UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-0816
American Century Mutual Funds, Inc.
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(Exact name of registrant as specified in charter)
4500 Main Street Kansas City, MO. 64111
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(Address of principal executive offices) (Zip code)
David C. Tucker, Esq., 4500 Main Street, 9th Floor, Kansas City, MO. 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: (816) 531-5575
Date of fiscal year end: October 31, 2002
Date of reporting period: April 30, 2003
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
Item 1. Report to Shareholders
Front cover
April 30, 2003
[graphic of chart]
American Century
Semiannual Report
[graphic of starfish]
[graphic of two steel bridges]
Giftrust(reg.sm)
[american century logo and text logo (reg. sm)]
Table of Contents
Our Message to You ........................................................ 1
GIFTRUST
Performance ............................................................... 2
Performance Review ........................................................ 3
Top Ten Holdings ....................................................... 3
Top Five Industries .................................................... 4
Types of Investments in Portfolio ...................................... 4
Schedule of Investments ................................................... 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 8
Statement of Operations ................................................... 9
Statement of Changes in Net Assets ........................................ 10
Notes to Financial Statements ............................................. 11
Financial Highlights ...................................................... 14
OTHER INFORMATION
Comparative Indices ....................................................... 15
Our Message to You
[photo of James E. Stowers III with James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the semiannual report for the Giftrust fund
for the six months ended April 30, 2003.
The report includes comparative performance graphs and tables, portfolio
commentary, tables that summarize portfolio investments, a full listing of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information helpful
in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next Giftrust shareholder report will be the annual report for the year
ended October 31, 2003, which should be available in approximately six months.
As always, we appreciate your investment with American Century.
Sincerely,
[signature of James E. Stowers, Jr.]
James E. Stowers, Jr.
Founder and Chairman
[signature of James E. Stowers, III]
James E. Stowers III
Co-Chairman of the Board
1
Giftrust - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
AVERAGE ANNUAL RETURNS
----------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------ ------- -------- --------- ----
GIFTRUST -23.04% -8.55% 4.38% 11.30% 11/25/83
RUSSELL MIDCAP GROWTH INDEX -16.67% -3.00% 7.77% N/A(1) --
(1) Benchmark began 12/31/85.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Giftrust 29.84% 32.24% 40.16% -27.08% 36.76% -21.02% 113.18% -42.37% -14.35% -23.04%
Russell Midcap
Growth Index 11.08% 13.10% 33.79% 3.92% 40.84% 12.33% 53.02% -29.47% -15.01% -16.67%
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Past performance
does not guarantee future results. None of the charts reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of fund
shares. Investment return and principal value will fluctuate, and redemption value
may be more or less than original cost.
2
Giftrust - Performance Review
[photo of Kurt Stalzer and Linda Peterson]
A performance review from Kurt Stalzer and Linda Peterson, portfolio managers on
the Giftrust investment team.
Giftrust fell 1.01% for the six months ended April 30, 2003 while its benchmark,
the Russell Midcap Growth Index, rose 8.19%. During the period, the domestic
stock market gained ground. The breadth of the advance was reflected in the
positive performances of the Russell 1000 Index, which measures large-cap
stocks, and the Russell 2000 Index, which measures smaller stocks. Much of the
market's progress was made in March and April. For example, from its six-month
low on March 11 through April 30, the Russell Midcap Growth Index returned
14.69%; from October 31, 2002, through March 11, 2003, the benchmark index lost
5.67%.
Giftrust's health care stake was a top detractor from the portfolio's six-month
returns. Investments in the medical providers and services industry hurt
performance most. This included the portfolio's biggest detractor, specialty
drug distributor Accredo Health, which was sold. However, there were a number of
bright spots among Giftrust's health care holdings. Omnicare, a provider of
pharmacy services to long-term care facilities, was one of the portfolio's best
individual contributors. Teva Pharmaceutical Industries, a global drug company
with a focus on generics, was another top contributor during the period. Select
medical products and supplies manufacturers also turned in positive results.
In the consumer services sector, Giftrust's investments in media companies
detracted from six-month returns. However, the portfolio earned positive results
from its industrials stake. The leading performers were found in the
environmental services industry. Positions in the energy and consumer cyclical
sectors also helped performance.
Giftrust's position in the technology sector was a top detractor from
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
Affiliated Computer
Services Inc. 2.9% 2.2%
Omnicare, Inc. 2.6% 2.5%
American Standard
Companies Inc. 2.4% 1.9%
Bard (C.R.), Inc. 2.4% 1.8%
Teva Pharmaceutical
Industries Ltd. ADR 2.3% 1.6%
Westwood One, Inc. 2.1% 2.7%
Cooper Cameron Corp. 2.0% 2.0%
Corporate Executive
Board Co. (The) 2.0% 1.5%
Pactiv Corporation 1.9% 0.8%
Aflac Inc. 1.6% 1.6%
(continued)
3
Giftrust - Performance Review
returns. The biggest declines in this area were posted by defense and aerospace
companies, including Alliant Techsystems. Computer hardware and software
companies also fell. However, the portfolio's returns were helped by its
semiconductor holdings.
Giftrust's position in the information services industry boosted returns.
Corporate Executive Board, a provider of business research and analysis services
to more than 1,900 companies in the U.S. and abroad, was one standout in the
area. On the downside, PEC Solutions, which helps government clients utilize the
Internet to improve performance, detracted from the portfolio's results, and the
stock was sold.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
Information Services 9.1% 8.3%
Medical Products
& Supplies 8.3% 11.4%
Semiconductor 5.2% 3.9%
Computer Hardware &
Business Machines 4.5% 3.3%
Media 4.4% 6.6%
TYPES OF INVESTMENTS IN PORTFOLIO
AS OF AS OF
4/30/03 10/31/02
U.S. Common Stocks &
Equity Futures 91.0% 94.2%
Foreign Stocks 5.2% 2.1%
TOTAL EQUITY EXPOSURE 96.2% 96.3%
Temporary Cash
Investments 3.8% 3.7%
4
Giftrust - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 91.3%
APPAREL & TEXTILES - 1.5%
352,500 Liz Claiborne, Inc. $ 11,467
BANKS - 0.5%
125,000 National City Corp. 3,745
BIOTECHNOLOGY - 2.4%
267,000 CV Therapeutics, Inc.(1) 5,335
109,200 Gilead Sciences, Inc.(1) 5,041
147,900 ICOS Corporation(1) 3,956
108,200 MedImmune, Inc.(1) 3,816
18,148
CHEMICALS - 3.9%
159,900 Avery Dennison Corp. 8,476
707,600 Pactiv Corporation(1) 14,520
151,600 Valspar Corp. 6,548
29,544
CLOTHING STORES - 2.1%
355,100 Foot Locker Inc. 3,906
409,200 Gap, Inc. (The) 6,805
244,650 Pacific Sunwear of California(1) 5,576
16,287
COMPUTER HARDWARE &
BUSINESS MACHINES - 4.5%
509,194 American Power Conversion Corp.(1) 7,941
180,731 Avocent Corp.(1) 5,362
105,059 Imation Corporation(1) 3,604
762,800 McData Corporation Cl A(1) 8,074
327,900 Pinnacle Systems, Inc.(1) 3,105
89,719 Zebra Technologies Corp. Cl A(1) 5,979
34,065
COMPUTER SOFTWARE - 4.1%
254,000 Amdocs Ltd.(1) 4,486
84,700 Business Objects S.A. ADR(1) 1,841
280,800 Cognos, Inc.(1) 7,623
309,600 Documentum Inc.(1) 5,694
121,600 Kronos Inc.(1) 5,547
168,700 Mercury Interactive Corp.(1) 5,723
30,914
DEFENSE/AEROSPACE - 1.9%
200,200 Alliant Techsystems Inc.(1) 10,755
79,100 Lockheed Martin Corp. 3,959
14,714
DEPARTMENT STORES - 0.7%
159,800 Family Dollar Stores, Inc. 5,464
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
DRUGS - 4.3%
154,600 Barr Laboratories, Inc.(1) $ 8,596
239,600 Mylan Laboratories Inc. 6,773
372,369 Teva Pharmaceutical
Industries Ltd. ADR 17,395
32,764
ELECTRICAL EQUIPMENT - 3.3%
85,000 Amphenol Corp. Cl A(1) 3,765
386,742 Comverse Technology, Inc.(1) 5,049
620,000 Corning Inc.(1) 3,360
632,200 Flextronics International Ltd. ADR(1) 5,538
349,000 UTStarcom Inc.(1) 7,600
25,312
ENERGY RESERVES & PRODUCTION - 2.4%
87,200 EOG Resources Inc. 3,260
180,500 Pioneer Natural Resources Co.(1) 4,318
552,800 XTO Energy Inc. 10,779
18,357
ENVIRONMENTAL SERVICES - 2.6%
400,900 Republic Services, Inc. Cl A(1) 8,603
278,500 Stericycle, Inc.(1) 10,950
19,553
FOOD & BEVERAGE - 1.5%
87,200 Hershey Foods Corp. 5,690
166,300 Performance Food Group Co.(1) 5,837
11,527
HEAVY MACHINERY - 0.3%
51,400 Deere & Co. 2,263
HOTELS - 0.6%
329,800 Hilton Hotels Corp. 4,393
INDUSTRIAL PARTS - 4.4%
254,600 American Standard Companies Inc.(1) 18,124
218,038 Fastenal Company 7,539
42,900 Grainger (W.W.), Inc. 1,980
59,277 Ingersoll-Rand Company 2,613
132,468 Pall Corp. 2,798
33,054
INDUSTRIAL SERVICES - 1.6%
366,166 Manpower Inc. 12,040
INFORMATION SERVICES - 9.1%
460,000 Affiliated Computer Services Inc.(1) 21,941
675,144 BearingPoint, Inc.(1) 5,516
226,700 ChoicePoint Inc.(1) 7,998
123,000 Computer Sciences Corp.(1) 4,053
365,796 Corporate Executive Board Co. (The)(1) 14,979
224,359 Getty Images Inc.(1) 7,595
241,400 Paychex, Inc. 7,518
69,600
See Notes to Financial Statements. (continued)
5
Giftrust - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
LEISURE - 0.5%
166,000 Mattel, Inc. $ 3,609
LIFE & HEALTH INSURANCE - 1.6%
372,800 Aflac Inc. 12,194
MEDIA - 4.4%
238,800 Cumulus Media Inc.(1) 4,113
197,800 Entercom Communications Corp.(1) 9,611
106,000 Lamar Advertising Company(1) 3,809
450,019 Westwood One, Inc.(1) 15,706
33,239
MEDICAL PRODUCTS & SUPPLIES - 8.3%
90,500 Alcon, Inc.(1) 3,987
281,500 Bard (C.R.), Inc. 17,841
161,800 Boston Scientific Corp.(1) 6,965
176,700 Cooper Companies, Inc. (The) 4,930
311,100 Edwards Lifesciences Corporation(1) 8,981
24,338 Gen-Probe Incorporated(1) 757
178,976 Henry Schein, Inc.(1) 7,720
143,000 Integra LifeSciences Holdings(1) 3,825
72,400 St. Jude Medical, Inc.(1) 3,798
169,102 Steris Corp.(1) 3,839
62,643
MEDICAL PROVIDERS & SERVICES - 4.2%
511,200 Health Management
Associates, Inc. Cl A 8,721
154,100 Odyssey HealthCare, Inc.(1) 3,983
730,255 Omnicare, Inc.(2) 19,366
32,070
MINING & METALS - 0.8%
101,700 Ball Corp. 5,711
MOTOR VEHICLES & PARTS - 2.3%
232,900 Genuine Parts Company 7,446
219,300 Harley-Davidson, Inc. 9,746
17,192
OIL SERVICES - 3.5%
206,800 BJ Services Co.(1) 7,550
313,500 Cooper Cameron Corp.(1) 15,004
94,600 Weatherford International Ltd.(1) 3,806
26,360
RAILROADS - 0.9%
140,900 Canadian National Railway Co. ORD 6,846
RESTAURANTS - 0.5%
147,300 Applebee's International Inc. 4,043
SECURITIES & ASSET MANAGEMENT - 3.6%
164,600 Affiliated Managers Group Inc.(1) 7,624
28,748 Alliance Capital
Management Holding L.P. 916
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
164,400 Franklin Resources, Inc. $ 5,734
129,400 Legg Mason, Inc. 7,026
94,000 Lehman Brothers Holdings Inc. 5,919
27,219
SEMICONDUCTOR - 5.2%
342,000 Arrow Electronics, Inc.(1) 5,773
165,000 International Rectifier Corp.(1) 3,732
70,100 KLA-Tencor Corp.(1) 2,872
286,500 Linear Technology Corp. 9,879
296,647 Maxim Integrated Products, Inc. 11,657
168,300 Power Integrations, Inc.(1) 3,729
71,000 Xilinx, Inc.(1) 1,922
39,564
SPECIALTY STORES - 3.8%
221,700 Best Buy Co., Inc.(1) 7,666
272,146 PETCO Animal Supplies, Inc.(1) 5,750
348,761 Staples, Inc.(1) 6,639
309,800 Tiffany & Co. 8,594
28,649
TOTAL COMMON STOCKS
(Cost $631,375) 692,550
TEMPORARY CASH INVESTMENTS -
SEGREGATED FOR FUTURES* - 4.9%
Repurchase Agreement, Merrill
Lynch & Co., Inc., (U.S. Treasury obligations),
in a joint trading account at 1.22%,
dated 4/30/03, due 5/1/03 (Delivery value $37,142)
(Cost $37,141) 37,141
TEMPORARY CASH INVESTMENTS - 3.8%
Repurchase Agreement, Merrill
Lynch & Co., Inc., (U.S. Treasury obligations),
in a joint trading account at 1.22%,
dated 4/30/03, due 5/1/03
(Delivery value $159) 159
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations),
in a joint trading account at 1.22%,
dated 4/30/03, due 5/1/03
(Delivery value $28,301) 28,300
TOTAL TEMPORARY
CASH INVESTMENTS
(Cost $28,459) 28,459
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $696,975) $758,150
See Notes to Financial Statements.
(continued)
6
Giftrust - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
($ In Thousands) Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED FOR
SECURITIES LENDING(3)
REPURCHASE AGREEMENTS
Repurchase Agreement, BNP Paribas
Securities Corp., (U.S. Agency obligations),
1.36%, dated 4/30/03, due 5/1/03
(Delivery value $50,002) $50,000
Repurchase Agreement, Nomura Securities,
(U.S. Agency obligations), 1.37%,
dated 4/30/03, due 5/1/03
(Delivery value $59,752) 59,750
$109,750
($ In Thousands) Value
- --------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES
$15,004 Citibank Credit Card Issuance
Trust, Series 2000 A2, Floater,
1.34%, 5/7/03, resets
quarterly off the 3-month LIBOR plus a
floor of 0.05% with no caps $ 15,004
10,000 Security Benefit Life
Insurance Co., Floater,
1.46%, 5/14/03 10,000
25,004
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $134,754) $134,754
EQUITY FUTURES CONTRACTS*
($ In Thousands)
Underlying Face
Purchased Expiration Date Amount at Value Unrealized Gain
--------- --------------- --------------- ---------------
320 NASDAQ 100 Futures June 2003 $35,392 $4,227
8 S&P 400 MidCap Futures June 2003 1,749 59
$37,141 $4,286
*EQUITY FUTURES CONTRACTS typically are based on a stock index and tend to track
the performance of the index while remaining very liquid (easy to buy and sell).
By investing its cash assets in index futures, the fund has increased equity
exposure while maintaining easy access to cash.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
LIBOR = London Interbank Offered Rate
ORD = Foreign Ordinary Share
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security
resets,the less risk the investor is taking that the coupon will vary
significantly from current market rates.
(1) Non-income producing.
(2) Security, or a portion thereof, has been segregated at the custodian bank
or with the broker as initial margin on futures contracts.
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
7
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
(Amounts In Thousands Except Per-Share Amounts)
ASSETS
Investment securities, at value (cost of $696,975) -
including $143,268 for securities loaned $758,150
Collateral received for securities loaned,
at value (cost of $134,754) 134,754
Cash 16
Receivable for investments sold 5,590
Dividends and interest receivable 142
898,652
LIABILITIES
Payable for securities loaned, at value 134,754
Payable for investments purchased 11,663
Payable for variation margin on futures contracts 333
Accrued management fees 602
147,352
Net Assets $751,300
CAPITAL SHARES, $0.01 PAR VALUE
Authorized 200,000
Outstanding 63,877
NET ASSET VALUE PER SHARE $11.76
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $1,347,836
Accumulated net investment loss (1,898)
Accumulated net realized loss on investment transactions (660,099)
Net unrealized appreciation on investments 65,461
$ 751,300
See Notes to Financial Statements.
8
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
(Amounts In Thousands)
INVESTMENT LOSS
INCOME:
Dividends $ 1,254
Interest 427
Securities lending 112
1,793
EXPENSES:
Management fees 3,682
Directors' fees and expenses 5
Other expenses 4
3,691
NET INVESTMENT LOSS (1,898)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investment transactions (55,803)
Change in net unrealized appreciation on investments 50,218
NET REALIZED AND UNREALIZED LOSS (5,585)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (7,483)
See Notes to Financial Statements.
9
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
(Amounts In Thousands)
DECREASE IN NET ASSETS 2003 2002
- ---------------------- ---- ----
OPERATIONS
Net investment loss $ (1,898) $ (3,667)
Net realized loss (55,803) (139,368)
Change in net unrealized appreciation 50,218 5,223
Net decrease in net assets resulting from operations (7,483) (137,812)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 8,709 24,279
Payments for shares redeemed (5,681) (11,020)
Net increase in net assets from capital share transactions 3,028 13,259
NET DECREASE IN NET ASSETS (4,455) (124,553)
NET ASSETS
Beginning of period 755,755 880,308
End of period $751,300 $755,755
Accumulated net investment loss $(1,898) --
TRANSACTIONS IN SHARES OF THE FUND
Sold 743 1,738
Redeemed (489) (816)
Net increase in shares of the fund 254 922
See Notes to Financial Statements.
10
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Giftrust Fund (the fund) is one fund in
a series issued by the corporation. The fund is diversified under the 1940 Act.
The fund's investment objective is to seek long-term capital growth. The
following is a summary of the fund's significant accounting policies.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts in
order to manage the fund's exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investment transactions and unrealized
appreciation (depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and net realized
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
11
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee. The Agreement
provides that all expenses of the fund, except brokerage commissions, taxes,
interest, fees and expenses of those directors who are not considered
"interested persons" as defined in the 1940 Act (including counsel fees) and
extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid
monthly in arrears based on the fund's average daily closing net assets during
the previous month. The annual management fee is 1.00%.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, American Century Investment
Services, Inc., and the corporation's transfer agent, American Century Services
Corporation.
During the six months ended April 30, 2003, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank
line of credit agreement with JPM. The fund has a securities lending agreement
with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the six months ended April 30, 2003, were $369,986 and $356,098,
respectively.
4. SECURITIES LENDING
As of April 30, 2003, securities in the fund valued at $143,268 were on loan
through the lending agent, Chase, to certain approved borrowers. Chase receives
and maintains collateral in the form of cash, U.S. Treasury or Government Agency
securities and/or letters of credit for the fund. The value of cash collateral
received at period end is disclosed in the Statement of Assets and Liabilities
and investments made with the cash by the lending agent are listed in the
Schedule of Investments. The total value of all collateral received, at this
date, was $146,120. The fund's risks in securities lending are that the borrower
may not provide additional collateral when required or return the securities
when due. If the borrower defaults, receipt of the collateral by the fund may
be delayed or limited.
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $620 million
unsecured bank line of credit agreement with JPM, which was renewed from $650
million effective December 17, 2002. The fund may borrow money for temporary or
emergency purposes to fund shareholder redemptions. Borrowings under the
agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not
borrow from the line during the six months ended April 30, 2003.
(continued)
12
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
6. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
Federal tax cost of investments $701,690
Gross tax appreciation of investments $71,567
Gross tax depreciation of investments (15,107)
Net tax appreciation of investments $56,460
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2002, the fund had capital loss carryovers of $597,522. The
accumulated capital losses represent net capital loss carryovers that may be
used to offset future realized capital gains for federal income tax purposes.
The capital loss carryovers expire in 2009 through 2010.
13
Giftrust - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
2003(1) 2002 2001 2000 1999 1998
------- ---- ---- ---- ---- ----
PER-SHARE DATA
Net Asset Value, Beginning of Period $11.88 $14.04 $43.71 $26.80 $16.85 $25.46
Income From Investment Operations
Net Investment Loss(2) (0.03) (0.06) (0.02) (0.32) (0.14) (0.12)
Net Realized and Unrealized
Gain (Loss) (0.09) (2.10) (21.07) 17.23 10.09 (7.74)
Total From Investment Operations (0.12) (2.16) (21.09) 16.91 9.95 (7.86)
Distributions
From Net Investment Income -- -- -- -- -- (0.75)
From Net Realized Gains -- -- (8.58) -- -- --(3)
Total Distributions -- -- (8.58) -- -- (0.75)
Net Asset Value, End of Period $11.76 $11.88 $14.04 $43.71 $26.80 $16.85
TOTAL RETURN(4) (1.01)% 15.38)% (56.36)% 63.10% 59.05% (31.55)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(5) 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment
Loss to Average Net Assets (0.52)%(5) (0.42)% (0.11)% (0.75)% (0.66)% (0.54)%
Portfolio Turnover Rate 53% 140% 196% 92% 117% 147%
Net Assets, End of Period (in millions) $751 $756 $880 $2,086 $1,250 $757
(1) For the six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements.
14
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The RUSSELL MIDCAP GROWTH INDEX measures the performance of those Russell Midcap
Index companies (the 800 smallest of the 1,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth values.
The RUSSELL 1000 INDEX is a market-capitalization weighted, large-cap index
created by Frank Russell Company to measure the performance of the 1,000 largest
companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S.
companies, based on total market capitalization).
The RUSSELL 2000 INDEX is a market-capitalization weighted index created by
Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization.
15
Notes
16
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
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EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE
COMPANIES:
1-800-345-6488
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1-800-634-4113 or 816-444-3485
American Century Mutual Funds, Inc.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
PRSRT STD
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
0306
SH-SAN-34843S
American Century Investment Services, Inc.
(c)2003 American Century Services Corporation
[front cover]
April 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of two bridges]
Ultra(reg.sm)
Vista(reg.sm)
[american century logo and text logo (reg. sm)]
[inside front cover]
Table of Contents
Our Message to You ........................................................ 1
ULTRA
Performance ............................................................... 2
Performance Review ........................................................ 3
Types of Investments in Portfolio ...................................... 3
Top Five Industries .................................................... 4
Top Ten Holdings ....................................................... 4
Schedule of Investments ................................................... 5
VISTA
Performance ............................................................... 9
Performance Review ........................................................ 10
Types of Investments in Portfolio ...................................... 10
Top Five Industries .................................................... 11
Top Ten Holdings ....................................................... 11
Schedule of Investments ................................................... 12
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 15
Statement of Operations ................................................... 16
Statement of Changes in Net Assets ........................................ 17
Notes to Financial Statements ............................................. 18
Financial Highlights ...................................................... 24
OTHER INFORMATION
Share Class Information ................................................... 32
Retirement Account Information ............................................ 33
Comparative Indices ....................................................... 34
Our Message to You
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with semiannual reports for the Ultra and Vista
funds for the six months ended April 30, 2003.
The reports include comparative performance graphs and tables, portfolio
commentaries, tables that summarize portfolio investments, full listings of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information
helpful in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next Ultra and Vista shareholder reports will be the annual reports for the
year ended October 31, 2003, which should be available in approximately six
months.
As always, we appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
-------
1
Ultra - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
================================================================================
INVESTOR CLASS -14.79% -2.12% 9.33% 13.46% 11/2/81
- --------------------------------------------------------------------------------
================================================================================
S&P 500 INDEX -13.31% -2.43% 9.66% 13.11%(1) --
- --------------------------------------------------------------------------------
Institutional Class -14.59% -1.94% -- 3.80% 11/14/96
- --------------------------------------------------------------------------------
Advisor Class -15.05% -2.36% -- 3.92% 10/2/96
- --------------------------------------------------------------------------------
C Class -15.76% -- -- -9.24% 10/29/01
- --------------------------------------------------------------------------------
(1) Since 10/31/81, the date nearest the Investor Class's inception for which
data are available.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
================================================================================
Investor Class 21.18% 6.21% 36.42% 10.69% 39.75% 25.52%
- --------------------------------------------------------------------------------
S&P 500 Index 5.32% 17.47% 30.21% 25.13% 41.07% 21.82%
- --------------------------------------------------------------------------------
[Continued]
- ---------------------------------------------------------------
2000 2001 2002 2003
- ---------------------------------------------------------------
===============================================================
Investor Class 27.06% -26.70% -9.83% -14.79%
- ---------------------------------------------------------------
S&P 500 Index 10.13% -12.97% -12.63% -13.31%
- ---------------------------------------------------------------
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees)
that reduce returns, while the total returns of the index do not. Unless
otherwise indicated, the charts are based on Investor Class shares;
performance for other classes will vary due to differences in fee structures.
Past performance does not guarantee future results. None of the charts reflect
the deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares. Investment return and principal value will
fluctuate, and redemption value may be more or less than original cost.
- -------
2
Ultra - Performance Review
[photo of Wade Slome, Jerry Sullivan, Bruce Wimberly, and Jim Stowers III.]
A performance review from the Ultra investment team (left to right): Portfolio
Managers Wade Slome and Jerry Sullivan, Senior Portfolio Manager Bruce Wimberly,
and Chief Investment Officer, U.S. Growth Equities, Jim Stowers III.
Ultra gained 2.78%* during the six months ended April 30, 2003, trailing its
benchmark, the S&P 500, which advanced 4.48%. The portfolio's results were in
line with the 2.77% average rise of the funds in Lipper, Inc.'s Large-Cap Growth
universe.
The breadth of the domestic stock market's rise during the last six months is
reflected in the 4.75% gain of the Russell 1000 Index which measures large-cap
stocks and the 7.55% advance of the Russell 2000 Index which measures smaller
issues. Among large-caps, value stocks outperformed growth stocks as illustrated
by the performance of the Russell 1000 Value Index compared to the Russell 1000
Growth Index. In the small-cap universe, growth stocks, as measured by the
Russell 2000 Growth Index, modestly outperformed value issues tracked by Russell
2000 Value Index.
In this environment, the technology sector was the biggest contributor to
Ultra's results. Several Internet companies were among the top performers. These
included USA Interactive, which operates electronic retail, information and
travel businesses, and eBay, which operates an online auction site listing a
broad range of items. Elsewhere in the technology sector, companies that make
computer hardware gained ground while defense contractors and electrical
equipment manufacturers declined.
The portfolio also earned positive results from holdings in the consumer
services sector. Top contributors included media companies Comcast, Liberty
Media and Walt Disney. Most investments in restaurants gained as well.
Accounting for Ultra's largest sector weighting on average, health care
companies boosted the portfolio's returns. Of the industries in this sector,
manufacturers of medical products and supplies provided the biggest lift. These
included St. Jude Medical, a manufacturer of pacemakers, implantable
defibrillators and other heart rhythm management products, and Boston
Scientific, a maker of devices used in the treatment of heart disease.
Holdings in biotechnology companies also turned in positive results. A top
contributor was Amgen, whose products include medications used in the treatment
of anemia and infections related to chemotherapy.
===============================================================================
TYPES OF INVESTMENTS IN PORTFOLIO
- -------------------------------------------------------------------------------
===============================================================================
AS OF AS OF
===============================================================================
4/30/03 10/31/02
- -------------------------------------------------------------------------------
U.S. Common Stocks 95.8% 96.0%
- -------------------------------------------------------------------------------
Foreign Stocks 3.4% 1.6%
- -------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 99.2% 97.6%
- -------------------------------------------------------------------------------
Temporary Cash
Investments 0.8% 2.4%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class shares.
(continued)
-------
3
Ultra - Performance Review
On the negative side, Ultra was hurt most by its stake in companies that make
and distribute non-cyclical consumer products. The biggest detractors in this
area were food and beverage companies, including Coca-Cola and Kraft Foods,
both of which posted double-digit declines.
Financial stocks also weighed on Ultra's results. Property and casualty
insurance companies, securities and asset managers, and life and health
insurance companies slowed performance the most in this sector. A top detractor
was American International Group, a diversified company involved in insurance,
financial services, retirement planning and asset management.
The portfolio's position in the industrial sector also hurt performance.
Manufacturers of industrial parts were the main detractors.
================================================================================
TOP FIVE INDUSTRIES
================================================================================
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
================================================================================
% OF FUND % OF FUND
================================================================================
INVESTMENTS INVESTMENTS
================================================================================
AS OF AS OF
================================================================================
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Drugs 14.0% 12.9%
- --------------------------------------------------------------------------------
Computer Software 7.0% 5.4%
- --------------------------------------------------------------------------------
Banks 5.9% 5.5%
- --------------------------------------------------------------------------------
Semiconductor 5.9% 1.7%
- --------------------------------------------------------------------------------
Medical Products
& Supplies 5.8% 3.6%
- --------------------------------------------------------------------------------
===============================================================================
TOP TEN HOLDINGS
===============================================================================
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
===============================================================================
% OF FUND % OF FUND
===============================================================================
INVESTMENTS INVESTMENTS
===============================================================================
AS OF AS OF
===============================================================================
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Pfizer, Inc. 5.4% 4.3%
- -------------------------------------------------------------------------------
Microsoft Corporation 4.5% 4.4%
- -------------------------------------------------------------------------------
Citigroup Inc. 3.7% 3.5%
- -------------------------------------------------------------------------------
Johnson & Johnson 3.4% 2.6%
- -------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 3.3% 2.4%
- -------------------------------------------------------------------------------
General Electric Co. 3.2% 2.5%
- -------------------------------------------------------------------------------
Intel Corporation 2.8% 1.2%
- -------------------------------------------------------------------------------
Dell Computer Corp. 2.7% 0.6%
- -------------------------------------------------------------------------------
Medtronic, Inc. 2.1% 1.4%
- -------------------------------------------------------------------------------
Procter &
Gamble Co. (The) 2.0% 1.6%
- -------------------------------------------------------------------------------
- -------
4
Ultra - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
================================================================================
COMMON STOCKS - 99.2%
ALCOHOL - 0.5%
- --------------------------------------------------------------------------------
2,020,000 Anheuser-Busch Companies, Inc. $100,758
- --------------------------------------------------------------------------------
BANKS - 5.9%
- --------------------------------------------------------------------------------
3,424,100 Bank of America Corp. 253,555
- --------------------------------------------------------------------------------
18,814,599 Citigroup Inc. 738,472
- --------------------------------------------------------------------------------
3,691,000 Wells Fargo & Co. 178,128
- --------------------------------------------------------------------------------
1,170,155
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 2.7%
- --------------------------------------------------------------------------------
5,874,900 Amgen Inc.(1) 360,190
- --------------------------------------------------------------------------------
2,800,000 Gilead Sciences, Inc.(1) 129,248
- --------------------------------------------------------------------------------
1,182,000 MedImmune, Inc.(1) 41,683
- --------------------------------------------------------------------------------
531,121
- --------------------------------------------------------------------------------
CHEMICALS - 0.7%
- --------------------------------------------------------------------------------
1,090,000 3M Co. 137,384
- --------------------------------------------------------------------------------
CLOTHING STORES - 1.9%
- --------------------------------------------------------------------------------
3,921,000 Chico's FAS, Inc.(1)(2) 95,437
- --------------------------------------------------------------------------------
1,525,000 Coach Inc.(1) 66,353
- --------------------------------------------------------------------------------
1,820,000 Gap, Inc. (The) 30,267
- --------------------------------------------------------------------------------
9,870,000 TJX Companies, Inc. (The) 189,997
- --------------------------------------------------------------------------------
382,054
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & BUSINESS MACHINES - 4.3%
- --------------------------------------------------------------------------------
21,565,767 Cisco Systems Inc.(1) 324,457
- --------------------------------------------------------------------------------
18,195,315 Dell Computer Corp.(1) 527,937
- --------------------------------------------------------------------------------
852,394
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 7.0%
- --------------------------------------------------------------------------------
1,665,000 Electronic Arts Inc.(1) 98,693
- --------------------------------------------------------------------------------
35,214,000 Microsoft Corporation 904,120
- --------------------------------------------------------------------------------
23,663,600 Oracle Corp.(1) 281,242
- --------------------------------------------------------------------------------
4,137,000 SAP AG ADR 105,535
- --------------------------------------------------------------------------------
250,000 Symantec Corp.(1) 10,986
- --------------------------------------------------------------------------------
1,400,576
- --------------------------------------------------------------------------------
CONSTRUCTION & REAL PROPERTY - 0.1%
- --------------------------------------------------------------------------------
315,000 Centex Corp. 20,796
- --------------------------------------------------------------------------------
DEPARTMENT STORES - 5.2%
- --------------------------------------------------------------------------------
2,658,000 Costco Companies, Inc.(1) 92,007
- --------------------------------------------------------------------------------
2,125,000 Family Dollar Stores, Inc. 72,654
- --------------------------------------------------------------------------------
2,523,000 Kohl's Corp.(1) 143,306
- --------------------------------------------------------------------------------
2,272,000 Target Corp. 75,976
- --------------------------------------------------------------------------------
11,535,600 Wal-Mart Stores, Inc. 649,684
- --------------------------------------------------------------------------------
1,033,627
- --------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
DRUGS - 14.0%
- -------------------------------------------------------------------------------
1,019,000 Barr Laboratories, Inc.(1) $56,656
- --------------------------------------------------------------------------------
4,532,000 Eli Lilly and Company 289,232
- --------------------------------------------------------------------------------
1,465,000 Forest Laboratories, Inc. Cl A(1) 75,770
- --------------------------------------------------------------------------------
11,977,000 Johnson & Johnson 675,024
- --------------------------------------------------------------------------------
3,444,000 Merck & Co., Inc. 200,372
- --------------------------------------------------------------------------------
34,939,775 Pfizer, Inc. 1,074,399
- --------------------------------------------------------------------------------
6,466,290 Teva Pharmaceutical
Industries Ltd. ADR 302,073
- --------------------------------------------------------------------------------
2,438,000 Wyeth 106,126
- --------------------------------------------------------------------------------
2,779,652
- --------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION - 1.9%
- -------------------------------------------------------------------------------
2,084,125 Apache Corp. 119,315
- --------------------------------------------------------------------------------
2,131,500 Burlington Resources, Inc. 98,710
- --------------------------------------------------------------------------------
921,000 EnCana Corp. 30,301
- --------------------------------------------------------------------------------
2,038,759 EOG Resources Inc. 76,209
- --------------------------------------------------------------------------------
2,516,900 XTO Energy Inc. 49,080
- --------------------------------------------------------------------------------
373,615
- --------------------------------------------------------------------------------
ENTERTAINMENT - 1.8%
- -------------------------------------------------------------------------------
6,740,000 Carnival Corporation 185,956
- --------------------------------------------------------------------------------
4,080,500 Viacom, Inc. Cl B(1) 177,135
- --------------------------------------------------------------------------------
363,091
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 4.3%
- -------------------------------------------------------------------------------
4,003,000 American Express Co. 151,554
- --------------------------------------------------------------------------------
21,421,500 General Electric Co. 630,863
- --------------------------------------------------------------------------------
675,000 SLM Corporation 75,600
- --------------------------------------------------------------------------------
858,017
- --------------------------------------------------------------------------------
FOOD & BEVERAGE - 2.2%
- -------------------------------------------------------------------------------
3,514,300 Coca-Cola Company (The) 141,978
- --------------------------------------------------------------------------------
4,675,900 PepsiCo, Inc. 202,373
- --------------------------------------------------------------------------------
3,545,000 SYSCO Corp. 101,848
- --------------------------------------------------------------------------------
446,199
- --------------------------------------------------------------------------------
GROCERY STORES - 0.3%
- -------------------------------------------------------------------------------
935,000 Whole Foods Market, Inc.(1) 55,478
- --------------------------------------------------------------------------------
HOME PRODUCTS - 3.7%
- -------------------------------------------------------------------------------
635,000 Alberto-Culver Company Cl B 31,293
- --------------------------------------------------------------------------------
1,570,000 Avon Products, Inc. 91,327
- --------------------------------------------------------------------------------
2,083,000 Clorox Company 94,193
- --------------------------------------------------------------------------------
1,221,400 Colgate-Palmolive Co. 69,827
- --------------------------------------------------------------------------------
1,813,593 Gillette Company 55,224
- --------------------------------------------------------------------------------
4,320,000 Procter & Gamble Co. (The) 388,152
- --------------------------------------------------------------------------------
730,016
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-------
5
Ultra - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
INFORMATION SERVICES - 4.9%
- --------------------------------------------------------------------------------
2,675,000 Affiliated Computer Services Inc.(1) $127,598
- --------------------------------------------------------------------------------
2,796,000 Apollo Group Inc. Cl A(1) 151,431
- --------------------------------------------------------------------------------
645,000 Career Education Corp.(1) 38,742
- --------------------------------------------------------------------------------
1,920,000 Corinthian Colleges, Inc.(1) 87,792
- --------------------------------------------------------------------------------
4,027,502 First Data Corporation 157,999
- --------------------------------------------------------------------------------
2,814,616 International Business
Machines Corp. 238,961
- --------------------------------------------------------------------------------
930,000 Moody's Corp. 44,910
- --------------------------------------------------------------------------------
3,885,000 Paychex, Inc. 120,998
- --------------------------------------------------------------------------------
968,431
- --------------------------------------------------------------------------------
INTERNET - 4.3%
- --------------------------------------------------------------------------------
3,625,200 Amazon.com, Inc.(1) 103,953
- --------------------------------------------------------------------------------
1,091,000 eBay Inc.(1) 101,207
- --------------------------------------------------------------------------------
4,367,000 Expedia, Inc.(1) 252,413
- --------------------------------------------------------------------------------
11,185,100 USA Interactive(1) 335,608
- --------------------------------------------------------------------------------
2,675,000 Yahoo! Inc.(1) 66,300
- --------------------------------------------------------------------------------
859,481
- --------------------------------------------------------------------------------
LEISURE - 0.3%
- --------------------------------------------------------------------------------
577,000 International Game Technology(1) 49,795
- --------------------------------------------------------------------------------
288,299 Mattel, Inc. 6,268
- --------------------------------------------------------------------------------
56,063
- --------------------------------------------------------------------------------
MEDIA - 3.9%
- --------------------------------------------------------------------------------
6,557 AOL Time Warner Inc.(1) 90
- --------------------------------------------------------------------------------
2,555,000 Clear Channel
Communications, Inc.(1) 99,926
- --------------------------------------------------------------------------------
10,472,500 Comcast Corporation(1) 334,229
- --------------------------------------------------------------------------------
6,469,000 Disney (Walt) Company 120,712
- --------------------------------------------------------------------------------
2,716,000 EchoStar Communications
Corp. Cl A(1) 81,399
- --------------------------------------------------------------------------------
3,100,000 Fox Entertainment Group,
Inc. Cl A(1) 78,740
- --------------------------------------------------------------------------------
5,642,832 Liberty Media
Corporation Cl A(1) 62,071
- --------------------------------------------------------------------------------
777,167
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES - 5.8%
- --------------------------------------------------------------------------------
2,394,900 Alcon, Inc.(1) 105,495
- --------------------------------------------------------------------------------
1,562,000 Becton Dickinson & Co. 55,295
- --------------------------------------------------------------------------------
2,380,000 Biomet Inc. 72,519
- --------------------------------------------------------------------------------
4,278,000 Boston Scientific Corp.(1) 184,167
- --------------------------------------------------------------------------------
1,350,000 Edwards Lifesciences Corporation(1) 38,975
- --------------------------------------------------------------------------------
8,571,400 Medtronic, Inc. 409,198
- --------------------------------------------------------------------------------
1,875,000 St. Jude Medical, Inc.(1) 98,363
- --------------------------------------------------------------------------------
2,030,000 Varian Medical Systems, Inc.(1) 109,336
- --------------------------------------------------------------------------------
1,551,000 Zimmer Holdings Inc.(1) 72,742
- --------------------------------------------------------------------------------
1,146,090
- --------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES - 2.4%
- -------------------------------------------------------------------------------
1,713,000 Cardinal Health, Inc. $94,695
- --------------------------------------------------------------------------------
2,960,000 UnitedHealth Group Incorporated 272,704
- --------------------------------------------------------------------------------
1,388,000 Wellpoint Health Networks Inc.(1) 105,405
- --------------------------------------------------------------------------------
472,804
- --------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS - 0.3%
- -------------------------------------------------------------------------------
1,340,000 Harley-Davidson, Inc. 59,550
- --------------------------------------------------------------------------------
OIL SERVICES - 1.2%
- -------------------------------------------------------------------------------
2,400,000 BJ Services Co.(1) 87,623
- --------------------------------------------------------------------------------
445,000 Cooper Cameron Corp.(1) 21,298
- --------------------------------------------------------------------------------
1,647,700 Nabors Industries Ltd.(1) 64,590
- --------------------------------------------------------------------------------
2,003,500 Patterson-UTI Energy Inc.(1) 66,366
- --------------------------------------------------------------------------------
239,877
- --------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE - 3.4%
- -------------------------------------------------------------------------------
4,611,571 American International
Group, Inc. 267,240
- -------------------------------------------------------------------------------
3,071 Berkshire Hathaway
Inc. Cl A(1) 214,402
- -------------------------------------------------------------------------------
80,870 Berkshire Hathaway
Inc. Cl B(1) 188,589
- -------------------------------------------------------------------------------
670,231
- -------------------------------------------------------------------------------
PUBLISHING - 1.0%
- -------------------------------------------------------------------------------
1,515,000 Gannett Co., Inc. 114,715
- --------------------------------------------------------------------------------
1,240,000 McGraw-Hill
Companies, Inc. (The) 72,404
- --------------------------------------------------------------------------------
400,000 Tribune Co. 19,592
- --------------------------------------------------------------------------------
206,711
- --------------------------------------------------------------------------------
RESTAURANTS - 2.4%
- -------------------------------------------------------------------------------
2,639,623 Applebee's International Inc.(2) 72,458
- --------------------------------------------------------------------------------
2,408,000 Brinker International, Inc.(1) 76,454
- --------------------------------------------------------------------------------
2,865,000 Cheesecake Factory Inc.(1)(2) 90,548
- --------------------------------------------------------------------------------
1,168,800 Outback Steakhouse, Inc. 41,773
- --------------------------------------------------------------------------------
1,645,000 PF Chang's China Bistro, Inc.(1)(2) 68,934
- --------------------------------------------------------------------------------
5,135,000 Starbucks Corporation(1) 120,646
- --------------------------------------------------------------------------------
470,813
- --------------------------------------------------------------------------------
SEMICONDUCTOR - 5.9%
- -------------------------------------------------------------------------------
1,930,000 Analog Devices, Inc.(1) 63,922
- --------------------------------------------------------------------------------
4,269,000 Applied Materials, Inc.(1) 62,349
- --------------------------------------------------------------------------------
30,305,004 Intel Corporation 557,763
- --------------------------------------------------------------------------------
1,305,000 KLA-Tencor Corp.(1) 53,472
- --------------------------------------------------------------------------------
2,105,000 Maxim Integrated Products, Inc. 82,716
- --------------------------------------------------------------------------------
6,540,000 Microchip Technology Inc. 135,999
- --------------------------------------------------------------------------------
2,299,200 QUALCOMM Inc. 73,287
- --------------------------------------------------------------------------------
11,594,000 Taiwan Semiconductor
Manufacturing Co. Ltd. ADR(1) 97,042
- --------------------------------------------------------------------------------
2,832,000 Texas Instruments Inc. 52,364
- --------------------------------------------------------------------------------
1,178,914
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- -------
6
Ultra - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
SPECIALTY STORES - 3.5%
- --------------------------------------------------------------------------------
1,891,000 Bed Bath & Beyond Inc.(1) $74,723
- --------------------------------------------------------------------------------
7,258,000 Home Depot, Inc. 204,168
- --------------------------------------------------------------------------------
1,415,000 Krispy Kreme Doughnuts, Inc.(1) 45,959
- --------------------------------------------------------------------------------
3,710,000 Lowe's Companies, Inc. 162,832
- --------------------------------------------------------------------------------
6,901,399 Walgreen Co. 212,977
- --------------------------------------------------------------------------------
700,659
- --------------------------------------------------------------------------------
THRIFTS - 1.2%
- --------------------------------------------------------------------------------
5,976,000 Washington Mutual, Inc. 236,052
- --------------------------------------------------------------------------------
TRUCKING, SHIPPING & AIR FREIGHT - 1.5%
- --------------------------------------------------------------------------------
1,200,000 Expeditors International
of Washington, Inc. 43,656
- --------------------------------------------------------------------------------
2,406,000 FedEx Corp. 144,071
- --------------------------------------------------------------------------------
1,910,000 United Parcel Service, Inc. Cl B 118,649
- --------------------------------------------------------------------------------
306,376
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS - 0.7%
- --------------------------------------------------------------------------------
7,115,000 Vodafone Group plc ADR 140,592
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $16,387,908) 19,724,744
- --------------------------------------------------------------------------------
================================================================================
TEMPORARY CASH INVESTMENTS - 0.8%
Repurchase Agreement, Credit Suisse
First Boston, Inc., (U.S. Treasury
obligations), in a joint trading account
at 1.23%, dated 4/30/03, due 5/1/03
(Delivery value $158,205)
(Cost $158,200) 158,200
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $16,546,108) $19,882,944
================================================================================
================================================================================
COLLATERAL RECEIVED
================================================================================
FOR SECURITIES LENDING(3)
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, BNP Paribas Securities Corp.,
(U.S. Government Agency obligations), 1.36%,
dated 4/30/03, due 5/1/03
(Delivery value $105,004) $105,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Credit Suisse First Boston, Inc.,
(U.S. Government Agency obligations), 1.25%,
dated 4/30/03, due 5/1/03
(Delivery value $200,007) 200,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Goldman Sachs & Co.,
(U.S. Government Agency obligations), 1.25%,
dated 4/30/03, due 5/1/03
(Delivery value $65,002) 65,000
- --------------------------------------------------------------------------------
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
Repurchase Agreement, Mizuho Securities USA Inc.,
(U.S. Government Agency obligations), 1.38%,
dated 4/30/03, due 5/1/03
(Delivery value $50,002) $50,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley Group, Inc.,
(AA Corporate Bonds), 1.45%,
dated 4/30/03, due 5/1/03
(Delivery value $100,004) 100,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Nomura Securities,
(U.S. Government Agency obligations),
1.37%, dated 4/30/03, due 5/1/03
(Delivery value $28,623) 28,622
- -------------------------------------------------------------------------------
548,622
- --------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES
- -------------------------------------------------------------------------------
$19,980 Amsterdam Funding,
1.26%, 5/5/03 19,980
- -------------------------------------------------------------------------------
49,953 Bayerische Landesbank,
N.Y., Floater, 1.475%, 5/1/03,
resets daily off the Fed Funds
rate plus 0.08% with no caps 49,953
- -------------------------------------------------------------------------------
24,994 Canadian Imperial Bank NY,
Floater, 1.39%, 5/1/03, resets
daily off the prime rate minus
2.90% with no caps 24,995
- -------------------------------------------------------------------------------
24,018 Chase Credit Card Master Trust,
Series 1997-1, Class A, Floater,
1.31%, 5/15/03, resets monthly
off the 1-month LIBOR plus a
floor of 0.09% with no caps 24,018
- -------------------------------------------------------------------------------
25,053 Citibank Credit Card Issuance
Trust, Series 2000 A2, Floater,
1.34%, 5/7/03, resets quarterly
off the 3-month LIBOR plus a
floor of 0.05% with no caps 25,053
- -------------------------------------------------------------------------------
40,035 Ford Credit Floorplan Master
Owner Trust, Series 2001-1,
Class A, Floater, 1.32%, 5/15/03,
resets monthly off the 1-month
LIBOR plus a floor of 0.09%
with no caps 40,035
- -------------------------------------------------------------------------------
25,000 Goldman Sachs Group, Inc.,
Floater, 1.52%, 5/1/03 25,000
- -------------------------------------------------------------------------------
32,000 Halogen Funding Company, LLC,
1.33%, 5/5/03 32,000
- -------------------------------------------------------------------------------
89,914 Independence Funding LLC,
1.27%, 5/5/03 89,914
- -------------------------------------------------------------------------------
25,000 Metropolitan Life Insurance Co.,
Floater, 1.39%, 5/1/03 25,000
- -------------------------------------------------------------------------------
49,977 Nordea Bank Finland plc, Floater,
1.42%, 5/1/03, resets daily off
the prime rate minus 2.89%
with no caps 49,980
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-------
7
Ultra - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Principal Amount ($ In Thousands) Value
- --------------------------------------------------------------------------------
$15,000 Security Benefit Life Insurance Co.,
Floater, 1.46%, 5/14/03 $15,000
- --------------------------------------------------------------------------------
40,000 Security Life of Denver
Insurance Co., 1.45%, 5/21/03 40,000
- --------------------------------------------------------------------------------
8,000 Wachovia Bank N.A., Floater,
1.52%, 5/1/03, resets daily
off the Fed Funds rate plus
0.19% with no caps 8,000
- --------------------------------------------------------------------------------
468,928
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $1,017,550) $1,017,550
================================================================================
===============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
LIBOR = London Interbank Offered Rate
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security resets,
the less risk the investor is taking that the coupon will vary significantly
from current market rates.
(1) Non-income producing.
(2) Affiliated Company: the fund's holding represents ownership of 5% or
more of the voting securities of the company, therefore, the company is
affiliated as defined in the Investment Company Act of 1940. (See Note 5 in
Notes to Financial Statements for a summary of transactions for each issuer
which is or was an affiliate at or during the six months ended April 30,
2003.)
