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 811-21861
----------------------------------------------
AMERICAN CENTURY GROWTH FUNDS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
4500 Main Street, Kansas City, Missouri 64111
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 816-531-5575
-----------------------------
Date of fiscal year end: 07-31
--------------------------------------------------------
Date of reporting period: 07-31-2007
-------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
[front cover]
AMERICAN CENTURY INVESTMENTS
Annual Report July 31, 2007
[photo of summer]
Legacy Focused Large Cap Fund
Legacy Large Cap Fund
Legacy Multi Cap Fund
[american century investments logo and text logo]
OUR MESSAGE TO YOU
We have the privilege of providing you with the annual report for the American
Century® Legacy Focused Large Cap, Legacy Large Cap and Legacy Multi Cap funds
for the 12 months ended July 31, 2007, to help you monitor your investment.
2007 has been an eventful year for the financial markets and for us. While the
markets experienced subprime-related turbulence, we've been working to secure
a smooth executive leadership transition. In our semiannual report, we
announced the promotion of former international equity chief investment
officer (CIO) Enrique Chang to overall CIO. One of Enrique's immediate
challenges was to hire a new international equity CIO, which he accomplished
in May when Mark On joined us from AXA Rosenberg. Enrique also hired Steve
Lurito from MUUS Asset Management LLC in July to fill our vacant U.S. growth
equity CIO position.
We also announced the promotion of Jonathan Thomas to chief executive officer.
In June, Jonathan hired Barry Fink, who came to us from Morgan Stanley, as
chief operating officer. This completed our leadership transition, and helped
make it possible for my son, Jim Stowers III, to step down from the American
Century Companies, Inc. (ACC) board of directors at the end of July to focus
on his new business ventures. I remain co-chair of the ACC board with Richard
Brown, who has been on the board since 1998 and also co-chairs the Stowers
Institute for Medical Research board.
Jim's recent departure, after he relinquished his executive leadership and
investment management responsibilities in early 2005, reflects his comfort
with the firm's direction and new leadership. As with Jim before them, we've
been energized by the skills and experience brought to the leadership team by
Jonathan, Enrique, Barry, Mark, and Steve. They've already had a positive
impact on the development and management of the products and services we take
pride in delivering to you.
[photo of James E. Stowers, Jr.]
/s/James E. Stowers, Jr.
James E. Stowers, Jr.
FOUNDER AND CO-CHAIRMAN OF THE BOARD
AMERICAN CENTURY COMPANIES, INC.
TABLE OF CONTENTS
Market Perspective. . . . . . . . . . . . . . . . . . . . . . . .. 2
U.S. Stock Index Returns . . . . . . . . . . . . . . . . . . . .. 2
LEGACY FOCUSED LARGE CAP
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . .. 5
Schedule of Investments . . . . . . . . . . . . . . . . . . . . .. 7
LEGACY LARGE CAP
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . .. 8
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . .. 10
Schedule of Investments . . . . . . . . . . . . . . . . . . . . .. 12
LEGACY MULTI CAP
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14
Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . .. 16
Schedule of Investments . . . . . . . . . . . . . . . . . . . . .. 18
Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . .. 21
FINANCIAL STATEMENTS
Statement of Assets and Liabilities . . . . . . . . . . . . . . .. 23
Statement of Operations . . . . . . . . . . . . . . . . . . . . .. 24
Statement of Changes in Net Assets. . . . . . . . . . . . . . . .. 25
Notes to Financial Statements . . . . . . . . . . . . . . . . . .. 27
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . .. 34
Report of Independent Registered Public Accounting Firm . . . . .. 46
OTHER INFORMATION
Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . .. 47
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
Approval of Management Agreements for Legacy Focused Large Cap,
Legacy Large Cap and Legacy Multi Cap. . . . . . . . . . . . . .. 52
Share Class Information . . . . . . . . . . . . . . . . . . . . .. 57
Additional Information. . . . . . . . . . . . . . . . . . . . . .. 58
Index Definitions . . . . . . . . . . . . . . . . . . . . . . . .. 59
The opinions expressed in the Market Perspective and each of the Portfolio
Commentaries 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.
MARKET PERSPECTIVE
[Photo of Chief Investment Officer]
By Steve Lurito, Chief Investment Officer, U.S. Growth Equity
UNEVEN ECONOMIC PERFORMANCE
U.S. stocks produced robust returns during the one-year period, despite an
economic slowdown brought on by a sharp decline in the housing market. U.S.
gross domestic product (GDP) slowed from 2.3% in the fourth quarter of 2006 to
an anemic 0.6% in the first quarter of 2007--the lowest growth rate since the
fourth quarter of 2002. But growth picked up significantly in the second
quarter of the year--government estimates showed the economy expanding at a
4.0% annual rate. The Federal Reserve (the Fed) held short-term interest rates
steady throughout the period as economic activity decelerated while overall
inflation remained above the Fed's comfort level, largely because of
stubbornly high energy prices.
Against this backdrop, corporate earnings growth decelerated--ending a streak
of double-digit quarterly earnings growth for the S&P 500 Index that began in
2002-- but continued to outshine expectations. In addition, heavy merger
activity provided support for stocks thanks to a deluge of leveraged buy-outs
from private equity firms.
STOCKS GAINED; GROWTH BEAT VALUE
Although the broad stock indexes returned more than 15% for the one-year
period, the market hit several speed bumps over the last six months. Stocks
stumbled in late February, mirroring a drop in the Chinese stock market, but
rebounded quickly in early March. Another brief selloff in early June gave way
to a rally that sent the S&P 500 to an all-time high in mid-July. But shortly
thereafter, the market fell sharply as higher energy prices and deteriorating
credit conditions--sparked by problems in the subprime lending
industry--weighed on investor confidence.
As the accompanying table shows, mid-cap stocks led the market's advance for
the one-year period, followed by large-cap shares, while small-cap issues
lagged. Growth stocks, which have trailed value stocks for seven consecutive
years, enjoyed a resurgence, outperforming value shares by a wide margin
across all capitalizations. The best-performing sectors of the market were
materials, information technology, and telecom. At the other end of the
spectrum, financials lagged badly, hurt by higher interest rates and the
subprime lending fallout.
U.S. Stock Index Returns
For the 12 months ended July 31, 2007
RUSSELL 1000 INDEX (LARGE CAP) 16.45%
Russell 1000 Growth Index 19.47%
Russell 1000 Value Index 13.47%
RUSSELL MIDCAP INDEX 18.93%
Russell Midcap Growth Index 21.40%
Russell Midcap Value Index 15.94%
RUSSELL 2000 INDEX (SMALL CAP) 12.12%
Russell 2000 Growth Index 16.83%
Russell 2000 Value Index 7.67%
- ------
2
PERFORMANCE
Legacy Focused Large Cap
Total Returns as of July 31, 2007
Average
Annual Returns
Since Inception
1 year Inception Date
INVESTOR CLASS 24.44% 21.74% 5/31/06
S&P 500 INDEX(1) 16.13% 14.41% --
RUSSELL 1000 GROWTH INDEX(1) 19.47% 14.18% --
Institutional Class 24.78% 22.02% 5/31/06
Advisor Class 24.07% 21.43% 5/31/06
R Class 23.82% 21.12% 5/31/06
(1) Data provided by Lipper Inc. - A Reuters Company. © 2007 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. The fund is considered nondiversified, which may subject
the fund to risk because a price change in any one security may have a greater
impact than would be the case if the fund were diversified. The fund's
investment process may also result in high portfolio turnover, which could
mean high transaction costs, affecting both performance and capital gains tax
liabilities to investors. International investing involves specific risks,
such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. 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.
- ------
3
Legacy Focused Large Cap
Growth of $10,000 Over Life of Class
$10,000 investment made May 31, 2006
One-Year Returns Over Life of Class
Periods ended July 31
2006* 2007
Investor Class 1.10% 24.44%
S&P 500 Index 0.75% 16.13%
Russell 1000 Growth Index -2.29% 19.47%
* From 5/31/06, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. The fund is considered nondiversified, which may subject
the fund to risk because a price change in any one security may have a greater
impact than would be the case if the fund were diversified. The fund's
investment process may also result in high portfolio turnover, which could
mean high transaction costs, affecting both performance and capital gains tax
liabilities to investors. International investing involves specific risks,
such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. 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.
- ------
4
PORTFOLIO COMMENTARY
Legacy Focused Large Cap
Portfolio Manager: John T. Small Jr.
In May 2007, portfolio manager Sheila Davis left American Century to pursue
another career opportunity. Veteran American Century portfolio manager John T.
Small Jr. (16 years with the firm) assumed the role of manager for Legacy
Focused Large Cap.
PERFORMANCE SUMMARY
Legacy Focused Large Cap advanced 24.44%* for the 12 months ended July 31,
2007, surpassing the 16.13% return of the portfolio's benchmark, the S&P 500
Index, and the 19.47% return of the Russell 1000 Growth Index.
As discussed in the Market Perspective on page 2, a pause in Federal Reserve
(Fed) interest rate moves, strong merger activity, and better-than-expected
corporate earnings growth contributed to solid U.S. stock index gains for the
one-year period, despite a slowdown in the housing market and growing problems
among subprime lenders.
Anticipating opportunities in foreign markets, we allocated a significant
portion of the portfolio's assets to holdings of companies outside of the
United States. The portfolio benefited from this allocation, as international
stocks outperformed the domestic market, boosted by improving global economic
conditions and a declining U.S. dollar. The top international performers were
emerging markets, with Latin America generating the largest gains. Among
developed markets, European bourses posted the best returns, while Japanese
shares lagged as a burgeoning economic recovery in the country appeared to
stall. Overweight positions and effective stock selection in the materials and
telecommunication services sectors, and effective stock selection in the
industrials sector benefited the portfolio's absolute and relative performance
during the reporting period. Those gains more than made up for detrimental
stock selection in the health care sector.
MOMENTUM RETURNED
Our highly systematic investment process focuses on finding stocks exhibiting
upward price momentum and acceleration in earnings and revenue, a process we
believe will lead to long-term growth. Early in the reporting period, the
market steered away from stocks exhibiting price momentum, placing a drag on
the portfolio's relative performance. Beginning in the fourth quarter of 2006,
though, investors tilted toward momentum factors, a trend that persisted
throughout the remainder of the period and helped the portfolio deliver strong
relative and absolute returns.
Top Ten Holdings as of July 31, 2007
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Southern Copper Corp. 5.8% 3.7%
Cia Vale do Rio Doce ADR 4.3% 3.5%
National Oilwell Varco, Inc. 4.2% --
Garmin Ltd. 4.0% --
Research In Motion Ltd. 3.8% 3.4%
Freeport-McMoRan Copper & Gold, Inc. 3.8% --
NVIDIA Corp. 3.6% --
Paccar Inc. 3.5% 3.4%
Precision Castparts Corp. 3.5% --
Transocean Inc. 3.4% --
* All fund returns referenced in this commentary are for Investor Class shares.
