
9,400 Public Service Enterprise Group Inc. 232,650
---------
373,150
---------
TOTAL COMMON STOCKS--44.2% 37,356,874
---------
(Cost $30,985,375)
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES
$ 1,230,000 U.S. Treasury Notes, 5.50%,
11/15/98 $ 1,220,775
3,400,000 U.S. Treasury Notes, 7.75%,
11/30/99 3,512,642
2,000,000 U.S. Treasury Notes, 5.50%,
12/31/00 1,941,260
1,300,000 U.S. Treasury Notes, 7.50%,
5/15/02 1,354,444
1,660,000 U.S. Treasury Notes, 6.50%,
5/15/05 1,644,446
1,125,000 U.S. Treasury Bonds, 12.00%,
8/15/08 1,571,839
1,050,000 U.S. Treasury Bonds, 8.75%,
5/15/17 1,246,875
---------
TOTAL U.S. TREASURY SECURITIES--14.8% 12,492,281
---------
(Cost $12,466,097)
U.S. GOVERNMENT AGENCY SECURITIES
1,350,000 FHLMC, 7.93%, 1/20/05 1,435,941
500,000 FNMA, 6.45%, 6/10/03 489,060
1,500,000 FNMA, 7.69%, 9/13/06 1,531,815
---------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--4.1% 3,456,816
---------
(Cost $3,435,765)
MORTGAGE-BACKED SECURITIES(3)
51,842 FNMA Pool #343829, 6.50%,
4/1/11 50,629
905,601 FNMA Pool #341477, 6.50%,
5/1/11 884,401
261,660 FNMA Pool #346400, 6.50%,
5/1/11 255,534
590,602 FNMA Pool #346779, 6.50%,
5/1/11 576,776
413,873 FNMA Pool #351417, 7.00%,
1/15/24 405,177
239,592 GNMA Pool #361446, 8.00%,
7/15/24 244,878
376,795 GNMA Pool #377238, 8.50%,
7/20/24 390,205
322,458 GNMA Pool #355903, 8.00%,
9/15/24 329,571
1,236,153 GNMA Pool #404303, 8.25%,
10/15/24 1,272,372
See Notes to Financial Statements
12 Schedule of Investments American Century Investments
SCHEDULE OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
$ 222,775 GNMA Pool #001991, 9.00%,
4/20/25 $ 232,651
783,534 GNMA Pool #009297, 8.25%,
7/20/25 798,162
490,930 GNMA Pool #412177, 7.00%,
9/15/25 478,617
297,052 GNMA Pool #425081, 7.50%,
2/15/26 296,232
470,359 GNMA Pool #402680, 8.00%,
5/15/26 479,818
500,803 GNMA Pool #417068, 8.00%,
5/15/26 510,875
607,843 GNMA Pool #002273, 9.00%,
8/20/26 634,247
---------
TOTAL MORTGAGE-BACKED
SECURITIES--9.3% 7,840,145
---------
(Cost $7,753,825)
CORPORATE BONDS
AEROSPACE & DEFENSE--0.6%
500,000 Lockheed Martin Corp., 7.25%,
5/15/06 501,875
---------
BANKING--1.2%
1,000,000 HSBC America Capital, 8.38%,
5/15/27 1,003,750
---------
DIVERSIFIED--0.5%
400,000 Hanson Overseas BV, 6.75%,
9/15/05 387,000
---------
FINANCIAL SERVICES--3.7%
600,000 Ford Motor Credit Co., 6.25%,
11/8/00 591,750
500,000 Japanese Financial Corp. for
Municipal Enterprises, 7.375%,
4/27/05 511,250
500,000 Korea Development Bank, 6.25%,
5/1/00 493,125
500,000 Merrill Lynch & Co., Inc., 8.00%,
2/1/02 521,250
1,000,000 Wharf International Finance Ltd.,
7.625%, 3/13/07 (Acquired
3/6/97, Cost $992,090)(2) 987,500
---------
3,104,875
---------
Principal Amount Value
- --------------------------------------------------------------------------------
METALS & MINING--0.2%
200,000 Dayton Mining Corp., 7.00%,
4/1/02 (Acquired 2/12/97,
Cost $200,000) 202,000
---------
PRINTING & PUBLISHING--0.6%
500,000 News America Holdings, 9.125%,
10/15/99 528,125
---------
UTILITIES--0.4%
300,000 Citizens Utilities Company, 7.60%,
6/1/06 309,000
---------
TOTAL CORPORATE BONDS--7.2% 6,036,625
---------
(Cost $6,068,479)
SOVEREIGN GOVERNMENTS & AGENCIES
