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, Missouri 64111
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(Address of principal executive offices) (Zip code)
David C. Tucker, Esq., 4500 Main Street, 9th Floor, Kansas City, Missouri 64111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
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Date of fiscal year end: October 31, 2004
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Date of reporting period: April 30, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
APRIL 30, 2004
American Century Investments
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of two steel bridges]
Ultra(reg.tm) Fund
Vista(reg.sm) Fund
[american century logo and text logo)
Table of Contents
Our Message to You........................................................ 1
ULTRA
Performance............................................................... 2
Portfolio Commentary...................................................... 3
Top Ten Holdings....................................................... 3
Top Five Industries.................................................... 4
Types of Investments in Portfolio...................................... 4
Schedule of Investments................................................... 5
VISTA
Performance............................................................... 9
Portfolio Commentary...................................................... 10
Top Ten Holdings....................................................... 10
Top Five Industries.................................................... 11
Types of Investments in Portfolio...................................... 11
Schedule of Investments................................................... 12
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...................................................... 26
OTHER INFORMATION
Share Class Information................................................... 35
Additional Information.................................................... 36
Index Definitions......................................................... 37
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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 Ultra and Vista
funds for the six months ended April 30, 2004.
The report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education &
Planning section of our site to help you with your investment strategy.
Your next shareholder report for these funds will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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
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1
Ultra - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
-------------------------------
AVERAGE ANNUAL RETURNS
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SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
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INVESTOR CLASS 21.64% -2.74% 9.37% 13.81% 11/2/81
- --------------------------------------------------------------------------------
S&P 500 INDEX 22.88% -2.26% 11.36% 13.53%(1) --
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Institutional Class 21.88% -2.55% -- 6.06% 11/14/96
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Advisor Class 21.42% -2.96% -- 6.08% 10/2/96
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C Class 20.62% -- -- 1.69% 10/29/01
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R Class -- -- -- 9.05%(2) 8/29/03
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(1) Since 10/31/81, the date nearest the Investor Class's inception for which
data are available.
(2) Returns for periods less than one year are not annualized.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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Investor Class 6.21% 36.42% 10.69% 39.75% 25.52% 27.06% -26.70% -9.83% -14.79% 21.64%
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S&P 500 Index 17.47% 30.21% 25.13% 41.07% 21.82% 10.13% -12.97% -12.63% -13.31% 22.88%
- -------------------------------------------------------------------------------------------------
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.
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2
Ultra - Portfolio Commentary
[photo of Wade Slome, Jerry Sullivan, Bruce Wimberly and Jim Stowers III]
A PORTFOLIO COMMENTARY 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 4.61%* during the six months ended April 30, 2004, outperforming
the 2.66% average gain of its large-cap growth peers tracked by Morningstar.
The Standard & Poor's 500 Index, a widely followed barometer of the broad
market, gained 6.27%. During the last year, the fund gained 21.64% compared
to the 19.70% average gain of its Morningstar peers, and a 22.88% rise for
the S&P 500.
Ultra's advance came during a stretch marked by rising corporate profits and
continued economic expansion. During the period's closing weeks, however, stock
prices came under pressure amid rising oil prices and indications that inflation
was beginning to rise. An analysis of the indices that tracked the U.S. stock
market by style and capitalization during the last six months shows that
investors preferred small- and mid-cap stocks over larger equities and
value-oriented issues over growth stocks.
The portfolio's health care holdings were the top contributors to performance.
The biggest lift was provided by manufacturers of health care equipment and
supplies. A good example is Boston Scientific, which won approval to sell its
Taxus drug-coated stent in the United States. The company reported strong
initial sales of Taxus, which props open arteries and releases medication aimed
at preventing them from closing. Other contributors from the health care
equipment industry included Varian, a maker of equipment used in radiation
treatment, and Medtronic, which makes implantable defibrillators.
Elsewhere in the health care sector, Pfizer led a rise in Ultra's pharmaceutical
stake after reporting consecutive quarters of sales growth and reaffirming its
profit forecast for 2004. UnitedHealth, the country's No. 1 health care insurer,
was another top contributor due to rising profits.
Ultra's financial holdings boosted six-month performance. The biggest lift was
provided by insurers, namely Berkshire Hathaway and American
TOP TEN HOLDINGS AS OF APRIL 30, 2004
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
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InterActiveCorp 2.5% 2.9%
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Pfizer, Inc. 2.4% 2.6%
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Microsoft Corporation 2.4% 2.9%
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Citigroup Inc. 2.2% 2.9%
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Dell Inc. 2.0% 2.9%
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Wal-Mart Stores, Inc. 2.0% 2.7%
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American International
Group, Inc. 1.8% 1.3%
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General Electric Co. 1.6% 1.7%
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Teva Pharmaceutical
Industries Ltd. ADR 1.6% 1.5%
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Procter & Gamble
Co. (The) 1.6% 1.5%
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*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
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3
Ultra - Portfolio Commentary
International Group. Both companies reported rising revenue from insurance
premiums. Diversified financial services companies Chicago Mercantile Exchange
and Citigroup also drove positive results in this sector. Citigroup, one of
Ultra's largest holdings, generated revenue growth from its consumer banking,
credit card and investment banking businesses.
The portfolio's industrial stake also turned in positive results. Led by Tyco
International, industrial conglomerates were the top contributors in this
sector. Another standout was Apollo Group, an education services provider that
offers undergraduate and graduate programs geared to working professionals. The
company reported rising revenue, profits and enrollment.
Ultra also benefited from its investments in companies that make everyday
consumer staples. This included PepsiCo, whose shares hit an all-time high after
the company reported strong profit growth led by brands such as Pepsi-Cola and
Lay's potato chips. Other contributors included Coca-Cola and Procter &
Gamble.
Not all companies catering to consumers performed well. Retailers Kohl's and
Family Dollar each declined more than 20%, and specialty stores such as Lowe's
and Home Depot turned in disappointing performances. Online businesses struggled
as well. This included InterActiveCorp, our largest holding.
Information technology companies produced mixed results and accounted for the
only sector-level detractor from performance. On the positive side, IT services
company First Data and communications equipment manufacturer QUALCOMM advanced
and contributed to Ultra's positive results. On the downside, Intel weighed on
the portfolio's semiconductor stake. The world's largest chipmaker was the top
performer in the Dow Jones Industrial Average in 2003, but declined during the
first four months of 2004. The slide began in January when the company predicted
that revenue would fall after hitting an all-time high in the fourth-quarter of
2003. Later in the period, Intel fell short of analysts' first-quarter earnings
projections.
Looking ahead, we are hopeful that improving economic conditions will support
continued profit growth. Regardless of economic and market conditions, however,
we will remain focused on trying to identify and own companies that appear best
able to sustain their accelerating growth.
TOP FIVE INDUSTRIES AS OF APRIL 30, 2004
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% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
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Pharmaceuticals 8.2% 8.0%
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Software 6.7% 6.3%
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Health Care
Equipment & Supplies 5.7% 5.3%
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Insurance 5.2% 3.7%
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Internet & Catalog Retail 5.0% 4.9%
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TYPES OF INVESTMENTS IN PORTFOLIO
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AS OF AS OF
4/30/04 10/31/03
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Common Stocks 99.1% 98.8%
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Temporary Cash
Investments 0.9% 1.2%
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4
Ultra - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 99.1%
AEROSPACE & DEFENSE -- 1.3%
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2,616,000 General Dynamics Corp. $ 244,910
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611,000 United Technologies Corp. 52,705
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297,615
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AIR FREIGHT & LOGISTICS -- 1.8%
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862,000 C.H. Robinson Worldwide, Inc. 35,376
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2,321,000 Expeditors International
of Washington, Inc.(1) 93,281
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1,988,000 FedEx Corporation 142,958
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1,975,000 United Parcel Service, Inc. Cl B 138,546
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410,161
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AIRLINES -- 0.5%
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3,964,000 JetBlue Airways Corporation(1)(2) 109,724
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AUTO COMPONENTS -- 0.2%
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2,178,000 China Yuchai International
Limited(1)(2)(3) 35,893
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AUTOMOBILES -- 1.1%
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4,614,000 Harley-Davidson, Inc. 259,860
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BEVERAGES -- 2.7%
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2,798,000 Anheuser-Busch Companies, Inc. 143,370
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4,172,000 Coca-Cola Company (The) 210,978
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5,006,000 PepsiCo, Inc.(1) 272,777
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627,125
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BIOTECHNOLOGY -- 3.4%
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3,549,000 Affymetrix Inc.(1)(2)(3) 108,457
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4,010,000 Amgen Inc.(2) 225,643
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1,076,000 Celgene Corp.(1)(2) 55,618
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1,984,000 Cephalon, Inc.(1)(2) 112,909
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1,667,000 Chiron Corp.(1)(2) 77,349
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695,000 Genentech, Inc.(2) 85,346
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949,000 Gilead Sciences, Inc.(1)(2) 57,728
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1,156,000 Invitrogen Corp.(1)(2) 83,498
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806,548
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CAPITAL MARKETS -- 2.3%
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3,165,000 Bank of New York Co., Inc. (The) 92,228
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1,249,000 Goldman Sachs Group, Inc. (The) 120,529
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505,000 Legg Mason, Inc.(1) 46,490
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2,443,000 Merrill Lynch & Co., Inc. 132,484
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2,761,000 T. Rowe Price Group Inc. 141,584
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533,315
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COMMERCIAL BANKS -- 1.3%
- --------------------------------------------------------------------------------
2,238,000 Bank of America Corp. 180,137
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2,055,000 Wells Fargo & Co. 116,025
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296,162
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Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 2.0%
- --------------------------------------------------------------------------------
3,467,000 Apollo Group Inc. Cl A(2) $ 315,081
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4,767,000 Corinthian Colleges, Inc.(2)(3) 145,966
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461,047
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COMMUNICATIONS EQUIPMENT -- 2.5%
- --------------------------------------------------------------------------------
14,699,000 Cisco Systems Inc.(2) 306,769
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2,534,000 Foundry Networks, Inc.(2) 28,634
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2,520,000 QUALCOMM Inc. 157,399
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3,486,000 UTStarcom Inc.(2) 91,856
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584,658
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COMPUTERS & PERIPHERALS -- 2.0%
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13,505,000 Dell Inc.(2) 468,759
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CONSUMER FINANCE -- 2.3%
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3,336,000 American Express Co.(1) 163,297
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4,663,000 MBNA Corporation 113,684
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6,852,000 SLM Corporation 262,500
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539,481
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DIVERSIFIED FINANCIAL SERVICES -- 3.1%
- --------------------------------------------------------------------------------
808,000 Chicago Mercantile Exchange(1) 94,778
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10,615,000 Citigroup Inc. 510,476
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1,900,000 Moody's Corp. 122,569
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727,823
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ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.6%
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1,118,000 Jabil Circuit, Inc.(2) 29,504
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2,746,000 Waters Corp.(2) 118,490
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147,994
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ENERGY EQUIPMENT & SERVICES -- 0.9%
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1,405,000 Baker Hughes Inc. 51,535
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1,847,000 Schlumberger Ltd. 108,105
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1,605,000 Transocean Inc.(2) 44,571
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204,211
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FOOD & STAPLES RETAILING -- 2.9%
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8,205,000 Wal-Mart Stores, Inc. 467,686
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3,668,399 Walgreen Co. 126,486
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1,056,000 Whole Foods Market, Inc.(1) 84,469
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678,641
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HEALTH CARE EQUIPMENT & SUPPLIES -- 5.7%
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914,000 Alcon, Inc. 67,865
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1,988,000 Baxter International, Inc. 62,920
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2,242,000 Biomet Inc. 88,559
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8,048,000 Boston Scientific Corp.(2) 331,497
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912,000 Guidant Corp. 57,465
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1,245,000 Inamed Corp.(1)(2) 73,256
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6,737,000 Medtronic, Inc. 339,949
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1,281,000 St. Jude Medical, Inc.(2) 97,689
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1,692,000 Varian Medical Systems, Inc.(2) 145,241
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1,310,000 Zimmer Holdings Inc.(2) 104,604
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1,369,045
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See Notes to Financial Statements. (continued)
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5
Ultra - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 2.2%
- --------------------------------------------------------------------------------
534,000 HCA Inc. $ 21,696
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1,302,000 Health Management
Associates, Inc. Cl A 30,115
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499,000 Patterson Dental Co.(1)(2) 36,776
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5,860,000 UnitedHealth Group Incorporated 360,274
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6,324,000 WebMD Corporation(1)(2) 55,588
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504,449
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HOTELS, RESTAURANTS & LEISURE -- 4.6%
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2,639,623 Applebee's International Inc.(3) 102,365
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2,347,000 Brinker International, Inc.(2) 90,266
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5,232,000 Carnival Corporation 223,249
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2,754,000 Cheesecake Factory Inc.(2)(3) 116,632
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2,302,000 International Game Technology 86,877
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3,271,000 Krispy Kreme
Doughnuts, Inc.(1)(2)(3) 106,340
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1,712,000 PF Chang's China
Bistro, Inc.(1)(2)(3) 83,648
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4,915,000 Starbucks Corporation(2) 190,997
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1,742,000 Wendy's International, Inc. 67,938
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1,068,312
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HOUSEHOLD DURABLES -- 0.1%
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870,000 Garmin Ltd.(1) 27,979
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HOUSEHOLD PRODUCTS -- 2.1%
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1,946,000 Colgate-Palmolive Co. 112,634
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3,489,000 Procter & Gamble Co. (The) 368,962
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481,596
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INDUSTRIAL CONGLOMERATES -- 3.3%
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1,570,000 3M Co. 135,774
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12,667,000 General Electric Co. 379,376
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9,619,000 Tyco International Ltd. 264,042
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779,192
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INSURANCE -- 5.2%
- --------------------------------------------------------------------------------
1,690,000 Aflac Inc. 71,369
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731,000 Ambac Financial Group, Inc. 50,439
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5,797,000 American International
Group, Inc. 415,354
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2,821 Berkshire Hathaway Inc. Cl A(2) 263,453
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73,870 Berkshire Hathaway Inc. Cl B(2) 230,401
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2,762,000 Marsh & McLennan
Companies, Inc. 124,566
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711,000 Progressive Corp. 62,227
- --------------------------------------------------------------------------------
1,217,809
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 5.0%
- --------------------------------------------------------------------------------
5,801,000 Amazon.com, Inc.(2) 252,111
- --------------------------------------------------------------------------------
3,460,000 eBay Inc.(2) 276,177
- --------------------------------------------------------------------------------
18,238,000 InterActiveCorp(1)(2) 581,245
- --------------------------------------------------------------------------------
2,637,000 Netflix Inc.(1)(2)(3) 66,690
- --------------------------------------------------------------------------------
1,176,223
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 2.0%
- --------------------------------------------------------------------------------
2,529,000 Digital River Inc.(1)(2)(3) $ 65,122
- --------------------------------------------------------------------------------
2,638,000 Sina Corp.(1)(2)(3) 75,183
- --------------------------------------------------------------------------------
9,223,000 VeriSign, Inc.(1)(2) 148,767
- --------------------------------------------------------------------------------
3,640,000 Yahoo! Inc.(2) 183,674
- --------------------------------------------------------------------------------
472,746
- --------------------------------------------------------------------------------
IT SERVICES -- 4.0%
- --------------------------------------------------------------------------------
6,300,000 Accenture Ltd. Cl A(2) 149,751
- --------------------------------------------------------------------------------
6,114,000 Checkfree Corp.(1)(2)(3) 183,665
- --------------------------------------------------------------------------------
2,198,000 Cognizant Technology
Solutions Corporation(2) 95,085
- --------------------------------------------------------------------------------
7,496,000 First Data Corp. 340,244
- --------------------------------------------------------------------------------
3,258,000 Paychex, Inc. 121,458
- --------------------------------------------------------------------------------
1,830,000 SunGard Data Systems Inc.(2) 47,708
- --------------------------------------------------------------------------------
937,911
- --------------------------------------------------------------------------------
MEDIA -- 3.6%
- --------------------------------------------------------------------------------
1,207,000 Clear Channel
Communications, Inc. 50,078
- --------------------------------------------------------------------------------
2,134,000 Comcast Corporation(2) 64,233
- --------------------------------------------------------------------------------
2,333,000 EchoStar Communications
Corp. Cl A(2) 77,432
- --------------------------------------------------------------------------------
1,182,000 Gannett Co., Inc. 102,456
- --------------------------------------------------------------------------------
699,000 Getty Images Inc.(1)(2) 38,165
- --------------------------------------------------------------------------------
3,531,000 Interpublic Group
of Companies, Inc.(2) 55,401
- --------------------------------------------------------------------------------
2,108,000 McGraw-Hill
Companies, Inc. (The) 166,238
- --------------------------------------------------------------------------------
3,013,000 Univision Communications
Inc. Cl A(1)(2) 101,990
- --------------------------------------------------------------------------------
2,381,000 Viacom, Inc. Cl B 92,026
- --------------------------------------------------------------------------------
3,854,000 XM Satellite Radio
Holdings Inc.(1)(2) 92,342
- --------------------------------------------------------------------------------
840,361
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.1%
- --------------------------------------------------------------------------------
2,482,000 Family Dollar Stores, Inc. 79,771
- --------------------------------------------------------------------------------
1,129,000 Kohl's Corp.(2) 47,181
- --------------------------------------------------------------------------------
2,980,000 Target Corporation 129,243
- --------------------------------------------------------------------------------
256,195
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.3%
- --------------------------------------------------------------------------------
992,000 Zebra Technologies Corp. Cl A(2) 72,704
- --------------------------------------------------------------------------------
OIL & GAS -- 2.6%
- --------------------------------------------------------------------------------
455,000 Anadarko Petroleum Corp. 24,379
- --------------------------------------------------------------------------------
3,546,000 Apache Corp. 148,471
- --------------------------------------------------------------------------------
478,000 BP plc ADR 25,286
- --------------------------------------------------------------------------------
1,019,000 Burlington Resources, Inc. 68,548
- --------------------------------------------------------------------------------
271,000 ChevronTexaco Corp. 24,797
- --------------------------------------------------------------------------------
5,814,000 Exxon Mobil Corp. 247,386
- --------------------------------------------------------------------------------
1,377,000 Occidental Petroleum Corp. 64,994
- --------------------------------------------------------------------------------
603,861
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
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6
Ultra - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------
1,102,500 Alberto-Culver Company Cl B $ 51,994
- --------------------------------------------------------------------------------
1,283,000 Avon Products, Inc. 107,772
- --------------------------------------------------------------------------------
159,766
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 8.2%
- --------------------------------------------------------------------------------
596,000 Allergan, Inc. 52,478
- --------------------------------------------------------------------------------
791,000 American Pharmaceutical
Partners Inc.(1)(2) 33,459
- --------------------------------------------------------------------------------
2,269,500 Barr Pharmaceuticals Inc.(2) 94,003
- --------------------------------------------------------------------------------
4,717,000 Eli Lilly and Company 348,162
- --------------------------------------------------------------------------------
2,310,000 Forest Laboratories, Inc. Cl A(2) 148,949
- --------------------------------------------------------------------------------
6,082,000 Johnson & Johnson 328,610
- --------------------------------------------------------------------------------
15,918,000 Pfizer, Inc. 569,227
- --------------------------------------------------------------------------------
6,080,290 Teva Pharmaceutical
Industries Ltd. ADR(1) 374,302
- --------------------------------------------------------------------------------
1,949,190
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 3.4%
- --------------------------------------------------------------------------------
1,958,000 Analog Devices, Inc. 83,411
- --------------------------------------------------------------------------------
3,808,000 Applied Materials, Inc.(2) 69,420
- --------------------------------------------------------------------------------
12,034,000 Intel Corp. 309,635
- --------------------------------------------------------------------------------
969,000 KLA-Tencor Corp.(2) 40,378
- --------------------------------------------------------------------------------
1,595,000 Maxim Integrated Products, Inc. 73,354
- --------------------------------------------------------------------------------
5,146,000 Microchip Technology Inc. 144,191
- --------------------------------------------------------------------------------
2,294,000 Taiwan Semiconductor
Manufacturing Co. Ltd. ADR(2) 21,862
- --------------------------------------------------------------------------------
1,545,000 Xilinx, Inc.(2) 51,958
- --------------------------------------------------------------------------------
794,209
- --------------------------------------------------------------------------------
SOFTWARE -- 6.7%
- --------------------------------------------------------------------------------
1,480,000 Adobe Systems Inc. 61,183
- --------------------------------------------------------------------------------
3,867,000 Computer Associates
International, Inc. 103,674
- --------------------------------------------------------------------------------
4,940,000 Electronic Arts Inc.(2) 250,063
- --------------------------------------------------------------------------------
3,632,000 Intuit Inc.(2) 154,251
- --------------------------------------------------------------------------------
21,913,000 Microsoft Corporation 569,080
- --------------------------------------------------------------------------------
12,189,000 Oracle Corp.(2) 136,761
- --------------------------------------------------------------------------------
1,776,000 Red Hat Inc.(2) 40,333
- --------------------------------------------------------------------------------
2,499,000 SAP AG ADR(1) 93,163
- --------------------------------------------------------------------------------
2,652,000 Symantec Corp.(2) 119,473
- --------------------------------------------------------------------------------
2,233,000 Veritas Software Corp.(2) 59,554
- --------------------------------------------------------------------------------
1,587,535
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.9%
- --------------------------------------------------------------------------------
2,423,000 Bed Bath & Beyond Inc.(2) $ 89,942
- --------------------------------------------------------------------------------
3,075,000 Carmax, Inc.(2) 79,704
- --------------------------------------------------------------------------------
3,130,000 Chico's FAS, Inc.(1)(2) 127,485
- --------------------------------------------------------------------------------
718,000 Dick's Sporting Goods Inc.(1)(2) 19,364
- --------------------------------------------------------------------------------
5,944,000 Home Depot, Inc.(1) 209,169
- --------------------------------------------------------------------------------
4,225,000 Lowe's Companies, Inc.(1) 219,953
- --------------------------------------------------------------------------------
1,950,000 Michaels Stores, Inc. 97,559
- --------------------------------------------------------------------------------
4,081,000 Petsmart Inc. 113,044
- --------------------------------------------------------------------------------
185,000 Tiffany & Co. 7,215
- --------------------------------------------------------------------------------
4,890,000 TJX Companies, Inc. (The)(1) 120,147
- --------------------------------------------------------------------------------
1,525,000 Weight Watchers
International Inc.(1)(2) 59,475
- --------------------------------------------------------------------------------
1,143,057
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.4%
- --------------------------------------------------------------------------------
2,296,000 Coach Inc.(2) 97,810
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 0.2%
- --------------------------------------------------------------------------------
471,000 Golden West Financial Corp. 49,507
- --------------------------------------------------------------------------------
TOBACCO -- 0.8%
- --------------------------------------------------------------------------------
3,439,000 Altria Group Inc. 190,452
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 1.1%
- --------------------------------------------------------------------------------
7,183,000 Nextel Communications, Inc.(2) 171,386
- --------------------------------------------------------------------------------
2,472,000 NII Holdings Inc. Cl B(1)(2) 86,520
- --------------------------------------------------------------------------------
257,906
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $16,846,173) 23,226,832
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.9%
- --------------------------------------------------------------------------------
Repurchase Agreement, Goldman Sachs & Co.,
(U.S. Treasury obligations), in a joint trading
account at 0.90%, dated 4/30/04, due 5/3/04
(Delivery value $96,607) 96,600
- --------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.90%, dated 4/30/04,
due 5/3/04 (Delivery value $110,708) 110,700
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $207,300) 207,300
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $17,053,473) $23,434,132
================================================================================
See Notes to Financial Statements. (continued)
- ------
7
Ultra - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED
FOR SECURITIES LENDING(4)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank AG,
(U.S. Treasury obligations), 1.04%, dated 4/30/04,
due 5/3/04 (Delivery value $5,540) $ 5,540
- --------------------------------------------------------------------------------
SHORT-TERM DEBT
- --------------------------------------------------------------------------------
$ 50,000 Bayerische Landesbank Girozentrale,
VRN, 1.09%, 5/3/04, resets daily off
the Federal Funds rate plus 0.06%
with no caps 49,974
- --------------------------------------------------------------------------------
50,000 Bayerische Landesbank Girozentrale,
VRN, 1.11%, 5/3/04, resets daily off
the Federal Funds rate plus 0.08%
with no caps 49,984
- --------------------------------------------------------------------------------
20,000 Bayerische Landesbank Girozentrale,
VRN, 1.23%, 5/3/04, resets daily off
the Federal Funds rate plus 0.20%
with no caps 20,003
- --------------------------------------------------------------------------------
79,000 Blue Herron Funding VII Ltd.,
Series 2003-7A, Class A2, VRN,
1.19%, 5/3/04, resets quarterly
off the Federal Funds rate plus
0.17% with no caps (Acquired
4/30/04, Cost $79,000)(5) 79,000
- --------------------------------------------------------------------------------
25,000 FHLMC, 5.00%, 5/15/04 25,468
- --------------------------------------------------------------------------------
36,203 FNMA, 5.625%, 5/14/04 37,000
- --------------------------------------------------------------------------------
40,000 Ford Credit Floorplan Master Owner
Trust, Series 2001-1, Class A, VRN,
1.19%, 5/17/04, resets monthly off
the 1-month LIBOR plus 0.09%
with no caps 40,007
- --------------------------------------------------------------------------------
1,500 HBOS Treasury Services plc,
1.10%, 8/31/04 1,500
- --------------------------------------------------------------------------------
50,000 ING USA Annuity and Life Insurance,
1.22%, 5/20/04 50,000
- --------------------------------------------------------------------------------
25,000 Metropolitan Life Insurance Co.,
VRN, 1.17%, 5/3/04 25,000
- --------------------------------------------------------------------------------
100,000 Morgan Stanley, VRN,
1.24%, 5/3/04 100,000
- --------------------------------------------------------------------------------
75,000 National City Bank of Indiana, VRN,
1.06%, 5/3/04, resets daily off
the Prime rate minus 2.94%
with no caps 74,968
- --------------------------------------------------------------------------------
70,000 RACERS(sm), Series 2000-7,
Class A3, VRN, 1.30%, 5/17/04,
resets monthly off the 1-month
LIBOR plus 0.20% with no caps
(Acquired 4/15/04, Cost $70,000)(5) 70,000
- --------------------------------------------------------------------------------
5,000 Security Benefit Life Insurance
Co., VRN, 1.26%, 5/7/04 5,000
- --------------------------------------------------------------------------------
25,000 Societe Generale, VRN, 1.10%,
5/3/04, resets daily off the
Federal Funds rate plus 0.07%
with no caps 24,989
- --------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
$125,000 SPARCS 2003-3, VRN, 1.42%,
5/24/04, resets quarterly off the
3-month LIBOR plus 0.30%
with no caps (Acquired 2/23/04,
Cost $125,000)(5) $125,000
- --------------------------------------------------------------------------------
16,000 Wachovia Bank N.A. Bank Note,
VRN, 1.22%, 5/3/04, resets daily off
the Federal Funds rate plus 0.19%
with no caps 16,000
- --------------------------------------------------------------------------------
4,000 Wachovia Corporation,
6.70%, 6/21/04 4,122
- --------------------------------------------------------------------------------
798,015
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $803,555) $803,555
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
LIBOR = London Interbank Offered Rate
RACERS = Restructured Asset Certificates Enhanced Returns
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.
SPARCS = Structured Product Asset Return Certificates
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective April 30, 2004.
(1) Security, or a portion thereof, was on loan as of April 30, 2004.
(2) Non-income producing.
(3) 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 company which is or was an affiliate at or during the six
months ended April 30, 2004.)
(4) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See
Note 6 in Notes to Financial Statements.)
(5) 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
purchased by the lending agent with cash collateral received for
securities lending at April 30, 2004, was $274,000 which represented
1.2% of net assets.
See Notes to Financial Statements.
- ------
8
Vista - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 43.43% 11.93% 9.83% 10.72% 11/25/83
- --------------------------------------------------------------------------------
RUSSELL MIDCAP
GROWTH INDEX 36.14% 0.80% 9.98% N/A(1) --
- --------------------------------------------------------------------------------
Institutional Class 43.56% 12.11% -- 5.54% 11/14/96
- --------------------------------------------------------------------------------
Advisor Class 43.18% 11.68% -- 4.04% 10/2/96
- --------------------------------------------------------------------------------
C Class 42.15% -- -- 2.56% 7/18/01
- --------------------------------------------------------------------------------
(1) Benchmark began 12/31/85.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------------------
Investor Class 21.46% 47.42% -23.56% 26.13% -15.78% 125.22% -22.00% -15.93% -17.07% 43.43%
- --------------------------------------------------------------------------------------------------------------
Russell Midcap
Growth Index 13.10% 33.79% 3.92% 40.84% 12.33% 53.02% -29.47% -15.01% -16.67% 36.14%
- --------------------------------------------------------------------------------------------------------------
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.
- ------
9
Vista - Portfolio Commentary
[photograph of Glenn Fogle and David M. Hollond]
A PORTFOLIO COMMENTARY FROM GLENN FOGLE AND DAVID M. HOLLOND, PORTFOLIO MANAGERS
ON THE VISTA INVESTMENT TEAM.
Vista gained 11.19%* during the six months ended April 30, 2004, far surpassing
its benchmark, the Russell Midcap Growth Index, which rose 5.74%.
Vista's performance was particularly noteworthy given that the growth style of
investing lagged its value counterpart: Looking at the Russell indices, smaller
capitalization stocks outperformed larger issues, and value stocks beat growth
offerings in all capitalization ranges. Small cap value performed best, yet
Vista outperformed the 9.09% return of the small-cap value proxy, the Russell
2000 Value Index. Vista's longer term performance is equally impressive.
Vista's advance during the six months covered by this report was achieved as the
market fought a number of headwinds. The stock market began the period with the
wind at its back as the upswing in economic growth, corporate profits and stock
returns in late 2003 carried into January. However, the rally lost its luster
when investors questioned the sustainability of the economic expansion given
weak job growth, rising oil prices and the prospect of higher interest rates.
Terrorism fears also resurfaced with the commuter-train bombings in Madrid and
continued violence in Iraq.
In this environment, Vista's health care stake was the primary boost to
performance. The biggest gains came from health care providers, including Aetna.
Moderate medical costs, solid enrollments, and expense management led to
earnings and revenues growth for this managed care company.
Investments in the pharmaceutical industry also performed well, and MGI Pharma
was a standout. The company boosted its first-quarter and full year sales
estimates for Aloxi, a drug used to prevent nausea caused by chemotherapy.
Similarly, biopharmaceutical company QLT surged when the government expanded
coverage of QLT's Visudyne drug treatment for age-related macular degeneration
(AMD). Previously, about 15%-25% of AMD patients insured by Medicare were
reimbursed for Visudyne. The decision boosted reimbursements to 50%-60% of AMD
patients.
TOP TEN HOLDINGS AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Boston Scientific Corp. 3.7% 3.9%
- --------------------------------------------------------------------------------
W Holding Company, Inc. 3.3% 3.7%
- --------------------------------------------------------------------------------
NII Holdings Inc. Cl B 3.3% 1.8%
- --------------------------------------------------------------------------------
QLT Inc. 3.3% 2.0%
- --------------------------------------------------------------------------------
NIKE, Inc. Cl B 3.0% 1.0%
- --------------------------------------------------------------------------------
Aetna Inc. 3.0% 3.5%
- --------------------------------------------------------------------------------
Corinthian Colleges, Inc. 2.9% 1.0%
- --------------------------------------------------------------------------------
Anthem, Inc. 2.9% 1.9%
- --------------------------------------------------------------------------------
Whole Foods Market, Inc. 2.7% --
- --------------------------------------------------------------------------------
National
Semiconductor Corp. 2.6% --
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
10
Vista - Portfolio Commentary
Vista's investments in companies that make and sell discretionary consumer
products advanced. Top contributors included athletic shoe manufacturers that
reported strong sales. However, not all results were positive in this sector.
Looking at media companies, satellite television provider Echostar detracted
from performance as the firm faced competitive pressure and rising costs to
acquire new viewers.
Vista earned mixed results from its technology stake, although the portfolio's
position declined less than the benchmark's position in this sector. On the
negative side, flash memory card maker SanDisk was the portfolio's top
detractor. Strong earnings and revenue growth couldn't overcome concern about
shrinking profit margins. In a similar vein, OmniVision Technologies, which
manufactures chips used in digital cameras and other electronic imaging
products, came under pressure when investors worried that increasing competition
could depress prices and hamper margins.
On the positive side, Research in Motion was the portfolio's top contributor.
The company's profits climbed as revenue more than doubled in the fourth quarter
amid broadening popularity of its BlackBerry(reg.tm) wireless e-mail device.
Vista's investment in New York Community Bank fell when the banking company
narrowly missed first-quarter earnings expectations, and analysts cited heavy
investments in mortgage-backed securities as the culprit.
Looking ahead, we are encouraged by the resilience demonstrated by the economy
and the stock market during the past six months. While it is impossible to be
certain that the progress can be sustained, we believe there will be
opportunities for companies to grow their profits at accelerating rates. Our
focus will be on owning these improving businesses in order to achieve solid
performance in the long run.
TOP FIVE INDUSTRIES AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Health Care Providers
& Services 9.4% 9.5%
- --------------------------------------------------------------------------------
Commercial Services
& Supplies 8.1% 3.6%
- --------------------------------------------------------------------------------
Health Care Equipment
& Supplies 8.0% 6.8%
- --------------------------------------------------------------------------------
Pharmaceuticals 6.9% 2.0%
- --------------------------------------------------------------------------------
Biotechnology 6.2% 2.5%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 97.0% 96.3%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 3.0% 3.7%
- --------------------------------------------------------------------------------
- ------
11
Vista - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.0%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.4%
- --------------------------------------------------------------------------------
206,043 Rockwell Collins $ 6,645
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 1.6%
- --------------------------------------------------------------------------------
435,000 CNF Inc. 15,904
- --------------------------------------------------------------------------------
210,000 Ryder System, Inc. 7,726
- --------------------------------------------------------------------------------
23,630
- --------------------------------------------------------------------------------
BEVERAGES -- 0.5%
- --------------------------------------------------------------------------------
290,000 Coca-Cola Enterprises 7,830
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 6.2%
- --------------------------------------------------------------------------------
475,000 Alkermes Inc.(1) 7,282
- --------------------------------------------------------------------------------
295,000 ImClone Systems Inc.(1) 19,729
- --------------------------------------------------------------------------------
745,000 Ligand Pharmaceuticals Inc.(1) 15,951
- --------------------------------------------------------------------------------
1,860,000 QLT Inc.(1) 50,164
- --------------------------------------------------------------------------------
93,126
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.2%
- --------------------------------------------------------------------------------
84,938 Investors Financial
Services Corporation 3,302
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 0.5%
- --------------------------------------------------------------------------------
140,000 East West BanCorp, Inc. 7,886
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES
& SUPPLIES -- 8.1%
- --------------------------------------------------------------------------------
225,000 Apollo Group Inc. Cl A(1) 20,448
- --------------------------------------------------------------------------------
445,000 Career Education Corp.(1) 28,480
- --------------------------------------------------------------------------------
735,000 Copart Inc.(1) 13,936
- --------------------------------------------------------------------------------
1,420,000 Corinthian Colleges, Inc.(1) 43,479
- --------------------------------------------------------------------------------
130,000 Strayer Education Inc. 16,246
- --------------------------------------------------------------------------------
122,589
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.7%
- --------------------------------------------------------------------------------
430,000 Andrew Corporation(1) 7,289
- --------------------------------------------------------------------------------
385,000 Research In Motion Ltd.(1) 33,402
- --------------------------------------------------------------------------------
40,691
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS -- 2.4%
- --------------------------------------------------------------------------------
1,155,000 Amphenol Corp. Cl A(1) 36,510
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.5%
- --------------------------------------------------------------------------------
255,000 BJ Services Co.(1) 11,348
- --------------------------------------------------------------------------------
210,000 Smith International, Inc.(1) 11,497
- --------------------------------------------------------------------------------
22,845
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 2.7%
- --------------------------------------------------------------------------------
505,000 Whole Foods Market, Inc. 40,395
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
295,000 Smithfield Foods Inc.(1) 7,847
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 8.0%
- --------------------------------------------------------------------------------
245,000 American Medical
Systems Holdings, Inc.(1) $ 6,360
- --------------------------------------------------------------------------------
560,000 Apogent Technologies Inc.(1) 18,155
- --------------------------------------------------------------------------------
1,365,000 Boston Scientific Corp.(1) 56,224
- --------------------------------------------------------------------------------
220,000 Fisher Scientific International(1) 12,881
- --------------------------------------------------------------------------------
200,000 Inamed Corp.(1) 11,768
- --------------------------------------------------------------------------------
500,000 Mentor Corp. 15,850
- --------------------------------------------------------------------------------
121,238
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS
& SERVICES -- 9.4%
- --------------------------------------------------------------------------------
545,000 Aetna Inc. 45,099
- --------------------------------------------------------------------------------
490,000 Anthem, Inc.(1) 43,404
- --------------------------------------------------------------------------------
560,000 Coventry Health Care Inc.(1) 23,430
- --------------------------------------------------------------------------------
400,000 DaVita Inc.(1) 20,440
- --------------------------------------------------------------------------------
270,000 PacifiCare Health Systems, Inc.(1) 9,655
- --------------------------------------------------------------------------------
142,028
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 5.6%
- --------------------------------------------------------------------------------
580,000 Mandalay Resort Group 33,321
- --------------------------------------------------------------------------------
365,000 Royal Caribbean Cruises Ltd. 14,793
- --------------------------------------------------------------------------------
225,000 Ruby Tuesday Inc.(1) 6,732
- --------------------------------------------------------------------------------
340,000 Station Casinos Inc. 15,327
- --------------------------------------------------------------------------------
515,000 WMS Industries Inc.(1) 14,544
- --------------------------------------------------------------------------------
84,717
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 2.1%
- --------------------------------------------------------------------------------
100,000 Fortune Brands, Inc. 7,625
- --------------------------------------------------------------------------------
255,000 Helen of Troy Ltd.(1) 8,479
- --------------------------------------------------------------------------------
195,000 Jarden Corp.(1) 7,254
- --------------------------------------------------------------------------------
185,000 Stanley Works (The) 7,864
- --------------------------------------------------------------------------------
31,222
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
280,000 Rayovac Corporation(1) 7,462
- --------------------------------------------------------------------------------
MACHINERY -- 2.3%
- --------------------------------------------------------------------------------
340,000 Deere & Co. 23,134
- --------------------------------------------------------------------------------
140,000 Illinois Tool Works Inc. 12,069
- --------------------------------------------------------------------------------
35,203
- --------------------------------------------------------------------------------
MEDIA(2)
- --------------------------------------------------------------------------------
-- KDG Investments Limited
Partnership (Acquired
7/7/00-5/15/01, Cost $20,000)(1)(3)(4) 557
- --------------------------------------------------------------------------------
OIL & GAS -- 2.9%
- --------------------------------------------------------------------------------
125,000 Murphy Oil Corp. 8,563
- --------------------------------------------------------------------------------
360,000 Western Gas Resources Inc. 19,602
- --------------------------------------------------------------------------------
590,000 XTO Energy Inc. 15,753
- --------------------------------------------------------------------------------
43,918
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
12
Vista - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 3.7%
- --------------------------------------------------------------------------------
90,000 Avon Products, Inc. $ 7,560
- --------------------------------------------------------------------------------
690,000 Estee Lauder Companies, Inc. Cl A 31,540
- --------------------------------------------------------------------------------
215,000 NBTY, Inc.(1) 7,989
- --------------------------------------------------------------------------------
355,000 Nu Skin Enterprises Inc., Cl A 8,403
- --------------------------------------------------------------------------------
55,492
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.9%
- --------------------------------------------------------------------------------
1,305,000 Elan Corp. plc ADR(1) 28,188
- --------------------------------------------------------------------------------
157,369 Eon Labs Inc.(1) 10,347
- --------------------------------------------------------------------------------
42,415 IVAX Corp.(1) 903
- --------------------------------------------------------------------------------
560,000 Medicis Pharmaceutical Corp. Cl A 24,035
- --------------------------------------------------------------------------------
630,000 MGI Pharma Inc.(1) 38,948
- --------------------------------------------------------------------------------
54,974 Salix Pharmaceuticals Ltd.(1) 1,700
- --------------------------------------------------------------------------------
104,121
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.8%
- --------------------------------------------------------------------------------
340,000 Yellow Roadway Corp.(1) 11,577
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 3.6%
- --------------------------------------------------------------------------------
95,000 International Rectifier Corp.(1) 3,766
- --------------------------------------------------------------------------------
965,000 National Semiconductor Corp.(1) 39,362
- --------------------------------------------------------------------------------
490,000 OmniVision Technologies, Inc.(1) 10,928
- --------------------------------------------------------------------------------
54,056
- --------------------------------------------------------------------------------
SOFTWARE -- 5.3%
- --------------------------------------------------------------------------------
240,000 Activision, Inc.(1) 3,614
- --------------------------------------------------------------------------------
825,000 Check Point Software
Technologies(1) 19,330
- --------------------------------------------------------------------------------
295,000 Hyperion Solutions Corp.(1) 11,322
- --------------------------------------------------------------------------------
2,460,000 Networks Associates Inc.(1) 38,573
- --------------------------------------------------------------------------------
165,000 Symantec Corp.(1) 7,433
- --------------------------------------------------------------------------------
80,272
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 3.0%
- --------------------------------------------------------------------------------
190,000 AnnTaylor Stores Corp.(1) 7,701
- --------------------------------------------------------------------------------
185,000 Chico's FAS, Inc.(1) 7,535
- --------------------------------------------------------------------------------
70,000 O'Reilly Automotive, Inc.(1) 3,142
- --------------------------------------------------------------------------------
695,000 Pep Boys-Manny,
Moe & Jack (The) 19,092
- --------------------------------------------------------------------------------
170,000 Urban Outfitters Inc.(1) 7,849
- --------------------------------------------------------------------------------
45,319
- --------------------------------------------------------------------------------
TEXTILES, APPAREL
& LUXURY GOODS -- 5.5%
- --------------------------------------------------------------------------------
360,000 Coach Inc.(1) $ 15,336
- --------------------------------------------------------------------------------
630,000 NIKE, Inc. Cl B 45,329
- --------------------------------------------------------------------------------
100,000 Puma AG Rudolf
Dassler Sport ORD 22,996
- --------------------------------------------------------------------------------
83,661
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 4.8%
- --------------------------------------------------------------------------------
865,000 New York Community
Bancorp Inc. 21,686
- --------------------------------------------------------------------------------
2,960,000 W Holding Company, Inc. 50,438
- --------------------------------------------------------------------------------
72,124
- --------------------------------------------------------------------------------
TRADING COMPANIES
& DISTRIBUTORS -- 2.0%
- --------------------------------------------------------------------------------
290,000 Fastenal Company 15,912
- --------------------------------------------------------------------------------
510,000 MSC Industrial Direct Co. 14,617
- --------------------------------------------------------------------------------
30,529
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 3.3%
- --------------------------------------------------------------------------------
1,440,000 NII Holdings Inc. Cl B(1) 50,400
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,211,037) 1,467,192
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 3.0%
- --------------------------------------------------------------------------------
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations), in a
joint trading account at 0.90%, dated 4/30/04,
due 5/3/04 (Delivery value $45,103)
(Cost $45,100) 45,100
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $1,256,137) $1,512,292
================================================================================
See Notes to Financial Statements. (continued)
- ------
13
Vista - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
($ IN THOUSANDS)
Contracts to Sell Settlement Date Value Unrealized Loss
- --------------------------------------------------------------------------------
7,151,398 EURO 5/28/04 $ 8,564 $(107)
- --------------------------------------------------------------------------------
9,492,065 EURO 5/28/04 11,367 (146)
- --------------------------------------------------------------------------------
14,524,004 EURO 5/28/04 17,394 (217)
- --------------------------------------------------------------------------------
$37,325 $(470)
=======================================
(Value on Settlement Date $36,855)
*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) Category is less than 0.05% of investment securities.
(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, 2004, was $557, which
represented 0.04% of net assets.
(4) Indicates a fair valued security which has not been valued utilizing an
independent quote but has been valued pursuant to guidelines established by
the Board of Directors. The aggregate value of fair valued securities at
April 30, 2004, was $557, which represented 0.04% of net assets.
See Notes to Financial Statements.
- -----
14
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) ULTRA VISTA
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities -- unaffiliated,
at value (cost of $16,139,221 and
$1,256,137, respectively) -- including
$493,082 and $- of securities loaned,
respectively $22,344,171 $1,512,292
- ------------------------------------------
Investment securities -- affiliated,
at value (cost of $914,252 and $-,
respectively) -- including $271,898 and
$- of securities loaned, respectively 1,089,961 --
- ------------------------------------------
Investments made with cash collateral
received for securities on loan, at value
(cost of $803,555 and $-, respectively) 803,555 --
- --------------------------------------------------------------------------------
Total investment securities, at value
(cost of $17,857,028 and $1,256,137,
respectively) 24,237,687 1,512,292
- ------------------------------------------
Cash collateral received on
securities loaned 671 --
- ------------------------------------------
Cash -- 25,519
- ------------------------------------------
Receivable for investments sold -- 52,606
- ------------------------------------------
Receivable for capital shares sold 723 390
- ------------------------------------------
Dividends and interest receivable 11,224 513
- --------------------------------------------------------------------------------
24,250,305 1,591,320
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for collateral received
on securities loaned 804,226 --
- ------------------------------------------
Disbursements in excess of
demand deposit cash 10,477 --
- ------------------------------------------
Payable for investments purchased 10,097 52,358
- ------------------------------------------
Payable for forward foreign
currency exchange contracts -- 470
- ------------------------------------------
Accrued management fees 19,301 1,267
- ------------------------------------------
Distribution fees payable 157 6
- ------------------------------------------
Service fees payable 155 5
- --------------------------------------------------------------------------------
844,413 54,106
- --------------------------------------------------------------------------------
NET ASSETS $23,405,892 $1,537,214
================================================================================
See Notes to Financial Statements.
(continued)
- ------
15
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) ULTRA VISTA
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $20,002,552 $1,559,299
- ------------------------------------------
Accumulated net investment loss (27,266) (4,215)
- ------------------------------------------
Accumulated net realized loss on
investment and foreign currency
transactions (2,950,053) (273,955)
- ------------------------------------------
Net unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies 6,380,659 256,085
- --------------------------------------------------------------------------------
$23,405,892 $1,537,214
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $21,620,548,929 $1,442,643,787
- ------------------------------------------
Shares outstanding 794,446,915 108,390,566
- ------------------------------------------
Net asset value per share $27.21 $13.31
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $1,050,282,799 $43,198,463
- ------------------------------------------
Shares outstanding 38,245,070 3,205,776
- ------------------------------------------
Net asset value per share $27.46 $13.48
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $727,556,859 $50,073,268
- ------------------------------------------
Shares outstanding 27,016,431 3,815,587
- ------------------------------------------
Net asset value per share $26.93 $13.12
- --------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $4,174,215 $1,298,981
- ------------------------------------------
Shares outstanding 156,823 100,310
- ------------------------------------------
Net asset value per share $26.62 $12.95
- --------------------------------------------------------------------------------
R CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $3,328,699 N/A
- ------------------------------------------
Shares outstanding 122,735 N/A
- ------------------------------------------
Net asset value per share $27.12 N/A
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
16
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS) ULTRA VISTA
INVESTMENT LOSS
- --------------------------------------------------------------------------------
INCOME:
- ------------------------------------------
Dividends (including $1,094 from
affiliates in Ultra and net of
foreign taxes withheld of $219 and $24,
respectively) $ 85,298 $ 2,821
- ------------------------------------------
Interest 1,281 153
- ------------------------------------------
Securities lending 2,244 --
- --------------------------------------------------------------------------------
88,823 2,974
- --------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------
Management fees 114,122 6,954
- ------------------------------------------
Distribution fees:
- ------------------------------------------
Advisor Class 865 25
- ------------------------------------------
C Class 16 3
- ------------------------------------------
Service fees:
- ------------------------------------------
Advisor Class 865 25
- ------------------------------------------
C Class 5 1
- ------------------------------------------
Service and distribution fees -- R Class 1 --
- ------------------------------------------
Directors' fees and expenses 148 8
- ------------------------------------------
Other expenses 67 9
- --------------------------------------------------------------------------------
116,089 7,025
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (27,266) (4,051)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on investment and
foreign currency transactions (including
$(24,905) from affiliates in Ultra) 838,813 127,914
- ------------------------------------------
Change in net unrealized appreciation on
investments and translation of assets and
liabilities in foreign currencies 243,663 15,871
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 1,082,476 143,785
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,055,210 $139,734
================================================================================
See Notes to Financial Statements.
- ------
17
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
- -------------------------------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS) ULTRA VISTA
- -------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003 2004 2003
OPERATIONS
Net investment loss $ (27,266) $ (16,642) $ (4,051) $ (6,036)
- ------------------------------------
Net realized gain (loss) 838,813 (143,036) 127,914 101,437
- ------------------------------------
Change in net
unrealized appreciation 243,663 3,892,939 15,871 193,426
- -------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 1,055,210 3,733,261 139,734 288,827
- -------------------------------------------------------------------------------------------------------
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 increase (decrease) in
net assets from capital
share transactions (458,488) (432,605) 105,570 (11,897)
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 596,722 3,244,178 245,304 276,930
NET ASSETS
Beginning of period 22,809,170 19,564,992 1,291,910 1,014,980
- -------------------------------------------------------------------------------------------------------
End of period $23,405,892 $22,809,170 $1,537,214 $1,291,910
=======================================================================================================
Accumulated net investment loss $(27,266) -- $(4,215) $(164)
=======================================================================================================
See Notes to Financial Statements.
- ------
18
Notes to Financial Statements
APRIL 30, 2004 (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) (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. Ultra generally invests in equity
securities of large companies, but may invest in companies of any size. Vista
generally invests in companies that are medium-sized and smaller, but may invest
in companies of any size. The following is a summary of the funds' significant
accounting policies.
MULTIPLE CLASS -- Ultra is authorized to issue the Investor Class, the
Institutional Class, the Advisor Class, the C Class and the R Class. Vista is
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. Sale of the R Class for Ultra commenced on
August 29, 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the close of the foreign exchange on which a
portfolio security principally trades, but before the net asset value per-share
of a fund was determined that was likely to materially affect the net asset
value of the fund, then that security would be 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.
SECURITIES ON LOAN -- Ultra may lend portfolio securities through its lending
agent to certain approved borrowers in order to earn additional income. Ultra
continues to recognize any gain or loss in the market price of the securities
loaned and records any interest earned or dividends declared.
FUTURES CONTRACTS -- The funds may enter into 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.
(continued)
- ------
19
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 each fund's policy to distribute substantially 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, 2004 (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 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 fee for Vista is 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, C AND R INSTITUTIONAL ADVISOR
CLASSES CLASS CLASS
- -------------------------------------------------------------------------------
FUND AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
First $20 billion 1.000% 0.800% 0.750%
- -------------------------------------------------------------------------------
More than $20 billion
to $30 billion 0.950% 0.750% 0.700%
- -------------------------------------------------------------------------------
More than $30 billion
to $40 billion 0.925% 0.725% 0.675%
- -------------------------------------------------------------------------------
Over $40 billion 0.900% 0.700% 0.650%
- -------------------------------------------------------------------------------
For the six months ended April 30, 2004, the effective annual management fee for
Ultra was 1.00%, 0.80%, 0.75%, 1.00% and 1.00% for the Investor Class,
Institutional Class, Advisor Class, C Class and R Class, respectively.