- ------
5
Legacy Focused Large Cap
WE MINED GOOD RESULTS IN METALS
Legacy Focused Large Cap's substantial overweight in materials focused on the
metals and mining industry, which contributed significantly to relative
performance. Southern Copper, the portfolio's largest holding and one of its
top individual performers, gained 151%, and overweight holding
Freeport-McMoRan Copper & Gold's share price gained 86% amid a surge in copper
prices.
An overweight in Companhia Vale do Rio Doce also contributed to the
portfolio's absolute and relative gains. Strong iron ore and nickel prices
helped push the Brazilian mining company's share price up 115% for the
reporting period.
STOCK SELECTION IN INDUSTRIALS HELPED
Although the portfolio held a slight underweight position in industrials, its
overwhelming focus in the sector was on the machinery industry -- an industry
overweight that resulted in strong relative gains. The two largest individual
stakes--truckmakers Volvo AB and Paccar Inc.--both made substantial
contributions to relative performance.
HEALTH CARE AND ENERGY HINDERED
The health care sector was home to a number of individual detractors to
portfolio performance. In particular, every holding in the biotechnology group
and four of the six holdings in health care services weighed on relative
performance.
An underweight in the energy sector also detracted from performance, as this
group benefited from continued rising oil prices. The portfolio's relative
weakness in the sector was curtailed, though, by an overweight position in oil
and gas services company National Oilwell Varco, which gained 79%.
STARTING POINT FOR NEXT REPORTING PERIOD
Legacy Focused Large Cap employs financial acceleration and price momentum
characteristics to identify investment opportunities. James Stowers Jr.,
American Century's founder, developed the company's initial acceleration and
momentum model in the 1970s. Legacy Focused Large Cap enhances this
traditional American Century approach. It uses a quantitative model consisting
of additional financial and market factors that aim to exploit large cap
investment opportunities across the growth and value spectrum, depending on
the economic cycle.
During the reporting period ending July 31, 2007, our model guided us to
overweight positions in materials and telecommunication services and
underweight positions in consumer staples and financials.
Top Five Industries as of July 31, 2007
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Metals & Mining 16.3% 10.7%
Wireless Telecommunication Services 11.8% 6.3%
Machinery 9.5% 7.3%
Diversified Telecommunication Services 8.9% 7.1%
Oil, Gas & Consumable Fuels 8.9% 3.0%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Domestic Common Stocks 57.9% 62.2%
Foreign Common Stocks(1) 40.7% 37.8%
TOTAL COMMON STOCKS 98.6% 100.0%
Cash and Equivalents(2) 1.4% --(3)
(1) Includes depositary shares, dual listed securities and foreign ordinary
shares.
(2) Includes temporary cash investments and other assets and liabilities.
(3) Category is less than 0.05% of total net assets.
- ------
6
SCHEDULE OF INVESTMENTS
Legacy Focused Large Cap
JULY 31, 2007
Shares Value
Common Stocks -- 98.6%
AEROSPACE & DEFENSE -- 6.7%
4,328 Boeing Co. $ 447,645
3,634 Precision Castparts Corp. 498,076
-----------
945,721
-----------
BIOTECHNOLOGY -- 2.4%
9,137 Gilead Sciences, Inc.(1) 340,171
-----------
COMMUNICATIONS EQUIPMENT -- 7.1%
15,135 Juniper Networks, Inc.(1) 453,445
2,517 Research In Motion Ltd.(1) 538,638
-----------
992,083
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 8.9%
11,815 AT&T Inc. 462,675
26,442 Royal KPN N.V. ADR 409,587
11,166 Telefonos de Mexico, SAB de CV ADR 381,542
-----------
1,253,804
-----------
ENERGY EQUIPMENT & SERVICES -- 7.6%
4,868 National Oilwell Varco, Inc.(1) 584,696
4,492 Transocean Inc.(1) 482,665
-----------
1,067,361
-----------
HEALTH CARE PROVIDERS & SERVICES -- 3.0%
8,296 Express Scripts, Inc.(1) 415,878
-----------
HOUSEHOLD DURABLES -- 4.0%
6,761 Garmin Ltd. 567,248
-----------
IT SERVICES -- 3.3%
4,157 International Business Machines Corp. 459,972
-----------
MACHINERY -- 9.5%
3,891 Cummins Inc. 461,862
3,117 Deere & Co. 375,349
6,105 Paccar Inc. 499,511
-----------
1,336,722
-----------
METALS & MINING -- 16.3%
5,796 Arcelor Mittal CI A New York Shares 353,672
12,313 Cia Vale do Rio Doce ADR 603,460
5,617 Freeport-McMoRan Copper & Gold, Inc. 527,886
7,228 Southern Copper Corp. 814,668
-----------
2,299,686
-----------
Shares Value
OIL, GAS & CONSUMABLE FUELS -- 8.9%
5,163 ConocoPhillips $ 417,377
7,674 Marathon Oil Corp. 423,604
6,053 Valero Energy Corp. 405,612
-----------
1,246,593
-----------
PHARMACEUTICALS -- 2.8%
5,398 Shire plc ADR 398,318
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 6.3%
6,575 KLA-Tencor Corp. 373,394
11,208 NVIDIA Corp.(1) 512,878
-----------
886,272
-----------
WIRELESS TELECOMMUNICATION SERVICES -- 11.8%
6,940 America Movil, SAB de CV ADR 415,567
5,995 Mobile TeleSystems ADR(1) 383,380
23,846 Turkcell Iletisim Hizmetleri AS ADR 421,597
4,156 Vimpel-Communications ADR 440,121
-----------
1,660,665
-----------
TOTAL COMMON STOCKS
(Cost $12,025,373) 13,870,494
-----------
Principal Amount
Temporary Cash Investments -- 2.1%
$300,000 FHLB Discount Notes, 5.09%, 8/1/07(2) 300,000
(Cost $300,000)
-----------
TOTAL INVESTMENT SECURITIES -- 100.7%
(Cost $12,325,373) 14,170,494
-----------
OTHER ASSETS AND LIABILITIES -- (0.7)% (96,206)
-----------
TOTAL NET ASSETS -- 100.0% $14,074,288
===========
Notes to Schedule of Investments
ADR = American Depositary Receipt
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.
- ------
7
PERFORMANCE
Legacy Large Cap
Total Returns as of July 31, 2007
Average
Annual Returns
Since Inception
1 year Inception Date
INVESTOR CLASS 17.83% 16.57% 5/31/06
S&P 500 INDEX(1) 16.13% 14.41% --
RUSSELL 1000 GROWTH INDEX(1) 19.47% 14.18% --
Institutional Class 18.16% 16.85% 5/31/06
Advisor Class 17.59% 16.27% 5/31/06
R Class 17.33% 16.05% 5/31/06
(1) Data provided by Lipper Inc. - A Reuters Company. © 2007 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. The fund's investment process may also result in high
portfolio turnover, which could mean high transaction costs, affecting both
performance and capital gains tax liabilities to investors. International
investing involves specific risks, such as political instability and currency
fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. 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.
- ------
8
Legacy Large Cap
Growth of $10,000 Over Life of Class
$10,000 investment made May 31, 2006
One-Year Returns Over Life of Class
Periods ended July 31
2006* 2007
Investor Class 1.50% 17.83%
S&P 500 Index 0.75% 16.13%
Russell 1000 Growth Index -2.29% 19.47%
* From 5/31/06, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. The fund's investment process may also result in high
portfolio turnover, which could mean high transaction costs, affecting both
performance and capital gains tax liabilities to investors. International
investing involves specific risks, such as political instability and currency
fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. 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.
- ------
9
PORTFOLIO COMMENTARY
Legacy Large Cap
Portfolio Manager: John T. Small Jr.
In May 2007, portfolio manager Sheila Davis left American Century to pursue
another career opportunity. Veteran American Century portfolio manager John T.
Small Jr. (16 years with the firm) assumed the role of manager for Legacy
Large Cap.
PERFORMANCE SUMMARY
Legacy Large Cap advanced 17.83%* for the 12 months ended July 31, 2007,
surpassing the 16.13% return of the portfolio's benchmark, the S&P 500 Index,
but lagging the 19.47% return of the Russell 1000 Growth Index.
As discussed in the Market Perspective on page 2, a pause in Federal Reserve
(Fed) interest rate moves, strong merger activity, and better-than-expected
corporate earnings growth contributed to solid U.S. stock index gains for the
one-year period, despite a slowdown in the housing market and growing problems
among subprime lenders.
Anticipating opportunities in foreign markets, we allocated a significant
portion of the portfolio's assets to holdings of companies outside of the
United States. The portfolio benefited from this allocation, as international
stocks outperformed the domestic market, boosted by improving global economic
conditions and a declining U.S. dollar. The top international performers were
emerging markets, with Latin America generating the largest gains. Among
developed markets, European bourses posted the best returns, while Japanese
shares lagged as a burgeoning economic recovery in the country appeared to
stall. Overweight positions and effective stock selection in the materials and
telecommunication services sectors, and effective stock selection in the
industrials sector benefited the portfolio's absolute and relative performance
during the reporting period. Those gains more than made up for a detrimental
underweight and stock selection in the energy sector.
MOMENTUM RETURNED
Our highly systematic investment process focuses on finding stocks exhibiting
upward price momentum and acceleration in earnings and revenue, a process we
believe will lead to long-term growth. Early in the reporting period, the
market steered away from stocks exhibiting price momentum, placing a drag on
the portfolio's relative performance. Beginning in the fourth quarter of 2006,
though, investors tilted toward momentum factors, a trend that persisted
throughout the remainder of the period and helped the portfolio deliver strong
relative returns.
Top Ten Holdings as of July 31, 2007
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Southern Copper Corp. 3.4% 2.2%
Cia Vale do Rio Doce ADR 3.1% 2.5%
Vimpel-Communications ADR 3.0% 2.9%
Research In Motion Ltd. 2.7% 2.2%
Arcelor Mittal CI A New York Shares 2.5% 2.3%
EMC Corp. 2.3% 2.0%
Transocean Inc. 2.2% 1.8%
Novo-Nordisk AS ADR 2.2% 2.1%
America Movil, SAB de CV ADR 2.2% --
Paccar Inc. 2.1% 2.1%
* All fund returns referenced in this commentary are for Investor Class shares.
- ------
10
Legacy Large Cap
WE MINED GOOD RESULTS IN METALS
Legacy Large Cap's substantial overweight in materials focused on the metals
and mining industry, which contributed significantly to relative performance.
Southern Copper, the portfolio's largest holding and one of its top individual
performers, gained 151% amid a surge in copper prices.
An overweight in Companhia Vale do Rio Doce also contributed to the
portfolio's absolute and relative gains. Strong iron ore and nickel prices
helped push the Brazilian mining company's share price up 115% for the
reporting period. Dutch steel producer Arcelor Mittal benefited from higher
steel prices, gaining 81% and contributing to relative performance.