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
- -------
8
Vista - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------
===============================================================================
INVESTOR CLASS -17.07% 0.62% 6.78% 9.26% 11/25/83
- -------------------------------------------------------------------------------
===============================================================================
RUSSELL MIDCAP
GROWTH INDEX -16.67% -3.00% 7.77% N/A(1) --
- -------------------------------------------------------------------------------
Institutional Class -16.83% 0.84% -- 0.63% 11/14/96
- -------------------------------------------------------------------------------
Advisor Class -17.31% 0.39% -- -0.89% 10/2/96
- -------------------------------------------------------------------------------
C Class -17.93% -- -- -14.59% 7/18/01
- -------------------------------------------------------------------------------
(1) Benchmark began 12/31/85.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
================================================================================
Investor Class 8.22% 21.46% 47.42% -23.56% 26.13% -15.78%
- --------------------------------------------------------------------------------
Russell Midcap
Growth Index 11.08% 13.10% 33.79% 3.92% 40.84% 12.33%
- --------------------------------------------------------------------------------
[continued]
- -----------------------------------------------------------------
2000 2001 2002 2003
- -----------------------------------------------------------------
=================================================================
Investor Class 125.22% -22.00% -15.93% -17.07%
- -----------------------------------------------------------------
Russell Midcap
Growth Index 53.02% -29.47% -15.01% -16.67%
- -----------------------------------------------------------------
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns I
nclude operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures. Past performance does
not guarantee future results. None of the charts reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
-------
9
Vista - Performance Review
[photo of Glenn Fogle and David Rose]
A performance review from Glenn Fogle and David Rose, portfolio managers on the
Vista investment team.
For the six months ended April 30, 2003, Vista gained 0.32%* while its
benchmark, the Russell Midcap Growth Index, rose 8.19%.
The domestic stock market rebounded during the six months covered by this
report. The breadth of the advance is reflected in gains posted by the Russell
1000 Growth and Value indices, which measure large stocks, and the Russell 2000
Growth and Value indices, which measure smaller stocks. Mid-cap growth issues
represented by the Russell Midcap Growth Index performed best. Much of the
progress was made in March and April: From its six-month low on March 11 through
April 30, the Russell Midcap Growth Index returned 14.69%. From October 31,
2002, through March 11, 2003, the benchmark index fell 5.67%.
The consumer services sector was the top detractor from Vista's six- month
returns. The biggest declines in this area were posted by broadcast media
companies, including Emmis Communications.
Holdings in the technology sector also weighed on results. Software companies
were the biggest detractors, including Take-Two Interactive Software and
Electronic Arts. Defense and aerospace companies also declined. On the other
hand, the portfolio's returns were boosted by its semiconductor holdings.
SanDisk, a manufacturer of flash memory storage products, was one standout in
this area. Investments in the electrical equipment and Internet industries also
gained ground.
The portfolio's position in the industrial sector hurt performance. The main
detractor was AGCO, a manufacturer of agricultural equipment. In the consumer
cyclical area, investments in specialty stores fell, more than offsetting
advances among clothing stores.
Vista earned positive results from its commercial services stake. The leading
performers were found in the information services industry. Apollo Group and
Career Education, which provide higher education programs, were top contributors
to portfolio performance.
===============================================================================
TYPES OF INVESTMENTS IN PORTFOLIO
- -------------------------------------------------------------------------------
===============================================================================
AS OF AS OF
===============================================================================
4/30/03 10/31/02
- -------------------------------------------------------------------------------
U.S. Common Stocks 84.4% 93.8%
- -------------------------------------------------------------------------------
Foreign Stocks 11.4% 3.4%
- -------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 95.8% 97.2%
- -------------------------------------------------------------------------------
Temporary Cash
Investments 4.2% 2.8%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class
shares.
(continued)
- -------
10
Vista - Performance Review
Positions in the health care sector, Vista's largest sector weighting, generated
positive returns for the portfolio. Overall, investments in drug companies and
medical products and supplies companies contributed to performance. Medical
providers and services as a group declined, although Coventry Health Care, a
managed health care company and Vista's largest position, was the portfolio's
top contributor.
Investments in wireless telecommunications providers lifted returns. The
portfolio also earned positive contributions from its financial stake,
particularly life and health insurers and financial services companies.
================================================================================
TOP FIVE INDUSTRIES
================================================================================
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
================================================================================
% OF FUND % OF FUND
================================================================================
INVESTMENTS INVESTMENTS
================================================================================
AS OF AS OF
================================================================================
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Medical Providers
& Services 17.5% 16.0%
- --------------------------------------------------------------------------------
Specialty Stores 9.5% 7.4%
- --------------------------------------------------------------------------------
Medical Products
& Supplies 6.2% 8.3%
- --------------------------------------------------------------------------------
Property & Casualty
Insurance 5.8% 5.6%
- --------------------------------------------------------------------------------
Information Services 5.5% 7.7%
- --------------------------------------------------------------------------------
===============================================================================
TOP TEN HOLDINGS
===============================================================================
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
===============================================================================
% OF FUND % OF FUND
===============================================================================
INVESTMENTS INVESTMENTS
===============================================================================
AS OF AS OF
===============================================================================
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Coventry Health Care Inc. 5.3% 2.2%
- -------------------------------------------------------------------------------
Wellpoint Health
Networks Inc. 4.0% 2.9%
- -------------------------------------------------------------------------------
Hollywood
Entertainment Corp. 2.7% 1.3%
- -------------------------------------------------------------------------------
Boston Scientific Corp. 2.6% 2.2%
- -------------------------------------------------------------------------------
Apollo Group Inc. Cl A 2.2% 2.0%
- -------------------------------------------------------------------------------
SAFECO Corp. 2.2% --
- -------------------------------------------------------------------------------
UTStarcom Inc. 2.2% --
- -------------------------------------------------------------------------------
Michaels Stores, Inc. 2.1% 0.8%
- -------------------------------------------------------------------------------
Anthem, Inc. 2.1% --
- -------------------------------------------------------------------------------
AETNA Inc. 2.0% --
- -------------------------------------------------------------------------------
-------
11
Vista - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
================================================================================
COMMON STOCKS - 95.8%
APPAREL & TEXTILES - 1.0%
- --------------------------------------------------------------------------------
105,840 Puma AG Rudolf Dassler
Sport ORD $10,175
- --------------------------------------------------------------------------------
BANKS - 1.7%
- --------------------------------------------------------------------------------
390,000 UCBH Holdings Inc. 9,943
- --------------------------------------------------------------------------------
360,000 W Holding Company, Inc. ADR 7,088
- --------------------------------------------------------------------------------
17,031
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 0.5%
- --------------------------------------------------------------------------------
450,000 QLT Inc. ADR(1) 5,243
- --------------------------------------------------------------------------------
CLOTHING STORES - 2.9%
- --------------------------------------------------------------------------------
1,133,000 Gap, Inc. (The) 18,842
- --------------------------------------------------------------------------------
409,179 Hot Topic, Inc.(1) 9,994
- --------------------------------------------------------------------------------
28,836
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & BUSINESS MACHINES - 2.4%
- --------------------------------------------------------------------------------
200,000 Avocent Corp.(1) 5,934
- --------------------------------------------------------------------------------
447,211 McData Corporation Cl A(1) 4,734
- --------------------------------------------------------------------------------
700,000 McData Corporation Cl B(1) 7,353
- --------------------------------------------------------------------------------
381,000 Research In Motion Ltd. ADR(1) 5,946
- --------------------------------------------------------------------------------
23,967
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 2.8%
- --------------------------------------------------------------------------------
600,000 Amdocs Ltd.(1) 10,595
- --------------------------------------------------------------------------------
1,450,000 Ascential Software Corporation(1) 5,568
- --------------------------------------------------------------------------------
355,000 Citrix Systems, Inc.(1) 6,738
- --------------------------------------------------------------------------------
115,676 Kronos Inc.(1) 5,277
- --------------------------------------------------------------------------------
28,178
- --------------------------------------------------------------------------------
CONSUMER DURABLES - 0.7%
- --------------------------------------------------------------------------------
103,000 Harman International
Industries Inc. 6,859
- --------------------------------------------------------------------------------
DEFENSE/AEROSPACE - 4.0%
- --------------------------------------------------------------------------------
110,000 L-3 Communications
Holdings, Inc.(1) 4,884
- --------------------------------------------------------------------------------
300,000 Lockheed Martin Corp. 15,015
- --------------------------------------------------------------------------------
230,000 Northrop Grumman Corp. 20,229
- --------------------------------------------------------------------------------
40,128
- --------------------------------------------------------------------------------
DEPARTMENT STORES - 1.0%
- --------------------------------------------------------------------------------
195,000 Dollar Tree Stores, Inc.(1) 4,964
- --------------------------------------------------------------------------------
83,000 Kohl's Corp.(1) 4,714
- --------------------------------------------------------------------------------
9,678
- --------------------------------------------------------------------------------
DRUGS - 4.5%
- --------------------------------------------------------------------------------
320,000 Andrx Corp(1) 5,162
- --------------------------------------------------------------------------------
545,000 Biovail Corp.
International ADR(1) 19,702
- --------------------------------------------------------------------------------
435,000 Teva Pharmaceutical
Industries Ltd. ADR 20,320
- --------------------------------------------------------------------------------
45,184
- --------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 4.3%
- -------------------------------------------------------------------------------
112,000 Amphenol Corp. Cl A(1) $4,960
- --------------------------------------------------------------------------------
275,000 Garmin Ltd. ADR(1) 11,648
- --------------------------------------------------------------------------------
230,638 Plantronics, Inc.(1) 4,267
- --------------------------------------------------------------------------------
1,000,000 UTStarcom Inc.(1) 21,775
- --------------------------------------------------------------------------------
42,650
- --------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION - 2.3%
- -------------------------------------------------------------------------------
85,000 Apache Corp. 4,866
- --------------------------------------------------------------------------------
125,000 Evergreen Resources, Inc.(1) 5,944
- --------------------------------------------------------------------------------
210,035 Tom Brown, Inc.(1) 5,150
- --------------------------------------------------------------------------------
340,633 XTO Energy Inc. 6,642
- --------------------------------------------------------------------------------
22,602
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 0.9%
- -------------------------------------------------------------------------------
100,000 FTI Consulting, Inc.(1) 4,525
- --------------------------------------------------------------------------------
140,000 Hilb, Rogal & Hamilton Co. 4,977
- --------------------------------------------------------------------------------
9,502
- --------------------------------------------------------------------------------
FOOD & BEVERAGE - 2.8%
- -------------------------------------------------------------------------------
315,000 Hain Celestial Group, Inc. (The)(1) 5,427
- --------------------------------------------------------------------------------
490,000 Performance Food Group Co.(1) 17,199
- --------------------------------------------------------------------------------
180,000 United Natural Foods Inc.(1) 5,252
- --------------------------------------------------------------------------------
27,878
- --------------------------------------------------------------------------------
INDUSTRIAL PARTS - 0.8%
- -------------------------------------------------------------------------------
362,341 Pall Corp. 7,653
- --------------------------------------------------------------------------------
INFORMATION SERVICES - 5.5%
- -------------------------------------------------------------------------------
409,500 Apollo Group Inc. Cl A(1) 22,178
- --------------------------------------------------------------------------------
190,000 Career Education Corp.(1) 11,412
- --------------------------------------------------------------------------------
330,000 Ceridian Corp.(1) 4,604
- --------------------------------------------------------------------------------
250,000 Corinthian Colleges, Inc.(1) 11,431
- --------------------------------------------------------------------------------
150,000 Getty Images Inc.(1) 5,078
- --------------------------------------------------------------------------------
54,703
- --------------------------------------------------------------------------------
INTERNET - 1.0%
- -------------------------------------------------------------------------------
105,000 eBay Inc.(1) 9,740
- --------------------------------------------------------------------------------
LEISURE - 0.5%
- -------------------------------------------------------------------------------
135,000 GTECH Holdings Corp.(1) 4,545
- --------------------------------------------------------------------------------
MEDIA - 2.0%
- -------------------------------------------------------------------------------
495,000 EchoStar Communications
Corp. Cl A(1) 14,835
- -------------------------------------------------------------------------------
-- KDG Investments Limited
Partnership (Acquired 7/7/00-5/15/01,
Cost $20,000)(1)(2) 557
- -------------------------------------------------------------------------------
525,000 XM Satellite Radio Holdings Inc.(1) 5,082
- -------------------------------------------------------------------------------
20,474
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- -------
12
Vista - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES - 6.2%
- --------------------------------------------------------------------------------
610,000 Boston Scientific Corp.(1) $26,260
- --------------------------------------------------------------------------------
680,744 Cooper Companies, Inc. (The) 18,993
- --------------------------------------------------------------------------------
88,368 Gen-Probe Incorporated(1) 2,747
- --------------------------------------------------------------------------------
110,000 Henry Schein, Inc.(1) 4,745
- --------------------------------------------------------------------------------
110,000 Patterson Dental Co.(1) 4,415
- --------------------------------------------------------------------------------
100,000 Varian Medical Systems, Inc.(1) 5,386
- --------------------------------------------------------------------------------
62,546
- --------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES - 17.5%
- --------------------------------------------------------------------------------
183,000 AdvancePCS(1) 5,500
- --------------------------------------------------------------------------------
410,000 AETNA Inc. 20,418
- --------------------------------------------------------------------------------
300,000 Anthem, Inc.(1) 20,592
- --------------------------------------------------------------------------------
560,000 Caremark Rx Inc.(1) 11,150
- --------------------------------------------------------------------------------
1,300,000 Coventry Health Care Inc.(1) 53,066
- --------------------------------------------------------------------------------
263,000 Quest Diagnostics Inc.(1) 15,714
- --------------------------------------------------------------------------------
43,631 Triad Hospitals Inc.(1) 960
- --------------------------------------------------------------------------------
415,711 WellChoice Inc.(1) 8,855
- --------------------------------------------------------------------------------
521,413 Wellpoint Health Networks Inc.(1) 39,596
- --------------------------------------------------------------------------------
175,851
- --------------------------------------------------------------------------------
OIL REFINING - 2.1%
- --------------------------------------------------------------------------------
100,000 Kinder Morgan, Inc. 4,702
- --------------------------------------------------------------------------------
450,387 Valero Energy Corp. 16,552
- --------------------------------------------------------------------------------
21,254
- --------------------------------------------------------------------------------
OIL SERVICES - 4.6%
- --------------------------------------------------------------------------------
239,086 ENSCO International Inc. 6,073
- --------------------------------------------------------------------------------
221,000 Global SantaFe Corp. 4,676
- --------------------------------------------------------------------------------
647,150 Grant Prideco, Inc.(1) 7,384
- --------------------------------------------------------------------------------
270,000 Maverick Tube Corp.(1) 4,803
- --------------------------------------------------------------------------------
47,513 Noble Corp.(1) 1,471
- --------------------------------------------------------------------------------
625,000 Pride International Inc.(1) 9,700
- --------------------------------------------------------------------------------
290,000 Weatherford International Ltd.(1) 11,667
- --------------------------------------------------------------------------------
45,774
- --------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE - 5.8%
- --------------------------------------------------------------------------------
78,000 Everest Re Group, Ltd. ADR 5,433
- --------------------------------------------------------------------------------
540,000 HCC Insurance Holdings, Inc. 14,850
- --------------------------------------------------------------------------------
350,000 Renaissancere Holdings Ltd. ADR 15,502
- --------------------------------------------------------------------------------
575,000 SAFECO Corp. 22,119
- --------------------------------------------------------------------------------
57,904
- --------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT - 0.5%
- --------------------------------------------------------------------------------
70,000 Bear Stearns Companies Inc. (The) 4,679
- --------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
SEMICONDUCTOR - 3.3%
- -------------------------------------------------------------------------------
285,000 Broadcom Corp.(1) $5,097
- --------------------------------------------------------------------------------
98,716 DSP Group, Inc. 2,064
- --------------------------------------------------------------------------------
335,000 Marvell Technology Group Ltd.(1) 7,720
- --------------------------------------------------------------------------------
300,000 OmniVision Technologies, Inc.(1) 7,284
- --------------------------------------------------------------------------------
470,000 SanDisk Corp.(1) 11,370
- --------------------------------------------------------------------------------
33,535
- --------------------------------------------------------------------------------
SPECIALTY STORES - 9.5%
- -------------------------------------------------------------------------------
565,382 Blockbuster, Inc. 10,109
- --------------------------------------------------------------------------------
1,500,085 Hollywood Entertainment Corp.(1) 26,574
- --------------------------------------------------------------------------------
685,000 Michaels Stores, Inc.(1) 21,399
- --------------------------------------------------------------------------------
1,000,000 Movie Gallery, Inc.(1) 18,565
- --------------------------------------------------------------------------------
63,329 O'Reilly Automotive, Inc.(1) 1,877
- --------------------------------------------------------------------------------
2,200,000 Officemax Inc.(1) 12,430
- --------------------------------------------------------------------------------
245,000 Sharper Image Corporation(1) 4,851
- --------------------------------------------------------------------------------
95,805
- --------------------------------------------------------------------------------
TRUCKING, SHIPPING & AIR FREIGHT - 2.0%
- -------------------------------------------------------------------------------
130,000 C.H. Robinson Worldwide, Inc. 4,796
- --------------------------------------------------------------------------------
468,448 Heartland Express, Inc.(1) 10,750
- --------------------------------------------------------------------------------
16,956 J.B. Hunt Transport Services, Inc.(1) 586
- --------------------------------------------------------------------------------
174,298 Knight Transportation Inc.(1) 4,200
- --------------------------------------------------------------------------------
20,332
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS - 2.7%
- -------------------------------------------------------------------------------
120,000 Mobile Telesystems ADR(1) 5,760
- --------------------------------------------------------------------------------
1,000,000 Nextel Communications, Inc.(1) 14,795
- --------------------------------------------------------------------------------
160,881 Vimpel-Communications ADR(1) 6,413
- --------------------------------------------------------------------------------
26,968
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $874,633) 959,674
- --------------------------------------------------------------------------------
================================================================================
TEMPORARY CASH INVESTMENTS - 4.2%
Repurchase Agreement, Deutsche Bank,
(U.S. Treasury obligations), in a joint
trading account at 1.23%,
dated 4/30/03, due 5/1/03
(Delivery value $42,101)
(Cost $42,100) 42,100
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $916,733) $1,001,774
===============================================================================
See Notes to Financial Statements. (continued)
-------
13
Vista - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
($ In Thousands)
Contracts to Sell Settlement Date Value Unrealized Loss
- --------------------------------------------------------------------------------
5,076,981 EURO 5/30/03 $5,667 $(73)
===================================
(Value on Settlement Date $5,594)
*FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's
foreign investments against declines in foreign currencies (also known as
hedging). The contracts are called "forward" because they allow the fund to
exchange a foreign currency for U.S. dollars on a specific date in the future -
and at a prearranged exchange rate.
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at April 30, was $557
(in thousands), which represented 0.1% of net assets.
See Notes to Financial Statements.
- -------
14
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
(Amounts In Thousands Except Per-Share Amounts) ULTRA VISTA
================================================================================
ASSETS
- ---------------------------------------------------------
Investment securities - unaffiliated, at value
(cost of $16,276,207 and $916,733, respectively) -
including $873,943 and $0 of securities loaned,
respectively $19,555,567 $1,001,774
- ---------------------------------------------------------
Investment securities - affiliated, at value
(cost of $269,901 and $0, respectively) -
including $119,219 and $0 of securities loaned,
respectively 327,377 --
- ---------------------------------------------------------
Collateral for securities loaned, at value
(cost of $1,017,550 and $0,
respectively) 1,017,550 --
- ---------------------------------------------------------
Receivable for investments sold 87,065 54,546
- ---------------------------------------------------------
Receivable for capital shares sold 695 1
- ---------------------------------------------------------
Dividends and interest receivable 5,776 58
- --------------------------------------------------------------------------------
20,994,030 1,056,379
- --------------------------------------------------------------------------------
================================================================================
LIABILITIES
- ---------------------------------------------------------
Disbursements in excess of demand deposit cash 28,218 7,836
- ---------------------------------------------------------
Payable for securities loaned, at value 1,017,550 --
- ---------------------------------------------------------
Payable for investments purchased 83,912 65,539
- ---------------------------------------------------------
Payable for forward foreign currency exchange contracts -- 73
- ---------------------------------------------------------
Accrued management fees 15,753 778
- ---------------------------------------------------------
Distribution fees payable 90 2
- ---------------------------------------------------------
Service fees payable 89 2
- --------------------------------------------------------------------------------
1,145,612 74,230
- --------------------------------------------------------------------------------
NET ASSETS $19,848,418 $ 982,149
================================================================================
================================================================================
NET ASSETS CONSIST OF:
- ---------------------------------------------------------
Capital (par value and paid-in surplus) $20,736,969 $1,435,373
- ---------------------------------------------------------
Accumulated net investment loss (3,545) (2,617)
- ---------------------------------------------------------
Accumulated net realized loss on investment and
foreign currency transactions
(4,221,842) (535,575)
- ---------------------------------------------------------
Net unrealized appreciation on investments
and translation of assets and liabilities
in foreign currencies 3,336,836 84,968
- --------------------------------------------------------------------------------
$19,848,418 $ 982,149
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $18,738,895,304 $932,098,993
- ---------------------------------------------------------
Shares outstanding 837,705,715 100,408,45
- ---------------------------------------------------------
Net asset value per share $22.37 $9.28
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $660,770,140 $37,704,63
- ---------------------------------------------------------
Shares outstanding 29,323,274 4,017,379
- ---------------------------------------------------------
Net asset value per share $22.53 $9.39
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $447,954,609 $12,213,19
- ---------------------------------------------------------
Shares outstanding 20,193,976 1,331,329
- ---------------------------------------------------------
Net asset value per share $22.18 $9.17
- --------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $797,958 $132,334
- ---------------------------------------------------------
Shares outstanding 36,158 14,529
- ---------------------------------------------------------
Net asset value per share $22.07 $9.11
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
-------
15
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
(Amounts In Thousands) ULTRA VISTA
================================================================================
INVESTMENT LOSS
INCOME:
- ---------------------------------------------------------
Dividends (including $158 and $0 from affiliates,
respectively, and net of foreign taxes withheld of
$235 and $14, respectively) $ 90,277 $ 1,836
- ---------------------------------------------------------
Interest and other income 2,203 283
- --------------------------------------------------------------------------------
92,480 2,119
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------
Management fees 93,430 4,694
- ---------------------------------------------------------
Distribution fees:
- ---------------------------------------------------------
Advisor Class 501 14
- ---------------------------------------------------------
C Class 2 --
- ---------------------------------------------------------
Service fees:
- ---------------------------------------------------------
Advisor Class 501 14
- ---------------------------------------------------------
C Class 1 --
- ---------------------------------------------------------
Directors' fees and expenses 127 6
- ---------------------------------------------------------
Other expenses 76 8
- --------------------------------------------------------------------------------
94,638 4,736
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (2,158) (2,617)
- --------------------------------------------------------------------------------
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED LOSS ON:
- ---------------------------------------------------------
Investment transactions (including $(21,877)
and $0 from affiliates,
respectively) (576,199) (33,052)
- ---------------------------------------------------------
Foreign currency transactions -- (116)
- --------------------------------------------------------------------------------
(576,199) (33,168)
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- ---------------------------------------------------------
Investments 1,092,779 38,253
- ---------------------------------------------------------
Translation of assets and liabilities
in foreign currencies -- (73)
- --------------------------------------------------------------------------------
1,092,779 38,180
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 516,580 5,012
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 514,422 $ 2,395
================================================================================
See Notes to Financial Statements.
- -------
16
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------
(Amounts In Thousands) ULTRA VISTA
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2003 2002 2003 2002
=======================================================================================================================
OPERATIONS
- ---------------------------------
Net investment income (loss) $ (2,158) $ 58,973 $ (2,617) $ (4,111)
- ---------------------------------
Net realized loss (576,199) (2,576,285) (33,168) (122,681)
- ---------------------------------
Change in net unrealized appreciation 1,092,779 (526,167) 38,180 (25,231)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 514,422 (3,043,479) 2,395 (152,023)
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
- ---------------------------------
Investor Class (53,614) -- -- --
- ---------------------------------
Institutional Class (2,704) -- -- --
- ---------------------------------
Advisor Class (160) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions (56,478) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets
from capital share transactions (174,518) (2,982,124) (35,226) (114,538)
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 283,426 (6,025,603) (32,831) (266,561)
=======================================================================================================================
NET ASSETS
Beginning of period 19,564,992 25,590,595 1,014,980 1,281,541
- -----------------------------------------------------------------------------------------------------------------------
End of period $19,848,418 $19,564,992 $ 982,149 $1,014,980
=======================================================================================================================
Accumulated undistributed
net investment income (loss) $(3,545) $55,091 $(2,617) --
=======================================================================================================================
See Notes to Financial Statements.
-------
17
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Ultra Fund (Ultra) and Vista Fund
(Vista) (the funds) are two funds in a series issued by the corporation. The
funds are diversified under the 1940 Act. The funds' investment objective is to
seek long-term capital growth. Ultra generally invests in equity securities of
larger companies, but may invest in companies of any size. Vista generally
invests in companies that are medium-sized and smaller at the time of purchase,
but may invest in companies of any size. The following is a summary of the
funds' significant accounting policies.
MULTIPLE CLASS --The funds are authorized to issue the Investor Class, the
Institutional Class, the Advisor Class and the C Class. The C Class may be
subject to a contingent deferred sales charge. The share classes differ
principally in their respective sales charges and 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. Income, non-class
specific expenses, and realized and unrealized capital gains and losses of the
funds are allocated to each class of shares based on their relative net assets.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The funds may enter into stock index futures contracts in
order to manage the funds' exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the funds are
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 funds. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The funds recognize 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 investment transactions and unrealized
appreciation (depreciation) on investments, respectively.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed
in foreign currencies are translated into U.S. dollars at prevailing exchange
rates at period end. Purchases and sales of investment securities, dividend and
interest income, and certain expenses are translated at the rates of exchange
prevailing on the respective dates of such transactions. For assets and
liabilities, other than investments in securities, net realized and unrealized
gains and losses from foreign currency translations arise from changes in
currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses occurring
during the holding period of investment securities are a component of realized
gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose taxes
on the contract amount of purchases and sales of foreign currency contracts in
their currency. The funds record the foreign tax expense, if any, as a reduction
to the net realized gain (loss) on foreign currency transactions.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward
foreign currency exchange contracts to facilitate transactions of securities
denominated in a foreign
(continued)
- -------
18
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
currency or to hedge the funds' exposure to foreign currency exchange rate
fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the funds and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. The funds bear the risk of an unfavorable change in the foreign currency
exchange rate underlying the forward contract. Additionally, losses may arise if
the counterparties do not perform under the contract terms.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable each fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, each fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and capital
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the funds with investment advisory and
management services in exchange for a single, unified management fee per class.
The Agreement provides that all expenses of the funds, except brokerage
commissions, taxes, interest, fees and expenses of those directors who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed
daily and paid monthly in arrears based on each class's pro rata share of the
funds' average daily closing net assets during the previous month. For the six
months ended April 30, 2003, the effective annual management fee for Vista was
1.00%, 0.80%, 0.75%, and 1.00% for the Investor Class, Institutional Class,
Advisor Class, and C Class, respectively. For the six months ended April 30,
2003, the effective annual management fee for Ultra was 1.00%, 0.80%, 0.75%, and
1.00% for the Investor Class, Institutional Class, Advisor Class, and C Class,
respectively.
The annual management fee schedule for each class of Ultra is as follows:
INVESTOR INSTITUTIONAL ADVISOR C
CLASS CLASS CLASS CLASS
- --------------------------------------------------------------------------------
================================================================================
FUND AVERAGE NET ASSETS
- ---------------------------------------------
First $20 billion 1.00% 0.80% 0.75% 1.00%
- --------------------------------------------------------------------------------
Over $20 billion 0.95% 0.75% 0.70% 0.95%
- --------------------------------------------------------------------------------
(continued)
-------
19
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
2. FEES AND TRANSACTIONS WITH RELATED (CONTINUED)
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class and a separate
Master Distribution and Individual Shareholder Services Plan for the C Class
(collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans
provide that the Advisor Class and C Class will pay American Century Investment
Services, Inc. (ACIS) an annual distribution fee equal to 0.25% and 0.75%,
respectively, and an annual service fee equal to 0.25%. The fees are computed
daily and paid monthly in arrears based on each class's average daily closing
net assets during the previous month. The distribution fee provides compensation
for expenses incurred in connection with distributing shares of the classes
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 ACIS, its affiliates or independent third
party providers for Advisor Class shares and for individual shareholder services
rendered by broker/dealers or other independent financial intermediaries for C
Class shares. Fees incurred under the plans during the six months ended April
30, 2003, are detailed in the Statement of Operations.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, ACIS, and the corporation's
transfer agent, American Century Services Corporation.
During the six months ended April 30, 2003, the funds invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a
bank line of credit agreement with JPM. Ultra has a securities lending agreement
with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2003, were as follows:
ULTRA VISTA
- --------------------------------------------------------------------------------
Purchases $10,461,941 $1,212,460
- --------------------------------------------------------------------------------
Proceeds from sales $10,189,406 $1,263,563
- --------------------------------------------------------------------------------
(continued)
- -------
20
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
ULTRA VISTA
- ----------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
====================================================================================================
INVESTOR CLASS
- ------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 3,500,000 800,000
====================================================================================================
Sold 49,440 $1,059,784 7,438 $ 66,132
- ------------------------------------------
Issued in reinvestment of distributions 2,406 51,578 -- --
- ------------------------------------------
Redeemed (66,788) (1,420,054) (11,476) (102,007)
- ----------------------------------------------------------------------------------------------------
Net decrease (14,942) $ (308,692) (4,038) $ (35,875)
====================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 3,500,000 800,000
====================================================================================================
Sold 92,545 $ 2,336,463 25,893 $ 275,275
- ------------------------------------------
Redeemed (218,852) (5,400,681) (36,565) (386,828)
- ----------------------------------------------------------------------------------------------------
Net decrease (126,307) $(3,064,218) (10,672) $(111,553)
====================================================================================================
====================================================================================================
INSTITUTIONAL CLASS
- ------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 200,000 80,000
====================================================================================================
Sold 7,009 $152,060 784 $7,032
- ------------------------------------------
Issued in reinvestment of distributions 125 2,698 -- --
- ------------------------------------------
Redeemed (3,080) (65,189) (808) (7,205)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) 4,054 $ 89,569 (24) $ (173)
====================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 200,000 80,000
====================================================================================================
Sold 11,571 $310,979 2,107 $22,418
- ------------------------------------------
Redeemed (9,814) (246,483) (2,372) (25,355)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) 1,757 $ 64,496 (265) $ (2,937)
====================================================================================================
====================================================================================================
ADVISOR CLASS
- ------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 300,000 210,000
====================================================================================================
Sold 4,920 $104,434 386 $3,327
- ------------------------------------------
Issued in reinvestment of distributions 7 158 -- --
- ------------------------------------------
Redeemed (2,859) (60,258) (294) (2,526)
- ----------------------------------------------------------------------------------------------------
Net increase 2,068 $ 44,334 92 $ 801
====================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 300,000 210,000
====================================================================================================
Sold 6,651 $165,720 1,311 $14,026
- ------------------------------------------
Redeemed (6,063) (148,584) (1,336) (14,189)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) 588 $ 17,136 (25) $ (163)
====================================================================================================
(continued)
- -------
21
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
ULTRA VISTA
- --------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
=============================================================================================
C CLASS
- -----------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 100,000 100,000
=============================================================================================
Sold 20 $430 3 $22
- -----------------------------------
Redeemed (7) (159) -- (1)
- ---------------------------------------------------------------------------------------------
Net increase 13 $271 3 $21
=============================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 100,000 100,000
=============================================================================================
Sold 24 $560 12 $115
- -----------------------------------
Redeemed (5) (98) -- --
- ---------------------------------------------------------------------------------------------
Net increase 19 $462 12 $115
=============================================================================================
5. AFFILIATED COMPANY TRANSACTIONS (SHARES IN FULL)
Affiliated Company: the fund's holding represents ownership of 5% or more of the
voting securities of the company, therefore, the company is affiliated as
defined in the Investment Company Act of 1940. A summary of transactions for
each issuer which is or was an affiliate at or during the six months ended April
30, 2003 follows:
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND APRIL 30, 2003
ISSUER 10/31/02 COST COST LOSS INCOME SHARE BALANCE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
ULTRA
- --------------------------------------------------------------------------------
Affiliated Managers
Group Inc.(1)(2) 1,050,000 $ -- $64,413 $(21,877) $ -- -- $ --
- ---------------------------
Applebee's
International Inc. 2,639,623 -- -- -- 158 2,639,623 72,458
- ---------------------------
Cheesecake Factory Inc.(1) 418,000 78,933 -- -- -- 2,865,000 90,548
- ---------------------------
Chico's FAS, Inc.(1) 2,425,000 29,988 -- -- -- 3,921,000 95,437
- ---------------------------
PF Chang's China
Bistro, Inc.(1) -- 59,206 -- -- -- 1,645,000 68,934
- ------------------------------------------------------------------------------------------------------------------------------------
$168,127 $64,413 $(21,877) $158 $327,377
====================================================================================================================================
(1) Non-income producing.
(2) Issuer was not an affiliate at April 30, 2003.
(continued)
- -------
22
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
6. SECURITIES LENDING
As of April 30, 2003, securities in Ultra valued at $993,162 were on loan
through the lending agent, Chase, to certain approved borrowers. Chase receives
and maintains collateral in the form of cash, U.S. Treasury or Government Agency
securities and/or letters of credit for Ultra. The value of cash collateral
received at period end is disclosed in the Statement of Assets and Liabilities
and investments made with the cash by the lending agent are listed in the
Schedule of Investments. The total value of all collateral received, at this
date, was $1,017,550. Ultra's risk in securities lending is that the borrower
may not provide additional collateral when required or return the securities
when due. If the borrower defaults, receipt of the collateral by Ultra may be
delayed or limited.
7. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $620 million
unsecured bank line of credit agreement with JPM, which was renewed from $650
million effective December 17, 2002. The funds may borrow money for temporary or
emergency purposes to fund shareholder redemptions. Borrowings under the
agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not
borrow from the line during the six months ended April 30, 2003.
8. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
ULTRA VISTA
- --------------------------------------------------------------------------------
Federal tax cost of investments $16,760,843 $926,459
================================================================================
Gross tax appreciation of investments $3,295,921 $111,185
- ---------------------------------------------------------
Gross tax depreciation of investments (173,820) (35,870)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $3,122,101 $75,315
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
Following are the capital loss carryover amounts as of October 31, 2002:
ULTRA VISTA
- --------------------------------------------------------------------------------
Accumulated capital losses $(3,430,907) $(492,681)
- --------------------------------------------------------------------------------
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire in 2009 through 2010,
for both funds.
-------
23
Ultra - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
====================================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $21.83 $25.09 $41.45 $38.97 $31.06 $33.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Income (Loss)(2) --(3) 0.06 (0.06) (0.28) (0.14) (0.02)
- ------------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.60 (3.32) (11.89) 4.14 11.17 4.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.60 (3.26) (11.95) 3.86 11.03 4.68
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Investment Income (0.06) -- -- -- -- (0.01)
- ------------------------------------------
From Net Realized Gains -- -- (4.41) (1.38) (3.12) (7.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) -- (4.41) (1.38) (3.12) (7.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.37 $21.83 $25.09 $41.45 $38.97 $31.06
====================================================================================================================================
TOTAL RETURN(4) 2.78% (12.99)% (31.44)% 9.81% 37.94% 17.61%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(5) 0.99% 0.98% 0.99% 1.00% 1.00%
- ------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.02)%(5) 0.24% (0.18)% (0.64)% (0.39)% (0.08)%
- ------------------------------------------
Portfolio Turnover Rate 54% 92% 86% 62% 42% 128%
- ------------------------------------------
Net Assets, End of Period (in millions) $18,739 $18,616 $24,560 $38,461 $35,752 $25,396
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
- -------
24
Ultra - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
====================================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $22.02 $25.24 $41.65 $39.13 $31.12 $33.53
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Income (Loss)(2) 0.02 0.11 0.01 (0.20) (0.09) 0.03
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.60 (3.33) (11.94) 4.10 11.22 4.72
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.62 (3.22) (11.93) 3.90 11.13 4.75
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Investment Income (0.11) -- -- -- -- (0.09)
- ------------------------------------------
From Net Realized Gains -- -- (4.48) (1.38) (3.12) (7.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.11) -- (4.48) (1.38) (3.12) (7.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.53 $22.02 $25.24 $41.65 $39.13 $31.12
====================================================================================================================================
TOTAL RETURN(3) 2.82% (12.76)% (31.25)% 9.87% 38.21% 17.85%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80%(4) 0.79% 0.78% 0.79% 0.80% 0.80%
- ------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.18%(4) 0.44% 0.02% (0.44)% (0.19)% 0.12%
- ------------------------------------------
Portfolio Turnover Rate 54% 92% 86% 62% 42% 128%
- ------------------------------------------
Net Assets, End of Period
(in thousands) $660,770 $556,316 $593,436 $763,304 $186,025 $36,065
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
-------
25
Ultra - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
====================================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $21.62 $24.92 $41.23 $38.80 $31.00 $33.36
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Income (Loss)(2) (0.03) --(3) (0.13) (0.40) (0.23) (0.11)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.60 (3.30) (11.87) 4.21 11.15 4.73
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.57 (3.30) (12.00) 3.81 10.92 4.62
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Investment Income (0.01) -- -- -- -- --
- ------------------------------------------
From Net Realized Gains -- -- (4.31) (1.38) (3.12) (6.98)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.01) -- (4.31) (1.38) (3.12) (6.98)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.18 $21.62 $24.92 $41.23 $38.80 $31.00
====================================================================================================================================
TOTAL RETURN(4) 2.63% (13.24)% (31.69)% 9.72% 37.63% 17.36%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25%(5) 1.24% 1.23% 1.24% 1.25% 1.25%
- ------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.27)%(5) (0.01)% (0.43)% (0.89)% (0.64)% (0.33)%
- ------------------------------------------
Portfolio Turnover Rate 54% 92% 86% 62% 42% 128%
- ------------------------------------------
Net Assets, End of Period
(in thousands) $447,955 $391,968 $437,024 $521,187 $247,814 $98,965
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
- -------
26
Ultra - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ----------------------------------------------------------------------------------------
C CLASS
- ----------------------------------------------------------------------------------------
2003(1) 2002 2001(2)
========================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $21.59 $25.09 $25.53
- ----------------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------
Net Investment Income (Loss)(3) (0.11) (0.19) --(4)
- -------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.59 (3.31) (0.44)
- ----------------------------------------------------------------------------------------
Total From Investment Operations 0.48 (3.50) (0.44)
- ----------------------------------------------------------------------------------------
Net Asset Value, End of Period $22.07 $21.59 $25.09
========================================================================================
TOTAL RETURN(5) 2.22% (13.95)% (1.72)%
========================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 2.00%(6) 1.99% 1.99%(6)
- -------------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (1.02)%(6) (0.76)% (3.10)%(6)
- -------------------------------------------------
Portfolio Turnover Rate 54% 92% 86%(7)
- -------------------------------------------------
Net Assets, End of Period
(in thousands) $798 $502 $95
- ----------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) October 29, 2001 (commencement of sale) through October 31, 2001.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales
charges. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect
the class expense differences because of the impact of calculating the
net asset value to two decimal places. If net asset values were calculated
to three decimal places, the total return differences would more closely
reflect the class expense differences. The calculation of net asset values
to two decimal places is made in accordance with SEC guidelines and does
not result in any gain or loss of value between one class and another.
(6) Annualized.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2001.
See Notes to Financial Statements.
-------
27
Vista - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
====================================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.25 $10.62 $24.37 $15.41 $9.27 $14.53
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Loss(2) (0.02) (0.04) (0.04) (0.16) (0.05) (0.05)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.05 (1.33) (7.38) 10.07 6.19 (4.41)
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.03 (1.37) (7.42) 9.91 6.14 (4.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Realized Gains -- -- (6.33) (0.95) -- (0.80)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.28 $9.25 $10.62 $24.37 $15.41 $9.27
====================================================================================================================================
TOTAL RETURN(3) 0.32% (12.90)% (37.48)% 66.16% 66.24% (31.94)%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00%
- ------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.55)%(4) (0.34)% (0.31)% (0.65)% (0.40)% (0.42)%
- ------------------------------------------
Portfolio Turnover Rate 133% 293% 290% 135% 187% 229%
- ------------------------------------------
Net Assets, End of Period (in millions) $932 $966 $1,222 $2,345 $1,146 $895
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
- -------
28
Vista - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
====================================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.34 $10.70 $24.50 $15.51 $9.32 $14.56
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Loss(2) (0.02) (0.02) (0.02) (0.11) (0.04) (0.01)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.07 (1.34) (7.41) 10.09 6.23 (4.43)
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.05 (1.36) (7.43) 9.98 6.19 (4.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Realized Gains -- -- (6.37) (0.99) -- (0.80)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.39 $9.34 $10.70 $24.50 $15.51 $9.32
====================================================================================================================================
TOTAL RETURN(3) 0.54% (12.71)% (37.31)% 66.28% 66.42% (31.72)%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80%(4) 0.80% 0.80% 0.80% 0.80% 0.80%
- ------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.35)%(4) (0.14)% (0.11)% (0.45)% (0.20)% (0.22)%
- ------------------------------------------
Portfolio Turnover Rate 133% 293% 290% 135% 187% 229%
- ------------------------------------------
Net Assets, End of Period (in thousands) $37,705 $37,743 $46,069 $56,022 $122 $60
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
-------
29
Vista - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ------------------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
====================================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.15 $10.53 $24.24 $15.31 $9.23 $14.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Loss(2) (0.04) (0.06) (0.08) (0.22) (0.08) (0.08)
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.06 (1.32) (7.35) 10.05 6.16 (4.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.02 (1.38) (7.43) 9.83 6.08 (4.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Realized Gains -- -- (6.28) (0.90) -- (0.80)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.17 $9.15 $10.53 $24.24 $15.31 $9.23
====================================================================================================================================
TOTAL RETURN(3) 0.22% (13.11)% (37.76)% 65.98% 65.87% (32.08)%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25%(4) 1.25% 1.25% 1.25% 1.25% 1.25%
- ------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.80)%(4) (0.59)% (0.56)% (0.90)% (0.65)% (0.67)%
- ------------------------------------------
Portfolio Turnover Rate 133% 293% 290% 135% 187% 229%
- ------------------------------------------
Net Assets, End of Period
(in thousands) $12,213 $11,333 $13,315 $22,077 $7,755 $4,052
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
- -------
30
Vista - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2003(1) 2002 2001(2)
=======================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.12 $10.59 $12.07
- ---------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Loss(3) (0.07) (0.15) (0.06)
- -----------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.06 (1.32) (1.42)
- ---------------------------------------------------------------------------------------
Total From Investment Operations (0.01) (1.47) (1.48)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.11 $9.12 $10.59
=======================================================================================
TOTAL RETURN(4) (0.11)% (13.88)% (12.26)%
=======================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 2.00%(5) 2.00% 2.00%(5)
- -----------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (1.55)%(5) (1.34)% (1.77)%(5)
- -----------------------------------------------
Portfolio Turnover Rate 133% 293% 290%(6)
- -----------------------------------------------
Net Assets, End of Period
(in thousands) $132 $110 $4
- ---------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) July 18, 2001 (commencement of sale) through October 31, 2001.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any, and does not reflect applicable sales
charges. Total returns for periods less than one year are not annualized.
The total return of the classes may not precisely reflect the class
expense differences because of the impact of calculating the net asset
value to two decimal places. If net asset values were calculated to
three decimal places, the total return differences would more closely
reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines
and does not result in any gain or loss of value between one class and
another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2001.
See Notes to Financial Statements.
-------
31
Share Class Information
Four classes of shares are authorized for sale by the funds: Investor Class,
Institutional Class, Advisor Class, and C Class. The total expense ratios of
Advisor and C Class shares are higher than those of Investor Class shares; the
total expense ratio of Institutional Class shares is lower than those of
Investor Class shares.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) 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
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as banks,
broker-dealers, insurance companies, and financial advisors. Advisor Class
shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee.
The total expense ratio of Advisor Class shares is 0.25% higher than the total
expense ratio of Investor Class shares.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as banks, broker-dealers, and insurance companies.
C Class shares redeemed within 12 months of purchase are subject to a CDSC of
1.00% for equity funds and 0.75% for fixed-income funds. There is no CDSC on
shares acquired through reinvestment of dividends or capital gains. C Class
shares also are subject to a Rule 12b-1 service and distribution fee of 1.00%
for stock funds and 0.75% for bond funds.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- -------
32
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
-------
33
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly
traded U.S. companies chosen for market size, liquidity and industry group
representation that are considered to be leading firms in dominant industries.
Each stock's weight in the index is proportionate to its market value. Created
by Standard & Poor's, it is considered to be a broad measure of U.S. stock
market performance.
The RUSSELL 2000 INDEX is a market-capitalization weighted index created by
Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
The RUSSELL 2000 VALUE INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with lower price-to-book ratios
and lower forecasted growth rates.
The RUSSELL MIDCAP GROWTH INDEX measures the performance of those Russell Midcap
Index companies (the 800 smallest of the 1,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth values.
The RUSSELL 1000 INDEX is a market-capitalization weighted, large-cap index
created by Frank Russell Company to measure the performance of the 1,000 largest
companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S.
companies, based on total market capitalization).
The RUSSELL 1000 GROWTH INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
The RUSSELL 1000 VALUE INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with lower price-to-book ratios
and lower forecasted growth rates.
- -------
34
Notes
-------
35
Notes
- -------
36
[inside back cover -- blank]
[back cover]
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
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EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
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FINANCIAL ADVISORS, INSURANCE
COMPANIES: 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City,
Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
0306 American Century Investment Services, Inc.
SH-SAN-34839N (c)2003 American Century Services Corporation
[front cover]
April 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of side-by-side bridges]
Heritage
Growth
[american century logo and text logo (reg.sm)]
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with semiannual reports for the Heritage and
Growth funds for the six months ended April 30, 2003.
The reports include comparative performance graphs and tables, portfolio
commentaries, tables that summarize portfolio investments, full listings of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information helpful
in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next Heritage and Growth shareholder reports will be the annual reports for
the year ended October 31, 2003, which should be available in approximately six
months.
As always, we appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
Table of Contents
Our Message to You ........................................................ 1
HERITAGE
Performance ............................................................... 2
Performance Review ........................................................ 3
Top Ten Holdings ....................................................... 3
Top Five Industries .................................................... 4
Types of Investments in Portfolio ...................................... 4
Schedule of Investments ................................................... 5
GROWTH
Performance ............................................................... 8
Performance Review ........................................................ 9
Top Ten Holdings ....................................................... 9
Top Five Industries .................................................... 10
Types of Investments in Portfolio ...................................... 10
Schedule of Investments ................................................... 11
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 14
Statement of Operations ................................................... 15
Statement of Changes in Net Assets ........................................ 16
Notes to Financial Statements ............................................. 17
Financial Highlights ...................................................... 23
OTHER INFORMATION
Share Class Information ................................................... 31
Retirement Account Information ............................................ 32
Comparative Indices ....................................................... 33
Heritage - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS -19.98% -0.57% 7.65% 11.04% 11/10/87
- ---------------------------------------------------------------------------------------------------------------------
RUSSELL MIDCAP INDEX -14.13% 1.00% 10.14% 12.37%(1) --
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class -19.72% -0.32% -- 2.86% 6/16/97
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class -20.11% -0.81% -- 1.58% 7/11/97
- ---------------------------------------------------------------------------------------------------------------------
C Class -20.79% -- -- -16.88% 6/26/01
- ---------------------------------------------------------------------------------------------------------------------
(1) Since 10/31/87, the date nearest the Investor Class's inception for which data are available.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- ------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------
Investor Class 13.14% 5.90% 25.04% 6.01% 35.37% -6.05% 54.89% -7.92% -9.34% -19.98%
- ------------------------------------------------------------------------------------------------------------
Russell Midcap Index 8.81% 12.30% 30.79% 10.95% 40.98% 5.93% 16.01% 0.29% -0.70% -14.13%
- ------------------------------------------------------------------------------------------------------------
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees)
that reduce returns, while the total returns of the index do not. Unless
otherwise indicated, the charts are based on Investor Class shares;
performance for other classes will vary due to differences in fee structures.
Past performance does not guarantee future results. None of the charts reflect
the deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares. Investment return and principal value will
fluctuate, and redemption value may be more or less than original cost.
- ------
2
Heritage - Performance Review
[photo of Kurt Stalzer and Linda Peterson]
A performance review from Kurt Stalzer and Linda Peterson, portfolio managers on
the Heritage investment team.
Heritage fell 1.10%* during the six months ended April 30, 2003 while its
benchmark, the Russell Midcap Index, rose 7.58%. During the period, the domestic
stock market gained ground. The breadth of the advance was reflected in the
positive performance of the Russell 1000 Index, which measures large-cap stocks,
and the Russell 2000 Index, which measures smaller stocks. Much of the market's
progress was made in March and April: For example, from its six-month low on
March 12 through April 30, the Russell Midcap Index returned 13.90%; from
October 31, 2002, through March 12, 2003, the benchmark index fell 5.54%.
Heritage's position in the technology sector was the top detractor from
six-month returns. The biggest declines in this area were posted by defense and
aerospace companies, including Alliant Techsystems. Computer hardware
businesses, electrical equipment manufacturers, and software companies also
fell. However, the portfolio's returns were helped by its semiconductor
holdings.
Heritage's health care stake weighed on returns. Investments in the medical
providers and services industry hurt performance most. This included the
portfolio's biggest detractor, specialty drug distributor Accredo Health, which
was sold. However, there were a number of bright spots among holdings in the
health care sector. Omnicare, a provider of pharmacy services to long-term care
facilities, was one of the portfolio's best individual contributors. Drug
companies and select manufacturers of medical products and supplies turned in
positive results for the portfolio. Teva Pharmaceutical Industries, a global
drug company with a focus on generics, was another top contributor during the
period.