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 C Class and R 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 and C Class will pay American Century Investment
Services, Inc. (ACIS) the following annual distribution and service fees:
- --------------------------------------------------------------------------------
ADVISOR C
- --------------------------------------------------------------------------------
Distribution Fee 0.25% 0.75%
- --------------------------------------------------------------------------------
Service Fee 0.25% 0.25%
- --------------------------------------------------------------------------------
The plans provide that the R Class will pay ACIS an annual distribution and
service fee of 0.50%. 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 and R Class shares. Fees
incurred under the plans during the six months ended April 30, 2004, 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, 2004, the funds invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 JPMorgan Chase Bank (JPMCB). Ultra has a securities
lending agreement with JPMCB. JPMCB is a wholly owned subsidiary of JPM.
(continued)
- ------
21
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2004, were as follows:
ULTRA VISTA
- --------------------------------------------------------------------------------
Purchases $4,660,773 $1,662,021
- --------------------------------------------------------------------------------
Proceeds from sales $5,062,726 $1,594,161
- --------------------------------------------------------------------------------
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, 2004
SHARES AUTHORIZED 3,500,000 800,000
=====================================================================================================
Sold 40,744 $ 1,100,238 14,936 $ 198,796
- ------------------------------------------
Redeemed (66,826) (1,810,771) (10,124) (130,609)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) (26,082) $ (710,533) 4,812 $ 68,187
=====================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 3,500,000 800,000
=====================================================================================================
Sold 92,700 $ 2,113,606 22,570 $ 230,280
- ------------------------------------------
Issued in reinvestment of distributions 2,406 51,578 -- --
- ------------------------------------------
Redeemed (127,225) (2,895,165) (23,437) (231,251)
- -----------------------------------------------------------------------------------------------------
Net decrease (32,119) $ (729,981) (867) $ (971)
=====================================================================================================
INSTITUTIONAL CLASS
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 200,000 80,000
=====================================================================================================
Sold 10,386 $287,331 749 $ 9,906
- ------------------------------------------
Redeemed (3,504) (95,974) (364) (4,725)
- -----------------------------------------------------------------------------------------------------
Net increase 6,882 $191,357 385 $ 5,181
=====================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 200,000 80,000
=====================================================================================================
Sold 11,823 $ 269,361 1,717 $ 17,138
- ------------------------------------------
Issued in reinvestment of distributions 125 2,698 -- --
- ------------------------------------------
Redeemed (5,854) (133,646) (2,937) (30,319)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) 6,094 $ 138,413 (1,220) $(13,181)
=====================================================================================================
(continued)
- ------
22
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
ULTRA VISTA
- -----------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 300,000 210,000
=====================================================================================================
Sold 6,136 $ 164,856 2,614 $34,299
- -----------------------------------------
Redeemed (4,078) (109,291) (241) (3,023)
- -----------------------------------------------------------------------------------------------------
Net increase 2,058 $ 55,565 2,373 $31,276
=====================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 300,000 210,000
=====================================================================================================
Sold 12,734 $ 291,379 732 $ 7,054
- -----------------------------------------
Issued in reinvestment of distributions 7 158 -- --
- -----------------------------------------
Redeemed (5,909) (134,079) (528) (4,976)
- -----------------------------------------------------------------------------------------------------
Net increase 6,832 $ 157,458 204 $ 2,078
=====================================================================================================
C CLASS
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 100,000 100,000
=====================================================================================================
Sold 120 $ 3,120 76 $982
- -----------------------------------------
Redeemed (50) (1,371) (4) (56)
- -----------------------------------------------------------------------------------------------------
Net increase 70 $ 1,749 72 $926
=====================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 100,000 100,000
=====================================================================================================
Sold 73 $1,704 17 $180
- -----------------------------------------
Redeemed (9) (201) (1) (3)
- -----------------------------------------------------------------------------------------------------
Net increase 64 $1,503 16 $177
=====================================================================================================
R CLASS
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 50,000 N/A
=====================================================================================================
Sold 131 $3,583
- -----------------------------------------
Redeemed (8) (209)
- -----------------------------------------------------------------------------------------------------
Net increase 123 $3,374
=====================================================================================================
PERIOD ENDED OCTOBER 31, 2003(1)
SHARES AUTHORIZED 50,000 N/A
=====================================================================================================
Sold -- $2
=====================================================================================================
(1) August 29, 2003 (commencement of sale) through October 31, 2003 for Ultra.
(continued)
- ------
23
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
5. AFFILIATED COMPANY TRANSACTIONS (SHARES IN FULL)
If a fund's holding represents ownership of 5% or more of the voting securities
of a company, the company is affiliated as defined in the 1940 Act. A summary of
transactions for each company which is or was an affiliate at or during the six
months ended April 30, 2004 follows:
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND 4/30/04
FUND/COMPANY 10/31/03 COST COST GAIN (LOSS) INCOME SHARE BALANCE MARKET VALUE
- --------------------------------------------------------------------------------------------------------------
ULTRA
- --------------------------------------------------------------------------------------------------------------
Affymetrix Inc.(1) 2,388,000 $ 38,680 $ 9,981 $ 288 $ -- 3,549,000 $ 108,457
- -----------------------
Applebee's
International Inc. 2,639,623 -- -- -- 185 2,639,623 102,365
- -----------------------
Checkfree Corp.(1) 5,736,600 11,128 -- -- -- 6,114,000 183,665
- -----------------------
Cheesecake
Factory Inc.(1) 3,040,000 -- 10,777 1,153 -- 2,754,000 116,632
- -----------------------
Chico's FAS,
Inc.(1)(2) 4,871,000 -- 37,815 20,627 -- 3,130,000 127,485
- -----------------------
China Yuchai
International
Limited(1) 892,000 37,216 -- -- -- 2,178,000 35,893
- -----------------------
Corinthian
Colleges, Inc.(1) 2,396,000 5,359 6,109 527 -- 4,767,000(3) 145,966
- -----------------------
Digital River Inc.(1) 800,000 40,521 -- -- -- 2,529,000 65,122
- -----------------------
Krispy Kreme
Doughnuts, Inc.(1) 2,910,000 45,780 40,858 (5,716) -- 3,271,000 106,340
- -----------------------
NAM TAI
Electronics Inc.(2) 836,000 33,862 64,311 (7,059) 909 -- --
- -----------------------
Netflix Inc.(1) 1,266,000 16,486 14,491 4,806 -- 2,637,000(3) 66,690
- -----------------------
Panera Bread
Company Cl A(2) 1,435,000 -- 62,538 (10,710) -- -- --
- -----------------------
PF Chang's
China Bistro, Inc.(1) 1,712,000 -- -- -- -- 1,712,000 83,648
- -----------------------
Sina Corp.(1) 2,727,000 48,548 53,042 (7,778) -- 2,638,000 75,183
- -----------------------
TiVo Inc.(2) 5,833,400 -- 63,243 (21,043) -- -- --
- --------------------------------------------------------------------------------------------------------------
$277,580 $363,165 $(24,905) $1,094 $1,217,446
===============================================================================================================
(1) Non-income producing.
(2) Issuer was not an affiliate at April 30, 2004.
(3) Includes adjustments for shares received from a stock split and/or stock
spinoff during the period.
6. SECURITIES LENDING
As of April 30, 2004, securities in Ultra valued at $764,980 were on loan
through the lending agent, JPMCB, to certain approved borrowers. JPMCB receives
and maintains collateral in the form of cash, and/or acceptable securities as
approved by ACIM. Cash collateral is invested in authorized investments by the
lending agent in a pooled account. 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. Any deficiencies or excess of collateral must be delivered or
transferred by the member firms no later than the close of business on the next
business day. The total value of all collateral received for Ultra, at this
date, was $804,226. Ultra'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 Ultra may be
delayed or limited.
(continued)
- ------
24
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
7. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $650 million
unsecured bank line of credit agreement with JPMCB, which was renewed from $620
million effective December 17, 2003. 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, 2004.
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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
ULTRA VISTA
- --------------------------------------------------------------------------------
Federal tax cost of investments $18,033,725 $1,259,757
================================================================================
Gross tax appreciation of investments $6,455,742 $294,485
- -----------------------------------------------
Gross tax depreciation of investments (251,780) (41,950)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $6,203,962 $252,535
================================================================================
The difference between book-basis and tax-basis cost and 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, 2003:
ULTRA VISTA
- --------------------------------------------------------------------------------
Accumulated capital losses $(3,612,168) $(398,250)
- --------------------------------------------------------------------------------
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 for Ultra and Vista expire in
2009 through 2011, and 2009 through 2010, respectively.
- ------
25
Ultra - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $26.01 $21.83 $25.09 $41.45 $38.97 $31.06
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------
Net Investment Income (Loss)(2) (0.03) (0.02) 0.06 (0.06) (0.28) (0.14)
- ---------------------------------------
Net Realized and
Unrealized Gain (Loss) 1.23 4.26 (3.32) (11.89) 4.14 11.17
- --------------------------------------------------------------------------------------------------------------
Total From Investment
Operations 1.20 4.24 (3.26) (11.95) 3.86 11.03
- --------------------------------------------------------------------------------------------------------------
Distributions
- ---------------------------------------
From Net Investment Income -- (0.06) -- -- -- --
- ---------------------------------------
From Net Realized Gains -- -- -- (4.41) (1.38) (3.12)
- --------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.06) -- (4.41) (1.38) (3.12)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $27.21 $26.01 $21.83 $25.09 $41.45 $38.97
==============================================================================================================
TOTAL RETURN(3) 4.61% 19.50% (12.99)% (31.44)% 9.81% 37.94%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.00%(4) 1.00% 0.99% 0.98% 0.99% 1.00%
- ---------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.24)%(4) (0.09)% 0.24% (0.18)% (0.64)% (0.39)%
- ---------------------------------------
Portfolio Turnover Rate 20% 82% 92% 86% 62% 42%
- ---------------------------------------
Net Assets, End of Period (in millions) $21,621 $21,341 $18,616 $24,560 $38,461 $35,752
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
26
Ultra - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $26.22 $22.02 $25.24 $41.65 $39.13 $31.12
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Income (Loss)(2) --(3) 0.02 0.11 0.01 (0.20) (0.09)
- ----------------------------------------
Net Realized and
Unrealized Gain (Loss) 1.24 4.29 (3.33) (11.94) 4.10 11.22
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.24 4.31 (3.22) (11.93) 3.90 11.13
- --------------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------------------
From Net Investment Income -- (0.11) -- -- -- --
- ----------------------------------------
From Net Realized Gains -- -- -- (4.48) (1.38) (3.12)
- --------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.11) -- (4.48) (1.38) (3.12)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $27.46 $26.22 $22.02 $25.24 $41.65 $39.13
==============================================================================================================
TOTAL RETURN(4) 4.73% 19.66% (12.76)% (31.25)% 9.87% 38.21%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.80%(5) 0.80% 0.79% 0.78% 0.79% 0.80%
- ----------------------------------------
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.04)%(5) 0.11% 0.44% 0.02% (0.44)% (0.19)%
- ----------------------------------------
Portfolio Turnover Rate 20% 82% 92% 86% 62% 42%
- ----------------------------------------
Net Assets, End of Period (in thousands) $1,050,283 $822,333 $556,316 $593,436 $763,304 $186,025
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
27
Ultra - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $25.77 $21.62 $24.92 $41.23 $38.80 $31.00
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------
Net Investment Loss(2) (0.06) (0.08) --(3) (0.13) (0.40) (0.23)
- ------------------------------------
Net Realized and
Unrealized Gain (Loss) 1.22 4.24 (3.30) (11.87) 4.21 11.15
- --------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.16 4.16 (3.30) (12.00) 3.81 10.92
- --------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------
From Net Investment Income -- (0.01) -- -- -- --
- ------------------------------------
From Net Realized Gains -- -- -- (4.31) (1.38) (3.12)
- --------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) -- (4.31) (1.38) (3.12)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $26.93 $25.77 $21.62 $24.92 $41.23 $38.80
================================================================================================================
TOTAL RETURN(4) 4.50% 19.24% (13.24)% (31.69)% 9.72% 37.63%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.25%(5) 1.25% 1.24% 1.23% 1.24% 1.25%
- ------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (0.49)%(5) (0.34)% (0.01)% (0.43)% (0.89)% (0.64)%
- ------------------------------------
Portfolio Turnover Rate 20% 82% 92% 86% 62% 42%
- ------------------------------------
Net Assets, End of Period
(in thousands) $727,557 $643,144 $391,968 $437,024 $521,187 $247,814
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
28
Ultra - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------------
C CLASS
- -------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001(2)
PER-SHARE DATA
- -------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $25.57 $21.59 $25.09 $25.53
- -------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Loss(3) (0.16) (0.26) (0.19) --(4)
- ----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.21 4.24 (3.31) (0.44)
- -------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.05 3.98 (3.50) (0.44)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $26.62 $25.57 $21.59 $25.09
=======================================================================================================
TOTAL RETURN(5) 4.11% 18.43% (13.95)% (1.72)%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 2.00%(6) 2.00% 1.99% 1.99%(6)
- ----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.24)%(6) (1.09)% (0.76)% (3.10)%(6)
- ----------------------------------------------------
Portfolio Turnover Rate 20% 82% 92% 86%(7)
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $4,174 $2,232 $502 $95
- -------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
29
Ultra - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period $25.99 $24.87
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------
Net Investment Loss(3) (0.02) (0.04)
- ------------------------------------------------------
Net Realized and Unrealized Gain 1.15 1.16
- --------------------------------------------------------------------------------
Total From Investment Operations 1.13 1.12
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $27.12 $25.99
================================================================================
TOTAL RETURN(4) 4.35% 4.50%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(5) 1.50% 1.50%
- ------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets(5) (0.74)% (0.81)%
- ------------------------------------------------------
Portfolio Turnover Rate 20% 82%(6)
- ------------------------------------------------------
Net Assets, End of Period (in thousands) $3,329 $3
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) August 29, 2003 (commencement of sale) through October 31, 2003.
(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 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, 2003.
See Notes to Financial Statements.
- ------
30
Vista - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.97 $9.25 $10.62 $24.37 $15.41 $9.27
- --------------------------------------------------------------------------------------------------------------
Income From Investment
Operations
- --------------------------------
Net Investment Loss(2) (0.04) (0.06) (0.04) (0.04) (0.16) (0.05)
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 1.38 2.78 (1.33) (7.38) 10.07 6.19
- --------------------------------------------------------------------------------------------------------------
Total From Investment
Operations 1.34 2.72 (1.37) (7.42) 9.91 6.14
- --------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Realized Gains -- -- -- (6.33) (0.95) --
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $13.31 $11.97 $9.25 $10.62 $24.37 $15.41
==============================================================================================================
TOTAL RETURN(3) 11.19% 29.41% (12.90)% (37.48)% 66.16% 66.24%
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 (0.58)%(4) (0.57)% (0.34)% (0.31)% (0.65)% (0.40)%
- --------------------------------
Portfolio Turnover Rate 115% 280% 293% 290% 135% 187%
- --------------------------------
Net Assets, End of Period
(in millions) $1,443 $1,240 $966 $1,222 $2,345 $1,146
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
31
Vista - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $12.11 $9.34 $10.70 $24.50 $15.51 $9.32
- --------------------------------------------------------------------------------------------------------------
Income From Investment
Operations
- --------------------------------
Net Investment Loss(2) (0.02) (0.03) (0.02) (0.02) (0.11) (0.04)
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 1.39 2.80 (1.34) (7.41) 10.09 6.23
- --------------------------------------------------------------------------------------------------------------
Total From Investment
Operations 1.37 2.77 (1.36) (7.43) 9.98 6.19
- --------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Realized Gains -- -- -- (6.37) (0.99) --
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $13.48 $12.11 $9.34 $10.70 $24.50 $15.51
==============================================================================================================
TOTAL RETURN(3) 11.31% 29.66% (12.71)% (37.31)% 66.28% 66.42%
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 (0.38)%(4) (0.37)% (0.14)% (0.11)% (0.45)% (0.20)%
- --------------------------------
Portfolio Turnover Rate 115% 280% 293% 290% 135% 187%
- --------------------------------
Net Assets, End of Period
(in thousands) $43,198 $34,177 $37,743 $46,069 $56,022 $122
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
32
Vista - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.82 $9.15 $10.53 $24.24 $15.31 $9.23
- --------------------------------------------------------------------------------------------------------------
Income From Investment
Operations
- --------------------------------
Net Investment Loss(2) (0.05) (0.08) (0.06) (0.08) (0.22) (0.08)
- --------------------------------
Net Realized and
Unrealized Gain (Loss) 1.35 2.75 (1.32) (7.35) 10.05 6.16
- --------------------------------------------------------------------------------------------------------------
Total From Investment
Operations 1.30 2.67 (1.38) (7.43) 9.83 6.08
- --------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Realized Gains -- -- -- (6.28) (0.90) --
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $13.12 $11.82 $9.15 $10.53 $24.24 $15.31
==============================================================================================================
TOTAL RETURN(3) 11.08% 29.18% (13.11)% (37.76)% 65.98% 65.87%
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 (0.83)%(4) (0.82)% (0.59)% (0.56)% (0.90)% (0.65)%
- --------------------------------
Portfolio Turnover Rate 115% 280% 293% 290% 135% 187%
- --------------------------------
Net Assets, End of Period
(in thousands) $50,073 $17,060 $11,333 $13,315 $22,077 $7,755
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
33
Vista - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001(2)
PER-SHARE DATA
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.71 $9.12 $10.59 $12.07
- --------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------
Net Investment Loss(3) (0.10) (0.16) (0.15) (0.06)
- ---------------------------------------------------
Net Realized and Unrealized Gain (Loss) 1.34 2.75 (1.32) (1.42)
- ---------------------------------------------------
Total From Investment Operations 1.24 2.59 (1.47) (1.48)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.95 $11.71 $9.12 $10.59
==============================================================================================================
TOTAL RETURN(4) 10.59% 28.40% (13.88)% (12.26)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 2.00%(5) 2.00% 2.00% 2.00%(5)
- ---------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.58)%(5) (1.57)% (1.34)% (1.77)%(5)
- ---------------------------------------------------
Portfolio Turnover Rate 115% 280% 293% 290%(6)
- ---------------------------------------------------
Net Assets, End of Period (in thousands) $1,299 $333 $110 $4
- --------------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
34
Share Class Information
Five classes of shares are authorized for sale by Ultra: Investor Class,
Institutional Class, Advisor Class, C Class, and R Class. Four classes of shares
are authorized for sale by Vista: Investor Class, Institutional Class, Advisor
Class, and C Class. The total expense ratio of Institutional Class shares is
lower than that of Investor Class shares. The total expense ratios of Advisor,
C, and R Class shares are higher than that 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 investment
advisors, 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 investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a contingent deferred sales charge (CDSC) of 1.00%. 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%.
R CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. R Class shares are subject to a 0.50% annual Rule 12b-1
service and distribution fee.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
35
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the funds. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
36
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
The DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
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 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 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.
- ------
37
Notes
- ------
38
Notes
- ------
39
Notes
- ------
40
CONTACT US
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
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0406
SH-SAN-38379S
American Century Investment Services, Inc.
(c)2004 American Century Services Corporation
[front cover]
APRIL 30, 2004
American Century Investments
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
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Heritage Fund
Growth Fund
[american century logo and text logo]
Table of Contents
Our Message to You....................................................... 1
HERITAGE
Performance.............................................................. 2
Portfolio Commentary..................................................... 3
Top Ten Holdings...................................................... 3
Top Five Industries................................................... 4
Types of Investments in Portfolio..................................... 4
Schedule of Investments.................................................. 5
GROWTH
Performance.............................................................. 7
Portfolio Commentary..................................................... 8
Top Ten Holdings...................................................... 8
Top Five Industries................................................... 9
Types of Investments in Portfolio..................................... 9
Schedule of Investments.................................................. 10
FINANCIAL STATEMENTS
Statement of Assets and Liabilities...................................... 12
Statement of Operations.................................................. 14
Statement of Changes in Net Assets....................................... 15
Notes to Financial Statements............................................ 16
Financial Highlights..................................................... 22
OTHER INFORMATION
Share Class Information.................................................. 31
Additional Information................................................... 32
Index Definitions........................................................ 33
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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 Heritage and
Growth funds for the six months ended April 30, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for these funds will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/signature/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/signature/James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
- ------
1
Heritage - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
-----------------------------------
AVERAGE ANNUAL RETURNS
- -----------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------------------
INVESTOR CLASS 20.31% 4.48% 8.31% 11.58% 11/10/87
- -----------------------------------------------------------------------------------------------
RUSSELL MIDCAP INDEX 35.45% 6.09% 12.58% 13.65%(1) --
- -----------------------------------------------------------------------------------------------
Institutional Class 20.37% 4.71% -- 5.24% 6/16/97
- -----------------------------------------------------------------------------------------------
Advisor Class 20.02% 4.20% -- 4.10% 7/11/97
- -----------------------------------------------------------------------------------------------
C Class 19.23% -- -- -5.63% 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, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------
Investor
Class 5.90% 25.04% 6.01% 35.37% -6.05% 54.89% -7.92% -9.34% -19.98% 20.31%
- --------------------------------------------------------------------------------------------------
Russell
Midcap
Index 12.30% 30.79% 10.95% 40.98% 5.93% 16.01% 0.29% -0.70% -14.13% 35.45%
- --------------------------------------------------------------------------------------------------
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 - Portfolio Commentary
[photo of Kurt Stalzer and David Rose]
A PORTFOLIO COMMENTARY FROM KURT STALZER AND DAVID ROSE, PORTFOLIO MANAGERS ON
THE HERITAGE INVESTMENT TEAM.
Heritage gained 0.56%* in the six months ended April 30, 2004, underperforming
its benchmark, the Russell Midcap Index, which rose 7.25%.
The period saw changes on Heritage's management team. Portfolio manager Linda
Peterson left American Century in March. David Rose, who previously served as a
portfolio manager on the Vista team, now co-manages Heritage with Kurt Stalzer.
The change in the management team brought about changes in the holdings in the
portfolio. For example, ImClone Systems was added to the portfolio in late March
and ended the period as the top contributor to performance. The biotechnology
company produced better-than-expected earnings due to the strength of sales of
the drug Erbitux, which received FDA approval in February as a treatment for
colon cancer. Former top-ten holding Navistar International was eliminated from
the portfolio at a profit. The portfolio managers were concerned that this
producer of commercial truck, school bus and mid-range diesel engines was losing
market share and that the company would be negatively impacted by higher
interest rates.
These changes occurred as the market fought a number of headwinds. The stock
market began the period with the wind at its back as the upswing in economic
growth, corporate profits and stock returns in late 2003 carried into the new
year. However, the rally lost momentum when investors questioned the
sustainability of the economic expansion amid weak job growth. Terrorism fears
also resurfaced with the commuter-train bombings in Madrid and continued
violence in Iraq. In the end, looking at the Russell indices,
small-capitalization stocks outperformed larger issues, and the value style
outperformed growth offerings in all capitalization ranges.
Against this backdrop, Heritage's underperformance relative to the benchmark
during the period was largely attributable to stock selection in the consumer
discretionary and industrials sectors.
TOP TEN HOLDINGS
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Whole Foods Market, Inc. 2.6% --
- --------------------------------------------------------------------------------
Coach Inc. 2.5% 2.3%
- --------------------------------------------------------------------------------
Estee Lauder
Companies, Inc. Cl A 2.3% --
- --------------------------------------------------------------------------------
PacifiCare Health
Systems, Inc. 2.3% --
- --------------------------------------------------------------------------------
Capital One
Financial Corp. 2.0% --
- --------------------------------------------------------------------------------
Bard (C.R.), Inc. 2.0% 1.1%
- --------------------------------------------------------------------------------
Corinthian Colleges, Inc. 1.9% --
- --------------------------------------------------------------------------------
Network Associates Inc. 1.9% --
- --------------------------------------------------------------------------------
Henry Schein, Inc. 1.9% 1.6%
- --------------------------------------------------------------------------------
Tektronix, Inc. 1.7% 1.8%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
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3
Heritage - Portfolio Commentary
Information technology stocks, the portfolio's largest sector position on
average, also hurt returns. A top detractor was Sierra Wireless, which issued a
disappointing earnings outlook. Another detractor was Network Associates, which
fell when the anti-virus software developer projected second-quarter earnings
and revenue below Wall Street expectations.
Despite the overall negative performance of technology stocks, the Heritage team
found some pockets of success. For example, Tektronix was a leading contributor.
The testing equipment maker reported a profit as revenue rose on strong demand
for most of its product lines.
In the telecommunications services sector, Wireless Facilities weighed on
returns and was sold. The company designs and manages wireless communications
networks for corporations and government agencies.
The top detractor during the period was New York Community Bank. The banking
company narrowly missed first-quarter earnings expectations, and analysts cited
heavy investments in mortgage-backed securities as the culprit.
On the positive side, Heritage generated strong absolute results from its
holdings in the energy, consumer staples and health care sectors. The
portfolio's biggest gains came from health care equipment and supply companies,
including C.R. Bard. The company reported first-quarter profit far ahead of
expectations on strong sales of its health-care products.
Investments in the pharmaceuticals industry also performed well, and MGI Pharma
was a standout. The company boosted its first-quarter and full-year sales
estimates for Aloxi, a drug used to prevent nausea caused by chemotherapy.
Looking ahead, the new Heritage team remains committed to American Century's
disciplined, time-tested growth investment approach that has been in place for
more than thirty years. They will continue to look for mid-sized and smaller
companies with earnings, revenues and other key business fundamentals that are
growing at an accelerating rate. They believe this process can position Heritage
for positive long-term performance.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Health Care Providers
& Services 7.6% 5.8%
- --------------------------------------------------------------------------------
Electronic Equipment
& Instruments 6.7% 6.2%
- --------------------------------------------------------------------------------
Software 5.5% 3.6%
- --------------------------------------------------------------------------------
Commercial Services
& Supplies 5.0% 6.5%
- --------------------------------------------------------------------------------
Health Care Equipment
& Supplies 4.9% 2.9%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- ------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks
& Equity Futures 97.2% 97.2%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 2.8% 2.8%
- --------------------------------------------------------------------------------
- ------
4
Heritage - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.2%
AEROSPACE & DEFENSE -- 1.2%
- --------------------------------------------------------------------------------
254,000 L-3 Communications
Holdings, Inc. $ 15,682
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 2.6%
- --------------------------------------------------------------------------------
371,800 C.H. Robinson Worldwide, Inc. 15,259
- --------------------------------------------------------------------------------
451,200 Expeditors International of
Washington, Inc. 18,133
- --------------------------------------------------------------------------------
33,392
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.6%
- --------------------------------------------------------------------------------
181,000 Autoliv, Inc. 7,698
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 3.8%
- --------------------------------------------------------------------------------
148,900 Charles River Laboratories(1) 6,849
- --------------------------------------------------------------------------------
326,000 ImClone Systems Inc.(1) 21,803
- --------------------------------------------------------------------------------
570,000 Ligand Pharmaceuticals Inc.(1) 12,204
- --------------------------------------------------------------------------------
314,981 QLT Inc.(1) 8,495
- --------------------------------------------------------------------------------
49,351
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.1%
- --------------------------------------------------------------------------------
403,900 Investors Financial
Services Corporation 15,699
- --------------------------------------------------------------------------------
130,500 Legg Mason, Inc. 12,014
- --------------------------------------------------------------------------------
27,713
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 2.9%
- --------------------------------------------------------------------------------
399,500 Cullen/Frost Bankers, Inc. 17,298
- --------------------------------------------------------------------------------
123,000 East West BanCorp, Inc. 6,929
- --------------------------------------------------------------------------------
466,000 Greater Bay BanCorp 13,220
- --------------------------------------------------------------------------------
37,447
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 5.0%
- --------------------------------------------------------------------------------
230,400 Career Education Corp.(1) 14,746
- --------------------------------------------------------------------------------
323,000 Copart Inc.(1) 6,124
- --------------------------------------------------------------------------------
828,000 Corinthian Colleges, Inc.(1) 25,353
- --------------------------------------------------------------------------------
197,057 Education Management
Corporation(1) 6,988
- --------------------------------------------------------------------------------
242,372 Manpower Inc. 11,367
- --------------------------------------------------------------------------------
64,578
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.4%
- --------------------------------------------------------------------------------
585,271 Andrew Corporation(1) 9,920
- --------------------------------------------------------------------------------
727,987 Comverse Technology, Inc.(1) 11,910
- --------------------------------------------------------------------------------
144,500 Harris Corp. 6,510
- --------------------------------------------------------------------------------
161,400 Sierra Wireless(1) 3,607
- --------------------------------------------------------------------------------
31,947
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.1%
- --------------------------------------------------------------------------------
66,800 Novatel Wireless Inc.(1) 985
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 2.0%
- --------------------------------------------------------------------------------
398,700 Capital One Financial Corp. 26,127
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 6.7%
- --------------------------------------------------------------------------------
442,000 Arrow Electronics, Inc.(1) $ 11,174
- --------------------------------------------------------------------------------
187,500 CDW Corp. 11,717
- --------------------------------------------------------------------------------
1,145,900 Flextronics International Ltd.(1) 18,449
- --------------------------------------------------------------------------------
343,600 PerkinElmer, Inc. 6,614
- --------------------------------------------------------------------------------
751,400 Tektronix, Inc. 22,242
- --------------------------------------------------------------------------------
390,700 Thermo Electron Corp.(1) 11,408
- --------------------------------------------------------------------------------
187,000 Varian Inc.(1) 7,674
- --------------------------------------------------------------------------------
89,278
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 3.1%
- --------------------------------------------------------------------------------
353,000 BJ Services Co.(1) 15,709
- --------------------------------------------------------------------------------
401,000 Patterson-UTI Energy Inc.(1) 14,512
- --------------------------------------------------------------------------------
175,400 Smith International, Inc.(1) 9,603
- --------------------------------------------------------------------------------
39,824
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 2.6%
- --------------------------------------------------------------------------------
416,600 Whole Foods Market, Inc. 33,324
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
250,800 Smithfield Foods Inc.(1) 6,671
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 4.9%
- --------------------------------------------------------------------------------
425,353 Apogent Technologies Inc.(1) 13,790
- --------------------------------------------------------------------------------
240,900 Bard (C.R.), Inc. 25,600
- --------------------------------------------------------------------------------
235,800 Boston Scientific Corp.(1) 9,713
- --------------------------------------------------------------------------------
251,400 Inamed Corp.(1) 14,792
- --------------------------------------------------------------------------------
63,895
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 7.6%
- --------------------------------------------------------------------------------
235,000 Covance Inc.(1) 7,929
- --------------------------------------------------------------------------------
399,550 Coventry Health Care Inc.(1) 16,717
- --------------------------------------------------------------------------------
285,400 DaVita Inc.(1) 14,584
- --------------------------------------------------------------------------------
346,995 Henry Schein, Inc.(1) 24,452
- --------------------------------------------------------------------------------
824,800 PacifiCare Health Systems, Inc.(1) 29,494
- --------------------------------------------------------------------------------
387,100 Select Medical Corporation 7,336
- --------------------------------------------------------------------------------
100,512
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 4.6%
- --------------------------------------------------------------------------------
757,805 Hilton Hotels Corporation 13,254
- --------------------------------------------------------------------------------
534,100 International Game Technology 20,157
- --------------------------------------------------------------------------------
231,700 Mandalay Resort Group 13,311
- --------------------------------------------------------------------------------
318,000 Royal Caribbean Cruises Ltd. 12,889
- --------------------------------------------------------------------------------
59,611
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 4.7%
- --------------------------------------------------------------------------------
175,800 Black & Decker Corporation 10,170
- --------------------------------------------------------------------------------
90,700 Fortune Brands, Inc. 6,916
- --------------------------------------------------------------------------------
148,300 Harman International Industries Inc. 11,249
- --------------------------------------------------------------------------------
269,100 Jarden Corp.(1) 10,011
- --------------------------------------------------------------------------------
215,000 Mohawk Industries Inc.(1) 16,584
- --------------------------------------------------------------------------------
145,000 Toll Brothers Inc.(1) 5,738
- --------------------------------------------------------------------------------
60,668
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
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5
Heritage - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
INSURANCE -- 3.8%
- --------------------------------------------------------------------------------
344,000 Aflac Inc. $ 14,527
- --------------------------------------------------------------------------------
81,400 Everest Re Group, Ltd. 6,934
- --------------------------------------------------------------------------------
443,200 HCC Insurance Holdings, Inc. 14,191
- --------------------------------------------------------------------------------
145,300 Lincoln National Corp. 6,521
- --------------------------------------------------------------------------------
156,800 Safeco Corp. 6,866
- --------------------------------------------------------------------------------
49,039
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 0.5%
- --------------------------------------------------------------------------------
173,500 Ask Jeeves, Inc.(1) 6,154
- --------------------------------------------------------------------------------
IT SERVICES -- 2.4%
- --------------------------------------------------------------------------------
389,600 Fiserv, Inc.(1) 14,244
- --------------------------------------------------------------------------------
703,400 Sabre Holdings Corp. 16,593
- --------------------------------------------------------------------------------
30,837
- --------------------------------------------------------------------------------
MACHINERY -- 1.6%
- --------------------------------------------------------------------------------
309,400 Deere & Co. 21,052
- --------------------------------------------------------------------------------
MEDIA -- 1.4%
- --------------------------------------------------------------------------------
712,400 Radio One Inc.(1) 13,507
- --------------------------------------------------------------------------------
469,106 Spanish Broadcasting System(1) 4,560
- --------------------------------------------------------------------------------
18,067
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.2%
- --------------------------------------------------------------------------------
475,900 J.C. Penney Co. Inc.
Holding Company 16,114
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 1.7%
- --------------------------------------------------------------------------------
301,445 Zebra Technologies Corp. Cl A(1) 22,093
- --------------------------------------------------------------------------------
OIL & GAS -- 1.6%
- --------------------------------------------------------------------------------
196,374 Western Gas Resources Inc. 10,693
- --------------------------------------------------------------------------------
389,632 XTO Energy Inc. 10,403
- --------------------------------------------------------------------------------
21,096
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 4.2%
- --------------------------------------------------------------------------------
147,200 Alberto-Culver Company Cl B 6,942
- --------------------------------------------------------------------------------
87,500 Avon Products, Inc. 7,350
- --------------------------------------------------------------------------------
647,000 Estee Lauder Companies, Inc. Cl A 29,574
- --------------------------------------------------------------------------------
308,200 NBTY, Inc.(1) 11,453
- --------------------------------------------------------------------------------
55,319
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 3.0%
- --------------------------------------------------------------------------------
284,200 IVAX Corp.(1) 6,053
- --------------------------------------------------------------------------------
455,000 Medicis Pharmaceutical Corp. Cl A 19,529
- --------------------------------------------------------------------------------
212,416 MGI Pharma Inc.(1) 13,132
- --------------------------------------------------------------------------------
38,714
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.5%
- --------------------------------------------------------------------------------
202,000 Yellow Roadway Corp.(1) 6,878
- --------------------------------------------------------------------------------
SEMICONDUCTORS
& SEMICONDUCTOR EQUIPMENT -- 0.9%
- --------------------------------------------------------------------------------
157,400 National Semiconductor Corp.(1) 6,421
- --------------------------------------------------------------------------------
102,700 Silicon Laboratories Inc.(1) 4,842
- --------------------------------------------------------------------------------
11,263
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
SOFTWARE -- 5.5%
- --------------------------------------------------------------------------------
385,400 Check Point Software
Technologies(1) $ 9,030
- --------------------------------------------------------------------------------
262,000 Hyperion Solutions Corp.(1) 10,056
- --------------------------------------------------------------------------------
228,000 Manhattan Associates Inc.(1) 6,126
- --------------------------------------------------------------------------------
1,589,400 Network Associates Inc.(1) 24,922
- --------------------------------------------------------------------------------
188,800 Symantec Corp.(1) 8,505
- --------------------------------------------------------------------------------
1,969,000 TIBCO Software Inc.(1) 14,768
- --------------------------------------------------------------------------------
73,407
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.1%
- --------------------------------------------------------------------------------
866,991 Foot Locker Inc. 20,808
- --------------------------------------------------------------------------------
180,100 Sherwin-Williams Co. 6,853
- --------------------------------------------------------------------------------
27,661
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 4.4%
- --------------------------------------------------------------------------------
763,800 Coach Inc.(1) 32,538
- --------------------------------------------------------------------------------
256,000 NIKE, Inc. Cl B 18,419
- --------------------------------------------------------------------------------
306,000 Quiksilver, Inc.(1) 6,619
- --------------------------------------------------------------------------------
57,576
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 3.1%
- --------------------------------------------------------------------------------
718,600 New York Community Bancorp Inc. 18,015
- --------------------------------------------------------------------------------
249,400 PMI Group, Inc. (The) 10,732
- --------------------------------------------------------------------------------
212,900 Radian Group Inc. 9,902
- --------------------------------------------------------------------------------
96,200 W Holding Company, Inc. 1,639
- --------------------------------------------------------------------------------
40,288
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS -- 0.6%
- --------------------------------------------------------------------------------
139,000 Hughes Supply, Inc. 7,769
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 1.3%
- --------------------------------------------------------------------------------
547,023 Nextel Partners, Inc. Cl A(1) 7,303
- --------------------------------------------------------------------------------
258,293 NII Holdings Inc. Cl B(1) 9,040
- --------------------------------------------------------------------------------
16,343
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,184,245) 1,268,373
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 2.8%
Repurchase Agreement, Bank of America
Securities, LLC, (U.S. Treasury obligations),
in a joint trading account at 0.88%,
dated 4/30/04, due 5/3/04
(Delivery value $35,903)
(Cost $35,900) 35,900
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $1,220,145) $1,304,273
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
See Notes to Financial Statements.
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6
Growth - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
--------------------------------------
AVERAGE ANNUAL RETURNS
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------------
INVESTOR CLASS 17.74% -4.38% 7.27% 15.16% 6/30/71(1)
- ----------------------------------------------------------------------------------------------------
RUSSELL 1000 GROWTH INDEX 21.65% -6.37% 9.61% N/A(2) --
- ----------------------------------------------------------------------------------------------------
Institutional Class 17.96% -4.17% -- 3.87% 6/16/97
- ----------------------------------------------------------------------------------------------------
Advisor Class 17.48% -4.65% -- 4.19% 6/4/97
- ----------------------------------------------------------------------------------------------------
C Class 16.64% -- -- -4.40% 11/28/01
- ----------------------------------------------------------------------------------------------------
R Class -- -- -- 7.07%(3) 8/29/03
- ----------------------------------------------------------------------------------------------------
(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.
(3) Returns for periods less than one year are not annualized.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- --------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------------------------
Investor Class 6.53% 16.31% 13.30% 44.50% 24.48% 32.16% -27.72% -15.05% -16.33% 17.74%
- --------------------------------------------------------------------------------------------------------------
Russell 1000
Growth Index 19.60% 32.55% 22.06% 42.09% 26.53% 27.58% -32.25% -20.10% -14.35% 21.65%
- --------------------------------------------------------------------------------------------------------------
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.
- ------
7
Growth - Portfolio Commentary
[photo of Prescott LeGard, Greg Woodhams and Tim Reynolds]
A PORTFOLIO COMMENTARY FROM PRESCOTT LEGARD, GREG WOODHAMS AND TIM REYNOLDS,
PORTFOLIO MANAGERS ON THE GROWTH INVESTMENT TEAM.
Growth gained 3.07%* during the six months ended April 30, 2004, outperforming
the 2.66% average return of the large-cap growth funds tracked by Morningstar.
Growth's benchmark, the Russell 1000 Growth Index, rose 4.14%.
The portfolio's advance came during a stretch marked by rising corporate profits
and continued economic expansion. During the period's closing weeks, however,
stock prices came under pressure amid rising oil prices and new concern that the
Federal Reserve would raise interest rates. An analysis of the indices that
tracked the U.S. stock market by style and capitalization during the last six
months shows that investors preferred small- and mid-cap stocks over larger
equities and value-oriented issues over growth stocks.
Investments in the health care sector were the top contributors to performance.
The biggest lift was provided by manufacturers of health care equipment and
supplies. A good example is Boston Scientific, which won approval to sell its
Taxus drug-coated stent in the United States. The company reported higher
profits and strong initial sales of Taxus, which props open arteries and
releases medication aimed at preventing them from closing. Another top
contributor was Fisher Scientific, a manufacturer and distributor of instruments
used in health care facilities and laboratories. During the period, Fisher
reported strong results and raised its 2004 earnings outlook. Investments in eye
care products manufacturer Alcon and medical supplies maker C.R. Bard also
boosted performance.
Elsewhere in the health care sector, Pfizer helped drive the positive
performance of Growth's pharmaceutical holdings after reporting back-to-back
quarters of sales growth and reaffirming its profit outlook. Another contributor
was Swiss drugmaker Roche, which generated better-than-expected sales results
and projected strong 2004 earnings growth.
Valero Energy, the top independent oil refiner in the United States, led a rise
in the portfolio's energy stake. The company's
TOP TEN HOLDINGS
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
General Electric Co. 4.6% 3.0%
- --------------------------------------------------------------------------------
Cisco Systems Inc. 4.0% 3.6%
- --------------------------------------------------------------------------------
Procter &
Gamble Co. (The) 3.8% 2.3%
- --------------------------------------------------------------------------------
Medtronic, Inc. 3.2% 1.1%
- --------------------------------------------------------------------------------
International Business
Machines Corp. 3.2% --
- --------------------------------------------------------------------------------
QUALCOMM Inc. 3.0% 0.1%
- --------------------------------------------------------------------------------
Nike, Inc. Cl B 2.6% --
- --------------------------------------------------------------------------------
First Data Corp. 2.5% --
- --------------------------------------------------------------------------------
American International
Group, Inc. 2.5% 1.7%
- --------------------------------------------------------------------------------
Oracle Corp. 2.3% 1.1%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
8
Growth - Portfolio Commentary
shares climbed more than 50% as its profit margins improved amid rising demand
and higher prices for gasoline and other refined products. Oil and gas producer
Occidental Petroleum also boosted Growth's returns.
Investments in companies that make and sell discretionary consumer products
turned in mixed results but lifted the portfolio's performance. The top
contributor from this area was motorcycle manufacturer Harley Davidson, which
reported stronger-than-expected earnings. On the downside, Growth was hurt by
media companies Clear Channel Communications and XM Satellite Radio, and by
specialty retailer Lowe's, which was sold.
Accounting for Growth's largest sector position on average, information
technology stocks were the top detractors from performance during the period.
Investments in software companies hurt returns most. This included Oracle and
Veritas, developers of software for storing and managing data, and BEA Systems,
a developer of software that ties together and streamlines business
applications. Holdings in the semiconductor industry declined as well. The top
detractors were Xilinx, which was sold, and Linear Technology.
On a positive note, technology companies that manufacture communications
equipment boosted the portfolio's results. The top contributor was QUALCOMM, a
designer of proprietary technology used in wireless phones. Another top
contributor was Nortel Networks, which was sold at a profit before the company
revealed that its accounting practices were being reviewed.
Looking ahead, we are hopeful that the strengthening economy will support
continued profit growth. Regardless of economic and market conditions, however,
we will remain focused on trying to identify and own companies that appear best
able to sustain their accelerating growth.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Health Care Equipment
& Supplies 12.5% 6.4%
- --------------------------------------------------------------------------------
Communications
Equipment 9.1% 5.5%
- --------------------------------------------------------------------------------
Pharmaceuticals 7.1% 9.2%
- --------------------------------------------------------------------------------
Software 6.9% 8.2%
- --------------------------------------------------------------------------------
Industrial Conglomerates 6.2% 6.4%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 98.0% 96.3%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 2.0% 3.7%
- --------------------------------------------------------------------------------
- ------
9
Growth - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%
AEROSPACE & DEFENSE -- 2.5%
- --------------------------------------------------------------------------------
1,738,400 Rockwell Collins $ 56,063
- --------------------------------------------------------------------------------
774,800 United Technologies Corp. 66,835
- --------------------------------------------------------------------------------
122,898
- --------------------------------------------------------------------------------
AUTOMOBILES -- 2.2%
- --------------------------------------------------------------------------------
1,947,700 Harley-Davidson, Inc. 109,694
- --------------------------------------------------------------------------------
BEVERAGES -- 1.9%
- --------------------------------------------------------------------------------
1,732,400 PepsiCo, Inc. 94,398
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 2.9%
- --------------------------------------------------------------------------------
937,500 Amgen Inc.(1) 52,753
- --------------------------------------------------------------------------------
951,100 Celgene Corp.(1) 49,162
- --------------------------------------------------------------------------------
590,500 Neurocrine Biosciences Inc.(1) 38,755
- --------------------------------------------------------------------------------
140,670
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.2%
- --------------------------------------------------------------------------------
617,500 Goldman Sachs Group, Inc. (The) 59,589
- --------------------------------------------------------------------------------
1,123,900 Northern Trust Corp. 47,518
- --------------------------------------------------------------------------------
107,107
- --------------------------------------------------------------------------------
CHEMICALS -- 2.0%
- --------------------------------------------------------------------------------
2,829,400 Monsanto Co. 97,869
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 1.1%
- --------------------------------------------------------------------------------
2,075,100 Monster Worldwide Inc.(1) 53,143
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 9.1%
- --------------------------------------------------------------------------------
9,483,300 Cisco Systems Inc.(1) 197,916
- --------------------------------------------------------------------------------
14,114,800 JDS Uniphase Corp.(1) 42,909
- --------------------------------------------------------------------------------
2,912,600 Juniper Networks, Inc.(1) 63,728
- --------------------------------------------------------------------------------
2,354,600 QUALCOMM Inc. 147,068
- --------------------------------------------------------------------------------
451,621
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 3.2%
- --------------------------------------------------------------------------------
1,767,400 International Business
Machines Corp. 155,832
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 2.0%
- --------------------------------------------------------------------------------
2,055,700 American Express Co. 100,627
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.0%
- --------------------------------------------------------------------------------
5,366,399 Sprint Corp. 96,005
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 0.3%
- --------------------------------------------------------------------------------
481,400 Jabil Circuit, Inc.(1) 12,704
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.6%
- --------------------------------------------------------------------------------
933,800 McCormick & Company, Inc. 31,899
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 12.5%
- --------------------------------------------------------------------------------
1,018,800 Alcon, Inc. $ 75,646
- --------------------------------------------------------------------------------
759,500 Bard (C.R.), Inc. 80,712
- --------------------------------------------------------------------------------
2,882,400 Baxter International, Inc. 91,228
- --------------------------------------------------------------------------------
1,604,400 Fisher Scientific International(1) 93,938
- --------------------------------------------------------------------------------
1,371,400 Hospira Inc.(1)(2) 39,030
- --------------------------------------------------------------------------------
3,143,400 Medtronic, Inc. 158,616
- --------------------------------------------------------------------------------
1,034,600 St. Jude Medical, Inc.(1) 78,899
- --------------------------------------------------------------------------------
618,069
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 3.6%
- --------------------------------------------------------------------------------
5,284,400 Caesars Entertainment Inc.(1) 70,018
- --------------------------------------------------------------------------------
2,513,400 Carnival Corporation 107,247
- --------------------------------------------------------------------------------
177,265
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.8%
- --------------------------------------------------------------------------------
1,744,700 Procter & Gamble Co. (The) 184,502
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 6.2%
- --------------------------------------------------------------------------------
7,567,900 General Electric Co. 226,658
- --------------------------------------------------------------------------------
1,395,900 Textron Inc. 77,026
- --------------------------------------------------------------------------------
303,684
- --------------------------------------------------------------------------------
INSURANCE -- 4.4%
- --------------------------------------------------------------------------------
1,681,000 American International Group, Inc. 120,443
- --------------------------------------------------------------------------------
2,810,800 MetLife, Inc. 96,973
- --------------------------------------------------------------------------------
217,416
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 2.1%
- --------------------------------------------------------------------------------
2,190,400 VeriSign, Inc.(1) 35,331
- --------------------------------------------------------------------------------
1,376,300 Yahoo! Inc.(1) 69,448
- --------------------------------------------------------------------------------
104,779
- --------------------------------------------------------------------------------
IT SERVICES -- 3.5%
- --------------------------------------------------------------------------------
1,055,000 DST Systems, Inc.(1) 46,578
- --------------------------------------------------------------------------------
2,716,300 First Data Corp. 123,293
- --------------------------------------------------------------------------------
169,871
- --------------------------------------------------------------------------------
MEDIA -- 5.0%
- --------------------------------------------------------------------------------
1,220,200 Clear Channel
Communications, Inc. 50,626
- --------------------------------------------------------------------------------
2,514,600 Disney (Walt) Co. 57,911
- --------------------------------------------------------------------------------
2,218,000 Univision Communications
Inc. Cl A(1) 75,079
- --------------------------------------------------------------------------------
2,492,600 XM Satellite Radio
Holdings Inc.(1) 59,723
- --------------------------------------------------------------------------------
243,339
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 2.6%
- --------------------------------------------------------------------------------
2,362,900 J.C. Penney Co. Inc.
Holding Company 80,008
- --------------------------------------------------------------------------------
1,539,900 May Department
Stores Co. (The) 47,429
- --------------------------------------------------------------------------------
127,437
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Growth - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
OIL & GAS -- 3.3%
- --------------------------------------------------------------------------------
1,508,100 Apache Corp. $ 63,144
- --------------------------------------------------------------------------------
1,436,200 Occidental Petroleum Corp. 67,788
- --------------------------------------------------------------------------------
456,300 Valero Energy Corp. 29,094
- --------------------------------------------------------------------------------
160,026
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.1%
- --------------------------------------------------------------------------------
617,900 Eli Lilly and Company 45,607
- --------------------------------------------------------------------------------
2,736,500 Mylan Laboratories Inc. 62,693
- --------------------------------------------------------------------------------
1,210,000 Novartis AG ORD 53,973
- --------------------------------------------------------------------------------
2,784,100 Pfizer, Inc. 99,559
- --------------------------------------------------------------------------------
823,400 Roche Holding AG ORD 86,420
- --------------------------------------------------------------------------------
348,252
- --------------------------------------------------------------------------------
SEMICONDUCTORS
& SEMICONDUCTOR EQUIPMENT -- 1.0%
- --------------------------------------------------------------------------------
1,365,300 Linear Technology Corp. 48,646
- --------------------------------------------------------------------------------
SOFTWARE -- 6.9%
- --------------------------------------------------------------------------------
6,349,200 BEA Systems, Inc.(1) 72,444
- --------------------------------------------------------------------------------
1,265,800 Microsoft Corporation 32,873
- --------------------------------------------------------------------------------
2,197,400 Novell, Inc.(1) 21,183
- --------------------------------------------------------------------------------
10,036,300 Oracle Corp.(1) 112,608
- --------------------------------------------------------------------------------
2,622,700 SAP AG ADR 97,774
- --------------------------------------------------------------------------------
336,882
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 2.6%
- --------------------------------------------------------------------------------
1,763,400 NIKE, Inc. Cl B $ 126,877
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.4%
- --------------------------------------------------------------------------------
948,800 MGIC Investment Corp. 69,851
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $4,326,401) 4,811,363
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 2.0%
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations), in a joint trading
account at 0.89%, dated 4/30/04,
due 5/3/04 (Delivery value $45,703) 45,700
- --------------------------------------------------------------------------------
Repurchase Agreement, Bank of America
Securities, LLC, (U.S. Treasury obligations),
in a joint trading account at 0.88%,
dated 4/30/04, due 5/3/04
(Delivery value $52,704)(3) 52,700
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $98,400) 98,400
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $4,424,801) $4,909,763
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
($ IN THOUSANDS)
Contracts to Sell Settlement Date Value Unrealized Loss
- -------------------------------------------------------------------------------
27,074,998 Euro 5/28/04 $ 32,423 $ (384)
- -------------------------------------------------------------------------------
17,694,683 Euro 5/28/04 21,190 (261)
- -------------------------------------------------------------------------------
13,331,317 Euro 5/28/04 15,965 (190)
- -------------------------------------------------------------------------------
128,649,920 CHF 5/28/04 99,341 (694)
- -------------------------------------------------------------------------------
$168,919 $(1,529)
===========================================
(Value on Settlement Date $167,390)
*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
CHF = Swiss Franc
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) When-issued security.