GOOD CALLS IN TELECOM
The portfolio's overweight position in the telecommunication services sector
also paid off. In the wireless telecom industry, shares in Russia-based Vimpel
Communications gained 123% and Mexico-based America Movil climbed 68%. Both
mobile phone providers experienced growing demand for cellular phone service
in burgeoning foreign markets.
UNDERWEIGHT IN ENERGY HINDERED
Legacy Large Cap held a substantial underweight in the energy sector during
the reporting period. This hampered relative performance, as the sector
continued to benefit from rising prices. Within the sector, the portfolio's
largest underweight was among oil, gas and consumable fuels companies - a
group that experienced healthy gains. The portfolio's relative weakness in
this area, though, was more than compensated for by strength in other sectors.
STARTING POINT FOR NEXT REPORTING PERIOD
Legacy Large Cap employs financial acceleration and price momentum
characteristics to identify investment opportunities. James Stowers Jr.,
American Century's founder, developed the company's initial acceleration and
momentum model in the 1970s. Legacy Large Cap enhances this traditional
American Century approach. It uses a quantitative model consisting of
additional financial and market factors that aim to exploit large cap
investment opportunities across the growth and value spectrum, depending on
the economic cycle.
During the reporting period ending July 31, 2007, our model guided us to
overweight positions in materials and telecommunication services and
underweight positions in consumer staples and financials.
Top Five Industries as of July 31, 2007
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Oil, Gas & Consumable Fuels 11.5% --
Pharmaceuticals 9.6% 4.1%
Metals & Mining 9.1% 7.0%
Communications Equipment 6.4% 4.2%
Aerospace & Defense 5.7% 1.8%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Domestic Common Stocks 69.1% 71.3%
Foreign Common Stocks(1) 28.6% 28.4%
TOTAL COMMON STOCKS 97.7% 99.7%
Cash and Equivalents(2) 2.3% 0.3%
(1) Includes depositary shares, dual listed securities and foreign ordinary
shares.
(2) Includes temporary cash investments and other assets and liabilities.
- ------
11
SCHEDULE OF INVESTMENTS
Legacy Large Cap
JULY 31, 2007
Shares Value
Common Stocks -- 97.7%
AEROSPACE & DEFENSE -- 5.7%
2,754 Honeywell International Inc. $ 158,383
1,673 Lockheed Martin Corp. 164,757
3,005 Raytheon Company 166,356
-----------
489,496
-----------
BEVERAGES -- 1.9%
3,075 Coca-Cola Company (The) 160,238
-----------
CAPITAL MARKETS -- 3.8%
1,010 BlackRock, Inc. 161,095
1,293 Franklin Resources, Inc. 164,689
-----------
325,784
-----------
CHEMICALS -- 1.9%
2,361 Bayer AG ADR 167,088
-----------
COMMUNICATIONS EQUIPMENT -- 6.4%
6,101 Corning Inc.(1) 145,448
5,649 Juniper Networks, Inc.(1) 169,244
1,085 Research In Motion Ltd.(1) 232,190
-----------
546,882
-----------
COMPUTERS & PERIPHERALS -- 4.3%
6,200 Dell Inc.(1) 173,414
10,645 EMC Corp.(1) 197,039
-----------
370,453
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.4%
4,471 AT&T Inc. 175,084
15,886 Qwest Communications International Inc.(1) 135,508
9,887 Royal KPN N.V. ADR 153,150
-----------
463,742
-----------
ELECTRIC UTILITIES -- 1.8%
2,994 Edison International 158,353
-----------
ELECTRICAL EQUIPMENT -- 1.9%
3,419 Emerson Electric Co. 160,932
-----------
ENERGY EQUIPMENT & SERVICES -- 2.2%
1,755 Transocean Inc.(1) 188,575
-----------
FOOD PRODUCTS -- 1.8%
5,992 ConAgra Foods, Inc. 151,897
-----------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.8%
1,120 Alcon, Inc. 152,880
-----------
HEALTH CARE PROVIDERS & SERVICES -- 1.4%
1,854 Humana Inc.(1) 118,823
-----------
HOTELS, RESTAURANTS & LEISURE -- 1.8%
3,169 McDonald's Corporation 151,700
-----------
Shares Value
HOUSEHOLD PRODUCTS -- 1.9%
2,501 Colgate-Palmolive Co. $ 165,066
-----------
INSURANCE -- 1.5%
2,127 Lincoln National Corp. 128,301
-----------
IT SERVICES -- 2.0%
1,532 International Business Machines Corp. 169,516
-----------
LIFE SCIENCES TOOLS & SERVICES -- 1.8%
3,054 Thermo Fisher Scientific Inc.(1) 159,449
-----------
MACHINERY -- 4.0%
2,995 Illinois Tool Works Inc. 164,875
2,179 Paccar Inc. 178,286
-----------
343,161
-----------
METALS & MINING -- 9.1%
3,574 Arcelor Mittal CI A New York Shares 218,085
5,455 Cia Vale do Rio Doce ADR 267,350
2,595 Southern Copper Corp. 292,482
-----------
777,917
-----------
OIL, GAS & CONSUMABLE FUELS -- 11.5%
1,978 Apache Corp. 159,724
2,242 Devon Energy Corporation 167,276
2,786 Hess Corp. 170,502
3,029 Marathon Oil Corp. 167,201
2,107 TOTAL SA ADR 165,631
2,286 Valero Energy Corp. 153,185
-----------
983,519
-----------
PHARMACEUTICALS -- 9.6%
2,736 Allergan, Inc. 159,044
5,283 Bristol-Myers Squibb Co. 150,090
1,782 Novo-Nordisk AS ADR 186,950
5,606 Schering-Plough Corp. 159,995
2,289 Shire plc ADR 168,905
-----------
824,984
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.7%
2,648 KLA-Tencor Corp. 150,380
-----------
SOFTWARE -- 5.5%
3,936 Adobe Systems Inc.(1) 158,581
5,365 Microsoft Corporation 155,531
8,402 Oracle Corp.(1) 160,647
-----------
474,759
-----------
TEXTILES, APPAREL & LUXURY GOODS -- 1.8%
2,780 NIKE, Inc. Cl B 156,931
-----------
- ------
12
Legacy Large Cap
Shares Value
WIRELESS TELECOMMUNICATION SERVICES -- 5.2%
3,109 America Movil, SAB de CV ADR $ 186,167
2,460 Vimpel-Communications ADR 260,514
-----------
446,681
-----------
TOTAL COMMON STOCKS
(Cost $7,495,911) 8,387,507
-----------
Principal Amount
Temporary Cash Investments -- 5.8%
$500,000 FHLB Discount Notes, 5.09%, 8/1/07(2) 500,000
(Cost $500,000)
-----------
TOTAL INVESTMENT SECURITIES -- 103.5%
(Cost $7,995,911) 8,887,507
-----------
OTHER ASSETS AND LIABILITIES -- (3.5)% (303,476)
-----------
TOTAL NET ASSETS -- 100.0% $ 8,584,031
===========
Notes to Schedule of Investments
ADR = American Depositary Receipt
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.
- ------
13
PERFORMANCE
Legacy Multi Cap
Total Returns as of July 31, 2007
Average
Annual Returns
Since Inception
1 year Inception Date
INVESTOR CLASS 27.21% 22.27% 5/31/06
RUSSELL 3000 INDEX(1) 16.08% 13.72% --
RUSSELL 3000 GROWTH INDEX(1) 19.24% 13.75% --
Institutional Class 27.45% 22.46% 5/31/06
Advisor Class 26.83% 21.95% 5/31/06
R Class 26.58% 21.64% 5/31/06
(1) Data provided by Lipper Inc. - A Reuters Company. © 2007 Reuters. All
rights reserved. Any copying, republication or redistribution of Lipper
content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Lipper. Lipper shall not be
liable for any errors or delays in the content, or for any actions taken in
reliance thereon.
The data contained herein has been obtained from company reports, financial
reporting services, periodicals and other resources believed to be reliable.
Although carefully verified, data on compilations is not guaranteed by Lipper
and may be incomplete. No offer or solicitations to buy or sell any of the
securities herein is being made by Lipper.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. Historically, small company stocks have been more
volatile than the stocks of larger, more established companies. The fund's
investment process may also result in high portfolio turnover, which could
mean high transaction costs, affecting both performance and capital gains tax
liabilities to investors. International investing involves specific risks,
such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. 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.
- ------
14
Legacy Multi Cap
Growth of $10,000 Over Life of Class
$10,000 investment made May 31, 2006
One-Year Returns Over Life of Class
Periods ended July 31
2006* 2007
Investor Class -0.60% 27.21%
Russell 3000 Index 0.08% 16.08%
Russell 3000 Growth Index -2.54% 19.24%
* From 5/31/06, the Investor Class's inception date. Not annualized.
Data presented reflect past performance. Past performance is no guarantee of
future results. Current performance may be higher or lower than the
performance shown. Investment return and principal value will fluctuate, and
redemption value may be more or less than original cost. To obtain performance
data current to the most recent month end, please call 1-800-345-2021 or visit
americancentury.com. Historically, small company stocks have been more
volatile than the stocks of larger, more established companies. The fund's
investment process may also result in high portfolio turnover, which could
mean high transaction costs, affecting both performance and capital gains tax
liabilities to investors. International investing involves specific risks,
such as political instability and currency fluctuations.
Unless otherwise indicated, performance reflects Investor Class shares;
performance for other share classes will vary due to differences in fee
structure. For information about other share classes available, please consult
the prospectus. Data assumes reinvestment of dividends and capital gains, and
none of the charts reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. 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.
- ------
15
PORTFOLIO COMMENTARY
Legacy Multi Cap
Portfolio Manager: John T. Small Jr.
In May 2007, portfolio manager Sheila Davis left American Century to pursue
another career opportunity. Veteran American Century portfolio manager John T.
Small Jr. (16 years with the firm) assumed the role of manager for Legacy
Multi Cap.
PERFORMANCE SUMMARY
Legacy Multi Cap advanced 27.21%* for the 12 months ended July 31, 2007,
surpassing the 16.08% return of the portfolio's benchmark, the Russell 3000
Index and the 19.24% return of the Russell 3000 Growth Index.
As discussed in the Market Perspective on page 2, a pause in Federal Reserve
(Fed) interest rate moves, strong merger activity, and better-than-expected
corporate earnings growth contributed to solid U.S. stock index gains for the
one-year period, despite a slowdown in the housing market and growing problems
among subprime lenders.