In the consumer services sector, Heritage's investments in media companies
detracted from the portfolio's six-month returns and overrode advances among
restaurant holdings. However,
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Affiliated Computer
Services Inc. 2.7% 2.3%
- -------------------------------------------------------------------------------
Omnicare, Inc. 2.5% 2.5%
- -------------------------------------------------------------------------------
Teva Pharmaceutical
Industries Ltd. ADR 2.4% 1.6%
- -------------------------------------------------------------------------------
American Standard
Companies Inc. 2.4% 1.8%
- -------------------------------------------------------------------------------
Corporate Executive
Board Co. (The) 2.1% 1.5%
- -------------------------------------------------------------------------------
Cooper Cameron Corp. 2.1% 2.0%
- -------------------------------------------------------------------------------
Westwood One, Inc. 2.0% 2.6%
- -------------------------------------------------------------------------------
Pactiv Corporation 1.9% 0.8%
- -------------------------------------------------------------------------------
Bard (C.R.), Inc. 1.7% 1.3%
- -------------------------------------------------------------------------------
Manpower Inc. 1.6% 1.4%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class shares.
(continued)
------
3
Heritage - Performance Review
Heritage earned positive results from its industrials stake. The leading
performers in this area were found in the environmental services industry.
Positions in the energy and consumer cyclical sectors also helped the
portfolio's performance.
Holdings in the information services industry boosted returns. Corporate
Executive Board, a provider of business research and analysis services to more
than 1,900 companies in the U.S. and abroad, was one standout in the area. On
the downside, PEC Solutions, which helps government clients utilize the Internet
to improve performance, detracted from the portfolio's results, and the stock
was sold.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Information Services 8.9% 8.5%
- --------------------------------------------------------------------------------
Medical Products
& Supplies 5.6% 9.2%
- --------------------------------------------------------------------------------
Industrial Parts 5.3% 6.5%
- --------------------------------------------------------------------------------
Drugs 4.4% 1.6%
- --------------------------------------------------------------------------------
Chemicals 4.3% 3.9%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/03 10/31/02
- --------------------------------------------------------------------------------
U.S. Common Stocks &
Equity Futures 89.5% 94.8%
- --------------------------------------------------------------------------------
Foreign Stocks 4.5% 2.3%
- --------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 94.0% 97.1%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 6.0% 2.9%
- --------------------------------------------------------------------------------
- ------
4
Heritage - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 88.6%
APPAREL & TEXTILES -- 1.5%
- -------------------------------------------------------------------------------
564,200 Liz Claiborne, Inc. $ 18,353
- -------------------------------------------------------------------------------
BANKS -- 3.0%
- -------------------------------------------------------------------------------
102,940 Charter One Financial Inc. 2,990
- -------------------------------------------------------------------------------
252,899 Commerce Bancshares, Inc. 9,592
- -------------------------------------------------------------------------------
465,400 Cullen/Frost Bankers, Inc. 15,261
- -------------------------------------------------------------------------------
285,300 National City Corp. 8,548
- -------------------------------------------------------------------------------
36,391
- -------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.6%
- -------------------------------------------------------------------------------
170,200 Gilead Sciences, Inc.(1) 7,856
- -------------------------------------------------------------------------------
CHEMICALS -- 4.3%
- -------------------------------------------------------------------------------
351,500 Avery Dennison Corp. 18,633
- -------------------------------------------------------------------------------
1,152,100 Pactiv Corporation(1) 23,641
- -------------------------------------------------------------------------------
243,800 Valspar Corp. 10,530
- -------------------------------------------------------------------------------
52,804
- -------------------------------------------------------------------------------
CLOTHING STORES -- 2.6%
- -------------------------------------------------------------------------------
138,000 Coach Inc.(1) 6,004
- -------------------------------------------------------------------------------
533,300 Foot Locker Inc. 5,866
- -------------------------------------------------------------------------------
636,900 Gap, Inc. (The) 10,592
- -------------------------------------------------------------------------------
386,000 Pacific Sunwear of California(1) 8,797
- -------------------------------------------------------------------------------
31,259
- -------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 2.5%
- -------------------------------------------------------------------------------
799,992 American Power
Conversion Corp.(1) 12,476
- -------------------------------------------------------------------------------
165,787 Imation Corporation(1) 5,686
- -------------------------------------------------------------------------------
368,800 Pinnacle Systems, Inc.(1) 3,493
- -------------------------------------------------------------------------------
134,349 Zebra Technologies Corp. Cl A(1) 8,954
- -------------------------------------------------------------------------------
30,609
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.4%
- -------------------------------------------------------------------------------
420,100 Amdocs Ltd.(1) 7,419
- -------------------------------------------------------------------------------
236,200 Cognos, Inc.(1) 6,413
- -------------------------------------------------------------------------------
337,100 Documentum Inc.(1) 6,199
- -------------------------------------------------------------------------------
132,000 Kronos Inc.(1) 6,021
- -------------------------------------------------------------------------------
267,800 Mercury Interactive Corp.(1) 9,085
- -------------------------------------------------------------------------------
210,900 Reynolds & Reynolds Co. Cl A 6,076
- -------------------------------------------------------------------------------
41,213
- -------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 1.9%
- -------------------------------------------------------------------------------
317,400 Alliant Techsystems Inc.(1) 17,051
- -------------------------------------------------------------------------------
124,100 Lockheed Martin Corp. 6,211
- -------------------------------------------------------------------------------
23,262
- -------------------------------------------------------------------------------
DEPARTMENT STORES -- 1.0%
- -------------------------------------------------------------------------------
342,300 Family Dollar Stores, Inc. 11,703
- -------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
DRUGS -- 4.4%
- -------------------------------------------------------------------------------
233,100 Barr Laboratories, Inc.(1) $ 12,960
- -------------------------------------------------------------------------------
395,200 Mylan Laboratories Inc. 11,172
- -------------------------------------------------------------------------------
629,536 Teva Pharmaceutical
Industries Ltd. ADR 29,409
- -------------------------------------------------------------------------------
53,541
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.0%
- -------------------------------------------------------------------------------
518,918 Comverse Technology, Inc.(1) 6,774
- -------------------------------------------------------------------------------
984,800 Flextronics International Ltd. ADR(1) 8,627
- -------------------------------------------------------------------------------
414,000 UTStarcom Inc.(1) 9,015
- -------------------------------------------------------------------------------
24,416
- -------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 2.5%
- -------------------------------------------------------------------------------
138,100 EOG Resources Inc. 5,162
- -------------------------------------------------------------------------------
297,800 Pioneer Natural Resources Co.(1) 7,123
- -------------------------------------------------------------------------------
918,666 XTO Energy Inc. 17,915
- -------------------------------------------------------------------------------
30,200
- -------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 2.5%
- -------------------------------------------------------------------------------
603,700 Republic Services, Inc. Cl A(1) 12,955
- -------------------------------------------------------------------------------
451,900 Stericycle, Inc.(1) 17,767
- -------------------------------------------------------------------------------
30,722
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.5%
- -------------------------------------------------------------------------------
161,000 Brown & Brown, Inc. 5,759
- -------------------------------------------------------------------------------
FOOD & BEVERAGE -- 2.0%
- -------------------------------------------------------------------------------
195,000 Corn Products International Inc. 5,827
- -------------------------------------------------------------------------------
141,500 Hershey Foods Corp. 9,233
- -------------------------------------------------------------------------------
259,300 Performance Food Group Co.(1) 9,101
- -------------------------------------------------------------------------------
24,161
- -------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.3%
- -------------------------------------------------------------------------------
87,500 Deere & Co. 3,853
- -------------------------------------------------------------------------------
HOTELS -- 0.6%
- -------------------------------------------------------------------------------
507,400 Hilton Hotels Corp. 6,759
- -------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 5.3%
- -------------------------------------------------------------------------------
405,500 American Standard
Companies Inc.(1) 28,867
- -------------------------------------------------------------------------------
339,837 Fastenal Company 11,750
- -------------------------------------------------------------------------------
70,600 Grainger (W.W.), Inc. 3,258
- -------------------------------------------------------------------------------
325,700 Idex Corporation 10,374
- -------------------------------------------------------------------------------
96,621 Ingersoll-Rand Company 4,259
- -------------------------------------------------------------------------------
278,923 Pall Corp. 5,891
- -------------------------------------------------------------------------------
64,399
- -------------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 1.6%
- -------------------------------------------------------------------------------
589,372 Manpower Inc. 19,379
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-----
5
Heritage - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
INFORMATION SERVICES -- 8.9%
- --------------------------------------------------------------------------------
687,900 Affiliated Computer
Services Inc.(1) $ 32,814
- --------------------------------------------------------------------------------
1,068,141 BearingPoint, Inc.(1) 8,727
- -------------------------------------------------------------------------------
352,700 ChoicePoint Inc.(1)(2) 12,443
- -------------------------------------------------------------------------------
194,000 Computer Sciences Corp.(1) 6,392
- -------------------------------------------------------------------------------
616,402 Corporate Executive
Board Co. (The)(1) 25,242
- -------------------------------------------------------------------------------
361,144 Getty Images Inc.(1) 12,225
- -------------------------------------------------------------------------------
380,900 Paychex, Inc. 11,863
- -------------------------------------------------------------------------------
109,706
- -------------------------------------------------------------------------------
LEISURE -- 0.7%
- -------------------------------------------------------------------------------
420,100 Mattel, Inc. 9,133
- -------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 1.6%
- -------------------------------------------------------------------------------
581,400 Aflac Inc. 19,018
- -------------------------------------------------------------------------------
MEDIA -- 3.7%
- -------------------------------------------------------------------------------
307,400 Entercom Communications Corp.(1) 14,937
- -------------------------------------------------------------------------------
167,000 Lamar Advertising Company(1) 6,000
- -------------------------------------------------------------------------------
702,315 Westwood One, Inc.(1) 24,511
- -------------------------------------------------------------------------------
45,448
- -------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 5.6%
- -------------------------------------------------------------------------------
142,300 Alcon, Inc.(1) 6,268
- -------------------------------------------------------------------------------
327,600 Bard (C.R.), Inc. 20,763
- -------------------------------------------------------------------------------
167,600 Becton Dickinson & Co. 5,933
- -------------------------------------------------------------------------------
255,600 Boston Scientific Corp.(1) 11,004
- -------------------------------------------------------------------------------
286,995 Henry Schein, Inc.(1) 12,380
- -------------------------------------------------------------------------------
108,500 St. Jude Medical, Inc.(1) 5,692
- -------------------------------------------------------------------------------
267,089 Steris Corp.(1) 6,063
- -------------------------------------------------------------------------------
68,103
- -------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 3.7%
- --------------------------------------------------------------------------------
798,600 Health Management
Associates, Inc. Cl A 13,624
- --------------------------------------------------------------------------------
1,164,974 Omnicare, Inc. 30,895
- -------------------------------------------------------------------------------
44,519
- -------------------------------------------------------------------------------
MINING & METALS -- 1.3%
- -------------------------------------------------------------------------------
159,500 Ball Corp. 8,957
- -------------------------------------------------------------------------------
368,100 Olin Corp. 6,670
- -------------------------------------------------------------------------------
15,627
- -------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 2.3%
- -------------------------------------------------------------------------------
367,000 Genuine Parts Company 11,733
- -------------------------------------------------------------------------------
354,700 Harley-Davidson, Inc. 15,763
- -------------------------------------------------------------------------------
27,496
- -------------------------------------------------------------------------------
OIL SERVICES -- 3.9%
- -------------------------------------------------------------------------------
315,100 BJ Services Co.(1) 11,504
- -------------------------------------------------------------------------------
526,400 Cooper Cameron Corp.(1) 25,193
- -------------------------------------------------------------------------------
446,400 ENSCO International Inc. 11,339
- -------------------------------------------------------------------------------
48,036
- -------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
PUBLISHING -- 0.5%
- -------------------------------------------------------------------------------
126,200 New York Times Co. (The) Cl A $ 5,853
- -------------------------------------------------------------------------------
RAILROADS -- 0.9%
- -------------------------------------------------------------------------------
224,100 Canadian National
Railway Co. ORD 10,888
- -------------------------------------------------------------------------------
RESTAURANTS -- 2.1%
- -------------------------------------------------------------------------------
502,300 Applebee's International Inc. 13,788
- -------------------------------------------------------------------------------
459,400 Sonic Corporation(1) 12,406
- -------------------------------------------------------------------------------
26,194
- -------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 3.9%
- -------------------------------------------------------------------------------
260,433 Affiliated Managers Group Inc.(1) 12,061
- -------------------------------------------------------------------------------
44,983 Alliance Capital
Management Holding L.P. 1,434
- -------------------------------------------------------------------------------
254,200 Franklin Resources, Inc. 8,866
- -------------------------------------------------------------------------------
304,500 Legg Mason, Inc. 16,535
- -------------------------------------------------------------------------------
145,900 Lehman Brothers Holdings Inc. 9,187
- -------------------------------------------------------------------------------
48,083
- -------------------------------------------------------------------------------
SEMICONDUCTOR -- 3.1%
- -------------------------------------------------------------------------------
541,000 Arrow Electronics, Inc.(1) 9,132
- -------------------------------------------------------------------------------
260,000 International Rectifier Corp.(1) 5,881
- -------------------------------------------------------------------------------
333,300 Linear Technology Corp. 11,492
- -------------------------------------------------------------------------------
275,888 Maxim Integrated Products, Inc. 10,841
- -------------------------------------------------------------------------------
37,346
- -------------------------------------------------------------------------------
SPECIALTY STORES -- 2.8%
- -------------------------------------------------------------------------------
350,500 Best Buy Co., Inc.(1) 12,120
- -------------------------------------------------------------------------------
427,645 PETCO Animal Supplies, Inc.(1) 9,036
- -------------------------------------------------------------------------------
483,800 Tiffany & Co. 13,421
- -------------------------------------------------------------------------------
34,577
- -------------------------------------------------------------------------------
TRUCKING, SHIPPING & AIR FREIGHT -- 1.1%
- -------------------------------------------------------------------------------
594,700 Werner Enterprises Inc. 13,437
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $976,652) 1,080,103
===============================================================================
TEMPORARY CASH INVESTMENTS --
SEGREGATED FOR FUTURES* -- 5.4%
Repurchase Agreement, Bank of America
Securities, LLC, (U.S. Treasury obligations),
in a joint trading account at 1.20%,
dated 4/30/03, due 5/1/03
(Delivery value $59,002) 59,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 1.20%,
dated 4/30/03, due 5/1/03
(Delivery value $6,575) 6,575
- -------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS --
SEGREGATED FOR FUTURES
(Cost $65,575) 65,575
===============================================================================
See Notes to Financial Statements. (continued)
- ------
6
Heritage - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 6.0%
$15,200 FHLB Discount Notes, 1.25%,
5/1/03(3) $ 15,200
- -------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 1.20%,
dated 4/30/03, due 5/1/03
(Delivery value $52,427) 52,425
- -------------------------------------------------------------------------------
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations), in a
joint trading account at 1.22%,
dated 4/30/03, due 5/1/03
(Delivery value $5,700) 5,700
- -------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $73,325) 73,325
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $1,115,552) $1,219,003
===============================================================================
EQUITY FUTURES CONTRACTS*
($ In Thousands)
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Gain
- -------------------------------------------------------------------------------
245 NASDAQ 100 Futures June 2003 $27,097 $3,061
- -------------------------------------------------------------------------------
176 S&P MidCap 400 Futures June 2003 38,478 3,860
- -------------------------------------------------------------------------------
$65,575 $6,921
=================================
*EQUITY FUTURES CONTRACTS typically are based on a stock index and tend to track
the performance of the index while remaining very liquid (easy to buy and sell).
By investing its cash assets in index futures, the fund has increased equity
exposure while maintaining easy access to cash.
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLB = Federal Home Loan Bank
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) Security, or a portion thereof, has been segregated at the custodian bank
or with the broker as initial margin on futures contracts.
(3) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
------
7
Growth - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------------
INVESTOR CLASS -16.33% -3.31% 6.93% 15.09% 6/30/71(1)
- -------------------------------------------------------------------------------------------------
RUSSELL 1000 GROWTH INDEX -14.35% -5.63% 7.88% N/A(2) --
- -------------------------------------------------------------------------------------------------
Institutional Class -16.16% -3.09% -- 1.65% 6/16/97
- -------------------------------------------------------------------------------------------------
Advisor Class -16.58% -3.59% -- 2.09% 6/4/97
- -------------------------------------------------------------------------------------------------
C Class -17.13% -- -- -16.91% 11/28/01
- -------------------------------------------------------------------------------------------------
(1) Although the fund's actual inception date was 10/31/58, this inception
date corresponds with the management company's implementation of its current
investment philosophy and practices.
(2) Benchmark began 12/29/78.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------------------------------------
Investor Class 14.04% 6.53% 16.31% 13.30% 44.50% 24.48% 32.16% -27.72% -15.05% -16.33%
- --------------------------------------------------------------------------------------------------------------
Russell 1000
Growth Index 3.80% 19.60% 32.55% 22.06% 42.09% 26.53% 27.58% -32.25% -20.10% -14.35%
- --------------------------------------------------------------------------------------------------------------
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees)
that reduce returns, while the total returns of the index do not. Unless
otherwise indicated, the charts are based on Investor Class shares;
performance for other classes will vary due to differences in fee structures.
Past performance does not guarantee future results. None of the charts
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Investment return and
principal value will fluctuate, and redemption value may be more or less
than original cost.
- ------
8
Growth - Performance Review
[photo of Greg Woodhams and Prescott LeGard]
A performance review from Greg Woodhams and Prescott LeGard, portfolio managers
on the Growth investment team.
Growth gained 2.09%* during the six months ended April 30, 2003, trailing its
benchmark, the Russell 1000 Growth Index, which rose 4.28%. On average, funds in
Growth's peer group, the Lipper, Inc. Large-Cap Growth universe, gained 2.77%.
The portfolio outperformed its benchmark and Lipper peers on a longer-term
basis. During the last three years, Growth declined an average of 19.88% per
year compared to average annual losses of 22.60% for the Russell 1000 Growth
Index and the average annual losses of 21.42% for its Lipper peers. During the
last five years, the portfolio's 3.31% average decline was better than the
average annual losses of 5.63% and 5.13% for its benchmark and peers
respectively.
The domestic equity market advanced during the six months covered by this
report, as evidenced by the performance of key indices. The Russell 1000 Index,
which measures the performance of large companies rose 4.75%, while the Russell
2000 Index, which tracks the progress of smaller companies, gained 7.55%. Among
large-cap equities, value stocks outperformed growth issues, as illustrated by
the performance of the Russell 1000 Value and Russell 1000 Growth Indices. In
the universe of small stocks, growth issues tracked by the Russell 2000 Growth
Index modestly outperformed value stocks measured by the Russell 2000 Value
Index.
Growth's health care stake was the biggest driver of the portfolio's positive
results during the period. The advance was led by biotechnology companies such
as Amgen, Growth's top contributor. Investments in companies that make medical
products and supplies also helped the portfolio's performance.
The technology sector, which accounted for one of Growth's largest sector
weightings, was another source of positive performance. The portfolio's stake in
the computer hardware industry was the biggest contributor in this sector.
Companies that gained ground
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Microsoft Corporation 5.5% 5.6%
- -------------------------------------------------------------------------------
Pfizer, Inc. 4.1% 2.8%
- -------------------------------------------------------------------------------
General Electric Co. 3.7% 2.0%
- -------------------------------------------------------------------------------
Johnson & Johnson 3.3% 3.3%
- -------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 3.2% 3.0%
- -------------------------------------------------------------------------------
Intel Corporation 3.2% 1.9%
- -------------------------------------------------------------------------------
Procter & Gamble
Co. (The) 2.8% 2.9%
- -------------------------------------------------------------------------------
Amgen Inc. 2.4% 1.4%
- -------------------------------------------------------------------------------
International Business
Machines Corp. 2.2% 1.7%
- -------------------------------------------------------------------------------
Medtronic, Inc. 2.1% 2.0%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class
shares. (continued)
-----
9
Growth - Performance Review
included Cisco Systems, a manufacturer of networking gear, and EMC, which makes
data storage equipment. Growth's holdings in semiconductor manufacturers and
Internet companies also boosted the portfolio's returns.
Investments in companies that make cyclical consumer products turned in positive
results. Specialty stores, including Best Buy and Home Depot, provided the
biggest lift in this area. The portfolio's stake in department stores advanced
as well.
Growth's holdings in companies that make non-cyclical consumer products were the
top detractors from the portfolio's six-month results. The decline was led by
food and beverage companies, including Sysco Corporation, a distributor of food
and restaurant supplies. Brewers also fell. On a positive note, investments in
manufacturers of home products gained ground.
Industrial companies, which accounted for less than 3% of the portfolio, hurt
Growth's performance. Deere & Co., a manufacturer of agricultural, construction
and lawn equipment, was the only detractor in this sector. The portfolio earned
positive results from its holdings in manufacturers of heavy electrical
equipment and industrial parts.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Drugs 12.4% 12.8%
- --------------------------------------------------------------------------------
Computer Software 8.1% 7.3%
- --------------------------------------------------------------------------------
Semiconductor 6.8% 4.3%
- --------------------------------------------------------------------------------
Financial Services 6.7% 5.3%
- --------------------------------------------------------------------------------
Specialty Stores 4.9% 2.1%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- -------------------------------------------------------------------------------
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
U.S. Common Stocks
& Equity Futures 95.6% 93.5%
- -------------------------------------------------------------------------------
Foreign Stocks 3.1% 5.5%
- -------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 98.7% 99.0%
- -------------------------------------------------------------------------------
Temporary Cash
Investments 1.3% 1.0%
- -------------------------------------------------------------------------------
- ------
10
Growth - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%
ALCOHOL -- 0.8%
- --------------------------------------------------------------------------------
697,100 Anheuser-Busch Companies, Inc. $ 34,771
- -------------------------------------------------------------------------------
BANKS -- 2.3%
- -------------------------------------------------------------------------------
285,500 Bank of America Corp. 21,141
- -------------------------------------------------------------------------------
2,086,466 Citigroup Inc. 81,894
- -------------------------------------------------------------------------------
103,035
- -------------------------------------------------------------------------------
BIOTECHNOLOGY -- 3.3%
- -------------------------------------------------------------------------------
1,728,232 Amgen Inc.(1) 105,958
- -------------------------------------------------------------------------------
944,500 Gilead Sciences, Inc.(1) 43,598
- -------------------------------------------------------------------------------
149,556
- -------------------------------------------------------------------------------
CHEMICALS -- 1.8%
- -------------------------------------------------------------------------------
404,700 3M Co. 51,008
- -------------------------------------------------------------------------------
135,400 Avery Dennison Corp. 7,178
- -------------------------------------------------------------------------------
472,500 Ecolab Inc. 24,140
- -------------------------------------------------------------------------------
82,326
- -------------------------------------------------------------------------------
CLOTHING STORES -- 0.9%
- -------------------------------------------------------------------------------
1,771,600 Gap, Inc. (The) 29,462
- -------------------------------------------------------------------------------
518,700 TJX Companies, Inc. (The) 9,985
- -------------------------------------------------------------------------------
39,447
- -------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 4.6%
- -------------------------------------------------------------------------------
5,472,300 Cisco Systems Inc.(1) 82,332
- -------------------------------------------------------------------------------
2,273,700 Dell Computer Corp.(1) 65,971
- -------------------------------------------------------------------------------
5,417,200 EMC Corporation(1) 49,242
- -------------------------------------------------------------------------------
693,000 McData Corporation Cl A(1) 7,335
- -------------------------------------------------------------------------------
204,880
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 8.1%
- -------------------------------------------------------------------------------
745,700 Autodesk, Inc. 11,607
- -------------------------------------------------------------------------------
9,671,502 Microsoft Corporation(2) 248,315
- -------------------------------------------------------------------------------
4,633,900 Oracle Corp.(1) 55,074
- -------------------------------------------------------------------------------
867,448 Red Hat Inc.(1) 5,192
- -------------------------------------------------------------------------------
1,811,400 SAP AG ADR 46,209
- -------------------------------------------------------------------------------
366,397
- -------------------------------------------------------------------------------
DEPARTMENT STORES -- 3.6%
- -------------------------------------------------------------------------------
467,800 Costco Companies, Inc.(1) 16,193
- -------------------------------------------------------------------------------
2,555,800 Wal-Mart Stores, Inc. 143,943
- -------------------------------------------------------------------------------
160,136
- -------------------------------------------------------------------------------
DIVERSIFIED -- 4.5%
- -------------------------------------------------------------------------------
414,000 iShares S&P 500 Index Fund 38,026
- -------------------------------------------------------------------------------
2,786,000 Nasdaq 100-Index
Tracking Stock(1) 76,615
- -------------------------------------------------------------------------------
937,400 Standard and Poor's 500
Depositary Receipt 86,213
- -------------------------------------------------------------------------------
200,854
- -------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
DRUGS -- 12.4%
- -------------------------------------------------------------------------------
838,300 Abbott Laboratories $ 34,060
- -------------------------------------------------------------------------------
375,600 Bristol-Myers Squibb Co. 9,593
- -------------------------------------------------------------------------------
918,000 Eli Lilly and Company 58,587
- -------------------------------------------------------------------------------
2,656,300 Johnson & Johnson 149,709
- -------------------------------------------------------------------------------
820,900 Merck & Co., Inc. 47,760
- -------------------------------------------------------------------------------
804,310 Novartis AG ORD 31,750
- -------------------------------------------------------------------------------
6,045,910 Pfizer, Inc. 185,911
- -------------------------------------------------------------------------------
969,300 Wyeth 42,194
- -------------------------------------------------------------------------------
559,564
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.6%
- -------------------------------------------------------------------------------
295,900 ADTRAN, Inc.(1) 11,994
- -------------------------------------------------------------------------------
2,066,800 CIENA Corporation(1) 10,076
- -------------------------------------------------------------------------------
520,900 Jabil Circuit, Inc.(1) 9,741
- -------------------------------------------------------------------------------
4,942,200 JDS Uniphase Corp.(1) 15,988
- -------------------------------------------------------------------------------
2,180,100 Juniper Networks, Inc.(1) 22,302
- -------------------------------------------------------------------------------
70,101
- -------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 1.2%
- -------------------------------------------------------------------------------
606,585 Apache Corp. 34,727
- -------------------------------------------------------------------------------
244,400 ConocoPhillips 12,293
- -------------------------------------------------------------------------------
365,000 Pioneer Natural Resources Co.(1) 8,731
- -------------------------------------------------------------------------------
55,751
- -------------------------------------------------------------------------------
ENTERTAINMENT -- 0.9%
- -------------------------------------------------------------------------------
943,282 Viacom, Inc. Cl B(1) 40,948
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 6.7%
- -------------------------------------------------------------------------------
1,347,900 American Express Co. 51,031
- -------------------------------------------------------------------------------
474,000 Fannie Mae 34,313
- -------------------------------------------------------------------------------
487,500 Freddie Mac 28,226
- -------------------------------------------------------------------------------
5,720,500 General Electric Co.(2) 168,470
- -------------------------------------------------------------------------------
189,100 SLM Corporation 21,179
- -------------------------------------------------------------------------------
303,219
- -------------------------------------------------------------------------------
FOOD & BEVERAGE -- 4.4%
- -------------------------------------------------------------------------------
788,600 Coca-Cola Company (The) 31,859
- -------------------------------------------------------------------------------
950,900 General Mills, Inc. 42,895
- -------------------------------------------------------------------------------
618,400 Kellogg Co. 20,246
- -------------------------------------------------------------------------------
694,500 McCormick &
Company, Incorporated 17,217
- -------------------------------------------------------------------------------
1,238,900 PepsiCo, Inc. 53,620
- -------------------------------------------------------------------------------
567,400 Wrigley (Wm.) Jr. Company 32,177
- -------------------------------------------------------------------------------
198,014
- -------------------------------------------------------------------------------
GROCERY STORES -- 0.5%
- -------------------------------------------------------------------------------
388,200 Whole Foods Market, Inc.(1) 23,034
- -------------------------------------------------------------------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.6%
- -------------------------------------------------------------------------------
545,700 Emerson Electric Co. 27,667
- -------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.8%
- -------------------------------------------------------------------------------
808,000 Deere & Co. 35,576
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-----
11
Growth - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
HOME PRODUCTS -- 4.6%
- -------------------------------------------------------------------------------
482,300 Colgate-Palmolive Co. $ 27,573
- -------------------------------------------------------------------------------
488,800 Estee Lauder
Companies, Inc. Cl A 15,886
- -------------------------------------------------------------------------------
536,400 Gillette Company 16,333
- -------------------------------------------------------------------------------
659,000 International Flavors &
Fragrances Inc. 20,943
- -------------------------------------------------------------------------------
1,409,200 Procter & Gamble Co. (The) 126,617
- -------------------------------------------------------------------------------
207,352
- -------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 0.8%
- -------------------------------------------------------------------------------
526,900 Illinois Tool Works Inc. 33,711
- -------------------------------------------------------------------------------
INFORMATION SERVICES -- 3.5%
- -------------------------------------------------------------------------------
618,000 Accenture Ltd. Cl A(1) 9,900
- -------------------------------------------------------------------------------
1,139,300 International Business
Machines Corp. 96,726
- -------------------------------------------------------------------------------
1,566,400 Paychex, Inc. 48,786
- -------------------------------------------------------------------------------
155,412
- -------------------------------------------------------------------------------
INTERNET -- 0.8%
- -------------------------------------------------------------------------------
195,400 eBay Inc.(1) 18,126
- -------------------------------------------------------------------------------
759,100 Yahoo! Inc.(1) 18,815
- -------------------------------------------------------------------------------
36,941
- -------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 1.2%
- -------------------------------------------------------------------------------
246,800 Aflac Inc. 8,073
- -------------------------------------------------------------------------------
742,900 Lincoln National Corp. 23,742
- -------------------------------------------------------------------------------
773,800 Principal Financial Group 22,518
- -------------------------------------------------------------------------------
54,333
- -------------------------------------------------------------------------------
MEDIA -- 2.3%
- -------------------------------------------------------------------------------
1,731,600 AOL Time Warner Inc.(1) 23,688
- -------------------------------------------------------------------------------
2,556,200 Comcast Corporation(1) 81,581
- -------------------------------------------------------------------------------
105,269
- -------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 4.4%
- -------------------------------------------------------------------------------
741,000 Becton Dickinson & Co. 26,231
- -------------------------------------------------------------------------------
633,300 Boston Scientific Corp.(1) 27,264
- -------------------------------------------------------------------------------
1,945,600 Medtronic, Inc. 92,883
- -------------------------------------------------------------------------------
435,400 St. Jude Medical, Inc.(1) 22,841
- -------------------------------------------------------------------------------
166,900 Varian Medical Systems, Inc.(1) 8,989
- -------------------------------------------------------------------------------
433,700 Zimmer Holdings Inc.(1) 20,341
- -------------------------------------------------------------------------------
198,549
- -------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 2.2%
- -------------------------------------------------------------------------------
909,900 AETNA Inc. 45,313
- -------------------------------------------------------------------------------
78,700 Laboratory Corporation
of America Holdings(1) 2,319
- -------------------------------------------------------------------------------
554,800 UnitedHealth Group Incorporated 51,113
- -------------------------------------------------------------------------------
98,745
- --------------------------------------------------------------------------------
Shares ($ In Thousands) Value
- -------------------------------------------------------------------------------
OIL REFINING -- 0.2%
- -------------------------------------------------------------------------------
273,100 Sunoco, Inc. $ 10,162
- ------------------------------------------------------------------------------
OIL SERVICES -- 0.4%
- ------------------------------------------------------------------------------
154,800 BJ Services Co.(1) 5,652
- ------------------------------------------------------------------------------
286,500 Smith International, Inc.(1) 10,188
- ------------------------------------------------------------------------------
15,840
- ------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE -- 2.4%
- ------------------------------------------------------------------------------
307,000 Allstate Corporation 11,602
- ------------------------------------------------------------------------------
1,029,437 American International Group, Inc. 59,655
- ------------------------------------------------------------------------------
521,900 PMI Group, Inc. (The) 16,085
- ------------------------------------------------------------------------------
517,900 Radian Group Inc. 20,561
- ------------------------------------------------------------------------------
107,903
- ------------------------------------------------------------------------------
PUBLISHING -- 0.2%
- ------------------------------------------------------------------------------
124,300 E.W. Scripps Company (The) 9,851
- ------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 2.6%
- ------------------------------------------------------------------------------
258,300 Bear Stearns Companies Inc. (The) 17,265
- ------------------------------------------------------------------------------
1,143,700 Franklin Resources, Inc. 39,893
- ------------------------------------------------------------------------------
373,300 Goldman Sachs Group, Inc. (The) 28,333
- ------------------------------------------------------------------------------
658,800 Morgan Stanley 29,481
- ------------------------------------------------------------------------------
114,972
- ------------------------------------------------------------------------------
SEMICONDUCTOR -- 6.8%
- ------------------------------------------------------------------------------
1,642,400 Applied Materials, Inc.(1) 23,987
- ------------------------------------------------------------------------------
3,173,800 Applied Micro Circuits Corp.(1) 14,155
- ------------------------------------------------------------------------------
7,732,100 Intel Corporation 142,309
- ------------------------------------------------------------------------------
1,685,000 Linear Technology Corp. 58,099
- ------------------------------------------------------------------------------
1,370,500 Maxim Integrated Products, Inc. 53,854
- ------------------------------------------------------------------------------
604,000 National Semiconductor Corp.(1) 11,313
- ------------------------------------------------------------------------------
303,717
- ------------------------------------------------------------------------------
SPECIALTY STORES -- 4.9%
- ------------------------------------------------------------------------------
293,600 Bed Bath & Beyond Inc.(1) 11,602
- ------------------------------------------------------------------------------
1,034,100 Best Buy Co., Inc.(1) 35,759
- ------------------------------------------------------------------------------
3,192,700 Home Depot, Inc. 89,811
- ------------------------------------------------------------------------------
447,300 Linens 'n Things, Inc.(1) 9,478
- ------------------------------------------------------------------------------
603,600 Lowe's Companies, Inc. 26,492
- ------------------------------------------------------------------------------
1,497,531 Walgreen Co. 46,214
- ------------------------------------------------------------------------------
219,356
- ------------------------------------------------------------------------------
TRUCKING, SHIPPING & AIR FREIGHT -- 0.6%
- ------------------------------------------------------------------------------
415,700 United Parcel Service, Inc. Cl B 25,823
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 1.1%
- ------------------------------------------------------------------------------
2,537,500 Vodafone Group plc ADR 50,141
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,840,022) 4,403,353
- ------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
12
Growth - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
($ In Thousands) Value
- ------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS --
SEGREGATED FOR FUTURES** -- 0.7%
Repurchase Agreement, Merrill Lynch
& Co., Inc., (U.S. Treasury obligations),
in a joint trading account at 1.22%,
dated 4/30/03, due 5/1/03
(Delivery value $29,307)
(Cost $29,306) $ 29,306
- ------------------------------------------------------------------------------
($ In Thousands) Value
- ------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 1.3%
Repurchase Agreement, Merrill Lynch & Co., Inc.,
(U.S. Treasury obligations), in a joint trading
account at 1.22%, dated 4/30/03,
due 5/1/03 (Delivery value $894) $ 894
- ------------------------------------------------------------------------------
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations), in a joint trading
account at 1.22%, dated 4/30/03,
due 5/1/03 (Delivery value $59,502) 59,500
- -------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $60,394) 60,394
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $3,929,722) $4,493,053
===============================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
($ In Thousands)
Contracts Settlement Unrealized
to Sell Date Value Loss
- -------------------------------------------------------------------------------
21,475,077 CHF 5/30/03 $15,859 $(115)
======================================
(Value on Settlement Date $15,744)
*FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's
foreign investments against declines in foreign currencies (also known as
hedging). The contracts are called "forward" because they allow the fund to
exchange a foreign currency for U.S. dollars on a specific date in the future --
and at a prearranged exchange rate.
EQUITY FUTURES CONTRACTS**
($ In Thousands)
Expiration Underlying Face Unrealized
Purchased Date Amount at Value Gain
- -------------------------------------------------------------------------------
128 S&P 500 Futures June 2003 $29,306 $3,614
==================================
**EQUITY FUTURES CONTRACTS typically are based on a stock index and tend to
track the performance of the index while remaining very liquid (easy to buy and
sell). By investing its cash assets in index futures, the fund has increased
equity exposure while maintaining easy access to cash.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
CHF = Swiss Franc
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) Security, or a portion thereof, has been segregated at the custodian bank
or with the broker as initial margin on futures contracts.
See Notes to Financial Statements.
-----
13
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
- ------------------------------------------------------------------------------------------
(Amounts In Thousands Except Per-Share Amounts) HERITAGE GROWTH
- ------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------
Investment securities, at value
(cost of $991,852 and $3,840,022, respectively) $1,095,303 $4,403,353
- -------------------------------------------------
Repurchase agreements, at value
(cost of $123,700 and $89,700, respectively) 123,700 89,700
- -------------------------------------------------
Receivable for investments sold 9,220 124,504
- -------------------------------------------------
Receivable for capital shares sold 27 149
- -------------------------------------------------
Dividends and interest receivable 210 3,470
- ------------------------------------------------------------------------------------------
1,228,460 4,621,176
- ------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------
Disbursements in excess of demand deposit cash 1,548 405
- -------------------------------------------------
Payable for investments purchased 40,788 112,135
- -------------------------------------------------
Payable for forward foreign currency
exchange contracts -- 115
- -------------------------------------------------
Payable for variation margin on futures contracts 191 24
- -------------------------------------------------
Accrued management fees 924 3,523
- -------------------------------------------------
Distribution fees payable 2 9
- -------------------------------------------------
Service fees payable 2 9
- ------------------------------------------------------------------------------------------
43,455 116,220
- ------------------------------------------------------------------------------------------
NET ASSETS $1,185,005 $4,504,956
==========================================================================================
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $1,492,195 $6,416,579
- -------------------------------------------------
Accumulated undistributed net investment
income (loss) (1,874) 4,674
- -------------------------------------------------
Accumulated net realized loss on investment and
foreign currency transactions (415,687) (2,483,213)
- -------------------------------------------------
Net unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 110,371 566,916
- ------------------------------------------------------------------------------------------
$1,185,005 $4,504,956
==========================================================================================
INVESTOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- ------------------------------------------------------------------------------------------
Net assets $1,024,389,151 $3,946,926,499
- -------------------------------------------------
Shares outstanding 113,635,946 261,216,49
- -------------------------------------------------
Net asset value per share $9.01 $15.11
- ------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- ------------------------------------------------------------------------------------------
Net assets $151,518,929 $515,229,789
- -------------------------------------------------
Shares outstanding 16,695,320 33,891,482
- -------------------------------------------------
Net asset value per share $9.08 $15.20
- ------------------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- ------------------------------------------------------------------------------------------
Net assets $8,810,413 $42,285,07
- -------------------------------------------------
Shares outstanding 985,417 2,820,420
- -------------------------------------------------
Net asset value per share $8.94 $14.99
- ------------------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- ------------------------------------------------------------------------------------------
Net assets $286,931 $514,988
- -------------------------------------------------
Shares outstanding 32,448 34,573
- -------------------------------------------------
Net asset value per share $8.84 $14.90
- ------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
14
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
(Amounts In Thousands) HERITAGE GROWTH
================================================================================
INVESTMENT INCOME (LOSS)
- ---------------------------------------------------------
INCOME:
- ---------------------------------------------------------
Dividends (net of foreign taxes withheld of $19
and $174, respectively) $ 3,016 $ 23,755
- ---------------------------------------------------------
Interest 716 1,219
- --------------------------------------------------------------------------------
3,732 24,974
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------
Management fees 5,581 21,163
- ---------------------------------------------------------
Distribution fees:
- ---------------------------------------------------------
Advisor Class 6 46
- ---------------------------------------------------------
C Class 1 2
- ---------------------------------------------------------
Service fees:
- ---------------------------------------------------------
Advisor Class 6 46
- ---------------------------------------------------------
C Class -- 1
- ---------------------------------------------------------
Directors' fees and expenses 7 28
- ---------------------------------------------------------
Other expenses 5 22
- --------------------------------------------------------------------------------
5,606 21,308
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (1,874) 3,666
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
- ---------------------------------------------------------
Investment transactions (87,068) (206,696)
- ---------------------------------------------------------
Foreign currency transactions 4 (8,735)
- --------------------------------------------------------------------------------
(87,064) (215,431)
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- ---------------------------------------------------------
Investments 75,291 302,282
- ---------------------------------------------------------
Translation of assets and liabilities
in foreign currencies (5) 822
- --------------------------------------------------------------------------------
75,286 303,104
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) (11,778) 87,673
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(13,652) $ 91,339
================================================================================
See Notes to Financial Statements.
-----
15
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
- -------------------------------------------------------------------------------------------------------------
(Amounts In Thousands) HERITAGE GROWTH
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2003 2002 2003 2002
=============================================================================================================
OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (1,874) $ (4,768) $ 3,666 $ (1,804)
- -----------------------------------------
Net realized loss (87,064) (105,879) (215,431) (969,696)
- -----------------------------------------
Change in net unrealized appreciation 75,286 (31,558) 303,104 9,448
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (13,652) (142,205) 91,339 (962,052)
- -------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets
from capital share transactions 32,452 20,572 (26,354) (422,085)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 18,800 (121,633) 64,985 (1,384,137)
=============================================================================================================
NET ASSETS
Beginning of period 1,166,205 1,287,838 4,439,971 5,824,108
- -------------------------------------------------------------------------------------------------------------
End of period $1,185,005 $1,166,205 $4,504,956 $4,439,971
=============================================================================================================
Accumulated undistributed net
investment income (loss) $(1,874) -- $4,674 $1,008
=============================================================================================================
See Notes to Financial Statements.
- ------
16
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Heritage Fund (Heritage) and Growth Fund
(Growth) (collectively, the funds) are two funds in a series issued by the
corporation. The funds are diversified under the 1940 Act. The funds' investment
objective is to seek long-term capital growth. The funds pursue this objective
by investing primarily in equity securities. The following is a summary of the
funds' significant accounting policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the
Institutional Class, the Advisor Class and the C Class. The C Class may be
subject to a contingent deferred sales charge. The share classes differ
principally in their respective sales charges and shareholder servicing and
distribution expenses and arrangements. All shares of each fund represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Income, non-class specific
expenses, and realized and unrealized capital gains and losses of the funds are
allocated to each class of shares based on their relative net assets.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The funds may enter into stock index futures contracts in
order to manage the funds' exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the funds are
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 funds. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The funds recognize 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 investment transactions and unrealized
appreciation (depreciation) on investments, respectively.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed
in foreign currencies are translated into U.S. dollars at prevailing exchange
rates at period end. Purchases and sales of investment securities, dividend and
interest income, and certain expenses are translated at the rates of exchange
prevailing on the respective dates of such transactions. For assets and
liabilities, other than investments in securities, net realized and unrealized
gains and losses from foreign currency translations arise from changes in
currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses occurring
during the holding period of investment securities are a component of realized
gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose taxes
on the contract amount of purchases and sales of foreign currency contracts in
their currency. The funds record the foreign tax expense, if any, as a reduction
to the net realized gain (loss) on foreign currency transactions.
(continued)
-----
17
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward
foreign currency exchange contracts to facilitate transactions of securities
denominated in a foreign currency or to hedge the funds' exposure to foreign
currency exchange rate fluctuations. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the funds and the
resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The funds bear the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable each fund to obtain those securities in the event of
a default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, each fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and net realized
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
18
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the funds with investment advisory and
management services in exchange for a single, unified management fee per class.
The Agreement provides that all expenses of the funds, except brokerage
commissions, taxes, interest, fees and expenses of those directors who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee for the funds is
computed daily and paid monthly in arrears based on each class's pro rata share
of the funds' average daily closing net assets during the previous month. The
annual management fee for the Investor, Institutional, Advisor and C Classes is
1.00%, 0.80%, 0.75%, and 1.00%, respectively, for each of the funds.
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class and a Master
Distribution and Individual Shareholder Services Plan for the C Class
(collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans
provide that the Advisor Class and C Class will pay American Century Investment
Services, Inc. (ACIS) an annual distribution fee equal to 0.25% and 0.75%,
respectively, and an annual service fee equal to 0.25%. The fees are computed
daily and paid monthly in arrears based on the Advisor Class's or C Class's
average daily closing net assets during the previous month. The distribution fee
provides compensation for expenses incurred in connection with distributing
shares of the Advisor Class or C 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 ACIS, its
affiliates or independent third party providers for Advisor Class shares and for
individual shareholder services rendered by broker/dealers or other independent
financial intermediaries for C Class shares. Fees incurred under the plans
during the six months ended April 30, 2003, are detailed in the Statement of
Operations.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, ACIS, and the corporation's
transfer agent, American Century Services Corporation.
During the six months ended April 30, 2003, the funds invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a
bank line of credit agreement with JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2003, were as follows:
- --------------------------------------------------------------------------------
HERITAGE GROWTH
- --------------------------------------------------------------------------------
Purchases $555,231 $2,839,342
- --------------------------------------------------------------------------------
Proceeds from sales $532,360 $2,747,361
- --------------------------------------------------------------------------------
(continued)
------
19
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
HERITAGE GROWTH
- ------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 400,000 800,000
============================================================================================================
Sold 15,850 $ 141,927 14,321 $ 208,989
- --------------------------------
Redeemed (13,035) (115,497) (20,155) (293,792)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) 2,815 $ 26,430 (5,834) $ (84,803)
============================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 400,000 800,000
============================================================================================================
Sold 35,580 $ 372,164 39,623 $ 700,907
- --------------------------------
Redeemed (43,789) (443,848) (92,766) (1,528,640)
- ------------------------------------------------------------------------------------------------------------
Net decrease (8,209) $ (71,684) (53,143) $ (827,733)
============================================================================================================
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 40,000 80,000
============================================================================================================
Sold 2,237 $ 20,166 5,470 $ 82,065
- --------------------------------
Redeemed (2,151) (19,244) (2,229) (32,364)
- ------------------------------------------------------------------------------------------------------------
Net increase 86 $ 922 3,241 $ 49,701
============================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 40,000 80,000
============================================================================================================
Sold 12,024 $122,309 31,439 $477,812
- --------------------------------
Redeemed (3,273) (32,286) (5,493) (87,564)
- ------------------------------------------------------------------------------------------------------------
Net increase 8,751 $ 90,023 25,946 $390,248
============================================================================================================
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 100,000 210,000
============================================================================================================
Sold 686 $5,960 997 $14,433
- --------------------------------
Redeemed (114) (996) (390) (5,712)
- ------------------------------------------------------------------------------------------------------------
Net increase 572 $4,964 607 $ 8,721
============================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 100,000 210,000
============================================================================================================
Sold 784 $ 7,420 2,436 $ 41,044
- --------------------------------
Redeemed (584) (5,342) (1,644) (26,197)
- ------------------------------------------------------------------------------------------------------------
Net increase 200 $ 2,078 792 $ 14,847
============================================================================================================
(continued)
- ------
20
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
HERITAGE GROWTH
- ------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
C CLASS
- ---------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 100,000 100,000
=============================================================================================================
Sold 17 $141 4 $ 55
- --------------------------------
Redeemed (1) (5) (2) (28)
- -------------------------------------------------------------------------------------------------------------
Net increase 16 $136 2 $ 27
=============================================================================================================
YEAR ENDED OCTOBER 31, 2002(1)
SHARES AUTHORIZED 100,000 100,000
=============================================================================================================
Sold 17 $163 36 $597
- --------------------------------
Redeemed (1) (8) (3) (44)
- -------------------------------------------------------------------------------------------------------------
Net increase 16 $155 33 $553
=============================================================================================================
(1) November 28, 2001 (commencement of sale) through October 31, 2002
for Growth.
5. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $620 million
unsecured bank line of credit agreement with JPM, which was renewed from $650
million effective December 17, 2002. The funds may borrow money for temporary or
emergency purposes to fund shareholder redemptions. Borrowings under the
agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not
borrow from the line during the six months ended April 30, 2003.
(continued)
------
21
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
6. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
HERITAGE GROWTH
- --------------------------------------------------------------------------------
Federal tax cost of investments $1,129,351 $4,015,999
================================================================================
Gross tax appreciation of investments $116,559 $550,722
- ---------------------------------------------------
Gross tax depreciation of investments (26,907) (73,668)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $ 89,652 $477,054
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales and the realization for tax purposes of unrealized gains on certain
forward foreign currency contracts.
Following are the capital loss carryovers as of October 31, 2002:
HERITAGE GROWTH
- --------------------------------------------------------------------------------
Accumulated capital losses $(316,041) $(2,180,901)
- --------------------------------------------------------------------------------
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire in 2009 through 2010 for
both funds.
- ------
22
Heritage - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
=============================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.11 $10.13 $19.10 $13.02 $9.98 $14.86
- ------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Income (Loss)(2) (0.02) (0.04) --(3) (0.03) 0.02 0.03
- --------------------------------------
Net Realized and
Unrealized Gain (Loss) (0.08) (0.98) (5.33) 7.63 3.04 (2.14)
- ------------------------------------------------------------------------------------------------------------
Total From Investment Operations (0.10) (1.02) (5.33) 7.60 3.06 (2.11)
- ------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------
From Net Investment Income -- -- -- (0.04) (0.02) (0.07)
- -------------------------------------
From Net Realized Gains -- -- (3.64) (1.48) -- (2.70)
- ------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (3.64) (1.52) (0.02) (2.77)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.01 $9.11 $10.13 $19.10 $13.02 $9.98
=============================================================================================================
TOTAL RETURN(4) (1.10)% (10.07)% (33.08)% 62.61% 30.71% (15.87)%
=============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(5) 1.00% 1.00% 1.00% 1.00% 1.00%
- --------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.35)%(5) (0.37)% (0.02)% (0.17)% 0.19% 0.29%
- --------------------------------------
Portfolio Turnover Rate 51% 128% 152% 119% 134% 148%
- --------------------------------------
Net Assets, End of Period (in millions) $1,024 $1,010 $1,206 $1,975 $1,000 $978
- ------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would
more closely reflect the class expense differences. The calculation of net
asset values to two decimal places is made in accordance with SEC
guidelines and does not result in any gain or loss of value between one
class and another.