(3) Security, or a portion thereof, has been segregated for a when-issued
security.
See Notes to Financial Statements.
- ------
11
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) HERITAGE GROWTH
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of
$1,220,145 and $4,424,801, respectively) $1,304,273 $4,909,763
- --------------------------------------------
Cash -- 33,370
- --------------------------------------------
Receivable for investments sold 20,670 82,959
- --------------------------------------------
Receivable for capital shares sold 12 100
- --------------------------------------------
Dividends and interest receivable 661 3,244
- --------------------------------------------------------------------------------
1,325,616 5,029,436
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Disbursements in excess
of demand deposit cash 301 --
- --------------------------------------------
Payable for investments purchased 18,127 98,571
- --------------------------------------------
Payable for forward foreign
currency exchange contracts -- 1,529
- --------------------------------------------
Accrued management fees 1,109 4,093
- --------------------------------------------
Distribution fees payable 4 14
- --------------------------------------------
Service fees payable 4 14
- --------------------------------------------------------------------------------
19,545 104,221
- --------------------------------------------------------------------------------
Net Assets $1,306,071 $4,925,215
================================================================================
See Notes to Financial Statements.
(continued)
- ------
12
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS) HERITAGE GROWTH
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $1,380,120 $ 6,036,743
- --------------------------------------------
Accumulated net investment loss (2,358) (114)
- --------------------------------------------
Accumulated net realized loss on investment
and foreign currency transactions (155,819) (1,594,847)
- --------------------------------------------
Net unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies 84,128 483,433
- --------------------------------------------------------------------------------
$1,306,071 $ 4,925,215
=================================================================================
INVESTOR CLASS, $0.01 PAR
VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $1,227,212,325 $4,201,338,200
- --------------------------------------------
Shares outstanding 113,189,183 236,193,382
- --------------------------------------------
Net asset value per share $10.84 $17.79
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $62,031,070 $658,934,972
- --------------------------------------------
Shares outstanding 5,672,766 36,753,540
- --------------------------------------------
Net asset value per share $10.93 $17.93
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $15,905,040 $64,238,926
- --------------------------------------------
Shares outstanding 1,482,388 3,647,828
- --------------------------------------------
Net asset value per share $10.73 $17.61
- --------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $922,231 $699,899
- --------------------------------------------
Shares outstanding 87,485 40,267
- --------------------------------------------
Net asset value per share $10.54 $17.38
- --------------------------------------------------------------------------------
R CLASS, $0.01 PAR VALUE
($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets N/A $2,677
- --------------------------------------------
Shares outstanding N/A 151
- --------------------------------------------
Net asset value per share N/A $17.73
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
13
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS) HERITAGE GROWTH
- --------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS)
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------
Dividends (net of foreign taxes
withheld of $7 and $348, respectively) $ 4,099 $ 25,179
- --------------------------------------------
Interest 279 380
- --------------------------------------------------------------------------------
4,378 25,559
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------
Management fees 6,681 24,989
- --------------------------------------------
Distribution fees:
- --------------------------------------------
Advisor Class 19 77
- --------------------------------------------
C Class 4 3
- --------------------------------------------
Service fees:
- --------------------------------------------
Advisor Class 19 77
- --------------------------------------------
C Class 1 1
- --------------------------------------------
Service and distribution fees -- R Class -- --
- --------------------------------------------
Directors' fees and expenses 8 32
- --------------------------------------------
Other expenses 4 20
- --------------------------------------------------------------------------------
6,736 25,199
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (2,358) 360
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------
NET REALIZED GAIN ON:
- --------------------------------------------
Investment transactions 169,653 524,023
- --------------------------------------------
Foreign currency transactions 35 2,041
- --------------------------------------------------------------------------------
169,688 526,064
- --------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION ON:
- --------------------------------------------
Investments (160,372) (364,820)
- --------------------------------------------
Translation of assets and
liabilities in foreign currencies -- (2,003)
- --------------------------------------------------------------------------------
(160,372) (366,823)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 9,316 159,241
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,958 $ 159,601
================================================================================
See Notes to Financial Statements.
- ------
14
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
- --------------------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS) HERITAGE GROWTH
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003 2004 2003
OPERATIONS
- ----------------------------
Net investment income (loss) $ (2,358) $ (4,418) $ 360 $ 3,234
- -----------------------------
Net realized gain 169,688 3,127 526,064 137,796
- -----------------------------
Change in net
unrealized appreciation (160,372) 209,415 (366,823) 586,444
- --------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 6,958 208,124 159,601 727,474
- --------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net decrease in net
assets from capital
share transactions (16,122) (59,094) (258,549) (143,282)
- --------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (9,164) 149,030 (98,948) 584,192
NET ASSETS
Beginning of period 1,315,235 1,166,205 5,024,163 4,439,971
- --------------------------------------------------------------------------------------------
End of period $1,306,071 $1,315,235 $4,925,215 $5,024,163
============================================================================================
Accumulated net
investment loss $(2,358) -- $(114) $(474)
============================================================================================
See Notes to Financial Statements.
- ------
15
Notes to Financial Statements
APRIL 30, 2004 (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 -- Heritage is authorized to issue the Investor Class, the
Institutional Class, the Advisor Class and the C Class. Growth is authorized to
issue the Investor Class, the Institutional Class, the Advisor Class, the C
Class and the R 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. Sale of the R Class for Growth commenced
August 29, 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the close of the foreign exchange on which a
portfolio security principally trades, but before the net asset value per-share
of a fund was determined that was likely to materially affect the net asset
value of the fund, then that security would be 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 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
(continued)
- ------
16
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
WHEN-ISSUED AND FORWARD COMMITMENTS -- The funds 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
this period, securities are subject to market fluctuations. The funds will
segregate cash, cash equivalents or other appropriate liquid securities on their
records in amounts sufficient to meet the purchase price.
INCOME TAX STATUS -- It is each fund's policy to distribute substantially 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 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
funds' average daily closing net assets during the previous month. The annual
management fee for the Investor, Institutional, Advisor, C Class and R Classes,
if applicable, is 1.00%, 0.80%, 0.75%, 1.00% 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 (the Advisor
Class plan) and a separate Master Distribution and Individual Shareholder
Services Plan for each of the C Class and R 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 and C Class will pay American Century Investment
Services, Inc. (ACIS) the following annual distribution and service fees:
- --------------------------------------------------------------------------
ADVISOR C
- --------------------------------------------------------------------------
Distribution Fee 0.25% 0.75%
- --------------------------------------------------------------------------
Service Fee 0.25% 0.25%
- --------------------------------------------------------------------------
(continued)
- ------
17
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
The plans provide that the R Class will pay ACIS an annual distribution and
service fee of 0.50%. 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 and R Class shares. Fees
incurred under the plans during the six months ended April 30, 2004, 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, 2004, the funds invested in a money
market fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 JPMorgan Chase Bank (JPMCB). JPMCB is a wholly owned
subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2004, were as follows:
- --------------------------------------------------------------------------------
HERITAGE GROWTH
- --------------------------------------------------------------------------------
Purchases $1,756,318 $4,391,208
- --------------------------------------------------------------------------------
Proceeds from sales $1,758,148 $4,580,425
- --------------------------------------------------------------------------------
(continued)
- ------
18
Notes to Financial Statements
APRIL 30, 2004 (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, 2004
SHARES AUTHORIZED 400,000 800,000
==========================================================================================
Sold 12,739 $ 142,208 8,096 $ 146,914
- --------------------------------
Redeemed (13,350) (148,422) (23,896) (434,580)
- ------------------------------------------------------------------------------------------
Net decrease (611) $ (6,214) (15,800) $(287,666)
==========================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 400,000 800,000
==========================================================================================
Sold 28,648 $ 268,539 22,332 $ 339,445
- --------------------------------
Redeemed (25,669) (240,926) (37,389) (575,738)
- ------------------------------------------------------------------------------------------
Net increase (decrease) 2,979 $ 27,613 (15,057) $(236,293)
==========================================================================================
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 40,000 100,000
==========================================================================================
Sold 263 $ 2,948 4,800 $ 87,707
- --------------------------------
Redeemed (1,378) (15,231) (3,633) (66,407)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (1,115) $(12,283) 1,167 $ 21,300
==========================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 40,000 80,000
==========================================================================================
Sold 3,262 $ 30,046 9,165 $142,960
- --------------------------------
Redeemed (13,083) (125,319) (4,228) (65,226)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (9,821) $ (95,273) 4,937 $ 77,734
==========================================================================================
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 100,000 210,000
==========================================================================================
Sold 687 $ 7,696 1,139 $ 20,488
- --------------------------------
Redeemed (484) (5,370) (706) (12,731)
- ------------------------------------------------------------------------------------------
Net increase 203 $ 2,326 433 $ 7,757
==========================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 100,000 210,000
==========================================================================================
Sold 1,288 $11,993 1,900 $ 29,049
- --------------------------------
Redeemed (422) (4,042) (898) (13,838)
- ------------------------------------------------------------------------------------------
Net increase 866 $ 7,951 1,002 $ 15,211
==========================================================================================
(continued)
- ------
19
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ------------------------------------------------------------------------------------------
HERITAGE GROWTH
- ------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
C CLASS
- ------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 100,000 100,000
==========================================================================================
Sold 22 $ 242 7 $126
- ----------------------------------
Redeemed (18) (193) (4) (66)
- ------------------------------------------------------------------------------------------
Net increase 4 $ 49 3 $ 60
==========================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 100,000 100,000
==========================================================================================
Sold 72 $669 6 $ 92
- ----------------------------------
Redeemed (5) (54) (2) (29)
- ------------------------------------------------------------------------------------------
Net increase 67 $615 4 $ 63
==========================================================================================
R CLASS
- --------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED N/A 50,000
==========================================================================================
Sold -- --
- ----------------------------------
Redeemed -- --
- ------------------------------------------------------------------------------------------
Net increase -- --
==========================================================================================
PERIOD ENDED OCTOBER 31, 2003(1)
SHARES AUTHORIZED N/A 50,000
==========================================================================================
Sold -- $3
==========================================================================================
(1) August 29, 2003 (commencement of sale) through October 31, 2003.
5. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM, have a $650 million
unsecured bank line of credit agreement with JPMCB, which was renewed from $620
million effective December 17, 2003. 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, 2004.
(continued)
- ------
20
Notes to Financial Statements
APRIL 30, 2004 (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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
HERITAGE GROWTH
- --------------------------------------------------------------------------------
Federal tax cost of investments $1,224,344 $4,461,605
================================================================================
Gross tax appreciation of investments $116,114 $594,673
- ---------------------------------------------------------
Gross tax depreciation of investments (36,185) (146,515)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $ 79,929 $448,158
================================================================================
The difference between book-basis and tax-basis cost and 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, 2003:
- --------------------------------------------------------------------------------
HERITAGE GROWTH
- --------------------------------------------------------------------------------
Accumulated capital losses $(320,498) $(2,084,110)
- --------------------------------------------------------------------------------
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 2011
for Heritage and 2009 through 2010 for Growth.
- ------
21
Heritage - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.78 $9.11 $10.13 $19.10 $13.02 $9.98
- ------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- ----------------------------
Net Investment
Income (Loss)(2) (0.02) (0.04) (0.04) --(3) (0.03) 0.02
- ----------------------------
Net Realized and
Unrealized Gain (Loss) 0.08 1.71 (0.98) (5.33) 7.63 3.04
- ------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.06 1.67 (1.02) (5.33) 7.60 3.06
- ------------------------------------------------------------------------------------------------------
Distributions
- ----------------------------
From Net
Investment Income -- -- -- -- (0.04) (0.02)
- ----------------------------
From Net Realized Gains -- -- -- (3.64) (1.48) --
- ------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (3.64) (1.52) (0.02)
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.84 $10.78 $9.11 $10.13 $19.10 $13.02
======================================================================================================
TOTAL RETURN(4) 0.56% 18.33% (10.07)% (33.08)% 62.61% 30.71%
- ------------------------------------------------------------------------------------------------------
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) (0.39)% (0.37)% (0.02)% (0.17)% 0.19%
- ----------------------------
Portfolio Turnover Rate 135% 129% 128% 152% 119% 134%
- ----------------------------
Net Assets, End of
Period (in millions) $1,227 $1,227 $1,010 $1,206 $1,975 $1,000
- ------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
22
Heritage - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.86 $9.17 $10.17 $19.14 $13.04 $10.00
- ---------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment
Income (Loss)(2) (0.01) (0.01) (0.02) --(3) --(3) 0.04
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.08 1.70 (0.98) (5.30) 7.65 3.04
- ---------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.07 1.69 (1.00) (5.30) 7.65 3.08
- ---------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Investment
Income -- -- -- -- (0.07) (0.04)
- --------------------------
From Net Realized Gains -- -- -- (3.67) (1.48) --
- ---------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (3.67) (1.55) (0.04)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.93 $10.86 $9.17 $10.17 $19.14 $13.04
=========================================================================================================
TOTAL RETURN(4) 0.64% 18.43% (9.83)% (32.84)% 63.00% 30.92%
- ---------------------------------------------------------------------------------------------------------
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) (0.19)% (0.17)% 0.18% 0.03% 0.39%
- --------------------------
Portfolio Turnover Rate 135% 129% 128% 152% 119% 134%
- --------------------------
Net Assets, End of
Period (in thousands) $62,031 $73,735 $152,256 $79,882 $8,302 $92
- ---------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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)
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------------------------
Net Asset
Value,
Beginning of Period $10.68 $9.05 $10.09 $19.05 $12.98 $9.96
- -----------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- ------------------------------
Net Investment Loss(2) (0.03) (0.06) (0.06) (0.04) (0.07) (0.01)
- ------------------------------
Net Realized and
Unrealized Gain (Loss) 0.08 1.69 (0.98) (5.32) 7.62 3.03
- -----------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.05 1.63 (1.04) (5.36) 7.55 3.02
- -----------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------
From Net Investment
Income -- -- -- -- --(3) --(3)
- ------------------------------
From Net Realized Gains -- -- -- (3.60) (1.48) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (3.60) (1.48) --(3)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.73 $10.68 $9.05 $10.09 $19.05 $12.98
===========================================================================================================
TOTAL RETURN(4) 0.47% 18.01% (10.31)% (33.30)% 62.26% 30.37%
- -----------------------------------------------------------------------------------------------------------
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
Loss to Average Net Assets (0.60)%(5) (0.64)% (0.62)% (0.27)% (0.42)% (0.06)%
- ------------------------------
Portfolio Turnover Rate 135% 129% 128% 152% 119% 134%
- ------------------------------
Net Assets, End of
Period (in thousands) $15,905 $13,668 $3,737 $2,146 $2,127 $1,060
- -----------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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)
- -----------------------------------------------------------------------------------------------------
C CLASS
- -----------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001(2)
- -----------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $10.54 $8.99 $10.10 $12.43
- -----------------------------------------------------------------------------------------------------
Income From
Investment Operations
- -----------------------------------------
Net Investment Loss(3) (0.07) (0.13) (0.13) (0.06)
- -----------------------------------------
Net Realized and
Unrealized Gain (Loss) 0.07 1.68 (0.98) (2.27)
- -----------------------------------------------------------------------------------------------------
Total From Investment Operations -- 1.55 (1.11) (2.33)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.54 $10.54 $8.99 $10.10
=====================================================================================================
TOTAL RETURN(4) 0.00% 17.24% (10.99)% (18.74)%
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 2.00%(5) 2.00% 2.00% 2.00%(5)
- -----------------------------------------
Ratio of Net Investment Loss
to Average Net Assets (1.35)%(5) (1.39)% (1.37)% (1.50)%(5)
- -----------------------------------------
Portfolio Turnover Rate 135% 129% 128% 152%(6)
- -----------------------------------------
Net Assets, End of
Period (in thousands) $922 $872 $146 $3
- -----------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
25
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
======================================================================================================
PER-SHARE DATA
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $17.26 $14.80 $17.85 $31.09 $31.60 $28.03
- ------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment
Income (Loss)(2) -- 0.01 (0.01) --(3) (0.10) (0.07)
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.53 2.45 (3.04) (9.66) 3.73 9.03
- ------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.53 2.46 (3.05) (9.66) 3.63 8.96
- ------------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Realized Gains -- -- -- (3.58) (4.14) (5.39)
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $17.79 $17.26 $14.80 $17.85 $31.09 $31.60
======================================================================================================
TOTAL RETURN(4) 3.07% 16.62% (17.09)% (34.14)% 11.49% 36.31%
- ------------------------------------------------------------------------------------------------------
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 (0.01)%(5) 0.05% (0.04)% (0.01)% (0.30)% (0.24)%
- --------------------------
Portfolio Turnover Rate 86% 159% 135% 114% 102% 92%
- --------------------------
Net Assets, End of
Period (in millions) $4,201 $4,350 $3,951 $5,715 $9,557 $8,333
- ------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
26
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ----------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ----------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ----------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $17.38 $14.87 $17.90 $31.15 $31.66 $28.08
- ----------------------------------------------------------------------------------------------------
Income From
Investment Operations
- ----------------------------
Net Investment
Income (Loss)(2) 0.02 0.04 0.02 0.04 (0.03) (0.03)
- ----------------------------
Net Realized and
Unrealized Gain (Loss) 0.53 2.47 (3.05) (9.65) 3.72 9.07
- ----------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.55 2.51 (3.03) (9.61) 3.69 9.04
- ----------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net Realized Gains -- -- -- (3.64) (4.20) (5.46)
- ----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $17.93 $17.38 $14.87 $17.90 $31.15 $31.66
====================================================================================================
TOTAL RETURN(3) 3.16% 16.88% (16.93)% (33.94)% 11.70% 36.62%
- ----------------------------------------------------------------------------------------------------
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 0.19%(4) 0.25% 0.16% 0.19% (0.10)% (0.04)%
- ----------------------------
Portfolio Turnover Rate 86% 159% 135% 114% 102% 92%
- ----------------------------
Net Assets, End of
Period (in thousands) $658,935 $618,569 $455,807 $84,189 $98,239 $1,453
- ----------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
27
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -----------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $17.11 $14.70 $17.78 $31.01 $31.52 $27.97
- -----------------------------------------------------------------------------------------------------
Income From
Investment Operations
- -----------------------------
Net Investment Loss(2) (0.02) (0.03) (0.05) (0.06) (0.19) (0.15)
- -----------------------------
Net Realized and
Unrealized Gain (Loss) 0.52 2.44 (3.03) (9.66) 3.73 9.02
- -----------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.50 2.41 (3.08) (9.72) 3.54 8.87
- -----------------------------------------------------------------------------------------------------
Distributions
- -----------------------------
From Net Realized Gains -- -- -- (3.51) (4.05) (5.32)
- -----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $17.61 $17.11 $14.70 $17.78 $31.01 $31.52
=====================================================================================================
TOTAL RETURN(3) 2.92% 16.39% (17.32)% (34.40)% 11.23% 35.93%
- -----------------------------------------------------------------------------------------------------
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 (0.26)%(4) (0.20)% (0.29)% (0.26)% (0.55)% (0.49)%
- -----------------------------
Portfolio Turnover Rate 86% 159% 135% 114% 102% 92%
- -----------------------------
Net Assets, End of
Period (in thousands) $64,239 $55,010 $32,530 $25,272 $24,750 $12,759
- -----------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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)
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004(1) 2003 2002(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $16.95 $14.66 $19.38
- --------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------
Net Investment Loss(3) (0.09) (0.15) (0.16)
- ----------------------------------
Net Realized and
Unrealized Gain (Loss) 0.52 2.44 (4.56)
- --------------------------------------------------------------------------------
Total From
Investment Operations 0.43 2.29 (4.72)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $17.38 $16.95 $14.66
================================================================================
TOTAL RETURN(4) 2.54% 15.62% (24.36)%
- --------------------------------------------------------------------------------
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 (1.01)%(5) (0.95)% (0.99)%(5)
- ----------------------------------
Portfolio Turnover Rate 86% 159% 135%(6)
- ----------------------------------
Net Assets, End of
Period (in thousands) $700 $623 $482
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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 period ended October 31, 2002.
See Notes to Financial Statements.
- ------
29
Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
R CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $17.25 $16.56
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------
Net Investment Loss(3) (0.05) (0.02)
- ---------------------------------------
Net Realized and Unrealized Gain 0.53 0.71
- --------------------------------------------------------------------------------
Total From Investment Operations 0.48 0.69
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $17.73 $17.25
================================================================================
TOTAL RETURN(4) 2.78% 4.17%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.50%(5) 1.50%(5)
- ---------------------------------------
Ratio of Net Investment
Loss to Average Net Assets (0.51)%(5) (0.58)%(5)
- ---------------------------------------
Portfolio Turnover Rate 86% 159%(6)
- ---------------------------------------
Net Assets, End of
Period (in thousands) $3 $3
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) August 29, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
30
Share Class Information
Four classes of shares are authorized for sale by Heritage: Investor Class,
Institutional Class, Advisor Class, and C Class. Five classes of shares are
authorized by Growth: Investor Class, Institutional Class, Advisor Class, C
Class, and R Class. The total expense ratio of Institutional Class shares is
lower than that of Investor Class shares. The total expense ratios of Advisor,
C, and R Class shares are higher than that 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 investment
advisors, 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 investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a contingent deferred sales charge (CDSC) of 1.00%. 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%.
R CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers, and
insurance companies. R Class shares are subject to a 0.50% annual Rule 12b-1
service and distribution fee.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
31
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' manager, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and
procedures the manager uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's Web site at americancentury.com and on the Securities and
Exchange Commission's Web site at sec.gov.
- ------
32
Index Definitions
The following indices are used to illustrate investment market, sector, or
style performance or to serve as fund performance comparisons. They are not
investment products available for purchase.
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.
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.
- ------
33
Notes
- ------
34
Notes
- ------
35
Notes
- ------
36
CONTACT US
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
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0406
SH-SAN-38380S
American Century Investment Services, Inc.
(c)2004 American Century Services Corporation
[front cover]
APRIL 30, 2004
[graphic of chart]
[graphic of starfish]
American Century Investments
Semiannual Report
[graphic of two steal bridges]
Giftrust(reg.tm) Fund
[American Century logo and text logo]
Table of Contents
Our Message to You....................................................... 1
GIFTRUST
Performance.............................................................. 2
Portfolio Commentary..................................................... 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
Additional Information................................................... 15
Index Definition...................................................... 15
Proxy Voting Guidelines............................................... 15
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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 Giftrust fund
for the six months ended April 30, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for this fund will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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
Giftrust - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------
GIFTRUST 19.73% -0.62% 3.54% 11.70% 11/25/83
- --------------------------------------------------------------------------------------
RUSSELL MIDCAP GROWTH INDEX 36.14% 0.80% 9.98% N/A(1) -
- --------------------------------------------------------------------------------------
(1) Benchmark began 12/31/85.
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- -------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------------
Giftrust 32.24% 40.16% -27.08% 36.76% -21.02% 113.18% -42.37% -14.35% -23.04% 19.73%
- -------------------------------------------------------------------------------------------------------
Russell Midcap
Growth Index 13.10% 33.79% 3.92% 40.84% 12.33% 53.02% -29.47% -15.01% -16.67% 36.14%
- -------------------------------------------------------------------------------------------------------
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 - Portfolio Commentary
[photo of Kurt Stalzer and David Rose]
A PORTFOLIO COMMENTARY FROM KURT STALZER AND DAVID ROSE, PORTFOLIO MANAGERS ON
THE GIFTRUST INVESTMENT TEAM.
Giftrust gained 0.28% during the six months ended April 30, 2004,
underperforming its benchmark, the Russell Midcap Growth Index, which rose 5.74%.
The period saw changes on Giftrust's management team. Portfolio manager Linda
Peterson left American Century in March. David Rose, who previously served as a
portfolio manager on the Vista team, now co-manages Giftrust with Kurt Stalzer.
The change in the management team brought about changes in the holdings in the
portfolio. For example, Estee Lauder became a top-ten position and contributed
to performance. The cosmetics maker reported profit growth boosted by strong
sales in Europe and the United States. Former top-ten holding Jabil Circuit was
eliminated from the portfolio at a profit.
These changes occurred as stocks fought a number of headwinds. The stock market
began the period with the wind at its back as the upswing in economic growth,
corporate profits and stock returns in late 2003 carried into the new year.
However, the rally lost momentum when investors questioned the sustainability of
the economic expansion amid weak job growth, rising oil prices and the prospect
of higher interest rates. Terrorism fears also resurfaced with the
commuter-train bombings in Madrid and continued violence in Iraq. In the end,
looking at the Russell indices, small-capitalization stocks outperformed larger
issues, and the value style outperformed growth in all capitalization ranges.
Against this backdrop, Giftrust's underperformance relative to the benchmark
during the period was partly attributable to stock selection in the consumer
discretionary and industrials sectors. Information technology stocks, the
portfolio's largest sector position on average, held back returns most. Earnings
disappointments weighed on a number of these holdings, including anti-virus
software maker Network
TOP TEN HOLDINGS
AS OF APRIL 30, 2004
- ----------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- ----------------------------------------------------------------------------
Whole Foods Market, Inc. 2.5% -
- ----------------------------------------------------------------------------
Coach Inc. 2.5% 1.1%
- ----------------------------------------------------------------------------
PacifiCare Health
Systems, Inc. 2.3% -
- ----------------------------------------------------------------------------
Estee Lauder
Companies, Inc. Cl A 2.3% -
- ----------------------------------------------------------------------------
Corinthian Colleges, Inc. 2.1% -
- ----------------------------------------------------------------------------
Bard (C.R.), Inc. 2.1% 1.4%
- ----------------------------------------------------------------------------
Network Associates Inc. 2.0% -
- ----------------------------------------------------------------------------
Capital One
Financial Corp. 2.0% -
- ----------------------------------------------------------------------------
QLT Inc. 1.9% 0.9%
- ----------------------------------------------------------------------------
Flextronics
International Ltd. 1.8% 1.4%
- ----------------------------------------------------------------------------
(continued)
- ------
3
Giftrust - Portfolio Commentary
Associates, "supercomputer" maker Cray and wireless modem manufacturer Sierra
Wireless.
In the financials sector, New York Community Bank held back returns. The banking
company narrowly missed first-quarter earnings expectations, and analysts cited
heavy investments in mortgage-backed securities as the culprit.
On the positive side, Giftrust generated strong absolute results from its
holdings in the energy, consumer staples and health care sectors. The
portfolio's biggest gains came from biotechnology companies. For example, QLT
surged when the government expanded reimbursement coverage of QLT's Visudyne
drug treatment for age-related macular degeneration (AMD). Previously, about
15%-25% of AMD patients insured by Medicare were reimbursed for Visudyne. The
decision boosted reimbursements to 50%-60% of AMD patients.
Similarly, ImClone Systems was added to the portfolio in March and ended the
period as a leading contributor to performance. The biotechnology company
produced better-than-expected earnings due to the strength of sales of the drug
Erbitux, which received FDA approval in February as a treatment for colon
cancer.
MGI Pharma was another standout. The pharmaceuticals company boosted its
first-quarter and full-year sales estimates for Aloxi, a drug used to prevent
nausea caused by chemotherapy. Investments in the health care equipment and
supplies industry, including C.R. Bard, performed well. The company reported
first-quarter profit far ahead of expectations on strong sales of its
health-care products.
Looking ahead, the new Giftrust team remains committed to American Century's
disciplined, time-tested growth investment approach that has been in place for
more than thirty years. They will continue to look for mid-sized and smaller
companies with earnings, revenues and other key business fundamentals that are
growing at an accelerating rate. They believe this process can position Giftrust
for positive long-term performance.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Health Care Providers
& Services 7.6% 5.4%
- --------------------------------------------------------------------------------
Electronic Equipment
& Instruments 6.9% 9.3%
- --------------------------------------------------------------------------------
Software 6.3% 4.4%
- --------------------------------------------------------------------------------
Health Care
Equipment & Supplies 5.8% 4.6%
- --------------------------------------------------------------------------------
Biotechnology 5.8% 2.8%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 97.3% 96.3%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 2.7% 3.7%
- --------------------------------------------------------------------------------
- ------
4
Giftrust - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.3%
AEROSPACE & DEFENSE - 0.5%
- --------------------------------------------------------------------------------
77,000 L-3 Communications
Holdings, Inc. $ 4,754
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS - 2.3%
- --------------------------------------------------------------------------------
243,000 C.H. Robinson Worldwide, Inc. 9,973
- --------------------------------------------------------------------------------
272,000 Expeditors International of
Washington, Inc. 10,931
- --------------------------------------------------------------------------------
20,904
- --------------------------------------------------------------------------------
AIRLINES - 0.5%
- --------------------------------------------------------------------------------
443,000 America West Holdings
Corporation Cl B(1) 4,386
- --------------------------------------------------------------------------------
AUTO COMPONENTS - 0.5%
- --------------------------------------------------------------------------------
112,000 Autoliv, Inc. 4,763
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 5.8%
- --------------------------------------------------------------------------------
255,000 Charles River Laboratories(1) 11,730
- --------------------------------------------------------------------------------
237,000 ImClone Systems Inc.(1) 15,851
- --------------------------------------------------------------------------------
348,000 Ligand Pharmaceuticals Inc.(1) 7,451
- --------------------------------------------------------------------------------
635,000 QLT Inc.(1) 17,125
- --------------------------------------------------------------------------------
52,157
- --------------------------------------------------------------------------------
CAPITAL MARKETS - 1.9%
- --------------------------------------------------------------------------------
220,400 Investors Financial
Services Corporation(2) 8,567
- --------------------------------------------------------------------------------
87,400 Legg Mason, Inc. 8,046
- --------------------------------------------------------------------------------
16,613
- --------------------------------------------------------------------------------
COMMERCIAL BANKS - 0.5%
- --------------------------------------------------------------------------------
158,000 Greater Bay BanCorp 4,482
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 5.7%
- --------------------------------------------------------------------------------
158,000 Career Education Corp.(1) 10,112
- --------------------------------------------------------------------------------
219,000 Copart Inc.(1) 4,152
- --------------------------------------------------------------------------------
627,000 Corinthian Colleges, Inc.(1) 19,199
- --------------------------------------------------------------------------------
295,599 Education Management Corporation(1) 10,482
- --------------------------------------------------------------------------------
161,166 Manpower Inc. 7,559
- --------------------------------------------------------------------------------
51,504
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.8%
- --------------------------------------------------------------------------------
515,519 Andrew Corporation(1)(2) 8,738
- --------------------------------------------------------------------------------
242,000 Comverse Technology, Inc.(1) 3,959
- --------------------------------------------------------------------------------
148,000 Sierra Wireless(1) 3,308
- --------------------------------------------------------------------------------
16,005
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS - 0.2%
- --------------------------------------------------------------------------------
102,000 Novatel Wireless Inc.(1) 1,503
- --------------------------------------------------------------------------------
CONSUMER FINANCE - 2.0%
- --------------------------------------------------------------------------------
274,000 Capital One Financial Corp. 17,955
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 6.9%
- --------------------------------------------------------------------------------
288,000 Arrow Electronics, Inc.(1) 7,281
- --------------------------------------------------------------------------------
129,000 CDW Corp. 8,061
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
993,200 Flextronics International Ltd.(1) $ 15,991
- --------------------------------------------------------------------------------
151,000 Flir Systems Inc.(1)(2) 7,083
- --------------------------------------------------------------------------------
378,000 PerkinElmer, Inc. 7,277
- --------------------------------------------------------------------------------
288,000 Tektronix, Inc. 8,525
- --------------------------------------------------------------------------------
237,000 Thermo Electron Corp.(1) 6,920
- --------------------------------------------------------------------------------
61,138
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES - 3.2%
- --------------------------------------------------------------------------------
249,100 BJ Services Co.(1) 11,085
- --------------------------------------------------------------------------------
306,000 Patterson-UTI Energy Inc.(1) 11,074
- --------------------------------------------------------------------------------
121,000 Smith International, Inc.(1) 6,625
- --------------------------------------------------------------------------------
28,784
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 2.5%
- --------------------------------------------------------------------------------
285,000 Whole Foods Market, Inc. 22,797
- --------------------------------------------------------------------------------
FOOD PRODUCTS - 0.5%
- --------------------------------------------------------------------------------
172,000 Smithfield Foods Inc.(1) 4,575
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES - 5.8%
- --------------------------------------------------------------------------------
290,816 Apogent Technologies Inc.(1) 9,428
- --------------------------------------------------------------------------------
178,900 Bard (C.R.), Inc. 19,012
- --------------------------------------------------------------------------------
213,400 Boston Scientific Corp.(1) 8,790
- --------------------------------------------------------------------------------
173,000 Inamed Corp.(1) 10,179
- --------------------------------------------------------------------------------
65,000 St. Jude Medical, Inc.(1) 4,957
- --------------------------------------------------------------------------------
52,366
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 7.6%
- --------------------------------------------------------------------------------
157,000 Covance Inc.(1) 5,297
- --------------------------------------------------------------------------------
264,000 Coventry Health Care Inc.(1) 11,046
- --------------------------------------------------------------------------------
245,000 DaVita Inc.(1) 12,520
- --------------------------------------------------------------------------------
178,976 Henry Schein, Inc.(1) 12,612
- --------------------------------------------------------------------------------
568,000 PacifiCare Health Systems, Inc.(1) 20,313
- --------------------------------------------------------------------------------
315,000 Select Medical Corporation 5,969
- --------------------------------------------------------------------------------
67,757
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 5.2%
- --------------------------------------------------------------------------------
520,790 Hilton Hotels Corporation 9,109
- --------------------------------------------------------------------------------
420,000 International Game Technology 15,851
- --------------------------------------------------------------------------------
79,000 Mandalay Resort Group 4,539
- --------------------------------------------------------------------------------
233,000 Royal Caribbean Cruises Ltd. 9,443
- --------------------------------------------------------------------------------
173,300 Station Casinos Inc.(2) 7,812
- --------------------------------------------------------------------------------
46,754
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 4.5%
- --------------------------------------------------------------------------------
121,000 Black & Decker Corporation 7,000
- --------------------------------------------------------------------------------
134,000 Harman International Industries Inc. 10,164
- --------------------------------------------------------------------------------
223,682 Helen of Troy Ltd.(1) 7,437
- --------------------------------------------------------------------------------
87,000 Mohawk Industries Inc.(1) 6,711
- --------------------------------------------------------------------------------
228,000 Toll Brothers Inc.(1)(2) 9,022
- --------------------------------------------------------------------------------
40,334
- --------------------------------------------------------------------------------
INSURANCE - 0.7%
- --------------------------------------------------------------------------------
157,000 Aflac Inc. 6,630
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
5
Giftrust - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES - 1.2%
- --------------------------------------------------------------------------------
155,000 Ask Jeeves, Inc.(1) $ 5,498
- --------------------------------------------------------------------------------
127,000 Infospace Inc.(1) 4,152
- --------------------------------------------------------------------------------
71,425 RADWARE Limited(1) 1,509
- --------------------------------------------------------------------------------
11,159
- --------------------------------------------------------------------------------
IT SERVICES - 3.2%
- --------------------------------------------------------------------------------
201,000 Fiserv, Inc.(1) 7,349
- --------------------------------------------------------------------------------
178,000 Global Payments Inc.(2) 8,540
- --------------------------------------------------------------------------------
558,000 Sabre Holdings Corp. 13,163
- --------------------------------------------------------------------------------
29,052
- --------------------------------------------------------------------------------
MACHINERY - 1.7%
- --------------------------------------------------------------------------------
222,000 Deere & Co. 15,105
- --------------------------------------------------------------------------------
MEDIA - 1.9%
- --------------------------------------------------------------------------------
101,100 Entercom Communications Corp.(1) 4,610
- --------------------------------------------------------------------------------
490,000 Radio One Inc.(1)(2) 9,291
- --------------------------------------------------------------------------------
322,527 Spanish Broadcasting System(1) 3,135
- --------------------------------------------------------------------------------
17,036
- --------------------------------------------------------------------------------
MULTILINE RETAIL - 1.2%
- --------------------------------------------------------------------------------
327,000 J.C. Penney Co. Inc. Holding Company 11,072
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS - 1.7%
- --------------------------------------------------------------------------------
212,817 Zebra Technologies Corp. Cl A(1) 15,597
- --------------------------------------------------------------------------------
OIL & GAS - 1.5%
- --------------------------------------------------------------------------------
129,423 Western Gas Resources Inc. 7,047
- --------------------------------------------------------------------------------
249,500 XTO Energy Inc. 6,662
- --------------------------------------------------------------------------------
13,709
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS - 3.0%
- --------------------------------------------------------------------------------
444,000 Estee Lauder Companies, Inc. Cl A 20,295
- --------------------------------------------------------------------------------
174,000 NBTY, Inc.(1) 6,466
- --------------------------------------------------------------------------------
26,761
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 4.4%
- --------------------------------------------------------------------------------
190,000 IVAX Corp.(1) 4,047
- --------------------------------------------------------------------------------
358,000 Medicis Pharmaceutical Corp. Cl A 15,364
- --------------------------------------------------------------------------------
142,213 MGI Pharma Inc.(1) 8,792
- --------------------------------------------------------------------------------
276,000 Salix Pharmaceuticals Ltd.(1)(2) 8,537
- --------------------------------------------------------------------------------
331,000 SuperGen Inc.(1) 2,718
- --------------------------------------------------------------------------------
39,458
- --------------------------------------------------------------------------------
ROAD & RAIL - 0.5%
- --------------------------------------------------------------------------------
120,640 Yellow Roadway Corp.(1) 4,108
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT - 1.7%
- --------------------------------------------------------------------------------
270,000 National Semiconductor Corp.(1) 11,013
- --------------------------------------------------------------------------------
85,000 Silicon Laboratories Inc.(1) 4,008
- --------------------------------------------------------------------------------
15,021
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
SOFTWARE - 6.3%
- --------------------------------------------------------------------------------
303,000 Check Point
Software Technologies(1) $ 7,099
- --------------------------------------------------------------------------------
168,000 Hyperion Solutions Corp.(1) 6,448
- --------------------------------------------------------------------------------
173,000 Manhattan Associates Inc.(1) 4,649
- --------------------------------------------------------------------------------
1,164,000 Network Associates Inc.(1) 18,251
- --------------------------------------------------------------------------------
199,000 Symantec Corp.(1) 8,965
- --------------------------------------------------------------------------------
1,331,000 TIBCO Software Inc.(1) 9,983
- --------------------------------------------------------------------------------
55,395
- --------------------------------------------------------------------------------
SPECIALTY RETAIL - 1.9%
- --------------------------------------------------------------------------------
185,284 Foot Locker Inc. 4,447
- --------------------------------------------------------------------------------
268,000 Office Depot, Inc.(1) 4,693
- --------------------------------------------------------------------------------
297,159 Pep Boys-Manny, Moe & Jack (The) 8,162
- --------------------------------------------------------------------------------
17,302
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS - 3.9%
- --------------------------------------------------------------------------------
523,200 Coach Inc.(1) 22,289
- --------------------------------------------------------------------------------
115,000 NIKE, Inc. Cl B 8,274
- --------------------------------------------------------------------------------
207,000 Quiksilver, Inc.(1) 4,477
- --------------------------------------------------------------------------------
35,040
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.7%
- --------------------------------------------------------------------------------
338,000 New York Community Bancorp Inc. 8,473
- --------------------------------------------------------------------------------
189,000 PMI Group, Inc. (The) 8,133
- --------------------------------------------------------------------------------
162,000 Radian Group Inc. 7,535
- --------------------------------------------------------------------------------
24,141
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.5%
- --------------------------------------------------------------------------------
86,238 Fastenal Company(2) 4,732
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 1.4%
- --------------------------------------------------------------------------------
444,000 Nextel Partners, Inc. Cl A(1)(2) 5,927
- --------------------------------------------------------------------------------
177,012 NII Holdings Inc. Cl B(1) 6,196
- --------------------------------------------------------------------------------
12,123
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $808,120) 872,972
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS - 2.7%
Repurchase Agreement, Credit Suisse
First Boston Corp., (U.S. Treasury obligations),
in a joint trading account at 0.89%,
dated 4/30/04, due 5/3/04
(Delivery value $8,901) 8,900
- --------------------------------------------------------------------------------
Repurchase Agreement, State Street Corp.,
(U.S. Treasury obligations), in a joint trading
account at 0.89%, dated 4/30/04, due 5/3/04
(Delivery value $15,701) 15,700
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $24,600) 24,600
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $832,720) $897,572
================================================================================
See Notes to Financial Statements. (continued)
- ------
6
Giftrust - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COLLATERAL RECEIVED FOR
SECURITIES LENDING(3)
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank AG,
(U.S. Treasury obligations), 1.04%, dated 4/30/04,
due 5/3/04 (Delivery value $248) $ 248
- --------------------------------------------------------------------------------
SHORT-TERM DEBT
- --------------------------------------------------------------------------------
$ 5,000 HBOS Treasury Services plc,
VRN, 1.19%, 5/3/04, resets daily off
the Federal Funds rate
plus 0.16% with no caps (Acquired 4/30/04,
Cost $4,999)(4) 4,999
- --------------------------------------------------------------------------------
1,000 RACERS SM, Series 2000-7, Class
A3, VRN, 1.30%, 5/17/04, resets
monthly off the 1-month
LIBOR plus 0.20% with no caps
(Acquired 4/15/04, Cost $1,000)(4) 1,000
- --------------------------------------------------------------------------------
11,000 Sears Credit Account Master Trust,
Series 2002-1, VRN, 1.20%, 5/17/04,
resets monthly off the 1-month
LIBOR plus 0.10% with no caps 11,005
- --------------------------------------------------------------------------------
3,900 Societe Generale, VRN, 1.12%,
5/3/04, resets daily off the
Federal Funds rate plus 0.06%
with no caps 3,899
- --------------------------------------------------------------------------------
20,903
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $21,151) $21,151
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
LIBOR = London Interbank Offered Rate
RACERS SM = Restructured Asset Certificates with Enhanced Returns
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.
VRN = Variable Rate Note. Interest reset date is indicated, unless otherwise
noted. Rate shown is effective April 30, 2004.
(1) Non-income producing.
(2) Security, or a portion thereof, was on loan as of April 30, 2004.
(3) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 4 in
Notes to Financial Statements.)
(4) 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 purchased by the lending agent
with cash collateral received for securities lending at April 30, 2004, was
$5,999, which represented 0.7% of net assets.
See Notes to Financial Statements.
- ------
7
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS)
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value
(cost of $832,720) - including $20,659 of
securites loaned $ 897,572
- --------------------------------------------------------------------
Investments made with cash collateral received
for securities on loan, at value (cost of $21,151) 21,151
- --------------------------------------------------------------------------------
Total investment securities, at value (cost of $853,871) 918,723
- --------------------------------------------------------------------
Receivable for investments sold 9,458
- --------------------------------------------------------------------
Dividends and interest receivable 296
- --------------------------------------------------------------------------------
928,477
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for securities loaned, at value 21,151
- --------------------------------------------------------------------
Disbursements in excess of demand deposit cash 15
- --------------------------------------------------------------------
Payable for investments purchased 13,472
- --------------------------------------------------------------------------------
34,638
- --------------------------------------------------------------------------------
NET ASSETS $ 893,839
================================================================================
CAPITAL SHARES, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Authorized 200,000
================================================================================
Outstanding 63,478
================================================================================
NET ASSET VALUE PER SHARE $14.08
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $1,337,791
- --------------------------------------------------------------------
Accumulated net investment loss (357)
- --------------------------------------------------------------------
Accumulated net realized loss on investment transactions (508,447)
- --------------------------------------------------------------------
Net unrealized appreciation on investments 64,852
- --------------------------------------------------------------------------------
$ 893,839
================================================================================
See Notes to Financial Statements.
- ------
8
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
INVESTMENT LOSS
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------------------------
Dividends $ 1,622
- --------------------------------------------------------------------
Interest 177
- --------------------------------------------------------------------
Security lending 141
- --------------------------------------------------------------------------------
1,940
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 4,563
- --------------------------------------------------------------------
Directors' fees and expenses 5
- --------------------------------------------------------------------
Other expenses 5
- --------------------------------------------------------------------------------
4,573
- --------------------------------------------------------------------
Amount waived (2,276)
- --------------------------------------------------------------------------------
2,297
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (357)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions 98,318
- --------------------------------------------------------------------
Change in net unrealized appreciation on investments (95,062)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 3,256
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,899
================================================================================
See Notes to Financial Statements.
- ------
9
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003
OPERATIONS
- --------------------------------------------------------------------------------
Net investment loss $ (357) $ (4,298)
- ---------------------------------------------------
Net realized gain (loss) 98,318 (2,472)
- ---------------------------------------------------
Change in net unrealized appreciation (95,062) 144,671
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 2,899 137,901
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Proceeds from shares sold 8,014 15,126
- ---------------------------------------------------
Payments for shares redeemed (12,995) (12,861)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions (4,981) 2,265
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (2,082) 140,166
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 895,921 755,755
- --------------------------------------------------------------------------------
End of period $893,839 $895,921
================================================================================
Accumulated net investment loss $(357) -
================================================================================
TRANSACTIONS IN SHARES OF THE FUND
- --------------------------------------------------------------------------------
Sold 558 1,239
- ---------------------------------------------------------
Redeemed (900) (1,042)
- --------------------------------------------------------------------------------
Net increase (decrease) in shares of the fund (342) 197
================================================================================
See Notes to Financial Statements.
- ------
10
Notes to Financial Statements
APRIL 30, 2004 (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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
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.
SECURITIES ON LOAN -- The fund may lend portfolio securities through its lending
agent to certain approved borrowers in order to earn additional income. The fund
continues to recognize any gain or loss in the market price of the securities
loaned and records any interest earned or dividends declared.
FUTURES CONTRACTS -- The fund may enter into 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 substantially 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, 2004 (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 before waiver is 1.00%. The
manager voluntarily agreed to waive its management fee from February 1, 2004
through July 31, 2004. The annual effective management fee after waiver is 0.50%.
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, 2004, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 and securities lending agreement with JPMorgan Chase Bank
(JPMCB). JPMCB 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, 2004, were $1,159,149 and $1,139,394,
respectively.
4. SECURITIES LENDING
As of April 30, 2004, securities in the fund valued at $20,659 were on loan
through the lending agent, JPMCB, to certain approved borrowers. JPMCB receives
and maintains collateral in the form of cash, and/or acceptable securities as
approved by ACIM. Cash collateral is invested in authorized investments by the
lending agent in a pooled account. 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. Any deficiencies or excess of collateral must be delivered or
transferred by the member firms no later than the close of business on the next
business day. The total value of all collateral received, at this date, was
$21,151. 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 $650 million
unsecured bank line of credit agreement with JPMCB, which was renewed from $620
million effective December 17, 2003. 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, 2004.
(continued)
- ------
12
Notes to Financial Statements
APRIL 30, 2004 (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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $856,705
================================================================================
Gross tax appreciation of investments $88,906
- --------------------------------------------------------------------
Gross tax depreciation of investments (26,888)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $62,018
================================================================================
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2003, the fund had accumulated capital losses of $603,762,
which represents 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 2011.
- ------
13
Giftrust - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
PER-SHARE DATA
Net Asset Value,
Beginning of Period $14.04 $11.88 $14.04 $43.71 $26.80 $16.85
- ------------------------------------------------------------------------------------------------------
Income From
Investment Operations
- ---------------------------------
Net Investment Loss(2) (0.01) (0.07) (0.06) (0.02) (0.32) (0.14)
- ---------------------------------
Net Realized and Unrealized
Gain (Loss) 0.05 2.23 (2.10) (21.07) 17.23 10.09
- ------------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.04 2.16 (2.16) (21.09) 16.91 9.95
- ------------------------------------------------------------------------------------------------------
Distributions
- ---------------------------------
From Net Realized Gains -- -- -- (8.58) -- --
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $14.08 $14.04 $11.88 $14.04 $43.71 $26.80
======================================================================================================
TOTAL RETURN(3) 0.28% 18.18% (15.38)% (56.36)% 63.10% 59.05%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 0.50%(4)(5) 1.00% 1.00% 1.00% 1.00% 1.00%
- ---------------------------------
Ratio of Net Investment Loss to
Average Net Assets (0.08)%(4)(5) (0.55)% (0.42)% (0.11)% (0.75)% (0.66)%
- ---------------------------------
Portfolio Turnover Rate 130% 140% 140% 196% 92% 117%
- ---------------------------------
Net Assets,
End of Period (in millions) $894 $896 $756 $880 $2,086 $1,250
- ------------------------------------------------------------------------------------------------------
(1) For the six months ended April 30, 2004 (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.
(4) Annualized.
(5) During a portion of the period ended April 30, 2004, the manager
voluntarily agreed to waive its management fee. The waiver will be in effect
from February 1, 2004 through July 31, 2004. Had fees not been waived the
annualized ratio of operating expenses to average net assets and annualized
ratio of net investment loss to average net assets would have been 1.00% and
(0.58)%, respectively.
See Notes to Financial Statements.
- ------
14
Additional Information
INDEX DEFINITION
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
15
Notes
- ------
16
CONTACT US
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
The American Century logo, American Century and American Century Investments
are service marks of American Century Services Corporation.
0406
SH-SAN-38383S
American Century Investment Services, Inc.