Anticipating opportunities in foreign markets, we allocated a significant
portion of the portfolio's assets to holdings of companies outside of the
United States. The portfolio benefited from this allocation, as international
stocks outperformed the domestic market, boosted by improving global economic
conditions and a declining U.S. dollar. The top international performers were
emerging markets, with Latin America generating the largest gains. Among
developed markets, European bourses posted the best returns, while Japanese
shares lagged as a burgeoning economic recovery in the country appeared to
stall. An underweight position and effective stock selection in the financials
sector, and effective stock selection in the industrials and telecommunication
services sectors benefited the portfolio's absolute and relative performance
during the reporting period. Those gains more than made up for a detrimental
underweight and stock selection in the energy sector.
MOMENTUM RETURNED
Our highly systematic investment process focuses on finding stocks exhibiting
upward price momentum and acceleration in earnings and revenue, a process we
believe will lead to long-term growth. Early in the reporting period, the
market steered away from stocks exhibiting price momentum, placing a drag on
the portfolio's relative performance. Beginning in the fourth quarter of 2006,
though, investors tilted toward momentum factors, a trend that persisted
throughout the remainder of the period and helped the portfolio deliver strong
relative returns.
INDUSTRIALS LED GAINS
Within the industrials sector, the portfolio held an overweight stake in
DryShips Inc. The shipping company's share price soared 442% for the reporting
period and contributed significantly to relative gains.
Top Ten Holdings as of July 31, 2007
% of net % of net
assets as of assets as of
7/31/07 1/31/07
DryShips Inc. 1.7% --
Foster Wheeler Ltd. 1.5% --
Precision Castparts Corp. 1.3% 1.2%
NAVTEQ Corp. 1.3% --
McDermott International, Inc. 1.3% 1.0%
Research In Motion Ltd. 1.3% 1.0%
Garmin Ltd. 1.3% --
ADDvantage Technologies Group, Inc. 1.2% --
Penford Corp. 1.2% --
Life Partners Holdings, Inc. 1.2% --
* All fund returns referenced in this commentary are for Investor Class shares.
- ------
16
Legacy Multi Cap
Construction and engineering company Foster Wheeler and industrial
conglomerate McDermott International also made substantial contributions to
relative performance, gaining 195% and 82%, respectively. Both companies are
representative of portfolio holdings involved in a variety of heavy
construction areas, including the construction of power plants, which have
benefited from growing global demand for energy infrastructure.
The portfolio also benefited from an overweight position in the aerospace and
defense industry. The investment team's focus in the industry is on companies
benefiting from a replacement cycle and expanding orders in global aviation.
The largest contributor to portfolio performance within this group was
Precision Castparts, a manufacturer of components for aerospace applications.
Precision's share price soared 130% for the reporting period.
UNDERWEIGHT IN FINANCIALS HELPED
Legacy Multi Cap benefited from an underweight position in the financials
sector, the benchmark's weakest-performing sector. Financial stocks as a whole
continued to be dragged down by concerns surrounding sub-prime mortgage
lenders.
An overweight stake in Intercontinental Exchange also contributed
significantly to relative performance and exemplifies the type of investment
opportunity our process is designed to target. Shares of Intercontinental
Exchange, which operates an internet marketplace for commodities futures,
soared 154% as second-quarter profit jumped 73%. Our investment process
identified the company's upward movement early in the reporting period,
allowing the portfolio to participate in its success.
STARTING POINT FOR NEXT REPORTING PERIOD
Legacy Multi Cap employs financial acceleration and price momentum
characteristics to identify investment opportunities. James Stowers Jr.,
American Century's founder, developed the company's initial acceleration and
momentum model in the 1970s. Legacy Multi Cap enhances this traditional
American Century approach. It uses a quantitative model consisting of
additional financial and market factors that aim to exploit investment
opportunities across the growth and value spectrum, depending on the economic
cycle.
During the reporting period ending July 31, 2007, our model guided us to
overweight positions in materials and telecommunication services and
underweight positions in consumer staples and financials.
Top Five Industries as of July 31, 2007
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Oil, Gas & Consumable Fuels 9.1% --
Machinery 8.4% 2.0%
Diversified Telecommunication
Services 7.7% 3.4%
Communications Equipment 5.3% 2.6%
Software 5.1% 3.9%
Types of Investments in Portfolio
% of net % of net
assets as of assets as of
7/31/07 1/31/07
Domestic Common Stocks 73.9% 80.9%
Foreign Common Stocks(1) 25.1% 17.9%
TOTAL COMMON STOCKS 99.0% 98.8%
Cash and Equivalents(2) 1.0% 1.2%
(1) Includes depositary shares, dual listed securities and foreign ordinary
shares.
(2) Includes temporary cash investments and other assets and liabilities.
- ------
17
SCHEDULE OF INVESTMENTS
Legacy Multi Cap
JULY 31, 2007
Shares Value
Common Stocks -- 99.0%
AEROSPACE & DEFENSE -- 2.3%
11,399 EDO Corp. $ 376,737
3,686 Precision Castparts Corp. 505,203
-----------
881,940
-----------
AUTO COMPONENTS -- 1.0%
11,539 Drew Industries Inc.(1) 401,326
-----------
BIOTECHNOLOGY -- 2.9%
7,760 Alexion Pharmaceuticals Inc.(1) 451,321
8,559 Gilead Sciences, Inc.(1) 318,652
9,428 Myriad Genetics Inc.(1) 352,419
-----------
1,122,392
-----------
BUILDING PRODUCTS -- 1.0%
10,186 Lennox International Inc. 390,124
-----------
CAPITAL MARKETS -- 1.8%
2,463 BlackRock, Inc. 392,849
1,577 Goldman Sachs Group, Inc. (The) 297,012
-----------
689,861
-----------
CHEMICALS -- 3.2%
8,146 Airgas Inc. 380,418
12,723 Penford Corp. 454,593
5,341 Praxair, Inc. 409,227
-----------
1,244,238
-----------
COMMERCIAL SERVICES & SUPPLIES -- 0.8%
8,521 Viad Corp. 306,330
-----------
COMMUNICATIONS EQUIPMENT -- 5.3%
10,336 Ciena Corp.(1) 377,574
8,164 Comtech Telecommunications Corp.(1) 354,889
41,832 Harmonic Inc.(1) 371,050
2,278 Research In Motion Ltd.(1) 487,492
19,678 Sierra Wireless, Inc.(1) 445,707
-----------
2,036,712
-----------
COMPUTERS & PERIPHERALS -- 1.1%
19,791 Novatel Wireless, Inc.(1) 426,100
-----------
CONSTRUCTION & ENGINEERING -- 1.5%
4,950 Foster Wheeler Ltd.(1) 556,331
-----------
DIVERSIFIED FINANCIAL SERVICES -- 1.1%
2,737 IntercontinentalExchange Inc.(1) 413,643
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 7.7%
17,951 Aruba Networks, Inc.(1) 360,457
9,090 AT&T Inc. 355,964
Shares Value
6,009 Brasil Telecom Participacoes SA ADR $ 397,495
14,350 Cogent Communications Group, Inc.(1) 411,559
10,657 PT Indosat Tbk ADR 428,944
40,440 Qwest Communications International Inc.(1) 344,953
23,105 Royal KPN N.V. ADR 357,896
9,148 Telefonos de Mexico, SAB de CV ADR 312,587
-----------
2,969,855
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 4.1%
79,523 ADDvantage Technologies Group, Inc.(1) 477,933
8,989 Agilent Technologies, Inc.(1) 342,930
21,979 AU Optronics Corp. ADR 371,885
17,015 LG.Philips LCD Co., Ltd. ADR(1) 393,217
-----------
1,585,965
-----------
ENERGY EQUIPMENT & SERVICES -- 2.8%
13,151 Matrix Service Co.(1) 303,657
14,846 Petroleum Geo-Services ASA ADR 356,675
3,927 Transocean Inc.(1) 421,956
-----------
1,082,288
-----------
FOOD & STAPLES RETAILING -- 0.9%
7,926 SUPERVALU INC. 330,276
-----------
FOOD PRODUCTS -- 1.0%
4,030 Wimm-Bill-Dann Foods OJSC ADR 378,820
-----------
HEALTH CARE EQUIPMENT & SUPPLIES -- 2.8%
15,198 Align Technology Inc.(1) 396,668
204,311 Antares Pharma, Inc.(1) 328,941
9,884 DENTSPLY International Inc. 360,667
-----------
1,086,276
-----------
HEALTH CARE PROVIDERS & SERVICES -- 3.0%
14,608 American Dental Partners Inc.(1) 374,987
5,323 Humana Inc.(1) 341,151
4,225 WellCare Health Plans Inc.(1) 427,824
-----------
1,143,962
-----------
HOTELS, RESTAURANTS & LEISURE -- 0.8%
12,479 WMS Industries Inc.(1) 325,577
-----------
HOUSEHOLD DURABLES -- 1.3%
5,790 Garmin Ltd. 485,781
-----------
INDUSTRIAL CONGLOMERATES -- 1.3%
5,999 McDermott International, Inc.(1) 497,557
-----------
- ------
18
Legacy Multi Cap
Shares Value
INSURANCE -- 2.9%
16,597 American Safety Insurance Holdings, Ltd.(1) $ 360,155
10,521 Life Partners Holdings, Inc. 454,191
4,909 Lincoln National Corp. 296,111
-----------
1,110,457
-----------
INTERNET SOFTWARE & SERVICES -- 1.1%
14,750 Vocus Inc.(1) 414,328
-----------
IT SERVICES -- 1.0%
3,413 International Business Machines Corp. 377,648
-----------
LIFE SCIENCES TOOLS & SERVICES -- 2.0%
9,633 Illumina, Inc.(1) 438,976
6,571 Thermo Fisher Scientific Inc.(1) 343,072
-----------
782,048
-----------
MACHINERY -- 8.4%
2,845 Deere & Co. 342,595
11,419 Greenbrier Companies Inc. 381,052
8,975 IDEX Corp. 324,985
6,917 Illinois Tool Works Inc. 380,781
5,825 Metso Corp. ADR 371,519
5,837 Oshkosh Truck Corp. 334,168
3,744 Paccar Inc. 306,334
28,053 Portec Rail Products, Inc. 355,993
17,669 Tecumseh Products Cl A(1) 406,916
-----------
3,204,343
-----------
MARINE -- 2.7%
11,446 DryShips Inc. 656,085
21,137 Quintana Maritime Ltd. 378,986
-----------
1,035,071
-----------
METALS & MINING -- 3.2%
10,243 AK Steel Holding Corp.(1) 409,413
5,852 Arcelor Mittal CI A New York Shares 357,089
9,024 Cia Vale do Rio Doce ADR 442,266
-----------
1,208,768
-----------
MULTI-UTILITIES -- 0.8%
6,802 DTE Energy Company 315,477
-----------
OIL, GAS & CONSUMABLE FUELS -- 9.1%
9,443 Alon USA Energy, Inc. 336,832
4,582 Apache Corp. 369,997
8,287 Consol Energy Inc. 345,154
6,203 Energy Transfer Partners L.P. 346,127
9,452 Frontier Oil Corp. 366,076
10,207 GMX Resources Inc.(1) 321,929
6,412 Hess Corp. 392,413
14,949 Mariner Energy Inc.(1) 315,872
Shares Value
10,057 Repsol YPF, SA ADR $ 378,445
4,784 Sunoco, Inc. 319,188
-----------
3,492,033
-----------
PERSONAL PRODUCTS -- 0.8%
5,576 Chattem, Inc.(1) 313,148
-----------
PHARMACEUTICALS -- 2.7%
6,500 Allergan, Inc. 377,845
186,840 Nutrition 21 Inc.(1) 285,865
5,143 Shire plc ADR 379,502
-----------
1,043,212
-----------
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
36,012 Anworth Mortgage Asset Corp. 284,495
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.9%
3,033 Jones Lang LaSalle Inc. 332,963
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.7%
6,277 KLA-Tencor Corp. 356,470
14,796 Microsemi Corp.(1) 344,895
13,514 National Semiconductor Corp. 351,229
18,790 Zoran Corp.(1) 354,192
-----------
1,406,786
-----------
SOFTWARE -- 5.1%
9,157 Adobe Systems Inc.(1) 368,936
12,033 Ansys, Inc.(1) 313,339
15,428 Check Point Software Technologies Ltd.(1) 375,826
9,203 NAVTEQ Corp.(1) 498,158
13,239 Shanda Interactive Entertainment Ltd. ADR(1) 380,754
-----------
1,937,013
-----------
SPECIALTY RETAIL -- 2.1%
5,766 Sherwin-Williams Co. 401,833
14,404 TJX Companies, Inc. (The) 399,711
-----------
801,544
-----------
TEXTILES, APPAREL & LUXURY GOODS -- 2.1%
4,150 Deckers Outdoor Corp.(1) 427,865
10,294 Luxottica Group SpA ADR 370,996
-----------
798,861
-----------
WIRELESS TELECOMMUNICATION SERVICES -- 2.0%
6,050 America Movil, SAB de CV ADR 362,274
6,316 Mobile TeleSystems ADR(1) 403,908
-----------
766,182
-----------
TOTAL COMMON STOCKS
(Cost $36,032,691) 37,979,731
-----------
- ------
19
Legacy Multi Cap
Principal Amount Value
Temporary Cash Investments -- 2.3%
$900,000 FHLB Discount Notes, 5.09%, 8/1/07(2) $ 900,000
(Cost $900,000)
-----------
TOTAL INVESTMENT SECURITIES -- 101.3%
(Cost $36,932,691) 38,879,731
-----------
OTHER ASSETS AND LIABILITIES -- (1.3)% (513,290)
-----------
TOTAL NET ASSETS -- 100.0% $38,366,441
===========
Notes to Schedule of Investments
ADR = American Depositary Receipt
FHLB = Federal Home Loan Bank
OJSC = Open Joint Stock Company
(1) Non-income producing.