(5) Annualized.
See Notes to Financial Statements.
------
23
Heritage - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
==============================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.17 $10.17 $19.14 $13.04 $10.00 $14.87
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Income (Loss)(2) (0.01) (0.02) --(3) --(3) 0.04 0.06
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) (0.08) (0.98) (5.30) 7.65 3.04 (2.14)
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations (0.09) (1.00) (5.30) 7.65 3.08 (2.08)
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Investment Income -- -- -- (0.07) (0.04) (0.09)
- ---------------------------------------
From Net Realized Gains -- -- (3.67) (1.48) -- (2.70)
- --------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (3.67) (1.55) (0.04) (2.79)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.08 $9.17 $10.17 $19.14 $13.04 $10.00
==============================================================================================================
TOTAL RETURN(4) (0.98)% (9.83)% (32.84)% 63.00% 30.92% (15.67)%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80%(5) 0.80% 0.80% 0.80% 0.80% 0.80%
- ----------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.15)%(5) (0.17)% 0.18% 0.03% 0.39% 0.49%
- ----------------------------------------
Portfolio Turnover Rate 51% 128% 152% 119% 134% 148%
- ----------------------------------------
Net Assets, End of Period (in thousands) $151,519 $152,256 $79,882 $8,302 $92 $70
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
- -------
24
Heritage - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
==============================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.05 $10.09 $19.05 $12.98 $9.96 $14.85
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Income (Loss)(2) (0.03) (0.06) (0.04) (0.07) (0.01) 0.02
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) (0.08) (0.98) (5.32) 7.62 3.03 (2.14)
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations (0.11) (1.04) (5.36) 7.55 3.02 (2.12)
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Investment Income -- -- -- --(3) --(3) (0.07)
- ----------------------------------------
From Net Realized Gains -- -- (3.60) (1.48) -- (2.70)
- --------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (3.60) (1.48) --(3) (2.77)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.94 $9.05 $10.09 $19.05 $12.98 $9.96
==============================================================================================================
TOTAL RETURN(4) (1.22)% (10.31)% (33.30)% 62.26% 30.37% (16.03)%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25%(5) 1.25% 1.25% 1.25% 1.25% 1.25%
- ----------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.60)%(5) (0.62)% (0.27)% (0.42)% (0.06)% 0.04%
- ----------------------------------------
Portfolio Turnover Rate 51% 128% 152% 119% 134% 148%
- ----------------------------------------
Net Assets, End of Period (in thousands) $8,810 $3,737 $2,146 $2,127 $1,060 $748
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
------
25
Heritage - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------
C CLASS
- -------------------------------------------------------------------------------------------------------
2003(1) 2002 2001(2)
=======================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $8.99 $10.10 $12.43
- -------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------
Net Investment Loss(3) (0.06) (0.13) (0.06)
- --------------------------------------------------
Net Realized and Unrealized Loss (0.09) (0.98) (2.27)
- -------------------------------------------------------------------------------------------------------
Total From Investment Operations (0.15) (1.11) (2.33)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.84 $8.99 $10.10
=======================================================================================================
TOTAL RETURN(4) (1.67)% (10.99)% (18.74)%
=======================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.00%(5) 2.00% 2.00%(5)
- --------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.35)%(5) (1.37)% (1.50)%(5)
- --------------------------------------------------
Portfolio Turnover Rate 51% 128% 152%(6)
- --------------------------------------------------
Net Assets, End of Period (in thousands) $287 $146 $2,616
- -------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) June 26, 2001 (commencement of sale) through October 31, 2001.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2001.
See Notes to Financial Statements.
- ------
26
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
==============================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.80 $17.85 $31.09 $31.60 $28.03 $27.86
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Income (Loss)(2) 0.01 (0.01) --(3) (0.10) (0.07) (0.01)
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.30 (3.04) (9.66) 3.73 9.03 4.35
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.31 (3.05) (9.66) 3.63 8.96 4.34
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Realized Gains -- -- (3.58) (4.14) (5.39) (4.17)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.11 $14.80 $17.85 $31.09 $31.60 $28.03
==============================================================================================================
TOTAL RETURN(4) 2.09% (17.09)% (34.14)% 11.49% 36.31% 18.53%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(5) 1.00% 1.00% 1.00% 1.00% 1.00%
- ----------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.15%(5) (0.04)% (0.01)% (0.30)% (0.24)% (0.02)%
- ----------------------------------------
Portfolio Turnover Rate 66% 135% 114% 102% 92% 126%
- ----------------------------------------
Net Assets, End of Period (in millions) $3,947 $3,951 $5,715 $9,557 $8,333 $6,097
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
-----
27
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
==============================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.87 $17.90 $31.15 $31.66 $28.08 $27.88
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Income (Loss)(2) 0.03 0.02 0.04 (0.03) (0.03) 0.05
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.30 (3.05) (9.65) 3.72 9.07 4.34
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.33 (3.03) (9.61) 3.69 9.04 4.39
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Realized Gains -- -- (3.64) (4.20) (5.46) (4.19)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.20 $14.87 $17.90 $31.15 $31.66 $28.08
==============================================================================================================
TOTAL RETURN(3) 2.22% (16.93)% (33.94)% 11.70% 36.62% 18.77%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80%(4) 0.80% 0.80% 0.80% 0.80% 0.80%
- ----------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.35%(4) 0.16% 0.19% (0.10)% (0.04)% 0.18%
- ----------------------------------------
Portfolio Turnover Rate 66% 135% 114% 102% 92% 126%
- ----------------------------------------
Net Assets, End of Period (in thousands) $515,230 $455,807 $84,189 $98,239 $1,453 $465
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
- ------
28
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
==============================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.70 $17.78 $31.01 $31.52 $27.97 $27.84
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Loss(2) (0.01) (0.05) (0.06) (0.19) (0.15) (0.08)
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.30 (3.03) (9.66) 3.73 9.02 4.35
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.29 (3.08) (9.72) 3.54 8.87 4.27
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Realized Gains -- -- (3.51) (4.05) (5.32) (4.14)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.99 $14.70 $17.78 $31.01 $31.52 $27.97
==============================================================================================================
TOTAL RETURN(3) 1.97% (17.32)% (34.40)% 11.23% 35.93% 18.23%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25%(4) 1.25% 1.25% 1.25% 1.25% 1.25%
- ----------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.10)%(4) (0.29)% (0.26)% (0.55)% (0.49)% (0.27)%
- ----------------------------------------
Portfolio Turnover Rate 66% 135% 114% 102% 92% 126%
- ----------------------------------------
Net Assets, End of Period (in thousands) $42,285 $32,530 $25,272 $24,750 $12,759 $5,520
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two
decimal places is made in accordance with SEC guidelines and does not result
in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
------
29
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2003(1) 2002(2)
================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $14.66 $19.38
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------
Net Investment Loss(3) (0.06) (0.16)
- ---------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.30 (4.56)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.24 (4.72)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $14.90 $14.66
================================================================================
TOTAL RETURN(4) 1.64% (24.36)%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.00%(5) 2.00%(5)
- ---------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.85)%(5) (0.99)%(5)
- ---------------------------------------------------
Portfolio Turnover Rate 66% 135%(6)
- ---------------------------------------------------
Net Assets, End of Period (in thousands) $515 $482
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) November 28, 2001 (commencement of sale) through October 31, 2002.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2002.
See Notes to Financial Statements.
- ------
30
Share Class Information
Four classes of shares are authorized for sale by the funds: Investor Class,
Institutional Class, Advisor Class, and C Class. The total expense ratios of
Advisor and C Class shares are higher than those of Investor Class shares; the
total expense ratio of Institutional Class shares is lower.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) 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
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as banks,
broker-dealers, insurance companies, and financial advisors. Advisor Class
shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee.
The total expense ratio of Advisor Class shares is 0.25% higher than the total
expense ratio of Investor Class shares.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as banks, broker-dealers, and insurance companies.
C Class shares redeemed within 12 months of purchase are subject to a CDSC of
1.00% for equity funds and 0.75% for fixed-income funds. There is no CDSC on
shares acquired through reinvestment of dividends or capital gains. C Class
shares also are subject to a Rule 12b-1 service and distribution fee of 1.00%
for stock funds and 0.75% for bond funds.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
31
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
- ------
32
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The RUSSELL 2000 INDEX is a market-capitalization weighted index created by
Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
The RUSSELL 2000 VALUE INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with lower price-to-book ratios
and lower forecasted growth rates.
The RUSSELL 1000 INDEX is a market-capitalization weighted, large-cap index
created by Frank Russell Company to measure the performance of the 1,000 largest
companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S.
companies, based on total market capitalization).
The RUSSELL 1000 GROWTH INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
The RUSSELL 1000 VALUE INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with lower price-to-book ratios
and lower forecasted growth rates.
The RUSSELL MIDCAP INDEX measures the performance of the 800 smallest of the
1,000 largest publicly traded U.S. companies, based on total market
capitalization.
------
33
Notes
- ------
34
Notes
------
35
Notes
- ------
36
[back cover]
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
PRSRT STD
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
0306 American Century Investment Services, Inc.
SH-SAN-34840S (c)2003 American Century Services Corporation
[front cover]
April 30, 2003
American Century
Semiannual Report
[photo]
Balanced
[american century logo and text logo (reg.sm)]
[inside front cover]
Table of Contents
Our Message to You ........................................................ 1
BALANCED
Performance ............................................................... 2
Portfolio Commentary ...................................................... 3
Top Ten Stock Holdings ................................................. 3
Top Five Stock Industries .............................................. 3
Types of Investments in the Portfolio .................................. 4
Schedule of Investments ................................................... 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 11
Statement of Operations ................................................... 12
Statement of Changes in Net Assets ........................................ 13
Notes to Financial Statements ............................................. 14
Financial Highlights ...................................................... 18
OTHER INFORMATION
Share Class Information ................................................... 21
Retirement Account Information ............................................ 22
Comparative Indices ....................................................... 23
Our Message to You
[photo]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the Balanced fund's semiannual report for the
six months ended April 30, 2003.
The report includes comparative performance figures, commentary, summary tables,
a full list of portfolio holdings, and other financial statements and highlights
(as of April 30, 2003, except as noted). We hope you find this information
helpful in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
communications about investments, portfolio strategy, and the markets.
Your next Balanced shareholder report will be the annual report for the year
ended October 31, 2003, available in approximately six months.
As always, we deeply appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
-----
1
Balanced - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
----------------------------------
AVERAGE ANNUAL RETURNS
- ----------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------
INVESTOR CLASS -2.95% 0.97% 7.02% 8.76% 10/20/88
- ----------------------------------------------------------------------------------------------
BLENDED INDEX -3.82% 1.96% 9.02% 10.32%(1) --
- ----------------------------------------------------------------------------------------------
S&P 500 INDEX -13.31% -2.43% 9.66% 11.10%(1) --
- ----------------------------------------------------------------------------------------------
LEHMAN U.S. AGGREGATE INDEX 10.47% 7.58% 7.24% 8.45%(1) --
- ----------------------------------------------------------------------------------------------
Institutional Class -2.68% -- -- -4.15% 5/1/00
- ----------------------------------------------------------------------------------------------
Advisor Class -3.18% 0.71% -- 4.13% 1/6/97
- ----------------------------------------------------------------------------------------------
(1) Since 10/31/88, the date nearest the Investor Class's inception for which
data are available.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- ------------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------
Investor Class 8.09% 6.81% 17.51% 10.24% 25.61% 10.05% 8.16% -4.25% -5.14% -2.95%
- ------------------------------------------------------------------------------------------------------------------------
Blended Index 3.55% 13.37% 21.20% 17.78% 28.45% 16.04% 6.79% -3.14% -4.54% -3.82%
- ------------------------------------------------------------------------------------------------------------------------
The charts on the performance page give historical return data for the fund.
Returns for the indices are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the indices do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures. Past performance does
not guarantee future results. None of the charts reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
- -----
2
Balanced - Portfolio Commentary
By Jeff Tyler (equity team leader) and Jeff Houston (fixed-income team leader)
PERFORMANCE SUMMARY
American Century Balanced outperformed its three comparative indices for the six
months ended April 30, 2003. Balanced returned 5.58%*, while its benchmark (the
blended index, defined on page 23) returned 4.62%. The benchmark's stock and
bond components (the S&P 500 Index and the Lehman U.S. Aggregate Index) returned
4.48% and 4.31%, respectively.
U.S. STOCK MARKET REVIEW
Besides the S&P 500, other broad U.S. stock market indices, including the
Wilshire 5000 (up 5.03%) and the Nasdaq Composite (up 10.40%), posted positive
returns for the six months ended April 30, 2003. The return posted by the
technology stock-oriented Nasdaq Composite was an indicator of the relative
outperformance of the technology sector during the period.
In the S&P 500, Yahoo (up 66% for the six months), Xerox (up 48%), eBay
(up 47%), Cisco Systems (up 35%), and Oracle (up 17%) helped boost the tech
sector.
Despite the strong showing by the growth-oriented Nasdaq Composite, it is worth
noting that the S&P 500/ BARRA Value Index (up 5.36%) outperformed the S&P
500/BARRA Growth Index (up 3.74%) for the period.
The value style received a boost from financial stocks, another relatively
strong sector during the period. JPMorgan Chase (up 41%), Morgan Stanley (up
15%), and Citigroup (up 6%) helped drive this sector higher.
Sectors that lagged included consumer non-cyclicals and telecommunications.
Tobacco companies, including RJ Reynolds (down 31%) and Altria Group (formerly
Philip Morris, down 25%) pulled down consumer non-cyclicals. Telecommunications
reflected the performance of AT&T (down 35%), SBC (down 9%), and BellSouth (down
3%).
TOP TEN STOCK HOLDINGS
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
% OF EQUITY % OF EQUITY
PORTFOLIO PORTFOLIO
AS OF AS OF
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Pfizer, Inc. 3.7% 2.9%
- --------------------------------------------------------------------------------
Microsoft Corporation 3.5% 3.4%
- --------------------------------------------------------------------------------
Merck & Co., Inc. 3.1% 2.8%
- --------------------------------------------------------------------------------
Bank of America Corp. 2.8% 3.3%
- --------------------------------------------------------------------------------
Intel Corp. 2.3% 1.6%
- --------------------------------------------------------------------------------
Procter & Gamble
Co. (The) 2.3% 1.7%
- --------------------------------------------------------------------------------
Verizon Communications 2.2% 1.9%
- --------------------------------------------------------------------------------
Citigroup Inc. 2.2% 2.0%
- --------------------------------------------------------------------------------
Johnson & Johnson 2.0% 2.8%
- --------------------------------------------------------------------------------
International Business
Machines Corp. 2.0% 1.8%
- --------------------------------------------------------------------------------
TOP FIVE STOCK INDUSTRIES
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
% OF EQUITY % OF EQUITY
PORTFOLIO PORTFOLIO
AS OF AS OF
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Banks 10.0% 9.5%
- --------------------------------------------------------------------------------
Drugs 10.0% 10.6%
- --------------------------------------------------------------------------------
Financial Services 5.8% 7.0%
- --------------------------------------------------------------------------------
Semiconductor 4.9% 2.8%
- --------------------------------------------------------------------------------
Property and Casualty
Insurance 4.8% 4.4%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
-----
3
Balanced - Portfolio Commentary
U.S. BOND MARKET REVIEW
The three largest components of the Lehman U.S. Aggregate Index (based on their
respective market weightings) were fixed-rate mortgage-backeds (35% as of April
30), corporates (23%), and Treasurys (21%). These sectors posted positive
returns for the six months ended April 30 as a key U.S. bond market benchmark,
the 10-year Treasury note yield, remained below 4%. The 10-year note's yield
fell from 3.90% at the start of the period to 3.84% at the end.
The leading Lehman Aggregate sector for the period by far was corporate bonds,
up 9.45%. Treasurys returned 3.06%, and fixed-rate mortgage-backeds were up
2.33%. Fixed-income securities with longer maturities and durations generally
outperformed those with shorter; for example, the two-year Treasury note, the
10-year Treasury note, and the 30-year Treasury bond returned 1.58%, 2.49%, and
5.81%, respectively.
STOCK PORTFOLIO REVIEW
The biggest positive contributors to Balanced's stock portfolio for the period
(in weighted absolute terms, based on the size of each stock's position and its
return) included two of the technology names mentioned earlier (Cisco Systems
and Xerox), an online lottery service provider (GTECH Holdings), a home builder
(Centex), an electric utility (Edison International), two title insurance
companies (First American and Fidelity National), and a rent-to-own services
company (Rent-A-Center).
The biggest detractors from performance (on the same basis) included J.C.
Penney, Pfizer, H&R Block, Microsoft, Winn-Dixie Stores, Verizon Communications,
Oxford Health Plans, and Altria Group.
BOND PORTFOLIO REVIEW
Like the Lehman Aggregate, Balanced's bond portfolio held mostly fixed-rate
mortgage-backeds, corporates, and Treasurys (see the table below). Relative
performance differences among those sectors (see the U.S. Bond Market Review)
and small asset allocation shifts reduced the "Mortgage- & Asset-Backed"
category and increased the corporate and Treasury positions during the period.
The corporate and Treasury positions had other noteworthy features. We increased
the diversification of the corporate position by owning "baskets" of
investment-grade corporate credits (Lehman Brothers TRAINS(SM) and Morgan
Stanley TRACERS(SM), approximately 19% of the corporate position as of April
30). The Treasury position included Treasury Inflation Indexed Notes
(approximately 10% of the Treasury position as of April 30).
TYPES OF INVESTMENTS IN THE PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Common Stocks 57.6% 60.2%
- --------------------------------------------------------------------------------
Mortgage- &
Asset-Backed Securities 15.4% 16.8%
- --------------------------------------------------------------------------------
Corporate Bonds 10.9% 9.8%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 8.3% 7.9%
- --------------------------------------------------------------------------------
U.S. Government
Agency Securities 2.6% 1.6%
- --------------------------------------------------------------------------------
Sovereign Governments
& Agencies 1.0% 0.4%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.2% 3.3%
- --------------------------------------------------------------------------------
- -----
4
Balanced - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ in Thousands) Value
- -------------------------------------------------------------------------------
COMMON STOCKS -- 57.6%
AIRLINES -- 0.1%
- -------------------------------------------------------------------------------
42,600 Southwest Airlines Co. $ 680
- -------------------------------------------------------------------------------
ALCOHOL(1)
- -------------------------------------------------------------------------------
9,600 Constellation Brands Inc.(2) 257
- -------------------------------------------------------------------------------
APPAREL & TEXTILES -- 0.4%
- -------------------------------------------------------------------------------
54,000 VF Corp. 2,124
- -------------------------------------------------------------------------------
BANKS -- 5.8%
- -------------------------------------------------------------------------------
127,200 Bank of America Corp. 9,420
- -------------------------------------------------------------------------------
190,100 Citigroup Inc. 7,461
- -------------------------------------------------------------------------------
36,300 First Tennessee National Corp. 1,590
- -------------------------------------------------------------------------------
13,309 HSBC Holdings plc ORD 728
- -------------------------------------------------------------------------------
65,900 PNC Financial Services Group 2,893
- -------------------------------------------------------------------------------
91,900 U.S. Bancorp 2,036
- -------------------------------------------------------------------------------
63,300 UnionBanCal Corporation 2,557
- -------------------------------------------------------------------------------
150,000 Wachovia Corp. 5,732
- -------------------------------------------------------------------------------
29,900 Wells Fargo & Co. 1,443
- -------------------------------------------------------------------------------
33,860
- -------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.2%
- -------------------------------------------------------------------------------
7,692 Amgen Inc.(2) 472
- -------------------------------------------------------------------------------
51,900 Applera Corporation-Applied
Biosystems Group 909
- -------------------------------------------------------------------------------
1,000 Cephalon, Inc.(2) 41
- -------------------------------------------------------------------------------
1,422
- -------------------------------------------------------------------------------
CHEMICALS -- 1.2%
- -------------------------------------------------------------------------------
66,500 Cytec Industries Inc.(2) 2,129
- -------------------------------------------------------------------------------
6,300 Dow Chemical Co. 206
- -------------------------------------------------------------------------------
30,000 du Pont (E.I.) de Nemours & Co. 1,276
- -------------------------------------------------------------------------------
126,000 Sherwin-Williams Co. 3,512
- -------------------------------------------------------------------------------
7,123
- -------------------------------------------------------------------------------
CLOTHING STORES -- 0.2%
- -------------------------------------------------------------------------------
79,200 Gap, Inc. (The) 1,317
- -------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 1.9%
- -------------------------------------------------------------------------------
250,100 Cisco Systems Inc.(2) 3,763
- -------------------------------------------------------------------------------
54,800 Dell Computer Corp.(2) 1,590
- -------------------------------------------------------------------------------
42,500 IKON Office Solutions Inc. 330
- -------------------------------------------------------------------------------
12,300 Lexmark International, Inc.(2) 916
- -------------------------------------------------------------------------------
27,600 Storage Technology Corp.(2) 682
- -------------------------------------------------------------------------------
176,200 Western Digital Corp.(2) 1,644
- -------------------------------------------------------------------------------
256,900 Xerox Corp.(2) 2,533
- -------------------------------------------------------------------------------
11,458
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.6%
- -------------------------------------------------------------------------------
80,200 BMC Software Inc.(2) 1,197
- -------------------------------------------------------------------------------
10,700 Compuware Corp.(2) 47
- -------------------------------------------------------------------------------
8,400 Electronic Arts Inc.(2) 498
- -------------------------------------------------------------------------------
465,000 Microsoft Corporation 11,939
- -------------------------------------------------------------------------------
Shares ($ in Thousands) Value
- -------------------------------------------------------------------------------
103,700 Oracle Corp.(2) $1,232
- -------------------------------------------------------------------------------
24,400 Take-Two Interactive Software, Inc.(2) 549
- -------------------------------------------------------------------------------
15,462
- -------------------------------------------------------------------------------
CONSTRUCTION & REAL PROPERTY -- 1.3%
- -------------------------------------------------------------------------------
66,500 Centex Corp. 4,390
- -------------------------------------------------------------------------------
57,700 KB Home 2,843
- -------------------------------------------------------------------------------
600 NVR, Inc.(2) 215
- -------------------------------------------------------------------------------
7,448
- -------------------------------------------------------------------------------
CONSUMER DURABLES(1)
- -------------------------------------------------------------------------------
2,500 Carlisle Companies, Inc. 113
- -------------------------------------------------------------------------------
DEFENSE/AEROSPACE(1)
- -------------------------------------------------------------------------------
7,300 Precision Castparts Corp. 202
- -------------------------------------------------------------------------------
DEPARTMENT STORES -- 1.9%
- -------------------------------------------------------------------------------
148,400 Federated Department Stores, Inc.(2) 4,544
- -------------------------------------------------------------------------------
169,500 J.C. Penney Company, Inc. 2,892
- -------------------------------------------------------------------------------
91,500 Saks Holdings, Inc.(2) 819
- -------------------------------------------------------------------------------
50,500 Wal-Mart Stores, Inc. 2,844
- -------------------------------------------------------------------------------
11,099
- -------------------------------------------------------------------------------
DIVERSIFIED -- 1.0%
- -------------------------------------------------------------------------------
61,200 Standard and Poor's 500 Depositary
Receipt 5,629
- -------------------------------------------------------------------------------
DRUGS -- 5.8%
- -------------------------------------------------------------------------------
65,200 Endo Pharmaceuticals Holdings Inc.(2) 1,076
- -------------------------------------------------------------------------------
28,000 IDEXX Laboratories, Inc.(2) 1,092
- -------------------------------------------------------------------------------
122,100 Johnson & Johnson 6,882
- -------------------------------------------------------------------------------
43,600 King Pharmaceuticals, Inc.(2) 550
- -------------------------------------------------------------------------------
182,700 Merck & Co., Inc. 10,629
- -------------------------------------------------------------------------------
412,900 Pfizer, Inc. 12,698
- -------------------------------------------------------------------------------
13,700 Sigma-Aldrich Corp. 683
- -------------------------------------------------------------------------------
5,400 Watson Pharmaceuticals, Inc.(2) 157
- -------------------------------------------------------------------------------
33,767
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.4%
- -------------------------------------------------------------------------------
22,500 ADTRAN, Inc.(2) 912
- -------------------------------------------------------------------------------
24,600 Anixter International Inc.(2) 565
- -------------------------------------------------------------------------------
72,400 Flextronics International Ltd. ADR(2) 634
- -------------------------------------------------------------------------------
2,700 Motorola, Inc. 21
- -------------------------------------------------------------------------------
2,132
- -------------------------------------------------------------------------------
ELECTRICAL UTILITY -- 0.7%
- -------------------------------------------------------------------------------
77,600 Exelon Corporation 4,116
- -------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 1.8%
- -------------------------------------------------------------------------------
20,900 Amerada Hess Corp. 944
- -------------------------------------------------------------------------------
51,300 ChevronTexaco Corp. 3,222
- -------------------------------------------------------------------------------
164,600 Exxon Mobil Corp. 5,794
- -------------------------------------------------------------------------------
26,200 Occidental Petroleum Corp. 782
- -------------------------------------------------------------------------------
10,742
- -------------------------------------------------------------------------------
ENTERTAINMENT -- 0.6%
- -------------------------------------------------------------------------------
87,800 Viacom, Inc. Cl B(2) 3,811
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-----
5
Balanced - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ in Thousands) Value
- -------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES(1)
- -------------------------------------------------------------------------------
8,000 Allied Waste Industries Inc.(2) $ 66
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 3.3%
- -------------------------------------------------------------------------------
146,400 American Express Co. 5,542
- -------------------------------------------------------------------------------
69,100 Block (H & R), Inc. 2,669
- -------------------------------------------------------------------------------
81,200 Capital One Financial Corp. 3,400
- -------------------------------------------------------------------------------
66,600 Fannie Mae 4,821
- -------------------------------------------------------------------------------
28,300 Freddie Mac 1,639
- -------------------------------------------------------------------------------
50,600 General Electric Co. 1,490
- -------------------------------------------------------------------------------
19,561
- -------------------------------------------------------------------------------
FOOD & BEVERAGE -- 1.6%
- -------------------------------------------------------------------------------
4,600 Chiquita Brands International, Inc.(2) 62
- -------------------------------------------------------------------------------
136,600 Coca-Cola Enterprises 2,662
- -------------------------------------------------------------------------------
128,794 ConAgra Foods, Inc. 2,705
- -------------------------------------------------------------------------------
78,000 Dean Foods Co.(2) 3,395
- -------------------------------------------------------------------------------
12,800 PepsiCo, Inc. 554
- -------------------------------------------------------------------------------
9,378
- -------------------------------------------------------------------------------
GROCERY STORES -- 0.5%
- -------------------------------------------------------------------------------
11,400 Supervalu Inc. 188
- -------------------------------------------------------------------------------
225,500 Winn-Dixie Stores, Inc. 2,825
- -------------------------------------------------------------------------------
3,013
- -------------------------------------------------------------------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.1%
- -------------------------------------------------------------------------------
10,100 United Technologies Corp. 624
- -------------------------------------------------------------------------------
HOME PRODUCTS -- 1.3%
- -------------------------------------------------------------------------------
87,700 Procter & Gamble Co. (The) 7,880
- -------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 1.4%
- -------------------------------------------------------------------------------
52,500 Black & Decker Corporation 2,166
- -------------------------------------------------------------------------------
65,400 Energizer Holdings, Inc.(2) 1,885
- -------------------------------------------------------------------------------
44,300 Lennox International Inc. 658
- -------------------------------------------------------------------------------
206,000 Tyco International Ltd. 3,213
- -------------------------------------------------------------------------------
24,600 York International Corp. 588
- -------------------------------------------------------------------------------
8,510
- -------------------------------------------------------------------------------
INFORMATION SERVICES -- 2.3%
- -------------------------------------------------------------------------------
13,900 Checkfree Corp.(2) 383
- -------------------------------------------------------------------------------
36,600 Computer Sciences Corp.(2) 1,206
- -------------------------------------------------------------------------------
39,800 First Data Corp. 1,561
- -------------------------------------------------------------------------------
80,200 International Business Machines
Corp. 6,810
- -------------------------------------------------------------------------------
51,700 Moore Corporation Ltd.(2) 590
- -------------------------------------------------------------------------------
16,900 Valassis Communications, Inc.(2) 450
- -------------------------------------------------------------------------------
112,600 Viad Corp. 2,264
- -------------------------------------------------------------------------------
13,264
- -------------------------------------------------------------------------------
LEISURE -- 1.0%
- -------------------------------------------------------------------------------
97,400 Eastman Kodak Co. 2,913
- -------------------------------------------------------------------------------
75,400 GTECH Holdings Corp.(2) 2,539
- -------------------------------------------------------------------------------
17,400 Mattel, Inc. 378
- -------------------------------------------------------------------------------
5,830
- -------------------------------------------------------------------------------
Shares ($ in Thousands) Value
- -------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 1.9%
- -------------------------------------------------------------------------------
18,700 CIGNA Corp. $ 978
- -------------------------------------------------------------------------------
63,400 MetLife, Inc. 1,821
- -------------------------------------------------------------------------------
138,300 Principal Financial Group 4,025
- -------------------------------------------------------------------------------
147,200 Protective Life Corporation 4,229
- -------------------------------------------------------------------------------
13,900 UNUM Corp. 160
- -------------------------------------------------------------------------------
11,213
- -------------------------------------------------------------------------------
MEDIA -- 1.1%
- -------------------------------------------------------------------------------
98,350 AOL Time Warner Inc.(2) 1,345
- -------------------------------------------------------------------------------
13,400 Clear Channel Communications,
Inc.(2) 524
- -------------------------------------------------------------------------------
18,008 Comcast Corporation(2) 575
- -------------------------------------------------------------------------------
75,900 Fox Entertainment Group, Inc. Cl A(2) 1,928
- -------------------------------------------------------------------------------
41,600 Gemstar - TV Guide International,
Inc.(2) 167
- -------------------------------------------------------------------------------
86,500 Hearst-Argyle Television, Inc.(2) 2,084
- -------------------------------------------------------------------------------
6,623
- -------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.9%
- -------------------------------------------------------------------------------
5,700 Bard (C.R.), Inc. 361
- -------------------------------------------------------------------------------
14,700 Boston Scientific Corp.(2) 633
- -------------------------------------------------------------------------------
112,400 Fisher Scientific International(2) 3,239
- -------------------------------------------------------------------------------
27,900 Guidant Corp.(2) 1,088
- -------------------------------------------------------------------------------
2,400 Steris Corp.(2) 54
- -------------------------------------------------------------------------------
5,375
- -------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 0.8%
- -------------------------------------------------------------------------------
9,700 AmerisourceBergen Corp. 561
- -------------------------------------------------------------------------------
39,900 Cardinal Health, Inc. 2,205
- -------------------------------------------------------------------------------
2,800 Health Net Inc.(2) 73
- -------------------------------------------------------------------------------
71,400 Humana Inc.(2) 789
- -------------------------------------------------------------------------------
34,700 McKesson Corp. 963
- -------------------------------------------------------------------------------
4,591
- -------------------------------------------------------------------------------
MINING & METALS -- 0.5%
- -------------------------------------------------------------------------------
41,600 Alcoa Inc. 954
- -------------------------------------------------------------------------------
15,300 Ball Corp. 859
- -------------------------------------------------------------------------------
51,800 Freeport-McMoRan Copper &
Gold, Inc. Cl B 897
- -------------------------------------------------------------------------------
2,710
- -------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 1.3%
- -------------------------------------------------------------------------------
490,500 Delphi Automotive Systems 4,120
- -------------------------------------------------------------------------------
269,000 Ford Motor Company 2,771
- -------------------------------------------------------------------------------
19,000 Lear Corporation(2) 755
- -------------------------------------------------------------------------------
7,646
- -------------------------------------------------------------------------------
OIL REFINING -- 0.6%
- -------------------------------------------------------------------------------
163,900 Marathon Oil Corp. 3,732
- -------------------------------------------------------------------------------
OIL SERVICES -- 0.6%
- -------------------------------------------------------------------------------
178,700 Transocean Inc. 3,404
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- -----
6
Balanced - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ in Thousands) Value
- -------------------------------------------------------------------------------
PROPERTY AND CASUALTY INSURANCE -- 2.7%
- -------------------------------------------------------------------------------
38,600 American International Group, Inc. $ 2,237
- -------------------------------------------------------------------------------
144,010 Fidelity National Financial, Inc. 4,953
- -------------------------------------------------------------------------------
163,500 First American Financial Corp. (The) 4,332
- -------------------------------------------------------------------------------
31,200 Loews Corp. 1,288
- -------------------------------------------------------------------------------
133,600 Odyssey Re Holdings Corp. 2,806
- -------------------------------------------------------------------------------
17,700 Old Republic International Corp. 542
- -------------------------------------------------------------------------------
16,158
- -------------------------------------------------------------------------------
RAILROADS -- 0.1%
- -------------------------------------------------------------------------------
9,400 Union Pacific Corp. 559
- -------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 0.9%
- -------------------------------------------------------------------------------
25,800 Bear Stearns Companies Inc. (The) 1,724
- -------------------------------------------------------------------------------
126,800 John Hancock Financial Services,
Inc. 3,680
- -------------------------------------------------------------------------------
5,404
- -------------------------------------------------------------------------------
SEMICONDUCTOR -- 2.8%
- -------------------------------------------------------------------------------
63,300 Altera Corp.(2) 1,000
- -------------------------------------------------------------------------------
133,100 Arrow Electronics, Inc.(2) 2,247
- -------------------------------------------------------------------------------
202,600 Avnet Inc.(2) 2,583
- -------------------------------------------------------------------------------
432,200 Intel Corp. 7,955
- -------------------------------------------------------------------------------
24,300 QUALCOMM Inc. 775
- -------------------------------------------------------------------------------
102,700 Texas Instruments Inc. 1,899
- -------------------------------------------------------------------------------
16,459
- -------------------------------------------------------------------------------
SPECIALTY STORES -- 2.0%
- -------------------------------------------------------------------------------
22,800 Advance Auto Parts(2) 1,134
- -------------------------------------------------------------------------------
22,900 Autozone Inc.(2) 1,851
- -------------------------------------------------------------------------------
69,400 Barnes & Noble Inc.(2) 1,367
- -------------------------------------------------------------------------------
48,935 Blockbuster Inc. 875
- -------------------------------------------------------------------------------
24,900 Claire's Stores Inc. 647
- -------------------------------------------------------------------------------
90,500 Office Depot, Inc.(2) 1,146
- -------------------------------------------------------------------------------
60,500 Rent-A-Center Inc.(2) 3,886
- -------------------------------------------------------------------------------
32,200 Staples, Inc.(2) 613
- -------------------------------------------------------------------------------
11,519
- -------------------------------------------------------------------------------
TELEPHONE -- 2.2%
- -------------------------------------------------------------------------------
48,480 AT&T Corp. 827
- -------------------------------------------------------------------------------
74,300 BellSouth Corp. 1,894
- -------------------------------------------------------------------------------
2,300 CenturyTel Inc. 68
- -------------------------------------------------------------------------------
230,605 Sprint Corp. 2,654
- -------------------------------------------------------------------------------
199,900 Verizon Communications 7,472
- -------------------------------------------------------------------------------
12,915
- -------------------------------------------------------------------------------
THRIFTS -- 0.1%
- -------------------------------------------------------------------------------
19,700 Washington Mutual, Inc. 778
- -------------------------------------------------------------------------------
TOBACCO -- 0.4%
- -------------------------------------------------------------------------------
71,900 Altria Group Inc. 2,212
- -------------------------------------------------------------------------------
Shares/Principal Amount ($ in Thousands) Value
- -------------------------------------------------------------------------------
TRUCKING & SHIPPING & AIR FREIGHT -- 0.5%
- -------------------------------------------------------------------------------
3,700 FedEx Corporation $ 222
- -------------------------------------------------------------------------------
39,700 United Parcel Service, Inc. Cl B 2,466
- -------------------------------------------------------------------------------
2,688
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 0.8%
- -------------------------------------------------------------------------------
300,700 Nextel Communications, Inc.(2) 4,449
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $313,277) 339,323
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 10.9%
BANKS -- 1.9%
- -------------------------------------------------------------------------------
$750 Amsouth Bank N.A., 4.85%, 4/1/13 760
- -------------------------------------------------------------------------------
3,250 Bank of America Corp., 6.625%,
6/15/04 3,438
- -------------------------------------------------------------------------------
750 Bank of America Corp., 4.875%,
1/15/13 771
- -------------------------------------------------------------------------------
1,500 Bank One N.A., 3.70%, 1/15/08 1,533
- -------------------------------------------------------------------------------
2,300 Citigroup Inc., 4.125%, 6/30/05 2,404
- -------------------------------------------------------------------------------
900 Citigroup Inc., 5.875%, 2/22/33 927
- -------------------------------------------------------------------------------
350 Deutsche Bank Financial LLC,
5.375%, 3/2/15 368
- -------------------------------------------------------------------------------
500 US Bancorp, 2.75%, 3/30/06 507
- -------------------------------------------------------------------------------
10,708
- -------------------------------------------------------------------------------
CLOTHING STORES(1)
- -------------------------------------------------------------------------------
250 Limited Brands, 6.95%, 3/1/33
(Acquired 2/13/03, Cost $250)(3) 261
- -------------------------------------------------------------------------------
DIVERSIFIED -- 2.8%
- -------------------------------------------------------------------------------
37,500 iShares GS $InvesTop Corporate
Bond Fund(4) 4,211
- -------------------------------------------------------------------------------
5,300 Lehman Brothers TRAINS(SM),
Series 10-2002, 6.96%, 1/15/12
(Acquired 5/23/02-1/3/03,
Cost $5,568)(3) 6,022
- -------------------------------------------------------------------------------
1,760 Lehman Brothers TRAINS(SM),
Series L-2002, 7.75%, 11/15/31
(Acquired 4/14/03, Cost $2,032)(3) 2,134
- -------------------------------------------------------------------------------
3,190 Morgan Stanley TRACERS(SM), 7.70%,
3/1/32 (Acquired 3/15/02-8/28/02,
Cost $3,356)(3) 3,803
- -------------------------------------------------------------------------------
16,170
- -------------------------------------------------------------------------------
ELECTRICAL UTILITY -- 0.5%
- -------------------------------------------------------------------------------
500 Calpine Corp., 8.25%, 8/15/05 423
- -------------------------------------------------------------------------------
750 Constellation Energy Group Inc.,
7.00%, 4/1/12 863
- -------------------------------------------------------------------------------
500 Dominion Resources Inc., 5.00%,
3/15/13 505
- -------------------------------------------------------------------------------
1,000 Pepco Holdings Inc., 6.45%,
8/15/12 (Acquired 9/3/02, Cost
$997)(3) 1,111
- -------------------------------------------------------------------------------
250 Virginia Electric and Power
Company, 4.75%, 3/1/13 254
- -------------------------------------------------------------------------------
3,156
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-----
7
Balanced - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 0.5%
- -------------------------------------------------------------------------------
$300 Anadarko Petroleum Corp., 7.95%,
4/15/29 $ 381
- -------------------------------------------------------------------------------
750 Burlington Resources Finance Co.,
6.50%, 12/1/11 854
- -------------------------------------------------------------------------------
1,000 Conoco Funding Co., 6.35%,
10/15/11 1,134
- -------------------------------------------------------------------------------
750 Occidental Petroleum Corp., 4.25%,
3/15/10 756
- -------------------------------------------------------------------------------
3,125
- -------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.5%
- -------------------------------------------------------------------------------
350 Allied Waste North America,
7.625%, 1/1/06 (Acquired 4/30/03,
Cost $364)(3) 365
- -------------------------------------------------------------------------------
1,000 Waste Management Inc., 7.00%,
10/15/06 1,112
- -------------------------------------------------------------------------------
1,100 Waste Management Inc., 6.375%,
11/15/12 1,221
- -------------------------------------------------------------------------------
2,698
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 1.5%
- -------------------------------------------------------------------------------
1,500 American General Finance Corp.,
Series H, 4.50%, 11/15/07 1,569
- -------------------------------------------------------------------------------
750 Countrywide Home Loans Inc.,
4.25%, 12/19/07 777
- -------------------------------------------------------------------------------
2,700 Ford Motor Credit Co., 6.75%,
5/15/05 2,782
- -------------------------------------------------------------------------------
2,250 General Electric Capital Corp.,
Series A, MTN, 6.00%, 6/15/12 2,487
- -------------------------------------------------------------------------------
1,000 General Electric Co., 5.00%, 2/1/13 1,036
- -------------------------------------------------------------------------------
400 General Motors Acceptance Corp.,
6.875%, 9/15/11 408
- -------------------------------------------------------------------------------
9,059
- -------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.1%
- -------------------------------------------------------------------------------
500 Abitibi-Consolidated Finance L.P.,
7.875%, 8/1/09 540
- -------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 0.1%
- -------------------------------------------------------------------------------
500 Sempra Energy, 6.00%, 2/1/13 535
- -------------------------------------------------------------------------------
HEAVY MACHINERY -- 0.3%
- -------------------------------------------------------------------------------
600 Caterpillar Financial Services Corp.,
2.59%, 7/15/06 601
- -------------------------------------------------------------------------------
1,000 John Deere Capital Corp., 5.10%,
1/15/13 1,030
- -------------------------------------------------------------------------------
1,631
- -------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 0.2%
- -------------------------------------------------------------------------------
900 Tyco International Group SA,
6.125%, 1/15/09 889
- -------------------------------------------------------------------------------
INTERNET -- 0.1%
- -------------------------------------------------------------------------------
750 USA Interactive, 7.00%, 1/15/13 826
- -------------------------------------------------------------------------------
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 0.1%
- -------------------------------------------------------------------------------
$750 Monumental Global Funding II,
3.85%, 3/3/08 (Acquired 2/5/03,
Cost $750)(3) $ 759
- -------------------------------------------------------------------------------
MEDIA -- 1.0%
- -------------------------------------------------------------------------------
1,300 AOL Time Warner Inc., 7.625%,
4/15/31 1,439
- -------------------------------------------------------------------------------
400 Clear Channel Communications Inc.,
4.25%, 5/15/09(5) 402
- -------------------------------------------------------------------------------
1,360 Comcast Cable Communications,
8.375%, 5/1/07 1,572
- -------------------------------------------------------------------------------
350 Comcast Corp., 5.50%, 3/15/11 362
- -------------------------------------------------------------------------------
500 COX Communications Inc., 6.75%,
3/15/11 570
- -------------------------------------------------------------------------------
1,100 CSC Holdings Inc., 7.625%,
7/15/18 1,147
- -------------------------------------------------------------------------------
550 News America Holdings, 7.75%,
1/20/24 627
- -------------------------------------------------------------------------------
6,119
- -------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 0.1%
- -------------------------------------------------------------------------------
750 DaimlerChrysler N.A. Holding Corp.,
4.75%, 1/15/08 776
- -------------------------------------------------------------------------------
OIL SERVICES -- 0.1%
- -------------------------------------------------------------------------------
750 Pemex Project Funding Master
Trust, 7.375%, 12/15/14 816
- -------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 0.4%
- -------------------------------------------------------------------------------
750 Goldman Sachs Group Inc., 4.125%,
1/15/08 775
- -------------------------------------------------------------------------------
750 Goldman Sachs Group Inc., 5.70%,
9/1/12 800
- -------------------------------------------------------------------------------
750 Morgan Stanley, 3.625%, 4/1/08 757
- -------------------------------------------------------------------------------
2,332
- -------------------------------------------------------------------------------
TELEPHONE(1)
- -------------------------------------------------------------------------------
131 AT&T Broadband Corp., 8.375%,
3/15/13 161
- -------------------------------------------------------------------------------
13 AT&T Corp., 6.00%, 3/15/09 13
- -------------------------------------------------------------------------------
174
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 0.7%
- -------------------------------------------------------------------------------
400 AT&T Wireless Services Inc.,
7.875%, 3/1/11 462
- -------------------------------------------------------------------------------
400 AT&T Wireless Services Inc., 8.75%,
3/1/31 500
- -------------------------------------------------------------------------------
500 Deutsche Telekom International
Finance BV, 8.75%, 6/15/30 615
- -------------------------------------------------------------------------------
2,200 Vodafone Group plc, 5.375%,
1/30/15 2,298
- -------------------------------------------------------------------------------
3,875
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $60,900) 64,449
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- -----
8
Balanced - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES(6) -- 10.8%
$3,000 FHLMC, 5.00%, settlement date
6/17/03(7) $ 3,082
- -------------------------------------------------------------------------------
1,246 FHLMC, 7.00%, 10/1/12 1,332
- -------------------------------------------------------------------------------
1,235 FHLMC, 6.50%, 1/1/28 1,292
- -------------------------------------------------------------------------------
4,000 FNMA, 6.00%, settlement date
5/14/03(7) 4,164
- -------------------------------------------------------------------------------
4,900 FNMA, 5.50%, settlement date
6/12/03(7) 5,015
- -------------------------------------------------------------------------------
5,000 FNMA, 6.50%, settlement date
6/12/03(7) 5,220
- -------------------------------------------------------------------------------
1,779 FNMA, 6.00%, 2/1/09 1,877
- -------------------------------------------------------------------------------
164 FNMA, 6.50%, 5/1/11 175
- -------------------------------------------------------------------------------
1,392 FNMA, 7.50%, 11/1/11 1,494
- -------------------------------------------------------------------------------
22 FNMA, 6.50%, 10/1/12 23
- -------------------------------------------------------------------------------
111 FNMA, 6.50%, 5/1/13 118
- -------------------------------------------------------------------------------
49 FNMA, 6.50%, 5/1/13 52
- -------------------------------------------------------------------------------
142 FNMA, 6.50%, 6/1/13 150
- -------------------------------------------------------------------------------
177 FNMA, 6.50%, 6/1/13 189
- -------------------------------------------------------------------------------
253 FNMA, 6.50%, 6/1/13 268
- -------------------------------------------------------------------------------
130 FNMA, 6.50%, 6/1/13 138
- -------------------------------------------------------------------------------
80 FNMA, 6.50%, 6/1/13 85
- -------------------------------------------------------------------------------
680 FNMA, 6.00%, 1/1/14 714
- -------------------------------------------------------------------------------
2,417 FNMA, 6.00%, 4/1/14 2,541
- -------------------------------------------------------------------------------
554 FNMA, 6.50%, 1/1/28 579
- -------------------------------------------------------------------------------
1,430 FNMA, 7.00%, 1/1/28 1,515
- -------------------------------------------------------------------------------
1,481 FNMA, 6.00%, 1/1/29 1,546
- -------------------------------------------------------------------------------
1,074 FNMA, 6.50%, 1/1/29 1,124
- -------------------------------------------------------------------------------
1,923 FNMA, 6.00%, 2/1/29 2,008
- -------------------------------------------------------------------------------
1,102 FNMA, 7.50%, 7/1/29 1,175
- -------------------------------------------------------------------------------
348 FNMA, 7.00%, 5/1/30 368
- -------------------------------------------------------------------------------
1,022 FNMA, 7.50%, 9/1/30 1,090
- -------------------------------------------------------------------------------
1,278 FNMA, 6.50%, 9/1/31 1,336
- -------------------------------------------------------------------------------
769 FNMA, 7.00%, 9/1/31 813
- -------------------------------------------------------------------------------
1,400 FNMA, 6.00%, 12/1/31 1,459
- -------------------------------------------------------------------------------
2,823 FNMA, 6.50%, 1/1/32 2,950
- -------------------------------------------------------------------------------
2,393 FNMA, 7.00%, 6/1/32 2,530
- -------------------------------------------------------------------------------
2,349 FNMA, 6.50%, 8/1/32 2,455
- -------------------------------------------------------------------------------
1,498 GNMA, 7.00%, 4/20/26 1,588
- -------------------------------------------------------------------------------
830 GNMA, 7.50%, 8/15/26 889
- -------------------------------------------------------------------------------
684 GNMA, 7.00%, 2/15/28 727
- -------------------------------------------------------------------------------
720 GNMA, 7.50%, 2/15/28 769
- -------------------------------------------------------------------------------
1,141 GNMA, 7.00%, 12/15/28 1,213
- -------------------------------------------------------------------------------
536 GNMA, 8.00%, 12/15/29 580
- -------------------------------------------------------------------------------
2,702 GNMA, 7.00%, 5/15/31 2,867
- -------------------------------------------------------------------------------
5,906 GNMA, 5.50%, 11/15/32 6,117
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $61,331) 63,627
- -------------------------------------------------------------------------------
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 8.3%
$1,250 U.S. Treasury Bonds, 8.875%,
2/15/19 $ 1,858
- -------------------------------------------------------------------------------
2,650 U.S. Treasury Bonds, 6.375%,
8/16/27 3,208
- -------------------------------------------------------------------------------
1,375 U.S. Treasury Bonds, 5.375%,
2/15/31 1,501
- -------------------------------------------------------------------------------
4,622 U.S. Treasury Inflation Indexed
Notes, 3.375%, 1/15/07 5,035
- -------------------------------------------------------------------------------
13,000 U.S. Treasury Notes, 1.625%,
3/31/05 13,043
- -------------------------------------------------------------------------------
10,600 U.S. Treasury Notes, 4.625%,
5/15/06 11,421
- -------------------------------------------------------------------------------
4,000 U.S. Treasury Notes, 3.25%,
8/15/07 4,110
- -------------------------------------------------------------------------------
200 U.S. Treasury Notes, 3.00%,
11/15/07 203
- -------------------------------------------------------------------------------
250 U.S. Treasury Notes, 3.00%,
2/15/08 253
- -------------------------------------------------------------------------------
5,100 U.S. Treasury Notes, 4.75%,
11/15/08 5,547
- -------------------------------------------------------------------------------
2,000 U.S. Treasury Notes, 4.375%,
8/15/12 2,089
- -------------------------------------------------------------------------------
850 U.S. Treasury Notes, 3.875%,
2/15/13 851
- -------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $48,309) 49,119
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 2.6%
5,500 FHLMC, 7.00%, 7/15/05 6,121
- -------------------------------------------------------------------------------
5,000 FHLMC, 3.50%, 9/15/07 5,145
- -------------------------------------------------------------------------------
4,000 FNMA MTN, 5.74%, 1/21/09 4,118
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $14,947) 15,384
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS(6) -- 2.4%
236 Chase Mortgage Finance
Corporation, Series 2001 S3,
Class A1 SEQ, AS, 6.50%, 7/25/16 242
- -------------------------------------------------------------------------------
1,144 FHLMC REMIC, Series 77, Class H,
8.50%, 9/15/20 1,212
- -------------------------------------------------------------------------------
1,600 FHLMC, Series 2561, Class UD,
4.00%, 4/15/15 1,636
- -------------------------------------------------------------------------------
2,209 FHLMC, Series 2580, Class JD SEQ,
4.50%, 12/15/16 2,276
- -------------------------------------------------------------------------------
2,838 FNMA, Series 2002-87, Class AM
SEQ, 5.50%, 6/25/31 2,933
- -------------------------------------------------------------------------------
2,000 FNMA, Series 2003-9, Class BC
SEQ, 5.00%, 2/25/22 2,077
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-----
9
Balanced - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Principal Amount ($ In Thousands) Value
- -------------------------------------------------------------------------------
$1,785 General Motors Acceptance Corp.