(c)2004 American Century Services Corporation
APRIL 30, 2004
American Century Investments
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of side-by-side bridges]
Select Fund
Capital Growth Fund
New Opportunities II Fund
[american century logo and text logo]
Table of Contents
Our Message to You....................................................... 1
SELECT
Performance.............................................................. 2
Portfolio Commentary..................................................... 4
Top Ten Holdings...................................................... 4
Top Five Industries................................................... 5
Types of Investments in Portfolio..................................... 5
Schedule of Investments.................................................. 6
CAPITAL GROWTH
Performance.............................................................. 9
Portfolio Commentary..................................................... 10
Top Ten Holdings...................................................... 10
Top Five Industries................................................... 11
Schedule of Investments.................................................. 12
NEW OPPORTUNITIES II
Performance.............................................................. 14
Portfolio Commentary..................................................... 16
Top Ten Holdings...................................................... 16
Top Five Industries................................................... 17
Types of Investments in Portfolio..................................... 17
Schedule of Investments.................................................. 18
FINANCIAL STATEMENTS
Statement of Assets and Liabilities...................................... 20
Statement of Operations.................................................. 22
Statement of Changes in Net Assets....................................... 23
Notes to Financial Statements............................................ 25
Financial Highlights..................................................... 32
OTHER INFORMATION
Share Class Information.................................................. 45
Additional Information................................................... 47
Index Definitions........................................................ 48
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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 Select, Capital
Growth and New Opportunities II funds for the six months ended April 30, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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. We also have many informative resources available in the Education &
Planning section of our site to help you with your investment strategy.
Your next shareholder report for these funds will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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, 2004
-------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 19.70% -4.12% 8.48% 14.23% 6/30/71(1)
- --------------------------------------------------------------------------------
S&P 500 INDEX 22.88% -2.26% 11.36% 11.28% --
- --------------------------------------------------------------------------------
Institutional Class 19.93% -3.93% -- 6.10% 3/13/97
- --------------------------------------------------------------------------------
Advisor Class 19.48% -4.35% -- 2.92% 8/8/97
- --------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 19.41% -- -- 22.06%(2)
With sales charge* 12.53% -- -- 16.40%(2)
- --------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 18.50% -- -- 21.15%(2)
With sales charge* 14.50% -- -- 18.07%(2)
- --------------------------------------------------------------------------------
C Class 18.52% -- -- 21.23%(2) 1/31/03
- --------------------------------------------------------------------------------
*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.
(continued)
- ------
2
Select - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made April 30, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- -----------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------------
Investor Class 7.13% 19.89% 20.54% 40.19% 28.41% 13.38% -17.52% -15.63% -14.23% 19.70%
- -----------------------------------------------------------------------------------------------------
S&P 500 Index 17.47% 30.21% 25.13% 41.07% 21.82% 10.13% -12.97% -12.63% -13.31% 22.88%
- -----------------------------------------------------------------------------------------------------
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 - Portfolio Commentary
[photo of John Sykora and Keith Lee]
A PORTFOLIO COMMENTARY FROM JOHN SYKORA AND KEITH LEE, PORTFOLIO MANAGERS ON THE
SELECT INVESTMENT TEAM.
Select gained 5.60%* during the six months ended April 30, 2004, more than
doubling the 2.66% average gain of its large-cap growth peers tracked by
Morningstar. The Standard & Poor's 500 Index gained 6.27%.
The portfolio's advance came during a stretch marked by continued economic and
profit growth. During the period's closing weeks, however, the stock market
weakened amid concerns that the recovery would be stalled by rising oil prices,
geopolitical uncertainty, and higher interest rates. From a size and investment
style standpoint, small- and mid-cap stocks outperformed large-cap stocks, and
value stocks outperformed growth issues.
Select's health care holdings, particularly pharmaceutical companies, provided
the biggest contribution to the portfolio's performance. The rise was led by
Pfizer, which markets a portfolio of well-known drugs including Lipitor,
Celebrex and Viagra. The company reported strong sales growth in back-to-back
quarters during the period and reaffirmed its earnings forecast for 2004.
Another top contributor was Forest Laboratories, which generated sales growth
from antidepressants Celexa and Lexapro, and from the launch of Namenda, its new
Alzheimer's drug. Investments in Novartis and Eli Lilly boosted performance as
well.
The health care sector also produced one of the portfolio's top individual
contributors, UnitedHealth. The No. 1 U.S. health insurer raised its 2004
earnings forecast and benefited from a slowdown in the rate of growth in health
care costs.
Investments in insurance companies helped drive gains in Select's financial
stake. The top contributors were American International Group and Berkshire
Hathaway. Higher insurance rates were key drivers of profit growth at both
companies. Prudential, one of the country's largest life insurers, also
advanced.
TOP TEN HOLDINGS AS OF APRIL 30, 2004
- -------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- -------------------------------------------------------------------------------
Aramark Corp. Cl B 4.3% 4.0%
- -------------------------------------------------------------------------------
UnitedHealth Group
Incorporated 4.2% 3.8%
- -------------------------------------------------------------------------------
American International
Group, Inc. 3.4% 3.7%
- -------------------------------------------------------------------------------
InterActiveCorp 3.3% 3.9%
- -------------------------------------------------------------------------------
Weight Watchers
International Inc. 3.1% 1.9%
- -------------------------------------------------------------------------------
Carnival Corporation 3.1% 2.4%
- -------------------------------------------------------------------------------
General Electric Co. 3.0% 1.4%
- -------------------------------------------------------------------------------
Four Seasons Hotels Inc. 2.8% 3.0%
- -------------------------------------------------------------------------------
Johnson & Johnson 2.8% 2.5%
- -------------------------------------------------------------------------------
Microsoft Corporation 2.7% 3.0%
- -------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor
Class shares. (continued)
- ------
4
Select - Portfolio Commentary
In addition, Select benefited from holdings in companies that make consumer
staples. The rise was led by Coca-Cola and PepsiCo. Another standout was Nestle,
one of the world's top food and beverage companies. Based in Switzerland, Nestle
markets such brands as Nescafe coffee, Perrier bottled water, KitKat chocolate
bars, Stouffer's convenience foods, and Purina pet foods. Elsewhere in this
sector, investments in manufacturers of personal products and everyday
household items also contributed to performance.
Discretionary consumer goods and services companies turned in mixed results.
Carnival Corporation, operator of the Princess, Cunard and Carnival Cruise lines
was a positive contributor. The Miami-based company saw its pricing improve and
bookings rise as the travel industry continued to recover from the slump it hit
in the run up to the Iraq war.
On the downside, Select was hurt by investments in retailers. One of the top
detractors was InterActiveCorp, an operator of online travel, shopping and
ticketing businesses. The company's shares are trading higher than a year ago,
but it struggled in the last six months. Other detractors from this sector
included movie-rental chain Blockbuster and multi-line retailer Kohl's.
The portfolio's stake in the information technology sector was the top detractor
from performance. Intel hurt performance the most in this sector. Although the
world's largest semiconductor manufacturer was the top performer in the
Dow Jones Industrial Average in 2003, it was unable to sustain its
advance after missing analysts' earnings projections. Wireless handset maker
Nokia was another detractor from the technology sector.
Not all of the technology news was negative. Select earned a positive
contribution from its stake in DST Systems, an IT company serving the financial
industry.
Looking ahead, we are hopeful that the strengthening economy will support
continued profit growth. Regardless of economic and market conditions, however,
we will remain focused on trying to identify and own great businesses
experiencing accelerating growth.
TOP FIVE INDUSTRIES AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Pharmaceuticals 12.3% 13.9%
- --------------------------------------------------------------------------------
Insurance 7.9% 9.9%
- --------------------------------------------------------------------------------
Commercial Services
& Supplies 7.6% 6.5%
- --------------------------------------------------------------------------------
Hotels, Restaurants
& Leisure 6.6% 6.1%
- --------------------------------------------------------------------------------
Health Care Providers
& Services 5.3% 5.8%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 98.9% 98.0%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 1.1% 2.0%
- --------------------------------------------------------------------------------
- ------
5
Select - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.9%
AEROSPACE & DEFENSE -- 0.9%
- --------------------------------------------------------------------------------
383,000 General Dynamics Corp. $ 35,856,460
- --------------------------------------------------------------------------------
AUTOMOBILES -- 2.2%
- --------------------------------------------------------------------------------
1,649,000 Harley-Davidson, Inc. 92,871,680
- --------------------------------------------------------------------------------
BEVERAGES -- 5.2%
- --------------------------------------------------------------------------------
890,000 Anheuser-Busch Companies, Inc. 45,603,600
- --------------------------------------------------------------------------------
1,660,000 Coca-Cola Company (The) 83,946,200
- --------------------------------------------------------------------------------
1,552,300 PepsiCo, Inc. 84,584,827
- --------------------------------------------------------------------------------
214,134,627
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 2.0%
- --------------------------------------------------------------------------------
711,200 Amgen Inc.(1) 40,019,224
- --------------------------------------------------------------------------------
115,000 Cephalon, Inc.(1) 6,544,650
- --------------------------------------------------------------------------------
75,000 Gilead Sciences, Inc.(1) 4,562,250
- --------------------------------------------------------------------------------
442,200 Invitrogen Corp.(1)(2) 31,940,106
- --------------------------------------------------------------------------------
83,066,230
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.8%
- --------------------------------------------------------------------------------
1,069,370 Bank of New York Co., Inc. (The) 31,161,442
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 0.5%
- --------------------------------------------------------------------------------
811,000 U.S. Bancorp 20,794,040
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 7.6%
- --------------------------------------------------------------------------------
6,242,379 Aramark Corp. Cl B 178,532,039
- --------------------------------------------------------------------------------
405,000 Avery Dennison Corp. 26,013,150
- --------------------------------------------------------------------------------
320,000 Block (H & R), Inc. 14,435,200
- --------------------------------------------------------------------------------
1,072,000 Cintas Corp. 48,197,120
- --------------------------------------------------------------------------------
1,644,800 Waste Management, Inc. 46,712,320
- --------------------------------------------------------------------------------
313,889,829
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.1%
- --------------------------------------------------------------------------------
2,690,000 Cisco Systems Inc.(1) 56,140,300
- --------------------------------------------------------------------------------
360,000 QUALCOMM Inc. 22,485,600
- --------------------------------------------------------------------------------
85,000 Research In Motion Ltd.(1) 7,374,600
- --------------------------------------------------------------------------------
86,000,500
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 2.5%
- --------------------------------------------------------------------------------
3,010,100 Dell Inc.(1) 104,480,571
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 2.0%
- --------------------------------------------------------------------------------
683,400 American Express Co. 33,452,430
- --------------------------------------------------------------------------------
1,260,000 SLM Corporation 48,270,600
- --------------------------------------------------------------------------------
81,723,030
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
- --------------------------------------------------------------------------------
1,113,966 Citigroup Inc. 53,570,625
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.1%
- --------------------------------------------------------------------------------
716,600 CDW Corp. 44,780,334
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 0.5%
- --------------------------------------------------------------------------------
475,000 BJ Services Co.(1) 21,137,500
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.5%
- --------------------------------------------------------------------------------
335,000 Wal-Mart Stores, Inc. 19,095,000
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 2.1%
- --------------------------------------------------------------------------------
341,977 Nestle SA ORD $ 86,563,093
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7%
- --------------------------------------------------------------------------------
565,100 Medtronic, Inc. 28,514,946
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 5.3%
- --------------------------------------------------------------------------------
1,925,148 Health Management
Associates, Inc. Cl A 44,528,673
- --------------------------------------------------------------------------------
2,845,000 UnitedHealth Group
Incorporated 174,910,600
- --------------------------------------------------------------------------------
219,439,273
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 6.6%
- --------------------------------------------------------------------------------
3,035,000 Carnival Corporation 129,503,450
- --------------------------------------------------------------------------------
724,802 Cheesecake Factory Inc.(1) 30,695,365
- --------------------------------------------------------------------------------
2,130,000 Four Seasons Hotels Inc.(2)(3) 113,955,000
- --------------------------------------------------------------------------------
274,153,815
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 2.1%
- --------------------------------------------------------------------------------
3,222,500 Yankee Candle Company Inc.(1)(3) 87,265,300
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.6%
- --------------------------------------------------------------------------------
590,000 Colgate-Palmolive Co. 34,149,200
- --------------------------------------------------------------------------------
694,300 Procter & Gamble Co. (The) 73,422,225
- --------------------------------------------------------------------------------
107,571,425
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 3.0%
- --------------------------------------------------------------------------------
4,155,700 General Electric Co. 124,463,215
- --------------------------------------------------------------------------------
INSURANCE -- 7.9%
- --------------------------------------------------------------------------------
1,969,625 American International
Group, Inc. 141,123,631
- --------------------------------------------------------------------------------
474,272 Axis Capital Holdings Limited 12,923,912
- --------------------------------------------------------------------------------
698 Berkshire Hathaway Inc. Cl A(1) 65,186,220
- --------------------------------------------------------------------------------
20,624 Berkshire Hathaway Inc. Cl B(1) 64,326,256
- --------------------------------------------------------------------------------
972,000 Marsh & McLennan
Companies, Inc. 43,837,200
- --------------------------------------------------------------------------------
327,397,219
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 4.0%
- --------------------------------------------------------------------------------
100,000 Amazon.com, Inc.(1) 4,346,000
- --------------------------------------------------------------------------------
280,000 eBay Inc.(1) 22,349,600
- --------------------------------------------------------------------------------
4,289,361 InterActiveCorp(1)(2) 136,701,935
- --------------------------------------------------------------------------------
163,397,535
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 0.5%
- --------------------------------------------------------------------------------
533,000 Sina Corp.(1) 15,190,500
- --------------------------------------------------------------------------------
80,000 Yahoo! Inc.(1) 4,036,800
- --------------------------------------------------------------------------------
19,227,300
- --------------------------------------------------------------------------------
IT SERVICES -- 2.5%
- --------------------------------------------------------------------------------
1,354,000 DST Systems, Inc.(1)(2) 59,779,100
- --------------------------------------------------------------------------------
105,000 First Data Corp. 4,765,950
- --------------------------------------------------------------------------------
735,000 Hewitt Associates, Inc.(1) 22,718,850
- --------------------------------------------------------------------------------
80,000 Paychex, Inc. 2,982,400
- --------------------------------------------------------------------------------
520,000 SunGard Data Systems Inc.(1) 13,556,400
- --------------------------------------------------------------------------------
103,802,700
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Select - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
MACHINERY -- 0.8%
- --------------------------------------------------------------------------------
840,000 Dover Corp. $ 33,625,200
- --------------------------------------------------------------------------------
MEDIA -- 1.8%
- --------------------------------------------------------------------------------
5,990,000 British Sky Broadcasting
plc ORD 70,864,641
- --------------------------------------------------------------------------------
40,600 McGraw-Hill Companies,
Inc. (The) 3,201,716
- --------------------------------------------------------------------------------
74,066,357
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.3%
- --------------------------------------------------------------------------------
771,000 Kohl's Corp.(1) 32,220,090
- --------------------------------------------------------------------------------
475,400 Target Corporation 20,618,098
- --------------------------------------------------------------------------------
52,838,188
- --------------------------------------------------------------------------------
OIL & GAS -- 2.2%
- --------------------------------------------------------------------------------
451,380 Apache Corp. 18,899,281
- --------------------------------------------------------------------------------
215,000 BP plc ADR 11,373,500
- --------------------------------------------------------------------------------
144,415 Devon Energy Corporation 8,838,198
- --------------------------------------------------------------------------------
325,500 EOG Resources Inc. 16,030,875
- --------------------------------------------------------------------------------
390,000 Exxon Mobil Corp. 16,594,500
- --------------------------------------------------------------------------------
625,000 Pioneer Natural Resources Co. 20,443,750
- --------------------------------------------------------------------------------
92,180,104
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
1,092,000 Estee Lauder Companies,
Inc. Cl A(2) 49,915,320
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 12.3%
- --------------------------------------------------------------------------------
1,350,000 Altana AG ORD 85,919,897
- --------------------------------------------------------------------------------
140,000 Barr Pharmaceuticals Inc.(1) 5,798,800
- --------------------------------------------------------------------------------
1,373,400 Eli Lilly and Company 101,370,654
- --------------------------------------------------------------------------------
858,000 Forest Laboratories, Inc. Cl A(1) 55,323,840
- --------------------------------------------------------------------------------
2,107,400 Johnson & Johnson 113,862,823
- --------------------------------------------------------------------------------
678,631 Novartis AG ORD 30,270,776
- --------------------------------------------------------------------------------
2,430,275 Pfizer, Inc. 86,906,634
- --------------------------------------------------------------------------------
460,000 Teva Pharmaceutical
Industries Ltd. ADR 28,317,600
- --------------------------------------------------------------------------------
507,771,024
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.6%
- --------------------------------------------------------------------------------
915,000 Integrated Circuit
Systems, Inc.(1)(2) 21,676,350
- --------------------------------------------------------------------------------
1,585,000 Intel Corp. 40,782,050
- --------------------------------------------------------------------------------
60,000 Linear Technology Corp. 2,137,800
- --------------------------------------------------------------------------------
75,000 Microchip Technology Inc. 2,101,500
- --------------------------------------------------------------------------------
66,697,700
- --------------------------------------------------------------------------------
SOFTWARE -- 3.9%
- --------------------------------------------------------------------------------
300,000 Citrix Systems, Inc.(1) 5,715,000
- --------------------------------------------------------------------------------
4,347,800 Microsoft Corporation 112,912,366
- --------------------------------------------------------------------------------
2,430,000 Oracle Corp.(1) 27,264,600
- --------------------------------------------------------------------------------
320,000 Red Hat Inc.(1) 7,267,200
- --------------------------------------------------------------------------------
200,000 Symantec Corp.(1) 9,010,000
- --------------------------------------------------------------------------------
162,169,166
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.1%
- --------------------------------------------------------------------------------
370,100 Home Depot, Inc. $ 13,023,819
- --------------------------------------------------------------------------------
390,200 Lowe's Companies, Inc. 20,313,812
- --------------------------------------------------------------------------------
3,330,000 Weight Watchers
International Inc.(1)(2) 129,870,000
- --------------------------------------------------------------------------------
205,000 Williams-Sonoma Inc.(1) 6,658,400
- --------------------------------------------------------------------------------
169,866,031
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.0%
- --------------------------------------------------------------------------------
672,000 Freddie Mac 39,244,800
- --------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE -- 1.1%
- --------------------------------------------------------------------------------
34,715,000 Hopewell Highway
Infrastructure Ltd. ORD 19,249,393
- --------------------------------------------------------------------------------
12,674,000 Jiangsu Express ORD(1) 5,727,783
- --------------------------------------------------------------------------------
31,116,000 Zhejiang Expressway
Co. Ltd. ORD 19,447,874
- --------------------------------------------------------------------------------
44,425,050
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 1.1%
- --------------------------------------------------------------------------------
1,940,000 Nextel Communications, Inc.(1) 46,288,400
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,242,217,402) 4,083,445,029
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 1.1%
Repurchase Agreement, Deutsche Bank, Inc.,
(U.S. Treasury obligations), in a joint trading
account at 0.91%, dated 4/30/04, due
5/3/04 (Delivery value $44,303,359)
(Cost $44,300,000) 44,300,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.0%
(Cost $3,286,517,402) $4,127,745,029
================================================================================
COLLATERAL RECEIVED FOR
SECURITIES LENDING(4)
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank AG,
(U.S. Treasury obligations), 1.04%,
dated 4/30/04, due 5/3/04
(Delivery value $6,038,439) 6,037,914
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Select - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM DEBT
- --------------------------------------------------------------------------------
$24,000,000 Ford Credit Floorplan Master
Owner Trust, Series 2001-1,
Class A, VRN, 1.19%, 5/17/04,
resets monthly off the
1-month LIBOR plus 0.09%
with no caps $ 24,004,471
- --------------------------------------------------------------------------------
8,000,000 RACERS(reg.sm), Series 2000-7,
Class A3, VRN, 1.30%, 5/17/04,
resets monthly off the
1-month LIBOR plus 0.20% with
no caps (Acquired 4/15/04,
Cost $8,000,000)(5) 8,000,000
- --------------------------------------------------------------------------------
$25,000,000 SPARCS 2003-3, VRN, 1.42%,
5/24/04, resets quarterly off
the 3-month LIBOR plus 0.30%
with no caps (Acquired 2/23/04,
Cost $25,000,000)(5) $ 25,000,000
- --------------------------------------------------------------------------------
57,004,471
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED
FOR SECURITIES LENDING
(Cost $63,042,385) $ 63,042,385
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts to Sell Settlement Date Value Unrealized Gain (Loss)
- --------------------------------------------------------------------------------
83,572,026 CAD 5/28/04 $ 60,925,966 $ 141,037
- --------------------------------------------------------------------------------
77,493,373 CHF 5/28/04 59,839,149 (418,095)
- --------------------------------------------------------------------------------
8,985,562 Euro 5/28/04 10,760,552 (125,872)
- --------------------------------------------------------------------------------
11,926,554 Euro 5/28/04 14,282,502 (173,207)
- --------------------------------------------------------------------------------
18,249,066 Euro 5/28/04 21,853,951 (255,784)
- --------------------------------------------------------------------------------
9,706,848 GBP 5/28/04 17,202,806 (24,306)
- --------------------------------------------------------------------------------
14,200,519 GBP 5/28/04 25,166,642 (2,968)
- --------------------------------------------------------------------------------
$210,031,568 $(859,195)
=========================================
(Value on Settlement Date $209,172,373)
*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
CAD = Canadian Dollar
CHF = Swiss Franc
GBP = British Pound
LIBOR = London Interbank Offered Rate
ORD = Foreign Ordinary Share
RACERS (reg.sm) = Restructured Asset Certificates Enhanced Returns
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.
SPARCS = Structured Product Asset Return Certificates
VRN = Variable Rate Note. Interest reset date is indicated. Rate shown is
effective April 30, 2004.
(1) Non-income producing.
(2) Security, or a portion thereof, was on loan as of April 30, 2004.
(3) 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.)
(4) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 6
in Notes to Financial Statements.)
(5) 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 purchased by the lending agent
with cash collateral received for securities lending at April 30, 2004,
was $33,000,000 which represented 0.8% of net assets.
See Notes to Financial Statements.
- ------
8
Capital Growth - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION(1) DATE
- --------------------------------------------------------------------------------
RUSSELL 1000 GROWTH INDEX -3.00%
- --------------------------------------------------------------------------------
A Class 2/27/04
No sales charge* -4.20%
With sales charge* -9.71%
- --------------------------------------------------------------------------------
B Class 2/27/04
No sales charge* -4.30%
With sales charge* -9.30%
- --------------------------------------------------------------------------------
C Class 2/27/04
No sales charge* -4.30%
With sales charge* -5.26%
- --------------------------------------------------------------------------------
*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) Returns for periods less than one year are not annualized.
The chart on the performance page gives 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. The chart does not 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
Capital Growth - Portfolio Commentary
[photo of Prescott LeGard, Greg Woodhams and Tim Reynolds]
A PORTFOLIO COMMENTARY FROM PRESCOTT LEGARD, GREG WOODHAMS AND TIM REYNOLDS,
PORTFOLIO MANAGERS ON THE CAPITAL GROWTH INVESTMENT TEAM.
American Century launched Capital Growth on February 27, 2004. The management
team seeks to invest in the stocks of large companies they believe will increase
in value over time, using a growth investment strategy developed by American
Century. The portfolio managers look for companies with earnings and revenues
that are not only growing, but growing at a successively faster, or
accelerating, pace. This includes companies whose growth rates, although still
negative, are less negative than in prior periods. Capital Growth's strategy is
based on the premise that, over the long term, the stocks of companies with
accelerating earnings and revenue growth have a greater-than-average chance to
increase in value. During the brief period from inception through April 30,
2004, the portfolio declined 4.20%* while its benchmark, the Russell 1000 Growth
Index, declined 3.00%.
Capital Growth's introduction came during a stretch in which stock prices were
under pressure from a number of factors. Oil prices were climbing, there was
speculation about higher interest rates, and geopolitical concerns were
heightened due to the Madrid train bombings and continued violence in Iraq. Not
all of the news was negative, however, as corporate profit growth exceeded
analysts' forecasts and the government reported that the economic expansion was
continuing.
Investments in information technology stocks were the top detractors from
performance against this backdrop. Manufacturers of communications equipment
hurt results the most. The decline was led by JDS Uniphase, the world's largest
manufacturer of parts that boost the speed and capacity of fiber-optic networks.
During the period, the company said the telecom recovery was uneven and reported
that a small number of customers expressed interest in delaying orders to future
quarters. Cisco Systems, the top supplier of networking gear, and Juniper
Networks were other notable detractors in this area.
TOP TEN HOLDINGS AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND
INVESTMENTS
AS OF
4/30/04
- --------------------------------------------------------------------------------
General Electric Co. 4.7%
- --------------------------------------------------------------------------------
Cisco Systems Inc. 4.1%
- --------------------------------------------------------------------------------
Procter & Gamble Co. (The) 3.8%
- --------------------------------------------------------------------------------
Medtronic, Inc. 3.3%
- --------------------------------------------------------------------------------
International Business Machines Corp. 3.2%
- --------------------------------------------------------------------------------
QUALCOMM Inc. 3.0%
- --------------------------------------------------------------------------------
NIKE, Inc. Cl B 2.6%
- --------------------------------------------------------------------------------
First Data Corp. 2.6%
- --------------------------------------------------------------------------------
American International Group, Inc. 2.5%
- --------------------------------------------------------------------------------
Oracle Corp. 2.3%
- --------------------------------------------------------------------------------
*All portfolio returns referenced in this review are for Class A shares and are
not reduced by sales charges. Class A shares are subject to a maximum sales
charge of 5.75%. Had the sale charge been applied, returns would be lower than
those shown.
(continued)
- ------
10
Capital Growth - Portfolio Commentary
Software and semiconductor stocks also fell. BEA Systems and Oracle led the
software decline. BEA develops software that ties together and streamlines
business applications, while Oracle designs data storage and management
software. Xilinx, a maker of programmable microchips, was the top detractor
from the semiconductor industry, and was eliminated from the portfolio.
Positive contributors from Capital Growth's information technology stake
included Yahoo! and First Data. Shares of Yahoo! rose to a 52-week high after
the company reported better-than-expected profits due to strong advertising
sales. First Data, a processor of credit card transactions and the parent
company of Western Union, rose after beating analysts' forecasts.
Companies leveraged to the financial markets led the decline of Capital Growth's
financial stake. Northern Trust and State Street were top detractors. Consumer
finance and insurance companies weighed on performance as well.
Accounting for one of the portfolio's largest sector allocations on average,
health care stocks were the top contributors to performance during the period.
Investments in companies that make health care equipment and supplies drove
positive results in this area. Alcon, the world's largest eye care products
maker, was a standout performer. The company beat analysts' earnings projections
due to strong sales of glaucoma treatments and artificial tear products.
Investments in C.R. Bard and Medtronic also boosted performance.
Looking ahead, we are hopeful that the strengthening economy will support
continued profit growth. Regardless of economic and market conditions, however,
we will remain focused on trying to identify and own companies that appear best
able to sustain their accelerating growth.
TOP FIVE INDUSTRIES AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND
INVESTMENTS
AS OF
4/30/04
- --------------------------------------------------------------------------------
Health Care Equipment & Supplies 12.7%
- --------------------------------------------------------------------------------
Communications Equipment 9.4%
- --------------------------------------------------------------------------------
Pharmaceuticals 7.2%
- --------------------------------------------------------------------------------
Software 7.0%
- --------------------------------------------------------------------------------
Industrial Conglomerates 6.3%
- --------------------------------------------------------------------------------
- ------
11
Capital Growth - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 2.5%
- --------------------------------------------------------------------------------
343 Rockwell Collins $ 11,062
- --------------------------------------------------------------------------------
153 United Technologies Corp. 13,198
- --------------------------------------------------------------------------------
24,260
- --------------------------------------------------------------------------------
AUTOMOBILES -- 2.3%
- --------------------------------------------------------------------------------
388 Harley-Davidson, Inc. 21,852
- --------------------------------------------------------------------------------
BEVERAGES -- 2.0%
- --------------------------------------------------------------------------------
346 PepsiCo, Inc. 18,854
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 2.9%
- --------------------------------------------------------------------------------
187 Amgen Inc.(1) 10,523
- --------------------------------------------------------------------------------
190 Celgene Corp.(1) 9,821
- --------------------------------------------------------------------------------
116 Neurocrine Biosciences Inc.(1) 7,613
- --------------------------------------------------------------------------------
27,957
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.2%
- --------------------------------------------------------------------------------
122 Goldman Sachs Group, Inc. (The) 11,773
- --------------------------------------------------------------------------------
222 Northern Trust Corp. 9,386
- --------------------------------------------------------------------------------
21,159
- --------------------------------------------------------------------------------
CHEMICALS -- 2.0%
- --------------------------------------------------------------------------------
563 Monsanto Co. 19,474
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 1.1%
- --------------------------------------------------------------------------------
414 Monster Worldwide Inc.(1) 10,603
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 9.4%
- --------------------------------------------------------------------------------
1,889 Cisco Systems Inc.(1) 39,423
- --------------------------------------------------------------------------------
2,818 JDS Uniphase Corp.(1) 8,567
- --------------------------------------------------------------------------------
581 Juniper Networks, Inc.(1) 12,712
- --------------------------------------------------------------------------------
469 QUALCOMM Inc. 29,294
- --------------------------------------------------------------------------------
89,996
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 3.2%
- --------------------------------------------------------------------------------
352 International Business
Machines Corp. 31,036
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 2.1%
- --------------------------------------------------------------------------------
410 American Express Co. 20,070
- --------------------------------------------------------------------------------
DIVERSIFIED -- 0.5%
- --------------------------------------------------------------------------------
47 Standard and Poor's 500
Depositary Receipt 5,217
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.0%
- --------------------------------------------------------------------------------
1,068 Sprint Corp. 19,107
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS -- 0.3%
- --------------------------------------------------------------------------------
96 Jabil Circuit, Inc.(1) 2,533
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------
184 McCormick & Company, Incorporated 6,285
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 12.7%
- --------------------------------------------------------------------------------
201 Alcon, Inc. $ 14,924
- --------------------------------------------------------------------------------
152 Bard (C.R.), Inc. 16,153
- --------------------------------------------------------------------------------
569 Baxter International, Inc. 18,009
- --------------------------------------------------------------------------------
317 Fisher Scientific International(1) 18,560
- --------------------------------------------------------------------------------
274 Hospira Inc.(1) 7,798
- --------------------------------------------------------------------------------
626 Medtronic, Inc. 31,589
- --------------------------------------------------------------------------------
204 St. Jude Medical, Inc.(1) 15,557
- --------------------------------------------------------------------------------
122,590
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 3.7%
- --------------------------------------------------------------------------------
1,053 Caesars Entertainment Inc.(1) 13,952
- --------------------------------------------------------------------------------
501 Carnival Corporation 21,378
- --------------------------------------------------------------------------------
35,330
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.8%
- --------------------------------------------------------------------------------
348 Procter & Gamble Co. (The) 36,801
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 6.3%
- --------------------------------------------------------------------------------
1,508 General Electric Co. 45,165
- --------------------------------------------------------------------------------
279 Textron Inc. 15,395
- --------------------------------------------------------------------------------
60,560
- --------------------------------------------------------------------------------
INSURANCE -- 4.5%
- --------------------------------------------------------------------------------
335 American International Group, Inc. 24,002
- --------------------------------------------------------------------------------
561 MetLife, Inc. 19,355
- --------------------------------------------------------------------------------
43,357
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 2.2%
- --------------------------------------------------------------------------------
437 VeriSign, Inc.(1) 7,049
- --------------------------------------------------------------------------------
272 Yahoo! Inc.(1) 13,725
- --------------------------------------------------------------------------------
20,774
- --------------------------------------------------------------------------------
IT SERVICES -- 3.5%
- --------------------------------------------------------------------------------
210 DST Systems, Inc.(1) 9,272
- --------------------------------------------------------------------------------
541 First Data Corp. 24,555
- --------------------------------------------------------------------------------
33,827
- --------------------------------------------------------------------------------
MEDIA -- 5.0%
- --------------------------------------------------------------------------------
241 Clear Channel Communications, Inc. 9,999
- --------------------------------------------------------------------------------
496 Disney (Walt) Co. 11,423
- --------------------------------------------------------------------------------
443 Univision Communications Inc. Cl A(1) 14,996
- --------------------------------------------------------------------------------
492 XM Satellite Radio Holdings Inc.(1) 11,788
- --------------------------------------------------------------------------------
48,206
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 2.6%
- --------------------------------------------------------------------------------
466 J.C. Penney Co. Inc. Holding Company 15,779
- --------------------------------------------------------------------------------
304 May Department Stores Co. (The) 9,363
- --------------------------------------------------------------------------------
25,142
- --------------------------------------------------------------------------------
OIL & GAS -- 3.3%
- --------------------------------------------------------------------------------
298 Apache Corp. 12,477
- --------------------------------------------------------------------------------
283 Occidental Petroleum Corp. 13,358
- --------------------------------------------------------------------------------
90 Valero Energy Corp. 5,738
- --------------------------------------------------------------------------------
31,573
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
12
Capital Growth - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.2%
- --------------------------------------------------------------------------------
123 Eli Lilly and Company $ 9,079
- --------------------------------------------------------------------------------
540 Mylan Laboratories Inc. 12,371
- --------------------------------------------------------------------------------
241 Novartis AG ORD 10,750
- --------------------------------------------------------------------------------
555 Pfizer, Inc. 19,846
- --------------------------------------------------------------------------------
164 Roche Holding AG ORD 17,213
- --------------------------------------------------------------------------------
69,259
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.0%
- --------------------------------------------------------------------------------
272 Linear Technology Corp. 9,691
- --------------------------------------------------------------------------------
SOFTWARE -- 7.0%
- --------------------------------------------------------------------------------
1,253 BEA Systems, Inc.(1) 14,297
- --------------------------------------------------------------------------------
250 Microsoft Corporation 6,493
- --------------------------------------------------------------------------------
438 Novell, Inc.(1) 4,222
- --------------------------------------------------------------------------------
2,000 Oracle Corp.(1) 22,440
- --------------------------------------------------------------------------------
523 SAP AG ADR 19,497
- --------------------------------------------------------------------------------
66,949
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 2.6%
- --------------------------------------------------------------------------------
351 NIKE, Inc. Cl B $ 25,254
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 1.4%
- --------------------------------------------------------------------------------
189 MGIC Investment Corp. 13,914
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $991,998) $961,630
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
ORD = Foreign Ordinary Share
(1) Non-income producing.
See Notes to Financial Statements.
- ------
13
New Opportunities II - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
-----------
AVERAGE
ANNUAL
RETURNS
- -------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR INCEPTION DATE
- -------------------------------------------------------------------------------
INVESTOR CLASS 49.04% 7.67% 6/1/01
- -------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX 41.57% -1.10%(1) --
- -------------------------------------------------------------------------------
A Class 1/31/03
No sales charge* 48.56% 37.73%(2)
With sales charge* 40.14% 31.41%(2)
- -------------------------------------------------------------------------------
B Class 1/31/03
No sales charge* 47.71% 36.84%(2)
With sales charge* 43.71% 33.85%(2)
- -------------------------------------------------------------------------------
C Class 47.84% 37.19%(2) 1/31/03
- -------------------------------------------------------------------------------
*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
6/30/03 for the A, B, and C Class shares, respectively.
(continued)
- ------
14
New Opportunities II - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made June 1, 2001
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended April 30
- --------------------------------------------------------------------------------
2002* 2003 2004
- --------------------------------------------------------------------------------
Investor Class 6.00% -21.51% 49.04%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index -10.59% -23.50% 41.57%
- --------------------------------------------------------------------------------
* 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.
- ------
15
New Opportunities II - Portfolio Commentary
[photo of John Seitzer and Harold Bradley]
A PORTFOLIO COMMENTARY FROM JOHN SEITZER, PORTFOLIO MANAGER, AND
HAROLD BRADLEY, CHIEF INVESTMENT OFFICER AND PORTFOLIO MANAGER, ON THE
NEW OPPORTUNITIES II INVESTMENT TEAM.
For the six months ended April 30, 2004, New Opportunities II gained 7.83%(1),
outperforming its benchmark, the Russell 2000 Growth Index, which returned
4.01%. The S&P 500 Index, representing the broader market, rose 6.27%.
The fund posted average annual returns of 7.67% since its June 1, 2001
inception, significantly exceeding the -1.10% average of its benchmark and the
- -2.65% average of the S&P 500.(2)
RENEWED VITALITY
During the six months covered by this report, the stock market continued on its
upward trajectory, a course set early in 2003 with a broad-based rally that
began just days ahead of the start of war in Iraq.
Numerous factors fostered positive sentiment, including mild inflation,
record-low interest rates and a moderate pace of economic expansion. All
provided a beneficial backdrop for profit growth, and many companies posted
earnings that exceeded expectations.
Along the way, investors put their money to work in the stock market. Their
enthusiasm eventually hoisted the Dow Jones Industrial Average to its highest
level in 32 months, the Nasdaq to its highest point since July 2001 and the
broader S&P 500 to a 23-month high. Though stocks later retreated from those
lofty heights amid challenges such as labor-market weakness, rising energy
prices and renewed terrorism concerns, the major U.S. indices booked solid gains
for the period.
SOURCES OF STRENGTH
Our investment discipline led us to select positions in the health care sector,
a significant area of emphasis and the greatest source of absolute contribution
to returns. Health care equipment and supplies companies delivered the best
performance. One top holding was Laserscope, which makes lasers for surgical and
cosmetic applications. Increased demand for the firm's newest product, the
GreenLight(tm) laser, designed to treat benign prostate conditions, was the
catalyst behind the
TOP TEN HOLDINGS AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Laserscope 2.1% 1.0%
- --------------------------------------------------------------------------------
PrivateBancorp, Inc. 1.9% 1.7%
- --------------------------------------------------------------------------------
Bone Care
International Inc. 1.8% --
- --------------------------------------------------------------------------------
Inveresk Research
Group Inc. 1.8% --
- --------------------------------------------------------------------------------
Medicis Pharmaceutical
Corp. Cl A 1.6% --
- --------------------------------------------------------------------------------
Euronet Worldwide Inc. 1.6% 1.1%
- --------------------------------------------------------------------------------
Titanium Metals Corp. 1.6% --
- --------------------------------------------------------------------------------
Carbo Ceramics Inc. 1.5% --
- --------------------------------------------------------------------------------
California Micro Devices
Corporation 1.5% --
- --------------------------------------------------------------------------------
SkyWest, Inc. 1.4% --
- --------------------------------------------------------------------------------
(1) All fund returns referenced in this commentary are for Investor Class
shares.
(2) Benchmark information since May 31, 2001, the date nearest the Investor
Class inception that data are available. (continued)
- ------
16
New Opportunities II - Portfolio Commentary
earnings acceleration that drew our attention. Elsewhere, pharmaceutical firm
Bone Care International and clinical laboratory operator BioReliance Corp. were
other well-performing names that bolstered our results.
Investments in the consumer discretionary sector also provided significant lift
and yielded additional contributors, including specialty retailer Big 5 Sporting
Goods Corp. and Jarden Corp., which makes a range of household goods, from home
canning products to tooth picks.
INFORMATION TECHNOLOGY: MIXED PERFORMANCE
The information technology sector, the largest average stake during the period,
gave the portfolio some of its best and worst results. We achieved considerable
success with TASER International Inc., which is benefiting from increased demand
for its non-lethal stun weapons -- net sales surged nearly 149% in 2003.
California Micro Devices also ranked high on the list of contributors. The
company's technology reduces electromagnetic interference on cell phones via a
small chip that replaces older, bulkier resistors and capacitors. In the wake of
cell-number portability, demand is rising for the sleek, quality handsets that
the company's products make possible for clients such as Motorola and Samsung.
Broadband equipment provider Netopia(reg.tm) also added value. The robust
performance of these and other holdings alongside our success in sidestepping
damage elsewhere in the sector helped us surpass our benchmark by a significant
margin.
However, there were some setbacks in this arena. One disappointment was Cray,
Inc., which develops and sells supercomputers with capabilities that far exceed
typical mainframe systems. The costs associated with completion of its latest
supercomputer, Red Storm, pressured margins and prompted investors to sell the
stock. Another that fell short was Nanometrics, from the semiconductors and
semiconductor equipment industry. Alvarion Ltd., CyberGuard Corp. and
Symmetricom, all communications equipment firms, also were notable detractors.
Elsewhere, investments in the telecommunication services and materials sectors
slowed overall performance.
We will remain committed to our strategy of seeking companies demonstrating
acceleration in earnings because we believe they offer our investors the
potential for long-term reward.
TOP FIVE INDUSTRIES AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Health Care Equipment
& Supplies 10.7% 9.3%
- --------------------------------------------------------------------------------
Electronic Equipment
& Instruments 7.8% 8.0%
- --------------------------------------------------------------------------------
Energy Equipment
& Services 6.4% 1.1%
- --------------------------------------------------------------------------------
Commercial Banks 5.7% 3.0%
- --------------------------------------------------------------------------------
Health Care Providers
& Services 5.3% 4.6%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 99.0% 95.6%
- --------------------------------------------------------------------------------
Preferred Stocks -- 1.2%
- --------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 99.0% 96.8%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 1.0% 3.2%
- --------------------------------------------------------------------------------
- ------
17
New Opportunities II - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 99.0%
AEROSPACE & DEFENSE -- 1.0%
- --------------------------------------------------------------------------------
21,012 United Industrial Corporation $ 431,586
- --------------------------------------------------------------------------------
AIRLINES -- 1.4%
- --------------------------------------------------------------------------------
32,183 SkyWest, Inc. 585,731
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.0%
- --------------------------------------------------------------------------------
22,453 LKQ Corporation(1) 398,765
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.8%
- --------------------------------------------------------------------------------
16,938 Protein Design Labs, Inc.(1) 414,643
- --------------------------------------------------------------------------------
14,482 Vicuron Pharmaceuticals Inc.(1) 330,334
- --------------------------------------------------------------------------------
744,977
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
6,452 American Woodmark Corp. 414,218
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.1%
- --------------------------------------------------------------------------------
4,230 Affiliated Managers Group Inc.(1) 206,001
- --------------------------------------------------------------------------------
7,027 Eaton Vance Corp. 256,556
- --------------------------------------------------------------------------------
10,788 Investors Financial Services
Corporation 419,329
- --------------------------------------------------------------------------------
881,886
- --------------------------------------------------------------------------------
CHEMICALS -- 0.4%
- --------------------------------------------------------------------------------
16,360 Material Sciences Corp.(1) 158,692
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 5.7%
- --------------------------------------------------------------------------------
25,059 Bancorp Bank (The)(1) 473,365
- --------------------------------------------------------------------------------
8,916 East West BanCorp, Inc. 502,238
- --------------------------------------------------------------------------------
6,447 First Bancorp (Puerto Rico) 237,636
- --------------------------------------------------------------------------------
14,071 PrivateBancorp, Inc. 778,408
- --------------------------------------------------------------------------------
10,582 Trico Bancshares 368,042
- --------------------------------------------------------------------------------
2,359,689
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 4.5%
- --------------------------------------------------------------------------------
8,980 Banta Corp. 399,430
- --------------------------------------------------------------------------------
7,351 Intersections Inc.(1) 181,570
- --------------------------------------------------------------------------------
32,703 Korn/Ferry International(1) 489,890
- --------------------------------------------------------------------------------
22,469 Navigant Consulting Inc.(1) 393,882
- --------------------------------------------------------------------------------
9,834 Resources Connection, Inc.(1) 396,409
- --------------------------------------------------------------------------------
1,861,181
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.9%
- --------------------------------------------------------------------------------
26,921 Alvarion Ltd.(1) 287,247
- --------------------------------------------------------------------------------
31,825 CyberGuard Corp.(1) 273,695
- --------------------------------------------------------------------------------
51,556 Harmonic Inc.(1) 340,785
- --------------------------------------------------------------------------------
12,406 Sirf Technology Holdings Inc.(1) 198,496
- --------------------------------------------------------------------------------
65,027 Symmetricom Inc.(1) 520,867
- --------------------------------------------------------------------------------
1,621,090
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.0%
- --------------------------------------------------------------------------------
8,225 Avid Technology, Inc.(1) 394,553
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.7%
- --------------------------------------------------------------------------------
40,687 Metris Companies Inc.(1) 284,809
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.0%
- --------------------------------------------------------------------------------
19,117 Hydrogenics Corp.(1) $ 104,761
- --------------------------------------------------------------------------------
38,478 Plug Power Inc.(1) 298,974
- --------------------------------------------------------------------------------
6,531 Woodward Governor Co. 407,143
- --------------------------------------------------------------------------------
810,878
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 7.8%
- --------------------------------------------------------------------------------
18,212 Cognex Corp. 578,777
- --------------------------------------------------------------------------------
10,922 Flir Systems Inc.(1) 512,351
- --------------------------------------------------------------------------------
26,186 Mechanical Technology Inc.(1) 143,237
- --------------------------------------------------------------------------------
6,192 Rogers Corp.(1) 369,662
- --------------------------------------------------------------------------------
8,469 Scansource Inc.(1) 467,743
- --------------------------------------------------------------------------------
15,743 Universal Display Corporation(1) 199,149
- --------------------------------------------------------------------------------
64,000 Viisage Technology Inc.(1) 532,480
- --------------------------------------------------------------------------------
29,346 X-Rite Inc. 395,584
- --------------------------------------------------------------------------------
3,198,983
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 6.4%
- --------------------------------------------------------------------------------
9,805 Carbo Ceramics Inc. 634,187
- --------------------------------------------------------------------------------
22,850 Lone Star Technologies, Inc.(1) 468,425
- --------------------------------------------------------------------------------
11,400 Patterson-UTI Energy Inc.(1) 412,566
- --------------------------------------------------------------------------------
18,762 Unit Corporation(1) 530,027
- --------------------------------------------------------------------------------
6,875 Universal Compression
Holdings Inc.(1) 204,600
- --------------------------------------------------------------------------------
26,025 Willbros Group Inc.(1) 376,842
- --------------------------------------------------------------------------------
2,626,647
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 10.7%
- --------------------------------------------------------------------------------
25,420 Abaxis Inc.(1) 451,968
- --------------------------------------------------------------------------------
23,678 Align Technology, Inc.(1) 410,103
- --------------------------------------------------------------------------------
8,700 Analogic Corporation 411,945
- --------------------------------------------------------------------------------
15,468 Haemonetics Corporation(1) 436,662
- --------------------------------------------------------------------------------
14,300 Kensey Nash Corp.(1) 463,320
- --------------------------------------------------------------------------------
29,180 Laserscope(1) 866,937
- --------------------------------------------------------------------------------
49,027 Sonic Innovations Inc.(1) 448,597
- --------------------------------------------------------------------------------
36,455 Urologix Inc.(1) 444,751
- --------------------------------------------------------------------------------
41,076 Vascular Solutions Inc.(1) 517,146
- --------------------------------------------------------------------------------
4,451,429
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 5.3%
- --------------------------------------------------------------------------------
9,814 DaVita Inc.(1) 501,495
- --------------------------------------------------------------------------------
25,782 Inveresk Research Group Inc.(1) 730,663
- --------------------------------------------------------------------------------
17,378 LCA-Vision Inc.(1) 437,752
- --------------------------------------------------------------------------------
13,824 SFBC International, Inc.(1) 505,405
- --------------------------------------------------------------------------------
2,175,315
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 5.1%
- --------------------------------------------------------------------------------
16,916 Ameristar Casinos Inc. 536,575
- --------------------------------------------------------------------------------
42,057 La Quinta Corporation(1) 302,390
- --------------------------------------------------------------------------------
22,491 Ryan's Family Steak Houses Inc.(1) 407,987
- --------------------------------------------------------------------------------
14,244 Shuffle Master, Inc.(1) 466,491
- --------------------------------------------------------------------------------
13,698 WMS Industries Inc.(1) 386,832
- --------------------------------------------------------------------------------
2,100,275
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
18
New Opportunities II - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 4.3%
- --------------------------------------------------------------------------------
52,224 Interface Inc.(1) $ 445,471
- --------------------------------------------------------------------------------
12,646 Jarden Corp.(1) 470,431
- --------------------------------------------------------------------------------
7,408 Standard-Pacific Corporation 373,660
- --------------------------------------------------------------------------------
5,559 William Lyon Homes Inc.(1) 490,081
- --------------------------------------------------------------------------------
1,779,643
- --------------------------------------------------------------------------------
INSURANCE -- 0.6%
- --------------------------------------------------------------------------------
20,594 American Equity Investment
Life Holding Co. 231,683
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 3.3%
- --------------------------------------------------------------------------------
26,550 Cybersource Corp.(1) 168,327
- --------------------------------------------------------------------------------
14,941 Digital River Inc.(1) 384,731
- --------------------------------------------------------------------------------
13,666 Equinix Inc.(1) 401,644
- --------------------------------------------------------------------------------
12,583 Infospace Inc.(1) 411,338
- --------------------------------------------------------------------------------
1,366,040
- --------------------------------------------------------------------------------
IT SERVICES -- 1.6%
- --------------------------------------------------------------------------------
33,897 Euronet Worldwide Inc.(1) 658,619
- --------------------------------------------------------------------------------
MACHINERY -- 2.5%
- --------------------------------------------------------------------------------
14,532 American Science and
Engineering Inc.(1) 200,542
- --------------------------------------------------------------------------------
24,187 Astec Industries Inc.(1) 431,496
- --------------------------------------------------------------------------------
11,983 Lincoln Electric Holdings Inc. 377,824
- --------------------------------------------------------------------------------
1,009,862
- --------------------------------------------------------------------------------
MEDIA -- 2.1%
- --------------------------------------------------------------------------------
7,894 Getty Images Inc.(1) 431,012
- --------------------------------------------------------------------------------
13,886 Salem Communications
Corp. Cl A(1) 413,942
- --------------------------------------------------------------------------------
844,954
- --------------------------------------------------------------------------------
METALS & MINING -- 4.3%
- --------------------------------------------------------------------------------
13,460 Arch Coal Inc. 412,011
- --------------------------------------------------------------------------------
30,448 KFX Inc.(1) 307,220
- --------------------------------------------------------------------------------
19,758 Steel Technologies Inc. 381,132
- --------------------------------------------------------------------------------
8,255 Titanium Metals Corp.(1) 654,208
- --------------------------------------------------------------------------------
1,754,571
- --------------------------------------------------------------------------------
OIL & GAS -- 1.0%
- --------------------------------------------------------------------------------
40,053 Magnum Hunter Resources Inc.(1) 411,344
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 3.4%
- --------------------------------------------------------------------------------
30,296 Bone Care International Inc.(1) 747,099
- --------------------------------------------------------------------------------
15,676 Medicis Pharmaceutical Corp. Cl A 672,814
- --------------------------------------------------------------------------------
1,419,913
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.3%
- --------------------------------------------------------------------------------
43,348 California Micro Devices
Corporation(1) $ 622,044
- --------------------------------------------------------------------------------
41,212 Silicon Image Inc.(1) 419,950
- --------------------------------------------------------------------------------
7,112 Silicon Laboratories Inc.(1) 335,331
- --------------------------------------------------------------------------------
1,377,325
- --------------------------------------------------------------------------------
SOFTWARE -- 3.6%
- --------------------------------------------------------------------------------
12,790 Activision, Inc.(1) 192,617
- --------------------------------------------------------------------------------
32,559 DocuCorporation International Inc.(1) 352,940
- --------------------------------------------------------------------------------
16,669 Open Solutions Inc.(1) 412,225
- --------------------------------------------------------------------------------
9,782 THQ Inc.(1) 181,358
- --------------------------------------------------------------------------------
136,442 Viewpoint Corp.(1) 337,012
- --------------------------------------------------------------------------------
1,476,152
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 3.5%
- --------------------------------------------------------------------------------
20,839 Big 5 Sporting Goods Corp.(1) 517,224
- --------------------------------------------------------------------------------
22,831 Brookstone Inc.(1) 454,109
- --------------------------------------------------------------------------------
9,937 Urban Outfitters Inc.(1) 458,791
- --------------------------------------------------------------------------------
1,430,124
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 2.5%
- --------------------------------------------------------------------------------
21,832 Fossil Inc.(1) 534,666
- --------------------------------------------------------------------------------
7,785 Timberland Co. (The)(1) 488,275
- --------------------------------------------------------------------------------
1,022,941
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS -- 1.2%
- --------------------------------------------------------------------------------
9,116 Hughes Supply, Inc. 509,493
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $37,081,098) 40,793,368
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 1.0%
Repurchase Agreement, Deutsche
Bank, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.91%,
dated 4/30/04, due 5/3/04 (Delivery value $400,030)
(Cost $400,000) 400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $37,481,098) $41,193,368
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
See Notes to Financial Statements.