DEM1,600,000 Federal Republic of Germany,
6.00%, 9/15/03 975,385
CAD500,000 Government of Canada,
6.50%, 6/1/04 369,626
FRF700,000 Government of France, 7.00%,
11/12/99 129,812
FRF1,000,000 Government of France, 6.75%,
10/25/03 187,251
NLG200,000 Government of Netherlands,
8.25%, 2/15/02 118,941
ESP25,000,000 Government of Spain,
10.50%, 10/30/03 211,773
JPY50,000,000 Inter. American Development
Bank , 4.50%, 3/20/03 484,907
BEF4,000,000 Kingdom of Belgium, 9.00%,
6/27/01 131,671
DKK1,000,000 Kingdom of Denmark, 8.00%,
5/15/03 171,343
SEK1,000,000 Kingdom of Sweden, 13.00%,
6/15/01 161,216
AUD300,000 Queensland Treasury Corp.,
8.00%, 8/14/01 239,077
ITL200,000,000 Republic of Italy,
9.50%, 12/1/97 119,043
JPY70,000,000 Republic of Italy, 9.50%,
2/1/01 638,958
JPY500,000,000 Republic of Italy, 3.50%,
6/20/01 320,626
See Notes to Financial Statements
Semiannual Report Schedule of Investments 13
SCHEDULE OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
DEM1,100,000 Rheinische Hypobank AG,
5.625%, 7/3/01 $ 667,224
GBP300,000 United Kingdom Treasury,
8.00%, 6/10/03 512,139
---------
TOTAL SOVEREIGN GOVERNMENTS
& AGENCIES--6.4% 5,438,992
---------
(Cost $5,663,730)
COMMERCIAL PAPER & OTHER SHORT-TERM INVESTMENTS(4)
BANKING--6.0%
3,500,000 Nordbanken North America, 5.45%,
7/18/97 3,474,594
1,600,000 Spintab-Swedmortgage AB, 5.39%,
6/30/97 1,592,718
---------
5,067,312
---------
FINANCIAL SERVICES--5.8%
3,500,000 Hitachi Credit America Corp.,
5.45%-5.51%, 7/17/97
through 8/15/97 2,967,916
2,000,000 Merrill Lynch & Co., Inc., 5.47%,
6/9/97 1,997,520
---------
4,965,436
---------
INSURANCE--1.7%
1,400,000 Principal Mutual Life Insurance
Co., 5.51%, 6/5/97 1,399,140
---------
TOTAL COMMERCIAL PAPER & OTHER
SHORT-TERM INVESTMENTS--13.5% 11,431,888
---------
(Cost $11,432,938)
TEMPORARY CASH INVESTMENTS--0.5%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.48%, dated 5/30/97,
due 6/2/97 (Delivery value $400,183) 400,000
---------
(Cost $400,000)
TOTAL INVESTMENT SECURITIES--100.0% $84,453,621
===========
(Cost $78,206,209)
Principal Amount Value
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value (Loss)
- ------------------------------------------------------
259,980 CHF 6/30/97 $ 184,644 (8,038)
978,573 DEM 6/30/97 574,864 (11,523)
1,131,041 FRF 6/30/97 196,661 (3,373)
108,979 GBP 6/30/97 178,569 (1,788)
331,445 NLG 6/30/97 173,059 (2,916)
----------- ----------
$ 1,307,797 (27,638)
=========== ==========
(Value on Settlement Date $1,280,159)
Notes to Schedule of Investments
AUD = Australian Dollar
BEF = Belgian Franc
CAD = Canadian Dollar
CHF = Swiss Franc
DEM = German Mark
DKK = Danish Krone
ESP = Spanish Peseta
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FRF = French Franc
GBP = British Pound
GNMA = Government National Mortgage Association
ITL = Italian Lira
JPY = Japanese Yen
NLG = Netherlands Guilder
ORD = Foreign Ordinary Share
SEK = Swedish Krona
(1) Non-income producing.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 and,
unless registered under the Act or exempted from registration, may only be
sold to qualified institutional investors. The aggregate value of
restricted securities at May 31, 1997, was $987,500, which represented 1.2%
of net assets.