(2) The rate indicated is the yield to maturity at purchase.
See Notes to Financial Statements.
- ------
20
SHAREHOLDER FEE EXAMPLES (UNAUDITED)
Fund shareholders may incur two types of costs: (1) transaction costs,
including sales charges (loads) on purchase payments and redemption/exchange
fees; and (2) ongoing costs, including management fees; distribution and
service (12b-1) fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in your fund
and to compare these costs with the ongoing cost of investing in other mutual
funds.
The example is based on an investment of $1,000 made at the beginning of the
period and held for the entire period from February 1, 2007 to July 31, 2007.
ACTUAL EXPENSES
The table provides information about actual account values and actual expenses
for each class. You may use the information, together with the amount you
invested, to estimate the expenses that you paid over the period. First,
identify the share class you own. Then simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
If you hold Investor Class shares of any American Century fund, or
Institutional Class shares of the American Century Diversified Bond Fund, in
an American Century account (i.e., not a financial intermediary or retirement
plan account), American Century may charge you a $12.50 semiannual account
maintenance fee if the value of those shares is less than $10,000. We will
redeem shares automatically in one of your accounts to pay the $12.50 fee. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. PERSONAL ACCOUNTS
include individual accounts, joint accounts, UGMA/UTMA accounts, personal
trusts, Coverdell Education Savings Accounts and IRAs (including traditional,
Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement
accounts. If you have only business, business retirement, employer-sponsored
or American Century Brokerage accounts, you are currently not subject to this
fee. We will not charge the fee as long as you choose to manage your accounts
exclusively online. If you are subject to the Account Maintenance Fee, your
account value could be reduced by the fee amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio of each class of your
fund and an assumed rate of return of 5% per year before expenses, which is
not the actual return of a fund's share class. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your fund and other funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption/exchange fees. Therefore, the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
- ------
21
Beginning Expenses Paid
Account Ending During Period*
Value Account Value 2/1/07 - Annualized
2/1/07 7/31/07 7/31/07 Expense Ratio*
Legacy Focused Large Cap
ACTUAL
Investor Class $1,000 $1,135.20 $5.82 1.10%
Institutional Class $1,000 $1,137.00 $4.77 0.90%
Advisor Class $1,000 $1,133.40 $7.14 1.35%
R Class $1,000 $1,132.60 $8.46 1.60%
HYPOTHETICAL
Investor Class $1,000 $1,019.34 $5.51 1.10%
Institutional Class $1,000 $1,020.33 $4.51 0.90%
Advisor Class $1,000 $1,018.10 $6.76 1.35%
R Class $1,000 $1,016.86 $8.00 1.60%
Legacy Large Cap
ACTUAL
Investor Class $1,000 $1,075.00 $5.66 1.10%
Institutional Class $1,000 $1,076.80 $4.63 0.90%
Advisor Class $1,000 $1,074.10 $6.94 1.35%
R Class $1,000 $1,073.20 $8.22 1.60%
HYPOTHETICAL
Investor Class $1,000 $1,019.34 $5.51 1.10%
Institutional Class $1,000 $1,020.33 $4.51 0.90%
Advisor Class $1,000 $1,018.10 $6.76 1.35%
R Class $1,000 $1,016.86 $8.00 1.60%
Legacy Multi Cap
ACTUAL
Investor Class $1,000 $1,132.10 $6.08 1.15%
Institutional Class $1,000 $1,133.00 $5.02 0.95%
Advisor Class $1,000 $1,130.30 $7.39 1.40%
R Class $1,000 $1,128.50 $8.71 1.65%
HYPOTHETICAL
Investor Class $1,000 $1,019.09 $5.76 1.15%
Institutional Class $1,000 $1,020.08 $4.76 0.95%
Advisor Class $1,000 $1,017.85 $7.00 1.40%
R Class $1,000 $1,016.61 $8.25 1.65%
* Expenses are equal to the class's annualized expense ratio listed in the
table above, multiplied by the average account value over the period,
multiplied by 181, the number of days in the most recent fiscal half-year,
divided by 365, to reflect the one-half year period.
- ------
22
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2007
Focused
Large Cap Large Cap Multi Cap
ASSETS
Investment securities, at value (cost
of $12,325,373, $7,995,911 and
$36,932,691, respectively) $14,170,494 $8,887,507 $38,879,731
Cash 131,463 75,125 78,174
Receivable for investments sold 682,262 463,563 1,716,875
Dividends and interest receivable 14,987 8,086 13,475
----------- ----------- -----------
14,999,206 9,434,281 40,688,255
----------- ----------- -----------
LIABILITIES
Payable for investments purchased 912,018 841,886 2,283,808
Accrued management fees 12,074 7,567 37,349
Distribution fees payable 209 198 187
Service fees (and distribution fees --
R Class) payable 617 599 470
----------- ----------- -----------
924,918 850,250 2,321,814
----------- ----------- -----------
NET ASSETS $14,074,288 $8,584,031 $38,366,441
=========== =========== ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $11,221,122 $7,469,988 $35,852,980
Undistributed net investment income 100,343 16,814 --
Undistributed net realized gain on
investment transactions 907,702 205,633 566,421
Net unrealized appreciation on
investments 1,845,121 891,596 1,947,040
----------- ----------- -----------
$14,074,288 $8,584,031 $38,366,441
=========== =========== ===========
INVESTOR CLASS, $0.01 PAR VALUE
Net assets $8,614,473 $5,887,293 $36,239,856
Shares outstanding 688,502 494,602 2,876,635
Net asset value per share $12.51 $11.90 $12.60
INSTITUTIONAL CLASS, $0.01 PAR VALUE
Net assets $3,561,212 $899,281 $633,477
Shares outstanding 284,275 75,462 50,231
Net asset value per share $12.53 $11.92 $12.61
ADVISOR CLASS, $0.01 PAR VALUE
Net assets $960,461 $894,583 $852,505
Shares outstanding 76,888 75,274 67,785
Net asset value per share $12.49 $11.88 $12.58
R CLASS, $0.01 PAR VALUE
Net assets $938,142 $902,874 $640,603
Shares outstanding 75,216 76,088 51,014
Net asset value per share $12.47 $11.87 $12.56
See Notes to Financial Statements.
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23
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2007
Focused
Large Cap Large Cap Multi Cap
INVESTMENT INCOME (LOSS)
INCOME:
Dividends (net of foreign taxes withheld
of $14,939, $5,380 and $3,911,
respectively) $ 256,682 $ 118,401 $ 117,573
Interest 18,136 4,854 20,524
---------- ---------- ----------
274,818 123,255 138,097
---------- ---------- ----------
EXPENSES:
Management fees 117,787 70,823 158,149
Distribution fees -- Advisor Class 2,219 2,095 1,790
Service fees -- Advisor Class 2,219 2,095 1,790
Distribution and service fees --
R Class 4,140 4,199 2,827
Directors' fees and expenses 232 151 235
Other expenses 20 11 25
---------- ---------- ----------
126,617 79,374 164,816
---------- ---------- ----------
NET INVESTMENT INCOME (LOSS) 148,201 43,881 (26,719)
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investment
transactions 1,032,147 310,813 672,018
Change in net unrealized appreciation
(depreciation) on investments 1,659,799 704,084 1,893,207
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) 2,691,946 1,014,897 2,565,225
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $2,840,147 $1,058,778 $2,538,506
========== ========== ==========
See Notes to Financial Statements.