- ------
19
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------
CAPITAL NEW
SELECT GROWTH OPPORTUNITIES II
- ------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------
Investment securities -- unaffiliated, at value
(cost of $3,137,989,028, $991,998 and $37,481,098,
respectively) --including $42,591,026,
$- and $-- of securities loaned, respectively $3,926,524,729 $ 961,630 $41,193,368
- ---------------------------------------------------
Investment securities -- affiliated, at value
(cost of $148,528,374, $-- and $--,
respectively) -- including $18,398,650,
$-- and $-- of securities loaned, respectively 201,220,300 -- --
- ---------------------------------------------------
Investments made with cash collateral
received for securities on loan, at value
(cost of $63,042,385, $-- and $--, respectively) 63,042,385 -- --
- ----------------------------------------------------------------------------------------------------
Total investment securities, at value
(cost of $3,349,559,787, $991,998
and $37,481,098, respectively) 4,190,787,414 961,630 41,193,368
- ---------------------------------------------------
Cash -- 26,574 227,106
- ---------------------------------------------------
Receivable for investments sold 31,738,738 16,694 1,233,882
- ---------------------------------------------------
Receivable for forward foreign
currency exchange contracts 141,037 -- --
- ---------------------------------------------------
Receivable for capital shares sold 318,098 -- 114,759
- ---------------------------------------------------
Dividends and interest receivable 3,260,741 550 6,359
- ----------------------------------------------------------------------------------------------------
4,226,246,028 1,005,448 42,775,474
- ----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for collateral received
on securities loaned 63,042,385 -- --
- ---------------------------------------------------
Disbursements in excess of demand deposit cash 4,773,044 -- --
- ---------------------------------------------------
Payable for investments purchased 26,283,431 20,576 1,427,302
- ---------------------------------------------------
Payable for forward foreign currency
exchange contracts 1,000,232 -- --
- ---------------------------------------------------
Accrued management fees 3,444,662 836 52,282
- ---------------------------------------------------
Distribution fees payable 9,876 420 567
- ---------------------------------------------------
Service fees and service and distribution
fees payable 12,586 209 1,068
- ----------------------------------------------------------------------------------------------------
98,566,216 22,041 1,481,219
- ----------------------------------------------------------------------------------------------------
NET ASSETS $4,127,679,812 $ 983,407 $41,294,255
====================================================================================================
See Notes to Financial Statements. (continued)
- ------
20
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
CAPITAL NEW
SELECT GROWTH OPPORTUNITIES II
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $3,995,963,683 $1,026,608 $33,971,733
- ---------------------------------------------------
Accumulated undistributed net
investment income (loss) 541,667 (1,800) (231,074)
- ---------------------------------------------------
Accumulated undistributed net realized
gain (loss) on investment
and foreign currency transactions (709,264,198) (11,033) 3,841,326
- ---------------------------------------------------
Net unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities in foreign currencies 840,438,660 (30,368) 3,712,270
- -----------------------------------------------------------------------------------------------------
$4,127,679,812 $ 983,407 $41,294,255
=====================================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------
Net assets $3,830,145,303 N/A $35,208,266
- ---------------------------------------------------
Shares outstanding 107,395,787 N/A 5,676,018
- ---------------------------------------------------
Net asset value per share $35.66 N/A $6.20
- -----------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------
Net assets $245,879,442 N/A --
- ---------------------------------------------------
Shares outstanding 6,843,897 N/A --
- ---------------------------------------------------
Net asset value per share $35.93 N/A --
- -----------------------------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------
Net assets $22,350,673 N/A N/A
- ---------------------------------------------------
Shares outstanding 632,684 N/A N/A
- ---------------------------------------------------
Net asset value per share $35.33 N/A N/A
- -----------------------------------------------------------------------------------------------------
A CLASS, $0.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------
Net assets $24,283,919 $328,483 $5,130,857
- ---------------------------------------------------
Shares outstanding 682,844 34,280 829,639
- ---------------------------------------------------
Net asset value per share $35.56 $9.58 $6.18
- ---------------------------------------------------
Maximum offering price (net asset value
divided by 0.9425) $37.73 $10.16 $6.56
- -----------------------------------------------------------------------------------------------------
B CLASS, $0.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------
Net assets $1,969,529 $326,137 $457,094
- ---------------------------------------------------
Shares outstanding 55,900 34,079 74,591
- ---------------------------------------------------
Net asset value per share $35.23 $9.57 $6.13
- -----------------------------------------------------------------------------------------------------
C CLASS, $0.01 PAR VALUE
- -----------------------------------------------------------------------------------------------------
Net assets $3,050,946 $328,787 $498,038
- ---------------------------------------------------
Shares outstanding 86,526 34,356 80,964
- ---------------------------------------------------
Net asset value per share $35.26 $9.57 $6.15
- -----------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
21
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) (EXCEPT AS NOTED)
- -----------------------------------------------------------------------------------------------------
CAPITAL NEW
SELECT GROWTH(1) OPPORTUNITIES II
- -----------------------------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS)
INCOME:
- -------------------------------------------------
Dividends (including $76,656 from affiliates
for Select and net of foreign taxes withheld
of $735,447, $29 and $71, respectively) $ 21,093,699 $ 1,212 $ 62,411
- -------------------------------------------------
Interest 257,195 17 4,980
- -------------------------------------------------
Securities lending 238,058 -- --
- -----------------------------------------------------------------------------------------------------
21,588,952 1,229 67,391
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------
Management fees 20,899,735 1,725 291,693
- -------------------------------------------------
Distribution fees:
- -------------------------------------------------
Advisor Class 39,716 -- --
- -------------------------------------------------
B Class 5,869 431 1,319
- -------------------------------------------------
C Class 9,218 434 1,003
- -------------------------------------------------
Service fees:
- -------------------------------------------------
Advisor Class 39,716 -- --
- -------------------------------------------------
B Class 1,956 144 440
- -------------------------------------------------
C Class 3,073 145 334
- -------------------------------------------------
Service and distribution fees - A Class 21,617 143 2,698
- -------------------------------------------------
Directors' fees and expenses 25,963 6 242
- -------------------------------------------------
Other expenses 11,913 1 736
- -----------------------------------------------------------------------------------------------------
21,058,776 3,029 298,465
- -----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 530,176 (1,800) (231,074)
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
- -------------------------------------------------
Investment transactions (including $1,866,602
from affiliates for Select) 201,315,350 (11,040) 5,935,781
- -------------------------------------------------
Foreign currency transactions 6,224,247 7 (386)
- -----------------------------------------------------------------------------------------------------
207,539,597 (11,033) 5,935,395
- -----------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) ON:
- -------------------------------------------------
Investments 24,067,029 (30,368) (3,266,075)
- -------------------------------------------------
Translation of assets and liabilities in
foreign currencies (791,271) -- --
- -----------------------------------------------------------------------------------------------------
23,275,758 (30,368) (3,266,075)
- -----------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 230,815,355 (41,401) 2,669,320
- -----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $231,345,531 $(43,201) $2,438,246
=====================================================================================================
(1) February 27, 2004 (inception date) through April 30, 2004.
See Notes to Financial Statements.
- ------
22
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003 (EXCEPT AS NOTED)
- -----------------------------------------------------------------------------------------------------
SELECT CAPITAL GROWTH(1)
- -----------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003 2004
- -----------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------
Net investment income (loss) $ 530,176 $ 1,404,549 $ (1,800)
- ---------------------------------------------
Net realized gain (loss) 207,539,597 228,893,778 (11,033)
- ---------------------------------------------
Change in net unrealized
appreciation (depreciation) 23,275,758 374,823,238 (30,368)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 231,345,531 605,121,565 (43,201)
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------
Investor Class -- (8,963,381) --
- ---------------------------------------------
Institutional Class -- (850,467) --
- ---------------------------------------------
Advisor Class -- (1,215) --
- -----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions -- (9,815,063) --
- -----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions (202,413,801) (225,051,208) 1,026,608
- -----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 28,931,730 370,255,294 983,407
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Beginning of period 4,098,748,082 3,728,492,788 --
- -----------------------------------------------------------------------------------------------------
End of period $4,127,679,812 $4,098,748,082 $ 983,407
=====================================================================================================
Accumulated undistributed net
investment income (loss) $541,667 $11,491 $(1,800)
=====================================================================================================
(1) February 27, 2004 (inception date) through April 30, 2004.
See Notes to Financial Statements. (continued)
- ------
23
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
- -------------------------------------------------------------------------------
NEW OPPORTUNITIES II
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003
- -------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------
Net investment loss $ (231,074) $ (304,861)
- ------------------------------------------
Net realized gain 5,935,395 2,820,904
- ------------------------------------------
Change in net unrealized
appreciation (depreciation) (3,266,075) 7,085,442
- ------------------------------------------
Net increase in net assets
resulting from operations 2,438,246 9,601,485
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 5,203,340 (1,427,778)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 7,641,586 8,173,707
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of period 33,652,669 25,478,962
- -------------------------------------------------------------------------------
End of period $41,294,255 $33,652,669
===============================================================================
Accumulated net investment loss $(231,074) --
===============================================================================
See Notes to Financial Statements.
- ------
24
Notes to Financial Statements
APRIL 30, 2004 (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), Capital Growth
Fund (Capital Growth) and New Opportunities II Fund (New Opportunities II)
(collectively, the funds) are three 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 common stocks that are considered by management to have
better-than-average prospects for appreciation. 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. Capital Growth is authorized to issue 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 Select and
New Opportunities II's 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.
Capital Growth's A Class, B Class and C Class incepted on February 27, 2004.
Sale of New Opportunities II's Institutional Class had not commenced as of
April 30, 2004.
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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the close of the foreign exchange on which a
portfolio security principally trades, but before the net asset value per-share
of a fund was determined that was likely to materially affect the net asset
value of the fund, then that security would be 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.
SECURITIES ON LOAN -- Select may lend portfolio securities through its lending
agent to certain approved borrowers in order to earn additional income. Select
continues to recognize any gain or loss in the market price of the securities
loaned and records any interest earned or dividends declared.
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. 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 foreign currency transactions and unrealized appreciation
(depreciation) on translation of assets and liabilities in foreign currencies,
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)
- ------
25
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
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 each fund's policy to distribute substantially 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 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
funds' average daily closing net assets during the previous month. The annual
management fees for each class of the funds are:
INVESTOR INSTITUTIONAL ADVISOR A, B, C
CLASS CLASS CLASS CLASS
- --------------------------------------------------------------------------------
Select 1.00% 0.80% 0.75% 1.00%
- --------------------------------------------------------------------------------
Capital Growth N/A N/A N/A 1.00%
- --------------------------------------------------------------------------------
New Opportunities II 1.50% 1.30% N/A 1.50%
- --------------------------------------------------------------------------------
(continued)
- ------
26
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
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, B and C Class shares.
Fees incurred under the plans during the six months ended April 30, 2004,
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. On
February 27, 2004, ACIM purchased 100,000 shares to seed operations of Capital
Growth. ACIM owned approximately 97% of Capital Growth as of April 30, 2004.
During the six months ended April 30, 2004, Select and New Opportunities II
invested in a money market fund for temporary purposes, which was managed by
J.P. Morgan Investment Management, Inc. (JPMIM). JPMIM is a wholly owned
subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC.
Select and New Opportunities II have a bank line of credit agreement with
JPMorgan Chase Bank (JPMCB). Select has a securities lending agreement with
JPMCB. JPMCB is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six months
ended April 30, 2004, were as follows:
- --------------------------------------------------------------------------------
CAPITAL NEW
SELECT GROWTH OPPORTUNITIES II
- --------------------------------------------------------------------------------
Purchases $1,196,791,291 $1,279,251 $53,228,631
- --------------------------------------------------------------------------------
Proceeds from sales $1,396,614,641 $276,213 $48,403,529
- --------------------------------------------------------------------------------
(continued)
- ------
27
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the funds were as follows:
- ------------------------------------------------------------------------------------------------------------
SELECT CAPITAL GROWTH NEW OPPORTUNITIES II
- ------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 360,000,000 N/A 250,000,000
============================================================================================================
Sold 2,404,185 $ 85,901,404 452,160 $ 2,877,680
- --------------------------------
Redeemed (8,339,680) (299,211,276) (427,317) (2,723,277)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (5,935,495) $(213,309,872) 24,843 $ 154,403
============================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 360,000,000 N/A 250,000,000
============================================================================================================
Sold 5,893,639 $ 179,550,191 1,005,193 $ 4,562,699
- --------------------------------
Issued in reinvestment
of distributions 293,884 8,460,923 -- --
- --------------------------------
Redeemed (14,695,299) (441,320,181) (1,493,317) (6,906,299)
- ------------------------------------------------------------------------------------------------------------
Net decrease (8,507,776) $(253,309,067) (488,124) $(2,343,600)
============================================================================================================
INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 40,000,000 N/A 50,000,000
============================================================================================================
Sold 667,568 $24,032,297 -- --
- --------------------------------
Redeemed (579,034) (20,843,290) -- --
- ------------------------------------------------------------------------------------------------------------
Net increase 88,534 $ 3,189,007 -- --
============================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 40,000,000 N/A 50,000,000
============================================================================================================
Sold 1,326,164 $40,613,361 -- --
- --------------------------------
Issued in reinvestment
of distributions 28,974 838,204 -- --
- --------------------------------
Redeemed (988,050) (30,031,037) -- --
- ------------------------------------------------------------------------------------------------------------
Net increase 367,088 $11,420,528 -- --
============================================================================================================
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 100,000,000 N/A N/A
============================================================================================================
Sold 186,786 $ 6,610,087
- --------------------------------
Redeemed (424,462) (15,029,194)
- ------------------------------------------------------------------------------------------------------------
Net decrease (237,676) $(8,419,107)
============================================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 100,000,000 N/A N/A
============================================================================================================
Sold 352,320 $10,590,730
- --------------------------------
Issued in reinvestment
of distributions 38 1,083
- --------------------------------
Redeemed (194,900) (5,788,629)
- ------------------------------------------------------------------------------------------------------------
Net increase 157,458 $ 4,803,184
============================================================================================================
(continued)
- ------
28
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------
SELECT CAPITAL GROWTH NEW OPPORTUNITIES II
- ------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
A CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004(1)
SHARES AUTHORIZED 25,000,000 100,000,000 25,000,000
============================================================================================================
Sold 407,351 $14,493,835 34,280 $342,747 696,894 $4,481,931
- -------------------------
Redeemed (30,129) (1,078,220) -- -- (22,472) (140,283)
- ------------------------------------------------------------------------------------------------------------
Net increase 377,222 $13,415,615 34,280 $342,747 674,422 $4,341,648
============================================================================================================
PERIOD ENDED
OCTOBER 31, 2003(2)
SHARES AUTHORIZED 25,000,000 N/A 25,000,000
============================================================================================================
Sold 306,963 $10,010,611 203,007 $ 945,809
- -------------------------
Redeemed (1,341) (42,396) (47,790) (231,694)
- ------------------------------------------------------------------------------------------------------------
Net increase 305,622 $ 9,968,215 155,217 $ 714,115
============================================================================================================
B CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004(1)
SHARES AUTHORIZED 25,000,000 100,000,000 25,000,000
============================================================================================================
Sold 25,227 $887,834 34,079 $340,533 51,251 $322,128
- --------------------------
Redeemed (119) (4,261) -- -- (14,260) (91,337)
- ------------------------------------------------------------------------------------------------------------
Net increase 25,108 $883,573 34,079 $340,533 36,991 $230,791
============================================================================================================
PERIOD ENDED
OCTOBER 31, 2003(2)
SHARES AUTHORIZED 25,000,000 N/A 25,000,000
============================================================================================================
Sold 31,012 $986,003 38,203 $171,946
- -------------------------
Redeemed (220) (6,857) (603) (2,898)
- ------------------------------------------------------------------------------------------------------------
Net increase 30,792 $979,146 37,600 $169,048
============================================================================================================
C CLASS
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004(1)
SHARES AUTHORIZED 25,000,000 100,000,000 25,000,000
============================================================================================================
Sold 54,640 $1,898,095 34,356 $343,328 75,588 $480,467
- -------------------------
Redeemed (1,973) (71,112) -- -- (629) (3,969)
- ------------------------------------------------------------------------------------------------------------
Net increase 52,667 $1,826,983 34,356 $343,328 74,959 $476,498
============================================================================================================
PERIOD ENDED
OCTOBER 31, 2003(2)
SHARES AUTHORIZED 25,000,000 N/A 25,000,000
============================================================================================================
Sold 34,025 $1,092,115 6,005 $32,659
- -------------------------
Redeemed (166) (5,329) -- --
- ------------------------------------------------------------------------------------------------------------
Net increase 33,859 $1,086,786 6,005 $32,659
============================================================================================================
(1) February 27, 2004 (inception date) through April 30, 2004 for
Capital Growth.
(2) January 31, 2003 (commencement of sale) through October 31, 2003
for Select and New Opportunities II.
(continued)
- ------
29
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
5. AFFILIATED COMPANY TRANSACTIONS
If a fund's holding represents ownership of 5% or more of the voting securities
of a company, the company is affiliated as defined in the 1940 Act. A summary of
transactions for each company which is or was an affiliate at or during the six
months ended April 30, 2004 follows:
- -------------------------------------------------------------------------------------------------------------
APRIL 30, 2004
SHARE BALANCE PURCHASE SALES REALIZED DIVIDEND SHARE MARKET
FUND/COMPANY 10/31/03 COST COST GAIN INCOME BALANCE VALUE
- -------------------------------------------------------------------------------------------------------------
SELECT
- -------------------------------------------------------------------------------------------------------------
Four Seasons
Hotels Inc. 2,240,000 $ -- $4,278,362 $1,866,602 $76,656 2,130,000 $113,955,000
- ----------------
Yankee Candle
Company Inc.(1) 1,510,000 47,040,759 -- -- -- 3,222,500 87,265,300
- -------------------------------------------------------------------------------------------------------------
$47,040,759 $4,278,362 $1,866,602 $76,656 $201,220,300
=============================================================================================================
(1) Non-income producing.
6. SECURITIES LENDING
As of April 30, 2004, securities in Select valued at $60,989,676 were on loan
through the lending agent, JPMCB, to certain approved borrowers. JPMCB receives
and maintains collateral in the form of cash, and/or acceptable securities as
approved by ACIM. Cash collateral is invested in authorized investments by the
lending agent in a pooled account. 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. Any deficiencies or excess of collateral must be delivered or
transferred by the member firms no later than the close of business on the next
business day. The total value of all collateral received, at this date, was
$63,042,385. 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
Select and New Opportunities II, along with certain other funds managed by ACIM,
have a $650,000,000 unsecured bank line of credit agreement with JPMCB, which
was renewed from $620,000,000 effective December 17, 2003. Select and New
Opportunities II 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%. Select and New Opportunities II did not borrow
from the line during the six months ended April 30, 2004.
(continued)
- ------
30
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- -----------------------------------------------------------------------------------------------------
CAPITAL NEW
SELECT GROWTH OPPORTUNITIES II
- -----------------------------------------------------------------------------------------------------
Federal tax cost of investments $3,365,840,818 $991,998 $37,481,098
=====================================================================================================
Gross tax appreciation of investments $869,568,866 $ 18,753 $ 5,031,929
- ---------------------------------------------------
Gross tax depreciation of investments (44,622,270) (49,121) (1,319,659)
- -----------------------------------------------------------------------------------------------------
Net tax appreciation (depreciation) of investments $824,946,596 $(30,368) $ 3,712,270
=====================================================================================================
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) in Select is attributable primarily to the tax deferral of losses
on wash sales.
Following are the capital loss carryovers as of October 31, 2003:
- -----------------------------------------------------------------------------------------------------
CAPITAL NEW
SELECT GROWTH OPPORTUNITIES II
- -----------------------------------------------------------------------------------------------------
Accumulated capital losses $(900,522,763) N/A $(2,094,069)
- -----------------------------------------------------------------------------------------------------
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 Select and in 2010 for New Opportunities II.
- ------
31
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $33.77 $28.91 $34.94 $52.20 $53.32 $49.54
- ---------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------
Net Investment Income (Loss)(2) --(3) 0.01 0.07 0.06 (0.06) 0.01
- -----------------------------------------
Net Realized and Unrealized Gain (Loss) 1.89 4.92 (6.04) (14.53) 4.04 13.73
- ---------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.89 4.93 (5.97) (14.47) 3.98 13.74
- ---------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------
From Net Investment Income -- (0.07) (0.06) -- -- (0.17)
- -----------------------------------------
From Net Realized Gains -- -- -- (2.79) (5.10) (9.79)
- ---------------------------------------------------------------------------------------------------------
Total Distributions -- (0.07) (0.06) (2.79) (5.10) (9.96)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $35.66 $33.77 $28.91 $34.94 $52.20 $53.32
=========================================================================================================
TOTAL RETURN(4) 5.60% 17.11% (17.11)% (28.93)% 7.64% 31.22%
- ---------------------------------------------------------------------------------------------------------
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 0.02%(5) 0.03% 0.21% 0.15% (0.11)% 0.03%
- -----------------------------------------
Portfolio Turnover Rate 29% 84% 168% 98% 67% 130%
- -----------------------------------------
Net Assets, End of Period (in millions) $3,830 $3,828 $3,522 $4,745 $7,086 $7,216
- ---------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
32
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $33.99 $29.10 $35.16 $52.36 $53.41 $49.63
- ---------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------
Net Investment Income(2) 0.04 0.07 0.13 0.14 0.04 0.02
- --------------------------------------
Net Realized and Unrealized
Gain (Loss) 1.90 4.95 (6.06) (14.55) 4.01 13.83
- ---------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.94 5.02 (5.93) (14.41) 4.05 13.85
- ---------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------
From Net Investment Income -- (0.13) (0.13) -- -- (0.28)
- --------------------------------------
From Net Realized Gains -- -- -- (2.79) (5.10) (9.79)
- ---------------------------------------------------------------------------------------------------------
Total Distributions -- (0.13) (0.13) (2.79) (5.10) (10.07)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $35.93 $33.99 $29.10 $35.16 $52.36 $53.41
=========================================================================================================
TOTAL RETURN(3) 5.71% 17.34% (16.93)% (28.71)% 7.77% 31.47%
- ---------------------------------------------------------------------------------------------------------
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 0.22%(4) 0.23% 0.41% 0.35% 0.09% 0.23%
- --------------------------------------
Portfolio Turnover Rate 29% 84% 168% 98% 67% 130%
- --------------------------------------
Net Assets, End of Period
(in thousands) $245,879 $229,596 $185,897 $181,708 $259,092 $112,293
- ---------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
33
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $33.49 $28.66 $34.68 $52.01 $53.19 $49.44
- ---------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------
Net Investment Loss(2) (0.04) (0.07) (0.02) (0.04) (0.21) (0.13)
- --------------------------------------
Net Realized and Unrealized
Gain (Loss) 1.88 4.90 (6.00) (14.50) 4.13 13.71
- ---------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.84 4.83 (6.02) (14.54) 3.92 13.58
- ---------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------
From Net Investment Income -- --(3) -- -- -- (0.04)
- --------------------------------------
From Net Realized Gains -- -- -- (2.79) (5.10) (9.79)
- ---------------------------------------------------------------------------------------------------------
Total Distributions -- --(3) -- (2.79) (5.10) (9.83)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $35.33 $33.49 $28.66 $34.68 $52.01 $53.19
=========================================================================================================
TOTAL RETURN(4) 5.49% 16.86% (17.36)% (29.18)% 7.54% 30.87%
- ---------------------------------------------------------------------------------------------------------
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 Loss
to Average Net Assets (0.23)%(5) (0.22)% (0.04)% (0.10)% (0.36)% (0.22)%
- --------------------------------------
Portfolio Turnover Rate 29% 84% 168% 98% 67% 130%
- --------------------------------------
Net Assets, End of Period
(in thousands) $22,351 $29,152 $20,432 $23,389 $22,239 $8,369
- ---------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
34
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $33.72 $27.75
- --------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Loss(3) (0.04) (0.14)
- ----------------------------------------------------
Net Realized and Unrealized Gain 1.88 6.11
- --------------------------------------------------------------------------------
Total From Investment Operations 1.84 5.97
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $35.56 $33.72
================================================================================
TOTAL RETURN(4) 5.46% 21.51%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25%(5) 1.25%(5)
- ----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.23)%(5) (0.56)%(5)
- ----------------------------------------------------
Portfolio Turnover Rate 29% 84%(6)
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $24,284 $10,305
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
35
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $33.53 $27.75
- --------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Loss(3) (0.17) (0.31)
- ----------------------------------------------------
Net Realized and Unrealized Gain 1.87 6.09
- --------------------------------------------------------------------------------
Total From Investment Operations 1.70 5.78
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $35.23 $33.53
================================================================================
TOTAL RETURN(4) 5.07% 20.83%
- --------------------------------------------------------------------------------
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 (0.98)%(5) (1.28)%(5)
- ----------------------------------------------------
Portfolio Turnover Rate 29% 84%(6)
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $1,970 $1,032
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
36
Select - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
C CLASS
- -------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $33.56 $27.75
- --------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Loss(3) (0.17) (0.31)
- ----------------------------------------------------
Net Realized and Unrealized Gain 1.87 6.12
- --------------------------------------------------------------------------------
Total From Investment Operations 1.70 5.81
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $35.26 $33.56
================================================================================
TOTAL RETURN(4) 5.07% 20.94%
- --------------------------------------------------------------------------------
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 (0.98)%(5) (1.28)%(5)
- ----------------------------------------------------
Portfolio Turnover Rate 29% 84%(6)
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $3,051 $1,136
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
37
Capital Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Loss(2) (0.01)
- -------------------------------------------------------
Net Realized and Unrealized Loss (0.41)
- --------------------------------------------------------------------------------
Total From Investment Operations (0.42)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.58
================================================================================
TOTAL RETURN(3) (4.20)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.25%(4)
- -------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (0.54)%(4)
- -------------------------------------------------------
Portfolio Turnover Rate 29%
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $328
- --------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through April 30, 2004
(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.
(4) Annualized.
See Notes to Financial Statements.
- ------
38
Capital Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Loss(2) (0.02)
- -------------------------------------------------------
Net Realized and Unrealized Loss (0.41)
- --------------------------------------------------------------------------------
Total From Investment Operations (0.43)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.57
================================================================================
TOTAL RETURN(3) (4.30)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 2.00%(4)
- -------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.29)%(4)
- -------------------------------------------------------
Portfolio Turnover Rate 29%
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $326
- --------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through April 30, 2004
(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.
(4) Annualized.
See Notes to Financial Statements.
- ------
39
Capital Growth - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004(1)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------
Net Investment Loss(2) (0.02)
- -------------------------------------------------------
Net Realized and Unrealized Loss (0.41)
- --------------------------------------------------------------------------------
Total From Investment Operations (0.43)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.57
================================================================================
TOTAL RETURN(3) (4.30)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 2.00%(4)
- -------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.29)%(4)
- -------------------------------------------------------
Portfolio Turnover Rate 29%
- -------------------------------------------------------
Net Assets, End of Period (in thousands) $329
- --------------------------------------------------------------------------------
(1) February 27, 2004 (commencement of sale) through April 30, 2004
(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.
(4) Annualized.
See Notes to Financial Statements.
- ------
40
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- ---------------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001(2)
- ---------------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.75 $4.15 $4.52 $5.00
- ---------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------
Net Investment Loss(3) (0.04) (0.05) (0.05) (0.01)
- ----------------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.49 1.65 (0.32) (0.47)
- ---------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.45 1.60 (0.37) (0.48)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.20 $5.75 $4.15 $4.52
=========================================================================================================
TOTAL RETURN(4) 7.83% 38.55% (8.19)% (9.60)%
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.51%(5) 1.50% 1.50% 1.50%(5)
- ----------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.16)%(5) (1.11)% (1.02)% (0.81)%(5)
- ----------------------------------------------------
Portfolio Turnover Rate 127% 236% 182% 89%
- ----------------------------------------------------
Net Assets, End of Period (in thousands) $35,208 $32,512 $25,479 $18,217
- ---------------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
41
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
A CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.74 $4.15
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------
Net Investment Loss(3) (0.04) (0.05)
- ---------------------------------------------------
Net Realized and Unrealized Gain 0.48 1.64
- --------------------------------------------------------------------------------
Total From Investment Operations 0.44 1.59
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.18 $5.74
================================================================================
TOTAL RETURN(4) 7.67% 38.31%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 1.76%(5) 1.75%(5)
- ---------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.41)%(5) (1.47)%(5)
- ---------------------------------------------------
Portfolio Turnover Rate 127% 236%(6)
- ---------------------------------------------------
Net Assets, End of Period (in thousands) $5,131 $891
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
42
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
B CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.71 $4.15
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------
Net Investment Loss(3) (0.07) (0.08)
- ---------------------------------------------------
Net Realized and Unrealized Gain 0.49 1.64
- --------------------------------------------------------------------------------
Total From Investment Operations 0.42 1.56
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.13 $5.71
================================================================================
TOTAL RETURN(4) 7.36% 37.59%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 2.51%(5) 2.50%(5)
- ---------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (2.16)%(5) (2.20)%(5)
- ---------------------------------------------------
Portfolio Turnover Rate 127% 236%(6)
- ---------------------------------------------------
Net Assets, End of Period (in thousands) $457 $215
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
43
New Opportunities II - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
- --------------------------------------------------------------------------------
C CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.73 $4.15
- --------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------
Net Investment Loss(3) (0.07) (0.07)
- ---------------------------------------------
Net Realized and Unrealized Gain 0.49 1.65
- --------------------------------------------------------------------------------
Total From Investment Operations 0.42 1.58
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.15 $5.73
================================================================================
TOTAL RETURN(4) 7.33% 38.07%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets 2.51%(5) 2.22%(5)
- ---------------------------------------------
Ratio of Operating Expenses to
Average Net Assets (Before Expense Waiver) 2.51%(5) 2.50%(5)(6)
- ---------------------------------------------
Ratio of Net Investment Loss to
Average Net Assets (2.16)%(5) (1.97)%(5)
- ---------------------------------------------
Ratio of Net Investment Loss to
Average Net Assets (Before Expense Waiver) (2.16)%(5) (2.25)%(5)(6)
- ---------------------------------------------
Portfolio Turnover Rate 127% 236%(7)
- ---------------------------------------------
Net Assets, End of Period (in thousands) $498 $34
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) January 31, 2003 (commencement of sale) through October 31, 2003.
(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) During a portion of the period ended October 31, 2003, the distributor
agreed to voluntarily waive the distribution and service fees.
(7) Portfolio turnover is calculated at the fund level. Percentage indicated
was calculated for the year ended October 31, 2003.
See Notes to Financial Statements.
- ------
44
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. Three
classes of shares are authorized for sale by Capital Growth: A Class, B Class,
and C Class. Five classes of share are authorized for sale by New Opportunities
II: Investor Class, Institutional Class, A Class, B Class, and C Class. The
total expense ratio of Institutional Class shares is lower than that of Investor
Class shares. The total expense ratios of Advisor, A, B, and C Class shares are
higher than that of Investor Class shares. 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 investment
advisors, 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 investment advisors, 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.
B CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, 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
(continued)
- ------
45
Share Class Information
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 investment advisors, banks, broker-dealers, and
insurance companies. C Class shares redeemed within 12 months of purchase are
subject to a CDSC of 1.00%. 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%.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
- ------
46
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the funds' manager, is
responsible for exercising the voting rights associated with the securities
purchased and/or held by the funds. A description of the policies and
procedures the manager uses in fulfilling this responsibility is available
without charge, upon request, by calling 1-800-345-2021. It is also available
on American Century's Web site at americancentury.com and on the Securities
and Exchange Commission's Web site at sec.gov.
- ------
47
Index Definitions
The following indices are used to illustrate investment market, sector, or
style performance or 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 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 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 DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
The NASDAQ COMPOSITE INDEX is a market-value weighted index of all domestic
and international common stocks listed on the Nasdaq stock market.
- ------
48
CONTACT US
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
The American Century logo, American Century and American Century Investments
are service marks of American Century Services Corporation.
0406 American Century Investment Services, Inc.
SH-SAN-38381S (c)2004 American Century Services Corporation
[front cover]
APRIL 30, 2004
American Century Investments
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of side-by-side bridges]
New Opportunities Fund
[american century logo and text logo]
Table of Contents
Our Message to You....................................................... 1
NEW OPPORTUNITIES
Performance.............................................................. 2
Portfolio Commentary..................................................... 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..................................................... 13
OTHER INFORMATION
Additional Information................................................... 14
Index Definitions........................................................ 15
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
Our Message to You
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, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for this fund will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
Sincerely,
/signature/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CHAIRMAN
/signature/James E. Stowers III
James E. Stowers III
CO-CHAIRMAN OF THE BOARD
New Opportunities - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
NEW OPPORTUNITIES 12/26/96
Before redemption fee 29.85% 5.37% 7.01%
Net of redemption fee(1) 27.25% 5.37% 7.01%
- --------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX 41.57% -0.44% 2.48%(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 2004
- --------------------------------------------------------------------------------------------------
New Opportunities -20.00% 50.50% 5.15% 172.82% -46.30% -7.32% -26.32% 29.85%
- --------------------------------------------------------------------------------------------------
Russell 2000
Growth Index -11.52% 43.70% -3.77% 31.39% -24.85% -8.52% -23.50% 41.57%
- --------------------------------------------------------------------------------------------------
* 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 - Portfolio Commentary
[photo of John Seitzer and Harold Bradley]
A PORTFOLIO COMMENTARY FROM JOHN SEITZER, PORTFOLIO MANAGER, AND HAROLD BRADLEY,
CHIEF INVESTMENT OFFICER AND PORTFOLIO MANAGER ON THE NEW OPPORTUNITIES
INVESTMENT TEAM.
For the six months ended April 30, 2004, New Opportunities gained 0.59%, lagging
its benchmark, the Russell 2000 Growth Index, which returned 4.01%. The S&P 500
Index, representing the broader market, rose 6.27%.
Since its December 26, 1996 inception, the fund posted average annual returns of
7.01%, outpacing the 2.48%(1) average for its benchmark but slightly behind the
7.23%(1) average for the S&P 500.
RENEWED VITALITY
During the six months covered by this report, the stock market continued on its
upward trajectory, a course set early in 2003 with a broad-based rally that
began just days ahead of the start of war in Iraq.
Numerous factors fostered positive sentiment, including mild inflation,
record-low interest rates and a moderate pace of economic expansion. All
provided a beneficial backdrop for profit growth, and many companies posted
earnings that exceeded expectations.
Along the way, investors put their money to work in the stock market. Their
enthusiasm eventually hoisted the Dow Jones Industrial Average to its highest
level in 32 months, the Nasdaq to its highest point since July 2001 and the
broader S&P 500 to a 23-month high. Though stocks later retreated from those
lofty heights amid challenges such as labor-market weakness, rising energy
prices and renewed terrorism concerns, the major U.S. indices booked solid gains
for the period.
OPPORTUNITIES AND SETBACKS
Our search for companies demonstrating earnings acceleration, the cornerstone of
our discipline, led us to select positions in the health care sector, where we
maintained ample exposure. While many holdings advanced, others declined, and we
lacked exposure to well-performing names in the sector that did not meet the
fund's criteria for inclusion in the portfolio. Consequently, this group weighed
on absolute performance and significantly slowed overall results relative to our
benchmark.
TOP TEN HOLDINGS
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Carbo Ceramics Inc. 1.9% --
- --------------------------------------------------------------------------------
Euronet Worldwide Inc. 1.9% 1.2%
- --------------------------------------------------------------------------------
California Micro
Devices Corporation 1.8% --
- --------------------------------------------------------------------------------
Inveresk Research
Group Inc. 1.7% --
- --------------------------------------------------------------------------------
Flir Systems Inc. 1.5% 1.0%
- --------------------------------------------------------------------------------
Jarden Corp. 1.5% 1.1%
- --------------------------------------------------------------------------------
PrivateBancorp, Inc. 1.5% 0.6%
- --------------------------------------------------------------------------------
Rogers Corp. 1.5% --
- --------------------------------------------------------------------------------
SkyWest, Inc. 1.5% --
- --------------------------------------------------------------------------------
La Quinta Corporation 1.5% 1.2%
- --------------------------------------------------------------------------------
(1)Benchmark and index information since December 31, 1996, the
date nearest the fund's inception for which data are available.
(continued)
- ------
3
New Opportunities - Portfolio Commentary
SOURCES OF STRENGTH
Conversely, the consumer discretionary sector was the greatest source of
absolute contribution to returns and an area of strength versus our benchmark.
Household durables firms were the best performers. One top contributor was
Stanley Works, which makes branded tools and doors for commercial and
residential applications. Acquisitions contributed to improved revenue, as did
increased demand, and investors rewarded the stock.
Investments in the energy sector also provided significant lift. Carbo Ceramics
Inc., whose ceramic parts are used in drilling for natural gas and oil, was a
noteworthy name. Increased demand for natural gas in the United States and for
the company's products in Russia and China contributed to a 50% increase in 2003
net income.
INFORMATION TECHNOLOGY: MIXED PERFORMANCE
The information technology sector, the largest average stake during the period,
gave the portfolio some of its best and worst results. Our discipline led us to
top contributors TASER International Inc., which makes hand-held stun weapons,
and California Micro Devices, a semiconductor firm whose chip reduces
electromagnetic interference on cell phones. The robust performance of these and
other holdings alongside our success in sidestepping damage elsewhere in the
sector helped us surpass our benchmark in this arena.
However, that strength was not enough to offset the declines of other
investments, and overall the information technology sector represented the
biggest drag on absolute performance. One disappointment was Cray, Inc., which
develops and sells supercomputers. Another that fell short was JDA Software
Group, which makes inventory-management software for retailers. We eliminated
both positions.
Alvarion Limited and CyberGuard Corporation, both communications equipment
firms, and SanDisk, a provider of flash memory cards such as those used in
digital cameras, were other notable detractors.
We will remain committed to our strategy of seeking companies demonstrating
acceleration in earnings because we believe they offer our investors the
potential for long-term reward.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Health Care Equipment
& Supplies 8.8% 6.5%
- --------------------------------------------------------------------------------
Electronic Equipment
& Instruments 7.4% 5.9%
- --------------------------------------------------------------------------------
Energy Equipment
& Services 6.6% 1.3%
- --------------------------------------------------------------------------------
Household Durables 5.6% 4.4%
- --------------------------------------------------------------------------------
Health Care Providers
& Services 5.5% 5.1%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 98.6% 95.4%
- --------------------------------------------------------------------------------
Preferred Stocks -- 2.0%
- --------------------------------------------------------------------------------
TOTAL EQUITY EXPOSURE 98.6% 97.4%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 1.4% 2.6%
- --------------------------------------------------------------------------------
- ------
4
New Opportunities - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.6%
AEROSPACE & DEFENSE -- 1.7%
- --------------------------------------------------------------------------------
76,942 Applied Signal Technology Inc. $ 2,081
- --------------------------------------------------------------------------------
141,240 United Industrial Corporation 2,901
- --------------------------------------------------------------------------------
4,982
- --------------------------------------------------------------------------------
AIRLINES -- 1.5%
- --------------------------------------------------------------------------------
243,391 SkyWest, Inc. 4,430
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.0%
- --------------------------------------------------------------------------------
175,266 LKQ Corporation(1) 3,113
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.9%
- --------------------------------------------------------------------------------
133,758 Protein Design Labs, Inc.(1) 3,275
- --------------------------------------------------------------------------------
108,164 Vicuron Pharmaceuticals Inc.(1) 2,467
- --------------------------------------------------------------------------------
5,742
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.1%
- --------------------------------------------------------------------------------
51,915 American Woodmark Corp. 3,333
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.2%
- --------------------------------------------------------------------------------
31,030 Affiliated Managers Group Inc.(1) 1,511
- --------------------------------------------------------------------------------
51,544 Eaton Vance Corp. 1,882
- --------------------------------------------------------------------------------
79,138 Investors Financial
Services Corporation 3,076
- --------------------------------------------------------------------------------
6,469
- --------------------------------------------------------------------------------
CHEMICALS -- 0.4%
- --------------------------------------------------------------------------------
116,541 Material Sciences Corp.(1) 1,130
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 3.9%
- --------------------------------------------------------------------------------
104,383 Bancorp Bank (The)(1) 1,972
- --------------------------------------------------------------------------------
56,710 East West BanCorp, Inc. 3,194
- --------------------------------------------------------------------------------
49,174 First Bancorp (Puerto Rico) 1,813
- --------------------------------------------------------------------------------
81,248 PrivateBancorp, Inc. 4,494
- --------------------------------------------------------------------------------
11,473
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 4.8%
- --------------------------------------------------------------------------------
72,117 Banta Corp. 3,208
- --------------------------------------------------------------------------------
52,649 Intersections Inc.(1) 1,300
- --------------------------------------------------------------------------------
255,275 Korn/Ferry International(1) 3,824
- --------------------------------------------------------------------------------
166,544 Navigant Consulting Inc.(1) 2,920
- --------------------------------------------------------------------------------
75,809 Resources Connection, Inc.(1) 3,056
- --------------------------------------------------------------------------------
14,308
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 4.7%
- --------------------------------------------------------------------------------
212,584 Alvarion Ltd.(1) 2,268
- --------------------------------------------------------------------------------
256,964 CyberGuard Corp.(1) 2,210
- --------------------------------------------------------------------------------
480,758 Harmonic Inc.(1) 3,178
- --------------------------------------------------------------------------------
26,279 Plantronics, Inc.(1) 997
- --------------------------------------------------------------------------------
91,349 Sirf Technology Holdings Inc.(1) 1,462
- --------------------------------------------------------------------------------
491,776 Symmetricom Inc.(1) 3,939
- --------------------------------------------------------------------------------
14,054
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.0%
- --------------------------------------------------------------------------------
60,626 Avid Technology, Inc.(1) 2,908
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.7%
- --------------------------------------------------------------------------------
303,884 Metris Companies Inc.(1) $ 2,127
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.2%
- --------------------------------------------------------------------------------
157,416 Hydrogenics Corp.(1) 863
- --------------------------------------------------------------------------------
303,853 Plug Power Inc.(1) 2,361
- --------------------------------------------------------------------------------
52,868 Woodward Governor Co. 3,295
- --------------------------------------------------------------------------------
6,519
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 7.4%
- --------------------------------------------------------------------------------
134,241 Cognex Corp. 4,266
- --------------------------------------------------------------------------------
98,256 Flir Systems Inc.(1) 4,608
- --------------------------------------------------------------------------------
225,064 Mechanical Technology Inc.(1) 1,231
- --------------------------------------------------------------------------------
74,270 Rogers Corp.(1) 4,434
- --------------------------------------------------------------------------------
62,121 Scansource Inc.(1) 3,431
- --------------------------------------------------------------------------------
85,737 Universal Display Corporation(1) 1,085
- --------------------------------------------------------------------------------
158,235 Viisage Technology Inc.(1) 1,317
- --------------------------------------------------------------------------------
121,354 X-Rite Inc. 1,636
- --------------------------------------------------------------------------------
22,008
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 6.6%
- --------------------------------------------------------------------------------
87,945 Carbo Ceramics Inc. 5,689
- --------------------------------------------------------------------------------
168,258 Lone Star Technologies, Inc.(1) 3,449
- --------------------------------------------------------------------------------
91,719 Patterson-UTI Energy Inc.(1) 3,319
- --------------------------------------------------------------------------------
136,604 Unit Corporation(1) 3,859
- --------------------------------------------------------------------------------
50,678 Universal Compression
Holdings Inc.(1) 1,508
- --------------------------------------------------------------------------------
132,335 Willbros Group Inc.(1) 1,916
- --------------------------------------------------------------------------------
19,740
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 8.8%
- --------------------------------------------------------------------------------
180,341 Align Technology, Inc.(1) 3,124
- --------------------------------------------------------------------------------
76,045 Analogic Corporation 3,601
- --------------------------------------------------------------------------------
120,740 Haemonetics Corporation(1) 3,408
- --------------------------------------------------------------------------------
104,900 Kensey Nash Corp.(1) 3,399
- --------------------------------------------------------------------------------
74,231 Laserscope(1) 2,205
- --------------------------------------------------------------------------------
369,161 Sonic Innovations Inc.(1) 3,378
- --------------------------------------------------------------------------------
265,995 Urologix Inc.(1) 3,245
- --------------------------------------------------------------------------------
302,775 Vascular Solutions Inc.(1) 3,813
- --------------------------------------------------------------------------------
26,173
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 5.5%
- --------------------------------------------------------------------------------
81,732 DaVita Inc.(1) 4,177
- --------------------------------------------------------------------------------
182,553 Inveresk Research Group Inc.(1) 5,173
- --------------------------------------------------------------------------------
133,134 LCA-Vision Inc.(1) 3,354
- --------------------------------------------------------------------------------
100,694 SFBC International, Inc.(1) 3,681
- --------------------------------------------------------------------------------
16,385
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 4.7%
- --------------------------------------------------------------------------------
104,085 Ameristar Casinos Inc. 3,302
- --------------------------------------------------------------------------------
611,893 La Quinta Corporation(1) 4,399
- --------------------------------------------------------------------------------
182,076 Ryan's Family Steak Houses Inc.(1) 3,303
- --------------------------------------------------------------------------------
102,309 WMS Industries Inc.(1) 2,889
- --------------------------------------------------------------------------------
13,893
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
5
New Opportunities - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 5.6%
- --------------------------------------------------------------------------------
213,095 Interface Inc.(1) $ 1,818
- --------------------------------------------------------------------------------
122,866 Jarden Corp.(1) 4,570
- --------------------------------------------------------------------------------
58,496 Standard-Pacific Corporation 2,951
- --------------------------------------------------------------------------------
84,380 Stanley Works (The) 3,587
- --------------------------------------------------------------------------------
40,797 William Lyon Homes Inc.(1) 3,597
- --------------------------------------------------------------------------------
16,523
- --------------------------------------------------------------------------------
INSURANCE -- 1.7%
- --------------------------------------------------------------------------------
175,138 American Equity Investment
Life Holding Co. 1,970
- --------------------------------------------------------------------------------
90,144 Hilb, Rogal & Hamilton Co. 3,232
- --------------------------------------------------------------------------------
5,202
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 2.5%
- --------------------------------------------------------------------------------
193,345 Cybersource Corp.(1) 1,226
- --------------------------------------------------------------------------------
110,129 Digital River Inc.(1) 2,836
- --------------------------------------------------------------------------------
101,055 Infospace Inc.(1) 3,303
- --------------------------------------------------------------------------------
7,365
- --------------------------------------------------------------------------------
IT SERVICES -- 1.9%
- --------------------------------------------------------------------------------
286,788 Euronet Worldwide Inc.(1) 5,572
- --------------------------------------------------------------------------------
MACHINERY -- 1.1%
- --------------------------------------------------------------------------------
100,043 Lincoln Electric Holdings Inc. 3,154
- --------------------------------------------------------------------------------
MEDIA -- 2.1%
- --------------------------------------------------------------------------------
61,980 Getty Images Inc.(1) 3,384
- --------------------------------------------------------------------------------
99,456 Salem Communications
Corp. Cl A(1) 2,965
- --------------------------------------------------------------------------------
6,349
- --------------------------------------------------------------------------------
METALS & MINING -- 4.4%
- --------------------------------------------------------------------------------
132,865 Arch Coal Inc. 4,067
- --------------------------------------------------------------------------------
265,272 KFX Inc.(1) 2,677
- --------------------------------------------------------------------------------
49,946 Titanium Metals Corp.(1) 3,958
- --------------------------------------------------------------------------------
135,430 Worthington Industries, Inc. 2,445
- --------------------------------------------------------------------------------
13,147
- --------------------------------------------------------------------------------
OIL & GAS -- 1.1%
- --------------------------------------------------------------------------------
312,651 Magnum Hunter Resources Inc.(1) 3,211
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 2.6%
- --------------------------------------------------------------------------------
138,766 Bone Care International Inc.(1) 3,422
- --------------------------------------------------------------------------------
99,724 Medicis Pharmaceutical Corp. Cl A 4,280
- --------------------------------------------------------------------------------
7,702
- --------------------------------------------------------------------------------
ROAD & RAIL -- 1.0%
- --------------------------------------------------------------------------------
155,426 Werner Enterprises Inc. 3,107
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 3.7%
- --------------------------------------------------------------------------------
364,128 California Micro Devices
Corporation(1) $ 5,225
- --------------------------------------------------------------------------------
299,208 Silicon Image Inc.(1) 3,049
- --------------------------------------------------------------------------------
58,043 Silicon Laboratories Inc.(1) 2,737
- --------------------------------------------------------------------------------
11,011
- --------------------------------------------------------------------------------
SOFTWARE -- 3.5%
- --------------------------------------------------------------------------------
148,864 Activision, Inc.(1) 2,242
- --------------------------------------------------------------------------------
131,628 Open Solutions Inc.(1) 3,254
- --------------------------------------------------------------------------------
117,683 THQ Inc.(1) 2,182
- --------------------------------------------------------------------------------
1,074,035 Viewpoint Corp.(1) 2,653
- --------------------------------------------------------------------------------
10,331
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 3.8%
- --------------------------------------------------------------------------------
125,780 Aaron Rents Inc. 3,643
- --------------------------------------------------------------------------------
164,887 Big 5 Sporting Goods Corp.(1) 4,092
- --------------------------------------------------------------------------------
79,949 Urban Outfitters Inc.(1) 3,691
- --------------------------------------------------------------------------------
11,426
- --------------------------------------------------------------------------------
TEXTILES, APPAREL
& LUXURY GOODS -- 2.3%
- --------------------------------------------------------------------------------
137,508 Fossil Inc.(1) 3,368
- --------------------------------------------------------------------------------
54,741 Timberland Co. (The)(1) 3,433
- --------------------------------------------------------------------------------
6,801
- --------------------------------------------------------------------------------
TRADING COMPANIES
& DISTRIBUTORS -- 1.2%
- --------------------------------------------------------------------------------
62,893 Hughes Supply, Inc. 3,515
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $271,409) 293,203
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 1.4%
$4,200 FHLB Discount Notes,
0.90%, 5/3/04(2)
(Cost $4,200) 4,200
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $275,609) $297,403
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
(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, 2004 (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS)
- --------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------
Investment securities, at value (cost of $275,609) $297,403
- ------------------------------------------------------------
Cash 2,572
- ------------------------------------------------------------
Receivable for investments sold 13,159
- ------------------------------------------------------------
Dividends and interest receivable 55
- --------------------------------------------------------------------------------
313,189
- --------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------
Payable for investments purchased 17,293
- ------------------------------------------------------------
Accrued management fees 389
- --------------------------------------------------------------------------------
17,682
- --------------------------------------------------------------------------------
NET ASSETS $295,507
================================================================================
CAPITAL SHARES, $0.01 PAR VALUE
Authorized 300,000
================================================================================
Outstanding 58,042
================================================================================
NET ASSET VALUE PER SHARE $5.09
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $451,919
- ------------------------------------------------------------
Accumulated net investment loss (1,721)
- ------------------------------------------------------------
Accumulated net realized loss on investment
and foreign currency transactions (176,485)
- ------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 21,794
- --------------------------------------------------------------------------------
$295,507
================================================================================
See Notes to Financial Statements.