(3) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(4) The rates for commercial paper represent are the yield to maturity as of
May 31, 1997.
See Notes to Financial Statements
14 Schedule of Investments American Century Investments
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED)
ASSETS
<S> <C>
Investment securities, at value (identified cost of $78,206,209) (Note 3) ..... $84,453,621
Cash .......................................................................... 30,206
Receivable for investments sold. .............................................. 1,333,238
Receivable for capital shares sold ............................................ 10,755
Dividends and interest receivable ............................................. 708,179
Prepaids and other assets ..................................................... 56,329
------
86,592,328
----------
LIABILITIES
Payable for forward foreign currency exchange contracts ....................... 27,638
Payable for investments purchased ............................................. 1,385,066
Payable for capital shares redeemed ........................................... 88,011
Accrued management fees (Note 2) .............................................. 64,789
Other liabilities ............................................................. 21,460
------
1,586,964
---------
Net Assets Applicable to Outstanding Shares ................................... $85,005,364
===========
CAPITAL SHARES
Outstanding (Unlimited number of shares authorized) ........................... 6,805,311
=========
Net Asset Value Per Share ..................................................... $12.49
======
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) ....................................... $75,504,653
Undistributed net investment income ........................................... 513,509
Accumulated undistributed net realized gain on investment and foreign currency
transactions .................................................................. 2,767,082
Net unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies (Note 3) .............................. 6,220,120
---------
$85,005,364
===========
</TABLE>
See Notes to Financial Statements
Semiannual Report Statement of Assets and Liabilities 15
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ........................................................ $1,417,081
Dividends (net of foreign taxes withheld of $9,060) ............. 362,212
-------
1,779,293
---------
Expenses (Note 2):
Investment advisory fees ........................................ 267,964
Transfer agency fees ............................................ 47,715
Printing and postage ............................................ 46,911
Administrative fees ............................................. 38,639
Custodian fees .................................................. 24,471
Auditing and legal fees ......................................... 12,989
Trustees' fees and expenses ..................................... 11,671
Registration and filing fees .................................... 10,689
Organizational expense .......................................... 8,299
Telephone expenses .............................................. 3,332
Other operating expenses ........................................ 6,103
-----
Total expenses ................................................ 478,783
Amount waived (Note 2) .......................................... (66,456)
-------
Net Expenses .................................................. 412,327
-------
Net investment income ........................................... 1,366,966
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized gain on:
Investments ..................................................... 2,918,135
Foreign currency transactions ................................... 28,475
------
2,946,610
---------
Change in net unrealized appreciation (depreciation) on:
Investments ..................................................... (914,027)
Translation of assets and liabilities in foreign currencies ..... (124,390)
--------
(1,038,417)
----------
Net realized and unrealized
gain on investments ............................................. 1,908,193
---------
Net Increase in Net Assets
Resulting from Operations ....................................... $3,275,159
==========
See Notes to Financial Statements
16 Statement of Operations American Century Investments
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
AND YEAR ENDED NOVEMBER 30, 1996
Increase in Net Assets 1997 1996
OPERATIONS
<S> <C> <C>
Net investment income ........................................................... $ 1,366,966 $ 2,456,251
Net realized gain on investments and foreign currency transactions .............. 2,946,610 3,802,778
Change in net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies ................... (1,038,417) 4,108,109
---------- ---------
Net increase in net assets resulting from operations ............................ 3,275,159 10,367,138
--------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ...................................................... (1,559,781) (2,084,783)
From net realized gains on investment transactions .............................. (4,100,972) (817,408)
---------- --------
Decrease in net assets from distributions ....................................... (5,660,753) (2,902,191)