Commercial Mortgage Securities
Inc., Series 2002 C2, Class A1 SEQ,
4.32%, 10/15/38 $ 1,867
- -------------------------------------------------------------------------------
2,000 J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series
2002 FL1A, Class A2, VRN, 1.74%,
5/14/03, resets monthly off the
1-month LIBOR plus 0.44%
with no caps (Acquired 4/3/02, Cost
$2,000)(3) 2,000
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $14,017) 14,243
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(6) -- 2.2%
1,765 AmeriCredit Automobile Receivables
Trust, Series 1999 D, Class A3 SEQ,
7.02%, 12/12/05 1,803
- -------------------------------------------------------------------------------
1,907 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%, 2/15/12 1,960
- -------------------------------------------------------------------------------
3,000 CPL Transition Funding LLC,
Series 2002-1, Class A4 SEQ,
5.96%, 7/15/15 3,334
- -------------------------------------------------------------------------------
1,000 Ford Credit Auto Owner Trust,
Series 2002 A, Class B SUB,
4.79%, 11/15/06 1,044
- -------------------------------------------------------------------------------
416 Long Beach Asset Holdings
Corporation, Series 2002-2,
Class SC, 8.50%, 7/25/32
(Acquired 6/6/02, Cost $415)(3) 417
- -------------------------------------------------------------------------------
307 Onyx Automobile Receivables,
Series 2002 A, 13.61%, 10/20/08 305
- -------------------------------------------------------------------------------
650 Peco Energy Transition Trust,
Series 1999 A, Class A6 SEQ,
6.05%, 3/1/09 721
- -------------------------------------------------------------------------------
3,000 Residential Funding Mortgage
Securities II, Series 2002 HS2,
Class A4 SEQ, 5.24%, 3/25/17 3,120
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $12,091) 12,704
- -------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS &
AGENCIES -- 1.0%
2,200 Province of Ontario, 3.50%,
9/17/07 2,254
- -------------------------------------------------------------------------------
850 Province of Ontario, 3.125%,
5/2/08(5) 853
- -------------------------------------------------------------------------------
1,000 Province of Quebec, 7.50%,
9/15/29 1,299
- -------------------------------------------------------------------------------
1,500 Republic of Italy, 2.50%, 3/31/06 1,514
- -------------------------------------------------------------------------------
TOTAL SOVEREIGN GOVERNMENTS
& AGENCIES
(Cost $5,776) 5,920
- -------------------------------------------------------------------------------
($ In Thousands) Value
- -------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.2%
Repurchase Agreement, Goldman Sachs & Co.,
(U.S. Treasury obligations), in a joint trading
account at 1.22%, dated 4/30/03, due 5/1/03
(Delivery value $24,701)(8)
(Cost $24,700) $ 24,700
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $555,348) $589,469
===============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
LIBOR = London Interbank Offered Rate
MTN = Medium Term Note
ORD = Foreign Ordinary Share
REMIC = Real Estate Mortgage Investment Conduit
resets = The frequency with which a security's coupon changes, based on current
markets conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
SEQ = Sequential Payer
TRACERS(SM) = Traded Custody Receipts(SM). Rate indicated is the
weighted-average coupon of the underlying securities held.
TRAINS(SM) = Target Return Index Securities(SM). Rate indicated is the
weighted-average coupon of the underlying securities held.
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective April 30, 2003.
(1) Industry is less than 0.05% of total investment securities.
(2) Non-income producing.
(3) Security was purchased under Rule 144A of the Securities Act of 1933
or is a private placement and, unless registered under the Act or exempted
from registration, may only be sold to qualified institutional investors.
The aggregate value of restricted securities at April 30, 2003, was
$16,872, which represented 3.0% of net assets.
(4) Security is an exchange-traded bond fund. Quantity indicated reflects
the number of shares owned.
(5) When-issued security.
(6) Final maturity indicated, unless otherwise noted. Expected remaining
maturity used for purposes of calculating the weighted average portfolio
maturity.
(7) Forward Commitment.
(8) Security, or a portion thereof, has been segregated for when-issued
securities and Forward Commitments.
See Notes to Financial Statements.
- -----
10
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
(Amounts In Thousands Except Per-Share Amounts)
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of $555,348) $589,469
- -----------------------------------------------------------
Cash 48
- -----------------------------------------------------------
Receivable for investments sold 9,083
- -----------------------------------------------------------
Receivable for capital shares sold 7
- -----------------------------------------------------------
Dividends and interest receivable 2,467
- --------------------------------------------------------------------------------
601,074
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 30,537
- -----------------------------------------------------------
Accrued management fees 407
- -----------------------------------------------------------
Distribution fees payable 3
- -----------------------------------------------------------
Service fees payable 3
- --------------------------------------------------------------------------------
30,950
- --------------------------------------------------------------------------------
NET ASSETS $570,124
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $617,575
- -----------------------------------------------------------
Undistributed net investment income 1,041
- -----------------------------------------------------------
Accumulated net realized loss on investment transactions (82,613)
- -----------------------------------------------------------
Net unrealized appreciation on investments 34,121
- --------------------------------------------------------------------------------
$570,124
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $539,021,883
- -----------------------------------------------------------
Shares outstanding 39,721,704
- -----------------------------------------------------------
Net asset value per share $13.57
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $16,991,278
- -----------------------------------------------------------
Shares outstanding 1,251,653
- -----------------------------------------------------------
Net asset value per share $13.58
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $14,111,026
- -----------------------------------------------------------
Shares outstanding 1,040,757
- -----------------------------------------------------------
Net asset value per share $13.56
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
-----
11
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
(Amounts in Thousands)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- -----------------------------------------------------------
Interest $5,262
- -----------------------------------------------------------
Dividends 2,679
- --------------------------------------------------------------------------------
7,941
- --------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------
Management fees 2,470
- -----------------------------------------------------------
Distribution fees -- Advisor Class 17
- -----------------------------------------------------------
Service fees -- Advisor Class 17
- -----------------------------------------------------------
Directors' fees and expenses 4
- -----------------------------------------------------------
Other expenses 7
- --------------------------------------------------------------------------------
2,515
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,426
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized loss on investments (11,811)
- -----------------------------------------------------------
Change in net unrealized appreciation on investments 36,835
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 25,024
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,450
================================================================================
See Notes to Financial Statements.
- -----
12
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
(Amounts in Thousands)
- --------------------------------------------------------------------------------
DECREASE IN NET ASSETS 2003 2002
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $5,426 $16,109
- ---------------------------------------------------
Net realized loss (11,811) (38,987)
- ---------------------------------------------------
Change in net unrealized appreciation 36,835 (20,501)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 30,450 (43,379)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------------
Investor Class (5,207) (15,305)
- ---------------------------------------------------
Institutional Class (175) (488)
- ---------------------------------------------------
Advisor Class (121) (352)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (5,503) (16,145)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital share transactions (26,259) (69,838)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (1,312) (129,362)
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 571,436 700,798
- --------------------------------------------------------------------------------
End of period $570,124 $571,436
================================================================================
Undistributed net investment income $1,041 $1,118
================================================================================
See Notes to Financial Statements.
-----
13
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts in Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Balanced Fund (the fund) is one fund in
a series issued by the corporation. The fund is diversified under the 1940 Act.
The fund's investment objective is to seek capital growth and current income by
investing 60% of its assets in equity securities and the remainder in bonds and
other fixed-income securities. The following is a summary of the fund's
significant accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Institutional Class, and the Advisor Class. The share classes differ principally
in their respective shareholder servicing and distribution expenses and
arrangements. All shares of the fund represent an equal pro rata interest in the
assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the fund are allocated to each class of
shares based on their relative net assets.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts in
order to manage the fund's exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investment transactions and unrealized
appreciation (depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The fund may engage in securities
transactions on a when-issued or forward commitment basis. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future date. During
(continued)
- -----
14
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts in Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
this period, securities are subject to market fluctuations. The fund will
segregate cash, cash equivalents or other appropriate liquid securities on its
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income are declared and
paid quarterly. Distributions from net realized gains, if any, are generally
declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee per class. The
Agreement provides that all expenses of the fund, except brokerage commissions,
taxes, interest, fees and expenses of those directors who are not considered
"interested persons" as defined in the 1940 Act (including counsel fees) and
extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid
monthly in arrears based on each class's pro rata share of the fund's average
daily closing net assets during the previous month. The effective annual
management fee for the six months ended April 30, 2003 was 0.90%, 0.70%, and
0.65%, for the Investor, Institutional, and Advisor Classes, respectively.
The annual management fee schedule for each class of the fund is as follows:
- --------------------------------------------------------------------------------
INVESTOR INSTITUTIONAL ADVISOR
CLASS CLASS CLASS
- --------------------------------------------------------------------------------
FUND AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
First $1 billion 0.90% 0.70% 0.65%
- --------------------------------------------------------------------------------
Over $1 billion 0.80% 0.60% 0.55%
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan (the plan) for the Advisor Class,
pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class
will pay American Century Investment Services, Inc. (ACIS) an annual
distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The
fees are computed daily and paid monthly in arrears based on the Advisor Class's
average daily closing net assets during the previous month. The distribution fee
provides compensation for expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIS, its affiliates or independent third party providers. Fees incurred
under the plan during the six months ended April 30, 2003, are detailed in the
Statement of Operations.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, ACIS, and the corporation's
transfer agent, American Century Services Corporation.
During the six months ended April 30, 2003, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank
line of credit agreement with JPM.
(continued)
-----
15
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts in Thousands)
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments, for the
six months ended April 30, 2003, totaled $372,175 of which $155,031 represented
U.S. Treasury and Agency obligations. Sales of investment securities, excluding
short-term investments, for the six months ended April 30, 2003, totaled
$375,385 of which $139,085 represented U.S. Treasury and Agency obligations.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 150,000
================================================================================
Sold 1,928 $25,269
- ---------------------------------------------------
Issued in reinvestment of distributions 388 5,049
- ---------------------------------------------------
Redeemed (4,283) (56,092)
- --------------------------------------------------------------------------------
Net decrease (1,967) $(25,774)
================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 150,000
================================================================================
Sold 4,082 $57,307
- ---------------------------------------------------
Issued in reinvestment of distributions 1,078 14,862
- ---------------------------------------------------
Redeemed (9,918) (137,752)
- --------------------------------------------------------------------------------
Net decrease (4,758) $(65,583)
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 15,000
================================================================================
Sold 70 $914
- ---------------------------------------------------
Issued in reinvestment of distributions 13 175
- ---------------------------------------------------
Redeemed (82) (1,084)
- --------------------------------------------------------------------------------
Net increase 1 $5
================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 15,000
================================================================================
Sold 148 $2,063
- ---------------------------------------------------
Issued in reinvestment of distributions 35 488
- ---------------------------------------------------
Redeemed (365) (5,172)
- --------------------------------------------------------------------------------
Net decrease (182) $(2,621)
================================================================================
(continued)
- -----
16
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts in Thousands)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 50,000
================================================================================
Sold 160 $2,099
- ---------------------------------------------------------
Issued in reinvestment of distributions 8 107
- ---------------------------------------------------------
Redeemed (205) (2,696)
- --------------------------------------------------------------------------------
Net decrease (37) $(490)
================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 50,000
================================================================================
Sold 345 $4,746
- ---------------------------------------------------------
Issued in reinvestment of distributions 22 311
- ---------------------------------------------------------
Redeemed (479) (6,691)
- --------------------------------------------------------------------------------
Net decrease (112) $(1,634)
================================================================================
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $620 million
unsecured bank line of credit agreement with JPM, which was renewed from $650
million effective December 17, 2002. The fund may borrow money for temporary or
emergency purposes to fund shareholder redemptions. Borrowings under the
agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not
borrow from the line during the six months ended April 30, 2003.
6. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $566,423
================================================================================
Gross tax appreciation of investments $44,380
- -----------------------------------------------------------
Gross tax depreciation of investments (21,334)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $23,046
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2002, the fund had accumulated capital losses of $59,728,
which represent net capital loss carryovers that may be used to offset future
realized capital gains for federal income tax purposes. The capital loss
carryovers expire in 2009 through 2010.
-----
17
Balanced - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $12.98 $14.28 $17.01 $18.95 $19.39 $19.55
- ------------------------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income(2) 0.13 0.35 0.38 0.42 0.46 0.42
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 0.59 (1.30) (2.10) 0.61 1.69 1.45
- ------------------------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.72 (0.95) (1.72) 1.03 2.15 1.87
- ------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.13) (0.35) (0.40) (0.43) (0.47) (0.43)
- --------------------------------
From Net Realized Gains -- -- (0.61) (2.54) (2.12) (1.60)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.13) (0.35) (1.01) (2.97) (2.59) (2.03)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.57 $12.98 $14.28 $17.01 $18.95 $19.39
========================================================================================================================
TOTAL RETURN(3) 5.58% (6.80)% (10.46)% 5.90% 12.03% 10.46%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.90%(4) 0.90% 0.90% 0.97% 1.00% 1.00%
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.96%(4) 2.46% 2.46% 2.40% 2.44% 2.16%
- --------------------------------
Portfolio Turnover Rate 68% 108% 107% 85% 128% 102%
- --------------------------------
Net Assets, End of Period
(in millions) $539 $541 $663 $835 $914 $938
- ------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
- -----
18
Balanced - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000(2)
- ---------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.99 $14.28 $17.01 $17.34
- ---------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------
Net Investment Income(3) 0.14 0.37 0.41 0.23
- --------------------------------------
Net Realized and Unrealized
Gain (Loss) 0.59 (1.29) (2.10) (0.34)
- ---------------------------------------------------------------------------------------------------
Total From Investment Operations 0.73 (0.92) (1.69) (0.11)
- ---------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------
From Net Investment Income (0.14) (0.37) (0.43) (0.22)
- --------------------------------------
From Net Realized Gains -- -- (0.61) --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.37) (1.04) (0.22)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.58 $12.99 $14.28 $17.01
===================================================================================================
TOTAL RETURN(4) 5.68% (6.54)% (10.27)% (0.63)%
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.70%(5) 0.70% 0.70% 0.75%(5)
- --------------------------------------
Ratio of Net Investment Income
to Average Net Assets 2.16%(5) 2.66% 2.66% 2.66%(5)
- --------------------------------------
Portfolio Turnover Rate 68% 108% 107% 85%(6)
- --------------------------------------
Net Assets, End of Period
(in thousands) $16,991 $16,245 $20,474 $23,214
- ---------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) May 1, 2000 (commencement of sale) through October 31, 2000.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2000.
See Notes to Financial Statements.
-----
19
Balanced - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $12.97 $14.27 $17.00 $18.94 $19.38 $19.55
- ------------------------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income(2) 0.11 0.31 0.34 0.37 0.41 0.37
- --------------------------------
Net Realized and Unrealized
Gain (Loss) 0.59 (1.30) (2.10) 0.62 1.69 1.44
- ------------------------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.70 (0.99) (1.76) 0.99 2.10 1.81
- ------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.11) (0.31) (0.36) (0.39) (0.42) (0.38)
- --------------------------------
From Net Realized Gains -- -- (0.61) (2.54) (2.12) (1.60)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.31) (0.97) (2.93) (2.54) (1.98)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.56 $12.97 $14.27 $17.00 $18.94 $19.38
========================================================================================================================
TOTAL RETURN(3) 5.47% (7.04)% (10.69)% 5.63% 11.74% 10.15%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.15%(4) 1.15% 1.15% 1.22% 1.25% 1.25%
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.71%(4) 2.21% 2.21% 2.15% 2.19% 1.91%
- --------------------------------
Portfolio Turnover Rate 68% 108% 107% 85% 128% 102%
- --------------------------------
Net Assets, End of Period
(in thousands) $14,111 $13,985 $16,990 $17,046 $10,946 $6,723
- ------------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
- -----
20
Share Class Information
Three classes of shares are authorized for sale by the fund: Investor Class,
Institutional Class, and Advisor Class. The total expense ratio of Advisor Class
shares is higher than that of Investor Class shares; the total expense ratio of
Institutional Class shares is lower.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) 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
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as banks,
broker-dealers, insurance companies, and financial advisors. Advisor Class
shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee.
The total expense ratio of Advisor Class shares is 0.25% higher than the total
expense ratio of Investor Class shares.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
-----
21
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
- -----
22
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The BLENDED INDEX is considered the benchmark for Balanced. It combines two
widely known indices in proportion to the asset mix of the fund. Accordingly,
60% of the index is represented by the S&P 500, which reflects the approximately
60% of the fund's assets invested in stocks. The remaining 40% of the index is
represented by the Lehman Brothers U.S. Aggregate Index, which reflects the
roughly 40% of the fund's assets invested in fixed-income securities.
The LEHMAN BROTHERS U.S. AGGREGATE INDEX represents securities that are
registered with the Securities and Exchange Commission, taxable, and U.S.
dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond
market, with index components for government and corporate securities, mortgage
pass-through securities, and asset-backed securities.
The S&P 500 INDEX is a market-value weighted index of the stocks of 500
publicly-traded U.S. companies chosen for market size, liquidity, and industry
group representation that are considered to be leading firms in dominant
industries. Each stock's weight in the index is proportionate to its market
value. Created by Standard & Poor's, it is considered to be a broad measure of
U.S. stock market performance.
The S&P 500/BARRA VALUE AND GROWTH INDICES are market value-weighted indices
consisting of stocks in the S&P 500 Index. S&P 500/BARRA VALUE consists of those
stocks with lower price-to-book ratios that are slower growing or undervalued,
and S&P 500/BARRA GROWTH consists of those stocks with higher price-to-book
ratios that are faster growing.
The NASDAQ COMPOSITE INDEX is a market-value weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
The WILSHIRE 5000 TOTAL MARKET INDEX measures the performance of all U.S.
headquartered equity securities with readily available price data.
-----
23
Notes
- -----
24
[inside back cover - blank]
[back cover]
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
0306 American Century Investment Services, Inc.
SH-SAN-34846N (c)2003 American Century Services Corporation
Front cover
April 30, 2003
[graphic of chart]
American Century
Semiannual Report
[graphic of starfish]
[graphic of two steel bridges]
Capital Value
[american century logo and text logo (reg. sm)]
Table of Contents
Our Message to You ........................................................ 1
CAPITAL VALUE
Performance ............................................................... 2
Performance Review ........................................................ 3
Types of Investments in Portfolio ...................................... 3
Top Five Industries .................................................... 4
Top Ten Holdings ....................................................... 4
Schedule of Investments ................................................... 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 7
Statement of Operations ................................................... 8
Statement of Changes in Net Assets ........................................ 9
Notes to Financial Statements ............................................. 10
Financial Highlights ...................................................... 14
OTHER INFORMATION
Share Class Information ................................................... 16
Retirement Account Information ............................................ 17
Comparative Indices ....................................................... 18
Our Message to You
[photo of James E. Stowers III with James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the semiannual report for the Capital Value
fund for the six months ended April 30, 2003.
The report includes comparative performance graphs and tables, portfolio
commentary, tables that summarize portfolio investments, a full listing of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information helpful
in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next Capital Value shareholder report will be the annual report for the year
ended October 31, 2003, which should be available in approximately six months.
As always, we appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
Co-Chairman of the Board
1
Capital Value - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
AVERAGE ANNUAL
RETURNS
SINCE INCEPTION
1 YEAR INCEPTION DATE
------ --------- ----
INVESTOR CLASS -12.11% 1.41% 3/31/99
RUSSELL 1000 VALUE INDEX -13.01% -1.63% --
Institutional Class -11.97% -11.16% 3/1/02
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made March 31, 1999
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS
Periods ended April 30
1999* 2000 2001 2002 2003
----- ---- ---- ---- ----
Investor Class 10.20% -6.71% 16.92% 0.21% -12.11%
Russell 1000 Value Index 9.34% -3.88% 6.43% -3.91% -13.01%
* From 3/31/99, the Investor Class's inception date. Not annualized.
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures. Past performance does
not guarantee future results. None of the charts reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
2
Capital Value - Performance Review
[photo of Chuck Ritter and Mark Mallon]
A performance review from Chuck Ritter and Mark Mallon, portfolio managers on
the Capital Value investment team.
Capital Value, formerly known as Tax-Managed Value, gained 4.64%* during the six
months ended April 30, 2003. The portfolio trailed its benchmark, the Russell
1000 Value Index, which rose 5.25%.
During a period in which domestic value stocks of all size categories advanced,
large-cap value shares gained at a slower rate than smaller value stocks,
according to indices of the Russell Co. The Russell 1000 Value Index, which
represents the 1,000 largest publicly traded U.S. stocks with lower
price-to-book ratios and lower forecasted growth values, rose 5.25%. In
comparison, the Russell 2000 Value Index, which represents the next 2,000
largest stocks with lower price-to-book ratios, increased 7.44%.
The financial sector, Capital Value's largest sector weighting on average during
the period, also contributed the most to performance, led by investments in the
banking industry. Among the top contributors were Citigroup, the world's
second-largest financial services company, and Bank of America. Other groups
that advanced included securities and asset managers, financial services
providers, thrifts, and property and casualty insurers. Though some life and
health insurers advanced, one, UnumProvident, was the portfolio's largest
detractor.
Consumer cyclical stocks also performed well, demonstrating success in a variety
of industries. Within this sector, the leading industry group was specialty
stores, spurred by Best Buy, the consumer electronics retailer and the
portfolio's top individual contributor to results. Other investments in
cyclicals, including apparel makers, automakers, clothing and department stores,
advanced as well.
Technology stocks as a group helped, as the sector was boosted by computer
software, computer hardware, and electrical equipment companies. The commercial
services sector was guided by information services stocks, such as Electronic
Data Systems, the largest independent systems management and services firm in
the United States. The consumer services sector excelled as well, lifted by
leisure goods manufacturers and hotel chains.
TYPES OF INVESTMENTS IN PORTFOLIO
AS OF AS OF
4/30/03 10/31/02
U.S. Common Stocks 91.7% 91.7%
Foreign Stocks 3.1% 3.3%
TOTAL EQUITY EXPOSURE 94.8% 95.0%
Temporary Cash
Investments 5.2% 5.0%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class
shares. (continued)
3
Capital Value - Performance Review
Energy stocks, representing Capital Value's second-largest sector concentration,
added slightly to performance. Among the contributors was Exxon Mobil, the
world's largest integrated oil company. But shares of some other energy reserves
companies in the portfolio, such as Royal Dutch Petroleum and ChevronTexaco,
lost ground during the period.
The portfolio's investments in health care also added to returns. Pharmaceutical
company Merck and syringe and medical equipment maker Becton Dickinson were
among the leaders. But progress was restrained by hospital chain Tenet
Healthcare and intravenous supply maker Baxter International.
Only two of the fund's sectors detracted during the period. One was
telecommunications, tripped up by declining telephone stocks such as SBC
Communications and Verizon. Joining telecom in the negative column was the
consumer non-cyclical sector, which was slowed by tobacco stocks. Altria Group,
formerly known as Philip Morris Co., was the portfolio's second-largest
detractor.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003*
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
Banks 14.8% 14.8%
Energy Reserves
& Production 10.0% 10.6%
Telephone 6.3% 6.5%
Financial Services 5.8% 4.3%
Drugs 4.1% 5.1%
*Excludes securities in the Diversified industry category. Those securities
represent investments in diversified pools of underlying securities in multiple
industry categories.
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
Standard and Poor's
500 Depositary Receipt 4.9% 4.9%
Citigroup Inc. 4.2% 4.2%
Freddie Mac 3.8% 1.2%
Exxon Mobil Corp. 3.7% 3.8%
SBC Communications Inc. 2.8% 2.4%
Royal Dutch Petroleum
Co. New York Shares 2.5% 2.6%
Bank of America Corp. 2.4% 2.4%
Merck & Co., Inc. 2.1% 2.3%
Hewlett-Packard Co. 1.7% 1.4%
McDonald's Corporation 1.5% 1.2%
4
Capital Value - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- -----------------------------------------------------------------------------------
COMMON STOCKS -- 94.8%
APPAREL & TEXTILES -- 1.5%
- ------------------------------------------------------------------------------------
14,400 Liz Claiborne, Inc. $ 468,432
- ------------------------------------------------------------------------------------
15,900 VF Corp. 625,506
- ------------------------------------------------------------------------------------
1,093,938
- ------------------------------------------------------------------------------------
BANKS -- 14.8%
- ------------------------------------------------------------------------------------
23,900 Bank of America Corp. 1,769,795
- ------------------------------------------------------------------------------------
28,300 Bank One Corp. 1,020,215
- ------------------------------------------------------------------------------------
78,200 Citigroup Inc. 3,069,349
- ------------------------------------------------------------------------------------
24,050 Fleet Boston Financial Corp. 637,806
- ------------------------------------------------------------------------------------
23,600 KeyCorp 568,996
- ------------------------------------------------------------------------------------
27,600 National City Corp. 826,896
- ------------------------------------------------------------------------------------
19,300 PNC Financial Services Group 847,270
- ------------------------------------------------------------------------------------
45,610 U.S. Bancorp 1,010,262
- ------------------------------------------------------------------------------------
27,300 Wachovia Corp. 1,043,133
- ------------------------------------------------------------------------------------
10,793,722
- ------------------------------------------------------------------------------------
CHEMICALS -- 0.8%
- ------------------------------------------------------------------------------------
12,100 PPG Industries, Inc. 586,971
- ------------------------------------------------------------------------------------
CLOTHING STORES -- 0.7%
- ------------------------------------------------------------------------------------
34,400 Limited Brands 500,176
- ------------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 2.1%
- ------------------------------------------------------------------------------------
77,526 Hewlett-Packard Co. 1,263,674
- ------------------------------------------------------------------------------------
76,973 Sun Microsystems, Inc.(1) 254,396
- ------------------------------------------------------------------------------------
1,518,070
- ------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.2%
- ------------------------------------------------------------------------------------
54,700 Computer Associates
International, Inc. 888,328
- ------------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.6%
- ------------------------------------------------------------------------------------
7,800 Whirlpool Corp. 417,222
- ------------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 2.6%
- ------------------------------------------------------------------------------------
21,200 Boeing Co. 578,336
- ------------------------------------------------------------------------------------
33,400 Honeywell International Inc. 788,240
- ------------------------------------------------------------------------------------
16,600 Raytheon Company 496,838
- ------------------------------------------------------------------------------------
1,863,414
- ------------------------------------------------------------------------------------
DEPARTMENT STORES -- 2.1%
- ------------------------------------------------------------------------------------
36,000 May Department Stores Co. (The) 778,320
- ------------------------------------------------------------------------------------
26,000 Sears, Roebuck & Co. 736,840
- ------------------------------------------------------------------------------------
1,515,160
- ------------------------------------------------------------------------------------
DIVERSIFIED -- 4.9%
- ------------------------------------------------------------------------------------
38,700 Standard and Poor's 500
Depositary Receipt 3,559,239
- ------------------------------------------------------------------------------------
DRUGS -- 4.1%
- ------------------------------------------------------------------------------------
15,500 Abbott Laboratories 629,765
- ------------------------------------------------------------------------------------
31,700 Bristol-Myers Squibb Co. 809,618
- ------------------------------------------------------------------------------------
26,500 Merck & Co., Inc. 1,541,770
- ------------------------------------------------------------------------------------
2,981,153
- ------------------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.6%
- ------------------------------------------------------------------------------------
16,400 Dover Corp. $ 471,336
- -----------------------------------------------------------------------------------
ELECTRICAL UTILITIES -- 3.2%
- ------------------------------------------------------------------------------------
25,300 American Electric Power 667,414
- -----------------------------------------------------------------------------------
15,000 DTE Energy Company 604,800
- -----------------------------------------------------------------------------------
19,400 Exelon Corporation 1,028,976
- -----------------------------------------------------------------------------------
2,301,190
- -----------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 10.0%
- ------------------------------------------------------------------------------------
14,300 ChevronTexaco Corp. 898,183
- -----------------------------------------------------------------------------------
21,850 ConocoPhillips 1,099,055
- -----------------------------------------------------------------------------------
77,710 Exxon Mobil Corp. 2,735,392
- -----------------------------------------------------------------------------------
25,000 Occidental Petroleum Corp. 746,250
- -----------------------------------------------------------------------------------
43,909 Royal Dutch Petroleum Co.
New York Shares 1,795,000
- -----------------------------------------------------------------------------------
7,273,880
- -----------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.9%
- ------------------------------------------------------------------------------------
31,100 Waste Management, Inc. 675,492
- -----------------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.8%
- ------------------------------------------------------------------------------------
47,700 Freddie Mac 2,761,830
- -----------------------------------------------------------------------------------
29,100 General Electric Co. 856,995
- -----------------------------------------------------------------------------------
14,000 MGIC Investment Corp. 636,440
- -----------------------------------------------------------------------------------
4,255,265
- -----------------------------------------------------------------------------------
FOOD & BEVERAGE -- 1.5%
- ------------------------------------------------------------------------------------
22,300 Heinz (H.J.) Co. 666,324
- -----------------------------------------------------------------------------------
7,300 Unilever N.V. New York Shares 459,681
- -----------------------------------------------------------------------------------
1,126,005
- -----------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 0.6%
- ------------------------------------------------------------------------------------
22,400 NiSource Inc. 423,360
- -----------------------------------------------------------------------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.6%
- ------------------------------------------------------------------------------------
9,100 Emerson Electric Co. 461,370
- -----------------------------------------------------------------------------------
HOME PRODUCTS -- 0.9%
- ------------------------------------------------------------------------------------
12,600 Kimberly-Clark Corp. 627,102
- -----------------------------------------------------------------------------------
HOTELS -- 0.6%
- ------------------------------------------------------------------------------------
10,500 Harrah's Entertainment, Inc.(1) 413,595
- -----------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 3.4%
- ------------------------------------------------------------------------------------
12,400 Black & Decker Corporation 511,500
- -----------------------------------------------------------------------------------
13,700 Ingersoll-Rand Company 603,896
- -----------------------------------------------------------------------------------
10,600 Parker-Hannifin Corp. 431,208
- -----------------------------------------------------------------------------------
9,500 Snap-on Incorporated 278,825
- -----------------------------------------------------------------------------------
43,600 Tyco International Ltd. 680,160
- -----------------------------------------------------------------------------------
2,505,589
- -----------------------------------------------------------------------------------
INFORMATION SERVICES -- 2.7%
- ------------------------------------------------------------------------------------
14,700 Computer Sciences Corp.(1) 484,365
- -----------------------------------------------------------------------------------
45,500 Electronic Data Systems Corp. 825,825
- -----------------------------------------------------------------------------------
8,100 International Business
Machines Corp. 687,690
- -----------------------------------------------------------------------------------
1,997,880
- -----------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
5
Capital Value - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- -----------------------------------------------------------------------------------
LIFE & HEALTH INSURANCE -- 1.6%
- ------------------------------------------------------------------------
10,800 CIGNA Corp. $ 564,840
- -----------------------------------------------------------------------------------
15,700 Torchmark Corp. 608,375
- -----------------------------------------------------------------------------------
1,173,215
- -----------------------------------------------------------------------------------
MEDIA -- 0.6%
- -----------------------------------------------------------------------------------
29,800 AOL Time Warner Inc.(1) 407,664
- -----------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.6%
- -----------------------------------------------------------------------------------
28,900 Baxter International, Inc. 664,700
- -----------------------------------------------------------------------------------
14,400 Becton Dickinson & Co. 509,760
- -----------------------------------------------------------------------------------
1,174,460
- -----------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 1.1%
- -----------------------------------------------------------------------------------
11,700 HCA Inc. 375,570
- -----------------------------------------------------------------------------------
27,800 Tenet Healthcare Corp.(1) 412,552
- -----------------------------------------------------------------------------------
788,122
- -----------------------------------------------------------------------------------
MINING & METALS -- 1.3%
- -----------------------------------------------------------------------------------
22,000 Alcoa Inc. 504,460
- -----------------------------------------------------------------------------------
11,400 Nucor Corp. 465,690
- -----------------------------------------------------------------------------------
970,150
- -----------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 1.0%
- -----------------------------------------------------------------------------------
21,200 General Motors Corp. 764,260
- -----------------------------------------------------------------------------------
OIL SERVICES -- 0.5%
- -----------------------------------------------------------------------------------
17,400 Transocean Inc. 331,470
- -----------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE -- 3.6%
- -----------------------------------------------------------------------------------
26,400 Allstate Corporation 997,656
- -----------------------------------------------------------------------------------
19,300 Hartford Financial Services
Group, Inc. (The) 786,668
- -----------------------------------------------------------------------------------
19,800 Loews Corp. 817,146
- -----------------------------------------------------------------------------------
2,601,470
- -----------------------------------------------------------------------------------
PUBLISHING -- 1.7%
- -----------------------------------------------------------------------------------
11,200 Gannett Co., Inc. 848,064
- -----------------------------------------------------------------------------------
20,600 R.R. Donnelley & Sons Company 415,296
- -----------------------------------------------------------------------------------
1,263,360
- -----------------------------------------------------------------------------------
RAILROADS -- 0.8%
- -----------------------------------------------------------------------------------
21,700 Burlington Northern Santa Fe Corp. 611,072
- -----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.5%
- -----------------------------------------------------------------------------------
15,200 Equity Residential 393,832
- -----------------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------------
RESTAURANTS -- 1.5%
- -----------------------------------------------------------------------------------
64,400 McDonald's Corporation $ 1,101,240
- ----------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 2.8%
- -----------------------------------------------------------------------------------
25,400 Merrill Lynch & Co., Inc. 1,042,670
- ----------------------------------------------------------------------------------
22,600 Morgan Stanley 1,011,350
- ----------------------------------------------------------------------------------
2,054,020
- ----------------------------------------------------------------------------------
SPECIALTY STORES -- 0.7%
- -----------------------------------------------------------------------------------
15,400 Best Buy Co., Inc.(1) 532,532
- ----------------------------------------------------------------------------------
TELEPHONE -- 6.3%
- -----------------------------------------------------------------------------------
35,740 AT&T Corp. 609,367
- ----------------------------------------------------------------------------------
31,700 BellSouth Corp. 808,033
- ----------------------------------------------------------------------------------
86,400 SBC Communications Inc. 2,018,304
- ----------------------------------------------------------------------------------
49,700 Sprint Corporation 572,047
- ----------------------------------------------------------------------------------
15,580 Verizon Communications 582,380
- ----------------------------------------------------------------------------------
4,590,131
- ----------------------------------------------------------------------------------
THRIFTS -- 1.5%
- -----------------------------------------------------------------------------------
27,100 Washington Mutual, Inc. 1,070,450
- ----------------------------------------------------------------------------------
TOBACCO -- 1.5%
- -----------------------------------------------------------------------------------
35,600 Altria Group Inc. 1,095,056
- ----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $68,252,789) 69,171,961
==================================================================================
TEMPORARY CASH INVESTMENTS -- 5.2%
Repurchase Agreement, Goldman Sachs & Co.,
(U.S. Treasury obligations), in a joint trading
account at 1.22%, dated 4/30/03, due 5/1/03
(Delivery value $3,600,122) 3,600,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Merrill Lynch & Co., Inc.,
(U.S. Treasury obligations), in a joint trading
account at 1.22%, dated 4/30/03, due 5/1/03
(Delivery value $200,007) 200,000
- -------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $3,800,000) 3,800,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $72,052,789) $72,971,961
===============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
See Notes to Financial Statements.
6
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
================================================================================
ASSETS
Investment securities, at value (cost of $72,052,789) $72,971,961
- --------------------------------------------------------------------
Cash 156,755
- --------------------------------------------------------------------
Receivable for investments sold 671,944
- --------------------------------------------------------------------
Receivable for capital shares sold 117,855
- --------------------------------------------------------------------
Dividends and interest receivable 139,708
- --------------------------------------------------------------------------------
74,058,223
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 1,138,214
- --------------------------------------------------------------------
Accrued management fees 61,574
- --------------------------------------------------------------------------------
1,199,788
- --------------------------------------------------------------------------------
NET ASSETS $72,858,435
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $75,307,830
- --------------------------------------------------------------------
Undistributed net investment income 281,168
- --------------------------------------------------------------------
Accumulated net realized loss on investment transactions (3,649,735)
- --------------------------------------------------------------------
Net unrealized appreciation on investments 919,172
- --------------------------------------------------------------------------------
$72,858,435
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $68,046,875
- --------------------------------------------------------------------
Shares outstanding 13,509,974
- --------------------------------------------------------------------
Net asset value per share $5.04
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $4,811,560
- --------------------------------------------------------------------
Shares outstanding 954,550
- --------------------------------------------------------------------
Net asset value per share $5.04
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
================================================================================
INVESTMENT INCOME
INCOME:
- --------------------------------------------------------------------
Dividends (net of foreign taxes withheld $7,456) $ 844,569
- --------------------------------------------------------------------
Interest 19,785
- --------------------------------------------------------------------------------
864,354
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 340,010
- --------------------------------------------------------------------
Directors' fees and expenses 384
- --------------------------------------------------------------------
Other expenses 222
- --------------------------------------------------------------------------------
340,616
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 523,738
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------
Net realized loss on investments (1,057,338)
- --------------------------------------------------------------------
Change in net unrealized appreciation on investments 3,441,567
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 2,384,229
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,907,967
================================================================================
See Notes to Financial Statements.
8
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
- ------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2003 2002
==============================================================================
OPERATIONS
Net investment income $ 523,738 $ 711,741
- ------------------------------------------------------------------------------
Net realized gain (loss) (1,057,338) 22,580
- ------------------------------------------------------------------------------
Change in net unrealized appreciation 3,441,567 (5,893,252)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 2,907,967 (5,158,931)
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
- ------------------------------------------------------------------------------
Investor Class (722,398) (537,623)
- ------------------------------------------------------------------------------
Institutional Class (55,069) --
- ------------------------------------------------------------------------------
Decrease in net assets from distributions (777,467) (537,623)
- ------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------
Net increase in net assets from capital
share transactions 16,523,592 12,358,988
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 18,654,092 6,662,434
==============================================================================
NET ASSETS
Beginning of period 54,204,343 47,541,909
- ------------------------------------------------------------------------------
End of period $72,858,435 $54,204,343
==============================================================================
Undistributed net investment income $281,168 $534,897
==============================================================================
See Notes to Financial Statements.
9
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Capital Value Fund (formerly Tax-Managed
Value Fund) (the fund) is one fund in a series issued by the corporation. The
fund is diversified under the 1940 Act. The fund's investment objective is to
seek long-term capital growth. The fund pursues its objective by investing
primarily in common stocks that management believes to be undervalued at the
time of purchase while attempting to minimize the impact of federal taxes on
shareholder returns. The following is a summary of the fund's significant
accounting policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Institutional Class, and the Advisor Class. The share classes differ principally
in their respective shareholder servicing and distribution expenses and
arrangements. All shares of the fund represent an equal pro rata interest in the
assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the fund are allocated to each class of
shares based on their relative net assets. Sale of the Advisor Class had not
commenced as of April 30, 2003.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and net realized
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
10
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee per class. The
Agreement provides that all expenses of the fund, except brokerage commissions,
taxes, interest, fees and expenses of those directors who are not considered
"interested persons" as defined in the 1940 Act (including counsel fees) and
extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid
monthly in arrears based on each class's pro rata share of the fund's average
daily closing net assets during the previous month.
The annual management fee schedule for each class is as follows:
INVESTOR INSTITUTIONAL ADVISOR
CLASS CLASS CLASS
- ---------------------------------------------------------------------------
FUND AVERAGE NET ASSETS
- ---------------------------------------------------------------------------
First $500 million 1.10% 0.90% 0.85%
- ---------------------------------------------------------------------------
Next $500 million 1.00% 0.80% 0.75%
- ---------------------------------------------------------------------------
Over $1 billion 0.90% 0.70% 0.65%
- ---------------------------------------------------------------------------
The effective annual management fee for the six months ended April 30, 2003 was
1.10% for the Investor Class and 0.90% for the Institutional Class.
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan (the plan) for the Advisor Class,
pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor Class
will pay American Century Investment Services, Inc. (ACIS) an annual
distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The
fees are computed daily and paid monthly in arrears based on the Advisor Class's
average daily closing net assets during the previous month. The distribution fee
provides compensation for expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIS, its affiliates or independent third party providers. No fees were
incurred under the plan during the six months ended April 30, 2003.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, ACIS, and the corporation's
transfer agent, American Century Services Corporation.
During the six months ended April 30, 2003, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank
line of credit agreement with JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the six months ended April 30, 2003, were $26,293,321 and $11,019,960,
respectively.
(continued)
11
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 150,000,000
================================================================================
Sold 4,043,479 $19,847,962
- -----------------------------------------------
Issued in reinvestment of distributions 122,823 606,746
- -----------------------------------------------
Redeemed (995,188) (4,856,447)
- --------------------------------------------------------------------------------
Net increase 3,171,114 $15,598,261
================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 150,000,000
================================================================================
Sold 2,594,265 $13,819,985
- -----------------------------------------------
Issued in reinvestment of distributions 93,495 525,443
- -----------------------------------------------
Redeemed (1,166,105) (6,402,273)
- --------------------------------------------------------------------------------
Net increase 1,521,655 $ 7,943,155
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 15,000,000
================================================================================
Sold 412,180 $2,069,290
- -----------------------------------------------
Issued in reinvestment of distributions 10,959 54,137
- -----------------------------------------------
Redeemed (242,384) (1,198,096)
- --------------------------------------------------------------------------------
Net increase 180,755 $ 925,331
================================================================================
PERIOD ENDED OCTOBER 31, 2002(1)
SHARES AUTHORIZED 15,000,000
================================================================================
Sold 828,349 $4,679,830
- -----------------------------------------------
Redeemed (54,554) (263,997)
- --------------------------------------------------------------------------------
Net increase 773,795 $4,415,833
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SHARES AUTHORIZED 50,000,000
================================================================================
(1) March 1, 2002 (commencement of sale) through October 31, 2002.
(continued)
12
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $620,000,000
unsecured bank line of credit agreement with JPM, which was renewed from
$650,000,000 effective December 17, 2002. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund
did not borrow from the line during the six months ended April 30, 2003.
6. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $72,471,473
================================================================================
Gross tax appreciation of investments $5,126,889
- --------------------------------------------------------------------
Gross tax depreciation of investments (4,626,401)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $ 500,488
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2002, the fund had accumulated capital losses of $2,173,713,
which represent net capital loss carryovers that may be used to offset future
realized capital gains for federal income tax purposes. The capital loss
carryovers expire in 2007 through 2010.
13
Capital Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999(2)
==================================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.88 $5.39 $5.50 $5.18 $5.00
- ------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------
Net Investment Income 0.04(3) 0.07(3) 0.06 0.08 0.04
- ---------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.19 (0.52) (0.09) 0.29 0.14
- ------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.23 (0.45) (0.03) 0.37 0.18
- ------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------
From Net Investment Income (0.07) (0.06) (0.08) (0.05) --
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $5.04 $4.88 $5.39 $5.50 $5.18
==================================================================================================================
TOTAL RETURN(4) 4.64% (8.49)% (0.47)% 7.23% 3.60%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.10%(5) 1.10% 1.10% 1.10% 1.10%(5)
- ---------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.66%(5) 1.32% 1.18% 1.56% 1.14%(5)
- ---------------------------------------------------------
Portfolio Turnover Rate 18% 42% 56% 73% 41%
- ---------------------------------------------------------
Net Assets, End of Period (in thousands) $68,047 $50,425 $47,542 $39,135 $46,132
- ------------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) March 31, 1999 (inception) through October 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
14
Capital Value - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2003(1) 2002(2)
================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.88 $5.87
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------
Net Investment Income(3) 0.04 0.06
- ------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.19 (1.05)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.23 (0.99)
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------
From Net Investment Income (0.07) --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $5.04 $4.88
================================================================================
TOTAL RETURN(4) 4.81% (16.87)%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.90%(5) 0.90%(5)
- ------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.86%(5) 1.56%(5)
- ------------------------------------------------------------
Portfolio Turnover Rate 18% 42%(6)
- ------------------------------------------------------------
Net Assets, End of Period (in thousands) $4,812 $3,779
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) March 1, 2002 (commencement of sale) through October 31, 2002.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year
are not annualized. The total return of the classes may not precisely
reflect the class expense differences because of the impact of calculating
the net asset values to two decimal places. If net asset values were
calculated to three decimal places, the total return differences would more
closely reflect the class expense differences. The calculation of net asset
values to two decimal places is made in accordance with SEC guidelines and
does not result in any gain or loss of value between one class and another.
(5) Annualized.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2002.
See Notes to Financial Statements.
15
Share Class Information
Three classes of shares are authorized for sale by the fund: Investor Class,
Institutional Class, and Advisor Class. The total expense ratio of Advisor Class
shares are higher than those of Investor Class shares; the total expense ratio
of Institutional Class shares is lower.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) 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
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as banks,
broker-dealers, insurance companies, and financial advisors. Advisor Class
shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee.
The total expense ratio of Advisor Class shares is 0.25% higher than the total
expense ratio of Investor Class shares.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
16
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
17
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The RUSSELL 1000 VALUE INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with lower price-to-book ratios
and lower forecasted growth rates.
The RUSSELL 2000 VALUE INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with lower ratios and lower
forecasted growth rates.
18
Notes
19
Notes
20
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
PRSRT STD
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
0306 American Century Investment Services, Inc.
SH-SAN-34845S (c)2003 American Century Services Corporation
[front cover]
April 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of side-by-side bridges]
New Opportunities
[american century logo and text logo (reg. sm)]
[inside front cover]
Table of Contents
Our Message to You ........................................................ 1
NEW OPPORTUNITIES
Performance ............................................................... 2
Performance Review ........................................................ 3
Top Ten Holdings ....................................................... 3
Top Five Industries .................................................... 4
Types of Investments in Portfolio ...................................... 4
Schedule of Investments ................................................... 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 7
Statement of Operations ................................................... 8
Statement of Changes in Net Assets ........................................ 9
Notes to Financial Statements ............................................. 10
Financial Highlights ...................................................... 12
OTHER INFORMATION
Retirement Account Information ............................................ 13
Comparative Indices ....................................................... 14
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the semiannual report for the New
Opportunities fund for the six months ended April 30, 2003.
The report includes comparative performance graphs and tables, portfolio
commentary, tables that summarize portfolio investments, a full listing of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information helpful
in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next New Opportunities shareholder report will be the annual report for the
year ended October 31, 2003, which should be available in approximately six
months.
As always, we appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
------
1
New Opportunities - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
----------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
NEW OPPORTUNITIES 12/26/96
Before redemption fee -26.32% 1.02% 3.80%
Net of redemption fee(1) -27.79% -- --
- --------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX -23.50% -7.84% -2.62%(2) --
- --------------------------------------------------------------------------------
(1) Returns reflect deduction of a 2% redemption fee, incurred if shares were
redeemed within the first five years after purchase.
(2) Since 12/31/96, the date nearest the fund's inception for which data are
available.
GROWTH OF $10,000 OVER LIFE OF FUND
$10,000 investment made December 26, 1996
ONE-YEAR RETURNS OVER LIFE OF FUND
Periods ended April 30
- ------------------------------------------------------------------------------------------------------
1997* 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------
New Opportunities -20.00% 50.50% 5.15% 172.82% -46.30% -7.32% -26.32%
- ------------------------------------------------------------------------------------------------------
Russell 2000 Growth Index -11.52% 43.70% -3.77% 31.39% -24.85% -8.52% -23.50%
- ------------------------------------------------------------------------------------------------------
* From 12/26/96, the fund's inception date. Index data from 12/31/96, the date
nearest the fund's inception for which data are available. Not annualized.
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Past performance
does not guarantee future results. None of the charts reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost.
- ------
2
New Opportunities - Performance Review
[photo of Chris Boyd and John Seitzer]
A performance review from Chris Boyd and John Seitzer, portfolio managers on the
New Opportunities investment team.
New Opportunities declined 2.24% during the six months ended April 30, 2003. By
comparison, the 521 Mid-Cap Growth funds tracked by Lipper Inc. rose an average
of 4.04%.
The domestic equity market advanced during the six months covered by this
report, as evidenced by the performance of several market indices. The Russell
1000 Growth Index, which measures the performance of larger, growth-oriented
companies, rose 4.28%, while the Russell 2000 Growth Index, which tracks the
progress of smaller growth companies, gained 7.68%. The S&P 500 Index,
representative of the broader market, advanced 4.48%.
Against this backdrop, New Opportunities' stake in the consumer cyclical sector
restrained performance the most during the six-month period. In particular,
specialty stores, such as Advance Auto Parts and CSK Auto Corp., weighed on
performance.
Exposure to the health care sector, the portfolio's largest weighting on
average, also hindered returns. Medical service providers were the worst
performers in this sector and several holdings were among the top detractors for
the period, including Province Healthcare and LifePoint Hospital. Another was
Accredo Health Inc., which provides specialized pharmaceuticals and related
services for patients suffering from chronic disease. By contrast, New
Opportunities' stake in the drug industry was beneficial to performance, and two
holdings, Martek Biosciences Corp. and Medicis Pharmaceutical Corp., were among
the top contributors for the period.