- ------
7
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
INVESTMENT LOSS
- --------------------------------------------------------------------
INCOME:
- --------------------------------------------------------------------
Dividends $ 659
- --------------------------------------------------------------------
Interest 30
- --------------------------------------------------------------------------------
689
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 2,405
- --------------------------------------------------------------------
Directors' fees and expenses 2
- --------------------------------------------------------------------
Other expenses 3
- --------------------------------------------------------------------------------
2,410
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (1,721)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------
Net realized gain on investment and foreign currency transactions 36,754
- --------------------------------------------------------------------
Change in net unrealized appreciation on investments and
translation of assets and liabilities in foreign currencies (32,153)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 4,601
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,880
================================================================================
See Notes to Financial Statements.
- ------
8
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment loss $ (1,721) $ (2,820)
- -------------------------------------------------
Net realized gain 36,754 18,192
- -------------------------------------------------
Change in net unrealized appreciation (32,153) 52,934
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 2,880 68,306
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Proceeds from shares sold 6,348 11,765
- -------------------------------------------------
Payments for shares redeemed(1) (31,947) (59,025)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital share transactions (25,599) (47,260)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (22,719) 21,046
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 318,226 297,180
- --------------------------------------------------------------------------------
End of period $295,507 $318,226
================================================================================
Accumulated net investment loss $(1,721) --
================================================================================
TRANSACTIONS IN SHARES OF THE FUND
- --------------------------------------------------------------------------------
Sold 1,191 2,743
- -------------------------------------------------
Redeemed (6,018) (13,977)
- --------------------------------------------------------------------------------
Net decrease in shares of the fund (4,827) (11,234)
================================================================================
(1) Net of redemption fees of $190,946 and $237,053, respectively.
See Notes to Financial Statements.
- ------
9
Notes to Financial Statements
APRIL 30, 2004 (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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the value of a security was established at the
close of the security's principal market but before the net asset value
per-share was determined that was likely to materially affect the net asset
value, then that security would be 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 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.
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 fund records 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 fund may enter into forward
foreign currency exchange contracts to facilitate transactions of securities
denominated in a foreign currency or to hedge the fund's exposure to foreign
currency exchange rate fluctuations. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the fund and the
resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The fund bears the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM),
(continued)
- ------
10
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 substantially 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.
REDEMPTION -- The fund may impose a 2% redemption fee on shares held less than
five years. These redemption fees are recorded as a reduction in the cost of
shares redeemed. The redemption fee is retained by the fund and helps cover
transaction costs that long-term investors may bear when the fund sells
securities to meet investor redemptions.
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. 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, 2004, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 JPMorgan Chase Bank (JPMCB). JPMCB 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, 2004, were $445,911 and $467,082,
respectively.
(continued)
- ------
11
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
4. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $650 million
unsecured bank line of credit agreement with JPMCB, which was renewed from $620
million effective December 17, 2003. 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, 2004.
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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $275,609
================================================================================
Gross tax appreciation of investments $32,238
- -----------------------------------------------------------
Gross tax depreciation of investments (10,444)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $21,794
================================================================================
The cost of investments for federal income tax purposes was the same as the cost
for financial statement purposes.
As of October 31, 2003, the fund had accumulated capital losses of $213,239,
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.
- ------
12
New Opportunities - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -----------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -----------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $5.06 $4.01 $4.80 $15.35 $9.16 $4.77
- -----------------------------------------------------------------------------------------------------
Income From
Investment Operations
- -------------------------------
Net Investment Loss (0.03) (0.04) (0.05) (0.05) (0.19) (0.08)
- -------------------------------
Net Realized and
Unrealized Gain (Loss) 0.06 1.09 (0.74) (6.85) 7.52 4.47
- -----------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.03 1.05 (0.79) (6.90) 7.33 4.39
- -----------------------------------------------------------------------------------------------------
Distributions
- -------------------------------
From Net Realized Gains -- -- -- (3.65) (1.14) --
- -----------------------------------------------------------------------------------------------------
Redemption Fees(2) --(3) --(3) --(3) -- -- --
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $5.09 $5.06 $4.01 $4.80 $15.35 $9.16
=====================================================================================================
TOTAL RETURN(4) 0.59% 26.18% (16.46)% (53.81)% 83.28% 92.03%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets 1.50%(5) 1.50% 1.50% 1.50% 1.50% 1.50%
- -------------------------------
Ratio of Net Investment
Loss to Average Net Assets (1.07)%(5) (0.98)% (1.02)% (0.72)% (1.28)% (1.29)%
- -------------------------------
Portfolio Turnover Rate 141% 217% 175% 189% 112% 156%
- -------------------------------
Net Assets, End of Period
(in thousands) $295,507 $318,226 $297,180 $380,741 $873,376 $400,962
- -----------------------------------------------------------------------------------------------------
(1) For the six months ended April 30, 2004 (unaudited).
(2) The fund adopted the provisions of the revised AICPA Audit and Accounting
Guide for Investment Companies which requires the disclosure of the
per-share effect of redemption fees. Periods prior to November 1, 2001,
have not been restated to reflect this change. Amounts 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.
- ------
13
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
14
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or to serve as fund performance comparisons. They are not investment
products available for purchase.
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 NASDAQ COMPOSITE INDEX is a market-value weighted index of all domestic and
international common stocks listed on the Nasdaq stock market.
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 DOW JONES INDUSTRIAL AVERAGE (DJIA) is a price-weighted average of 30
actively traded blue chip stocks, primarily industrials but including
service-oriented firms. Prepared and published by Dow Jones & Co., it is the
oldest and most widely quoted of all the market indicators.
- ------
15
Notes
- ------
16
CONTACT US
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
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0406
SH-SAN-38382S
American Century Investment Services, Inc.
(c)2004 American Century Services Corporation
[front cover]
APRIL 30, 2004
American Century Investments
Semiannual Report
Balanced Fund
[american century logo and text logo]
[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 Portfolio..................................... 4
Key Fixed-Income Portfolio Statistics................................. 4
Schedule of Investments.................................................. 5
FINANCIAL STATEMENTS
Statement of Assets and Liabilities...................................... 12
Statement of Operations.................................................. 13
Statement of Changes in Net Assets....................................... 14
Notes to Financial Statements............................................ 15
Financial Highlights..................................................... 20
OTHER INFORMATION
Share Class Information.................................................. 23
Additional Information................................................... 24
Index Definitions........................................................ 25
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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 Balanced fund
for the six months ended April 30, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for this fund will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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, 2004
--------------------------------
AVERAGE ANNUAL RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 14.98% 1.85% 7.68% 9.15% 10/20/88
- --------------------------------------------------------------------------------
BLENDED INDEX 14.15% 1.63% 10.09% 10.57%(1) --
- --------------------------------------------------------------------------------
S&P 500 INDEX 22.88% -2.26% 11.36% 11.83%(1) --
- --------------------------------------------------------------------------------
LEHMAN BROTHERS U.S.
AGGREGATE INDEX 1.82% 6.66% 7.34% 8.01%(1) --
- --------------------------------------------------------------------------------
Institutional Class 15.13% -- -- 0.34% 5/1/00
- --------------------------------------------------------------------------------
Advisor Class 14.70% 1.60% -- 5.52% 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, 1994
ONE-YEAR RETURNS OVER 10 YEARS
Periods ended April 30
- -------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------
Investor Class 6.81% 17.51% 10.24% 25.61% 10.05% 8.16% -4.25% -5.14% -2.95% 14.98%
- -------------------------------------------------------------------------------------------------
Blended Index 13.37% 21.20% 17.78% 28.45% 16.04% 6.80% -3.14% -4.54% -3.82% 14.15%
- -------------------------------------------------------------------------------------------------
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
Balanced returned 4.73%* for the six months ended April 30, 2004, a better
performance than the 4.27% return of its blended benchmark (defined on page 25).
U.S. stock gains were primarily responsible for the portfolio's and the
benchmark's performance; U.S. bond returns were relatively flat. The portfolio
beat the benchmark primarily because Balanced's stock holdings outperformed the
benchmark's equity component, the S&P 500 Index.
ECONOMIC & STOCK MARKET REVIEW
The S&P 500 returned 6.27% for the six months. Stocks enjoyed a favorable
start--in late January 2004, stocks surged to 30-month highs amid solid economic
growth data, low interest rates, mild inflation, and strong fourth-quarter
corporate earnings.
But the economic data and changing expectations constrained returns thereafter.
Investors questioned the sustainability of high corporate earnings growth and
stock valuation levels, especially as terrorism concerns resurfaced and the
government released a string of disappointing monthly payroll employment
reports.
Investor anxiety mounted in April 2004 when economic reports triggered interest
rate fears. The U.S. government reported that the economy added 308,000 jobs in
March, more than in any month since April 2000. This news, combined with higher
inflation numbers, convinced investors that the Federal Reserve could raise
interest rates as early as June 2004. The impact of interest rate concerns
overrode a stellar first-quarter corporate earnings season.
Soaring energy prices also affected the markets. Though higher oil prices
hindered the broad market by raising concerns about slower economic growth,
energy (up 22%) posted the best sector return in the S&P 500 and was one of the
biggest contributors to the index, along with health care and consumer staples
(up over 10% each). The biggest detractor was information technology (down 3%),
one of 2003's leading sectors.
BALANCED'S TOP TEN STOCK HOLDINGS
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF EQUITY % OF
PORTFOLIO S&P 500
- --------------------------------------------------------------------------------
International Business
Machines Corp. 3.0% 1.5%
- --------------------------------------------------------------------------------
Johnson & Johnson 2.9% 1.6%
- --------------------------------------------------------------------------------
Microsoft Corporation 2.9% 2.7%
- --------------------------------------------------------------------------------
Citigroup Inc. 2.7% 2.4%
- --------------------------------------------------------------------------------
Pfizer, Inc. 2.6% 2.7%
- --------------------------------------------------------------------------------
Bank of America Corp. 2.4% 1.6%
- --------------------------------------------------------------------------------
Intel Corp. 2.3% 1.6%
- --------------------------------------------------------------------------------
ChevronTexaco Corp. 2.2% 1.0%
- --------------------------------------------------------------------------------
Ford Motor Company 2.0% 0.3%
- --------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 2.0% 0.8%
- --------------------------------------------------------------------------------
BALANCED'S TOP FIVE STOCK INDUSTRIES
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF EQUITY % OF
PORTFOLIO S&P 500
- --------------------------------------------------------------------------------
Pharmaceuticals 6.9% 8.4%
- --------------------------------------------------------------------------------
Insurance 6.2% 4.7%
- --------------------------------------------------------------------------------
Oil & Gas 5.8% 5.4%
- --------------------------------------------------------------------------------
Commercial Banks 5.5% 6.2%
- --------------------------------------------------------------------------------
Media 5.5% 3.8%
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
3
Balanced - Portfolio Commentary
STOCK PORTFOLIO REVIEW
Balanced's equity holdings returned approximately 7.7% for the six months. As in
the S&P 500, the consumer staples, energy, and health care sectors were among
the biggest contributors (up 18%, 26%, and 9%, respectively), while information
technology (down 7%) detracted.
Our equity investment goal is to outperform the S&P 500 without taking on
significant additional risk, utilizing a two-step process that uses computer
models as key tools in decision-making. Our biggest positive contribution to
Balanced's relative equity performance was stock selection in the consumer
staples, utilities, materials, energy, and financials sectors, where the
portfolio significantly outperformed the index. That more than offset less
favorable selections and underperformance in the industrials, health care,
telecommunication services, and information technology sectors.
BOND MARKET & FIXED-INCOME PORTFOLIO REVIEW
The bond component of Balanced's blended benchmark (the Lehman Brothers U.S.
Aggregate Index, or LBA) returned 1.25% for the six months. Bond prices rose and
yields fell for most of the period, pushing the LBA up 4% from November to the
end of March and the 10-year Treasury yield down to 3.68% on March 16. Then the
market reversed sharply in April--the LBA fell 2.60%, its worst monthly
performance since the July 2003 selloff, and the 10-year Treasury yield jumped
to 4.51%.
The LBA consists primarily of the taxable investment-grade U.S. bond market's
three largest sectors: fixed-rate mortgage-backed securities (MBS), Treasury
securities, and corporate bonds. Corporates (1.68% return) led for the six
months, followed by MBS (1.39%) and Treasurys (0.75%). Of the three sectors,
Treasurys were hurt most (-3.22%) by the April selloff, while MBS held up best
(-1.78%).
Like the LBA, Balanced's largest bond positions were in MBS, Treasurys, and
corporates, but we allocated more to corporates than to Treasurys. We reduced
our Treasury position in anticipation of underperformance in this sector if
interest rates continue to rise, like they did in April.
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 56.8% 59.5%
- --------------------------------------------------------------------------------
Mortgage- &
Asset-Backed Securities 15.3% 15.0%
- --------------------------------------------------------------------------------
Corporate Bonds 11.1% 12.1%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 5.9% 7.5%
- --------------------------------------------------------------------------------
U.S. Government
Agency Securities 3.5% 2.4%
- --------------------------------------------------------------------------------
Municipal Securities 0.5% 0.9%
- --------------------------------------------------------------------------------
Sovereign Governments
& Agencies 0.3% 0.8%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 6.6% 1.8%
- --------------------------------------------------------------------------------
KEY FIXED-INCOME PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Weighted Average
Maturity 5.3 yrs 5.6 yrs
- --------------------------------------------------------------------------------
Average Duration
(Effective) 4.5 yrs 4.2 yrs
- --------------------------------------------------------------------------------
- ------
4
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 56.8%
AIR FREIGHT & LOGISTICS -- 0.4%
- --------------------------------------------------------------------------------
4,101 FedEx Corporation $ 295
- --------------------------------------------------------------------------------
34,500 United Parcel Service, Inc. Cl B 2,420
- --------------------------------------------------------------------------------
2,715
- --------------------------------------------------------------------------------
AIRLINES -- 0.1%
- --------------------------------------------------------------------------------
35,699 Southwest Airlines Co. 510
- --------------------------------------------------------------------------------
AUTOMOBILES -- 1.2%
- --------------------------------------------------------------------------------
484,532 Ford Motor Company(1) 7,442
- --------------------------------------------------------------------------------
BEVERAGES -- 1.5%
- --------------------------------------------------------------------------------
82,227 Adolph Coors Company Cl B 5,404
- --------------------------------------------------------------------------------
99,462 Coca-Cola Enterprises 2,685
- --------------------------------------------------------------------------------
72,139 PepsiAmericas Inc. 1,445
- --------------------------------------------------------------------------------
9,534
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.5%
- --------------------------------------------------------------------------------
53,882 Amgen Inc.(2) 3,032
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 1.5%
- --------------------------------------------------------------------------------
5,110 Goldman Sachs Group, Inc. (The) 493
- --------------------------------------------------------------------------------
194,820 J.P. Morgan Chase & Co. 7,325
- --------------------------------------------------------------------------------
14,369 Lehman Brothers Holdings Inc. 1,055
- --------------------------------------------------------------------------------
13,278 Morgan Stanley 682
- --------------------------------------------------------------------------------
9,555
- --------------------------------------------------------------------------------
CHEMICALS -- 0.6%
- --------------------------------------------------------------------------------
112,083 Monsanto Co. 3,877
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 3.1%
- --------------------------------------------------------------------------------
106,500 Bank of America Corp. 8,572
- --------------------------------------------------------------------------------
166,255 National City Corp. 5,764
- --------------------------------------------------------------------------------
125,239 Wachovia Corp. 5,730
- --------------------------------------------------------------------------------
20,066
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.9%
- --------------------------------------------------------------------------------
146,018 Cendant Corporation 3,457
- --------------------------------------------------------------------------------
34,805 Equifax Inc. 853
- --------------------------------------------------------------------------------
43,673 United Stationers Inc.(2) 1,660
- --------------------------------------------------------------------------------
5,970
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.1%
- --------------------------------------------------------------------------------
27,400 Aspect Communications
Corporation(2) 324
- --------------------------------------------------------------------------------
196,067 Cisco Systems Inc.(2) 4,092
- --------------------------------------------------------------------------------
146,023 Motorola, Inc. 2,665
- --------------------------------------------------------------------------------
7,081
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 2.0%
- --------------------------------------------------------------------------------
19,361 Dell Inc.(1)(2) 672
- --------------------------------------------------------------------------------
61,581 Hewlett-Packard Co. 1,213
- --------------------------------------------------------------------------------
122,196 International Business Machines
Corp. 10,774
- --------------------------------------------------------------------------------
12,659
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.7%
- --------------------------------------------------------------------------------
30,996 American Express Co. $ 1,517
- --------------------------------------------------------------------------------
31,156 CompuCredit Corp.(2) 516
- --------------------------------------------------------------------------------
93,397 MBNA Corporation 2,278
- --------------------------------------------------------------------------------
4,311
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.1%
- --------------------------------------------------------------------------------
54,800 Crown Holdings Inc.(2) 463
- --------------------------------------------------------------------------------
DIVERSIFIED -- 0.3%
- --------------------------------------------------------------------------------
15,200 Standard and Poor's 500
Depositary Receipt 1,687
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.2%
- --------------------------------------------------------------------------------
206,842 Citigroup Inc. 9,947
- --------------------------------------------------------------------------------
114,390 Principal Financial Group 4,038
- --------------------------------------------------------------------------------
13,985
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 1.6%
- --------------------------------------------------------------------------------
10,125 ALLTEL Corp. 510
- --------------------------------------------------------------------------------
18,800 AT&T Corp. 322
- --------------------------------------------------------------------------------
131,041 BellSouth Corp. 3,382
- --------------------------------------------------------------------------------
188,235 Sprint Corp. 3,368
- --------------------------------------------------------------------------------
64,976 Verizon Communications 2,452
- --------------------------------------------------------------------------------
10,034
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.6%
- --------------------------------------------------------------------------------
291,145 CenterPoint Energy, Inc. 3,141
- --------------------------------------------------------------------------------
259,603 Edison International 6,075
- --------------------------------------------------------------------------------
210,077 TXU Corp. 7,172
- --------------------------------------------------------------------------------
16,388
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT &
INSTRUMENTS -- 0.7%
- --------------------------------------------------------------------------------
49,427 Arrow Electronics, Inc.(2) 1,250
- --------------------------------------------------------------------------------
98,366 Avnet Inc.(2) 2,129
- --------------------------------------------------------------------------------
125,389 Sanmina-SCI Corp.(2) 1,256
- --------------------------------------------------------------------------------
4,635
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 0.6%
- --------------------------------------------------------------------------------
66,336 Schlumberger Ltd. 3,883
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.8%
- --------------------------------------------------------------------------------
12,638 7-Eleven Inc.(2) 203
- --------------------------------------------------------------------------------
163,233 Supervalu Inc. 5,026
- --------------------------------------------------------------------------------
5,229
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
67,158 Archer-Daniels-Midland Co. 1,179
- --------------------------------------------------------------------------------
8,336 Corn Products International Inc. 354
- --------------------------------------------------------------------------------
328,900 Tyson Foods, Inc. Cl A 6,164
- --------------------------------------------------------------------------------
7,697
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.1%
- --------------------------------------------------------------------------------
11,744 UGI Corp. 370
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
5
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.0%
- --------------------------------------------------------------------------------
98,200 Becton Dickinson & Co. $ 4,964
- --------------------------------------------------------------------------------
26,106 Respironics, Inc.(2) 1,368
- --------------------------------------------------------------------------------
6,332
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 0.5%
- --------------------------------------------------------------------------------
49,626 AmerisourceBergen Corp. 2,873
- --------------------------------------------------------------------------------
25,538 Humana Inc.(2) 416
- --------------------------------------------------------------------------------
3,326 UnitedHealth Group Incorporated 204
- --------------------------------------------------------------------------------
3,493
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 1.1%
- --------------------------------------------------------------------------------
250,560 McDonald's Corporation 6,823
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.7%
- --------------------------------------------------------------------------------
57,956 Black & Decker Corporation 3,353
- --------------------------------------------------------------------------------
24,686 KB Home 1,702
- --------------------------------------------------------------------------------
9,816 NVR, Inc.(2) 4,426
- --------------------------------------------------------------------------------
39,488 Stanley Works (The) 1,679
- --------------------------------------------------------------------------------
11,160
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
29,700 Energizer Holdings, Inc.(2) 1,286
- --------------------------------------------------------------------------------
1,300 Kimberly-Clark Corp. 85
- --------------------------------------------------------------------------------
50,395 Procter & Gamble Co. (The) 5,329
- --------------------------------------------------------------------------------
6,700
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.8%
- --------------------------------------------------------------------------------
1,400 3M Co. 121
- --------------------------------------------------------------------------------
44,490 General Electric Co. 1,332
- --------------------------------------------------------------------------------
141,132 Tyco International Ltd. 3,875
- --------------------------------------------------------------------------------
5,328
- --------------------------------------------------------------------------------
INSURANCE -- 3.6%
- --------------------------------------------------------------------------------
98,492 Ace, Ltd. 4,318
- --------------------------------------------------------------------------------
33,545 American International Group, Inc. 2,403
- --------------------------------------------------------------------------------
63,353 Berkley (W.R.) Corp. 2,566
- --------------------------------------------------------------------------------
15,106 Fidelity National Financial, Inc. 553
- --------------------------------------------------------------------------------
131,882 First American Financial Corp. (The) 3,577
- --------------------------------------------------------------------------------
61,579 Lincoln National Corp. 2,764
- --------------------------------------------------------------------------------
4,400 Odyssey Re Holdings Corp. 104
- --------------------------------------------------------------------------------
5,139 Progressive Corp. 450
- --------------------------------------------------------------------------------
31,864 Protective Life Corporation 1,146
- --------------------------------------------------------------------------------
105,900 Prudential Financial Inc. 4,653
- --------------------------------------------------------------------------------
22,534
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL(3)
- --------------------------------------------------------------------------------
4,600 Amazon.com, Inc.(2) 200
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 0.6%
- --------------------------------------------------------------------------------
204,527 Earthlink Inc.(2) 1,883
- --------------------------------------------------------------------------------
48,262 United Online, Inc.(2) 801
- --------------------------------------------------------------------------------
68,546 VeriSign, Inc.(2) 1,106
- --------------------------------------------------------------------------------
3,790
- --------------------------------------------------------------------------------
Shares ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
IT SERVICES -- 0.3%
- --------------------------------------------------------------------------------
19,900 Checkfree Corp.(2) $ 598
- --------------------------------------------------------------------------------
19,837 Computer Sciences Corp.(2) 811
- --------------------------------------------------------------------------------
18,570 Convergys Corp.(2) 270
- --------------------------------------------------------------------------------
1,679
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
232,839 Eastman Kodak Co. 6,005
- --------------------------------------------------------------------------------
100,502 Hasbro, Inc. 1,898
- --------------------------------------------------------------------------------
7,903
- --------------------------------------------------------------------------------
MEDIA -- 3.1%
- --------------------------------------------------------------------------------
301,744 Disney (Walt) Co. 6,949
- --------------------------------------------------------------------------------
24,976 McGraw-Hill Companies, Inc. (The) 1,970
- --------------------------------------------------------------------------------
123,115 PanAmSat Corp.(1)(2) 2,841
- --------------------------------------------------------------------------------
56,507 Regal Entertainment Group(1) 1,231
- --------------------------------------------------------------------------------
414,150 Time Warner Inc.(2) 6,967
- --------------------------------------------------------------------------------
19,958
- --------------------------------------------------------------------------------
METALS & MINING -- 0.3%
- --------------------------------------------------------------------------------
27,774 Phelps Dodge Corp.(2) 1,828
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.6%
- --------------------------------------------------------------------------------
149,000 Federated Department Stores, Inc. 7,301
- --------------------------------------------------------------------------------
82,680 May Department Stores Co. (The) 2,547
- --------------------------------------------------------------------------------
13,704 Saks Incorporated 197
- --------------------------------------------------------------------------------
10,045
- --------------------------------------------------------------------------------
OIL & GAS -- 3.3%
- --------------------------------------------------------------------------------
88,443 ChevronTexaco Corp. 8,093
- --------------------------------------------------------------------------------
3,722 ConocoPhillips 265
- --------------------------------------------------------------------------------
119,792 Exxon Mobil Corp. 5,097
- --------------------------------------------------------------------------------
7,688 Kerr-McGee Corp. 376
- --------------------------------------------------------------------------------
81,196 Marathon Oil Corp. 2,725
- --------------------------------------------------------------------------------
71,105 Sunoco, Inc. 4,473
- --------------------------------------------------------------------------------
2,610 Valero Energy Corp. 166
- --------------------------------------------------------------------------------
21,195
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.0%
- --------------------------------------------------------------------------------
36,690 Georgia-Pacific Corp. 1,288
- --------------------------------------------------------------------------------
121,300 Louisiana-Pacific Corp. 2,861
- --------------------------------------------------------------------------------
54,542 Potlatch Corp. 2,066
- --------------------------------------------------------------------------------
6,215
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
85,486 Gillette Company 3,498
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 4.0%
- --------------------------------------------------------------------------------
196,306 Johnson & Johnson 10,607
- --------------------------------------------------------------------------------
147,947 King Pharmaceuticals, Inc.(2) 2,552
- --------------------------------------------------------------------------------
9,622 Merck & Co., Inc. 452
- --------------------------------------------------------------------------------
99,045 Perrigo Co. 2,136
- --------------------------------------------------------------------------------
265,344 Pfizer, Inc. 9,490
- --------------------------------------------------------------------------------
25,237
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares/Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.1%
- --------------------------------------------------------------------------------
1,200 Burlington Northern Santa Fe Corp. $ 39
- --------------------------------------------------------------------------------
8,989 Union Pacific Corp. 530
- --------------------------------------------------------------------------------
569
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.5%
- --------------------------------------------------------------------------------
318,531 Intel Corp. 8,196
- --------------------------------------------------------------------------------
57,488 Texas Instruments Inc. 1,443
- --------------------------------------------------------------------------------
9,639
- --------------------------------------------------------------------------------
SOFTWARE -- 1.7%
- --------------------------------------------------------------------------------
9,765 Autodesk, Inc. 327
- --------------------------------------------------------------------------------
406,066 Microsoft Corporation 10,546
- --------------------------------------------------------------------------------
10,873
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.2%
- --------------------------------------------------------------------------------
8,400 Advance Auto Parts(2) 362
- --------------------------------------------------------------------------------
51,900 Barnes & Noble Inc.(2) 1,550
- --------------------------------------------------------------------------------
108,902 Blockbuster Inc.(1) 1,802
- --------------------------------------------------------------------------------
54,112 Claire's Stores Inc. 1,103
- --------------------------------------------------------------------------------
98,417 Gap, Inc. (The) 2,166
- --------------------------------------------------------------------------------
3,400 Home Depot, Inc. 120
- --------------------------------------------------------------------------------
50,340 RadioShack Corp. 1,548
- --------------------------------------------------------------------------------
96,018 Rent-A-Center Inc.(2) 2,811
- --------------------------------------------------------------------------------
70,938 Sherwin-Williams Co. 2,700
- --------------------------------------------------------------------------------
14,162
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 0.6%
- --------------------------------------------------------------------------------
52,603 Fannie Mae 3,614
- --------------------------------------------------------------------------------
10,148 New Century Financial Corp.(1) 431
- --------------------------------------------------------------------------------
4,045
- --------------------------------------------------------------------------------
TOBACCO -- 0.7%
- --------------------------------------------------------------------------------
73,080 R.J. Reynolds Tobacco Holdings, Inc. 4,733
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.6%
- --------------------------------------------------------------------------------
173,500 Nextel Communications, Inc.(2) 4,140
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $303,799) 363,202
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES(4) -- 12.5%
$ 4,750 FHLMC, 5.00%, settlement date
5/18/04(5) 4,783
- --------------------------------------------------------------------------------
5,000 FHLMC, 6.00%, settlement date
6/14/04(5) 5,097
- --------------------------------------------------------------------------------
578 FHLMC, 7.00%, 10/1/12 615
- --------------------------------------------------------------------------------
436 FHLMC, 6.50%, 1/1/28 454
- --------------------------------------------------------------------------------
4,086 FHLMC, 5.00%, 8/1/33 3,965
- --------------------------------------------------------------------------------
1,989 FHLMC, 5.50%, 12/1/33 1,988
- --------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
$ 3,945 FNMA, 5.50%, settlement date
5/13/04(5) $ 3,936
- --------------------------------------------------------------------------------
2,500 FNMA, 7.00%, settlement date
5/13/04(5) 2,644
- --------------------------------------------------------------------------------
12,390 FNMA, 5.00%, settlement date
5/18/04(5) 12,463
- --------------------------------------------------------------------------------
4,413 FNMA, 6.00%, settlement date
6/14/04(5) 4,500
- --------------------------------------------------------------------------------
1,042 FNMA, 6.00%, 2/1/09 1,092
- --------------------------------------------------------------------------------
74 FNMA, 6.50%, 5/1/11 78
- --------------------------------------------------------------------------------
766 FNMA, 7.50%, 11/1/11 821
- --------------------------------------------------------------------------------
10 FNMA, 6.50%, 10/1/12 11
- --------------------------------------------------------------------------------
19 FNMA, 6.50%, 5/1/13 21
- --------------------------------------------------------------------------------
53 FNMA, 6.50%, 5/1/13 56
- --------------------------------------------------------------------------------
101 FNMA, 6.50%, 6/1/13 107
- --------------------------------------------------------------------------------
21 FNMA, 6.50%, 6/1/13 22
- --------------------------------------------------------------------------------
55 FNMA, 6.50%, 6/1/13 58
- --------------------------------------------------------------------------------
46 FNMA, 6.50%, 6/1/13 49
- --------------------------------------------------------------------------------
151 FNMA, 6.50%, 6/1/13 160
- --------------------------------------------------------------------------------
354 FNMA, 6.00%, 1/1/14 370
- --------------------------------------------------------------------------------
1,241 FNMA, 6.00%, 4/1/14 1,297
- --------------------------------------------------------------------------------
223 FNMA, 6.50%, 1/1/28 233
- --------------------------------------------------------------------------------
607 FNMA, 7.00%, 1/1/28 643
- --------------------------------------------------------------------------------
460 FNMA, 6.50%, 1/1/29 479
- --------------------------------------------------------------------------------
462 FNMA, 7.50%, 7/1/29 495
- --------------------------------------------------------------------------------
265 FNMA, 7.00%, 5/1/30 280
- --------------------------------------------------------------------------------
359 FNMA, 7.50%, 9/1/30 384
- --------------------------------------------------------------------------------
407 FNMA, 6.50%, 9/1/31 424
- --------------------------------------------------------------------------------
258 FNMA, 7.00%, 9/1/31 272
- --------------------------------------------------------------------------------
842 FNMA, 6.50%, 1/1/32 877
- --------------------------------------------------------------------------------
1,756 FNMA, 7.00%, 6/1/32 1,857
- --------------------------------------------------------------------------------
873 FNMA, 6.50%, 8/1/32 909
- --------------------------------------------------------------------------------
2,711 FNMA, 5.50%, 6/1/33 2,707
- --------------------------------------------------------------------------------
3,764 FNMA, 5.50%, 8/1/33 3,758
- --------------------------------------------------------------------------------
1,836 FNMA, 5.50%, 9/1/33 1,834
- --------------------------------------------------------------------------------
12,063 FNMA, 5.50%, 1/1/34(6) 12,044
- --------------------------------------------------------------------------------
772 GNMA, 7.00%, 4/20/26 822
- --------------------------------------------------------------------------------
391 GNMA, 7.50%, 8/15/26 421
- --------------------------------------------------------------------------------
275 GNMA, 7.00%, 2/15/28 293
- --------------------------------------------------------------------------------
446 GNMA, 7.50%, 2/15/28 479
- --------------------------------------------------------------------------------
553 GNMA, 7.00%, 12/15/28 588
- --------------------------------------------------------------------------------
242 GNMA, 8.00%, 12/15/29 264
- --------------------------------------------------------------------------------
1,087 GNMA, 7.00%, 5/15/31 1,156
- --------------------------------------------------------------------------------
4,170 GNMA, 5.50%, 11/15/32 4,175
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $80,017) 79,981
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 11.1%
AEROSPACE & DEFENSE -- 0.2%
- --------------------------------------------------------------------------------
$ 1,050 Raytheon Co., 4.85%, 1/15/11 $ 1,047
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.1%
- --------------------------------------------------------------------------------
350 Dana Corp., 6.50%, 3/1/09 369
- --------------------------------------------------------------------------------
300 Lear Corp., 8.11%, 5/15/09 346
- --------------------------------------------------------------------------------
715
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.3%
- --------------------------------------------------------------------------------
1,875 General Motors Corporation,
7.20%, 1/15/11 1,996
- --------------------------------------------------------------------------------
BEVERAGES -- 0.1%
- --------------------------------------------------------------------------------
750 Miller Brewing Co., 4.25%,
8/15/08 (Acquired 1/6/04,
Cost $762)(7) 753
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.7%
- --------------------------------------------------------------------------------
750 Goldman Sachs Group Inc., 5.70%,
9/1/12 774
- --------------------------------------------------------------------------------
750 Goldman Sachs Group Inc., 5.25%,
10/15/13 739
- --------------------------------------------------------------------------------
600 Goldman Sachs Group Inc., 6.125%,
2/15/33 579
- --------------------------------------------------------------------------------
800 JP Morgan Chase & Co., 4.875%,
3/15/14 766
- --------------------------------------------------------------------------------
750 Morgan Stanley, 4.25%, 5/15/10 740
- --------------------------------------------------------------------------------
600 Morgan Stanley, 4.75%, 4/1/14 562
- --------------------------------------------------------------------------------
4,160
- --------------------------------------------------------------------------------
CHEMICALS -- 0.2%
- --------------------------------------------------------------------------------
1,250 Crompton Corp., 8.50%, 3/15/05 1,303
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 0.4%
- --------------------------------------------------------------------------------
1,600 Bank of America Corp., 4.375%,
12/1/10 1,578
- --------------------------------------------------------------------------------
500 US Bancorp, 2.75%, 3/30/06 502
- --------------------------------------------------------------------------------
750 Wells Fargo & Co., 4.95%,
10/16/13 735
- --------------------------------------------------------------------------------
2,815
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.6%
- --------------------------------------------------------------------------------
900 Allied Waste North America, Inc.,
Series 1998 B, 7.625%, 1/1/06 954
- --------------------------------------------------------------------------------
850 Hutchison Whampoa International
Ltd., 5.45%, 11/24/10 (Acquired
11/19/03, Cost $847)(7) 839
- --------------------------------------------------------------------------------
900 Quebecor World Capital Corp.,
6.125%, 11/15/13 887
- --------------------------------------------------------------------------------
350 RR Donnelley & Sons Co., 3.75%,
4/1/09 (Acquired 3/3/04,
Cost $349)(7) 343
- --------------------------------------------------------------------------------
1,000 Waste Management Inc., 7.00%,
10/15/06 1,089
- --------------------------------------------------------------------------------
4,112
- --------------------------------------------------------------------------------
Shares/Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.2%
- --------------------------------------------------------------------------------
$ 1,000 Ball Corp., 7.75%, 8/1/06 $ 1,075
- --------------------------------------------------------------------------------
DIVERSIFIED -- 2.6%
- --------------------------------------------------------------------------------
72,450 iShares GS $ InvesTop Corporate
Bond Fund(1)(8) 7,898
- --------------------------------------------------------------------------------
5,155 Lehman Brothers TRAINS(SM),
Series 10-2002, 6.96%, 1/15/12
(Acquired 5/23/02-1/3/03,
Cost $5,415)(7) 5,732
- --------------------------------------------------------------------------------
3,045 Morgan Stanley TRACERS(SM),
7.72%, 3/1/32 (Acquired 3/15/02-
8/28/02, Cost $3,203)(7) 3,505
- --------------------------------------------------------------------------------
17,135
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.0%
- --------------------------------------------------------------------------------
1,500 American General Finance Corp.,
Series 2002 H, 4.50%, 11/15/07(1) 1,546
- --------------------------------------------------------------------------------
2,300 Citigroup Inc., 4.125%, 6/30/05 2,358
- --------------------------------------------------------------------------------
775 Ford Motor Credit Co., 5.80%,
1/12/09 790
- --------------------------------------------------------------------------------
750 Ford Motor Credit Co., 7.375%,
10/28/09 812
- --------------------------------------------------------------------------------
600 Ford Motor Credit Co., 7.00%,
10/1/13 618
- --------------------------------------------------------------------------------
6,124
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.7%
- --------------------------------------------------------------------------------
700 Ameritech Capital Funding, 6.25%,
5/18/09 752
- --------------------------------------------------------------------------------
13 AT&T Corp., 6.00%, 3/15/09 13
- --------------------------------------------------------------------------------
690 British Telecommunications plc,
7.00%, 5/23/07 755
- --------------------------------------------------------------------------------
131 Comcast Cable Communications
Holdings Inc., 8.375%, 3/15/13 157
- --------------------------------------------------------------------------------
750 France Telecom, 7.75%, 3/1/11 888
- --------------------------------------------------------------------------------
900 Sprint Capital Corp., 8.375%,
3/15/12 1,058
- --------------------------------------------------------------------------------
800 Verizon New England Inc., 4.75%,
10/1/13 762
- --------------------------------------------------------------------------------
4,385
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.8%
- --------------------------------------------------------------------------------
750 CenterPoint Energy Resources
Corp., 5.95%, 1/15/14(1) 746
- --------------------------------------------------------------------------------
750 Dominion Resources Inc., 4.125%,
2/15/08 755
- --------------------------------------------------------------------------------
300 Pacific Gas & Electric Co., 6.05%,
3/1/34 285
- --------------------------------------------------------------------------------
1,000 Progress Energy Inc., 7.10%,
3/1/11 1,115
- --------------------------------------------------------------------------------
300 Tampa Electric Co., 6.375%,
8/15/12 317
- --------------------------------------------------------------------------------
1,370 Virginia Electric and Power Co.,
5.75%, 3/31/06 1,445
- --------------------------------------------------------------------------------
750 Virginia Electric and Power Co.,
5.25%, 12/15/15 736
- --------------------------------------------------------------------------------
5,399
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.2%
- --------------------------------------------------------------------------------
$ 1,000 Delhaize America Inc., 7.375%,
4/15/06 $ 1,074
- --------------------------------------------------------------------------------
450 Sysco Corp., 4.60%, 3/15/14
(Acquired 2/27/04, Cost $450)(7) 435
- --------------------------------------------------------------------------------
1,509
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
1,150 Cadbury Schweppes US Finance
LLC, 5.125%, 10/1/13 (Acquired
9/22/03, Cost $1,144)(7) 1,137
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.1%
- --------------------------------------------------------------------------------
900 Kinder Morgan Energy Partners
L.P., 5.00%, 12/15/13 866
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 0.4%
- --------------------------------------------------------------------------------
600 Mandalay Resort Group, 6.45%,
2/1/06 630
- --------------------------------------------------------------------------------
1,250 MGM Mirage, 6.00%, 10/1/09 1,272
- --------------------------------------------------------------------------------
450 Royal Caribbean Cruises Ltd.,
6.875%, 12/1/13 453
- --------------------------------------------------------------------------------
2,355
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.3%
- --------------------------------------------------------------------------------
620 General Electric Capital Corp.,
4.25%, 12/1/10 607
- --------------------------------------------------------------------------------
1,000 General Electric Co., 5.00%,
2/1/13 996
- --------------------------------------------------------------------------------
1,603
- --------------------------------------------------------------------------------
INSURANCE -- 0.3%
- --------------------------------------------------------------------------------
750 Allstate Financial Global Funding,
4.25%, 9/10/08 (Acquired 9/3/03,
Cost $749)(7) 760
- --------------------------------------------------------------------------------
750 American International Group Inc.,
4.25%, 5/15/13 704
- --------------------------------------------------------------------------------
750 Monumental Global Funding II,
3.85%, 3/3/08 (Acquired 2/5/03,
Cost $750)(7) 754
- --------------------------------------------------------------------------------
2,218
- --------------------------------------------------------------------------------
MEDIA -- 0.8%
- --------------------------------------------------------------------------------
1,360 Comcast Cable Communications,
8.375%, 5/1/07 1,543
- --------------------------------------------------------------------------------
1,500 Comcast Corp., 5.50%, 3/15/11 1,539
- --------------------------------------------------------------------------------
450 COX Communications Inc., 6.75%,
3/15/11 492
- --------------------------------------------------------------------------------
1,200 Liberty Media Corp., VRN, 2.61%,
6/15/04, resets quarterly off the
3-month LIBOR plus 1.50% with
no caps 1,222
- --------------------------------------------------------------------------------
550 News America Holdings, 7.75%,
1/20/24 631
- --------------------------------------------------------------------------------
5,427
- --------------------------------------------------------------------------------
METALS & MINING -- 0.1%
- --------------------------------------------------------------------------------
350 IPSCO Inc., 8.75%, 6/1/13 394
- --------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
OIL & GAS -- 0.3%
- --------------------------------------------------------------------------------
$ 300 Anadarko Petroleum Corp., 7.95%,
4/15/29 $ 359
- --------------------------------------------------------------------------------
800 Devon Energy Corp., 2.75%, 8/1/06 797
- --------------------------------------------------------------------------------
450 XTO Energy Inc., 6.25%, 4/15/13(1) 480
- --------------------------------------------------------------------------------
1,636
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------
650 International Paper Co., 4.25%,
1/15/09 646
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.1%
- --------------------------------------------------------------------------------
400 Schering-Plough Corp., 5.30%,
12/1/13 400
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.1%
- --------------------------------------------------------------------------------
600 Norfolk Southern Corp., 7.80%,
5/15/27 698
- --------------------------------------------------------------------------------
SPECIALTY RETAIL(3)
- --------------------------------------------------------------------------------
300 Toys "R" Us, Inc., 7.375%,
10/15/18(1) 289
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.2%
- --------------------------------------------------------------------------------
850 AT&T Wireless Services Inc.,
7.875%, 3/1/11 980
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $70,485) 71,177
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 5.9%
5,000 U.S. Treasury Bonds, 8.00%,
11/15/21 6,588
- --------------------------------------------------------------------------------
3,700 U.S. Treasury Bonds, 6.25%,
8/15/23 4,112
- --------------------------------------------------------------------------------
1,675 U.S. Treasury Bonds, 5.375%,
2/15/31(1) 1,698
- --------------------------------------------------------------------------------
11,400 U.S. Treasury Notes, 2.375%,
8/15/06(1) 11,370
- --------------------------------------------------------------------------------
1,000 U.S. Treasury Notes, 3.00%,
2/15/08 993
- --------------------------------------------------------------------------------
11,000 U.S. Treasury Notes, 3.375%,
11/15/08(1) 10,942
- --------------------------------------------------------------------------------
1,800 U.S. Treasury Notes, 4.00%,
2/15/14 1,730
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES
(Cost $37,986) 37,433
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES -- 3.5%
5,500 FHLB, 1.875%, 6/15/06 5,426
- --------------------------------------------------------------------------------
1,600 FHLMC, 4.875%, 3/15/07 1,682
- --------------------------------------------------------------------------------
6,100 FHLMC, 3.375%, 4/15/09 5,927
- --------------------------------------------------------------------------------
2,000 FNMA, 6.625%, 10/15/07 2,214
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
$ 4,750 FNMA, 3.25%, 11/15/07 $ 4,730
- --------------------------------------------------------------------------------
1,700 FNMA, 5.75%, 2/15/08 1,832
- --------------------------------------------------------------------------------
600 FNMA, 3.25%, 8/15/08 589
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $22,747) 22,400
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(4) -- 1.9%
149 AQ Finance Non-Improvement
Trust, Series 2003 N11A, 7.14%,
11/25/33 149
- --------------------------------------------------------------------------------
225 Argent Non-Improvement Trust,
Series 2004 WN2, Class A SC,
4.55%, 4/25/34 225
- --------------------------------------------------------------------------------
1,500 Argent Securities Inc., Series
2003 W3, Class AF3 SEQ, 3.99%,
9/25/30 1,528
- --------------------------------------------------------------------------------
164 Asset Backed Funding Corp.
Non-Improvement Trust, Series
2003-1, Class N1, 6.90%, 7/26/33 165
- --------------------------------------------------------------------------------
577 Bayview Financial Acquisition Trust,
Series 1998 B, Class M1, VRN,
2.50%, 5/25/04, resets monthly
off the 1-month LIBOR plus 1.40%
with a cap of 13.00% (Acquired
6/13/03, Cost $579)(7) 572
- --------------------------------------------------------------------------------
447 Bayview Financial Acquisition Trust,
Series 2002 DA, Class M1, VRN,
1.95%, 5/25/04, resets monthly
off the 1-month LIBOR plus 0.85%
with no caps (Acquired 9/19/03,
Cost $448)(7) 450
- --------------------------------------------------------------------------------
832 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%, 2/15/12 849
- --------------------------------------------------------------------------------
358 First Franklin Non-Improvement
Trust, Series 2004 FF1, Class N1,
4.50%, 9/25/05 358
- --------------------------------------------------------------------------------
1,000 Ford Credit Auto Owner Trust,
Series 2002 A, Class B, 4.79%,
11/15/06 1,031
- --------------------------------------------------------------------------------
724 Household Mortgage Loan Trust,
Series 2002 HC1, Class M, VRN,
1.75%, 5/20/04, resets monthly
off the 1-month LIBOR plus 0.65%
with no caps 725
- --------------------------------------------------------------------------------
827 Household Mortgage Loan Trust,
Series 2003 HC2, Class M, VRN,
1.70%, 5/20/04, resets monthly
off the 1-month LIBOR plus 0.60%
with no caps 830
- --------------------------------------------------------------------------------
1,200 Long Beach Mortgage Loan Trust,
Series 2001-2, Class M2, VRN,
2.05%, 5/25/04, resets monthly
off the 1-month LIBOR plus 0.95%
with no caps 1,196
- --------------------------------------------------------------------------------
167 Merrill Lynch Mortgage Investors
Inc., Series 2003 OP1N, Class N1,
7.25%, 7/25/34 169
- --------------------------------------------------------------------------------
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
$ 111 Morgan Stanley ABS Capital I,
Series 2003 NC9N, Class X and P,
7.60%, 7/25/33 (Acquired
10/29/03, Cost $111)(7) $ 112
- --------------------------------------------------------------------------------
225 Morgan Stanley ABS Capital I,
Series 2004 NC2N, Class NOTE SC,
6.25%, 12/25/33 (Acquired
3/16/04, Cost $226)(7) 226
- --------------------------------------------------------------------------------
1,750 Residential Asset Mortgage
Products Inc., Series 2003 RZ4,
Class A4 SEQ, 4.04%, 12/25/30 1,739
- --------------------------------------------------------------------------------
300 Residential Asset Securities Corp.,
Series 2004 KS2, Class MI1,
4.71%, 3/25/34 290
- --------------------------------------------------------------------------------
1,240 Saxon Asset Securities Trust,
Series 2003-3, Class AF3, 3.60%,
12/25/33 1,246
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $11,786) 11,860
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS(4) -- 0.9%
17,642 Banc of America Commercial
Mortgage Inc. STRIPS -- COUPON,
Series 2004-1, Class XP, VRN,
0.83%, 5/1/04 616
- --------------------------------------------------------------------------------
743 FHLMC REMIC, Series 77, Class H,
8.50%, 9/15/20 764
- --------------------------------------------------------------------------------
1,405 FNMA, Series 2002-87, Class AM
SEQ, 5.50%, 6/25/31 1,442
- --------------------------------------------------------------------------------
1,513 GMAC Commercial Mortgage
Securities Inc., Series 2002 C2,
Class A1 SEQ, 4.32%, 10/15/38 1,553
- --------------------------------------------------------------------------------
1,556 MASTR Alternative Loans Trust,
Series 2003-8, Class 4A1, 7.00%,
12/25/33 1,601
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $5,972) 5,976
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 0.5%
1,400 Illinois GO, (Taxable Pension),
5.10%, 6/1/33 1,265
- --------------------------------------------------------------------------------
2,000 New Jersey Turnpike Auth. Rev.,
Series 2003 B, 4.25%, 1/1/16
(AMBAC) 1,872
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL SECURITIES
(Cost $3,419) 3,137
- --------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS &
AGENCIES -- 0.3%
2,200 Province of Ontario, 3.50%,
9/17/07(1)
(Cost $2,191) 2,211
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
10
Balanced - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Principal Amount ($ IN THOUSANDS) Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 6.6%
Repurchase Agreement, Credit Suisse First Boston
Corp., (U.S. Treasury obligations), in a joint trading
account at 0.89%, dated 4/30/04, due 5/3/04
(Delivery value $11,901) $ 11,900
- --------------------------------------------------------------------------------
Repurchase Agreement, Merrill Lynch & Co., Inc.,
(U.S. Treasury obligations), in a joint trading
account at 0.89%, dated 4/30/04, due 5/3/04
(Delivery value $30,402)(6) 30,400
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $42,300) 42,300
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0%
(Cost $580,702) $639,677
================================================================================
COLLATERAL RECEIVED FOR
SECURITIES LENDING(9)
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
Repurchase Agreement, Deutsche Bank AG, (U.S.
Treasury obligations), 1.043%, dated 4/30/04,
due 5/3/04 (Delivery value $2,028) $ 2,028
- --------------------------------------------------------------------------------
SHORT-TERM DEBT
- --------------------------------------------------------------------------------
$14,100 Bear Stearns Companies, Inc.
Master Note, VRN, 1.24%, 5/3/04 14,100
- --------------------------------------------------------------------------------
8,000 John Hancock Global Funding II,
VRN, 1.37%, 5/3/04, resets daily
off the Federal Funds Rate
plus
0.34% 8,019
- --------------------------------------------------------------------------------
3,000 RACERS(SM), Series 2000-7,
Class A3, VRN, 1.30%, 5/17/04,
resets monthly off the 1-month
LIBOR plus 0.20% with no caps
(Acquired 4/15/04, Cost $3,000)(7) 3,000
- --------------------------------------------------------------------------------
25,119
- --------------------------------------------------------------------------------
TOTAL COLLATERAL RECEIVED FOR
SECURITIES LENDING
(Cost $27,147) $27,147
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
AMBAC = AMBAC Assurance Corporation
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GMAC = General Motors Acceptance Corporation
GNMA = Government National Mortgage Association
GO = General Obligation
LIBOR = London Interbank Offered Rate
MASTR = Mortgage Asset Securitization Transactions, Inc.