---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ....................................................... 13,358,613 50,647,741
Proceeds from reinvestment of distributions ..................................... 5,444,078 2,787,490
Payments for shares redeemed .................................................... (14,401,585) (29,066,856)
----------- -----------
Net increase in net assets from capital share transactions ...................... 4,401,106 24,368,375
--------- ----------
Net increase in net assets ...................................................... 2,015,512 31,833,322
NET ASSETS
Beginning of period ............................................................. 82,989,852 51,156,530
---------- ----------
End of period ................................................................... $85,005,364 $82,989,852
=========== ===========
Undistributed net investment income ............................................. $ 513,509 $ 706,324
============= =============
TRANSACTIONS IN SHARES OF THE FUND
Sold ............................................................................ 1,094,093 4,251,362
Issued in reinvestment of distributions ......................................... 458,298 238,336
Redeemed ........................................................................ (1,182,506) (2,428,334)
---------- ----------
Net Increase .................................................................... 369,885 2,061,364
======= =========
</TABLE>
See Notes to Financial Statements
Semiannual Report Statements of Changes in Net Assets 17
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
1. Organization and Summary of Significant Accounting Policies
Organization--American Century Manager Funds (the Trust) is registered under the
Investment Company Act of 1940 as an open-end diversified management investment
company. American Century Capital Manager Fund (the Fund) is the sole fund
issued by the Trust. The Fund's investment objective is to seek to maximize
total return (capital appreciation plus dividend income) consistent with prudent
investment risk. The Fund seeks to achieve this objective by allocating its
assets among U.S. equity securities, U.S fixed-income securities, money market
instruments, foreign equity and fixed-income securities, and securities of
companies with substantial gold-related assets and natural resources linked
investments. The following significant accounting policies, related to the Fund,
are in accordance with accounting policies generally accepted in the investment
company industry.
Security Valuations--Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or the mean of
the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. Debt securities not
traded on a principal securities exchange are valued through valuations obtained
from a commercial pricing service or at the mean of the most recent bid and
asked prices. When valuations are not readily available, securities are valued
at fair value as determined in accordance with procedures adopted by the Board
of Trustees.
Security Transactions--Security transactions are accounted for on the date
purchased or sold. Net realized gains and losses are determined on the
identified cost basis, which is also used for federal income tax purposes.
Investment Income--Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of discounts and premiums.
Foreign Currency Transactions--The accounting records of the Fund are maintained
in U.S. dollars. All assets and liabilities initially expressed in foreign
currencies are converted into U.S. dollars at prevailing exchange rates.
Purchases and sales of investment securities, dividend and interest income, and
certain expenses are translated at the rates of exchange prevailing on the
respective dates of such transactions.
Net realized foreign currency exchange gains or losses arise from sales of
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 assets and liabilities, other than
portfolio securities, resulting from changes in the exchange rates.
Net realized and unrealized foreign currency exchange gains or losses occurring
during the holding period of portfolio securities are a component of realized
gain (loss) on investments and unrealized appreciation (depreciation) on
investments, respectively.
Forward Foreign Currency Exchange Contracts--The Fund 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 Fund will segregate assets in an amount sufficient to cover its
obligations under the hedge contracts. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the Fund 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 Statement of Assets and Liabilities. The
Fund bears 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.
Futures Contracts--The Fund may enter into stock index futures contracts in
order to manage the Fund's exposure to changes in market conditions. One of the
risks of entering into futures contracts may include the possibility that the
change in value of the contract may not correlate with the changes in value of
the underlying securities. Upon entering into a futures contract, the Fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the Fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The Fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investments and unrealized appreciation
(depreciation) on investments, respectively. There were no open futures
contracts at May 31, 1997.