The fund's holdings in the transportation sector restrained results. Exposure to
the trucking and shipping industry hurt performance the most in this sector.
Brinks Company was one of the period's top detractors.
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
- ---------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- ---------------------------------------------------------------
iShares Russell 2000
Growth Index Fund 4.9% --
- ---------------------------------------------------------------
iShares Lehman 1-3 Year
Treasury Bond Fund 4.8% --
- ---------------------------------------------------------------
Fisher Scientific
International 3.4% 3.6%
- ---------------------------------------------------------------
Bard (C.R.), Inc. 2.4% 0.8%
- ---------------------------------------------------------------
Premcor Inc. 2.2% --
- ---------------------------------------------------------------
AGL Resources Inc. 2.2% --
- ---------------------------------------------------------------
Valero Energy Corp. 2.0% 0.5%
- ---------------------------------------------------------------
Placer Dome Inc. 1.9% --
- ---------------------------------------------------------------
Noble Corp. 1.8% 1.5%
- ---------------------------------------------------------------
L-3 Communications
Holdings, Inc. 1.8% 1.6%
- ---------------------------------------------------------------
(continued)
------
3
New Opportunities - Performance Review
Investments in the basic materials sector were another source of weakness. Gold
companies such as Placer Dome, a gold mining firm with operations in several
countries, were notable detractors.
Positions in the industrials sector delivered positive performance during the
period. Industrial parts firms and heavy electrical equipment companies were the
strongest performers, and the latter group produced a top contributor for the
period, MSC Industrial Direct, an industrial parts distributor.
New Opportunities' stake in the utility sector also yielded a positive
contribution. AGL Resources Inc., a natural gas distributor, ranked high among
the top contributors.
Holdings in the financials sector also boosted performance. Most of the gains
came from investments in the property and casualty insurance industry. One top
contributor from that group was W.R. Berkley Corp., which offers a variety of
property and specialty insurance products.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003*
- ----------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- ----------------------------------------------------------------
Medical Products
& Supplies 12.5% 13.2%
- ----------------------------------------------------------------
Gold 6.9% --
- ----------------------------------------------------------------
Information Services 5.5% 5.4%
- ----------------------------------------------------------------
Drugs 4.9% 2.9%
- ----------------------------------------------------------------
Oil Services 4.3% 2.5%
- ----------------------------------------------------------------
*Excludes securities in the Diversified industry category. These
securities represent investments in diversified pools of
underlying securities in multiple industry categories.
TYPES OF INVESTMENTS IN PORTFOLIO
- ----------------------------------------------------------------
AS OF AS OF
4/30/03 10/31/02
- ----------------------------------------------------------------
U.S. Common Stocks
& Equity Futures 74.8% 96.1%
- ----------------------------------------------------------------
Foreign Stocks 9.6% --
- ----------------------------------------------------------------
TOTAL EQUITY EXPOSURE 84.4% 96.1%
- ----------------------------------------------------------------
Fixed Income Exposure 4.8% --
- ----------------------------------------------------------------
Temporary Cash
Investments 10.8% 3.9%
- ----------------------------------------------------------------
- ------
4
New Opportunities -
Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- ----------------------------------------------------------------------------
COMMON STOCKS - 89.2%
- ----------------------------------------------------------------------------
ALCOHOL - 0.4%
- ----------------------------------------------------------------------------
43,464 Constellation Brands, Inc.(1) $ 1,165
- ----------------------------------------------------------------------------
BIOTECHNOLOGY - 0.5%
- ----------------------------------------------------------------------------
42,400 IDEC Pharmaceuticals Corp.(1) 1,389
- ----------------------------------------------------------------------------
CHEMICALS - 1.5%
- ----------------------------------------------------------------------------
40,400 Pactiv Corporation(1) 829
- ----------------------------------------------------------------------------
152,200 Spartech Corporation 3,295
- ----------------------------------------------------------------------------
4,124
- ----------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES - 1.4%
- ---------------------------------------------------------------------------
44,781 Avocent Corp.(1) 1,329
- ---------------------------------------------------------------------------
139,586 Cray, Inc.(1) 1,058
- ---------------------------------------------------------------------------
147,700 McData Corporation Cl A(1) 1,563
- ---------------------------------------------------------------------------
3,950
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.0%
- ----------------------------------------------------------------------------
74,100 Documentum Inc.(1) 1,362
- ---------------------------------------------------------------------------
38,400 Mercury Interactive Corp.(1) 1,303
- ---------------------------------------------------------------------------
2,665
- ---------------------------------------------------------------------------
CONSTRUCTION & REAL PROPERTY - 0.5%
- ----------------------------------------------------------------------------
33,300 Jacobs Engineering Group Inc.(1) 1,370
- ----------------------------------------------------------------------------
DEFENSE/AEROSPACE - 3.7%
- ----------------------------------------------------------------------------
50,400 Alliant Techsystems Inc.(1) 2,707
- ---------------------------------------------------------------------------
109,200 L-3 Communications Holdings, Inc.(1) 4,849
- ---------------------------------------------------------------------------
44,600 Moog Inc.(1) 1,418
- ---------------------------------------------------------------------------
85,627 Signal Technology Corporation(1) 1,129
- ---------------------------------------------------------------------------
10,103
- ---------------------------------------------------------------------------
DIVERSIFIED - 9.8%
- ---------------------------------------------------------------------------
157,089 iShares Lehman 1-3 Year
Treasury Bond Fund 12,963
- ---------------------------------------------------------------------------
319,400 iShares Russell 2000
Growth Index Fund 13,472
- ---------------------------------------------------------------------------
26,435
- ---------------------------------------------------------------------------
DRUGS - 4.9%
- ----------------------------------------------------------------------------
91,463 Biovail Corporation(1) 3,306
- ---------------------------------------------------------------------------
71,200 Martek Biosciences Corporation(1) 2,427
- ---------------------------------------------------------------------------
61,100 Medicis Pharmaceutical Corp. Cl A(1) 3,522
- ---------------------------------------------------------------------------
142,000 Watson Pharmaceuticals, Inc.(1) 4,128
- ---------------------------------------------------------------------------
13,383
- ---------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.4%
- ----------------------------------------------------------------------------
31,000 Analogic Corporation 1,488
- ---------------------------------------------------------------------------
116,327 Comverse Technology, Inc.(1) 1,519
- ---------------------------------------------------------------------------
114,400 Plantronics, Inc.(1) 2,116
- ---------------------------------------------------------------------------
60,300 UTStarcom Inc.(1) 1,313
- ---------------------------------------------------------------------------
6,436
- ---------------------------------------------------------------------------
Shares ($ In Thousands) Value
- ----------------------------------------------------------------------------
ELECTRICAL UTILITIES - 4.3%
- ---------------------------------------------------------------------------
96,500 Ameren Corp. $ 3,956
- ---------------------------------------------------------------------------
49,800 Cinergy Corp. 1,700
- ---------------------------------------------------------------------------
20,000 Consolidated Edison, Inc. 777
- ---------------------------------------------------------------------------
40,800 Energy East Corp. 743
- ---------------------------------------------------------------------------
61,700 NSTAR 2,665
- ---------------------------------------------------------------------------
39,000 Puget Energy Inc. 824
- ---------------------------------------------------------------------------
35,000 SCANA Corporation 1,111
- ---------------------------------------------------------------------------
11,776
- ---------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 1.0%
- ----------------------------------------------------------------------------
129,800 Republic Services, Inc. Cl A(1) 2,786
- ----------------------------------------------------------------------------
FINANCIAL SERVICES - 0.7%
- ----------------------------------------------------------------------------
44,300 FTI Consulting, Inc.(1) 2,005
- ----------------------------------------------------------------------------
FOOD & BEVERAGE - 4.0%
- ----------------------------------------------------------------------------
44,300 Corn Products International Inc. 1,324
- ----------------------------------------------------------------------------
149,600 Hormel Foods Corp. 3,442
- ----------------------------------------------------------------------------
75,800 J.M. Smucker Company (The) 2,750
- ----------------------------------------------------------------------------
117,600 United Natural Foods Inc.(1) 3,431
- ----------------------------------------------------------------------------
10,947
- ----------------------------------------------------------------------------
FOREST PRODUCTS & PAPER - 0.7%
- ----------------------------------------------------------------------------
84,000 Sonoco Products Co. 1,835
- ----------------------------------------------------------------------------
GAS & WATER UTILITIES - 2.2%
- ----------------------------------------------------------------------------
231,400 AGL Resources Inc. 5,954
- ----------------------------------------------------------------------------
GOLD - 6.9%
- ----------------------------------------------------------------------------
208,100 Agnico-Eagle Mines Ltd. 2,085
- ----------------------------------------------------------------------------
51,900 Anglogold Limited ADR 1,465
- ----------------------------------------------------------------------------
202,500 Barrick Gold Corp. 3,027
- ----------------------------------------------------------------------------
69,400 Glamis Gold Ltd.(1) 770
- ----------------------------------------------------------------------------
67,200 Gold Fields Limited ADR 682
- ----------------------------------------------------------------------------
248,500 Goldcorp Inc. 2,592
- ----------------------------------------------------------------------------
446,800 Hecla Mining Company(1) 1,671
- ----------------------------------------------------------------------------
213,000 Kinross Gold Corporation(1) 1,304
- ----------------------------------------------------------------------------
522,300 Placer Dome Inc. 5,165
- ----------------------------------------------------------------------------
18,761
- ----------------------------------------------------------------------------
HOME PRODUCTS - 0.6%
- ----------------------------------------------------------------------------
74,000 Dial Corp. (The) 1,541
- ----------------------------------------------------------------------------
INDUSTRIAL PARTS - 1.0%
- ----------------------------------------------------------------------------
39,800 Idex Corporation 1,268
- ----------------------------------------------------------------------------
70,600 Pall Corp. 1,491
- ----------------------------------------------------------------------------
2,759
- ----------------------------------------------------------------------------
INDUSTRIAL SERVICES - 1.2%
- ----------------------------------------------------------------------------
150,300 Kroll Inc.(1) 3,343
- ----------------------------------------------------------------------------
INFORMATION SERVICES - 5.5%
- ----------------------------------------------------------------------------
71,563 Affiliated Computer Services Inc.(1) 3,414
- ----------------------------------------------------------------------------
106,100 Alliance Data Systems Corporation(1) 2,228
- ----------------------------------------------------------------------------
49,300 Anteon International Corp.(1) 1,167
- ----------------------------------------------------------------------------
132,700 CGI Group Inc. ORD(1) 649
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
(continued)
------
5
New Opportunities -
Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares ($ In Thousands) Value
- ----------------------------------------------------------------------------
45,200 Cognizant Technology
Solutions Corporation(1) $ 813
- ----------------------------------------------------------------------------
30,600 Getty Images Inc.(1) 1,036
- ----------------------------------------------------------------------------
145,500 MacDonald, Dettwiler
& Associates Ltd. ORD(1) 2,355
- ----------------------------------------------------------------------------
9,248 Resources Connection, Inc.(1) 203
- ----------------------------------------------------------------------------
86,200 SI International Inc.(1) 841
- ----------------------------------------------------------------------------
123,300 Veridian Corporation(1) 2,341
- ----------------------------------------------------------------------------
15,047
- ----------------------------------------------------------------------------
LEISURE - 1.1%
- ----------------------------------------------------------------------------
134,245 Shuffle Master, Inc.(1) 3,072
- ----------------------------------------------------------------------------
MEDIA - 2.2%
- ----------------------------------------------------------------------------
160,100 Astral Media Inc. Cl A ORD 2,692
- ---------------------------------------------------------------------------
23,200 Entercom Communications Corp.(1) 1,127
- ---------------------------------------------------------------------------
62,800 Lamar Advertising Company(1) 2,256
- ---------------------------------------------------------------------------
6,075
- ---------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES - 12.5%
- ----------------------------------------------------------------------------
102,600 Bard (C.R.), Inc. 6,503
- ----------------------------------------------------------------------------
39,300 Beckman Coulter Inc. 1,528
- ----------------------------------------------------------------------------
40,700 Becton Dickinson & Co. 1,441
- ----------------------------------------------------------------------------
33,294 Closure Medical Corp.(1) 601
- ----------------------------------------------------------------------------
114,200 Cooper Companies, Inc. (The) 3,186
- ----------------------------------------------------------------------------
34,600 CTI Molecular Imaging, Inc.(1) 635
- ----------------------------------------------------------------------------
325,000 Fisher Scientific International(1) 9,363
- ----------------------------------------------------------------------------
54,396 Gen-Probe Incorporated(1) 1,691
- ----------------------------------------------------------------------------
41,900 ICU Medical, Inc.(1) 1,328
- ----------------------------------------------------------------------------
32,300 Integra LifeSciences Holdings(1) 864
- ----------------------------------------------------------------------------
90,700 Kensey Nash Corp.(1) 1,978
- ----------------------------------------------------------------------------
35,700 Patterson Dental Co.(1) 1,433
- ----------------------------------------------------------------------------
12,400 Varian Medical Systems, Inc.(1) 668
- ----------------------------------------------------------------------------
84,000 Zoll Medical Corp.(1) 2,705
- ----------------------------------------------------------------------------
33,924
- ----------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES - 3.0%
- ----------------------------------------------------------------------------
66,300 American Healthcorp, Inc.(1) 1,635
- ----------------------------------------------------------------------------
150,800 Caremark Rx Inc.(1) 3,002
- ----------------------------------------------------------------------------
80,600 Health Management
Associates, Inc. Cl A 1,375
- ----------------------------------------------------------------------------
16,398 Odyssey HealthCare, Inc.(1) 424
- ----------------------------------------------------------------------------
26,100 Pharmaceutical Product
Development, Inc.(1) 684
- ----------------------------------------------------------------------------
40,900 Priority Healthcare Corp. Cl B(1) 933
- ----------------------------------------------------------------------------
8,053
- ----------------------------------------------------------------------------
Shares/Principal Amount ($ In Thousands) Value
- ----------------------------------------------------------------------------
OIL REFINING - 4.2%
- ----------------------------------------------------------------------------
268,800 Premcor Inc.(1) $ 5,992
- ----------------------------------------------------------------------------
152,000 Valero Energy Corp. 5,586
- ----------------------------------------------------------------------------
11,578
- ----------------------------------------------------------------------------
OIL SERVICES - 4.3%
- ----------------------------------------------------------------------------
97,900 Cooper Cameron Corp.(1) 4,685
- ----------------------------------------------------------------------------
108,100 National-Oilwell, Inc.(1) 2,269
- ----------------------------------------------------------------------------
158,100 Noble Corp.(1) 4,894
- ----------------------------------------------------------------------------
11,848
- ----------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE - 2.6%
- ----------------------------------------------------------------------------
80,600 Berkley (W.R.) Corp. 3,744
- ----------------------------------------------------------------------------
33,600 Mercury General Corp. 1,478
- ----------------------------------------------------------------------------
63,500 RLI Corp. 1,876
- ----------------------------------------------------------------------------
7,098
- ----------------------------------------------------------------------------
PUBLISHING - 1.1%
- ----------------------------------------------------------------------------
119,900 John Wiley & Sons, Inc. 2,939
- ----------------------------------------------------------------------------
SPECIALTY STORES - 4.0%
- ----------------------------------------------------------------------------
27,394 Advance Auto Parts(1) 1,363
- ----------------------------------------------------------------------------
103,275 Big 5 Sporting Goods Corp.(1) 1,287
- ----------------------------------------------------------------------------
225,700 CSK Auto Corp.(1) 2,313
- ----------------------------------------------------------------------------
66,700 Michaels Stores, Inc.(1) 2,084
- ----------------------------------------------------------------------------
32,800 Tuesday Morning Corporation(1) 767
- ----------------------------------------------------------------------------
187,389 West Marine Inc.(1) 3,064
- ----------------------------------------------------------------------------
10,878
- ----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $228,613) 243,239
- ----------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS - 10.8%
$16,100 FHLB, 1.25%, 5/1/03(2) 16,100
- ----------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 1.20%,
dated 4/30/03, due 5/1/03
Delivery value $13,200) 13,200
- ----------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $29,300) 29,300
- ----------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $257,913) $272,539
============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLB = Federal Home Loan Bank
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
6
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
(Amounts In Thousands Except Per-Share Amounts)
- ---------------------------------------------------------------------------
ASSETS
Investment securities, at value (cost of $257,913) $272,539
- ---------------------------------------------------------------
Receivable for investments sold 4,196
- ---------------------------------------------------------------
Dividends and interest receivable 112
- ---------------------------------------------------------------------------
276,847
- ---------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of demand deposit cash 84
- ---------------------------------------------------------------
Payable for investments purchased 10,013
- ---------------------------------------------------------------
Accrued management fees 324
- ---------------------------------------------------------------------------
10,421
- ---------------------------------------------------------------------------
NET ASSETS $266,426
===========================================================================
CAPITAL SHARES, $0.01 PAR VALUE
Authorized 300,000
===========================================================================
Outstanding 67,893
===========================================================================
NET ASSET VALUE PER SHARE $3.92
===========================================================================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $503,002
- ---------------------------------------------------------------
Accumulated net investment loss (1,241)
- ---------------------------------------------------------------
Accumulated net realized loss on investment transactions (249,961)
- ---------------------------------------------------------------
Net unrealized appreciation on investments 14,626
- ---------------------------------------------------------------------------
$266,426
===========================================================================
See Notes to Financial Statements.
-----
7
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
(Amounts In Thousands)
- -------------------------------------------------------------------------
INVESTMENT LOSS
INCOME:
- --------------------------------------------------------------
Dividends $ 702
- --------------------------------------------------------------
Interest 131
- --------------------------------------------------------------------------
833
- --------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------
Management fees 2,070
- --------------------------------------------------------------
Directors' fees and expenses 2
- --------------------------------------------------------------
Other expenses 2
- --------------------------------------------------------------------------
2,074
- --------------------------------------------------------------------------
NET INVESTMENT LOSS (1,241)
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investment transactions (18,515)
- --------------------------------------------------------------
Change in net unrealized appreciation on investments 13,613
- --------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS (4,902)
- --------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(6,143)
==========================================================================
See Notes to Financial Statements.
- ------
8
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
(Amounts In Thousands)
- -------------------------------------------------------------------------------
DECREASE IN NET ASSETS 2003 2002
OPERATIONS
- ---------------------------------------------------------
Net investment loss $ (1,241) $ (3,765)
- ---------------------------------------------------------
Net realized loss (18,515) (37,753)
- ---------------------------------------------------------
Change in net unrealized appreciation 13,613 (18,757)
- -------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (6,143) (60,275)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 5,763 22,629
- ---------------------------------------------------------
Payments for shares redeemed (30,374) (45,915)
- -------------------------------------------------------------------------------
Net decrease in net assets from capital share transactions (24,611) (23,286)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (30,754) (83,561)
NET ASSETS
Beginning of period 297,180 380,741
- -------------------------------------------------------------------------------
End of period $266,426 $297,180
===============================================================================
Accumulated net investment loss $(1,241) --
===============================================================================
TRANSACTIONS IN SHARES OF THE FUND
Sold 1,441 4,560
- ----------------------------------------------------------
Redeemed (7,651) (9,796)
- -------------------------------------------------------------------------------
Net decrease in shares of the fund (6,210) (5,236)
===============================================================================
See Notes to Financial Statements.
------
9
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. New Opportunities Fund (the fund) is one
fund in a series issued by the corporation. The fund is diversified under the
1940 Act. The fund's investment objective is to seek long-term capital growth.
The fund pursues its objective by investing primarily in common stocks of
smaller-sized companies that are considered by management to have
better-than-average prospects for appreciation. The following is a summary of
the fund's significant accounting policies.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts in
order to manage the fund's exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investment transactions and unrealized
appreciation (depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, the fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and net realized
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
10
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED) (Amounts In Thousands)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee. The Agreement
provides that all expenses of the fund, except brokerage commissions, taxes,
interest, fees and expenses of those directors who are not considered
"interested persons" as defined in the 1940 Act (including counsel fees) and
extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid
monthly in arrears based on the fund's average daily closing net assets during
the previous month. The annual management fee is 1.50%.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, American Century Investment
Services, Inc., and the corporation's transfer agent, American Century Services
Corporation.
During the six months ended April 30, 2003, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank
line of credit agreement with JPM.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the six months ended April 30, 2003, were $212,294 and $238,400,
respectively.
4. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $620 million
unsecured bank line of credit agreement with JPM, which was renewed from $650
million effective December 17, 2002. The fund may borrow money for temporary or
emergency purposes to fund shareholder redemptions. Borrowings under the
agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not
borrow from the line during the six months ended April 30, 2003.
5. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
Federal tax cost of investments $258,339
================================================================================
Gross tax appreciation of investments $18,872
- --------------------------------------------------------------------
Gross tax depreciation of investments (4,672)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $14,200
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2002, the fund had accumulated capital loss carryovers of
$230,866. The accumulated capital losses represent net capital loss carryovers
that may be used to offset future realized capital gains for federal income tax
purposes. The capital loss carryovers expire in 2009 through 2010.
------
11
New Opportunities - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.01 $4.80 $15.35 $9.16 $4.77 $5.31
- ---------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------
Net Investment Loss (0.02) (0.05) (0.05) (0.19) (0.08) (0.06)
- ------------------------------------------
Net Realized and
Unrealized Gain (Loss) (0.07) (0.74) (6.85) 7.52 4.47 (0.48)
- ---------------------------------------------------------------------------------------------------------
Total From Investment Operations (0.09) (0.79) (6.90) 7.33 4.39 (0.54)
- ---------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Realized Gains -- -- (3.65) (1.14) -- --
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $3.92 $4.01 $4.80 $15.35 $9.16 $4.77
=========================================================================================================
TOTAL RETURN(2) (2.24)% (16.46)% (53.81)% 83.28% 92.03% (10.17)%
=========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.50%(3) 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.90)%(3) (1.02)% (0.72)% (1.28)% (1.29)% (1.16)%
- ---------------------------------------
Portfolio Turnover Rate 83% 175% 189% 112% 156% 147
- ---------------------------------------
Net Assets, End of Period
(in thousands) $266,426 $297,180 $380,741 $873,376 $400,962 $213,491
- ---------------------------------------------------------------------------------------------------------
(1) For the six months ended April 30, 2003 (unaudited).
(2) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods of less than one
year are not annualized.
(3) Annualized.
See Notes to Financial Statements.
- ------
12
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
------
13
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly
traded U.S. companies chosen for market size, liquidity and industry group
representation that are considered to be leading firms in dominant industries.
Each stock's weight in the index is proportionate to its market value. Created
by Standard & Poor's, it is considered to be a broad measure of U.S. stock
market performance.
The RUSSELL 1000 GROWTH INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
- ------
14
Notes
------
15
Notes
- ------
16
[back cover]
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
0306 American Century Investment Services, Inc.
SH-SAN-34842S (c)2003American Century Services Corporation
[front cover]
April 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of side-by-side bridges]
Select
New Opportunities II
[american century logo and text logo (reg.sm)]
Table of Contents
Our Message to You ........................................................ 1
SELECT
Performance ............................................................... 2
Performance Review ........................................................ 4
Top Ten Holdings ....................................................... 4
Top Five Industries .................................................... 5
Types of Investments in Portfolio ...................................... 5
Schedule of Investments ................................................... 6
NEW OPPORTUNITIES II
Performance ............................................................... 9
Performance Review ........................................................ 11
Top Ten Holdings ....................................................... 11
Top Five Industries .................................................... 12
Types of Investments in Portfolio ...................................... 12
Schedule of Investments ................................................... 13
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 15
Statement of Operations ................................................... 17
Statement of Changes in Net Assets ........................................ 18
Notes to Financial Statements ............................................. 19
Financial Highlights ...................................................... 25
OTHER INFORMATION
Share Class Information ................................................... 35
Retirement Account Information ............................................ 37
Comparative Indices ....................................................... 38
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with semiannual reports for the Select and New
Opportunities II funds for the six months ended April 30, 2003.
The reports include comparative performance graphs and tables, portfolio
commentaries, tables that summarize portfolio investments, full listings of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information helpful
in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next Select and New Opportunities II shareholder reports will be the annual
reports for the year ended October 31, 2003, which should be available in
approximately six months.
As always, we appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
------
1
Select - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
--------------------------------
AVERAGE ANNUAL RETURNS
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------------
INVESTOR CLASS -14.23% -2.77% 6.96% 14.06% 6/30/71(1)
- ----------------------------------------------------------------------------------------------------
S&P 500 INDEX -13.31% -2.43% 9.66% 10.94% --
- ----------------------------------------------------------------------------------------------------
Institutional Class -14.01% -2.56% -- 4.00% 3/13/97
- ----------------------------------------------------------------------------------------------------
Advisor Class -14.48% -3.01% -- 0.27% 8/8/97
- ----------------------------------------------------------------------------------------------------
A Class(2)(3) 1/31/03
No sales charge* -- -- -- 7.32%
With sales charge -- -- -- 1.15%
- ----------------------------------------------------------------------------------------------------
B Class(2)(3) 1/31/03
No sales charge* -- -- -- 7.14%
With sales charge -- -- -- 2.14%
- ----------------------------------------------------------------------------------------------------
C Class(2)(3) 1/31/03
No sales charge* -- -- -- 7.21%
With sales charge -- -- -- 6.21%
- ----------------------------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (A Class shares have an initial sales charge and
CDSC; B and C Class shares have CDSCs. Please see the Share Class Information
pages for more about the applicable sales charges for each share class.) The SEC
requires that mutual funds provide performance information net of maximum sales
charges in all cases where charges could be applied.
(1) Although the fund's actual inception date was 10/31/58, this inception date
corresponds with the management company's implementation of its current
investment philosophy and practices.
(2) Class returns would have been lower if service and distribution fees had not
been waived from 2/1/03 to 3/11/03, 2/1/03 to 2/11/03, and 2/1/03 to 3/11/03
for the A, B, and C Class shares, respectively.
(3) Returns for periods less than one year are not annualized.
(continued)
- ------
2
Select - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1993
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------------------------------------
Investor Class 3.92% 7.13% 19.89% 20.54% 40.19% 28.41% 13.38% -17.52% -15.63% -14.23%
- --------------------------------------------------------------------------------------------------------------
S&P 500 Index 5.32% 17.47% 30.21% 25.13% 41.07% 21.82% 10.13% -12.97% -12.63% -13.31%
- --------------------------------------------------------------------------------------------------------------
The charts on the performance pages give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table on the previous page). Past performance does not guarantee future results.
None of these charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
------
3
Select - Performance Review
[photo of Tim Reynolds and John Sykora]
A performance review from Tim Reynolds and John Sykora, portfolio managers on
the Select investment team.
Select rose 3.31%* during the six months ended April 30, 2003, beating the 2.96%
average gain posted by funds in Lipper, Inc.'s Large-Cap Core universe. The
portfolio trailed its benchmark, the S&P 500 Index, which advanced 4.48%.
The domestic stock market, as measured by the S&P 500, rebounded during the last
six months. During this stretch, the index alternated between positive and
negative territory before falling to its low water mark for the period on March
11. From this trough through April 30, 2003, the S&P 500 rallied 14.75%, lifting
the index to a 4.48% gain for the period.
Investments in the consumer services sector, particularly media companies, were
the top drivers of Select's positive performance during the last six months. The
biggest contributors in this area included Liberty Media, a provider of cable
programming, broadband and interactive technology services in the United States
and overseas, and Comcast, a cable company that operates video and high-speed
Internet networks. The portfolio also earned positive results from its stake in
restaurants, including Brinker International, which operates restaurant chains
including On The Border Mexican Grill & Cantina and Chili's.
The portfolio's technology stake also turned in positive results. Internet
companies USA Interactive and Expedia provided the biggest lift in this sector.
Manufacturers of computer hardware advanced as well.
Select's position in the energy sector also boosted returns. The top
contributors were oil services companies Patterson-UTI Energy and BJ Services.
Investments in the energy reserves and production industry also helped
performance.
Accounting for one of the portfolio's largest sector positions, Select's health
care stake gained ground during the period. Most of the portfolio's invest-
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Pfizer, Inc. 5.5% 3.7%
- -------------------------------------------------------------------------------
American International
Group, Inc. 3.9% 3.5%
- -------------------------------------------------------------------------------
Microsoft Corporation 3.6% 3.9%
- -------------------------------------------------------------------------------
General Electric Co. 3.4% 3.2%
- -------------------------------------------------------------------------------
Liberty Media
Corporation Cl A 2.7% 0.8%
- -------------------------------------------------------------------------------
Aramark Corp. 2.5% 0.4%
- -------------------------------------------------------------------------------
USA Interactive 2.3% --
- -------------------------------------------------------------------------------
American Express Co. 2.1% 1.6%
- -------------------------------------------------------------------------------
Wyeth 2.0% 1.1%
- -------------------------------------------------------------------------------
Johnson & Johnson 1.9% 2.0%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class
shares. (continued)
- ------
4
Select - Performance Review
ments in this area were concentrated in drug companies, which turned in positive
results. Manufacturers of medical products and supplies also advanced. These
included Boston Scientific, which makes devices used in the treatment of heart
disease, and Medtronic, a maker of pacemakers, implantable defibrillators and
other heart rhythm management products.
On the negative side, Select's stake in medical providers suffered a sharp
decline during the period. HCA and Tenet Healthcare were among those hardest
hit. Both were eliminated from the portfolio.
Select's holdings in the financial sector turned in mixed results. Financial
services companies advanced and were among the portfolio's top contributors.
However, these gains were partially offset by the declines of Select's holdings
in the property and casualty insurance industry.
Investments in the defense and aerospace industry weighed on Select's returns.
General Dynamics, Northrop Grumman, and Lockheed Martin were hit by double-digit
declines and were among the portfolio's top detractors.
Select's industrial stake, which on average accounted for less than 3% of the
portfolio, was the top sector-level detractor from performance. Results in this
area were hurt most by Tyco International, which has been eliminated from the
portfolio.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Drugs 14.5% 12.2%
- -------------------------------------------------------------------------------
Financial Services 8.6% 7.0%
- -------------------------------------------------------------------------------
Media 7.5% 3.0%
- -------------------------------------------------------------------------------
Property & Casualty
Insurance 5.8% 3.5%
- -------------------------------------------------------------------------------
Oil Services 4.9% 3.1%
- -------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- -------------------------------------------------------------------------------
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
U.S. Common Stocks &
Equity Futures 90.4% 96.1%
- -------------------------------------------------------------------------------
Foreign Stocks 6.1% 1.2%
- -------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 96.5% 97.3%
- -------------------------------------------------------------------------------
Temporary Cash
Investments 3.5% 2.7%
- -------------------------------------------------------------------------------
-----
5
Select - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.5%
BANKS -- 3.3%
- --------------------------------------------------------------------------------
1,479,370 Bank of New York
Co., Inc. (The) $ 39,129,337
- --------------------------------------------------------------------------------
1,398,966 Citigroup Inc. 54,909,415
- --------------------------------------------------------------------------------
359,500 Fleet Boston Financial Corp. 9,533,940
- --------------------------------------------------------------------------------
811,000 U.S. Bancorp 17,963,650
- --------------------------------------------------------------------------------
121,536,342
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.8%
- --------------------------------------------------------------------------------
511,200 Amgen Inc.(1) 31,341,672
- --------------------------------------------------------------------------------
CLOTHING STORES -- 0.2%
- --------------------------------------------------------------------------------
338,900 Chico's FAS, Inc.(1) 8,248,826
- --------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 0.7%
- --------------------------------------------------------------------------------
916,800 Dell Computer Corp.(1) 26,600,952
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.6%
- --------------------------------------------------------------------------------
5,230,800 Microsoft Corporation 134,300,790
- --------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 4.5%
- --------------------------------------------------------------------------------
1,093,000 General Dynamics Corp. 67,842,510
- --------------------------------------------------------------------------------
208,200 Lockheed Martin Corp. 10,420,410
- --------------------------------------------------------------------------------
594,900 Northrop Grumman Corp. 52,321,455
- --------------------------------------------------------------------------------
1,600,000 Rockwell Collins 34,208,000
- --------------------------------------------------------------------------------
164,792,375
- --------------------------------------------------------------------------------
DEPARTMENT STORES -- 0.3%
- --------------------------------------------------------------------------------
320,400 Target Corp. 10,714,176
- --------------------------------------------------------------------------------
DRUGS -- 14.5%
- --------------------------------------------------------------------------------
795,400 Abbott Laboratories 32,317,102
- --------------------------------------------------------------------------------
476,000 Eli Lilly and Company 30,378,320
- --------------------------------------------------------------------------------
1,269,400 Johnson & Johnson 71,543,384
- --------------------------------------------------------------------------------
1,015,000 Merck & Co., Inc. 59,052,700
- --------------------------------------------------------------------------------
1,655,900 Novartis AG ORD 65,366,081
- --------------------------------------------------------------------------------
6,589,075 Pfizer, Inc. 202,614,056
- --------------------------------------------------------------------------------
1,695,000 Wyeth 73,783,350
- --------------------------------------------------------------------------------
535,054,993
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.7%
- --------------------------------------------------------------------------------
955,000 Dover Corp. 27,446,700
- --------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 4.5%
- --------------------------------------------------------------------------------
690,690 Apache Corp. 39,542,002
- --------------------------------------------------------------------------------
335,000 Burlington Resources, Inc. 15,513,850
- --------------------------------------------------------------------------------
504,415 Devon Energy Corporation 23,833,609
- --------------------------------------------------------------------------------
225,000 EnCana Corp. ORD 7,378,619
- --------------------------------------------------------------------------------
730,500 EOG Resources Inc. 27,306,090
- --------------------------------------------------------------------------------
1,100,000 Pioneer Natural
Resources Co.(1) 26,312,000
- --------------------------------------------------------------------------------
1,274,133 XTO Energy Inc. 24,845,594
- --------------------------------------------------------------------------------
164,731,764
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.9%
- --------------------------------------------------------------------------------
2,540,000 Carnival Corporation $ 70,078,600
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.5%
- --------------------------------------------------------------------------------
120,000 Stericycle, Inc.(1) 4,717,800
- --------------------------------------------------------------------------------
2,384,800 Waste Management, Inc. 51,797,856
- --------------------------------------------------------------------------------
56,515,656
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 8.6%
- --------------------------------------------------------------------------------
2,068,400 American Express Co. 78,309,624
- --------------------------------------------------------------------------------
160,000 Freddie Mac 9,264,000
- --------------------------------------------------------------------------------
4,257,700 General Electric Co. 125,389,264
- --------------------------------------------------------------------------------
705,000 Marsh & McLennan
Companies, Inc. 33,614,400
- --------------------------------------------------------------------------------
2,199,250 Prudential Financial Inc. 70,310,023
- --------------------------------------------------------------------------------
316,887,311
- --------------------------------------------------------------------------------
FOOD & BEVERAGE -- 4.3%
- --------------------------------------------------------------------------------
1,190,000 Coca-Cola Company (The) 48,076,000
- --------------------------------------------------------------------------------
530,000 Kraft Foods Inc. 16,377,000
- --------------------------------------------------------------------------------
287,763 Nestle SA ORD 58,707,644
- --------------------------------------------------------------------------------
822,300 PepsiCo, Inc. 35,589,144
- --------------------------------------------------------------------------------
158,749,788
- --------------------------------------------------------------------------------
GOLD -- 0.2%
- --------------------------------------------------------------------------------
235,000 Newmont Mining Corporation 6,349,700
- --------------------------------------------------------------------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.3%
- --------------------------------------------------------------------------------
188,100 United Technologies Corp. 11,626,461
- --------------------------------------------------------------------------------
HOME PRODUCTS -- 3.5%
- --------------------------------------------------------------------------------
820,000 Estee Lauder
Companies, Inc. Cl A 26,650,000
- --------------------------------------------------------------------------------
1,305,000 Gillette Company 39,737,250
- --------------------------------------------------------------------------------
689,300 Procter & Gamble Co. (The) 61,933,605
- --------------------------------------------------------------------------------
128,320,855
- --------------------------------------------------------------------------------
HOTELS -- 2.4%
- --------------------------------------------------------------------------------
2,140,000 Four Seasons Hotels Inc.(2) 64,563,800
- --------------------------------------------------------------------------------
1,660,000 Hilton Hotels Corp. 22,111,200
- --------------------------------------------------------------------------------
86,675,000
- --------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 0.3%
- --------------------------------------------------------------------------------
228,200 Grainger (W.W.), Inc. 10,531,430
- --------------------------------------------------------------------------------
INFORMATION SERVICES -- 2.5%
- --------------------------------------------------------------------------------
1,964,000 DST Systems, Inc.(1) 60,294,800
- --------------------------------------------------------------------------------
165,000 Paychex, Inc. 5,138,925
- --------------------------------------------------------------------------------
1,325,000 SunGard Data Systems Inc.(1) 28,487,500
- --------------------------------------------------------------------------------
93,921,225
- --------------------------------------------------------------------------------
INTERNET -- 3.9%
- --------------------------------------------------------------------------------
1,039,000 Expedia, Inc.(1) 60,054,200
- --------------------------------------------------------------------------------
2,770,000 USA Interactive(1) 83,113,850
- --------------------------------------------------------------------------------
143,168,050
- --------------------------------------------------------------------------------
LEISURE -- 0.1%
- --------------------------------------------------------------------------------
161,232 Mattel, Inc. 3,505,184
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Select - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
MEDIA -- 7.5%
- --------------------------------------------------------------------------------
4,350,200 AOL Time Warner Inc.(1) $ 59,510,736
- --------------------------------------------------------------------------------
1,852,010 Comcast Corporation(1) 59,106,899
- --------------------------------------------------------------------------------
299,200 Disney (Walt) Company 5,583,072
- --------------------------------------------------------------------------------
790,000 EchoStar Communications
Corp. Cl A(1) 23,676,300
- --------------------------------------------------------------------------------
9,026,230 Liberty Media
Corporation Cl A(1) 99,288,530
- --------------------------------------------------------------------------------
1,020,000 Thomson Corporation
(The) ORD 30,162,400
- --------------------------------------------------------------------------------
277,327,937
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 3.8%
- --------------------------------------------------------------------------------
778,300 Alcon, Inc.(1) 34,284,115
- --------------------------------------------------------------------------------
160,000 Becton Dickinson & Co. 5,664,000
- --------------------------------------------------------------------------------
1,225,000 Boston Scientific Corp.(1) 52,736,250
- --------------------------------------------------------------------------------
552,200 Invitrogen Corp.(1) 18,079,028
- --------------------------------------------------------------------------------
620,100 Medtronic, Inc. 29,603,574
- --------------------------------------------------------------------------------
140,366,967
- --------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 3.4%
- --------------------------------------------------------------------------------
126,400 AmerisourceBergen Corp. 7,312,240
- --------------------------------------------------------------------------------
300,000 Cardinal Health, Inc. 16,584,000
- --------------------------------------------------------------------------------
727,000 Express Scripts, Inc. Cl A(1) 42,867,555
- --------------------------------------------------------------------------------
755,148 Health Management
Associates, Inc. Cl A 12,882,825
- --------------------------------------------------------------------------------
265,000 UnitedHealth Group
Incorporated 24,414,450
- --------------------------------------------------------------------------------
958,441 WellChoice Inc.(1) 20,414,793
- --------------------------------------------------------------------------------
124,475,863
- --------------------------------------------------------------------------------
OIL SERVICES -- 4.9%
- --------------------------------------------------------------------------------
670,000 Baker Hughes Inc. 18,760,000
- --------------------------------------------------------------------------------
1,490,400 BJ Services Co.(1) 54,414,504
- --------------------------------------------------------------------------------
595,000 Nabors Industries Ltd.(1) 23,324,000
- --------------------------------------------------------------------------------
1,658,000 Patterson-UTI Energy Inc.(1) 54,921,250
- --------------------------------------------------------------------------------
695,000 Weatherford
International Ltd.(1) 27,959,850
- --------------------------------------------------------------------------------
179,379,604
- --------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE -- 5.8%
- --------------------------------------------------------------------------------
2,474,625 American International
Group, Inc. 143,404,519
- --------------------------------------------------------------------------------
464 Berkshire Hathaway
Inc. Cl A(1) 32,394,183
- --------------------------------------------------------------------------------
16,674 Berkshire Hathaway
Inc. Cl B(1) 38,883,768
- --------------------------------------------------------------------------------
214,682,470
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.2%
- --------------------------------------------------------------------------------
273,500 Prologis Trust 7,039,890
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
RESTAURANTS -- 3.0%
- -------------------------------------------------------------------------------
3,994,121 Aramark Corp.(1) $ 91,705,018
- --------------------------------------------------------------------------------
401,700 Brinker International, Inc.(1) 12,753,975
- --------------------------------------------------------------------------------
195,000 Sonic Corporation(1) 5,265,975
- --------------------------------------------------------------------------------
109,724,968
- --------------------------------------------------------------------------------
SEMICONDUCTOR -- 1.0%
- --------------------------------------------------------------------------------
1,711,000 Agilent Technologies, Inc.(1) 27,410,220
- --------------------------------------------------------------------------------
720,000 Teradyne, Inc.(1) 8,352,000
- --------------------------------------------------------------------------------
35,762,220
- --------------------------------------------------------------------------------
SPECIALTY STORES -- 4.3%
- --------------------------------------------------------------------------------
3,855,000 Blockbuster, Inc. 68,927,400
- --------------------------------------------------------------------------------
1,340,000 Hollywood
Entertainment Corp.(1) 23,738,100
- --------------------------------------------------------------------------------
680,100 Home Depot, Inc. 19,131,213
- --------------------------------------------------------------------------------
260,300 Lowe's Companies, Inc. 11,424,567
- --------------------------------------------------------------------------------
1,345,000 Toys 'R' Us, Inc.(1) 13,786,250
- --------------------------------------------------------------------------------
660,000 Walgreen Co. 20,367,600
- --------------------------------------------------------------------------------
157,375,130
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,025,010,910) 3,557,232,899
================================================================================
TEMPORARY CASH INVESTMENTS -- 3.5%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 1.20%,
dated 4/30/03, due 5/1/03
(Delivery value $130,604,353)
(Cost $130,600,000) 130,600,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $3,155,610,910) $3,687,832,899
===============================================================================
COLLATERAL RECEIVED FOR
SECURITIES LENDING(3)
REPURCHASE AGREEMENTS
- -------------------------------------------------------------------------------
Repurchase Agreement, BNP Paribas
Securities Corp., (U.S. Government
Agency obligations), 1.36%,
dated 4/30/03, due 5/1/03
(Delivery value $200,007,555) 200,000,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Credit Suisse
First Boston, Inc., (U.S. Government
Agency obligations), 1.25%,
dated 4/30/03, due 5/1/03
(Delivery value $25,000,868) 25,000,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Goldman
Sachs & Co., (U.S. Government
Agency obligations), 1.25%,
dated 4/30/03, due 5/1/03
(Delivery value $50,001,736) 50,000,000
- -------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
------
7
Select - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Value
- --------------------------------------------------------------------------------
Repurchase Agreement, Mizuho
Securities USA Inc., (U.S. Government
Agency obligations), 1.38%,
dated 4/30/03, due 5/1/03
(Delivery value $50,001,917) $ 50,000,000
- --------------------------------------------------------------------------------
Repurchase Agreement, Nomura
Securities, (U.S. Government
Agency obligations), 1.37%,
dated 4/30/03, due 5/1/03
(Delivery value $13,080,935) 13,080,437
- --------------------------------------------------------------------------------
338,080,437
- --------------------------------------------------------------------------------
Principal Amount Value
- -------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES
- -------------------------------------------------------------------------------
$24,022,451 Ford Credit Floorplan Master
Owner Trust, Series 2001-1,
Class A, Floater, 1.32%,
5/15/03, resets monthly off
the 1-month LIBOR plus a
floor of 0.09% with no caps $ 24,022,451
- -------------------------------------------------------------------------------
12,000,000 Wachovia Bank N.A., Floater,
1.52%, 5/1/03, resets daily
off the Fed Funds rate plus
0.19% with no caps 12,000,000
- -------------------------------------------------------------------------------
36,022,451
- -------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $374,102,888) $ 374,102,888
===============================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts Settlement Unrealized
to Sell Date Value Loss
- -------------------------------------------------------------------------------
83,779,942 CHF 5/30/03 $61,869,145 $(448,701)
========================================
(Value on Settlement Date $61,420,444)
*FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's
foreign investments against declines in foreign currencies (also known as
hedging). The contracts are called "forward" because they allow the fund to
exchange a foreign currency for U.S. dollars on a specific date in the future --
and at a prearranged exchange rate.
NOTES TO SCHEDULE OF INVESTMENTS
CHF = Swiss Franc
LIBOR = London Interbank Offered Rate
ORD = Foreign Ordinary Share
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security resets,
the less risk the investor is taking that the coupon will vary significantly
from current market rates.
(1) Non-income producing.
(2) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial Statements
for a summary of transactions for each issuer which is or was an affiliate
at or during the six months ended April 30, 2003.)
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions.
See Notes to Financial Statements.
- -----
8
New Opportunities II - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
------------------
AVERAGE ANNUAL
RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS -21.51% -9.17% 6/1/01
- --------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX -23.50% -17.98%(1) --
- --------------------------------------------------------------------------------
A Class(2)(3) 1/31/03
No sales charge* -- 0.24%
With sales charge -- -5.45%
- --------------------------------------------------------------------------------
B Class(2)(3) 1/31/03
No sales charge* -- 0.00%
With sales charge -- -5.00%
- --------------------------------------------------------------------------------
C Class(2)(3) 1/31/03
No sales charge* -- 0.24%
With sales charge -- -0.76%
- --------------------------------------------------------------------------------
*Sales charges include initial sales charges and contingent deferred sales
charges (CDSCs), as applicable. (A Class shares have an initial sales charge and
CDSC; B and C Class shares have CDSCs. Please see the Share Class Information
pages for more about the applicable sales charges for each share class.) The SEC
requires that mutual funds provide performance information net of maximum sales
charges in all cases where charges could be applied.
(1) Since 5/31/01, the date nearest the Investor Class's inception for which
data are available.
(2) Class returns would have been lower if service and distribution fees had not
been waived from 2/1/03 to 2/21/03, 2/1/03 to 2/10/03, and 2/1/03 to 4/30/03
for the A, B, and C Class shares, respectively.
(3) Returns for periods less than one year are not annualized.
(continued)
------
9
New Opportunities II - Performance
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made June 1, 2001
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS
Periods ended April 30
- --------------------------------------------------------------------------------
2002* 2003
- --------------------------------------------------------------------------------
Investor Class 6.00% -21.51%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index -10.59% -23.50%
- --------------------------------------------------------------------------------
* From 6/1/01, the Investor Class's inception date. Index data from 5/31/01, the
date nearest the Investor Class's inception for which data are available. Not
annualized.
The charts on the performance pages give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table on the previous page). Past performance does not guarantee future results.
None of these charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
- ------
10
New Opportunities II - Performance Review
[photo of Chris Boyd and John Seitzer]
A performance review from Chris Boyd and John Seitzer, portfolio managers on the
New Opportunities II investment team.
New Opportunities II rose 0.24%* during the six months ended April 30, 2003. By
comparison, the funds in Lipper, Inc.'s Small-Cap Growth universe rose an
average of 4.60%.
The domestic equity market advanced during the six months covered by this
report, as evidenced by the performance of key market indices. The Russell 1000
Growth Index, which measures the performance of larger, growth-oriented
companies, rose 4.28%, while the Russell 2000 Growth Index, which tracks the
progress of smaller growth companies, gained 7.68%. The S&P 500 Index advanced
4.48%.
Against that backdrop, New Opportunities II's stake in the consumer cyclical
sector restrained performance during the six-month period. In particular,
specialty stores, such as Advance Auto Parts and CSK Auto Corp., weighed the
most on performance.
Investments in the basic materials sector were another source of weakness, and
gold mining companies such as Meridian Gold were notable detractors.
The fund's holdings in the transportation sector also detracted from
performance. Exposure to the trucking and shipping industry hurt performance and
resulted in two of the period's top detractors such as Brinks Co. and Celadon,
a carrier that supplies trucking services from Mexico to destinations in the
United States and Canada.
New Opportunities II earned a positive contribution from its stake in the health
care sector, which represented the portfolio's largest position during the last
six months. Investments in the drug industry helped, and two companies, Martek
Biosciences and Medicis Pharmaceutical, were among the top contributors for the
period. The fund's stake in medical products companies also added to results and
included
TOP TEN HOLDINGS
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
iShares Russell 2000
Growth Index Fund 4.9% --
- -------------------------------------------------------------------------------
iShares Lehman 1-3 Year
Treasury Bond Fund 4.7% --
- -------------------------------------------------------------------------------
Fisher Scientific
International 3.3% 3.7%
- -------------------------------------------------------------------------------
Packaging Dynamics
Corporation 2.6% 2.4%
- -------------------------------------------------------------------------------
Bard (C.R.), Inc. 2.3% 0.8%
- -------------------------------------------------------------------------------
AGL Resources Inc. 2.1% --
- -------------------------------------------------------------------------------
Premcor Inc. 2.1% --
- -------------------------------------------------------------------------------
L-3 Communications
Holdings, Inc. 1.7% 1.7%
- -------------------------------------------------------------------------------
Watson
Pharmaceuticals, Inc. 1.5% --
- -------------------------------------------------------------------------------
Kensey Nash Corp. 1.4% 1.7%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class shares.
(continued)
------
11
New Opportunities II - Performance Review
Possis Medical, a contributor, and Synovis Life Technologies, the top
contributing stock for the period.
Exposure to medical service providers proved problematic, however, and produced
some of the portfolio's top detracting stocks for the period, including Accredo
Health, a provider of specialized pharmaceuticals and related services for
patients suffering from chronic disease. Other declining issues included
Province Healthcare and Lifepoint Hospital.
The fund's stake in the utility sector was another bright spot. Gas and water
utility AGL Resources Inc., was the top contributor, though New Opportunities
II's electrical utility holdings also delivered positive results.