RACERS(SM) = Restructured Asset Certificates with Enhanced Returns
REMIC = Real Estate Mortgage Investment Conduit
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.
STRIPS = Separate Trading of Registered Interest and Principal of Securities
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, unless otherwise
noted. Rate shown is effective April 30, 2004.
(1) Security, or a portion thereof, was on loan as of April 30, 2004.
(2) Non-income producing.
(3) Industry is less than 0.05% of total investment securities.
(4) Final maturity indicated, unless otherwise noted.
(5) Forward commitment.
(6) Security, or a portion thereof, has been segregated for forward commitments.
(7) 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, 2004, was $18,618
(In Thousands), which represented 3.1% of net assets.
(8) Security is an exchange-traded bond fund. Quantity indicated reflects
the number of shares owned.
(9) Investments represent purchases made by the lending agent with cash
collateral received through securities lending transactions. (See Note 5 in
Notes to Financial Statements.)
See Notes to Financial Statements.
- ------
11
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER-SHARE AMOUNTS)
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of $580,702) --
including $26,510 of securities loaned $639,677
- --------------------------------------------------------------
Investments made with cash collateral received for
securities on loan, at value (cost of $27,147) 27,147
- --------------------------------------------------------------------------------
Total investment securities, at value (cost of $607,849) 666,824
- --------------------------------------------------------------
Receivable for investments sold 3,853
- --------------------------------------------------------------
Receivable for capital shares sold 49
- --------------------------------------------------------------
Dividends and interest receivable 2,406
- --------------------------------------------------------------------------------
673,132
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for collateral received on securities loaned 27,147
- --------------------------------------------------------------
Disbursements in excess of demand deposit cash 312
- --------------------------------------------------------------
Payable for investments purchased 37,885
- --------------------------------------------------------------
Accrued management fees 453
- --------------------------------------------------------------
Distribution fees payable 4
- --------------------------------------------------------------
Service fees payable 4
- --------------------------------------------------------------------------------
65,805
- --------------------------------------------------------------------------------
NET ASSETS $607,327
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $583,023
- --------------------------------------------------------------
Undistributed net investment income 997
- --------------------------------------------------------------
Accumulated net realized loss on investment transactions (35,668)
- --------------------------------------------------------------
Net unrealized appreciation on investments 58,975
- --------------------------------------------------------------------------------
$607,327
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $590,125,105
- --------------------------------------------------------------
Shares outstanding 38,502,439
- --------------------------------------------------------------
Net asset value per share $15.33
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $191,343
- --------------------------------------------------------------
Shares outstanding 12,483
- --------------------------------------------------------------
Net asset value per share $15.33
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL)
- --------------------------------------------------------------------------------
Net assets $17,010,554
- --------------------------------------------------------------
Shares outstanding 1,110,403
- --------------------------------------------------------------
Net asset value per share $15.32
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
12
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------------------
Interest $ 4,458
- --------------------------------------------------------------
Dividends 3,068
- --------------------------------------------------------------
Securities lending 77
- --------------------------------------------------------------------------------
7,603
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------
Management fees 2,721
- --------------------------------------------------------------
Distribution fees - Advisor Class 22
- --------------------------------------------------------------
Service fees - Advisor Class 22
- --------------------------------------------------------------
Directors' fees and expenses 4
- --------------------------------------------------------------
Other expenses 3
- --------------------------------------------------------------------------------
2,772
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,831
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions 32,681
- --------------------------------------------------------------
Change in net unrealized
appreciation on investments (9,860)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 22,821
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $27,652
================================================================================
See Notes to Financial Statements.
- ------
13
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 4,831 $ 11,213
- ---------------------------------------------------
Net realized gain 32,681 2,451
- ---------------------------------------------------
Change in net unrealized appreciation (9,860) 71,549
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 27,652 85,213
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------------
Investor Class (5,338) (10,188)
- ---------------------------------------------------
Institutional Class (2) (263)
- ---------------------------------------------------
Advisor Class (131) (241)
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (5,471) (10,692)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital share transactions (15,261) (45,550)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 6,920 28,971
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 600,407 571,436
- --------------------------------------------------------------------------------
End of period $607,327 $600,407
================================================================================
Undistributed net investment income $997 $1,637
================================================================================
See Notes to Financial Statements.
- ------
14
Notes to Financial Statements
APRIL 30, 2004 (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 long-term capital growth and current
income by investing approximately 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
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.
SECURITIES ON LOAN -- The fund may lend portfolio securities through its lending
agent to certain approved borrowers in order to earn additional income. The fund
continues to recognize any gain or loss in the market price of the securities
loaned and records any interest earned or dividends declared.
FUTURES CONTRACTS -- The fund may enter into 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.
TRACERS(SM)/TRAINS(SM) -- The fund may invest in these products which represent
ownership of a specified percentage of each security in an underlying pool of
securities. Owners are entitled to receive a pro rata share of distributions
from the underlying securities. In the event an underlying security is
downgraded by a rating agency, that portion of the investment product will be
redeemed and the underlying security will be distributed to the owner pro rata
or the owner may receive cash proceeds. The risk of owning these products are
the same as owning the individual securities, but enable the fund to be more
diversified by owning a single security.
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
(continued)
- ------
15
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
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 substantially 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 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%
- --------------------------------------------------------------------------------
The effective annual management fee for the six months ended April 30, 2004 was
0.90%, 0.70%, and 0.65%, for the Investor, Institutional and Advisor Classes,
respectively.
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
(continued)
- ------
16
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
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, 2004, 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, 2004, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 and securities lending agreement with JPMorgan Chase Bank
(JPMCB). JPMCB is a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments, for the
six months ended April 30, 2004, totaled $651,066, of which $416,332 represented
U.S. Treasury and Agency obligations. Sales of investment securities, excluding
short-term investments, for the six months ended April 30, 2004, totaled
$667,277, of which $392,790 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, 2004
SHARES AUTHORIZED 150,000
================================================================================
Sold 2,406 $ 37,140
- ------------------------------------------------------
Issued in reinvestment of distributions 336 5,163
- ------------------------------------------------------
Redeemed (3,686) (56,491)
- --------------------------------------------------------------------------------
Net decrease (944) $(14,188)
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 150,000
================================================================================
Sold 4,621 $ 63,845
- ------------------------------------------------------
Issued in reinvestment of distributions 721 9,881
- ------------------------------------------------------
Redeemed (7,585) (103,228)
- --------------------------------------------------------------------------------
Net decrease (2,243) $ (29,502)
================================================================================
(continued)
- ------
17
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
- --------------------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 15,000
================================================================================
Sold 3 $38
- ------------------------------------------------------
Issued in reinvestment of distributions -- 2
- ------------------------------------------------------
Redeemed (1) (9)
- --------------------------------------------------------------------------------
Net increase 2 $31
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 15,000
================================================================================
Sold 90 $ 1,192
- ------------------------------------------------------
Issued in reinvestment of distributions 19 263
- ------------------------------------------------------
Redeemed (1,350) (19,069)
- --------------------------------------------------------------------------------
Net decrease (1,241) $(17,614)
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 50,000
================================================================================
Sold 230 $ 3,560
- ------------------------------------------------------
Issued in reinvestment of distributions 8 118
- ------------------------------------------------------
Redeemed (312) (4,782)
- --------------------------------------------------------------------------------
Net decrease (74) $(1,104)
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 50,000
================================================================================
Sold 420 $ 5,827
- ------------------------------------------------------
Issued in reinvestment of distributions 16 214
- ------------------------------------------------------
Redeemed (330) (4,475)
- --------------------------------------------------------------------------------
Net increase 106 $ 1,566
================================================================================
5. SECURITIES LENDING
As of April 30, 2004, securities in the fund valued at $26,510 were on loan
through the lending agent, JPMCB, to certain approved borrowers. JPMCB receives
and maintains collateral in the form of cash, and/or acceptable securities as
approved by ACIM. Cash collateral is invested in authorized investments by the
lending agent in a pooled account. 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. Any deficiencies or excess of collateral must be delivered or
transferred by the member firms no later than the close of business on the next
business day. The total value of all collateral received, at this date, was
$27,147. 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.
(continued)
- ------
18
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED) (AMOUNTS IN THOUSANDS)
6. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $650 million
unsecured bank line of credit agreement with JPMCB, which was renewed from $620
million effective December 17, 2003. 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, 2004.
7. 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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $615,147
================================================================================
Gross tax appreciation of investments $61,140
- --------------------------------------------------------------------
Gross tax depreciation of investments (9,463)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $51,677
================================================================================
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2003, the fund had accumulated capital losses of $61,051,
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 2011.
- ------
19
Balanced - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------
INVESTOR CLASS
- -------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $14.77 $12.98 $14.28 $17.01 $18.95 $19.39
- -------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income(2) 0.12 0.27 0.35 0.38 0.42 0.46
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.58 1.77 (1.30) (2.10) 0.61 1.69
- -------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.70 2.04 (0.95) (1.72) 1.03 2.15
- -------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.14) (0.25) (0.35) (0.40) (0.43) (0.47)
- --------------------------
From Net Realized Gains -- -- -- (0.61) (2.54) (2.12)
- -------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.25) (0.35) (1.01) (2.97) (2.59)
- -------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $15.33 $14.77 $12.98 $14.28 $17.01 $18.95
=================================================================================================
TOTAL RETURN(3) 4.73% 15.92% (6.80)% (10.46)% 5.90% 12.03%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.90%(4) 0.90% 0.90% 0.90% 0.97% 1.00%
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.60%(4) 1.96% 2.46% 2.46% 2.40% 2.44%
- --------------------------
Portfolio Turnover Rate 109% 133% 108% 107% 85% 128%
- --------------------------
Net Assets, End of Period
(in millions) $590 $583 $541 $663 $835 $914
- -------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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
Balanced - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000(2)
- -------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $14.78 $12.99 $14.28 $17.01 $17.34
- -------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income(3) 0.14 0.41 0.37 0.41 0.23
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.56 1.66 (1.29) (2.10) (0.34)
- -------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.70 2.07 (0.92) (1.69) (0.11)
- -------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.15) (0.28) (0.37) (0.43) (0.22)
- --------------------------
From Net
Realized Gains -- -- -- (0.61) --
- -------------------------------------------------------------------------------------------------
Total Distributions (0.15) (0.28) (0.37) (1.04) (0.22)
- -------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $15.33 $14.78 $12.99 $14.28 $17.01
=================================================================================================
TOTAL RETURN(4) 4.77% 16.13% (6.54)% (10.27)% (0.63)%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 0.70%(5) 0.70% 0.70% 0.70% 0.75%(5)
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.80%(5) 2.16% 2.66% 2.66% 2.66%(5)
- --------------------------
Portfolio Turnover Rate 109% 133% 108% 107% 85%(6)
- --------------------------
Net Assets, End of Period
(in thousands) $191 $155 $16,245 $20,474 $23,214
- -------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
21
Balanced - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- -------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------
PER-SHARE DATA
- -------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $14.77 $12.97 $14.27 $17.00 $18.94 $19.38
- -------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------
Net Investment Income(2) 0.10 0.22 0.31 0.34 0.37 0.41
- --------------------------
Net Realized and
Unrealized Gain (Loss) 0.57 1.80 (1.30) (2.10) 0.62 1.69
- -------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.67 2.02 (0.99) (1.76) 0.99 2.10
- -------------------------------------------------------------------------------------------------
Distributions
- --------------------------
From Net
Investment Income (0.12) (0.22) (0.31) (0.36) (0.39) (0.42)
- --------------------------
From Net
Realized Gains -- -- -- (0.61) (2.54) (2.12)
- -------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.22) (0.31) (0.97) (2.93) (2.54)
- -------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $15.32 $14.77 $12.97 $14.27 $17.00 $18.94
=================================================================================================
TOTAL RETURN(3) 4.52% 15.74% (7.04)% (10.69)% 5.63% 11.74%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.15%(4) 1.15% 1.15% 1.15% 1.22% 1.25%
- --------------------------
Ratio of Net Investment
Income to Average
Net Assets 1.35%(4) 1.71% 2.21% 2.21% 2.15% 2.19%
- --------------------------
Portfolio Turnover Rate 109% 133% 108% 107% 85% 128%
- --------------------------
Net Assets, End of Period
(in thousands) $17,011 $17,482 $13,985 $16,990 $17,046 $10,946
- -------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
22
Share Class Information
Three classes of shares are authorized for sale by Balanced: Investor Class,
Institutional Class, and Advisor Class. The total expense ratio of Institutional
Class shares is lower than that of Investor Class shares. The total expense
ratio of Advisor Class shares is higher than that 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 investment
advisors, 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.
- ------
23
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
24
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or 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 Index, 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 taxable,
registered with the Securities and Exchange Commission, 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.
- ------
25
Notes
- ------
26
Notes
- ------
27
Notes
- ------
28
[inside back cover - blank]
[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR RELATIONS:
1-800-345-2021 or 816-531-5575
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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.
The American Century logo, American Century and American Century Investments are
service marks of American Century Services Corporation.
0406 American Century Investment Services, Inc.
SH-SAN-38386N (c)2004 American Century Services Corporation
APRIL 30, 2004
American Century Investments
Semiannual Report
[graphic of market line chart]
[graphic of starfish]
[graphic of two steel bridges]
Veedot(reg.sm) Fund
[american century logo and text logo]
Table of Contents
Our Message to You....................................................... 1
VEEDOT
Performance.............................................................. 2
Portfolio Commentary..................................................... 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...................................... 11
Statement of Operations.................................................. 12
Statement of Changes in Net Assets....................................... 13
Notes to Financial Statements............................................ 14
Financial Highlights..................................................... 19
OTHER INFORMATION
Share Class Information.................................................. 21
Additional Information................................................... 22
Index Definition......................................................... 23
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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 Veedot fund for
the six months ended April 30, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for this fund will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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, 2004
----------------
AVERAGE ANNUAL
RETURNS
- --------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR INCEPTION DATE
- --------------------------------------------------------------------------------
INVESTOR CLASS 11/30/99
Before redemption fee 32.28% 0.00%
Net of redemption fee(1) 29.63% -0.46%
- --------------------------------------------------------------------------------
WILSHIRE 5000 TOTAL MARKET INDEX 26.08% -2.53% --
- --------------------------------------------------------------------------------
Institutional Class 8/1/00
Before redemption fee 32.63% -5.05%
Net of redemption fee(1) 29.98% -5.56%
- --------------------------------------------------------------------------------
(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 CLASS
$10,000 investment made November 30, 1999
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended April 30
- --------------------------------------------------------------------------------
2000* 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Investor Class 35.20% -26.18% -4.21% -20.92% 32.28%
- --------------------------------------------------------------------------------
Wilshire 5000 Total Market Index 5.88% -14.10% -9.88% -13.58% 26.08%
- --------------------------------------------------------------------------------
* 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 - Portfolio Commentary
[photo of Jim Stowers III and John Small, Jr.]
A PORTFOLIO COMMENTARY FROM JIM STOWERS III AND JOHN SMALL, JR., PORTFOLIO
MANAGERS ON THE VEEDOT INVESTMENT TEAM.
During the six months that ended April 30, 2004, Veedot rose 0.20%*, trailing
its benchmark, the Wilshire 5000 Total Market Index, which gained 6.38%.
OPTIMISM FADED IN MARCH AND APRIL
Last year's optimism--exemplified by the third quarter, which produced the
biggest quarterly advances in gross domestic product and corporate earnings in
almost two decades--helped spur the market in late 2003 and the early part of
this year. The Wilshire 5000 Total Market Index reached a 30-month high on
February 11. Exactly one month later, however, terrorist attacks on a Madrid
train station shook confidence in many worldwide markets. Many of the gains made
by stocks from November to February were reduced in March and April, according
to the indices tracked by the Frank Russell Company.
Still, despite losses in the last two months, all the major Russell indices
advanced, regardless of investment style or market capitalization. Based on a
comparison of indices, small cap stocks generally advanced at a slightly faster
rate than larger companies. And despite some declines late in the period, all
but two of the sector stakes within Veedot contributed positively to
performance.
HEALTH CARE LED CONTRIBUTORS
Health care companies lifted performance the most. Five of the portfolio's top
ten contributors came from this sector, including Urologix, a manufacturer of
products used to treat urological disorders, which reported its first quarterly
profit ever, and projected a profit for its fiscal year. Health care providers
also helped, including Amedisys, which jumped after the company acquired 11
agencies and hospices from Tenet Healthcare. Drug companies were led by First
Horizon Pharmaceutical Co., a marketer of prescription products for cardiology
and women's health, which raised its earnings guidance in two consecutive
quarters.
TOP TEN HOLDINGS AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
California Micro
Devices Corporation 0.9% 0.9%
- --------------------------------------------------------------------------------
Autodesk, Inc. 0.8% 0.4%
- --------------------------------------------------------------------------------
Urologix Inc. 0.8% 0.3%
- --------------------------------------------------------------------------------
First Horizon
Pharmaceutical
Corporation 0.7% 0.3%
- --------------------------------------------------------------------------------
Ventiv Health Inc. 0.7% 0.3%
- --------------------------------------------------------------------------------
Stanley Works (The) 0.6% 0.4%
- --------------------------------------------------------------------------------
Lone Star
Technologies, Inc. 0.6% --
- --------------------------------------------------------------------------------
Comstock
Resources Inc. 0.5% 0.2%
- --------------------------------------------------------------------------------
Korn/Ferry International 0.5% --
- --------------------------------------------------------------------------------
Viewpoint Corp. 0.5% --
- --------------------------------------------------------------------------------
*All fund returns referenced in this commentary
are for Investor Class shares. (continued)
- ------
3
Veedot - Portfolio Commentary
Energy stocks contributed as well. Oil prices generally rose throughout the
period, as a tightening worldwide petroleum supply pushed U.S. average gasoline
prices, unadjusted for inflation, to an all-time high. That helped make Veedot's
oil and gas companies the portfolio's largest contributing industry group. Among
its top performers was Range Resources, which operates oil and gas fields in the
southern and eastern United States.
Companies that produce industrial materials also helped portfolio performance.
This sector was led by chemical and paper makers. Some steelmakers rose, too,
after proposed U.S. tariffs on imported steel were scrapped, averting a trade
war that could have hurt American exporters' opportunities in Europe and Asia.
The fund's industrial holdings rose, led by machinery makers. But progress was
restrained by declining airlines, construction companies and electrical
equipment makers. The portfolio's biggest detractor was MasTec, a provider of
construction services for telecommunications firms that slumped after it delayed
its annual report to securities regulators.
IT, TELECOM STOCKS DETRACTED
Unfortunately, Veedot's biggest sector stake, information technology, detracted
the most from performance. The holdings, which represented on average about 28%
for the portfolio, suffered as the growth of investment in computers and
peripheral equipment slowed from 2003 levels. Almost every industry group in
this area lost ground. Several semiconductor firms suffered, including August
Technology, which provides measurement technology for microchip manufacturers.
Internet software companies were led downward by Tumbleweed Communications,
which reported disappointing earnings and the resignation of a top executive.
One of the few bright spots in this area was Research in Motion, the portfolio's
top contributor. Its shares rose after Sony Ericsson and Samsung Electronic both
agreed to offer the Canadian company's BlackBerry wireless email service.
Another stake that detracted was telecommunications, as several wireless and
diversified firms declined during the period.
SEARCH FOR ACCELERATION
Using its systematic investment process, Veedot continues to focus on finding
businesses whose fundamentals meet strict requirements for accelerating growth
and whose stock price histories point to the likelihood of future increases.
TOP FIVE INDUSTRIES AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Semiconductors
& Semiconductor
Equipment 7.9% 8.3%
- --------------------------------------------------------------------------------
Electronic Equipment
& Instruments 6.6% 4.8%
- --------------------------------------------------------------------------------
Specialty Retail 6.1% 3.7%
- --------------------------------------------------------------------------------
Commercial Services
& Supplies 4.6% 3.2%
- --------------------------------------------------------------------------------
Software 4.1% 8.1%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 95.5% 98.7%
- --------------------------------------------------------------------------------
Temporary
Cash Investments 4.5% 1.3%
- --------------------------------------------------------------------------------
- ------
4
Veedot - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 95.5%
AEROSPACE & DEFENSE -- 0.9%
- --------------------------------------------------------------------------------
40,000 AAR Corporation(1) $ 406,000
- --------------------------------------------------------------------------------
15,000 Cubic Corp. 354,000
- --------------------------------------------------------------------------------
25,000 Honeywell International Inc. 864,500
- --------------------------------------------------------------------------------
6,000 United Technologies Corp. 517,560
- --------------------------------------------------------------------------------
2,142,060
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS -- 1.0%
- --------------------------------------------------------------------------------
7,000 FedEx Corporation 503,370
- --------------------------------------------------------------------------------
25,000 J.B. Hunt Transport
Services, Inc.(1) 791,500
- --------------------------------------------------------------------------------
25,000 TPG NV ORD 538,958
- --------------------------------------------------------------------------------
7,500 United Parcel Service, Inc. Cl B 526,125
- --------------------------------------------------------------------------------
2,359,953
- --------------------------------------------------------------------------------
AIRLINES -- 0.3%
- --------------------------------------------------------------------------------
35,000 SkyWest, Inc. 637,000
- --------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.5%
- --------------------------------------------------------------------------------
20,000 Drew Industries Inc.(1) 744,000
- --------------------------------------------------------------------------------
20,000 Keystone Automotive
Industries, Inc.(1) 518,000
- --------------------------------------------------------------------------------
1,262,000
- --------------------------------------------------------------------------------
AUTOMOBILES -- 0.8%
- --------------------------------------------------------------------------------
35,000 Ford Motor Company 537,600
- --------------------------------------------------------------------------------
25,000 Monaco Coach Corp. 651,750
- --------------------------------------------------------------------------------
12,500 Thor Industries Inc. 348,250
- --------------------------------------------------------------------------------
15,000 Winnebago Industries 432,450
- --------------------------------------------------------------------------------
1,970,050
- --------------------------------------------------------------------------------
BEVERAGES -- 0.2%
- --------------------------------------------------------------------------------
11,500 Ito En Ltd. ORD 490,536
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 2.2%
- --------------------------------------------------------------------------------
260,000 Avant Immunotherapeutics Inc.(1) 725,400
- --------------------------------------------------------------------------------
55,000 Alkermes Inc.(1) 843,150
- --------------------------------------------------------------------------------
96,000 BioCryst Pharmaceuticals Inc.(1) 835,104
- --------------------------------------------------------------------------------
10,000 Gilead Sciences, Inc.(1) 608,300
- --------------------------------------------------------------------------------
7,500 IDEXX Laboratories, Inc.(1) 459,450
- --------------------------------------------------------------------------------
120,000 Luminex Corporation(1) 1,146,000
- --------------------------------------------------------------------------------
125,000 Titan Pharmaceuticals Inc.(1) 546,250
- --------------------------------------------------------------------------------
5,163,654
- --------------------------------------------------------------------------------
BUILDING PRODUCTS -- 1.2%
- --------------------------------------------------------------------------------
8,000 American Woodmark Corp. 513,600
- --------------------------------------------------------------------------------
30,000 Griffon Corp.(1) 658,500
- --------------------------------------------------------------------------------
25,000 Lennox International Inc. 417,750
- --------------------------------------------------------------------------------
21,000 NCI Building Systems Inc.(1) 614,670
- --------------------------------------------------------------------------------
10,000 Simpson Manufacturing
Company Inc. 521,600
- --------------------------------------------------------------------------------
2,726,120
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.9%
- --------------------------------------------------------------------------------
9,000 Affiliated Managers
Group Inc.(1) $ 438,300
- --------------------------------------------------------------------------------
12,500 Blackrock Inc. 777,500
- --------------------------------------------------------------------------------
20,000 Eaton Vance Corp. 730,200
- --------------------------------------------------------------------------------
15,000 Edwards (A.G.), Inc. 548,850
- --------------------------------------------------------------------------------
20,000 Gabelli Asset Management Inc. 804,000
- --------------------------------------------------------------------------------
5,000 Goldman Sachs
Group, Inc. (The) 482,500
- --------------------------------------------------------------------------------
15,000 Investors Financial
Services Corporation 583,050
- --------------------------------------------------------------------------------
20,000 Jefferies Group Inc. 682,000
- --------------------------------------------------------------------------------
3,500 Legg Mason, Inc. 322,210
- --------------------------------------------------------------------------------
6,000 Lehman Brothers Holdings Inc. 440,400
- --------------------------------------------------------------------------------
17,500 T. Rowe Price Group Inc. 897,400
- --------------------------------------------------------------------------------
6,706,410
- --------------------------------------------------------------------------------
CHEMICALS -- 1.3%
- --------------------------------------------------------------------------------
30,000 Georgia Gulf Corporation 955,800
- --------------------------------------------------------------------------------
15,000 Lubrizol Corp. 477,000
- --------------------------------------------------------------------------------
18,000 Praxair, Inc. 657,900
- --------------------------------------------------------------------------------
175,000 Terra Industries Inc.(1) 906,500
- --------------------------------------------------------------------------------
2,997,200
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 2.1%
- --------------------------------------------------------------------------------
25,000 Center Financial Corp. 362,500
- --------------------------------------------------------------------------------
7,500 Cathay General Bancorp 488,250
- --------------------------------------------------------------------------------
15,000 Cullen/Frost Bankers, Inc. 649,500
- --------------------------------------------------------------------------------
9,000 East West BanCorp, Inc. 506,970
- --------------------------------------------------------------------------------
35,000 First Commonwealth
Financial Corp. 493,850
- --------------------------------------------------------------------------------
6,000 First Financial Bankshares Inc. 247,020
- --------------------------------------------------------------------------------
14,000 Mercantile Bank Corp. 503,300
- --------------------------------------------------------------------------------
12,500 North Fork Bancorporation, Inc. 464,000
- --------------------------------------------------------------------------------
10,000 SunTrust Banks, Inc. 680,500
- --------------------------------------------------------------------------------
10,000 UnionBanCal Corporation 534,300
- --------------------------------------------------------------------------------
4,930,190
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES
& SUPPLIES -- 4.6%
- --------------------------------------------------------------------------------
15,000 Banta Corp. 667,200
- --------------------------------------------------------------------------------
32,500 Brink's Company (The) 901,225
- --------------------------------------------------------------------------------
20,000 Consolidated Graphics Inc.(1) 746,400
- --------------------------------------------------------------------------------
35,000 Copart Inc.(1) 663,600
- --------------------------------------------------------------------------------
10,000 Corporate Executive
Board Co. (The) 516,500
- --------------------------------------------------------------------------------
25,000 Hudson Highland Group Inc.(1) 764,750
- --------------------------------------------------------------------------------
80,000 Korn/Ferry International(1) 1,198,400
- --------------------------------------------------------------------------------
80,000 Labor Ready Inc.(1) 1,011,200
- --------------------------------------------------------------------------------
20,000 New England Business
Service, Inc. 694,200
- --------------------------------------------------------------------------------
10,000 R. R. Donnelley
& Sons Company 294,200
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
5
Veedot - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
20,000 Resources Connection, Inc.(1) $ 806,200
- --------------------------------------------------------------------------------
65,000 Sotheby's Holdings Cl A(1) 844,350
- --------------------------------------------------------------------------------
25,000 Sourcecorp, Inc.(1) 642,250
- --------------------------------------------------------------------------------
100,000 Spherion Corp.(1) 985,000
- --------------------------------------------------------------------------------
10,735,475
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.6%
- --------------------------------------------------------------------------------
15,000 Avocent Corp.(1) 481,350
- --------------------------------------------------------------------------------
55,000 Cable Design
Technologies Corp.(1) 469,150
- --------------------------------------------------------------------------------
50,000 Carrier Access Corporation(1) 532,000
- --------------------------------------------------------------------------------
45,000 Cisco Systems Inc.(1) 939,150
- --------------------------------------------------------------------------------
38,400 Digi International Inc.(1) 373,248
- --------------------------------------------------------------------------------
30,000 Ditech Communications Corp.(1) 431,400
- --------------------------------------------------------------------------------
400,000 Eagle Broadband Inc.(1) 340,000
- --------------------------------------------------------------------------------
15,000 F5 Networks, Inc.(1) 381,000
- --------------------------------------------------------------------------------
85,000 Globecomm Systems Inc.(1) 501,500
- --------------------------------------------------------------------------------
47,500 Motorola, Inc. 866,875
- --------------------------------------------------------------------------------
70,000 NMS Communications Corp.(1) 542,500
- --------------------------------------------------------------------------------
12,500 Plantronics, Inc.(1) 474,375
- --------------------------------------------------------------------------------
12,500 QUALCOMM Inc. 780,750
- --------------------------------------------------------------------------------
7,000 Research In Motion Ltd.(1) 607,320
- --------------------------------------------------------------------------------
33,900 Tekelec(1) 565,113
- --------------------------------------------------------------------------------
8,285,731
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.2%
- --------------------------------------------------------------------------------
15,000 Avid Technology, Inc.(1) 719,550
- --------------------------------------------------------------------------------
75,000 Fujitsu Ltd. ORD 520,965
- --------------------------------------------------------------------------------
50,000 Gemplus International SA ADR(1) 226,550
- --------------------------------------------------------------------------------
50,000 InFocus Corporation(1) 408,500
- --------------------------------------------------------------------------------
30,000 PalmOne Inc.(1) 489,600
- --------------------------------------------------------------------------------
30,000 SBS Technologies Inc.(1) 447,000
- --------------------------------------------------------------------------------
2,812,165
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING -- 0.3%
- --------------------------------------------------------------------------------
25,000 Dycom Industries Inc.(1) 589,500
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.5%
- --------------------------------------------------------------------------------
15,000 Florida Rock Industries Inc. 596,850
- --------------------------------------------------------------------------------
15,000 Martin Marietta Materials, Inc. 648,750
- --------------------------------------------------------------------------------
1,245,600
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.2%
- --------------------------------------------------------------------------------
10,000 American Express Co. 489,500
- --------------------------------------------------------------------------------
DISTRIBUTORS -- 0.5%
- --------------------------------------------------------------------------------
25,000 Handleman Co. 562,750
- --------------------------------------------------------------------------------
35,000 WESCO International Inc.(1) 500,500
- --------------------------------------------------------------------------------
1,063,250
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.4%
- --------------------------------------------------------------------------------
50,000 Allegheny Energy, Inc.(1) 689,000
- --------------------------------------------------------------------------------
20,000 XCEL Energy Inc. 334,600
- --------------------------------------------------------------------------------
1,023,600
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.1%
- --------------------------------------------------------------------------------
17,500 Ametek Inc. $ 463,750
- --------------------------------------------------------------------------------
80,000 Artesyn Technologies Inc.(1) 736,800
- --------------------------------------------------------------------------------
14,000 Cooper Industries, Ltd. 768,740
- --------------------------------------------------------------------------------
7,500 Encore Wire Corp.(1) 205,050
- --------------------------------------------------------------------------------
40,000 Intelligent Digital Integrated
Security ORD 466,979
- --------------------------------------------------------------------------------
20,000 Intermagnetics General
Corporation(1) 490,400
- --------------------------------------------------------------------------------
50,000 RF Monolithics Inc.(1) 463,500
- --------------------------------------------------------------------------------
35,000 Vicor Corp.(1) 486,500
- --------------------------------------------------------------------------------
13,000 Woodward Governor Co. 810,420
- --------------------------------------------------------------------------------
4,892,139
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS -- 6.6%
- --------------------------------------------------------------------------------
40,000 Acacia Research-Acacia
Technologies(1) 259,600
- --------------------------------------------------------------------------------
80,000 Aeroflex Inc.(1) 1,006,400
- --------------------------------------------------------------------------------
50,000 Agilysys Inc. 586,500
- --------------------------------------------------------------------------------
30,000 Amphenol Corp. Cl A(1) 948,300
- --------------------------------------------------------------------------------
17,000 Anixter International Inc. 498,100
- --------------------------------------------------------------------------------
35,000 California Amplifier Inc.(1) 281,750
- --------------------------------------------------------------------------------
7,500 CDW Corp. 468,675
- --------------------------------------------------------------------------------
15,000 Cognex Corp. 476,700
- --------------------------------------------------------------------------------
10,000 Dionex Corp.(1) 510,300
- --------------------------------------------------------------------------------
20,000 Electro Scientific
Industries Inc.(1) 408,800
- --------------------------------------------------------------------------------
15,000 Excel Technology Inc.(1) 507,600
- --------------------------------------------------------------------------------
10,000 Flir Systems Inc.(1) 469,100
- --------------------------------------------------------------------------------
15,000 Keithley Instruments Inc. 312,750
- --------------------------------------------------------------------------------
25,000 Littelfuse, Inc.(1) 960,000
- --------------------------------------------------------------------------------
25,000 Molex Inc. 744,500
- --------------------------------------------------------------------------------
20,250 National Instruments Corp. 618,840
- --------------------------------------------------------------------------------
15,000 Rogers Corp.(1) 895,500
- --------------------------------------------------------------------------------
200,000 Satcon Technology Corp.(1) 538,000
- --------------------------------------------------------------------------------
12,000 Scansource Inc.(1) 662,760
- --------------------------------------------------------------------------------
55,000 Sirenza Microdevices Inc.(1) 229,900
- --------------------------------------------------------------------------------
35,000 Sypris Solutions Inc. 670,600
- --------------------------------------------------------------------------------
20,000 Taser International Inc.(1) 646,800
- --------------------------------------------------------------------------------
12,500 Tech Data Corp.(1) 425,000
- --------------------------------------------------------------------------------
35,000 Technitrol Inc.(1) 744,450
- --------------------------------------------------------------------------------
20,000 Tektronix, Inc. 592,000
- --------------------------------------------------------------------------------
10,000 Trimble Navigation Ltd.(1) 250,500
- --------------------------------------------------------------------------------
35,000 Viisage Technology Inc.(1) 291,200
- --------------------------------------------------------------------------------
24,000 Vishay Intertechnology, Inc.(1) 417,600
- --------------------------------------------------------------------------------
15,422,225
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 3.3%
- --------------------------------------------------------------------------------
15,000 Baker Hughes Inc. 550,200
- --------------------------------------------------------------------------------
17,500 BJ Services Co.(1) 778,750
- --------------------------------------------------------------------------------
60,000 Grant Prideco, Inc.(1) 915,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
6
Veedot - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
65,000 Lone Star Technologies, Inc.(1) $ 1,332,500
- --------------------------------------------------------------------------------
25,000 Nabors Industries Ltd.(1) 1,109,000
- --------------------------------------------------------------------------------
22,500 Patterson-UTI Energy Inc.(1) 814,275
- --------------------------------------------------------------------------------
20,000 Smith International, Inc.(1) 1,095,000
- --------------------------------------------------------------------------------
29,000 W-H Energy Services Inc.(1) 533,020
- --------------------------------------------------------------------------------
15,000 Weatherford International Ltd.(1) 652,200
- --------------------------------------------------------------------------------
7,779,945
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 1.3%
- --------------------------------------------------------------------------------
15,000 CVS Corp. 579,450
- --------------------------------------------------------------------------------
30,000 Pantry Inc. (The)(1) 598,500
- --------------------------------------------------------------------------------
100,000 Rite Aid Corp.(1) 490,000
- --------------------------------------------------------------------------------
50,000 Smart & Final Inc.(1) 577,500
- --------------------------------------------------------------------------------
27,500 Supervalu Inc. 846,725
- --------------------------------------------------------------------------------
3,092,175
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.5%
- --------------------------------------------------------------------------------
17,000 Corn Products International Inc. 722,500
- --------------------------------------------------------------------------------
17,500 Dean Foods Co.(1) 587,650
- --------------------------------------------------------------------------------
25,000 Flowers Foods Inc. 612,250
- --------------------------------------------------------------------------------
20,000 Hormel Foods Corp. 609,800
- --------------------------------------------------------------------------------
16,000 Pilgrim's Pride Corp. 370,080
- --------------------------------------------------------------------------------
25,000 Sara Lee Corp. 577,000
- --------------------------------------------------------------------------------
3,479,280
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.2%
- --------------------------------------------------------------------------------
12,500 Piedmont Natural Gas Co., Inc. 506,250
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT
& SUPPLIES -- 2.7%
- --------------------------------------------------------------------------------
50,000 Abiomed Inc.(1) 571,000
- --------------------------------------------------------------------------------
7,000 Alcon, Inc. 519,750
- --------------------------------------------------------------------------------
13,000 Analogic Corporation 615,550
- --------------------------------------------------------------------------------
5,000 Bard (C.R.), Inc. 531,350
- --------------------------------------------------------------------------------
30,000 DJ Orthopedics Inc.(1) 690,900
- --------------------------------------------------------------------------------
15,000 Laserscope(1) 445,650
- --------------------------------------------------------------------------------
10,000 Millipore Corp.(1) 524,300
- --------------------------------------------------------------------------------
100,000 Rita Medical Systems Inc.(1) 640,000
- --------------------------------------------------------------------------------
150,000 Urologix Inc.(1) 1,830,000
- --------------------------------------------------------------------------------
6,368,500
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS
& SERVICES -- 2.5%
- --------------------------------------------------------------------------------
70,000 Allscripts Healthcare
Solutions Inc.(1) 658,700
- --------------------------------------------------------------------------------
30,000 Amedisys Inc.(1) 903,000
- --------------------------------------------------------------------------------
17,000 America Service Group Inc.(1) 623,900
- --------------------------------------------------------------------------------
20,000 eResearch Technology, Inc.(1) 629,600
- --------------------------------------------------------------------------------
25,000 Manor Care, Inc. 811,000
- --------------------------------------------------------------------------------
7,500 Patterson Dental Co.(1) 552,750
- --------------------------------------------------------------------------------
115,000 Ventiv Health Inc.(1) 1,618,050
- --------------------------------------------------------------------------------
5,797,000
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE -- 3.8%
- --------------------------------------------------------------------------------
17,500 Cheesecake Factory Inc.(1) $ 741,125
- --------------------------------------------------------------------------------
175,000 Denny's Corp.(1) 455,000
- --------------------------------------------------------------------------------
25,000 Lone Star Steakhouse
& Saloon, Inc. 768,750
- --------------------------------------------------------------------------------
33,500 Marcus Corp. 542,700
- --------------------------------------------------------------------------------
20,000 McDonald's Corporation 544,600
- --------------------------------------------------------------------------------
12,500 Outback Steakhouse, Inc. 549,125
- --------------------------------------------------------------------------------
18,000 Red Robin Gourmet
Burgers Inc.(1) 517,500
- --------------------------------------------------------------------------------
17,000 Ruby Tuesday Inc.(1) 508,640
- --------------------------------------------------------------------------------
30,000 Ryan's Family Steak
Houses Inc.(1) 544,200
- --------------------------------------------------------------------------------
75,000 Six Flags, Inc.(1) 557,250
- --------------------------------------------------------------------------------
15,000 Sonic Corporation(1) 484,050
- --------------------------------------------------------------------------------
15,000 Starbucks Corporation(1) 582,900
- --------------------------------------------------------------------------------
22,500 Station Casinos Inc. 1,014,300
- --------------------------------------------------------------------------------
10,000 Wynn Resorts Ltd.(1) 399,300
- --------------------------------------------------------------------------------
14,000 Yum! Brands, Inc.(1) 543,060
- --------------------------------------------------------------------------------
8,752,500
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 3.2%
- --------------------------------------------------------------------------------
12,500 Black & Decker Corporation 723,125
- --------------------------------------------------------------------------------
15,000 Blyth Inc. 487,650
- --------------------------------------------------------------------------------
15,000 Ethan Allen Interiors Inc. 623,550
- --------------------------------------------------------------------------------
30,000 Furniture Brands
International Inc. 844,200
- --------------------------------------------------------------------------------
25,000 Jarden Corp.(1) 930,000
- --------------------------------------------------------------------------------
25,000 La-Z-Boy Inc. 521,000
- --------------------------------------------------------------------------------
20,000 Leggett & Platt, Inc. 452,000
- --------------------------------------------------------------------------------
7,500 Meritage Corp.(1) 508,875
- --------------------------------------------------------------------------------
6,500 Mohawk Industries Inc.(1) 501,410
- --------------------------------------------------------------------------------
15,000 Stanley Furniture Co. Inc. 600,000
- --------------------------------------------------------------------------------
32,500 Stanley Works (The) 1,381,575
- --------------------------------------------------------------------------------
7,573,385
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
- --------------------------------------------------------------------------------
15,000 Kimberly-Clark Corp. 981,750
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.6%
- --------------------------------------------------------------------------------
1,734 Alleghany Corp.(1) 455,106
- --------------------------------------------------------------------------------
20,000 Allete Inc. 691,000
- --------------------------------------------------------------------------------
10,000 Standex International Corp. 269,000
- --------------------------------------------------------------------------------
1,415,106
- --------------------------------------------------------------------------------
INSURANCE -- 1.5%
- --------------------------------------------------------------------------------
6,000 American National Insurance 565,380
- --------------------------------------------------------------------------------
16,000 AmerUs Group Co. 617,600
- --------------------------------------------------------------------------------
15,000 Delphi Financial Group, Inc. Cl A 602,400
- --------------------------------------------------------------------------------
14,000 Hilb, Rogal & Hamilton Co. 501,900
- --------------------------------------------------------------------------------
15,000 Torchmark Corp. 780,600
- --------------------------------------------------------------------------------
9,000 Triad Guaranty Inc.(1) 492,300
- --------------------------------------------------------------------------------
3,560,180
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
7
Veedot - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.7%
- --------------------------------------------------------------------------------
45,000 1-800-FLOWERS.COM
Inc. Cl A(1) $ 454,050
- --------------------------------------------------------------------------------
30,000 Insight Enterprises Inc.(1) 502,200
- --------------------------------------------------------------------------------
30,000 J. Jill Group, Inc. (The)(1) 635,400
- --------------------------------------------------------------------------------
1,591,650
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 1.6%
- --------------------------------------------------------------------------------
65,000 Akamai Technologies Inc.(1) 768,300
- --------------------------------------------------------------------------------
25,000 Autobytel Inc.(1) 234,000
- --------------------------------------------------------------------------------
120,000 Corillian Corp.(1) 518,400
- --------------------------------------------------------------------------------
70,000 Cybersource Corp.(1) 443,800
- --------------------------------------------------------------------------------
300,000 EasyLink Services Corp.(1) 462,000
- --------------------------------------------------------------------------------
15,000 eCollege.com Inc.(1) 271,200
- --------------------------------------------------------------------------------
125,000 Entrust Inc.(1) 571,250
- --------------------------------------------------------------------------------
100,000 LivePerson Inc.(1) 443,900
- --------------------------------------------------------------------------------
3,712,850
- --------------------------------------------------------------------------------
IT SERVICES -- 1.6%
- --------------------------------------------------------------------------------
13,000 Accenture Ltd. Cl A(1) 309,010
- --------------------------------------------------------------------------------
12,500 CACI International Inc.(1) 568,750
- --------------------------------------------------------------------------------
15,000 DST Systems, Inc.(1) 662,250
- --------------------------------------------------------------------------------
11,000 First Data Corp. 499,290
- --------------------------------------------------------------------------------
12,500 Global Payments Inc. 599,750
- --------------------------------------------------------------------------------
30,000 Inforte Corp.(1) 325,530
- --------------------------------------------------------------------------------
20,000 Wipro Ltd. ADR 861,000
- --------------------------------------------------------------------------------
3,825,580
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS -- 1.1%
- --------------------------------------------------------------------------------
25,000 Arctic Cat Inc. 593,750
- --------------------------------------------------------------------------------
20,000 MarineMax Inc.(1) 570,200
- --------------------------------------------------------------------------------
65,000 Nautilus Group, Inc. (The) 1,045,200
- --------------------------------------------------------------------------------
10,000 Polaris Industries Inc. 429,000
- --------------------------------------------------------------------------------
2,638,150
- --------------------------------------------------------------------------------
MACHINERY -- 3.6%
- --------------------------------------------------------------------------------
35,000 Alfa Laval AB ORD 527,039
- --------------------------------------------------------------------------------
15,000 Atlas Copco AB Cl B ORD 485,138
- --------------------------------------------------------------------------------
12,000 CLARCOR Inc. 528,240
- --------------------------------------------------------------------------------
7,000 Danaher Corp. 647,640
- --------------------------------------------------------------------------------
12,500 Dover Corp. 500,375
- --------------------------------------------------------------------------------
10,000 Eaton Corp. 593,800
- --------------------------------------------------------------------------------
10,000 Illinois Tool Works Inc. 862,100
- --------------------------------------------------------------------------------
7,000 ITT Industries, Inc. 555,030
- --------------------------------------------------------------------------------
20,000 Lincoln Electric Holdings Inc. 630,600
- --------------------------------------------------------------------------------
20,000 Mueller Industries Inc. 671,000
- --------------------------------------------------------------------------------
13,000 Parker-Hannifin Corp. 718,770
- --------------------------------------------------------------------------------
15,000 Pentair, Inc. 893,851
- --------------------------------------------------------------------------------
25,000 Reliance Steel &
Aluminum Company 825,500
- --------------------------------------------------------------------------------
8,439,083
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEDIA -- 2.0%
- --------------------------------------------------------------------------------
30,000 Citadel Broadcasting Corp.(1) $ 520,500
- --------------------------------------------------------------------------------
7,000 E.W. Scripps Company (The) 738,850
- --------------------------------------------------------------------------------
36,000 Emmis Communications
Corp. Cl A(1) 842,400
- --------------------------------------------------------------------------------
30,000 Information Holdings Inc.(1) 745,500
- --------------------------------------------------------------------------------
15,000 Lee Enterprises Inc. 716,700
- --------------------------------------------------------------------------------
20,000 Lodgenet Entertainment Corp.(1) 404,000
- --------------------------------------------------------------------------------
7,500 McGraw-Hill
Companies, Inc. (The) 591,450
- --------------------------------------------------------------------------------
4,559,400
- --------------------------------------------------------------------------------
METALS & MINING -- 2.0%
- --------------------------------------------------------------------------------
16,000 Arch Coal Inc. 489,760
- --------------------------------------------------------------------------------
20,000 Century Aluminum Co.(1) 396,000
- --------------------------------------------------------------------------------
27,500 Commercial Metals Co. 720,500
- --------------------------------------------------------------------------------
20,000 Metal Management Inc.(1) 290,000
- --------------------------------------------------------------------------------
9,000 Nucor Corp. 534,600
- --------------------------------------------------------------------------------
15,000 Quanex Corporation 612,000
- --------------------------------------------------------------------------------
50,000 Ryerson Tull Inc. 587,000
- --------------------------------------------------------------------------------
30,000 Steel Technologies Inc. 578,700
- --------------------------------------------------------------------------------
30,000 Worthington Industries, Inc. 541,500
- --------------------------------------------------------------------------------
4,750,060
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.3%
- --------------------------------------------------------------------------------
15,000 Target Corporation 650,550
- --------------------------------------------------------------------------------
OIL & GAS -- 2.0%
- --------------------------------------------------------------------------------
60,000 Comstock Resources Inc.(1) 1,221,000
- --------------------------------------------------------------------------------
90,000 LL&E Royalty Trust 463,500
- --------------------------------------------------------------------------------
100,000 Mission Resources Corp.(1) 414,000
- --------------------------------------------------------------------------------
50,000 Plains Exploration
& Production Co.(1) 985,000
- --------------------------------------------------------------------------------
50,000 San Juan Basin Royalty Trust 1,009,000
- --------------------------------------------------------------------------------
36,600 Williams Coal Seam Gas Trust 499,590
- --------------------------------------------------------------------------------
4,592,090
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.5%
- --------------------------------------------------------------------------------
15,000 Bowater Inc. 629,250
- --------------------------------------------------------------------------------
50,000 Buckeye Technologies Inc.(1) 525,000
- --------------------------------------------------------------------------------
1,154,250
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.4%
- --------------------------------------------------------------------------------
7,000 Avon Products, Inc. 588,000
- --------------------------------------------------------------------------------
35,000 Playtex Products Inc.(1) 259,350
- --------------------------------------------------------------------------------
847,350
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.2%
- --------------------------------------------------------------------------------
7,200 Eli Lilly and Company 531,432
- --------------------------------------------------------------------------------
10,000 Eon Labs Inc.(1) 657,500
- --------------------------------------------------------------------------------
110,000 First Horizon Pharmaceutical
Corporation(1) 1,706,100
- --------------------------------------------------------------------------------
2,895,032
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
8
Veedot - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
REAL ESTATE -- 1.0%
- --------------------------------------------------------------------------------
17,000 Crescent Real Estate
Equities Co. $ 262,990
- --------------------------------------------------------------------------------
6,700 Hospitality Properties Trust 261,836
- --------------------------------------------------------------------------------
35,000 Jones Lang LaSalle Inc.(1) 826,350
- --------------------------------------------------------------------------------
25,000 LTC Properties Inc. 389,000
- --------------------------------------------------------------------------------
17,000 Plum Creek Timber Co. Inc. 502,520
- --------------------------------------------------------------------------------
2,242,696
- --------------------------------------------------------------------------------
ROAD & RAIL -- 0.6%
- --------------------------------------------------------------------------------
15,000 Burlington Northern
Santa Fe Corp. 490,500
- --------------------------------------------------------------------------------
25,000 Celadon Group, Inc.(1) 411,500
- --------------------------------------------------------------------------------
25,000 Norfolk Southern Corp. 595,500
- --------------------------------------------------------------------------------
1,497,500
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT -- 7.9%
- --------------------------------------------------------------------------------
50,000 Advanced Micro Devices, Inc.(1) 711,000
- --------------------------------------------------------------------------------
12,500 Analog Devices, Inc. 532,500
- --------------------------------------------------------------------------------
75,000 Atmel Corporation(1) 438,000
- --------------------------------------------------------------------------------
35,000 August Technology
Corporation(1) 461,300
- --------------------------------------------------------------------------------
75,000 Axcelis Technologies Inc.(1) 788,250
- --------------------------------------------------------------------------------
145,000 California Micro Devices
Corporation(1) 2,080,749
- --------------------------------------------------------------------------------
62,500 Cirrus Logic Inc.(1) 389,375
- --------------------------------------------------------------------------------
22,500 Diodes Inc.(1) 488,475
- --------------------------------------------------------------------------------
105,000 Electroglas Inc.(1) 413,700
- --------------------------------------------------------------------------------
35,000 Integrated Device
Technology Inc.(1) 470,750
- --------------------------------------------------------------------------------
30,000 Integrated Silicon
Solutions Inc.(1) 411,900
- --------------------------------------------------------------------------------
12,500 International Rectifier Corp.(1) 495,500
- --------------------------------------------------------------------------------
40,000 IXYS Corp.(1) 342,800
- --------------------------------------------------------------------------------
15,000 Microchip Technology Inc. 420,300
- --------------------------------------------------------------------------------
90,000 Microsemi Corporation(1) 978,300
- --------------------------------------------------------------------------------
40,000 Mindspeed Technologies Inc.(1) 205,600
- --------------------------------------------------------------------------------
34,000 Mykrolis Corp.(1) 494,700
- --------------------------------------------------------------------------------
20,000 National Semiconductor Corp.(1) 815,800
- --------------------------------------------------------------------------------
120,000 Neomagic Corp.(1) 454,800
- --------------------------------------------------------------------------------
35,000 Pixelworks Inc.(1) 625,800
- --------------------------------------------------------------------------------
50,000 PLX Technology Inc.(1) 649,000
- --------------------------------------------------------------------------------
45,000 Semitool Inc.(1) 494,550
- --------------------------------------------------------------------------------
20,000 Semtech Corp.(1) 420,400
- --------------------------------------------------------------------------------
40,000 Silicon Storage
Technology Inc.(1) 530,000
- --------------------------------------------------------------------------------
55,000 Skyworks Solutions, Inc.(1) 470,800
- --------------------------------------------------------------------------------
20,000 Standard Microsystems
Corporation(1) 476,800
- --------------------------------------------------------------------------------
200,000 Tegal Corp.(1) 310,000
- --------------------------------------------------------------------------------
36,000 Teradyne, Inc.(1) 733,680
- --------------------------------------------------------------------------------
35,000 Texas Instruments Inc. 878,500
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
12,000 Varian Semiconductor
Equipment Associates, Inc.(1) $ 390,720
- --------------------------------------------------------------------------------
45,000 Xicor Inc.(1) 659,250
- --------------------------------------------------------------------------------
19,000 Xilinx, Inc.(1) 638,970
- --------------------------------------------------------------------------------
18,672,269
- --------------------------------------------------------------------------------
SOFTWARE -- 4.1%
- --------------------------------------------------------------------------------
12,500 Adobe Systems Inc. 516,750
- --------------------------------------------------------------------------------
70,000 American Software 402,500
- --------------------------------------------------------------------------------
55,000 Autodesk, Inc. 1,842,500
- --------------------------------------------------------------------------------
40,000 Catapult Communications Corp.(1) 752,400
- --------------------------------------------------------------------------------
30,000 DocuCorporation
International Inc.(1) 325,200
- --------------------------------------------------------------------------------
17,500 FileNet Corp.(1) 480,550
- --------------------------------------------------------------------------------
20,000 Hyperion Solutions Corp.(1) 767,600
- --------------------------------------------------------------------------------
25,000 InterVoice, Inc.(1) 311,250
- --------------------------------------------------------------------------------
25,000 Macromedia, Inc.(1) 515,000
- --------------------------------------------------------------------------------
15,000 Open Solutions Inc.(1) 370,950
- --------------------------------------------------------------------------------
100,000 Parametric Technology Corp.(1) 458,000
- --------------------------------------------------------------------------------
45,000 SS&C Technologies, Inc. 1,039,050
- --------------------------------------------------------------------------------
27,000 THQ Inc.(1) 500,580
- --------------------------------------------------------------------------------
477,500 Viewpoint Corp.(1) 1,179,425
- --------------------------------------------------------------------------------
9,461,755
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 6.1%
- --------------------------------------------------------------------------------
23,000 Aaron Rents Inc. 666,080
- --------------------------------------------------------------------------------
15,000 AnnTaylor Stores Corp.(1) 607,950
- --------------------------------------------------------------------------------
37,500 Brookstone Inc.(1) 745,875
- --------------------------------------------------------------------------------
35,000 Building Material
Holding Corporation 575,400
- --------------------------------------------------------------------------------
23,000 Chico's FAS, Inc.(1) 936,790
- --------------------------------------------------------------------------------
45,000 Cortefiel SA ORD 489,646
- --------------------------------------------------------------------------------
45,000 Culture Convenience
Club Co. Ltd. ORD 489,042
- --------------------------------------------------------------------------------
27,500 Foot Locker Inc. 660,000
- --------------------------------------------------------------------------------
30,000 GameStop Corporation Cl A(1) 528,300
- --------------------------------------------------------------------------------
15,000 Home Depot, Inc. 527,850
- --------------------------------------------------------------------------------
13,000 Michaels Stores, Inc. 650,390
- --------------------------------------------------------------------------------
13,000 O'Reilly Automotive, Inc.(1) 583,570
- --------------------------------------------------------------------------------
30,000 Pep Boys-Manny,
Moe & Jack (The) 824,100
- --------------------------------------------------------------------------------
35,000 Petsmart Inc. 969,500
- --------------------------------------------------------------------------------
12,000 RadioShack Corp. 369,120
- --------------------------------------------------------------------------------
30,000 Ross Stores, Inc. 915,000
- --------------------------------------------------------------------------------
16,000 Sharper Image Corporation(1) 488,960
- --------------------------------------------------------------------------------
17,500 Sherwin-Williams Co. 665,875
- --------------------------------------------------------------------------------
15,000 Sports Auth. Inc. (The)(1) 575,100
- --------------------------------------------------------------------------------
30,000 TJX Companies, Inc. (The) 737,100
- --------------------------------------------------------------------------------
17,500 Urban Outfitters Inc.(1) 807,975
- --------------------------------------------------------------------------------
10,000 Weight Watchers
International Inc.(1) 390,000
- --------------------------------------------------------------------------------
14,203,623
- --------------------------------------------------------------------------------
See Notes to Financial Statements. (continued)
- ------
9
Veedot - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
TEXTILES, APPAREL
& LUXURY GOODS -- 1.4%
- --------------------------------------------------------------------------------
10,000 Coach Inc.(1) $ 426,000
- --------------------------------------------------------------------------------
26,250 Fossil Inc.(1) 642,863
- --------------------------------------------------------------------------------
12,500 Timberland Co. (The)(1) 784,000
- --------------------------------------------------------------------------------
20,000 VF Corp. 923,200
- --------------------------------------------------------------------------------
19,000 Wolverine World Wide, Inc. 510,720
- --------------------------------------------------------------------------------
3,286,783
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE -- 0.9%
- --------------------------------------------------------------------------------
10,000 New Century Financial Corp. 424,300
- --------------------------------------------------------------------------------
25,000 Northwest Bancorp Inc. 515,750
- --------------------------------------------------------------------------------
15,000 PFF BanCorporation Inc. 561,750
- --------------------------------------------------------------------------------
30,000 W Holding Company, Inc. 511,200
- --------------------------------------------------------------------------------
2,013,000
- --------------------------------------------------------------------------------
TOBACCO -- 0.4%
- --------------------------------------------------------------------------------
17,500 UST Inc. 651,175
- --------------------------------------------------------------------------------
15,000 Vector Group Ltd. 248,100
- --------------------------------------------------------------------------------
899,275
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS -- 1.1%
- --------------------------------------------------------------------------------
9,500 Grainger (W.W.), Inc. 497,800
- --------------------------------------------------------------------------------
10,000 Hughes Supply, Inc. 558,900
- --------------------------------------------------------------------------------
30,000 MSC Industrial Direct Co. 859,800
- --------------------------------------------------------------------------------
20,000 Watsco, Inc. 583,000
- --------------------------------------------------------------------------------
2,499,500
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
WATER UTILITIES -- 0.1%
- --------------------------------------------------------------------------------
5,400 California Water
Service Group $ 154,008
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION
SERVICES -- 0.5%
- --------------------------------------------------------------------------------
100,000 LCC International Inc. Cl A(1) 540,000
- --------------------------------------------------------------------------------
130,000 SBA Communications
Corporation(1) 520,000
- --------------------------------------------------------------------------------
1,060,000
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $212,603,101) 222,896,883
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 4.5%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations),
in a joint trading account at 0.90%,
dated 4/30/04, due 5/3/04
(Delivery value $10,400,780)
(Cost $10,400,000) 10,400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES -- 100.0%
(Cost $223,003,101) $233,296,883
================================================================================
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS*
Contracts to Sell Settlement Date Value Unrealized Gain
- --------------------------------------------------------------------------------
116,634,001 JPY 5/28/04 $1,057,080 $8,396
===================================
(Value on Settlement Date $1,065,476)
*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
JPY = Japanese Yen
ORD = Foreign Ordinary Share
(1) Non-income producing.