18 Notes to Financial Statements American Century Investments
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
Repurchase Agreements--The Fund may enter into repurchase agreements with
institutions that the Fund's investment advisor, Benham Management Corporation
(BMC), has determined are creditworthy pursuant to criteria adopted by the Board
of Trustees. Each repurchase agreement is recorded at cost. The Fund requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those securities
in the event of a default under the repurchase agreement. BMC monitors, on a
daily basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each repurchase agreement.
Joint Trading Account--Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the Funds, along with other registered investment
companies having management agreements with BMC and American Century Investment
Management, Inc. (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 and Agency obligations.
Income Tax Status--It is the Fund's policy to distribute all net investment
income and net realized capital gains to shareholders and to otherwise qualify
as a regulated investment company under the provisions of the Internal Revenue
Code. Accordingly, no provision has been made for federal or state taxes.
Distributions to Shareholders--Distributions to shareholders are recorded on the
ex-dividend date. Distributions from net investment income are declared and paid
quarterly. Distributions from net realized gains are declared and paid annually.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differences
in the recognition of income and expense items for financial statement and tax
purposes.
Supplementary Information--Certain officers and Trustees of the Trust are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the Trust's investment advisor,
BMC, the Trust's distributor, American Century Investment Services, Inc. (ACIS)
and the Trust's transfer agent, American Century Services Corporation (ACSC).
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the period. Actual results could differ from these
estimates.
Organizational Costs--Costs incurred by the Fund in connection with its
organization, initial registration, and public offering of shares are being
amortized on a straight-line basis over a five-year period ending November 1999.
- --------------------------------------------------------------------------------
2. Transactions with Related Parties
The Trust has entered into an Investment Advisory Agreement with BMC that
provides the Trust with investment advisory services in exchange for an
investment advisory fee. ACSC pays all compensation of Trust officers and
trustees who are officers or directors of ACC or any of its subsidiaries. In
addition, promotion and distribution expenses are paid by BMC. The investment
advisory fee is paid monthly based on the Fund's average daily closing net
assets during the previous month. The annual investment advisory fee is as
follows:
0.65% of the first $100 million
0.60% of the next $100 million
0.55% of the next $100 million
0.50% of the next $100 million
0.45% of the next $100 million
0.37% of the next $1 billion
0.34% of the next $1 billion
0.31% of the next $1 billion
0.30% of the next $1 billion
0.29% of the next $1 billion
0.28% of the next $1 billion
0.27% of the average daily net assets over $6.5 billion
The Trust has an Administrative Services and Transfer Agency Agreement with
ACSC. Under the Agreement, ACSC provides substantially all administrative and
transfer agency services necessary to operate the Fund. Fees for these services
are based on transaction volume, number of accounts and average daily closing
net assets for funds advised by BMC.
Semiannual Report Notes to Financial Statements 19
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
The Trust has an additional agreement with BMC pursuant to which BMC established
a contractual expense guarantee that limits Fund expenses (excluding items such
as brokerage commissions, taxes, interest, custodian earnings credits, and
extraordinary expenses) to 1.00% of the Fund's average daily closing net assets.
The agreement provides that BMC may recover amounts (representing expenses in
excess of the Fund's expense guarantee rate) absorbed during the preceding 11
months, if , and to the extent that, for any given month, the Fund's expenses
are less than the expense guarantee rate in effect at that time.
The payable to affiliates as of May 31, 1997, based on the above agreements was
as follows:
Investment Advisor ........................ $34,786
Administrative Services and
Transfer Agent ............................ 30,003
--------
$64,789
========
On April 25, 1997, the Board of Trustees approved a plan to implement a unified
management fee, which would replace the existing contracts between the Fund and
related parties. Such plan is subject to shareholder approval and will be voted
on in July, 1997. The results of the vote were unknown at the time this report
was printed.
The Trust has a Distribution Agreement with ACIS, which is responsible for
promoting sales of and distributing the Trust's shares.