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24
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED JULY 31, 2007 AND JULY 31, 2006
Focused Large Cap Large Cap
Increase (Decrease) in
Net Assets 2007 2006(1) 2007 2006(1)
OPERATIONS
Net investment income
(loss) $ 148,201 $ 6,504 $ 43,881 $ 3,553
Net realized gain (loss) 1,032,147 (124,445) 310,813 (105,180)
Change in net unrealized
appreciation
(depreciation) 1,659,799 185,322 704,084 187,512
----------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations 2,840,147 67,381 1,058,778 85,885
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment
income:
Investor Class (27,963) -- (20,734) --
Institutional Class (20,238) -- (5,040) --
Advisor Class (3,836) -- (2,993) --
R Class (2,325) -- (1,853) --
----------- ----------- ----------- -----------
Decrease in net assets
from distributions (54,362) -- (30,620) --
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease)
in net assets from
capital share transactions 5,258,853 5,962,269 3,093,513 4,376,475
----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS 8,044,638 6,029,650 4,121,671 4,462,360
NET ASSETS
Beginning of period 6,029,650 -- 4,462,360 --
----------- ----------- ----------- -----------
End of period $14,074,288 $6,029,650 $8,584,031 $4,462,360
=========== =========== =========== ===========
Undistributed net
investment income $100,343 $6,504 $16,814 $3,553
=========== =========== =========== ===========
(1) May 31, 2006 (fund inception) through July 31, 2006.
See Notes to Financial Statements.
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25
YEARS ENDED JULY 31, 2007 AND JULY 31, 2006
Multi Cap
Increase (Decrease) in Net Assets 2007 2006(1)
OPERATIONS
Net investment income (loss) $ (26,719) $ 5,607
Net realized gain (loss) 672,018 (62,200)
Change in net unrealized appreciation (depreciation) 1,893,207 53,833
----------- -----------
Net increase (decrease) in net assets resulting from
operations 2,538,506 (2,760)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class (17,944) --
Institutional Class (2,505) --
Advisor Class (1,436) --
R Class (400) --
----------- -----------
Decrease in net assets from distributions (22,285) --
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets from capital
share transactions 31,437,983 4,414,997
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 33,954,204 4,412,237
NET ASSETS
Beginning of period 4,412,237 --
----------- -----------
End of period $38,366,441 $4,412,237
=========== ===========
Undistributed net investment income -- $5,607
=========== ===========
(1) May 31, 2006 (fund inception) through July 31, 2006.
See Notes to Financial Statements.
- ------
26
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2007
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Growth Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Legacy Focused Large Cap Fund (Focused
Large Cap), Legacy Large Cap Fund (Large Cap) and Legacy Multi Cap Fund (Multi
Cap) (collectively, the funds) are three funds in a series issued by the
corporation. Focused Large Cap is nondiversified under the 1940 Act. Large Cap
and Multi Cap are diversified under the 1940 Act. The funds' investment
objective is to seek long-term capital growth. Focused Large Cap and Large Cap
pursue their investment objective by investing in stocks of large-sized market
capitalization companies. Multi Cap pursues its investment objective by
investing in stocks of small-, mid- and large-sized market capitalization
companies. The following is a summary of the funds' significant accounting
policies.
MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the
Institutional Class, the Advisor Class and the R Class. The share classes
differ principally in their respective distribution and shareholder servicing
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. All
classes of the funds commenced sale on May 31, 2006, the funds' inception
date.
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. Securities traded on foreign securities exchanges and
over-the-counter markets are normally completed before the close of business
on days that the New York Stock Exchange (the Exchange) is open and may also
take place on days when the Exchange is not open. If an event occurs after the
value of a security was established but before the net asset value per share
was determined that was likely to materially change the net asset value, that
security would be valued as determined in accordance with procedures adopted
by the Board of Directors. If the funds determine that the market price of a
portfolio security is not readily available, or that the valuation methods
mentioned above do not reflect the security's fair value, such security is
valued as determined by, or in accordance with procedures adopted by, the
Board of Directors or its designee if such determination would materially
impact a fund's net asset value. Certain other circumstances may cause the
funds to use alternative procedures to value a security such as: a security
has been declared in default; trading in a security has been halted during the
trading day; or there is a foreign market holiday and no trading will commence.
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 funds may enter into repurchase agreements with
institutions that American Century Investment Management, Inc. (ACIM) (the
investment advisor) 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.
- ------
27
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 or American
Century Global Investment Management, Inc. (ACGIM), 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. At this time, management has not identified any uncertain tax
positions that would materially impact the financial statements. Accordingly,
no provision has been made for federal or state income taxes. Interest and
penalties associated with any federal or state income tax obligations, if any,
are recorded as interest expense.
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.
INDEMNIFICATIONS -- Under the corporation's organizational documents, its
officers and directors are indemnified against certain liabilities arising out
of the performance of their duties to the funds. In addition, in the normal
course of business, the funds enter into contracts that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the
funds. The risk of material loss from such claims is considered by management
to be remote.
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 (the 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 and accrued daily based on the daily net assets of each
specific class of shares of each fund and paid monthly in arrears. For funds
with a stepped fee schedule, the rate of the fee is determined by applying a
fee rate calculation formula. This formula takes into account all of the
investment advisor's assets under management in each fund's investment
strategy (strategy assets) to calculate the appropriate fee rate for each
fund. The strategy assets include each fund's assets and the assets of other
clients of the investment advisor that are not in the American Century family
of funds, but that have the same investment team and investment strategy. The
annual management fee schedule for Focused Large Cap and Large Cap ranges from
0.80% to 1.10% for the Investor Class and R Class. The annual management fee
schedule for Multi Cap ranges from 0.85% to 1.15% for the Investor Class and R
Class. The Institutional Class is 0.20% less and the Advisor Class is 0.25%
less at each point within the range.
For the year ended July 31, 2007, the effective annual management fee for each
class of each fund was as follows:
Investor & R Institutional Advisor
Focused Large Cap 1.10% 0.90% 0.85%
Large Cap 1.10% 0.90% 0.85%
Multi Cap 1.15% 0.95% 0.90%
- ------
28
DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master
Distribution and Shareholder Services Plan for the Advisor Class and a Master
Distribution and Individual Shareholder Services Plan for the R Class
(collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans
provide 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 plans provide that the R Class will pay ACIS an annual
distribution and service fee equal to 0.50%. The fees are computed and accrued
daily based on each class's average daily net assets and paid monthly in
arrears. The distribution fee provides compensation for expenses incurred by
financial intermediaries 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 R Class shares. Fees incurred under the plans during the
year ended July 31, 2007, 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 advisor, ACIM, the distributor of the corporation, ACIS, and the
corporation's transfer agent, American Century Services, LLC. ACIM owns 27%,
42% and 7% of the outstanding shares of Focused Large Cap, Large Cap and Multi
Cap, respectively. Learning Quest 529 Education Savings Program (Learning
Quest) owns 48% of Multi Cap. Learning Quest is managed by ACIM. ACIM and
Learning Quest do not invest in the funds for the purpose of exercising
management or control.
Beginning in December 2006, the funds were eligible to invest 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
JPMorgan 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
custodian of the funds and a wholly owned subsidiary of JPM.
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the year ended
July 31, 2007, were as follows:
Focused Large Cap Large Cap Multi Cap
Purchases $34,784,214 $19,407,910 $62,726,740
Proceeds from sales $29,498,550 $16,445,283 $31,652,129
- ------
29
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 3,000,000,000 shares. Transactions in
shares of the funds were as follows:
Year ended July 31, 2007 Period ended July 31, 2006(1)
Shares Amount Shares Amount
Focused Large Cap
INVESTOR CLASS
Sold 498,837 $ 5,695,141 365,089 $3,649,367
Issued in reinvestment
of distributions 2,572 27,620 -- --
Redeemed (175,804) (1,906,122) (2,192) (21,621)
----------- ----------- ----------- -----------
325,605 3,816,639 362,897 3,627,746
----------- ----------- ----------- -----------
INSTITUTIONAL CLASS
Sold 692,623 7,359,047 75,000 750,133
Issued in reinvestment
of distributions 1,884 20,238 -- --
Redeemed (485,232) (5,865,336) -- --
----------- ----------- ----------- -----------
209,275 1,513,949 75,000 750,133
----------- ----------- ----------- -----------
ADVISOR CLASS
Sold 400 5,280 83,577 834,257
Issued in reinvestment
of distributions 334 3,582 -- --
Redeemed (7,423) (82,500) -- --
----------- ----------- ----------- -----------
(6,689) (73,638) 83,577 834,257
----------- ----------- ----------- -----------
R CLASS
Sold 474 5,000 75,000 750,133
Issued in reinvestment
of distributions 216 2,325 -- --
Redeemed (474) (5,422) -- --
----------- ----------- ----------- -----------
216 1,903 75,000 750,133
----------- ----------- ----------- -----------
Net increase (decrease) 528,407 $ 5,258,853 596,474 $5,962,269
=========== =========== =========== ===========
Large Cap
INVESTOR CLASS
Sold 466,723 $ 5,197,801 223,046 $2,206,213
Issued in reinvestment
of distributions 1,825 19,926 -- --
Redeemed (188,854) (2,143,660) (8,138) (79,957)
----------- ----------- ----------- -----------
279,694 3,074,067 214,908 2,126,256
----------- ----------- ----------- -----------
INSTITUTIONAL CLASS
Sold -- -- 75,000 750,073
Issued in reinvestment
of distributions 462 5,040 -- --
----------- ----------- ----------- -----------
462 5,040 75,000 750,073
----------- ----------- ----------- -----------
ADVISOR CLASS
Sold 4,916 49,877 75,000 750,073
Issued in reinvestment
of distributions 274 2,993 -- --
Redeemed (4,916) (50,197) -- --
----------- ----------- ----------- -----------
274 2,673 75,000 750,073
----------- ----------- ----------- -----------
R CLASS
Sold 918 9,880 75,000 750,073
Issued in reinvestment
of distributions 170 1,853 -- --
----------- ----------- ----------- -----------
1,088 11,733 75,000 750,073
----------- ----------- ----------- -----------
Net increase (decrease) 281,518 $ 3,093,513 439,908 $4,376,475
=========== =========== =========== ===========
(1) May 31, 2006 (fund inception) through July 31, 2006.
- ------
30
Period ended July 31,
Year ended July 31, 2007 2006(1)
Shares Amount Shares Amount
Multi Cap
INVESTOR CLASS
Sold 2,859,961 $34,518,271 294,202 $2,919,311
Issued in reinvestment
of distributions 1,581 17,143 -- --
Redeemed (266,612) (3,181,744) (12,497) (122,653)
----------- ----------- ----------- -----------
2,594,930 31,353,670 281,705 2,796,658
----------- ----------- ----------- -----------
INSTITUTIONAL CLASS
Sold -- -- 50,000 500,036
Issued in reinvestment
of distributions 231 2,505 -- --
----------- ----------- ----------- -----------
231 2,505 50,000 500,036
----------- ----------- ----------- -----------
ADVISOR CLASS
Sold 5,467 67,596 62,185 618,223
Issued in reinvestment
of distributions 133 1,436 -- --
----------- ----------- ----------- -----------
5,600 69,032 62,185 618,223
----------- ----------- ----------- -----------
R CLASS
Sold 977 12,376 50,000 500,080
Issued in reinvestment
of distributions 37 400 -- --
----------- ----------- ----------- -----------
1,014 12,776 50,000 500,080
----------- ----------- ----------- -----------
Net increase (decrease) 2,601,775 $31,437,983 443,890 $4,414,997
=========== =========== =========== ===========
(1) May 31, 2006 (fund inception) through July 31, 2006.