See Notes to Financial Statements.
- ------
10
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value (cost of $223,003,101) $233,296,883
- -------------------------------------------------------------
Cash 137,465
- -------------------------------------------------------------
Receivable for investments sold 23,363,608
- -------------------------------------------------------------
Receivable for forward foreign currency exchange contracts 8,396
- -------------------------------------------------------------
Dividends and interest receivable 120,331
- --------------------------------------------------------------------------------
256,926,683
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 16,621,582
- -------------------------------------------------------------
Accrued management fees 313,547
- --------------------------------------------------------------------------------
16,935,129
- --------------------------------------------------------------------------------
NET ASSETS $239,991,554
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $ 341,393,134
- -------------------------------------------------------------
Accumulated net investment loss (707,466)
- -------------------------------------------------------------
Accumulated net realized loss on investment transactions (110,981,870)
- -------------------------------------------------------------
Net unrealized appreciation on investments 10,287,756
- --------------------------------------------------------------------------------
$ 239,991,554
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $227,417,987
- -------------------------------------------------------------
Shares outstanding 45,473,220
- -------------------------------------------------------------
Net asset value per share $5.00
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $12,573,567
- -------------------------------------------------------------
Shares outstanding 2,496,467
- -------------------------------------------------------------
Net asset value per share $5.04
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
11
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT LOSS
- --------------------------------------------------------------------------------
INCOME:
- -------------------------------------------------------------
Dividends $ 1,152,810
- -------------------------------------------------------------
Interest 16,002
- --------------------------------------------------------------------------------
1,168,812
- --------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------
Management fees 1,873,451
- -------------------------------------------------------------
Directors' fees and expenses 1,500
- -------------------------------------------------------------
Other expenses 1,327
- --------------------------------------------------------------------------------
1,876,278
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (707,466)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions 24,553,123
- -------------------------------------------------------------
Change in net unrealized appreciation on investments (23,539,565)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 1,013,558
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 306,092
================================================================================
See Notes to Financial Statements.
- ------
12
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2004 2003
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment loss $ (707,466) $ (1,366,055)
- -----------------------------------------------
Net realized gain 24,553,123 38,753,396
- -----------------------------------------------
Change in net unrealized appreciation (23,539,565) 22,021,528
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 306,092 59,408,869
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital share transactions (1,496,592) (14,387,320)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (1,190,500) 45,021,549
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 241,182,054 196,160,505
- --------------------------------------------------------------------------------
End of period $239,991,554 $241,182,054
================================================================================
Accumulated net investment loss $(707,466) --
================================================================================
See Notes to Financial Statements.
- ------
13
Notes to Financial Statements
APRIL 30, 2004 (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
capitalizations. 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, 2004.
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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
When valuations are not readily available, securities are valued at fair value
as determined in accordance with procedures adopted by the Board of Directors.
If an event were to occur after the close of the foreign exchange on which a
portfolio security principally trades, but before the net asset value per-share
of a fund was determined that was likely to materially affect the net asset
value of the fund, then that security would be 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 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.
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 fund records the foreign tax expense, if any, as a reduction
to the net realized gain (loss) on foreign currency transactions.
(continued)
- ------
14
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The fund may enter into forward
foreign currency exchange contracts to facilitate transactions of securities
denominated in a foreign currency or to hedge the fund's exposure to foreign
currency exchange rate fluctuations. The net U.S. dollar value of foreign
currency underlying all contractual commitments held by the fund and the
resulting unrealized appreciation or depreciation are determined daily using
prevailing exchange rates. The fund bears the risk of an unfavorable change in
the foreign currency exchange rate underlying the forward contract.
Additionally, losses may arise if the counterparties do not perform under the
contract terms.
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 substantially 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.
REDEMPTION -- The fund may impose a 2.00% redemption fee on shares held less
than five years. These redemption fees are recorded as a reduction in the cost
of shares redeemed. The redemption fee is retained by the fund and helps cover
transaction costs that long-term investors may bear when the fund sells
securities to meet investor redemptions.
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, 2004, was
1.50% and 1.30% for the Investor and Institutional Classes, respectively.
(continued)
- ------
15
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
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, 2004, as sale of
the Advisor Class had not yet commenced.
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, 2004, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 JPMorgan Chase Bank (JPMCB). JPMCB 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, 2004, were $394,904,422 and $412,990,630,
respectively.
(continued)
- ------
16
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 200,000,000
================================================================================
Sold 1,860,694 $ 9,804,162
- --------------------------------------------
Redeemed (2,215,778) (11,401,787)(1)
- --------------------------------------------------------------------------------
Net decrease (355,084) $ (1,597,625)
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 200,000,000
================================================================================
Sold 2,905,735 $ 12,117,434
- --------------------------------------------
Redeemed (6,820,595) (27,227,637)(2)
- --------------------------------------------------------------------------------
Net decrease (3,914,860) $(15,110,203)
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 50,000,000
================================================================================
Sold 267,296 $ 1,434,179
- --------------------------------------------
Redeemed (251,948) (1,333,146)
- --------------------------------------------------------------------------------
Net increase 15,348 $ 101,033
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 50,000,000
================================================================================
Sold 648,297 $ 2,730,343
- --------------------------------------------
Redeemed (467,938) (2,007,460)
- --------------------------------------------------------------------------------
Net increase 180,359 $ 722,883
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SHARES AUTHORIZED 50,000,000
================================================================================
(1) Net of redemption fees of $201,964.
(2) Net of redemption fees of $490,015.
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $650,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$620,000,000 effective December 17, 2003. 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, 2004.
(continued)
- ------
17
Notes to Financial Statements
APRIL 30, 2004 (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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $224,414,541
================================================================================
Gross tax appreciation of investments $ 18,911,614
- ----------------------------------------------------------------
Gross tax depreciation of investments (10,029,272)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $ 8,882,342
================================================================================
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2003, the fund had accumulated capital losses of $134,123,553,
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.
- ------
18
Veedot - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $4.99 $3.77 $4.32 $5.92 $5.00
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Loss(3) (0.01) (0.03) (0.01) --(4) (0.06)
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.02 1.24 (0.55) (1.60) 0.98
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.01 1.21 (0.56) (1.60) 0.92
- --------------------------------------------------------------------------------
Redemption Fees(5) --(4) 0.01 0.01 -- --
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $5.00 $4.99 $3.77 $4.32 $5.92
================================================================================
TOTAL RETURN(6) 0.20% 32.36% (12.73)% (27.03)% 18.40%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.50%(7) 1.50% 1.50% 1.50% 1.50%(7)
- ---------------------
Ratio of Net
Investment Loss
to Average
Net Assets (0.57)%(7) (0.68)% (0.31)% (0.09)% (0.92)%(7)
- ---------------------
Portfolio
Turnover Rate 158% 415% 330% 410% 250%
- ---------------------
Net Assets,
End of Period
(in thousands) $227,418 $228,724 $187,451 $231,108 $352,130
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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) The fund adopted the provisions of the revised AICPA Audit and Accounting
Guide for Investment Companies which requires the disclosure of the
per-share effect of redemption fees. Periods prior to November 1, 2001,
have not been restated to reflect this change. Amounts computed using
average shares outstanding throughout the period.
(6) 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.
(7) Annualized.
See Notes to Financial Statements.
- ------
19
Veedot - Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $5.02 $3.79 $4.33 $5.92 $6.12
- --------------------------------------------------------------------------------
Income From
Investment
Operations
- ---------------------
Net Investment
Income (Loss)(3) (0.01) (0.02) --(4) 0.01 (0.01)
- ---------------------
Net Realized
and Unrealized
Gain (Loss) 0.03 1.24 (0.55) (1.60) (0.19)
- --------------------------------------------------------------------------------
Total From
Investment
Operations 0.02 1.22 (0.55) (1.59) (0.20)
- --------------------------------------------------------------------------------
Redemption Fees(5) --(4) 0.01 0.01 -- --
- --------------------------------------------------------------------------------
Net Asset Value,
End of Period $5.04 $5.02 $3.79 $4.33 $5.92
================================================================================
TOTAL RETURN(6) 0.40% 32.45% (12.47)% (26.86)% (3.27)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating
Expenses to Average
Net Assets 1.30%(7) 1.30% 1.30% 1.30% 1.30%(7)
- ---------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (0.37)%(7) (0.48)% (0.11%) 0.11% (0.52)%(7)
- ---------------------
Portfolio
Turnover Rate 158% 415% 330% 410% 250%(8)
- ---------------------
Net Assets,
End of Period
(in thousands) $12,574 $12,458 $8,709 $9,659 $12,218
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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) The fund adopted the provisions of the revised AICPA Audit and Accounting
Guide for Investment Companies which requires the disclosure of the
per-share effect of redemption fees. Periods prior to November 1, 2001,
have not been restated to reflect this change. Amounts computed using
average shares outstanding throughout the period.
(6) 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.
(7) Annualized.
(8) 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.
- ------
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 for
Institutional Class shares is lower than that of Investor Class shares. The
total expense ratio for Advisor Class shares is higher than that 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 investment
advisors, 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
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
22
Index Definition
The following index is used to illustrate investment market, sector, or style
performance or to serve as a fund performance comparison. It is not an
investment product available for purchase.
The WILSHIRE 5000 TOTAL MARKET INDEX measures the performance of U.S.
headquartered equity securities with readily available price data.
- ------
23
Notes
- ------
24
CONTACT US
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
The American Century logo, American Century and
American Century Investments are service marks
of American Century Services Corporation.
0406 American Century Investment Services, Inc.
SH-SAN-38384S (c)2004 American Century Services Corporation
[front cover]
APRIL 30, 2004
[graphic of chart]
[graphic of starfish]
American Century Investments
Semiannual Report
[graphic of two steal bridges]
Capital Value Fund
[American Century logo and text logo]
Table of Contents
Our Message to You........................................................ 1
CAPITAL VALUE
Performance............................................................... 2
Portfolio Commentary...................................................... 4
Top Ten Holdings....................................................... 4
Top Five Industries.................................................... 5
Types of Investments in Portfolio...................................... 5
Schedule of Investments................................................... 6
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...................................................... 15
OTHER INFORMATION
Share Class Information................................................... 18
Additional Information.................................................... 19
Index Definitions......................................................... 20
The opinions expressed in the Portfolio Commentary reflect those of the
portfolio management team as of the date of the report, and do not necessarily
represent the opinions of American Century or any other person in the American
Century organization. Any such opinions are subject to change at any time based
upon market or other conditions and American Century disclaims any
responsibility to update such opinions. These opinions may not be relied upon as
investment advice and, because investment decisions made by American Century
funds are based on numerous factors, may not be relied upon as an indication of
trading intent on behalf of any American Century fund. Security examples are
used for representational purposes only and are not intended as recommendations
to purchase or sell securities. Performance information for comparative indices
and securities is provided to American Century by third party vendors. To the
best of American Century's knowledge, such information is accurate at the time
of printing.
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, 2004.
This report contains information that can help you monitor your investment.
You'll find details about your fund's return and holdings as well as data and
analysis that provide insight into the market conditions affecting the fund's
performance.
Through our Web site, americancentury.com, 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.
We also have many informative resources available in the Education & Planning
section of our site to help you with your investment strategy.
Your next shareholder report for this fund will be the annual report dated
October 31, 2004, available in approximately six months.
As always, we deeply appreciate your investment with American Century
Investments.
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
Capital Value - Performance
TOTAL RETURNS AS OF APRIL 30, 2004
----------------------
AVERAGE ANNUAL RETURNS
- ------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------
INVESTOR CLASS 26.67% 4.00% 5.94% 3/31/99
Return After-Tax
on Distributions(1) 26.48% 3.58% 5.51%
Return After-Tax on
Distributions and
Sale of Shares(1) 17.57% 3.17% 4.86%
- ------------------------------------------------------------------------------
RUSSELL 1000 VALUE INDEX 26.26% 1.55% 3.32% -
- ------------------------------------------------------------------------------
Institutional Class 27.12% - 4.84% 3/1/02
Return After-Tax
on Distributions(1) 26.89% - 4.47%
Return After-Tax on
Distributions and
Sale of Shares(1) 17.92% - 3.94%
- ------------------------------------------------------------------------------
Advisor Class - - 22.82%(2) 5/14/03
Return After-Tax
on Distributions(1) - - 22.66%(2)
Return After-Tax on
Distributions and
Sale of Shares(1) - - 15.03%(2)
- ------------------------------------------------------------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates, and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on an investor's tax situation
and may differ from those shown. After-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements such
as 401(k) plans or individual retirement accounts.
(2) Returns for periods less than one year are not annualized.
(continued)
- ------
2
Capital Value - Performance
GROWTH OF $10,000 OVER LIFE OF CLASS
$10,000 investment made March 31, 1999
ONE-YEAR RETURNS OVER LIFE OF CLASS
Periods ended April 30
- --------------------------------------------------------------------------------
1999* 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Investor Class 10.20% -6.71% 16.92% 0.21% -12.11% 26.67%
- --------------------------------------------------------------------------------
Russell 1000 Value Index 9.34% -3.88% 6.43% -3.91% -13.01% 26.26%
- --------------------------------------------------------------------------------
* From 3/31/99, the Investor Class's inception date. 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.
The Growth of $10,000 chart and the One-Year Returns chart do not 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
Capital Value - Portfolio Commentary
[photo of Brendan Healy, Chuck Ritter, and Mark Mallon]
A PORTFOLIO COMMENTARY FROM (LEFT TO RIGHT) BRENDAN HEALY, CHUCK RITTER, AND
MARK MALLON, PORTFOLIO MANAGERS ON THE CAPITAL VALUE INVESTMENT TEAM.
Capital Value increased 8.94%* during the six months ended April 30, 2004,
outpacing its benchmark, the Russell 1000 Value Index, which gained 8.15%.
MARCH OPTIMISM FADED
The portfolio's advance came during a stretch marked by rising corporate profits
and continued economic expansion. During the period's closing weeks, however,
stock prices came under pressure amid rising oil prices and new concern that the
Federal Reserve would raise interest rates. Exactly one month later, however,
terrorist attacks on the Madrid train station shook confidence throughout many
worldwide markets. As a result, many of the gains made by large-capitalization
stocks from November to February were reduced in March and April, according to
the indices tracked by the Frank Russell Company.
Still, despite losses in the last two months, all the major Russell indices
advanced during the six-month period, regardless of investment style or market
capitalization. Small stocks generally achieved higher gains than larger
equities, and value issues outperformed growth. Large-cap value stocks advanced
at a faster rate than their similarly sized growth rivals.
Despite some declines late in the period, all but one of the sector stakes
within Capital Value contributed, and the vast majority of stocks in the
portfolio added to performance.
ENERGY COMPANIES LED THE WAY
Energy stocks provided the biggest lift. Oil prices generally rose throughout
the period, as a tightening worldwide petroleum supply pushed U.S. average
gasoline prices, unadjusted for inflation, to an all-time high. As a result, six
of the portfolio's biggest contributors were either oil companies or the energy
equipment companies that serve them. The portfolio's greatest contributor was
Exxon Mobil, which benefited from higher crude prices as well as forecasts
TOP TEN HOLDINGS
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Citigroup Inc. 4.4% 4.4%
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.9% 3.6%
- --------------------------------------------------------------------------------
Freddie Mac 3.8% 3.7%
- --------------------------------------------------------------------------------
Standard and Poor's 500
Depositary Receipt 3.4% 4.5%
- --------------------------------------------------------------------------------
Bank of America Corp. 3.1% 3.4%(1)
- --------------------------------------------------------------------------------
Royal Dutch Petroleum
Co. New York Shares 2.6% 2.5%
- --------------------------------------------------------------------------------
Wells Fargo & Co. 2.1% 1.9%
- --------------------------------------------------------------------------------
SBC Communications Inc. 1.9% 2.8%
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 1.7% 1.9%
- --------------------------------------------------------------------------------
Altria Group Inc. 1.6% 1.8%
- --------------------------------------------------------------------------------
(1) Bank of America Corp. acquired FleetBoston Financial Corporation on 4/1/04.
The percentage as of 10/31/03 represents both the Bank of America Corp. and
FleetBoston Financial Corporation shares owned by the fund.
*All fund returns referenced in this commentary are for Investor Class shares.
(continued)
- ------
4
Capital Value - Portfolio Commentary
of greater reserves developed in Qatar, Nigeria and Chad.
Capital Value's biggest sector stake on average, financials, also boosted
performance. This area, representing about 30% of the portfolio, was led by
insurers, such as Loews and American International Group, which both reported
increased premium revenues. While commercial banks also aided, progress was
restrained by capital markets companies Merrill Lynch and Morgan Stanley.
In the industrials sector, industrial conglomerates and aerospace & defense
companies added to performance. One leader was Tyco International, which
reported higher earnings from higher revenues and lower costs, obtained by
closing excess facilities and reducing debt.
Less-cyclical sectors, such as consumer staples, also advanced, led by Altria,
whose American tobacco division benefited from greater fourth-quarter volume,
retail share and profitability. Other gains came from the portfolio's food and
household products selections.
Health care stocks were another source of positive performance, due mainly to
advances among health care equipment and supply companies. Pharmaceutical stocks
also contributed.
INFORMATION TECHNOLOGY DETRACTED
The one sector stake that detracted during the period was information
technology, led downward by computers and peripherals makers. Hewlett-Packard,
maker of PCs, printers and other hardware, was the portfolio's greatest
detractor, declining on concerns about greater competition and slowing growth in
its imaging and printing group. Information technology services firms
disappointed as well. Electronic Data Systems slumped after a
worse-than-expected loss on its Navy-Marine Corps contract led to a deep
fourth-quarter loss and a reduction in its revenue forecast for 2004.
Capital Value will continue to follow its investment discipline -- searching for
fundamentally sound businesses that, because of transitory issues, are selling
at what we believe to be below fair market value. Since the fund's inception on
March 31, 1999, our consistent, patient approach has enabled Capital Value to
surpass its benchmark, producing an average annual rate of return of 5.94%,
versus the Russell 1000 Value's 3.32% return.
TOP FIVE INDUSTRIES
AS OF APRIL 30, 2004
- --------------------------------------------------------------------------------
% OF FUND % OF FUND
INVESTMENTS INVESTMENTS
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Commercial Banks 12.1% 12.3%
- --------------------------------------------------------------------------------
Oil & Gas 10.0% 9.7%
- --------------------------------------------------------------------------------
Insurance 6.1% 4.3%
- --------------------------------------------------------------------------------
Thrifts & Mortgage
Finance 5.7% 5.9%
- --------------------------------------------------------------------------------
Diversified Telecommunication
Services 5.0% 6.2%
- --------------------------------------------------------------------------------
TYPES OF INVESTMENTS IN PORTFOLIO
- --------------------------------------------------------------------------------
AS OF AS OF
4/30/04 10/31/03
- --------------------------------------------------------------------------------
Common Stocks 95.2% 96.0%
- --------------------------------------------------------------------------------
Temporary Cash
Investments 4.8% 4.0%
- --------------------------------------------------------------------------------
- ------
5
Capital Value - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 95.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE - 2.3%
- --------------------------------------------------------------------------------
35,000 Boeing Co. $ 1,494,150
- --------------------------------------------------------------------------------
48,500 Honeywell International Inc. 1,677,130
- --------------------------------------------------------------------------------
26,800 Raytheon Company 864,568
- --------------------------------------------------------------------------------
4,035,848
- --------------------------------------------------------------------------------
AUTOMOBILES - 1.1%
- --------------------------------------------------------------------------------
31,400 General Motors Corp. 1,488,988
- --------------------------------------------------------------------------------
5,700 Toyota Motor Corp. ADR 417,297
- --------------------------------------------------------------------------------
1,906,285
- --------------------------------------------------------------------------------
BEVERAGES - 1.1%
- --------------------------------------------------------------------------------
13,700 Adolph Coors Company Cl B 900,227
- --------------------------------------------------------------------------------
36,600 Pepsi Bottling Group Inc. 1,071,282
- --------------------------------------------------------------------------------
1,971,509
- --------------------------------------------------------------------------------
CAPITAL MARKETS - 2.5%
- --------------------------------------------------------------------------------
41,600 Merrill Lynch & Co., Inc. 2,255,968
- --------------------------------------------------------------------------------
44,200 Morgan Stanley 2,271,438
- --------------------------------------------------------------------------------
4,527,406
- --------------------------------------------------------------------------------
CHEMICALS - 1.1%
- --------------------------------------------------------------------------------
33,500 PPG Industries, Inc. 1,986,885
- --------------------------------------------------------------------------------
COMMERCIAL BANKS - 12.1%
- --------------------------------------------------------------------------------
69,000 Bank of America Corp. 5,553,810
- --------------------------------------------------------------------------------
53,300 Bank One Corp. 2,631,421
- --------------------------------------------------------------------------------
46,200 KeyCorp 1,372,140
- --------------------------------------------------------------------------------
54,700 National City Corp. 1,896,449
- --------------------------------------------------------------------------------
36,000 PNC Financial Services Group 1,911,600
- --------------------------------------------------------------------------------
88,600 U.S. Bancorp 2,271,704
- --------------------------------------------------------------------------------
52,400 Wachovia Corp. 2,397,300
- --------------------------------------------------------------------------------
66,100 Wells Fargo & Co. 3,732,006
- --------------------------------------------------------------------------------
21,766,430
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 1.1%
- --------------------------------------------------------------------------------
36,400 R. R. Donnelley & Sons Company 1,070,888
- --------------------------------------------------------------------------------
33,000 Waste Management, Inc. 937,200
- --------------------------------------------------------------------------------
2,008,088
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS - 2.6%
- --------------------------------------------------------------------------------
155,000 Hewlett-Packard Co. 3,053,500
- --------------------------------------------------------------------------------
17,800 International Business
Machines Corp. 1,569,426
- --------------------------------------------------------------------------------
4,622,926
- --------------------------------------------------------------------------------
DIVERSIFIED - 3.4%
- --------------------------------------------------------------------------------
54,000 Standard and Poor's 500
Depositary Receipt 5,994,000
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 4.4%
- --------------------------------------------------------------------------------
163,500 Citigroup Inc. 7,862,715
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 5.0%
- --------------------------------------------------------------------------------
8,600 ALLTEL Corp. 432,924
- --------------------------------------------------------------------------------
55,400 AT&T Corp. 950,110
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
70,100 BellSouth Corp. $ 1,809,281
- --------------------------------------------------------------------------------
135,500 SBC Communications Inc. 3,373,950
- --------------------------------------------------------------------------------
74,300 Sprint Corp. 1,329,227
- --------------------------------------------------------------------------------
34,000 Verizon Communications 1,283,160
- --------------------------------------------------------------------------------
9,178,652
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.4%
- --------------------------------------------------------------------------------
36,400 Exelon Corporation 2,436,616
- --------------------------------------------------------------------------------
41,200 PPL Corporation 1,765,420
- --------------------------------------------------------------------------------
4,202,036
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 1.3%
- --------------------------------------------------------------------------------
29,400 CVS Corp. 1,135,722
- --------------------------------------------------------------------------------
65,200 Kroger Co. (The)(1) 1,141,000
- --------------------------------------------------------------------------------
2,276,722
- --------------------------------------------------------------------------------
FOOD PRODUCTS - 2.2%
- --------------------------------------------------------------------------------
40,400 H.J. Heinz Company 1,542,876
- --------------------------------------------------------------------------------
50,800 Sara Lee Corp. 1,172,464
- --------------------------------------------------------------------------------
17,400 Unilever N.V. New York Shares 1,147,182
- --------------------------------------------------------------------------------
3,862,522
- --------------------------------------------------------------------------------
GAS UTILITIES - 0.6%
- --------------------------------------------------------------------------------
49,400 NiSource Inc. 995,904
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.2%
- --------------------------------------------------------------------------------
44,700 Baxter International, Inc. 1,414,755
- --------------------------------------------------------------------------------
14,400 Becton Dickinson & Co. 727,920
- --------------------------------------------------------------------------------
2,142,675
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.8%
- --------------------------------------------------------------------------------
17,300 AmerisourceBergen Corp. 1,001,497
- --------------------------------------------------------------------------------
16,100 CIGNA Corp. 1,038,611
- --------------------------------------------------------------------------------
30,000 HCA Inc. 1,218,900
- --------------------------------------------------------------------------------
3,259,008
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 1.9%
- --------------------------------------------------------------------------------
20,000 Harrah's Entertainment, Inc. 1,063,600
- --------------------------------------------------------------------------------
85,300 McDonald's Corporation 2,322,719
- --------------------------------------------------------------------------------
3,386,319
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.8%
- --------------------------------------------------------------------------------
20,800 Black & Decker Corporation 1,203,280
- --------------------------------------------------------------------------------
42,400 Newell Rubbermaid Inc. 1,002,336
- --------------------------------------------------------------------------------
15,800 Snap-on Incorporated 533,724
- --------------------------------------------------------------------------------
6,700 Whirlpool Corp. 438,917
- --------------------------------------------------------------------------------
3,178,257
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.9%
- --------------------------------------------------------------------------------
23,800 Kimberly-Clark Corp. 1,557,710
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 1.9%
- --------------------------------------------------------------------------------
61,600 General Electric Co. 1,844,920
- --------------------------------------------------------------------------------
53,900 Tyco International Ltd. 1,479,555
- --------------------------------------------------------------------------------
3,324,475
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
(continued)
- ------
6
Capital Value - Schedule of Investments
APRIL 30, 2004 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
INSURANCE - 6.1%
- --------------------------------------------------------------------------------
53,200 Allstate Corp. $ 2,441,880
- --------------------------------------------------------------------------------
26,800 American International
Group, Inc. 1,920,220
- --------------------------------------------------------------------------------
30,400 Hartford Financial
Services Group Inc. (The) 1,856,832
- --------------------------------------------------------------------------------
34,000 Loews Corp. 1,972,340
- --------------------------------------------------------------------------------
30,600 Marsh & McLennan
Companies, Inc. 1,380,060
- --------------------------------------------------------------------------------
27,400 Torchmark Corp. 1,425,896
- --------------------------------------------------------------------------------
10,997,228
- --------------------------------------------------------------------------------
IT SERVICES - 1.8%
- --------------------------------------------------------------------------------
32,600 Computer Sciences Corp.(1) 1,333,666
- --------------------------------------------------------------------------------
51,100 Electronic Data Systems Corp. 934,619
- --------------------------------------------------------------------------------
25,400 Fiserv, Inc.(1) 928,624
- --------------------------------------------------------------------------------
3,196,909
- --------------------------------------------------------------------------------
MACHINERY - 2.0%
- --------------------------------------------------------------------------------
25,800 Dover Corp. 1,032,774
- --------------------------------------------------------------------------------
23,200 Ingersoll-Rand Company 1,497,560
- --------------------------------------------------------------------------------
18,000 Parker-Hannifin Corp. 995,220
- --------------------------------------------------------------------------------
3,525,554
- --------------------------------------------------------------------------------
MEDIA - 2.1%
- --------------------------------------------------------------------------------
22,000 Gannett Co., Inc. 1,906,960
- --------------------------------------------------------------------------------
110,200 Time Warner Inc.(1) 1,853,564
- --------------------------------------------------------------------------------
3,760,524
- --------------------------------------------------------------------------------
METALS & MINING - 1.2%
- --------------------------------------------------------------------------------
30,400 Alcoa Inc. 934,800
- --------------------------------------------------------------------------------
18,900 Nucor Corp. 1,122,660
- --------------------------------------------------------------------------------
2,057,460
- --------------------------------------------------------------------------------
MULTILINE RETAIL - 1.6%
- --------------------------------------------------------------------------------
61,300 May Department
Stores Co. (The) 1,888,040
- --------------------------------------------------------------------------------
22,900 Sears, Roebuck & Co. 917,145
- --------------------------------------------------------------------------------
2,805,185
- --------------------------------------------------------------------------------
OIL & GAS - 10.0%
- --------------------------------------------------------------------------------
26,800 ChevronTexaco Corp. 2,452,200
- --------------------------------------------------------------------------------
28,500 ConocoPhillips 2,032,050
- --------------------------------------------------------------------------------
162,500 Exxon Mobil Corp. 6,914,375
- --------------------------------------------------------------------------------
42,800 Occidental Petroleum Corp. 2,020,160
- --------------------------------------------------------------------------------
95,000 Royal Dutch Petroleum Co.
New York Shares 4,622,700
- --------------------------------------------------------------------------------
18,041,485
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.8%
- --------------------------------------------------------------------------------
23,500 Weyerhaeuser Co. 1,391,200
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 4.1%
- --------------------------------------------------------------------------------
54,200 Abbott Laboratories $ 2,385,884
- --------------------------------------------------------------------------------
54,900 Bristol-Myers Squibb Co. 1,377,990
- --------------------------------------------------------------------------------
34,100 Johnson & Johnson 1,842,423
- --------------------------------------------------------------------------------
37,100 Merck & Co., Inc. 1,743,700
- --------------------------------------------------------------------------------
7,349,997
- --------------------------------------------------------------------------------
ROAD & RAIL - 0.8%
- --------------------------------------------------------------------------------
43,400 Burlington Northern
Santa Fe Corp. 1,419,180
- --------------------------------------------------------------------------------
SOFTWARE - 1.9%
- --------------------------------------------------------------------------------
53,500 Computer Associates
International, Inc. 1,434,335
- --------------------------------------------------------------------------------
75,200 Microsoft Corporation 1,952,944
- --------------------------------------------------------------------------------
3,387,279
- --------------------------------------------------------------------------------
SPECIALTY RETAIL - 1.0%
- --------------------------------------------------------------------------------
46,400 Blockbuster Inc. 767,920
- --------------------------------------------------------------------------------
50,300 Limited Brands 1,038,192
- --------------------------------------------------------------------------------
1,806,112
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS - 1.1%
- --------------------------------------------------------------------------------
29,800 Liz Claiborne, Inc. 1,045,980
- --------------------------------------------------------------------------------
21,300 VF Corp. 983,208
- --------------------------------------------------------------------------------
2,029,188
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 5.7%
- --------------------------------------------------------------------------------
116,700 Freddie Mac 6,815,280
- --------------------------------------------------------------------------------
16,400 MGIC Investment Corp. 1,207,368
- --------------------------------------------------------------------------------
58,100 Washington Mutual, Inc. 2,288,559
- --------------------------------------------------------------------------------
10,311,207
- --------------------------------------------------------------------------------
TOBACCO - 1.6%
- --------------------------------------------------------------------------------
50,700 Altria Group Inc. 2,807,766
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 0.7%
- --------------------------------------------------------------------------------
48,300 Vodafone Group plc ADR 1,185,282
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $148,433,152) 170,117,928
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS - 4.8%
Repurchase Agreement, Merrill Lynch & Co., Inc.,
(U.S. Treasury obligations), in a joint trading
account at 0.89%, dated 4/30/04, due 5/3/04
(Delivery value $8,600,638)
(Cost $8,600,000) 8,600,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.0%
(Cost $157,033,152) $178,717,928
================================================================================
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements.
- ------
7
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
ASSETS
- --------------------------------------------------------------------------------
Investment securities, at value
(cost of $157,033,152) $178,717,928
- ------------------------------------------------------------
Cash 361,403
- ------------------------------------------------------------
Receivable for investments sold 770,829
- ------------------------------------------------------------
Receivable for capital shares sold 94,823
- ------------------------------------------------------------
Dividends and interest receivable 364,008
- --------------------------------------------------------------------------------
180,308,991
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased 2,383,780
- ------------------------------------------------------------
Accrued management fees 155,178
- ------------------------------------------------------------
Distribution fees payable 697
- ------------------------------------------------------------
Service fees payable 697
- --------------------------------------------------------------------------------
2,540,352
- --------------------------------------------------------------------------------
NET ASSETS $177,768,639
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital (par value and paid-in surplus) $158,893,317
- ------------------------------------------------------------
Undistributed net investment income 649,563
- ------------------------------------------------------------
Accumulated net realized loss on investment transactions (3,459,017)
- ------------------------------------------------------------
Net unrealized appreciation on investments 21,684,776
- --------------------------------------------------------------------------------
$177,768,639
================================================================================
INVESTOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $156,938,276
- ------------------------------------------------------------
Shares outstanding 24,812,992
- ------------------------------------------------------------
Net asset value per share $6.32
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $16,673,744
- ------------------------------------------------------------
Shares outstanding 2,635,168
- ------------------------------------------------------------
Net asset value per share $6.33
- --------------------------------------------------------------------------------
ADVISOR CLASS, $0.01 PAR VALUE
- --------------------------------------------------------------------------------
Net assets $4,156,619
- ------------------------------------------------------------
Shares outstanding 657,813
- ------------------------------------------------------------
Net asset value per share $6.32
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- ------
8
Statement of Operations
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
- --------------------------------------------------------------------
Dividends (net of foreign taxes withheld $18,397) $1,706,045
- --------------------------------------------------------------------
Interest 54,392
- --------------------------------------------------------------------------------
1,760,437
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Management fees 767,482
- --------------------------------------------------------------------
Distribution fees - Advisor Class 1,998
- --------------------------------------------------------------------
Service fees - Advisor Class 1,998
- --------------------------------------------------------------------
Directors' fees and expenses 804
- --------------------------------------------------------------------
Other expenses 394
- --------------------------------------------------------------------------------
772,676
- --------------------------------------------------------------------------------
Net investment income 987,761
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on investment transactions 6,301
- --------------------------------------------------------------------
Change in net unrealized appreciation on investments 8,600,328
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN 8,606,629
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $9,594,390
================================================================================
See Notes to Financial Statements.
- ------
9
Statement of Changes in Net Assets
SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED) AND YEAR ENDED OCTOBER 31, 2003
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS 2004 2003
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 987,761 $ 1,173,333
- --------------------------------------------
Net realized gain (loss) 6,301 (879,865)
- --------------------------------------------
Change in net unrealized appreciation 8,600,328 15,606,843
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 9,594,390 15,900,311
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
- --------------------------------------------
Investor Class (1,108,582) (722,398)
- --------------------------------------------
Institutional Class (149,309) (55,069)
- --------------------------------------------
Advisor Class (4,126) --
- --------------------------------------------------------------------------------
Decrease in net assets from distributions (1,262,017) (777,467)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase in net assets from
capital share transactions 66,030,823 34,078,256
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 74,363,196 49,201,100
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 103,405,443 54,204,343
- --------------------------------------------------------------------------------
End of period $177,768,639 $103,405,443
================================================================================
Undistributed net investment income $649,563 $923,819
================================================================================
See Notes to Financial Statements.
- ------
10
Notes to Financial Statements
APRIL 30, 2004 (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 (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 this objective by investing primarily in common stocks that
management believes to be undervalued at the time of purchase. The fund also
seeks to minimize the impact of federal taxes on shareholder returns by
attempting to minimize taxable distributions to shareholders. 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 commenced
on May 14, 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 may be valued through a
commercial pricing service or at amortized cost, which approximates fair value.
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 substantially 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, 2004 (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, 2004 was
1.10%, 0.90%, and 0.85%, for the Investor, Institutional and Advisor Classes,
respectively.
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, 2004, 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, 2004, the fund invested in a money market
fund for temporary purposes, which was managed by J.P. Morgan Investment
Management, Inc. (JPMIM). JPMIM 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 JPMorgan Chase Bank (JPMCB). JPMCB 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, 2004, were $70,695,252 and $8,448,041,
respectively.
(continued)
- ------
12
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the fund were as follows:
SHARES AMOUNT
- --------------------------------------------------------------------------------
INVESTOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 150,000,000
================================================================================
Sold 10,489,817 $66,120,882
- ------------------------------------------------
Issued in reinvestment of distributions 176,012 1,077,190
- ------------------------------------------------
Redeemed (1,535,051) (9,696,005)
- --------------------------------------------------------------------------------
Net increase 9,130,778 $57,502,067
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 150,000,000
================================================================================
Sold 7,059,686 $36,556,988
- ------------------------------------------------
Issued in reinvestment of distributions 122,823 606,746
- ------------------------------------------------
Redeemed (1,839,155) (9,565,446)
- --------------------------------------------------------------------------------
Net increase 5,343,354 $27,598,288
================================================================================
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 15,000,000
================================================================================
Sold 798,138 $5,033,057
- ------------------------------------------------
Issued in reinvestment of distributions 24,242 148,362
- ------------------------------------------------
Redeemed (101,924) (629,205)
- --------------------------------------------------------------------------------
Net increase 720,456 $4,552,214
================================================================================
YEAR ENDED OCTOBER 31, 2003
SHARES AUTHORIZED 15,000,000
================================================================================
Sold 1,478,545 $8,030,416
- ------------------------------------------------
Issued in reinvestment of distributions 10,959 54,137
- ------------------------------------------------
Redeemed (348,587) (1,796,602)
- --------------------------------------------------------------------------------
Net increase 1,140,917 $6,287,951
================================================================================
ADVISOR CLASS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2004
SHARES AUTHORIZED 50,000,000
================================================================================
Sold 705,325 $4,501,693
- ------------------------------------------------
Issued in reinvestment of distributions 674 4,126
- ------------------------------------------------
Redeemed (82,518) (529,277)
- --------------------------------------------------------------------------------
Net increase 623,481 $3,976,542
================================================================================
PERIOD ENDED OCTOBER 31, 2003(1)
SHARES AUTHORIZED 50,000,000
================================================================================
Sold 34,332 $192,017
================================================================================
(1) May 14, 2003 (commencement of sale) through October 31, 2003.
(continued)
- ------
13
Notes to Financial Statements
APRIL 30, 2004 (UNAUDITED)
5. BANK LINE OF CREDIT
The fund, along with certain other funds managed by ACIM, has a $650,000,000
unsecured bank line of credit agreement with JPMCB, which was renewed from
$620,000,000 effective December 17, 2003. 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, 2004.
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 on the financial statements.
As of April 30, 2004, the components of investments for federal income tax
purposes were as follows:
- --------------------------------------------------------------------------------
Federal tax cost of investments $157,790,387
================================================================================
Gross tax appreciation of investments $21,803,352
- -------------------------------------------------------------
Gross tax depreciation of investments (875,811)
- --------------------------------------------------------------------------------
Net tax appreciation of investments $20,927,541
================================================================================
The difference between book-basis and tax-basis cost and unrealized appreciation
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales.
As of October 31, 2003, the fund had accumulated capital losses of $2,708,083
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.
- ------
14
Capital Value - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- ---------------------------------------------------------------------------------------------------
INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999(2)
- ---------------------------------------------------------------------------------------------------
PER-SHARE DATA
- ---------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $5.86 $4.88 $5.39 $5.50 $5.18 $5.00
- ---------------------------------------------------------------------------------------------------
Income From
Investment Operations
- --------------------------------
Net Investment Income 0.04(3) 0.08(3) 0.07(3) 0.06 0.08 0.04
- --------------------------------
Net Realized and Unrealized
Gain (Loss) 0.48 0.97 (0.52) (0.09) 0.29 0.14
- ---------------------------------------------------------------------------------------------------
Total From
Investment Operations 0.52 1.05 (0.45) (0.03) 0.37 0.18
- ---------------------------------------------------------------------------------------------------
Distributions
- --------------------------------
From Net Investment Income (0.06) (0.07) (0.06) (0.08) (0.05) --
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.32 $5.86 $4.88 $5.39 $5.50 $5.18
===================================================================================================
TOTAL RETURN(4) 8.94% 21.67% (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% 1.10%(5)
- --------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.38%(5) 1.54% 1.32% 1.18% 1.56% 1.14%(5)
- --------------------------------
Portfolio Turnover Rate 6% 22% 42% 56% 73% 41%
- --------------------------------
Net Assets, End of Period
(in thousands) $156,938 $91,960 $50,425 $47,542 $39,135 $46,132
- ---------------------------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
15
Capital Value - Financial Highlights
For a Share Outstanding Throughout the Years Ended October 31 (except as noted)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
2004(1) 2003 2002(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.87 $4.88 $5.87
- --------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------
Net Investment Income(3) 0.05 0.09 0.06
- ------------------------------------------
Net Realized and Unrealized Gain (Loss) 0.48 0.97 (1.05)
- --------------------------------------------------------------------------------
Total From Investment Operations 0.53 1.06 (0.99)
- --------------------------------------------------------------------------------
Distributions
- ------------------------------------------
From Net Investment Income (0.07) (0.07) -
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.33 $5.87 $4.88
================================================================================
TOTAL RETURN(4) 9.15% 22.07% (16.87)%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.90%(5) 0.90% 0.90%(5)
- ------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.58%(5) 1.74% 1.56%(5)
- ------------------------------------------
Portfolio Turnover Rate 6% 22% 42%(6)
- ------------------------------------------
Net Assets, End of Period (in thousands) $16,674 $11,244 $3,779
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (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.
- ------
16
Capital Value - Financial Highlights
For a Share Outstanding Throughout the Periods Indicated
- --------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------
2004(1) 2003(2)
- --------------------------------------------------------------------------------
PER-SHARE DATA
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.86 $5.19
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------
Net Investment Income(3) 0.03 0.03
- --------------------------------------
Net Realized and Unrealized Gain 0.48 0.64
- --------------------------------------------------------------------------------
Total From Investment Operations 0.51 0.67
- --------------------------------------------------------------------------------
Distributions
- --------------------------------------
From Net Investment Income (0.05) -
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $6.32 $5.86
================================================================================
TOTAL RETURN(4) 8.78% 12.91%
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 1.35%(5) 1.35%(5)
- --------------------------------------
Ratio of Net Investment Income
to Average Net Assets 1.13%(5) 1.03%(5)
- --------------------------------------
Portfolio Turnover Rate 6% 22%(6)
- --------------------------------------
Net Assets, End of Period
(in thousands) $4,157 $201
- --------------------------------------------------------------------------------
(1) Six months ended April 30, 2004 (unaudited).
(2) May 14, 2003 (commencement of sale) through October 31, 2003.
(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, 2003.
See Notes to Financial Statements.
- ------
17
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 Institutional
Class shares is lower than that of Investor Class shares. The total expense
ratio of Advisor Class shares is higher than that 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 investment
advisors, 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.
- ------
18
Additional Information
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA or certain 403(b),
457 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.
PROXY VOTING GUIDELINES
American Century Investment Management, Inc., the fund's manager, is responsible
for exercising the voting rights associated with the securities purchased and/or
held by the fund. A description of the policies and procedures the manager uses
in fulfilling this responsibility is available without charge, upon request, by
calling 1-800-345-2021. It is also available on American Century's Web site at
americancentury.com and on the Securities and Exchange Commission's Web site at
sec.gov.
- ------
19
Index Definitions
The following indices are used to illustrate investment market, sector, or style
performance or 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 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.
- ------
20
CONTACT US
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.
The American Century logo, American Century and American Century Investments
are service marks of American Century Services Corporation.
0406 American Century Investment Services, Inc.
SH-SAN-38385N (c)2004 American Century Services Corporation
ITEM 2. CODE OF ETHICS.
Not applicable for semiannual report filings.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semiannual report filings.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semiannual report filings.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant does not currently have in place procedures by which
shareholders may recommend nominees to the registrant's board.
ITEM 10. 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-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the registrant's last fiscal
half-year that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting
ITEM 11. EXHIBITS.
(a)(1) Not applicable for semiannual report filings.
(a)(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are filed and attached hereto as Exhibit
99.302CERT.
(a)(3) Not applicable.
(b) A certification by the registrant's chief executive officer and chief
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
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
Date: June 21, 2004
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 21, 2004
By: /s/ Maryanne L. Roepke
------------------------------------------------
Name: Maryanne L. Roepke
Title: Sr. Vice President, Treasurer, and
Chief Accounting Officer
(principal financial officer)
Date: June 21, 2004