- --------------------------------------------------------------------------------
3. Investment Transactions
Purchases and sales of securities, other than short-term securities, aggregated
$30,203,438 and $34,000,612, respectively, of which U.S government and
government agency obligations aggregated $5,545,076 and $6,293,244,
respectively. On May 31, 1997, accumulated net unrealized appreciation on
investments, based on the aggregate cost of investments of $78,270,356 for
federal income tax purposes, was $6,183,264 consisting of unrealized
appreciation of $7,578,034 and unrealized depreciation of $1,394,770 .
20 Notes to Financial Statements American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CAPITAL MANAGER
For a Share Outstanding Throughout the Years Ended November 30 (except as
noted)
1997(1) 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C>
Beginning of Period ...................................................... $12.90 $11.70 $10.00
------ ------ ------
Income From Investment Operations
Net Investment Income .................................................. 0.20 0.41 0.36
Net Realized and Unrealized Gain
on Investment Transactions ............................................. 0.27 1.34 1.62
------ ------ ------
Total From
Investment Operations .................................................. 0.47 1.75 1.98
------ ------ ------
Distributions
From Net Investment Income ............................................. (0.24) (0.55) (0.28)
From Net Realized Capital Gains ........................................ (0.64) -- --
------ ------ ------
Total Distributions .................................................... (0.88) (0.55) (0.28)
------ ------ ------
Net Asset Value, End of Period ........................................... $12.49 $12.90 $11.70
====== ====== ======
Total Return(2) ........................................................ 4.02% 15.58% 20.12%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................................................... 1.00%(3) 1.00% 1.01%
Ratio of Net Investment Income to
Average Net Assets ....................................................... 3.31%(3) 3.41% 3.70%
Portfolio Turnover Rate .................................................. 42% 79% 100%
Average Commission Paid per Investment Security Traded ................... $0.0292 $0.0208 --(4)
Net Assets, End
of Period (in thousands) ................................................. $85,005 $82,990 $51,157
(1) Six months ended May 31, 1997 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
(4) Not computed for period indicated.
</TABLE>
See Notes to Financial Statements
Semiannual Report Financial Highlights 21
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain 403(b)
distributions [not eligible for rollover to an IRA or to another 403(b)] are
subject to federal income tax withholding at the rate of 10% of the total amount
withdrawn, unless you elect not to have withholding apply. If you don't want us
to withhold on this amount, you may send us a written notice not to have the
federal income tax withheld. Your written notice is valid for six months from
the date of receipt at American Century. Even if you plan to roll over the
amount you withdraw to another tax-deferred account, the withholding rate still
applies to the withdrawn amount unless we have received a written notice not to
withhold federal income tax within six months prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/ Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
22 Retirement Account Information American Century Investments
NOTES
Annual Report Notes 23
BACKGROUND INFORMATION
Investment Philosophy & Policies
Each asset allocation fund offered by American Century invests in a diversified
portfolio of stocks, bonds and money market securities, with the objective of
achieving as high a level of total return as is consistent with the fund's risk
profile, given its asset mix. The funds rely on a team management approach--
groups of managers are responsible for the ongoing active management of the
individual fund components.
Capital Manager emphasizes a balance between stocks and bonds, along with a
lesser allocation of money market securities and natural resources-linked
investments.
Comparative Indices
The following indices are used in the report as fund performance comparisons.
They are not investment products available for purchase.
The S&P 500 Index is composed of 500 large-capitalization stocks traded on
domestic exchanges. It is considered to be a broad measure of U.S. stock market
performance.
The Lehman Aggregate Bond Index is composed of the Lehman Government/ Corporate
Index and the Lehman Mortgage-Backed Securities Index. It reflects the price
fluctuations of Treasury securities, agency securities, corporate bond issues
and mortgage-backed securities.
The Morgan Stanley Europe, Australia, Far East (EAFE(R)) Index is a widely
followed group of stocks from 20 different countries.
The Salomon Brothers Non-U.S. World Government Bond Index consists of
fixed-income government bonds from 13 countries.
The Three-Month Treasury Bill Index is derived from secondary market interest
rates as published by the Federal Reserve Bank.