5. RISK FACTORS
The funds' investment process may result in high portfolio turnover, which
could mean high transaction costs, affecting both performance and capital
gains tax liabilities to investors. There are certain risks involved in
investing in foreign securities. These risks include those resulting from
future adverse political, social and economic developments, fluctuations in
currency exchange rates, the possible imposition of exchange controls, and
other foreign laws or restrictions.
Focused Large Cap is considered nondiversified which may subject the fund to
risk because a price change in any one security may have a greater impact than
would be the case if the fund were diversified.
Multi Cap invests in common stocks of small companies. Because of this, Multi
Cap may be subject to greater risk and market fluctuations than a fund
investing in larger, more established companies.
6. BANK LINE OF CREDIT
The funds, along with certain other funds managed by ACIM or ACGIM, have a
$500,000,000 unsecured bank line of credit agreement with JPMCB. 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 0.40%. The funds did not borrow from the line during the year ended
July 31, 2007.
- ------
31
7. FEDERAL TAX INFORMATION
The tax character of distributions paid during the year ended July 31, 2007
and period May 31, 2006 (fund inception) through July 31, 2006 were as follows:
Focused Large Cap Large Cap Multi Cap
2007 2006 2007 2006 2007 2006
DISTRIBUTIONS PAID FROM
Ordinary income $54,362 -- $30,620 -- $22,285 --
Long-term capital gains -- -- -- -- -- --
The book-basis 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 July 31, 2007, the components of investments for federal income tax
purposes were as follows:
Focused Large
Cap Large Cap Multi Cap
Federal tax cost of investments $12,325,978 $7,995,911 $36,932,691
=========== =========== ===========
Gross tax appreciation of investments $2,078,763 $1,053,626 $ 3,334,260
Gross tax depreciation of investments (234,247) (162,030) (1,387,220)
----------- ----------- -----------
Net tax appreciation (depreciation)
of investments $1,844,516 $ 891,596 $ 1,947,040
=========== =========== ===========
Undistributed ordinary income $754,179 $222,447 $495,312
Accumulated long-term gains $254,471 -- $71,109
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.
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether an entity is taxable
in a particular jurisdiction), and requires certain expanded tax disclosures.
FIN 48 is effective for fiscal years beginning after December 15, 2006, and is
to be applied to all open tax years as of the date of effectiveness.
Management has concluded that the adoption of FIN 48 will not materially
impact the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" (FAS 157), in September 2006, which is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands the required
financial statement disclosures about fair value measurements. Management is
currently evaluating the impact that adopting FAS 157 will have on the
financial statement disclosures.
9. CORPORATE EVENT
At meetings held on November 29, 2006 and March 7, 2007, the Directors
approved a change in the fee structure of the Advisor Class, pending
shareholder approval. At a special meeting of shareholders on July 27, 2007,
each fund's Advisor Class shareholders approved the change in the fee
structure of the Advisor Class. Effective September 4, 2007, the Advisor
Class's effective annual management fee will increase 0.25% and the total
distribution and service fee will decrease 0.25%. The change in the fee
structure will not change the Advisor Class's ratio of operating expenses to
average net assets.
- ------
32
10. OTHER TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
For corporate taxpayers, the following ordinary income distributions paid
during the fiscal year ended July 31, 2007, qualify for the corporate
dividends received deduction.
Focused Large Cap Large Cap Multi Cap
$54,362 $30,620 $22,152
The funds hereby designate qualified dividend income for the fiscal year ended
July 31, 2007, as follows:
Focused Large Cap Large Cap Multi Cap
$54,362 $30,620 $22,285
Legacy Multi Cap hereby designates $16,678 as qualified short-term capital
gain distributions for purposes of Internal Revenue Code 871 for the fiscal
year ended July 31, 2007.
- ------
33
FINANCIAL HIGHLIGHTS
Legacy Focused Large Cap
Investor Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.11 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.12 0.01
Net Realized and Unrealized Gain (Loss) 2.34 0.10
------ ------
Total From Investment Operations 2.46 0.11
------ ------
Distributions
From Net Investment Income (0.06) --
------ ------
Net Asset Value, End of Period $12.51 $10.11
====== ======
TOTAL RETURN(3) 24.44% 1.10%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.10% 1.10%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.24% 0.88%(4)
Portfolio Turnover Rate 255% 30%
Net Assets, End of Period (in thousands) $8,614 $3,669
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
34
Legacy Focused Large Cap
Institutional Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.11 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.18 0.02
Net Realized and Unrealized Gain (Loss) 2.31 0.09
------ ------
Total From Investment Operations 2.49 0.11
------ ------
Distributions
From Net Investment Income (0.07) --
------ ------
Net Asset Value, End of Period $12.53 $10.11
====== ======
TOTAL RETURN(3) 24.78% 1.10%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.90% 0.90%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 1.44% 1.08%(4)
Portfolio Turnover Rate 255% 30%
Net Assets, End of Period (in thousands) $3,561 $758
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
35
Legacy Focused Large Cap
Advisor Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.11 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.10 0.01
Net Realized and Unrealized Gain (Loss) 2.33 0.10
------ ------
Total From Investment Operations 2.43 0.11
------ ------
Distributions
From Net Investment Income (0.05) --
------ ------
Net Asset Value, End of Period $12.49 $10.11
====== ======
TOTAL RETURN(3) 24.07% 1.10%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.35% 1.35%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.99% 0.63%(4)
Portfolio Turnover Rate 255% 30%
Net Assets, End of Period (in thousands) $960 $845
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
36
Legacy Focused Large Cap
R Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.10 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.07 0.01
Net Realized and Unrealized Gain (Loss) 2.33 0.09
------ ------
Total From Investment Operations 2.40 0.10
------ ------
Distributions
From Net Investment Income (0.03) --
------ ------
Net Asset Value, End of Period $12.47 $10.10
====== ======
TOTAL RETURN(3) 23.82% 1.00%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.60% 1.60%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.74% 0.38%(4)
Portfolio Turnover Rate 255% 30%
Net Assets, End of Period (in thousands) $938 $758
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
37
Legacy Large Cap
Investor Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.15 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.08 0.01
Net Realized and Unrealized Gain (Loss) 1.73 0.14
------ ------
Total From Investment Operations 1.81 0.15
------ ------
Distributions
From Net Investment Income (0.06) --
------ ------
Net Asset Value, End of Period $11.90 $10.15
====== ======
TOTAL RETURN(3) 17.83% 1.50%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.10% 1.10%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.72% 0.66%(4)
Portfolio Turnover Rate 246% 39%
Net Assets, End of Period (in thousands) $5,887 $2,180
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
38
Legacy Large Cap
Institutional Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.15 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.10 0.01
Net Realized and Unrealized Gain (Loss) 1.74 0.14
------ ------
Total From Investment Operations 1.84 0.15
------ ------
Distributions
From Net Investment Income (0.07) --
------ ------
Net Asset Value, End of Period $11.92 $10.15
====== ======
TOTAL RETURN(3) 18.16% 1.50%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.90% 0.90%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.92% 0.86%(4)
Portfolio Turnover Rate 246% 39%
Net Assets, End of Period (in thousands) $899 $761
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
39
Legacy Large Cap
Advisor Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.14 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.05 0.01
Net Realized and Unrealized Gain (Loss) 1.73 0.13
------ ------
Total From Investment Operations 1.78 0.14
------ ------
Distributions
From Net Investment Income (0.04) --
------ ------
Net Asset Value, End of Period $11.88 $10.14
====== ======
TOTAL RETURN(3) 17.59% 1.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.35% 1.35%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.47% 0.41%(4)
Portfolio Turnover Rate 246% 39%
Net Assets, End of Period (in thousands) $895 $761
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
40
Legacy Large Cap
R Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $10.14 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.02 --(3)
Net Realized and Unrealized Gain (Loss) 1.73 0.14
------ ------
Total From Investment Operations 1.75 0.14
------ ------
Distributions
From Net Investment Income (0.02) --(3)
------ ------
Net Asset Value, End of Period $11.87 $10.14
====== ======
TOTAL RETURN(4) 17.33% 1.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.60% 1.60%(5)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.22% 0.16%(5)
Portfolio Turnover Rate 246% 39%
Net Assets, End of Period (in thousands) $903 $760
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
41
Legacy Multi Cap
Investor Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.94 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) (0.02) 0.01
Net Realized and Unrealized Gain (Loss) 2.72 (0.07)
------ ------
Total From Investment Operations 2.70 (0.06)
------ ------
Distributions
From Net Investment Income (0.04) --
------ ------
Net Asset Value, End of Period $12.60 $9.94
====== ======
TOTAL RETURN(3) 27.21% (0.60)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.15% 1.15%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.16)% 0.99%(4)
Portfolio Turnover Rate 230% 14%
Net Assets, End of Period (in thousands) $36,240 $2,801
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
42
Legacy Multi Cap
Institutional Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.94 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) 0.02 0.02
Net Realized and Unrealized Gain (Loss) 2.70 (0.08)
------ ------
Total From Investment Operations 2.72 (0.06)
------ ------
Distributions
From Net Investment Income (0.05) --
------ ------
Net Asset Value, End of Period $12.61 $9.94
====== ======
TOTAL RETURN(3) 27.45% (0.60)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 0.95% 0.95%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets 0.04% 1.19%(4)
Portfolio Turnover Rate 230% 14%
Net Assets, End of Period (in thousands) $633 $497
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
43
Legacy Multi Cap
Advisor Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.94 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) (0.03) 0.01
Net Realized and Unrealized Gain (Loss) 2.69 (0.07)
------ ------
Total From Investment Operations 2.66 (0.06)
------ ------
Distributions
From Net Investment Income (0.02) --
------ ------
Net Asset Value, End of Period $12.58 $9.94
====== ======
TOTAL RETURN(3) 26.83% (0.60)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.40% 1.40%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.41)% 0.74%(4)
Portfolio Turnover Rate 230% 14%
Net Assets, End of Period (in thousands) $853 $618
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
- ------
44
Legacy Multi Cap
R Class
For a Share Outstanding Throughout the Years Ended July 31 (except as noted)
2007 2006(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period $9.93 $10.00
------ ------
Income From Investment Operations
Net Investment Income (Loss)(2) (0.06) 0.01
Net Realized and Unrealized Gain (Loss) 2.70 (0.08)
------ ------
Total From Investment Operations 2.64 (0.07)
------ ------
Distributions
From Net Investment Income (0.01) --
------ ------
Net Asset Value, End of Period $12.56 $9.93
====== ======
TOTAL RETURN(3) 26.58% (0.70)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets 1.65% 1.65%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.66)% 0.49%(4)
Portfolio Turnover Rate 230% 14%
Net Assets, End of Period (in thousands) $641 $497
(1) May 31, 2006 (fund inception) through July 31, 2006.