Finally, New Opportunities II garnered positive contribution from its exposure
to the financial sector. Gains came from investments in the property and
casualty insurance industry. One top contributor from that group was W.R.
Berkley Corp., which offers a variety of property and specialty insurance
products.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2003*
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Medical Products &
Supplies 14.1% 15.3%
- -------------------------------------------------------------------------------
Information Services 6.5% 5.6%
- -------------------------------------------------------------------------------
Drugs 5.5% 3.0%
- -------------------------------------------------------------------------------
Gold 5.1% --
- -------------------------------------------------------------------------------
Defense/Aerospace 4.0% 1.7%
- -------------------------------------------------------------------------------
*Excludes securities in the Diversified industry category. These securities
represent investments in diversified pools of underlying securities in multiple
industry categories.
TYPES OF INVESTMENTS IN PORTFOLIO
- -------------------------------------------------------------------------------
AS OF AS OF
4/30/03 10/31/02
- -------------------------------------------------------------------------------
U.S. Common Stocks &
Equity Futures 75.8% 96.8%
- -------------------------------------------------------------------------------
Foreign Stocks 8.6% --
- -------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 84.4% 96.8%
- -------------------------------------------------------------------------------
Fixed Income Exposure 4.7% --
- -------------------------------------------------------------------------------
Temporary Cash
Investments 10.9% 3.2%
- -------------------------------------------------------------------------------
- ------
12
New Opportunities II - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 89.1%
ALCOHOL -- 0.4%
- --------------------------------------------------------------------------------
4,036 Constellation Brands, Inc.(1) $ 108,205
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.5%
- --------------------------------------------------------------------------------
3,800 IDEC Pharmaceuticals Corp.(1) 124,469
- --------------------------------------------------------------------------------
CHEMICALS -- 1.5%
- --------------------------------------------------------------------------------
3,700 Pactiv Corporation(1) 75,924
- --------------------------------------------------------------------------------
14,000 Spartech Corporation 303,100
- --------------------------------------------------------------------------------
379,024
- --------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 1.9%
- --------------------------------------------------------------------------------
4,206 Avocent Corp.(1) 124,792
- --------------------------------------------------------------------------------
12,767 Cray, Inc.(1) 96,774
- --------------------------------------------------------------------------------
30,800 Digi International Inc.(1) 130,438
- --------------------------------------------------------------------------------
13,400 McData Corporation Cl A(1) 141,839
- --------------------------------------------------------------------------------
493,843
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.0%
- --------------------------------------------------------------------------------
6,900 Documentum Inc.(1) 126,891
- --------------------------------------------------------------------------------
3,500 Mercury Interactive Corp.(1) 118,738
- --------------------------------------------------------------------------------
245,629
- --------------------------------------------------------------------------------
CONSTRUCTION & REAL PROPERTY -- 0.5%
- --------------------------------------------------------------------------------
3,100 Jacobs Engineering Group Inc.(1) 127,565
- --------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 4.0%
- --------------------------------------------------------------------------------
4,700 Alliant Techsystems Inc.(1) 252,484
- --------------------------------------------------------------------------------
10,100 L-3 Communications
Holdings, Inc.(1) 448,440
- --------------------------------------------------------------------------------
4,100 Moog Inc.(1) 130,380
- --------------------------------------------------------------------------------
15,093 Signal Technology Corporation(1) 199,001
- --------------------------------------------------------------------------------
1,030,305
- --------------------------------------------------------------------------------
DIVERSIFIED -- 9.6%
- --------------------------------------------------------------------------------
14,528 iShares Lehman 1-3 Year
Treasury Bond Fund 1,198,851
- --------------------------------------------------------------------------------
29,900 iShares Russell 2000
Growth Index Fund 1,261,182
- --------------------------------------------------------------------------------
2,460,033
- --------------------------------------------------------------------------------
DRUGS -- 5.5%
- --------------------------------------------------------------------------------
13,200 Bentley Pharmaceuticals, Inc.(1) 117,876
- --------------------------------------------------------------------------------
8,551 Biovail Corporation(1) 309,119
- --------------------------------------------------------------------------------
6,200 Martek Biosciences
Corporation(1) 211,358
- --------------------------------------------------------------------------------
5,700 Medicis Pharmaceutical
Corp. Cl A(1) 328,548
- --------------------------------------------------------------------------------
4,100 Neogen Corporation(1) 66,851
- --------------------------------------------------------------------------------
13,100 Watson Pharmaceuticals, Inc.(1) 380,816
- --------------------------------------------------------------------------------
1,414,568
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 3.4%
- --------------------------------------------------------------------------------
2,849 Analogic Corporation $ 136,709
- --------------------------------------------------------------------------------
10,709 Comverse Technology, Inc.(1) 139,806
- --------------------------------------------------------------------------------
12,900 Daktronics, Inc.(1) 181,181
- --------------------------------------------------------------------------------
15,400 Plantronics, Inc.(1) 284,899
- --------------------------------------------------------------------------------
5,700 UTStarcom Inc.(1) 124,118
- --------------------------------------------------------------------------------
866,713
- --------------------------------------------------------------------------------
ELECTRICAL UTILITIES -- 3.7%
- --------------------------------------------------------------------------------
6,000 Ameren Corp. 245,880
- --------------------------------------------------------------------------------
3,100 Cinergy Corp. 105,834
- --------------------------------------------------------------------------------
3,800 Energy East Corp. 69,236
- --------------------------------------------------------------------------------
6,300 NSTAR 272,160
- --------------------------------------------------------------------------------
7,200 Puget Energy Inc. 152,064
- --------------------------------------------------------------------------------
3,200 SCANA Corporation 101,568
- --------------------------------------------------------------------------------
946,742
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.8%
- --------------------------------------------------------------------------------
9,700 Republic Services, Inc. Cl A(1) 208,162
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.7%
- --------------------------------------------------------------------------------
4,100 FTI Consulting, Inc.(1) 185,525
- --------------------------------------------------------------------------------
FOOD & BEVERAGE -- 4.0%
- --------------------------------------------------------------------------------
4,100 Corn Products International Inc. 122,508
- --------------------------------------------------------------------------------
14,000 Hormel Foods Corp. 322,140
- --------------------------------------------------------------------------------
7,000 J.M. Smucker Company (The) 253,960
- --------------------------------------------------------------------------------
11,000 United Natural Foods Inc.(1) 320,925
- --------------------------------------------------------------------------------
1,019,533
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 3.2%
- --------------------------------------------------------------------------------
96,480 Packaging Dynamics Corporation(1) 673,913
- --------------------------------------------------------------------------------
7,100 Sonoco Products Co. 155,135
- --------------------------------------------------------------------------------
829,048
- --------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 2.1%
- --------------------------------------------------------------------------------
21,300 AGL Resources Inc. 548,049
- --------------------------------------------------------------------------------
GOLD -- 5.1%
- --------------------------------------------------------------------------------
16,300 Agnico-Eagle Mines Ltd. 163,326
- --------------------------------------------------------------------------------
24,900 Glamis Gold Ltd.(1) 276,141
- --------------------------------------------------------------------------------
19,400 Goldcorp Inc. 202,342
- --------------------------------------------------------------------------------
40,400 Hecla Mining Company(1) 151,096
- --------------------------------------------------------------------------------
37,917 Kinross Gold Corporation(1) 232,052
- --------------------------------------------------------------------------------
28,000 Placer Dome Inc. 276,920
- --------------------------------------------------------------------------------
1,301,877
- --------------------------------------------------------------------------------
HOME PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
6,300 Dial Corp. (The) 131,229
- --------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 1.0%
- --------------------------------------------------------------------------------
3,700 Idex Corporation 117,845
- --------------------------------------------------------------------------------
6,500 Pall Corp. 137,280
- --------------------------------------------------------------------------------
255,125
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-----
13
New Opportunities II - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 0.9%
- --------------------------------------------------------------------------------
10,200 Kroll Inc.(1) $ 226,899
- --------------------------------------------------------------------------------
INFORMATION SERVICES -- 6.5%
- --------------------------------------------------------------------------------
5,000 Affiliated Computer
Services Inc.(1) 238,500
- --------------------------------------------------------------------------------
9,900 Alliance Data Systems
Corporation(1) 207,900
- --------------------------------------------------------------------------------
4,200 Anteon International Corp.(1) 99,456
- --------------------------------------------------------------------------------
24,900 CGI Group Inc. ORD(1) 121,764
- --------------------------------------------------------------------------------
4,200 Cognizant Technology
Solutions Corporation(1) 75,516
- --------------------------------------------------------------------------------
2,600 Getty Images Inc.(1) 88,010
- --------------------------------------------------------------------------------
19,000 MacDonald, Dettwiler &
Associates Ltd. ORD(1) 307,499
- --------------------------------------------------------------------------------
852 Resources Connection, Inc.(1) 18,727
- --------------------------------------------------------------------------------
33,100 SI International Inc.(1) 323,056
- --------------------------------------------------------------------------------
9,900 Veridian Corporation(1) 188,001
- --------------------------------------------------------------------------------
1,668,429
- --------------------------------------------------------------------------------
LEISURE -- 1.0%
- --------------------------------------------------------------------------------
11,355 Shuffle Master, Inc.(1) 259,859
- --------------------------------------------------------------------------------
MEDIA -- 2.4%
- --------------------------------------------------------------------------------
18,700 Astral Media Inc. Cl A ORD 314,384
- --------------------------------------------------------------------------------
2,100 Entercom Communications Corp.(1) 102,039
- --------------------------------------------------------------------------------
33,900 Regent Communications, Inc.(1) 204,248
- --------------------------------------------------------------------------------
620,671
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 14.1%
- --------------------------------------------------------------------------------
9,400 Bard (C.R.), Inc. 595,771
- --------------------------------------------------------------------------------
3,600 Beckman Coulter Inc. 139,932
- --------------------------------------------------------------------------------
1,900 Becton Dickinson & Co. 67,260
- --------------------------------------------------------------------------------
6,206 Closure Medical Corp.(1) 111,987
- --------------------------------------------------------------------------------
10,700 Cooper Companies, Inc. (The) 298,530
- --------------------------------------------------------------------------------
3,200 CTI Molecular Imaging, Inc.(1) 58,736
- --------------------------------------------------------------------------------
29,000 Fisher Scientific International(1) 835,489
- --------------------------------------------------------------------------------
5,000 Gen-Probe Incorporated(1) 155,450
- --------------------------------------------------------------------------------
5,900 ICU Medical, Inc.(1) 186,942
- --------------------------------------------------------------------------------
3,000 Integra LifeSciences Holdings(1) 80,250
- --------------------------------------------------------------------------------
16,800 Kensey Nash Corp.(1) 366,323
- --------------------------------------------------------------------------------
3,300 Patterson Dental Co.(1) 132,446
- --------------------------------------------------------------------------------
7,100 Possis Medical, Inc.(1) 136,356
- --------------------------------------------------------------------------------
8,700 Synovis Life Technologies, Inc.(1) 127,673
- --------------------------------------------------------------------------------
1,200 Varian Medical Systems, Inc.(1) 64,632
- --------------------------------------------------------------------------------
7,900 Zoll Medical Corp.(1) 254,420
- --------------------------------------------------------------------------------
3,612,197
- --------------------------------------------------------------------------------
Shares/Principal Amount Value
- --------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 2.4%
- --------------------------------------------------------------------------------
6,100 American Healthcorp, Inc.(1) $ 150,396
- --------------------------------------------------------------------------------
14,000 Caremark Rx Inc.(1) 278,740
- --------------------------------------------------------------------------------
1,520 Odyssey HealthCare, Inc.(1) 39,284
- --------------------------------------------------------------------------------
2,400 Pharmaceutical Product
Development, Inc.(1) 62,892
- --------------------------------------------------------------------------------
3,800 Priority Healthcare Corp. Cl B(1) 86,678
- --------------------------------------------------------------------------------
617,990
- --------------------------------------------------------------------------------
OIL REFINING -- 3.5%
- --------------------------------------------------------------------------------
21,200 Frontier Oil Corp. 358,704
- --------------------------------------------------------------------------------
24,400 Premcor Inc.(1) 543,876
- --------------------------------------------------------------------------------
902,580
- --------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE -- 2.8%
- --------------------------------------------------------------------------------
7,000 Berkley (W.R.) Corp. 325,080
- --------------------------------------------------------------------------------
3,100 Mercury General Corp. 136,400
- --------------------------------------------------------------------------------
9,100 RLI Corp. 268,905
- --------------------------------------------------------------------------------
730,385
- --------------------------------------------------------------------------------
PUBLISHING -- 1.1%
- --------------------------------------------------------------------------------
11,200 John Wiley & Sons, Inc. 274,512
- --------------------------------------------------------------------------------
SPECIALTY STORES -- 3.9%
- --------------------------------------------------------------------------------
2,565 Advance Auto Parts(1) 127,583
- --------------------------------------------------------------------------------
9,673 Big 5 Sporting Goods Corp.(1) 120,526
- --------------------------------------------------------------------------------
20,800 CSK Auto Corp.(1) 213,200
- --------------------------------------------------------------------------------
6,200 Michaels Stores, Inc.(1) 193,688
- --------------------------------------------------------------------------------
3,100 Tuesday Morning Corporation(1) 72,509
- --------------------------------------------------------------------------------
17,502 West Marine Inc.(1) 286,245
- --------------------------------------------------------------------------------
1,013,751
- --------------------------------------------------------------------------------
TRUCKING, SHIPPING & AIR FREIGHT -- 1.1%
- --------------------------------------------------------------------------------
36,750 Celadon Group, Inc.(1) 285,364
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $21,240,214) 22,888,281
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 10.9%
$1,600,000 FHLB Discount Notes,
1.25%, 5/1/03(2) 1,600,000
- -------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 1.20%,
dated 4/30/03, due 5/1/03
(Delivery value $1,200,040) 1,200,000
- -------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $2,800,000) 2,800,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $24,040,214) $25,688,281
===============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
14
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NEW
SELECT OPPORTUNITIES II
- --------------------------------------------------------------------------------
ASSETS
Investment securities -- unaffiliated,
at value (cost of $3,093,485,317 and
$24,040,214, respectively) --
including $296,326,709 and $0 of
securities loaned, respectively $3,623,269,099 $25,688,281
- ------------------------------------------------
Investment securities -- affiliated,
at value (cost of $62,125,593 and
$0, respectively) -- including
$64,563,800 and $0 of securities
loaned, respectively 64,563,800 --
- ------------------------------------------------
Collateral received for securities
loaned, at value (cost of $374,102,888
and $0, respectively) 374,102,888 --
- ------------------------------------------------
Cash -- 83,666
- ------------------------------------------------
Receivable for investments sold 46,836,516 419,089
- ------------------------------------------------
Receivable for capital shares sold 105,476 --
- ------------------------------------------------
Dividends and interest receivable 2,211,388 10,868
- --------------------------------------------------------------------------------
4,111,089,167 26,201,904
- --------------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of demand deposit cash 20,489,946 --
- ------------------------------------------------
Payable for securities loaned 374,102,888 --
- ------------------------------------------------
Payable for investments purchased 32,860,528 1,213,857
- ------------------------------------------------
Payable for forward foreign
currency exchange contracts 448,701 --
- ------------------------------------------------
Accrued management fees 2,915,860 30,169
- ------------------------------------------------
Distribution fees payable 4,653 29
- ------------------------------------------------
Service fees payable 4,674 25
- --------------------------------------------------------------------------------
430,827,250 1,244,080
- --------------------------------------------------------------------------------
NET ASSETS $3,680,261,917 $24,957,824
================================================================================
See Notes to Financial Statements. (continued)
-----
15
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NEW
SELECT OPPORTUNITIES II
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $4,270,052,169 $29,933,690
- -----------------------------------------------
Accumulated undistributed net investment
income (loss) 4,890,947 (124,679)
- -----------------------------------------------
Accumulated net realized loss on investment
and foreign currency transactions (1,126,457,656) (6,499,254)
- -----------------------------------------------
Net unrealized appreciation on investments
and translation of assets and liabilities in
foreign currencies 531,776,457 1,648,067
- --------------------------------------------------------------------------------
$3,680,261,917 $24,957,824
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $3,459,451,395 $24,804,964
- -----------------------------------------------
Shares outstanding 116,117,673 5,964,408
- -----------------------------------------------
Net asset value per share $29.79 $4.16
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $196,773,505 --
- -----------------------------------------------
Shares outstanding 6,567,775 --
- -----------------------------------------------
Net asset value per share $29.96 --
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $23,079,665 N/A
- -----------------------------------------------
Shares outstanding 780,417 N/A
- -----------------------------------------------
Net asset value per share $29.57 N/A
- --------------------------------------------------------------------------------
A CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $625,903 $94,897
- -----------------------------------------------
Shares outstanding 21,016 22,829
- -----------------------------------------------
Net asset value per share $29.78 $4.16
- -----------------------------------------------
Maximum offering price
(net asset value divided by 0.9425) $31.60 $4.41
- --------------------------------------------------------------------------------
B CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $119,387 $55,458
- -----------------------------------------------
Shares outstanding 4,016 13,364
- -----------------------------------------------
Net asset value per share $29.73 $4.15
- --------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $212,062 $2,505
- -----------------------------------------------
Shares outstanding 7,128 602
- -----------------------------------------------
Net asset value per share $29.75 $4.16
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
16
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NEW
SELECT OPPORTUNITIES II
- --------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS)
INCOME:
- -----------------------------------------------
Dividends (including $29,834 from affiliates
for Select and net of foreign taxes withheld
of $393,191 and $516, respectively) $ 21,860,953 $ 51,657
- -----------------------------------------------
Interest and other income 1,040,899 10,693
- --------------------------------------------------------------------------------
22,901,852 62,350
- --------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Management fees 17,712,726 186,554
- -----------------------------------------------
Distribution fees:
- -----------------------------------------------
Advisor Class 26,297 --
- -----------------------------------------------
B Class 74 64
- -----------------------------------------------
C Class 64 4
- -----------------------------------------------
Service fees:
- -----------------------------------------------
Advisor Class 26,297 --
- -----------------------------------------------
B Class 25 21
- -----------------------------------------------
C Class 21 1
- -----------------------------------------------
Service and distribution fees -- A Class 107 28
- -----------------------------------------------
Directors' fees and expenses 23,505 162
- -----------------------------------------------
Other expenses 17,478 205
- --------------------------------------------------------------------------------
17,806,594 187,039
- --------------------------------------------------------------------------------
Amount waived (4) (10)
- --------------------------------------------------------------------------------
17,806,590 187,029
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 5,095,262 (124,679)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
- -----------------------------------------------
Investment transactions 22,617,321 (1,580,743)
- -----------------------------------------------
Foreign currency transactions (1,217,800) (854)
- --------------------------------------------------------------------------------
21,399,521 (1,581,597)
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- -----------------------------------------------
Investments 89,755,480 1,755,164
- -----------------------------------------------
Translation of assets and liabilities
in foreign currencies (318,686) --
- --------------------------------------------------------------------------------
89,436,794 1,755,164
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 110,836,315 173,567
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $115,931,577 $ 48,888
================================================================================
See Notes to Financial Statements.
-----
17
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
- --------------------------------------------------------------------------------------------------------------
SELECT NEW OPPORTUNITIES II
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2003 2002 2003 2002
==============================================================================================================
OPERATIONS
Net investment income (loss) $ 5,095,262 $ 9,652,541 $ (124,679) $ (261,331)
- -------------------------------------------
Net realized gain (loss) 21,399,521 (503,424,521) (1,581,597) (2,365,345)
- -------------------------------------------
Change in net unrealized appreciation 89,436,794 (302,909,699) 1,755,164 (987,937)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 115,931,577 (796,681,679) 48,888 (3,614,613)
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
- -------------------------------------------
Investor Class (8,963,378) (8,455,501) -- --
- -------------------------------------------
Institutional Class (850,467) (690,450) -- --
- -------------------------------------------
Advisor Class (1,215) -- -- --
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets
from distributions (9,815,060) (9,145,951) -- --
- --------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets
from capital share transactions (154,347,388) (415,693,326) (570,026) 10,876,569
- --------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (48,230,871) (1,221,520,956) (521,138) 7,261,956
- --------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 3,728,492,788 4,950,013,744 25,478,962 18,217,006
- --------------------------------------------------------------------------------------------------------------
End of period $3,680,261,917 $3,728,492,788 $24,957,824 $25,478,962
- --------------------------------------------------------------------------------------------------------------
Accumulated undistributed
net investment income (loss) $4,890,947 $9,610,745 $(124,679) --
==============================================================================================================
See Notes to Financial Statements.
- ------
18
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Select Fund (Select) and New
Opportunities II Fund (New Opportunities II) (the funds) are two funds in a
series issued by the corporation. The funds are diversified under the 1940 Act.
The funds' investment objective is to seek long-term capital growth. The
following is a summary of the funds' significant accounting policies.
MULTIPLE CLASS -- Select is authorized to issue the Investor Class, the
Institutional Class, the Advisor Class, the A Class, the B Class, and the C
Class. New Opportunities II is authorized to issue the Investor Class, the
Institutional Class, the A Class, the B Class, and the C Class. The A Class may
incur an initial sales charge. The A Class, B Class, and C Class may be subject
to a contingent deferred sales charge. The share classes differ principally in
their respective sales charges and 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. Income, non-class specific expenses,
and realized and unrealized capital gains and losses of the funds are allocated
to each class of shares based on their relative net assets. Sale of the A Class,
B Class, and C Class commenced on January 31, 2003, at which time the Investor
Class was no longer available to new investors. Sale of New Opportunities II's
Institutional Class had not commenced as of April 30, 2003.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a commercial
pricing service. When valuations are not readily available, securities are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed
in foreign currencies are translated into U.S. dollars at prevailing exchange
rates at period end. Purchases and sales of investment securities, dividend and
interest income, and certain expenses are translated at the rates of exchange
prevailing on the respective dates of such transactions. For assets and
liabilities, other than investments in securities, net realized and unrealized
gains and losses from foreign currency translations arise from changes in
currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses occurring
during the holding period of investment securities are a component of realized
gain (loss) on investment transactions and unrealized appreciation
(depreciation) on investments, respectively. Certain countries may impose taxes
on the contract amount of purchases and sales of foreign currency contracts in
their currency. The funds record the foreign tax expense, if any, as a reduction
to the net realized gain (loss) on foreign currency transactions.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward
foreign currency exchange contracts to facilitate transactions of securities
denominated in a foreign currency or to hedge the funds' exposure to foreign
currency exchange rate fluctuations. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the funds and the
resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The funds bear the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
FUTURES CONTRACTS -- The funds may enter into stock index futures contracts in
order to manage the funds' exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the
(continued)
-----
19
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
changes in value of the underlying securities. Upon entering into a futures
contract, the funds are 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 funds. The variation margin is equal to the daily change in the contract
value and is recorded as unrealized gains and losses. The funds recognize 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 investment transactions and
unrealized appreciation (depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. Each fund requires that the collateral, represented by securities,
received in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable each fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to each fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities
and Exchange Commission, each fund, along with other registered investment
companies having management agreements with ACIM, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are collateralized by U.S. Treasury or Agency
obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and net realized
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
(continued)
- ------
20
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the funds with investment advisory and
management services in exchange for a single, unified management fee per class.
The Agreement provides that all expenses of the funds, except brokerage
commissions, taxes, interest, fees and expenses of those directors who are not
considered "interested persons" as defined in the 1940 Act (including counsel
fees) and extraordinary expenses, will be paid by ACIM. The fee is computed
daily and paid monthly in arrears based on each class's pro rata share of each
fund's average daily closing net assets during the previous month. The annual
management fees for Select are 1.00%, 0.80%, 0.75%, 1.00%, 1.00% and 1.00% for
the Investor Class, Institutional Class, Advisor Class, A Class, B Class, and C
Class, respectively. The annual management fees for New Opportunities II are
1.50% for the Investor Class, A Class, B Class and C Class. The annual
management fee for the Institutional Class of New Opportunities II is 1.30%.
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class (the Advisor
Class plan) and a separate Master Distribution and Individual Shareholder
Services Plan for each of the A Class , B Class, and C Class (collectively with
the Advisor Class plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The
plans provide that the Advisor Class, B Class, and C Class will pay American
Century Investment Services, Inc. (ACIS) the following annual distribution and
service fees:
- --------------------------------------------------------------------
ADVISOR B C
- --------------------------------------------------------------------
Distribution Fee 0.25% 0.75% 0.75%
- --------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25%
- --------------------------------------------------------------------
The plans provide that the A Class will pay ACIS an annual distribution and
service fee of 0.25%. The fees are computed daily and paid monthly in arrears
based on each class's average daily closing net assets during the previous
month. The distribution fee provides compensation for expenses incurred in
connection with distributing shares of the classes 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
ACIS, its affiliates or independent third party providers for Advisor Class
shares and for individual shareholder services rendered by broker/dealers or
other independent financial intermediaries for A Class, B Class, and C Class
shares. All or a portion of the distribution and service fees for the A Class,
B Class, and C Class may have been voluntarily waived during the period. For
the period ended April 30, 2003, the A Class, B Class, and C Class waived
$1, $1, and $2, respectively, of distribution and service fees for Select.
For the period ended April 30, 2003, the A Class, B Class, and C Class
waived $1, $3, and $6, respectively, of distribution and service fees for
New Opportunities II. Fees incurred under the plans during the six months
ended April 30, 2003, are detailed in the Statement of Operations.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, ACIS, and the corporation's
transfer agent, American Century Services Corporation.
During the six months ended April 30, 2003, the funds invested in a money
market fund for temporary purposes, which was managed by J.P. Morgan Fleming
Asset Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of
J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have
a bank line of credit agreement with JPM. Select has a securities lending
agreement with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary
of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2003, were as follows:
- --------------------------------------------------------------------------------
SELECT NEW OPPORTUNITIES II
- --------------------------------------------------------------------------------
Purchases $1,633,924,993 $19,360,431
- --------------------------------------------------------------------------------
Proceeds from sales $1,649,639,527 $20,294,865
- --------------------------------------------------------------------------------
(continued)
-----
19
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
SELECT NEW OPPORTUNITIES II
- --------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 360,000,000 250,000,000
==============================================================================================================
Sold 3,100,444 $ 88,667,760 575,297 $ 2,383,342
- -------------------------------------------
Issued in reinvestment of distributions 293,884 8,460,920 -- --
- -------------------------------------------
Redeemed (9,115,713) (259,737,749) (750,188) (3,100,682)
- --------------------------------------------------------------------------------------------------------------
Net decrease (5,721,385) $(162,609,069) (174,891) $ (717,340)
==============================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 360,000,000 250,000,000
==============================================================================================================
Sold 7,647,780 $ 254,798,414 3,166,849 $15,641,897
- -------------------------------------------
Issued in reinvestment of distributions 221,484 8,037,661 -- --
- -------------------------------------------
Redeemed (21,831,795) (725,014,527) (1,056,633) (4,765,328)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) (13,962,531) $(462,178,452) 2,110,216 $10,876,569
==============================================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 40,000,000 50,000,000
==============================================================================================================
Sold 704,004 $ 20,342,799
- -------------------------------------------
Issued in reinvestment of distributions 28,974 838,204
- -------------------------------------------
Redeemed (553,478) (15,741,963)
- --------------------------------------------------------------------------------------------------------------
Net increase 179,500 $ 5,439,040
==============================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 40,000,000 50,000,000
==============================================================================================================
Sold 3,521,855 $124,022,589
- -------------------------------------------
Issued in reinvestment of distributions 18,456 672,725
- -------------------------------------------
Redeemed (2,320,751) (79,590,692)
- --------------------------------------------------------------------------------------------------------------
Net increase 1,219,560 $ 45,104,622
==============================================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 100,000,000 N/A
==============================================================================================================
Sold 196,462 $ 5,561,058
- -------------------------------------------
Issued in reinvestment of distributions 38 1,083
- -------------------------------------------
Redeemed (128,985) (3,658,591)
- --------------------------------------------------------------------------------------------------------------
Net increase 67,515 $ 1,903,550
==============================================================================================================
YEAR ENDED OCTOBER 31, 2002
SHARES AUTHORIZED 100,000,000 N/A
==============================================================================================================
Sold 467,008 $ 14,260,550
- -------------------------------------------
Redeemed (428,428) (12,880,046)
- --------------------------------------------------------------------------------------------------------------
Net increase 38,580 $ 1,380,504
==============================================================================================================
(continued)
- ------
22
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
SELECT NEW OPPORTUNITIES II
- --------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------------------------------------
PERIOD ENDED APRIL 30, 2003(1)
SHARES AUTHORIZED 25,000,000 25,000,000
==============================================================================================================
Sold 21,106 $601,815 22,829 $91,237
- ----------------------------------------
Redeemed (90) (2,561) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 21,016 $599,254 22,829 $91,237
==============================================================================================================
B CLASS
- --------------------------------------------------------------------------------------------------------------
PERIOD ENDED APRIL 30, 2003(1)
SHARES AUTHORIZED 25,000,000 25,000,000
==============================================================================================================
Sold 4,106 $117,148 13,364 $53,577
- ----------------------------------------
Redeemed (90) (2,664) -- --
- --------------------------------------------------------------------------------------------------------------
Net increase 4,016 $114,484 13,364 $53,577
==============================================================================================================
C CLASS
- --------------------------------------------------------------------------------------------------------------
PERIOD ENDED APRIL 30, 2003(1)
SHARES AUTHORIZED 25,000,000 25,000,000
==============================================================================================================
Sold 7,128 $205,353 602 $2,500
==============================================================================================================
(1) January 31, 2003 (commencement of sale) through April 30, 2003.
5. AFFILIATED COMPANY TRANSACTIONS
Affiliated Company: Select's holding represents ownership of 5% or more of the
voting securities of the company, therefore, the company is affiliated as
defined in the Investment Company Act of 1940. A summary of transactions for
each issuer which is or was an affiliate at or during the six months ended April
30, 2003, follows:
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND APRIL 30, 2003
FUND/ISSUER 10/31/02 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE
- --------------------------------------------------------------------------------------------------------------
SELECT
- --------------------------------------------------------------------------------------------------------------
Four Seasons Hotels Inc. -- $62,125,593 $-- $-- $29,834 2,140,000 $64,563,800
==============================================================================================================
(continued)
-----
23
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
6. SECURITIES LENDING
As of April 30, 2003, securities in Select valued at $360,890,509 were on loan
through the lending agent, Chase, to certain approved borrowers. Chase receives
and maintains collateral in the form of cash, U.S. Treasury or Government Agency
securities and/or letters of credit for Select. The value of cash collateral
received at period end is disclosed in the Statement of Assets and Liabilities
and investments made with the cash by the lending agent are listed in the
Schedule of Investments. The total value of all collateral received, at this
date, was $374,102,888. Select's risks in securities lending are that the
borrower may not provide additional collateral when required or return the
securities when due. If the borrower defaults, receipt of the collateral by
Select may be delayed or limited.
7. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $620,000,000
unsecured bank line of credit agreement with JPM, which was renewed from
$650,000,000 effective December 17, 2002. The funds may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The
funds did not borrow from the line during the six months ended April 30, 2003.
8. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
NEW
SELECT OPPORTUNITIES II
- --------------------------------------------------------------------------------
Federal tax cost of investments $3,194,897,954 $24,085,664
================================================================================
Gross tax appreciation of investments $565,376,030 $2,061,823
- -----------------------------------------
Gross tax depreciation of investments (72,441,085) (459,206)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $492,934,945 $1,602,617
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
Following are the capital loss carryover amounts as of October 31, 2002:
- --------------------------------------------------------------------------------
NEW
SELECT OPPORTUNITIES II
- --------------------------------------------------------------------------------
Accumulated capital losses $(1,112,272,553) $(4,852,132)
================================================================================
The accumulated capital losses listed above represent net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes. The capital loss carryovers expire in 2009 through 2010.
- ------
24
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $28.91 $34.94 $52.20 $53.32 $49.54 $48.18
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------
Net Investment Income (Loss)(2) 0.04 0.07 0.06 (0.06) 0.01 0.12
- -------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.91 (6.04) (14.53) 4.04 13.73 9.37
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.95 (5.97) (14.47) 3.98 13.74 9.49
- --------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------
From Net Investment Income (0.07) (0.06) -- -- (0.17) (0.20)
- -------------------------------------
From Net Realized Gains -- -- (2.79) (5.10) (9.79) (7.93)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.07) (0.06) (2.79) (5.10) (9.96) (8.13)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.79 $28.91 $34.94 $52.20 $53.32 $49.54
==============================================================================================================
TOTAL RETURN(3) 3.31% (17.11)% (28.93)% 7.64% 31.22% 22.96%
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(4) 1.00% 1.00% 1.00% 1.00% 1.00%
- -------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.28%(4) 0.21% 0.15% (0.11)% 0.03% 0.25%
- -------------------------------------
Portfolio Turnover Rate 47% 168% 98% 67% 130% 165%
- -------------------------------------
Net Assets, End of Period
(in millions) $3,459 $3,522 $4,745 $7,086 $7,216 $5,591
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
-----
25
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Period $29.10 $35.16 $52.36 $53.41 $49.63 $48.24
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------
Net Investment Income(2) 0.07 0.13 0.14 0.04 0.02 0.22
- ----------------------------------
Net Realized and
Unrealized Gain (Loss) 0.92 (6.06) (14.55) 4.01 13.83 9.37
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.99 (5.93) (14.41) 4.05 13.85 9.59
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------
From Net Investment Income (0.13) (0.13) -- -- (0.28) (0.27)
- ----------------------------------
From Net Realized Gains -- -- (2.79) (5.10) (9.79) (7.93)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.13) (0.13) (2.79) (5.10) (10.07) (8.20)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.96 $29.10 $35.16 $52.36 $53.41 $49.63
==============================================================================================================
TOTAL RETURN(3) 3.43% (16.93)% (28.71)% 7.77% 31.47% 23.22%
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.80%(4) 0.80% 0.80% 0.80% 0.80% 0.80%
- ----------------------------------
Ratio of Net Investment Income
to Average Net Assets 0.48%(4) 0.41% 0.35% 0.09% 0.23% 0.45%
- ----------------------------------
Portfolio Turnover Rate 47% 168% 98% 67% 130% 165%
- ----------------------------------
Net Assets, End of Period
(in thousands) $196,774 $185,897 $181,708 $259,092 $112,293 $173
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(4) Annualized.
See Notes to Financial Statements.
- ------
26
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value,
Beginning of Period $28.66 $34.68 $52.01 $53.19 $49.44 $48.16
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------
Net Investment Income (Loss)(2) --(3) (0.02) (0.04) (0.21) (0.13) --
- -------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.91 (6.00) (14.50) 4.13 13.71 9.37
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.91 (6.02) (14.54) 3.92 13.58 9.37
- --------------------------------------------------------------------------------------------------------------
Distributions
- -------------------------------------
From Net Investment Income --(3) -- -- -- (0.04) (0.16)
- -------------------------------------
From Net Realized Gains -- -- (2.79) (5.10) (9.79) (7.93)
- --------------------------------------------------------------------------------------------------------------
Total Distributions -- -- (2.79) (5.10) (9.83) (8.09)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $29.57 $28.66 $34.68 $52.01 $53.19 $49.44
==============================================================================================================
TOTAL RETURN(4) 3.18% (17.36)% (29.18)% 7.54% 30.87% 22.67%
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.25%(5) 1.25% 1.25% 1.25% 1.25% 1.25%
- -------------------------------------
Ratio of Net Investment Income
(Loss) to Average Net Assets 0.03%(5) (0.04)% (0.10)% (0.36)% (0.22)% --
- -------------------------------------
Portfolio Turnover Rate 47% 168% 98% 67% 130% 165%
- -------------------------------------
Net Assets, End of Period
(in thousands) $23,080 $20,432 $23,389 $22,239 $8,369 $1,617
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount is less than $0.005.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
-----
27
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $27.75
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------
Net Investment Loss(2) (0.02)
- -------------------------------------------------------------------
Net Realized and Unrealized Gain 2.05
- --------------------------------------------------------------------------------
Total From Investment Operations 2.03
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $29.78
================================================================================
TOTAL RETURN(3) 7.32%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.25%(4)
- -------------------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.33)%(4)
- -------------------------------------------------------------------
Portfolio Turnover Rate 47%(5)
- -------------------------------------------------------------------
Net Assets, End of Period (in thousands) $626
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the six months ended April 30, 2003.
See Notes to Financial Statements.
- ------
28
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $27.75
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------
Net Investment Loss(2) (0.07)
- -------------------------------------------------------------------
Net Realized and Unrealized Gain 2.05
- --------------------------------------------------------------------------------
Total From Investment Operations 1.98
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $29.73
================================================================================
TOTAL RETURN(3) 7.14%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.99%(4)
- -------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver)(5) 2.00%(4)
- -------------------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.99)%(4)
- -------------------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets
(Before Expense Waiver)(5) (1.00)%(4)
- -------------------------------------------------------------------
Portfolio Turnover Rate 47%(6)
- -------------------------------------------------------------------
Net Assets, End of Period (in thousands) $119
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) During the period ended April 30, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the six months ended April 30, 2003.
See Notes to Financial Statements.
-----
29
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $27.75
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------
Net Investment Loss(2) (0.08)
- -----------------------------------------------------------
Net Realized and Unrealized Gain 2.08
- --------------------------------------------------------------------------------
Total From Investment Operations 2.00
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $29.75
================================================================================
TOTAL RETURN(3) 7.21%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.97%(4)
- -----------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver)(5) 2.00%(4)
- -----------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.16)%(4)
- -----------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets
(Before Expense Waiver)(5) (1.19)%(4)
- -----------------------------------------------------------
Portfolio Turnover Rate 47%(6)
- -----------------------------------------------------------
Net Assets, End of Period (in thousands) $212
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) During the period ended April 30, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the six months ended April 30, 2003.
See Notes to Financial Statements.
- ------
30
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- -------------------------------------------------------------------------------------------------------
2003(1) 2002 2001(2)
- -------------------------------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.15 $4.52 $5.00
- -------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Loss (0.02)(3) (0.05) (0.01)
- -----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.03 (0.32) (0.47)
- -------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.01 (0.37) (0.48)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $4.16 $4.15 $4.52
=======================================================================================================
TOTAL RETURN(4) 0.24% (8.19)% (9.60)%
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.50%(5) 1.50% 1.50%(5)
- -----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.00)%(5) (1.02)% (0.81)%(5)
- -----------------------------------------------------
Portfolio Turnover Rate 83% 182% 89%
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $24,805 $25,479 $18,217
- -------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) June 1, 2001 (inception) through October 31, 2001.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of net investment income and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(5) Annualized.
See Notes to Financial Statements.
-----
31
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.15
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Loss(2) (0.01)
- -----------------------------------------------------
Net Realized and Unrealized Gain 0.02
- --------------------------------------------------------------------------------
Total From Investment Operations 0.01
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $4.16
================================================================================
TOTAL RETURN(3) 0.24%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.75%(4)
- -----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.06)%(4)
- -----------------------------------------------------
Portfolio Turnover Rate 83%(5)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $95
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the six months ended April 30, 2003.
See Notes to Financial Statements.
- ------
32
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.15
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Loss(2) (0.02)
- -----------------------------------------------------
Net Realized and Unrealized Gain 0.02
- --------------------------------------------------------------------------------
Total From Investment Operations --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $4.15
================================================================================
TOTAL RETURN(3) 0.00%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 2.47%(4)
- -----------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver)(5) 2.50%(4)
- -----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.83)%(4)
- -----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets
(Before Expense Waiver)(5) (1.86)%(4)
- -----------------------------------------------------
Portfolio Turnover Rate 83%(6)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $55
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through April 30, 2003 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) During the period ended April 30, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the six months ended April 30, 2003.
See Notes to Financial Statements.
-----
33
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2003(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
Net Asset Value, Beginning of Period $4.15
- --------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------
Net Investment Loss(2) (0.01)
- -----------------------------------------------------
Net Realized and Unrealized Gain 0.02
- --------------------------------------------------------------------------------
Total From Investment Operations 0.01
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $4.16
================================================================================
TOTAL RETURN(3) 0.24%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.50%(4)
- -----------------------------------------------------
Ratio of Operating Expenses to Average Net Assets
(Before Expense Waiver)(5) 2.50%(4)
- -----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.92)%(4)
- -----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets
(Before Expense Waiver)(5) (1.92)%(4)
- -----------------------------------------------------
Portfolio Turnover Rate 83%(6)
- -----------------------------------------------------
Net Assets, End of Period (in thousands) $3
- --------------------------------------------------------------------------------
(1) January 31, 2003 (commencement of sale) through April 30, 2002 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of net investment income and capital gains
distributions, if any, and does not reflect applicable sales charges. Total
returns for periods less than one year are not annualized. The total return
of the classes may not precisely reflect the class expense differences
because of the impact of calculating the net asset values to two decimal
places. If net asset values were calculated to three decimal places, the
total return differences would more closely reflect the class expense
differences. The calculation of net asset values to two decimal places is
made in accordance with SEC guidelines and does not result in any gain or
loss of value between one class and another.
(4) Annualized.
(5) During the period ended April 30, 2003, the distributor voluntarily waived
a portion of the distribution and service fees.
(6) Portfolio turnover is calculated at the fund level. Percentage indicated was
calculated for the six months ended April 30, 2002.
See Notes to Financial Statements.
- ------
34
Share Class Information
Six classes of shares are authorized for sale by Select: Investor Class,
Institutional Class, Advisor Class, A Class, B Class, and C Class. Five classes
of shares are authorized for sale by New Opportunities II: Investor Class,
Institutional Class, A Class, B Class, and C Class. The total expense ratios of
Advisor, A, B, and C Class shares are higher than those of Investor Class
shares; the total expense ratio of Institutional Class shares is lower. ON
JANUARY 31, 2003, INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW INVESTORS.
INVESTOR CLASS shares are available for purchase BY EXISTING SHAREHOLDERS in two
ways: 1) directly from American Century without any commissions or other fees;
or 2) through a broker-dealer, which may require payment of a transaction fee to
the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) 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
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as banks,
broker-dealers, insurance companies, and financial advisors. Advisor Class
shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee.
The total expense ratio of Advisor Class shares is 0.25% higher than the total
expense ratio of Investor Class shares.
A CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as banks, broker-dealers, and insurance companies.
A Class shares are sold at their offering price, which is net asset value plus
an initial sales charge that ranges from 4.50% to 0.00% for fixed-income funds
and 5.75% to 0.00% for equity funds, depending on the amount invested. The
initial sales charge is deducted from the purchase amount before it is invested.
A Class shares may be subject to a contingent deferred sales charge (CDSC).
There is no CDSC on shares acquired through reinvestment of dividends or capital
gains. The prospectus contains information regarding reductions and waivers of
sales charges for A Class shares. A Class shares also are subject to a 0.25%
annual Rule 12b-1 service and distribution fee.
(continued)
-----
35
Share Class Information
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as banks, broker-dealers, and insurance companies.
B Class shares redeemed within six years of purchase are subject to a CDSC that
declines from 5.00% during the first year after purchase to 0.00% the sixth year
after purchase. There is no CDSC on shares acquired through reinvestment of
dividends or capital gains. B Class shares also are subject to a 1.00% annual
Rule 12b-1 service and distribution fee. B Class shares automatically convert to
A Class shares (with lower expenses) eight years after their purchase date.
C CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as banks, broker-dealers, and insurance companies.
C Class shares redeemed within 12 months of purchase are subject to a CDSC of
1.00% for equity funds and 0.75% for fixed-income funds. There is no CDSC on
shares acquired through reinvestment of dividends or capital gains. C Class
shares also are subject to a Rule 12b-1 service and distribution fee of 1.00%
for stock funds and 0.75% for bond funds.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
36
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
-----
37
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly
traded U.S. companies chosen for market size, liquidity and industry group
representation that are considered to be leading firms in dominant industries.
Each stock's weight in the index is proportionate to its market value. Created
by Standard & Poor's, it is considered to be a broad measure of U.S. stock
market performance.
The RUSSELL 1000 GROWTH INDEX measures the performance of those Russell 1000
companies (the 1,000 largest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
companies (the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies, based on total market capitalization) with higher price-to-book
ratios and higher forecasted growth rates.
- ------
38
Notes
-----
39
Notes
- ------
40
[back cover]
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
INVESTORS USING ADVISORS:
1-800-378-9878
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE
COMPANIES: 1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City,
Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
COMPANIES
0306 American Century Investment Services, Inc.
SH-SAN-34841S (c)2003 American Century Services Corporation
[front cover]
April 30, 2003
American Century
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of two bridges]
Veedot(reg.sm)
[american century logo and text logo (reg. sm)]
[inside front cover]
Table of Contents
Our Message to You ........................................................ 1
VEEDOT
Performance ............................................................... 2
Performance Review ........................................................ 3
Types of Investments in Portfolio ...................................... 3
Top Five Industries .................................................... 4
Top Ten Holdings ....................................................... 4
Schedule of Investments ................................................... 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statement of Changes in Net Assets ........................................ 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 17
OTHER INFORMATION
Share Class Information ................................................... 19
Retirement Account Information ............................................ 20
Comparative Indices ....................................................... 21
Our Message to You
[photo of James E. Stowers III and James E. Stowers, Jr.]
James E. Stowers III with James E. Stowers, Jr.
We are pleased to provide you with the semi-annual report for the Veedot fund
for the six months ended April 30, 2003.
The report includes comparative performance graphs and tables, portfolio
commentary, tables that summarize portfolio investments, a full listing of
portfolio holdings, and other financial statements and highlights (all as of
April 30, 2003, except as noted). We hope you will find this information helpful
in monitoring your investment.
Also, through our Web site, we provide quarterly commentaries on all American
Century portfolios, the views of our senior investment officers, and other
information about investments, portfolio strategy, and the markets.
The next Veedot shareholder report will be the annual report for the year ended
October 31, 2003, which should be available in approximately six months.
As always, we appreciate your investment with American Century.
Sincerely,
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
Founder and Chairman
/s/James E. Stowers III
James E. Stowers III
Co-Chairman of the Board
-------
1
Veedot - Performance
TOTAL RETURNS AS OF APRIL 30, 2003
--------------
AVERAGE ANNUAL
RETURNS
- -------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR INCEPTION DATE
- -------------------------------------------------------------------------------
===============================================================================
INVESTOR CLASS 11/30/99
===============================================================================
Before redemption fee -20.92% -7.87%
===============================================================================
Net of redemption fee(1) -22.50% -8.41%
- -------------------------------------------------------------------------------
===============================================================================
WILSHIRE 5000 INDEX -13.58% -9.60% --
- -------------------------------------------------------------------------------
Institutional Class 8/1/00
Before redemption fee -20.83% -15.94%
Net of redemption fee(1) -22.42% -16.56%
- -------------------------------------------------------------------------------
(1) Returns reflect the deduction of a 2% redemption fee, incurred if shares
were redeemed within the first five years after purchase.
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made on November 30, 1999
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS
Periods ended April 30
- -------------------------------------------------------------------------------
2000* 2001 2002 2003
- -------------------------------------------------------------------------------
===============================================================================
Investor Class 35.20% -26.18% -4.21% -20.92%
- -------------------------------------------------------------------------------
Wilshire 5000 Index 5.88% -14.09% -9.87% -13.58%
- -------------------------------------------------------------------------------
* From 11/30/99, the Investor Class's inception date. Not annualized.
The charts on the performance page give historical return data for the fund.
Returns for the index are provided for comparison. The fund's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. Unless otherwise
indicated, the charts are based on Investor Class shares; performance for other
classes will vary due to differences in fee structures. Past performance does
not guarantee future results. None of the charts reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
- -------
2
Veedot - Performance Review
[photo of Jim Stowers III and John Small, Jr.]
A performance review from Jim Stowers III and John Small, Jr., portfolio
managers on the Veedot investment team.
During the six months that ended April 30, 2003, Veedot rose 0.27%*, trailing
its benchmark, the Wilshire 5000 Total Market Index, which gained 5.03%.
Based on a comparison of indices, smaller companies advanced at a faster rate
than larger companies during the period. The Russell 1000 Index, which
represents the 1,000 largest publicly traded U.S. stocks, rose 4.75%, while the
Russell 2000, which represents the next 2,000 largest stocks, rose 7.55%.
For the most part, Veedot's largest sector positions drove positive performance,
while some of its smaller concentrations detracted. Among the portfolio's
largest sector concentrations were its four top contributors during the
period--technology, health care, financials, and energy.
Technology stocks, which accounted for Veedot's largest sector concentration,
contributed the most to results. The sector was led by computer software, the
portfolio's leading industry group, which included Sonic Solutions, a seller of
hardware and software for professional video workstations, and Sonus Networks,
whose products include switching equipment used by providers of voice and data
communications networks. Sonus was both the top contributor as well as the
portfolio's largest holding when the period ended.
Veedot's health care holdings included positive performance from the medical
products group, the portfolio's largest industry weighting. Among the stocks
that gained was Align Technology, which makes products used by dentists to
correct misaligned teeth. Shares of Sepracor, a biotech company whose products
include a drug used to treat asthma, also rose.
Financial services companies and banks led a rise in financial stocks that also
helped Veedot's performance. Energy stocks also contributed, with the help of
Williams Cos., a natural gas exploration, processing, and storage company.
The consumer services sector slowed the fund the most, as many of the
portfolio's holdings in publishing, entertainment, and leisure fell. Among
===============================================================================
TYPES OF INVESTMENTS IN PORTFOLIO
- -------------------------------------------------------------------------------
===============================================================================
AS OF AS OF
===============================================================================
4/30/03 10/31/02
- -------------------------------------------------------------------------------
U.S. Common Stocks 98.5% 98.8%
- -------------------------------------------------------------------------------
Foreign Stocks -- 0.2%
- -------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 98.5% 99.0%
- -------------------------------------------------------------------------------
Temporary Cash
Investments 1.5% 1.0%
- -------------------------------------------------------------------------------
*All fund returns referenced in this review are for Investor Class shares.
(continued)
-------
3
Veedot - Performance Review
the biggest detractors were commercial printer Consolidated Graphics and Shuffle
Master, a maker of automatic card shuffling devices and developer of slot
machines.