Lipper Rankings
Lipper Analytical Services, Inc. is an independent mutual fund ranking service
that groups funds according to their investment objectives. Rankings are based
on average annual returns for each fund in the Flexible Portfolio Funds category
for the periods indicated. Rankings are not included for periods less than one
year. The Flexible Portfolio Funds category includes funds that allocate their
investments across various asset classes, with a focus on total return.
THE FUND'S NEUTRAL ASSET MIX
U.S. Stocks 35%
Foreign Stocks 6%
U.S. Bonds 35%
Foreign Bonds 6%
Cash (money market securities) 15%
Natural Resources-Linked Investments 3%
PORTFOLIO MANAGEMENT TEAM
Lead Managers Jeff Tyler, Brian Howell
U.S. Stocks Bill Martin
Foreign Stocks Henrik Strabo, Mark Kopinski
U.S. Bonds Casey Colton, Bud Hoops,
Jeff Houston, Dave Schroeder
Foreign Bonds Dave Schroeder
Money Market Securities Denise Tabacco
Natural Resources Bill Martin
24 Background Information American Century Investments
GLOSSARY
Returns
o 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.
o 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 returns, please refer to the "Financial
Highlights" on page 21.
Stock Portfolio Statistics
o Number of Companies--the number of different companies held by a fund on a
given date.
o Dividend Yield--a percentage return calculated by dividing a company's annual
cash dividend by the current market value of the company's stock.
o Price/Earnings Ratio--a stock value measurement calculated by dividing a
company's stock price by its earnings per share, with the result expressed as a
multiple instead of a percentage. (Earnings per share is calculated by dividing
a company's after-tax earnings by its outstanding shares.)
Bond Portfolio Statistics
o Number of Securities--the number of different securities held by a fund on a
given date.
o Weighted Average Maturity (WAM)--a measurement of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
o Average Duration--another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.
Fixed-Income Security Types
o Corporate Securities--debt securities or instruments issued by corporations.
Short-term corporate securities are typically issued to raise cash and cover
current expenses in anticipation of future revenues; long-term corporate
securities are issued to finance capital expenditures, such as new plant
construction or equipment purchases.
o Foreign Government Securities--debt securities issued or guaranteed by foreign
governments or their political subdivisions. Some of these securities are direct
obligations of the issuing government; others are backed by some form of
government sponsorship.
o Mortgage-Backed Securities--debt securities that represent ownership in pools
of mortgage loans. Most mortgage-backed securities are structured as
"pass-throughs"--the monthly payments of principal and interest on the mortgages
in the pool are collected by the bank that is servicing the mortgages and are
"passed through" to investors. While the payments of principal and interest are
considered secure (many are backed by government agency guarantees), the cash
flow is less certain than in other fixed-income investments. Mortgages that are
paid off early reduce future interest payments from the pool.
o U.S. Government Agency Securities--debt securities issued by U.S. government
agencies (such as the Federal Home Loan Bank and the Federal Farm Credit Bank).
Some agency securities are backed by the full faith and credit of the U.S.
government, while others are guaranteed only by the issuing agency. Government
agency securities include discount notes (maturing in one year or less) and
medium-term notes, debentures and bonds (maturing in three months to 50 years).
o U.S. Treasury Securities--debt securities issued by the U.S. Treasury and
backed by the direct "full faith and credit" pledge of the U.S. government.
Treasury securities include bills (maturing in one year or less), notes
(maturing in two to ten years) and bonds (maturing in more than ten years).
Semiannual Report Glossary 25
[american century logo]
American
Century(sm)
P.O. Box 419200
Kansas City, Missouri
64141-6200
Investor Services:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-444-3485
Fax: 816-340-7962
Internet: www.americancentury.com
AMERICAN CENTURY MANAGER FUNDS
Investment Manager
Benham Management Corporation
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution
to prospective investors unless preceded or accompanied by an effective
prospectus.
American Century Investment Services, Inc.
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SH-BKT-9003 Recycled