Holdings in the basic materials realm, namely mining and metals, also hurt
Veedot's performance. The sector included a significant detractor, Liquidmetal
Technologies, a developer of amorphous alloys. The consumer non-cyclical sector
was diminished by setbacks in food and beverage and home product companies.
The portfolio's most heavily detracting industry group was specialty stores,
which falls in the consumer cyclical sector. Returns from this industry were
dragged down by arts and crafts retailer Michaels Stores.
================================================================================
TOP FIVE INDUSTRIES
================================================================================
AS OF APRIL 30, 2003
- --------------------------------------------------------------------------------
================================================================================
% OF FUND % OF FUND
================================================================================
INVESTMENTS INVESTMENTS
================================================================================
AS OF AS OF
================================================================================
4/30/03 10/31/02
- --------------------------------------------------------------------------------
Medical Products
& Supplies 8.3% 6.9%
- --------------------------------------------------------------------------------
Computer Software 7.2% 1.9%
- --------------------------------------------------------------------------------
Semiconductor 6.7% 2.7%
- --------------------------------------------------------------------------------
Electrical Equipment 5.0% 2.7%
- --------------------------------------------------------------------------------
Biotechnology 5.0% 1.7%
- --------------------------------------------------------------------------------
===============================================================================
TOP TEN HOLDINGS
===============================================================================
AS OF APRIL 30, 2003
- -------------------------------------------------------------------------------
===============================================================================
% OF FUND % OF FUND
===============================================================================
INVESTMENTS INVESTMENTS
===============================================================================
AS OF AS OF
===============================================================================
4/30/03 10/31/02
- -------------------------------------------------------------------------------
Sonus Networks, Inc. 0.9% --
- -------------------------------------------------------------------------------
Amgen Inc. 0.8% --
- -------------------------------------------------------------------------------
MedImmune, Inc. 0.8% --
- -------------------------------------------------------------------------------
Sonic Solutions 0.8% --
- -------------------------------------------------------------------------------
OmniVision
Technologies, Inc. 0.8% --
- -------------------------------------------------------------------------------
Silicon Laboratories Inc. 0.8% 0.2%
- -------------------------------------------------------------------------------
Eclipsys Corporation 0.7% --
- -------------------------------------------------------------------------------
Dionex Corp. 0.7% 0.5%
- -------------------------------------------------------------------------------
National City Corp. 0.7% --
- -------------------------------------------------------------------------------
United Online, Inc. 0.7% 0.2%
- -------------------------------------------------------------------------------
- -------
4
Veedot - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
================================================================================
COMMON STOCKS -- 98.5%
AIRLINES -- 0.2%
- --------------------------------------------------------------------------------
50,000 Airtran Holdings Inc.(1) $392,500
- --------------------------------------------------------------------------------
ALCOHOL -- 0.2%
- --------------------------------------------------------------------------------
5,000 Brown-Forman Corp. Cl B 382,700
- --------------------------------------------------------------------------------
APPAREL & TEXTILES -- 1.1%
- --------------------------------------------------------------------------------
27,000 K-Swiss Inc. Cl A 801,225
- --------------------------------------------------------------------------------
30,000 Quiksilver, Inc.(1) 978,000
- --------------------------------------------------------------------------------
5,000 Timberland Co. (The)(1) 249,950
- --------------------------------------------------------------------------------
2,029,175
- --------------------------------------------------------------------------------
BANKS -- 3.9%
- --------------------------------------------------------------------------------
15,000 AmSouth Bancorporation 315,750
- --------------------------------------------------------------------------------
15,000 Bank of America Corp. 1,110,750
- --------------------------------------------------------------------------------
15,000 Citigroup Inc. 588,750
- --------------------------------------------------------------------------------
10,000 City Holding Company 287,050
- --------------------------------------------------------------------------------
18,000 First Tennessee National Corp. 788,400
- --------------------------------------------------------------------------------
20,000 Independent Bank Corp. (Mich.) 477,400
- --------------------------------------------------------------------------------
45,000 Irwin Financial Corporation 1,066,500
- --------------------------------------------------------------------------------
45,000 National City Corp. 1,348,200
- --------------------------------------------------------------------------------
30,000 UCBH Holdings Inc. 764,850
- --------------------------------------------------------------------------------
20,000 United National Bancorp 516,100
- --------------------------------------------------------------------------------
7,263,750
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 5.0%
- --------------------------------------------------------------------------------
80,000 Alkermes Inc.(1) 798,000
- --------------------------------------------------------------------------------
25,000 Amgen Inc.(1) 1,532,750
- --------------------------------------------------------------------------------
25,000 Applera Corp. - Celera
Genomics Group(1) 262,500
- --------------------------------------------------------------------------------
15,000 Genentech, Inc.(1) 569,850
- --------------------------------------------------------------------------------
20,000 Genzyme Corp.(1) 805,700
- --------------------------------------------------------------------------------
80,000 Human Genome Sciences, Inc.(1) 936,000
- --------------------------------------------------------------------------------
30,000 Kos Pharmaceuticals, Inc.(1) 609,750
- --------------------------------------------------------------------------------
20,000 Medicines Company (The)(1) 411,100
- --------------------------------------------------------------------------------
43,000 MedImmune, Inc.(1) 1,516,395
- --------------------------------------------------------------------------------
40,000 Protein Design Labs, Inc.(1) 397,000
- --------------------------------------------------------------------------------
30,000 Sepracor Inc.(1) 574,650
- --------------------------------------------------------------------------------
100,000 Tularik Inc.(1) 548,000
- --------------------------------------------------------------------------------
25,000 United Therapeutics Corp.(1) 448,375
- --------------------------------------------------------------------------------
9,410,070
- --------------------------------------------------------------------------------
CHEMICALS -- 1.0%
- --------------------------------------------------------------------------------
10,000 3M Co. 1,260,400
- --------------------------------------------------------------------------------
20,000 Airgas Inc.(1) 404,600
- --------------------------------------------------------------------------------
30,000 Hercules Inc.(1) 304,500
- --------------------------------------------------------------------------------
1,969,500
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
CLOTHING STORES -- 1.3%
- -------------------------------------------------------------------------------
60,000 Children's Place Retail
Stores, Inc. (The)(1) $912,000
- -------------------------------------------------------------------------------
20,000 Finish Line, Inc.(1) 336,200
- --------------------------------------------------------------------------------
50,000 Pacific Sunwear of California(1) 1,139,500
- --------------------------------------------------------------------------------
2,387,700
- --------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 5.0%
- --------------------------------------------------------------------------------
80,000 Adaptec, Inc.(1) 549,600
- --------------------------------------------------------------------------------
50,000 Advanced Digital
Information Corp.(1) 400,000
- --------------------------------------------------------------------------------
40,000 American Power
Conversion Corp.(1) 623,800
- --------------------------------------------------------------------------------
150,000 Avaya Inc.(1) 585,000
- --------------------------------------------------------------------------------
35,000 Avocent Corp.(1) 1,038,450
- --------------------------------------------------------------------------------
30,000 Dell Computer Corp.(1) 870,450
- --------------------------------------------------------------------------------
120,000 EMC Corporation(1) 1,090,800
- --------------------------------------------------------------------------------
50,000 Foundry Networks, Inc.(1) 543,750
- --------------------------------------------------------------------------------
5,000 Lexmark International, Inc.(1) 372,550
- --------------------------------------------------------------------------------
100,000 McData Corporation Cl A(1) 1,058,500
- --------------------------------------------------------------------------------
15,000 NetScreen Technologies Inc.(1) 304,125
- --------------------------------------------------------------------------------
25,000 Overland Storage, Inc.(1) 442,000
- --------------------------------------------------------------------------------
20,000 Storage Technology Corp.(1) 494,400
- --------------------------------------------------------------------------------
15,000 Zebra Technologies Corp. Cl A(1) 999,675
- --------------------------------------------------------------------------------
9,373,100
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 7.2%
- -------------------------------------------------------------------------------
30,000 Adobe Systems Inc. 1,036,950
- --------------------------------------------------------------------------------
225,000 Ascential Software Corporation(1) 864,000
- --------------------------------------------------------------------------------
35,000 Avid Technology, Inc.(1) 959,175
- --------------------------------------------------------------------------------
25,000 BEA Systems, Inc.(1) 267,625
- --------------------------------------------------------------------------------
30,000 Citrix Systems, Inc.(1) 569,400
- --------------------------------------------------------------------------------
30,000 Concord Communications, Inc.(1) 378,300
- --------------------------------------------------------------------------------
30,000 Documentum Inc.(1) 551,700
- --------------------------------------------------------------------------------
155,000 Eclipsys Corporation(1) 1,401,975
- --------------------------------------------------------------------------------
15,000 Kronos Inc.(1) 684,225
- --------------------------------------------------------------------------------
30,000 Macrovision Corp.(1) 530,850
- --------------------------------------------------------------------------------
25,000 Mentor Graphics Corp.(1) 260,500
- --------------------------------------------------------------------------------
30,000 Mercury Interactive Corp.(1) 1,017,750
- --------------------------------------------------------------------------------
350,000 Pumatech, Inc.(1) 1,062,250
- --------------------------------------------------------------------------------
40,000 Renaissance Learning Inc.(1) 763,400
- --------------------------------------------------------------------------------
200,000 Sonic Solutions(1) 1,496,000
- --------------------------------------------------------------------------------
500,000 Sonus Networks, Inc.(1) 1,600,000
- --------------------------------------------------------------------------------
13,444,100
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-------
5
Veedot - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
CONSTRUCTION & REAL PROPERTY -- 2.2%
- --------------------------------------------------------------------------------
10,000 Centex Corp. $660,200
- --------------------------------------------------------------------------------
20,000 ElkCorp 405,000
- --------------------------------------------------------------------------------
5,000 Lennar Corp. 271,200
- --------------------------------------------------------------------------------
24,000 MDC Holdings Inc 1,106,400
- --------------------------------------------------------------------------------
1,000 NVR, Inc.(1) 357,750
- --------------------------------------------------------------------------------
10,000 Ryland Group, Inc. (The) 542,300
- --------------------------------------------------------------------------------
12,500 Toll Brothers Inc.(1) 290,625
- --------------------------------------------------------------------------------
30,000 WCI Communities Inc.(1) 414,900
- --------------------------------------------------------------------------------
4,048,375
- --------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.2%
- --------------------------------------------------------------------------------
10,000 The Toro Company 373,100
- --------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 0.3%
- --------------------------------------------------------------------------------
25,000 EDO Corp. 471,250
- --------------------------------------------------------------------------------
DEPARTMENT STORES -- 0.2%
- --------------------------------------------------------------------------------
15,000 Dollar Tree Stores, Inc.(1) 381,825
- --------------------------------------------------------------------------------
DRUGS -- 3.7%
- --------------------------------------------------------------------------------
35,000 Andrx Corp.(1) 564,550
- --------------------------------------------------------------------------------
25,000 Atrix Laboratories, Inc.(1) 439,750
- --------------------------------------------------------------------------------
25,000 Biosite Incorporated(1) 1,068,375
- --------------------------------------------------------------------------------
50,000 Digene Corporation(1) 950,250
- --------------------------------------------------------------------------------
10,000 Forest Laboratories, Inc. Cl A(1) 517,200
- --------------------------------------------------------------------------------
10,000 IDEXX Laboratories, Inc.(1) 390,150
- --------------------------------------------------------------------------------
35,000 Martek Biosciences Corporation(1) 1,193,150
- --------------------------------------------------------------------------------
10,000 Merck & Co., Inc. 581,800
- --------------------------------------------------------------------------------
14,500 Pharmaceutical Resources Inc.(1) 637,275
- --------------------------------------------------------------------------------
15,000 Wyeth 652,950
- --------------------------------------------------------------------------------
6,995,450
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 5.0%
- --------------------------------------------------------------------------------
25,000 ADTRAN, Inc.(1) 1,013,375
- --------------------------------------------------------------------------------
10,000 Amphenol Corp. Cl A(1) 442,900
- --------------------------------------------------------------------------------
10,000 Analogic Corporation 479,850
- --------------------------------------------------------------------------------
75,000 Centillium Communications Inc.(1) 434,625
- --------------------------------------------------------------------------------
40,000 Cognex Corp.(1) 876,000
- --------------------------------------------------------------------------------
40,000 Dionex Corp.(1) 1,382,200
- --------------------------------------------------------------------------------
20,000 Esterline Technologies Corp.(1) 355,000
- --------------------------------------------------------------------------------
100,000 Innovex Inc.(1) 863,500
- --------------------------------------------------------------------------------
25,000 Intermagnetics General
Corporation(1) 487,750
- --------------------------------------------------------------------------------
85,000 Network Equipment
Technologies, Inc.(1) 609,450
- --------------------------------------------------------------------------------
75,000 Scientific-Atlanta, Inc. 1,218,750
- --------------------------------------------------------------------------------
45,000 Ultratech Stepper Inc.(1) 638,550
- --------------------------------------------------------------------------------
30,000 UTStarcom Inc.(1) 653,250
- --------------------------------------------------------------------------------
9,455,200
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
ELECTRICAL UTILITIES -- 1.8%
- -------------------------------------------------------------------------------
45,000 American Electric Power $1,187,100
- --------------------------------------------------------------------------------
5,000 Dominion Resources Inc. 295,900
- --------------------------------------------------------------------------------
75,000 Dynegy Inc. Cl A 330,000
- --------------------------------------------------------------------------------
15,000 FPL Group, Inc. 913,050
- --------------------------------------------------------------------------------
10,000 Public Service Enterprise
Group Inc. 384,700
- --------------------------------------------------------------------------------
22,000 XCEL Energy Inc. 297,440
- --------------------------------------------------------------------------------
3,408,190
- --------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 3.8%
- -------------------------------------------------------------------------------
10,000 Apache Corp. 572,500
- --------------------------------------------------------------------------------
40,000 BP Prudhoe Bay Royalty Trust 589,200
- --------------------------------------------------------------------------------
15,000 Burlington Resources, Inc. 694,650
- --------------------------------------------------------------------------------
65,000 Comstock Resources Inc.(1) 721,500
- --------------------------------------------------------------------------------
20,000 Dominion Resources Black
Warrior Trust 478,600
- --------------------------------------------------------------------------------
15,000 Evergreen Resources, Inc.(1) 713,250
- --------------------------------------------------------------------------------
10,000 MDU Resources Group, Inc. 297,600
- --------------------------------------------------------------------------------
28,000 Newfield Exploration Company(1) 962,920
- --------------------------------------------------------------------------------
5,000 Pogo Producing Co. 198,000
- --------------------------------------------------------------------------------
40,000 San Juan Basin Royalty Trust 606,800
- --------------------------------------------------------------------------------
190,000 Williams Companies, Inc. (The) 1,320,500
- --------------------------------------------------------------------------------
7,155,520
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.5%
- --------------------------------------------------------------------------------
100,000 Newpark Resources, Inc.(1) 469,000
- --------------------------------------------------------------------------------
25,000 Republic Services, Inc. Cl A(1) 536,500
- --------------------------------------------------------------------------------
1,005,500
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.8%
- -------------------------------------------------------------------------------
25,000 American Express Co. 946,500
- --------------------------------------------------------------------------------
35,000 American Home Mortgage
Holdings Inc. 426,650
- --------------------------------------------------------------------------------
10,000 Countrywide Financial Corporation 676,000
- --------------------------------------------------------------------------------
40,000 LendingTree, Inc.(1) 568,200
- --------------------------------------------------------------------------------
15,000 Fannie Mae 1,085,850
- --------------------------------------------------------------------------------
250,000 Metris Companies Inc. 902,500
- --------------------------------------------------------------------------------
15,000 NCO Group, Inc.(1) 250,950
- --------------------------------------------------------------------------------
3,500 SLM Corporation 392,000
- --------------------------------------------------------------------------------
5,248,650
- --------------------------------------------------------------------------------
FOOD & BEVERAGE -- 0.6%
- -------------------------------------------------------------------------------
40,000 Delta and Pine Land Company 930,400
- --------------------------------------------------------------------------------
10,000 Flowers Foods Inc. 283,000
- --------------------------------------------------------------------------------
1,213,400
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.2%
- --------------------------------------------------------------------------------
15,000 Potlatch Corp. 357,750
- --------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 0.4%
- --------------------------------------------------------------------------------
25,000 WGL Holdings Inc. 674,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- -------
6
Veedot - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
GROCERY STORES -- 0.5%
- --------------------------------------------------------------------------------
15,000 Whole Foods Market, Inc.(1) $890,025
- --------------------------------------------------------------------------------
HEAVY ELECTRICAL EQUIPMENT -- 0.2%
- --------------------------------------------------------------------------------
105,000 GrafTech International Ltd.(1) 422,100
- --------------------------------------------------------------------------------
HOME PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------
10,000 Central Garden and Pet Co.(1) 242,000
- --------------------------------------------------------------------------------
20,000 Estee Lauder Companies, Inc. Cl A 650,000
- --------------------------------------------------------------------------------
5,000 Fortune Brands, Inc. 242,000
- --------------------------------------------------------------------------------
45,000 Helen of Troy Ltd.(1) 634,050
- --------------------------------------------------------------------------------
1,768,050
- --------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 2.3%
- --------------------------------------------------------------------------------
45,000 Applied Films Corporation(1) 978,300
- --------------------------------------------------------------------------------
25,000 Briggs & Stratton Corp. 1,128,500
- --------------------------------------------------------------------------------
15,000 CLARCOR Inc. 561,150
- --------------------------------------------------------------------------------
10,000 Genlyte Group Inc.(1) 377,050
- --------------------------------------------------------------------------------
5,000 Ingersoll-Rand Company 220,400
- --------------------------------------------------------------------------------
10,000 Pentair, Inc. 385,400
- --------------------------------------------------------------------------------
20,000 Wilson Greatbatch
Technologies Inc.(1) 655,800
- --------------------------------------------------------------------------------
4,306,600
- --------------------------------------------------------------------------------
INFORMATION SERVICES -- 3.4%
- --------------------------------------------------------------------------------
15,000 Apollo Group Inc. Cl A(1) 812,400
- --------------------------------------------------------------------------------
15,000 Corinthian Colleges, Inc.(1) 685,875
- --------------------------------------------------------------------------------
35,000 Costar Group Inc.(1) 779,625
- --------------------------------------------------------------------------------
20,000 Fair, Isaac and Co., Inc. 1,041,600
- --------------------------------------------------------------------------------
15,000 Getty Images Inc.(1) 507,750
- --------------------------------------------------------------------------------
10,000 Paychex, Inc. 311,450
- --------------------------------------------------------------------------------
15,000 ProQuest Co.(1) 376,200
- --------------------------------------------------------------------------------
50,000 Resources Connection, Inc.(1) 1,099,000
- --------------------------------------------------------------------------------
15,000 SOURCECORP, Incorporated(1) 236,475
- --------------------------------------------------------------------------------
60,000 WebMD Corporation(1) 579,000
- --------------------------------------------------------------------------------
6,429,375
- --------------------------------------------------------------------------------
INTERNET -- 3.9%
- --------------------------------------------------------------------------------
15,000 Amazon.com, Inc.(1) 430,125
- --------------------------------------------------------------------------------
75,000 Ask Jeeves, Inc.(1) 619,125
- --------------------------------------------------------------------------------
10,000 eBay Inc.(1) 927,650
- --------------------------------------------------------------------------------
40,000 F5 Networks, Inc.(1) 550,800
- --------------------------------------------------------------------------------
100,000 Looksmart, Ltd.(1) 338,000
- --------------------------------------------------------------------------------
35,000 Packeteer Inc.(1) 461,825
- --------------------------------------------------------------------------------
48,100 PC-Tel, Inc.(1) 444,204
- --------------------------------------------------------------------------------
60,000 United Online, Inc.(1) 1,340,700
- --------------------------------------------------------------------------------
250,000 Valueclick, Inc.(1) 1,016,250
- --------------------------------------------------------------------------------
35,000 Yahoo! Inc.(1) 867,475
- --------------------------------------------------------------------------------
100,000 Youbet.com, Inc.(1) 286,000
- --------------------------------------------------------------------------------
7,282,154
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
LEISURE -- 0.4%
- -------------------------------------------------------------------------------
25,000 Arctic Cat Inc. $453,375
- --------------------------------------------------------------------------------
75,000 Lexar Media Inc.(1) 364,125
- --------------------------------------------------------------------------------
817,500
- --------------------------------------------------------------------------------
MEDIA -- 1.6%
- -------------------------------------------------------------------------------
20,000 Gray Television, Inc. 221,000
- --------------------------------------------------------------------------------
30,000 Hispanic Broadcasting Corp.(1) 769,500
- --------------------------------------------------------------------------------
5,000 Liberty Corp. (The) 220,850
- --------------------------------------------------------------------------------
120,000 Liberty Media Corporation Cl A(1) 1,320,000
- --------------------------------------------------------------------------------
40,000 XM Satellite Radio Holdings Inc.(1) 387,200
- --------------------------------------------------------------------------------
2,918,550
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 8.3%
- -------------------------------------------------------------------------------
5,000 Advanced Neuromodulation
Systems, Inc.(1) 209,125
- -------------------------------------------------------------------------------
125,000 Align Technology, Inc.(1) 946,875
- --------------------------------------------------------------------------------
5,000 Arrow International Inc. 213,775
- --------------------------------------------------------------------------------
25,000 ArthroCare Corp.(1) 382,250
- --------------------------------------------------------------------------------
25,000 Becton Dickinson & Co. 885,000
- --------------------------------------------------------------------------------
13,000 Biomet Inc. 396,110
- --------------------------------------------------------------------------------
20,000 Boston Scientific Corp.(1) 861,000
- --------------------------------------------------------------------------------
30,000 Closure Medical Corp.(1) 541,350
- --------------------------------------------------------------------------------
25,000 Cooper Companies, Inc. (The) 697,500
- --------------------------------------------------------------------------------
10,000 Cyberonics, Inc.(1) 228,050
- --------------------------------------------------------------------------------
40,000 Cytyc Corp.(1) 527,800
- --------------------------------------------------------------------------------
35,000 Datascope Corp. 999,950
- --------------------------------------------------------------------------------
20,000 Edwards Lifesciences Corporation(1) 577,400
- --------------------------------------------------------------------------------
25,000 Exelixis Inc.(1) 212,875
- --------------------------------------------------------------------------------
10,000 ICU Medical, Inc.(1) 316,850
- --------------------------------------------------------------------------------
15,000 Inamed Corp.(1) 559,575
- --------------------------------------------------------------------------------
40,000 Integra LifeSciences Holdings(1) 1,070,000
- --------------------------------------------------------------------------------
30,000 Luminex Corporation(1) 182,700
- --------------------------------------------------------------------------------
10,000 Medtronic, Inc. 477,400
- --------------------------------------------------------------------------------
20,000 Owens & Minor Inc. 372,000
- --------------------------------------------------------------------------------
15,000 ResMed Inc.(1) 550,200
- --------------------------------------------------------------------------------
10,000 Stryker Corp. 670,100
- --------------------------------------------------------------------------------
35,000 Sybron Dental Specialties Inc.(1) 712,250
- --------------------------------------------------------------------------------
60,000 Thoratec Corp.(1) 823,800
- --------------------------------------------------------------------------------
10,000 Varian Medical Systems, Inc.(1) 538,600
- --------------------------------------------------------------------------------
25,000 VISX, Inc.(1) 391,500
- --------------------------------------------------------------------------------
25,000 Zimmer Holdings Inc.(1) 1,172,499
- --------------------------------------------------------------------------------
15,516,534
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
-------
7
Veedot - Schedule of Investments
APRIL 30, 2003 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
MEDICAL PROVIDERS & SERVICES -- 2.4%
- --------------------------------------------------------------------------------
25,000 AdvancePCS(1) $751,375
- --------------------------------------------------------------------------------
30,000 Coventry Health Care Inc.(1) 1,224,600
- --------------------------------------------------------------------------------
15,000 Odyssey HealthCare, Inc.(1) 387,675
- --------------------------------------------------------------------------------
10,000 SFBC International, Inc.(1) 155,150
- --------------------------------------------------------------------------------
40,000 Sierra Health Services, Inc.(1) 664,000
- --------------------------------------------------------------------------------
35,000 Sunrise Senior Living, Inc.(1) 945,000
- --------------------------------------------------------------------------------
5,000 UnitedHealth Group Incorporated 460,650
- --------------------------------------------------------------------------------
4,588,450
- --------------------------------------------------------------------------------
MINING & METALS -- 0.7%
- --------------------------------------------------------------------------------
45,000 Freeport-McMoRan Copper &
Gold, Inc. Cl B 778,950
- --------------------------------------------------------------------------------
25,000 Lone Star Technologies, Inc.(1) 530,750
- --------------------------------------------------------------------------------
1,309,700
- --------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 1.4%
- --------------------------------------------------------------------------------
25,000 Carmax, Inc.(1) 528,750
- --------------------------------------------------------------------------------
55,000 Ford Motor Co. 566,500
- --------------------------------------------------------------------------------
30,000 Keystone Automotive
Industries, Inc.(1) 550,500
- --------------------------------------------------------------------------------
30,000 Modine Manufacturing Co. 606,750
- --------------------------------------------------------------------------------
25,000 United Auto Group, Inc.(1) 426,250
- --------------------------------------------------------------------------------
2,678,750
- --------------------------------------------------------------------------------
OIL REFINING -- 3.4%
- --------------------------------------------------------------------------------
20,000 Amerigas Partners, L.P.(1) 522,400
- --------------------------------------------------------------------------------
20,000 Enbridge Energy Partners L.P. 912,000
- --------------------------------------------------------------------------------
25,000 Enterprise Products Partners L.P. 566,000
- --------------------------------------------------------------------------------
65,000 Frontier Oil Corp. 1,099,800
- --------------------------------------------------------------------------------
45,000 Marathon Oil Corp. 1,024,650
- --------------------------------------------------------------------------------
20,000 Sunoco, Inc. 744,200
- --------------------------------------------------------------------------------
15,000 Valero Energy Corp. 551,250
- --------------------------------------------------------------------------------
10,000 Valero L.P. 394,000
- --------------------------------------------------------------------------------
15,000 Williams Energy Partners L.P. 633,750
- --------------------------------------------------------------------------------
6,448,050
- --------------------------------------------------------------------------------
OIL SERVICES -- 2.1%
- --------------------------------------------------------------------------------
25,000 BJ Services Co.(1) 912,750
- --------------------------------------------------------------------------------
15,000 Carbo Ceramics Inc. 564,300
- --------------------------------------------------------------------------------
20,000 Maverick Tube Corp.(1) 355,800
- --------------------------------------------------------------------------------
12,500 Patterson-UTI Energy Inc.(1) 414,063
- --------------------------------------------------------------------------------
60,000 Pride International Inc.(1) 931,200
- --------------------------------------------------------------------------------
40,000 Unit Corporation(1) 784,000
- --------------------------------------------------------------------------------
3,962,113
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE -- 3.7%
- --------------------------------------------------------------------------------
10,000 Allstate Corporation $377,900
- --------------------------------------------------------------------------------
35,000 American Financial
Group, Inc. 776,300
- --------------------------------------------------------------------------------
300 Berkshire Hathaway Inc. Cl B(1) 699,600
- --------------------------------------------------------------------------------
30,000 First American Financial
Corp. (The) 795,000
- --------------------------------------------------------------------------------
30,000 HCC Insurance Holdings, Inc. 825,000
- --------------------------------------------------------------------------------
15,000 LandAmerica Financial
Group, Inc. 616,050
- --------------------------------------------------------------------------------
30,000 Odyssey Re Holdings Corp. 630,000
- --------------------------------------------------------------------------------
10,000 Progressive Corp. 680,000
- --------------------------------------------------------------------------------
25,000 RLI Corp. 738,750
- --------------------------------------------------------------------------------
30,000 Unitrin, Inc. 741,300
- --------------------------------------------------------------------------------
6,879,900
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 3.5%
- --------------------------------------------------------------------------------
10,000 Centerpoint Properties Corp. 579,500
- --------------------------------------------------------------------------------
20,000 Corporate Office Properties Trust 305,000
- --------------------------------------------------------------------------------
25,000 Corrections Corporation
of America(1) 531,250
- --------------------------------------------------------------------------------
15,000 Developers Diversified Realty Corp. 378,000
- --------------------------------------------------------------------------------
10,000 EastGroup Properties 259,800
- --------------------------------------------------------------------------------
35,000 Entertainment Properties Trust 943,250
- --------------------------------------------------------------------------------
25,000 Home Properties of New York, Inc. 868,250
- --------------------------------------------------------------------------------
15,000 Kimco Realty Corporation 543,000
- --------------------------------------------------------------------------------
15,000 Macerich Company (The) 495,000
- --------------------------------------------------------------------------------
10,000 Redwood Trust, Inc. 332,400
- --------------------------------------------------------------------------------
30,000 Regency Centers Corp. 990,000
- --------------------------------------------------------------------------------
15,000 Thornburg Mortgage Inc. 336,000
- --------------------------------------------------------------------------------
6,561,450
- --------------------------------------------------------------------------------
RESTAURANTS -- 1.2%
- --------------------------------------------------------------------------------
25,000 Applebee's International Inc. 686,250
- --------------------------------------------------------------------------------
35,000 CEC Entertainment Inc.(1) 1,053,850
- --------------------------------------------------------------------------------
20,000 Triarc Companies, Inc.(1) 554,000
- --------------------------------------------------------------------------------
2,294,100
- --------------------------------------------------------------------------------
SECURITIES & ASSET MANAGEMENT -- 0.6%
- --------------------------------------------------------------------------------
10,000 Goldman Sachs
Group, Inc. (The) 759,000
- --------------------------------------------------------------------------------
30,000 Janus Capital Group Inc. 417,000
- --------------------------------------------------------------------------------
1,176,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- -------
8
Veedot - Schedule of Investments
APRIL 30, 2003 (UNAUDITED
Shares Value
- --------------------------------------------------------------------------------
SEMICONDUCTOR -- 6.7%
- --------------------------------------------------------------------------------
100,000 Advanced Micro Devices, Inc.(1) $744,000
- --------------------------------------------------------------------------------
80,000 Altera Corp.(1) 1,264,400
- --------------------------------------------------------------------------------
60,000 Amkor Technology, Inc.(1) 453,300
- --------------------------------------------------------------------------------
20,000 Analog Devices, Inc.(1) 662,400
- --------------------------------------------------------------------------------
60,000 Broadcom Corp.(1) 1,073,100
- --------------------------------------------------------------------------------
60,000 Intel Corporation 1,104,300
- --------------------------------------------------------------------------------
40,000 Microchip Technology Inc. 831,800
- --------------------------------------------------------------------------------
60,000 OmniVision Technologies, Inc.(1) 1,456,800
- --------------------------------------------------------------------------------
20,000 Power Integrations, Inc.(1) 443,100
- --------------------------------------------------------------------------------
75,000 Rainbow Technologies Inc.(1) 670,125
- --------------------------------------------------------------------------------
55,000 SanDisk Corp.(1) 1,330,450
- --------------------------------------------------------------------------------
50,000 Silicon Laboratories Inc.(1) 1,422,250
- --------------------------------------------------------------------------------
35,000 Standard Microsystems Corp.(1) 441,525
- --------------------------------------------------------------------------------
20,000 Texas Instruments Inc. 369,800
- --------------------------------------------------------------------------------
10,000 Xilinx, Inc.(1) 270,750
- --------------------------------------------------------------------------------
12,538,100
- --------------------------------------------------------------------------------
SPECIALTY STORES -- 1.4%
- --------------------------------------------------------------------------------
15,000 Best Buy Co., Inc.(1) 518,700
- --------------------------------------------------------------------------------
30,000 Brown Shoe Company, Inc. 876,900
- --------------------------------------------------------------------------------
50,000 Chronimed, Inc.(1) 410,750
- --------------------------------------------------------------------------------
75,000 Officemax Inc.(1) 423,750
- --------------------------------------------------------------------------------
20,000 Tuesday Morning Corporation(1) 467,800
- --------------------------------------------------------------------------------
2,697,900
- --------------------------------------------------------------------------------
TELEPHONE -- 0.5%
- --------------------------------------------------------------------------------
15,000 CenturyTel Inc. 441,750
- --------------------------------------------------------------------------------
163,547 Time Warner Telecom Inc. Cl A(1) 587,134
- --------------------------------------------------------------------------------
1,028,884
- --------------------------------------------------------------------------------
THRIFTS -- 0.3%
- --------------------------------------------------------------------------------
10,000 Capitol Federal Financial 311,700
- --------------------------------------------------------------------------------
10,000 FirstFed Financial Corp.(1) 324,900
- --------------------------------------------------------------------------------
636,600
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
TOBACCO -- 0.3%
- --------------------------------------------------------------------------------
20,000 UST Inc. $626,600
- --------------------------------------------------------------------------------
TRUCKING, SHIPPING &
AIR FREIGHT -- 1.5%
- --------------------------------------------------------------------------------
20,000 C.H. Robinson Worldwide, Inc. 737,800
- --------------------------------------------------------------------------------
15,000 Expeditors International of
Washington, Inc. 545,700
- --------------------------------------------------------------------------------
50,000 General Maritime Corp.(1) 434,500
- --------------------------------------------------------------------------------
150,000 OMI Corp.(1) 727,500
- --------------------------------------------------------------------------------
20,000 Overseas Shipholding Group, Inc. 376,200
- --------------------------------------------------------------------------------
2,821,700
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 0.7%
- --------------------------------------------------------------------------------
70,000 Boston Communications
Group(1) 1,262,100
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $166,637,604) 185,302,590
- -------------------------------------------------------------------------------
===============================================================================
TEMPORARY CASH INVESTMENTS -- 1.5%
Repurchase Agreement, Deutsche
Bank, Inc., (U.S. Treasury obligations), in a
joint trading account at 1.23%,
dated 4/30/03, due 5/1/03
(Delivery value $2,900,099)
(Cost $2,900,000) 2,900,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $169,537,604) $188,202,590
===============================================================================
===============================================================================
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
See Notes to Financial Statements.
-------
9
Statement of Assets and Liabilities
APRIL 30, 2003 (UNAUDITED)
================================================================================
ASSETS
- --------------------------------------------------------------------
Investment securities, at value (cost of $169,537,604) $188,202,590
- --------------------------------------------------------------------
Cash 233,670
- --------------------------------------------------------------------
Receivable for investments sold 14,126,809
- --------------------------------------------------------------------
Dividends and interest receivable 96,411
- --------------------------------------------------------------------------------
202,659,480
- --------------------------------------------------------------------------------
================================================================================
LIABILITIES
Payable for investments purchased 15,354,918
- --------------------------------------------------------------------
Accrued management fees 221,434
- --------------------------------------------------------------------------------
15,576,352
- --------------------------------------------------------------------------------
NET ASSETS $187,083,128
================================================================================
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $349,797,067
- --------------------------------------------------------------------
Accumulated net investment loss (359,196)
- --------------------------------------------------------------------
Accumulated net realized loss on investment transactions (181,019,729)
- --------------------------------------------------------------------
Net unrealized appreciation on investments 18,664,986
- --------------------------------------------------------------------------------
$187,083,128
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $177,857,566
- --------------------------------------------------------------------
Shares outstanding 47,099,508
- --------------------------------------------------------------------
Net asset value per share $3.78
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $9,225,562
- --------------------------------------------------------------------
Shares outstanding 2,429,732
- --------------------------------------------------------------------
Net asset value per share $3.80
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- -------
10
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
================================================================================
INVESTMENT LOSS
INCOME:
- --------------------------------------------------------------------
Dividends $ 979,829
- --------------------------------------------------------------------
Interest 23,575
- --------------------------------------------------------------------------------
1,003,404
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 1,360,037
- --------------------------------------------------------------------
Directors' fees and expenses 1,195
- --------------------------------------------------------------------
Other expenses 1,368
- --------------------------------------------------------------------------------
1,362,600
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (359,196)
- --------------------------------------------------------------------------------
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investment transactions (6,700,679)
- --------------------------------------------------------------------
Change in net unrealized appreciation on investments 6,859,193
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 158,514
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (200,682)
================================================================================
See Notes to Financial Statements.
-------
11
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2002
- --------------------------------------------------------------------------------
DECREASE IN NET ASSETS 2003 2002
================================================================================
OPERATIONS
Net investment loss $ (359,196) $ (705,290)
- --------------------------------------------------
Net realized loss (6,700,679) (30,555,408)
- --------------------------------------------------
Change in net unrealized appreciation 6,859,193 1,516,500
- --------------------------------------------------------------------------------
Net decrease in net assets resulting
from operations (200,682) (29,744,198)
- --------------------------------------------------------------------------------
================================================================================
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets from
capital share transactions (8,876,695) (14,862,949)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (9,077,377) (44,607,147)
================================================================================
NET ASSETS
Beginning of period 196,160,505 240,767,652
- --------------------------------------------------------------------------------
End of period $187,083,128 $196,160,505
================================================================================
Accumulated net investment loss $(359,196) --
================================================================================
See Notes to Financial Statements.
- -------
12
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Veedot Fund (the fund) is one fund in a
series issued by the corporation. The fund is non-diversified under the 1940
Act. The fund's investment objective is to seek long-term capital growth. The
fund pursues its objective by investing primarily in common stocks that
management believes to have better than average prospects for appreciation. The
fund generally invests in companies with small, medium, and large market
capitalization. The following is a summary of the fund's significant accounting
policies.
MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the
Institutional Class, and the Advisor Class. The share classes differ principally
in their respective shareholder servicing and distribution expenses and
arrangements. All shares of the fund represent an equal pro rata interest in
the assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Income, non-class specific expenses, and realized and
unrealized capital gains and losses of the fund are allocated to each class of
shares based on their relative net assets. Sale of the Advisor Class had not
commenced as of April 30, 2003.
SECURITY VALUATIONS -- Securities traded primarily on a principal securities
exchange are valued at the last reported sales price, or at the mean of the
latest bid and asked prices where no last sales price is available. Depending on
local convention or regulation, securities traded over-the-counter are valued at
the mean of the latest bid and asked prices, the last sales price, or the
official close price. Debt securities not traded on a principal securities
exchange are valued through a commercial pricing service or at the mean of the
most recent bid and asked prices. Discount notes are valued through a
commercial pricing service. When valuations are not readily available,
securities are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade
date. Net realized gains and losses are determined on the identified cost basis,
which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The fund may enter into stock index futures contracts in
order to manage the fund's exposure to changes in market conditions. One of the
risks of entering into futures contracts is the possibility that the change in
value of the contract may not correlate with the changes in value of the
underlying securities. Upon entering into a futures contract, the fund is
required to deposit either cash or securities in an amount equal to a certain
percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the fund. The
variation margin is equal to the daily change in the contract value and is
recorded as unrealized gains and losses. The fund recognizes a realized gain or
loss when the contract is closed or expires. Net realized and unrealized gains
or losses occurring during the holding period of futures contracts are a
component of realized gain (loss) on investment transactions and unrealized
appreciation (depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.
(continued)
-------
13
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAX STATUS -- It is the fund's policy to distribute all net investment
income and net realized gains to shareholders and to otherwise qualify as a
regulated investment company under provisions of the Internal Revenue Code.
Accordingly, no provision has been made for federal or state income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on
the ex-dividend date. Distributions from net investment income and net realized
gains, if any, are generally declared and paid annually.
USE OF ESTIMATES -- The financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require management to make certain estimates and assumptions at the date of
the financial statements. Actual results could differ from these estimates.
2. FEES AND TRANSACTIONS WITH RELATED PARTIES
MANAGEMENT FEES -- The corporation has entered into a Management Agreement with
ACIM, under which ACIM provides the fund with investment advisory and management
services in exchange for a single, unified management fee per class. The
Agreement provides that all expenses of the fund, except brokerage commissions,
taxes, interest, fees and expenses of those directors who are not considered
"interested persons" as defined in the 1940 Act (including counsel fees) and
extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid
monthly in arrears based on each class's pro rata share of the fund's average
daily closing net assets during the previous month.
The annual management fee schedule for each class is as follows:
INVESTOR INSTITUTIONAL ADVISOR
CLASS CLASS CLASS
- -------------------------------------------------------------------------------
===============================================================================
FUND AVERAGE NET ASSETS
- -----------------------------------
First $500 million 1.50% 1.30% 1.25%
- -------------------------------------------------------------------------------
Next $500 million 1.45% 1.25% 1.20%
- -------------------------------------------------------------------------------
Over $1 billion 1.40% 1.20% 1.15%
- -------------------------------------------------------------------------------
The effective annual management fee for the six months ended April 30, 2003,
was 1.50% for the Investor Class and 1.30% for the Institutional Class.
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan (the plan) for the Advisor Class,
pursuant to Rule 12b-1 of the 1940 Act. The plan provides that the Advisor
Class will pay American Century Investment Services, Inc. (ACIS) an annual
distribution fee equal to 0.25% and an annual service fee equal to 0.25%. The
fees are computed daily and paid monthly in arrears based on the Advisor Class's
average daily closing net assets during the previous month. The distribution fee
provides compensation for expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIS, its affiliates or independent third party providers.
RELATED PARTIES -- Certain officers and directors of the corporation are also
officers and/or directors, and, as a group, controlling stockholders of American
Century Companies, Inc. (ACC), the parent of the corporation's investment
manager, ACIM, the distributor of the corporation, ACIS, and the corporation's
transfer agent, American Century Services Corporation.
During the six months ended April 30, 2003, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset
Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P.
Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank
line of credit agreement with JPM.
(continued)
- -------
14
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term investments,
for the six months ended April 30, 2003, were $329,297,539 and $339,768,967,
respectively.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
- --------------------------------------------------------------------------------
================================================================================
INVESTOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 200,000,000
================================================================================
Sold 1,147,488 $ 4,176,514
- --------------------------------------------------
Redeemed (3,791,144) (13,536,486)
- --------------------------------------------------------------------------------
Net decrease (2,643,656) $(9,359,972)
================================================================================
YEAR ENDED OCTOBER 31, 2002
Sold 2,795,235 $ 12,674,077
- --------------------------------------------------
Redeemed (6,537,630) (27,838,795)
- --------------------------------------------------------------------------------
Net decrease (3,742,395) $(15,164,718)
================================================================================
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
SHARES AUTHORIZED 50,000,000
================================================================================
Sold 264,379 $975,742
- --------------------------------------------------------------
Redeemed (135,407)
(492,465)
- --------------------------------------------------------------------------------
Net increase 128,972 $483,277
================================================================================
YEAR ENDED OCTOBER 31, 2002
Sold 532,774 $2,369,124
- --------------------------------------------------------------
Redeemed (462,472) (2,067,355)
- --------------------------------------------------------------------------------
Net increase 70,302 $ 301,769
================================================================================
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SHARES AUTHORIZED 50,000,000
================================================================================
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $620,000,000
unsecured bank line of credit agreement with JPM, which was renewed from
$650,000,000 effective December 17, 2002. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. Borrowings
under the agreement bear interest at the Federal Funds rate plus 0.50%. The
fund did not borrow from the line during the six months ended April 30, 2003.
(continued)
-------
15
Notes to Financial Statements
APRIL 30, 2003 (UNAUDITED)
6. FEDERAL TAX INFORMATION
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes, and may result in reclassification among certain
capital accounts.
As of April 30, 2003, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $170,962,471
================================================================================
Gross tax appreciation of investments $18,641,349
- --------------------------------------------------------------------
Gross tax depreciation of investments (1,401,230)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $17,240,119
================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2002, the fund had accumulated capital losses of $172,894,183,
which represent net capital loss carryovers that may be used to offset future
realized capital gains for federal income tax purposes. The capital loss
carryovers expire in 2008 through 2010.
- -------
16
Veedot - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000(2)
======================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $3.77 $4.32 $5.92 $5.00
- ------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------
Net Investment Loss(3) (0.01) (0.01) --(4) (0.06)
- --------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.02 (0.54) (1.60) 0.98
- ------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.01 (0.55) (1.60) 0.92
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $3.78 $3.77 $4.32 $5.92
======================================================================================================
TOTAL RETURN(5) 0.27% (12.73)% (27.03)% 18.40%
======================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.50%(6) 1.50% 1.50% 1.50%(6)
- --------------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.40)%(6) (0.31)% (0.09)% (0.92)%(6)
- --------------------------------------------
Portfolio Turnover Rate 183% 330% 410% 250%
- --------------------------------------------
Net Assets, End of Period (in thousands) $177,858 $187,451 $231,108 $352,130
- ------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) November 30, 1999 (inception) through October 31, 2000.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(6) Annualized.
See Notes to Financial Statements.
-------
17
Veedot - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -----------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------------------------------------------------------------------
2003(1) 2002 2001 2000(2)
=====================================================================================================
PER-SHARE DATA
Net Asset Value, Beginning of Period $3.79 $4.33 $5.92 $6.12
- -----------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------
Net Investment Income (Loss)(3) --(4) --(4) 0.01 (0.01)
- --------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.01 (0.54) (1.60) (0.19)
- -----------------------------------------------------------------------------------------------------
Total From Investment Operations 0.01 (0.54) (1.59) (0.20)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $3.80 $3.79 $4.33 $5.92
=====================================================================================================
TOTAL RETURN(5) 0.26% (12.47)% (26.86)% (3.27)%
=====================================================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.30%(6) 1.30% 1.30% 1.30%(6)
- --------------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.20)%(6) (0.11)% 0.11% (0.52)%(6)
- --------------------------------------------
Portfolio Turnover Rate 183% 330% 410% 250%(7)
- --------------------------------------------
Net Assets, End of Period (in thousands) $9,226 $8,709 $9,659 $12,218
- -----------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2003 (unaudited).
(2) August 1, 2000 (commencement of sale) through October 31, 2000.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of net investment income and capital
gains distributions, if any. Total returns for periods less than one year are
not annualized. The total return of the classes may not precisely reflect the
class expense differences because of the impact of calculating the net asset
values to two decimal places. If net asset values were calculated to three
decimal places, the total return differences would more closely reflect the
class expense differences. The calculation of net asset values to two decimal
places is made in accordance with SEC guidelines and does not result in any
gain or loss of value between one class and another.
(6) Annualized.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the period November 30, 1999 (inception of fund) through
October 31, 2000.
See Notes to Financial Statements.
- -------
18
Share Class Information
Three classes of shares are authorized for sale by the fund: Investor Class,
Institutional Class, and Advisor Class. The total expense ratio of Advisor Class
shares is higher than those of Investor Class shares; the total expense ratio of
Institutional Class shares is lower.
INVESTOR CLASS shares are available for purchase in two ways: 1) directly from
American Century without any commissions or other fees; or 2) through a
broker-dealer, which may require payment of a transaction fee to the broker.
INSTITUTIONAL CLASS shares are available to large investors such as endowments,
foundations, and retirement plans, and to financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million ($3 million
for endowments and foundations) 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
Institutional Class shares is 0.20% less than the total expense ratio of
Investor Class shares.
ADVISOR CLASS shares are sold primarily through institutions such as banks,
broker-dealers, insurance companies, and financial advisors. Advisor Class
shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee.
The total expense ratio of Advisor Class shares is 0.25% higher than the total
expense ratio of Investor Class shares.
All classes of shares represent a pro rata interest in the fund and generally
have the same rights and preferences.
-------
19
Retirement Account Information
As required by law, any distributions you receive from an IRA or certain 403(b)
and qualified plans [those not eligible for rollover to an IRA or to another
qualified plan] are subject to federal income tax withholding, unless you elect
not to have withholding apply. Tax will be withheld on the total amount
withdrawn even though you may be receiving amounts that are not subject to
withholding, such as nondeductible contributions. In such case, excess amounts
of withholding could occur. You may adjust your withholding election so that a
greater or lesser amount will be withheld.
If you don't want us to withhold on this amount, you must notify us to not
withhold the federal income tax. 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 notice not to withhold federal
income tax prior to the withdrawal. You may notify us in writing or in certain
situations by telephone or through other electronic means. You have the right to
revoke your withholding election at any time and any election you make may
remain in effect until revoked by filing a new election.
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.
State tax will be withheld if, at the time of your distribution, your address is
within one of the mandatory withholding states and you have federal income tax
withheld. State taxes will be withheld from your distribution in accordance with
the respective state rules.
- -------
20
Comparative Indices
The following indices are used in the report to serve as fund performance
comparisons. They are not investment products available for purchase.
The RUSSELL 1000 INDEX is a market-capitalization weighted, large-cap index
created by Frank Russell Company to measure the performance of the 1,000
largest companies in the Russell 3000 Index (the 3,000 largest publicly traded
U.S. companies, based on total market capitalization).
The RUSSELL 2000 INDEX is a market-capitalization weighted index created by
Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization.
The WILSHIRE 5000 TOTAL MARKET INDEX measures the performance of all U.S.
headquartered equity securities with readily available price data.
- -------
21
Notes
- -------
22
Notes
- -------
23
Notes
- -------
24
[back cover]
CONTACT US
WWW.AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
BUSINESS, NOT-FOR-PROFIT,
EMPLOYER-SPONSORED RETIREMENT PLANS:
1-800-345-3533
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY MUTUAL FUNDS, INC.
INVESTMENT MANAGER:
American Century Investment Management, Inc.
Kansas City, Missouri
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments
P.O. Box 419200
Kansas City, MO 64141-6200
PRSRT STD
U.S. POSTAGE PAID
AMERICAN CENTURY
COMPANIES
American Century Investment Services, Inc.
SH-SAN-34844S (c)2003 American Century Services Corporation
[inside back cover-- blank]
Item 2 - N/A
Item 3 - N/A
Item 4 - N/A
Item 5 - Reserved
Item 6 - Reserved
Item 7 - N/A
Item 8 - Reserved
Item 9. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940, as amended) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
document.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Item 10. Exhibits
10(a) - N/A
10(b) - Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: American Century Mutual Funds, Inc.
By: /s/William M. Lyons
Name: William M. Lyons
Title: President (principal executive officer)
Date: June 27, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/William M. Lyons
Name: William M. Lyons
Title: President (principal executive officer)
Date: June 27, 2003
By: /s/Maryanne L. Roepke
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer and
Chief Accounting Officer (principal financial officer)
Date: June 27, 2003