(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.
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45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders,
American Century Growth Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Legacy Focused Large Cap Fund,
Legacy Large Cap Fund, and Legacy Multi Cap Fund (collectively the "Funds"),
comprising American Century Growth Funds, Inc. as of July 31, 2007, and the
related statements of operations for the year then ended, and the statements
of changes in net assets and the financial highlights for the year then ended
and the period from May 31, 2006 (fund inception) through July 31, 2006. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Funds are not required to have, nor were we engaged to
perform, an audit of their internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
July 31, 2007, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Funds comprising American Century Growth Funds, Inc. as of July 31,
2007, the results of their operations for the year then ended, and the changes
in their net assets and the financial highlights for the year then ended and
the period from May 31, 2006 (fund inception) through July 31, 2006, in
conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Kansas City, Missouri
September 14, 2007
- ------
46
PROXY VOTING RESULTS
A special meeting of shareholders was held on July 27, 2007, to vote on the
following proposals. The proposals received the required number of votes of
the American Century Growth Funds, Inc. or the applicable fund, depending on
the proposal, and were adopted. A summary of voting results is listed below
each proposal.
PROPOSAL 1:
To elect nine Directors to the Board of Directors of American Century Growth
Funds, Inc. (the proposal was voted on by all shareholders of funds issued by
American Century Growth Funds, Inc.):
James E. Stowers, Jr. For: 26,042,891
Withhold: 551,671
Abstain: 0
Broker Non-Vote: 0
Jonathan S. Thomas For: 26,100,723
Withhold: 493,839
Abstain: 0
Broker Non-Vote: 0
Thomas A. Brown For: 26,073,390
Withhold: 521,171
Abstain: 0
Broker Non-Vote: 0
Andrea C. Hall For: 26,087,609
Withhold: 506,953
Abstain: 0
Broker Non-Vote: 0
James A. Olson For: 26,084,354
Withhold: 510,207
Abstain: 0
Broker Non-Vote: 0
Donald H. Pratt For: 26,047,947
Withhold: 546,615
Abstain: 0
Broker Non-Vote: 0
Gale E. Sayers For: 26,056,130
Withhold: 538,432
Abstain: 0
Broker Non-Vote: 0
M. Jeannine Strandjord For: 26,082,395
Withhold: 512,167
Abstain: 0
Broker Non-Vote: 0
Timothy S. Webster For: 26,092,875
Withhold: 501,687
Abstain: 0
Broker Non-Vote: 0
- ------
47
PROPOSAL 2:
To approve a change in the fee structure of the Advisor Class. This proposal
was voted on by the Advisor Class shareholders of the following funds:
Legacy Focused Large Cap Legacy Large Cap Legacy Multi Cap
For: 850,367 855,113 599,775
Against: 0 0 0
Abstain: 0 0 0
Broker
Non-Vote: 62,784 0 167,257
- ------
48
MANAGEMENT
The individuals listed below serve as directors or officers of the funds. Each
director serves until his or her successor is duly elected and qualified or
until he or she retires. Mandatory retirement age for independent directors is
72. Those listed as interested directors are "interested" primarily by virtue
of their engagement as directors and/or officers of, or ownership interest in,
American Century Companies, Inc. (ACC) or its wholly owned, direct or
indirect, subsidiaries, including the funds' investment advisor, American
Century Investment Management, Inc. (ACIM); the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS); and the funds' transfer
agent, American Century Services, LLC (ACS).
The other directors (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers
of, and have no financial interest in, ACC or any of its wholly owned, direct
or indirect, subsidiaries, including ACIM, ACIS, and ACS. The directors serve
in this capacity for seven registered investment companies in the American
Century family of funds.
All persons named as officers of the funds also serve in similar capacities
for the other 14 investment companies advised by ACIM or American Century
Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM,
unless otherwise noted. Only officers with policy-making functions are listed.
No officer is compensated for his or her service as an officer of the funds.
The listed officers are interested persons of the funds and are appointed or
re-appointed on an annual basis.
INTERESTED DIRECTORS
JAMES E. STOWERS, JR.
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1924
POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since
2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director
and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to
February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM,
ACGIM, ACS, ACIS and other ACC subsidiaries
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JONATHAN S. THOMAS
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUNDS: Director and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM,
ACGIM, ACIS and other ACC subsidiaries; Managing Director, Morgan Stanley
(March 2000 to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 109
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
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49
INDEPENDENT DIRECTORS
THOMAS A. BROWN
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1940
POSITION(S) HELD WITH FUNDS: Director (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated
Investments, LLC (real estate investment company); Managing Member, Brown
Cascade Properties, LLC (real estate investment company); Retired, Area Vice
President, Applied Industrial Technologies
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
ANDREA C. HALL, PH.D.
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1997)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the
President, Midwest Research Institute
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
JAMES A. OLSON
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1942
POSITION(S) HELD WITH FUNDS: Director (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief
Financial Officer, Plaza Belmont LLC (September 1999 to September 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment
Properties Trust
DONALD H. PRATT
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive
Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler
Manufacturing Company
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
GALE E. SAYERS
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1943
POSITION(S) HELD WITH FUNDS: Director (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer and Founder, Sayers40, Inc., a technology products and service provider
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
M. JEANNINE STRANDJORD
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Director (since 1994)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice
President, Sprint Corporation
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director,
Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc.
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50
TIMOTHY S. WEBSTER
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1961
POSITION(S) HELD WITH FUNDS: Director (since 2001)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Director, TDB
Acquisition Group LLC (September 2006 to present); President and Chief
Executive Officer, American Italian Pasta Company (2001 to December 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66
OTHER DIRECTORSHIPS HELD BY DIRECTOR: None
OFFICERS
MARYANNE ROEPKE
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century funds (July 2000 to August 2006). Also serves as: Senior Vice
President, ACS
CHARLES A. ETHERINGTON
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (November
2005 to present); General Counsel, ACC (March 2007 to present). Also serves
as: General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries; and
Senior Vice President, ACIM, ACGIM and ACS
ROBERT LEACH
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present); and Controller, various American Century funds (1997 to
September 2006)
C. JEAN WADE
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1964
POSITION(S) HELD WITH FUNDS: Controller (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February
2000 to present)
JON ZINDEL
4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
The SAI has additional information about the funds' directors and is available
without charge, upon request, by calling 1-800-345-2021.
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51
APPROVAL OF MANAGEMENT AGREEMENTS
Legacy Focused Large Cap, Legacy Large Cap, Legacy Multi Cap
Under Section 15(c) of the Investment Company Act, contracts for investment
advisory services are required to be reviewed, evaluated and approved by a
majority of a fund's independent directors or trustees (the "Directors") each
year. At American Century, this process is referred to as the "15(c) Process."
As a part of this process, the board reviews fund performance, shareholder
services, audit and compliance information, and a variety of other reports
from the advisor concerning fund operations. In addition to this annual
review, the board of directors oversees and evaluates on a continuous basis at
its quarterly meetings the nature and quality of significant services
performed by the advisor, fund performance, audit and compliance information,
and a variety of other reports relating to fund operations. The board, or
committees of the board, also holds special meetings as needed.
Under a Securities and Exchange Commission rule, each fund is required to
disclose in its annual or semiannual report, as appropriate, the material
factors and conclusions that formed the basis for the board's approval or
renewal of any advisory agreements within the fund's most recently completed
fiscal half-year period.
ANNUAL CONTRACT REVIEW PROCESS
As part of the annual 15(c) Process undertaken during the most recent fiscal
half-year period, the Directors reviewed extensive data and information
compiled by the advisor and certain independent providers of evaluative data
(the "15(c) Providers") concerning Legacy Large Cap, Legacy Focused Large Cap
and Legacy Multi Cap (the "funds") and the services provided to the funds
under the management agreement. The information considered and the discussions
held at the meetings included, but were not limited to:
* the nature, extent and quality of investment management, shareholder
services and other services provided to the funds under the management
agreement;
* reports on the advisor's activities relating to the wide range of programs
and services the advisor provides to the funds and their shareholders on a
routine and non-routine basis;
* data comparing the cost of owning the funds to the cost of owning similar
funds;
* data comparing the funds' performance to appropriate benchmarks and/or a
peer group of other mutual funds with similar investment objectives and
strategies;
* financial data showing the profitability of the funds to the advisor and
the overall profitability of the advisor; and
* data comparing services provided and charges to other investment management
clients of the advisor.
In keeping with its practice, the funds' board of directors held two regularly
scheduled meetings and one special meeting to review and discuss the
information provided by the advisor and to complete its negotiations with the
advisor regarding the renewal of the management agreement, including the
setting of the applicable advisory fee. The board also had the benefit of the
advice of its independent counsel throughout the period.
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52
FACTORS CONSIDERED
The Directors considered all of the information provided by the advisor, the
15(c) Providers, and the board's independent counsel, and evaluated such
information for each fund for which the board has responsibility. The
Directors did not identify any single factor as being all-important or
controlling, and each Director may have attributed different levels of
importance to different factors. In deciding to renew the agreement under the
terms ultimately determined by the board to be appropriate, the Directors'
decision was based on the following factors.
NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management
agreement, the advisor is responsible for providing or arranging for all
services necessary for the operation of the funds. The board noted that under
the management agreement, the advisor provides or arranges at its own expense
a wide variety of services including:
* fund construction and design
* portfolio security selection
* initial capitalization/funding
* securities trading
* custody of fund assets
* daily valuation of the funds' portfolio
* shareholder servicing and transfer agency, including shareholder
confirmations, recordkeeping and communications
* legal services
* regulatory and portfolio compliance
* financial reporting
* marketing and distribution
The Directors noted that many of these services have expanded over time both
in terms of quantity and complexity in response to shareholder demands,
competition in the industry and the changing regulatory environment. In
performing their evaluation, the Directors considered information received in
connection with the annual review, as well as information provided on an
ongoing basis at their regularly scheduled board and committee meetings.
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53
INVESTMENT MANAGEMENT SERVICES. The nature of the investment management
services provided is quite complex and allows fund shareholders access to
professional money management, instant diversification of their investments
within an asset class, the opportunity to easily diversify among asset
classes, and liquidity. In evaluating investment performance, the board
expects the advisor to manage the funds in accordance with their investment
objectives and approved strategies. In providing these services, the advisor
utilizes teams of investment professionals (portfolio managers, analysts,
research assistants, and securities traders) who require extensive information
technology, research, training, compliance and other systems to conduct their
business. At each quarterly meeting the Directors review investment
performance information for the funds, together with comparative information
for appropriate benchmarks and peer groups of funds managed similarly to the
funds. The Directors also review detailed performance information during the
15(c) Process comparing the funds' performance with that of similar funds not
managed by the advisor. If performance concerns are identified, the Directors
discuss with the advisor the reasons for such results (e.g., market
conditions, security selection) and any efforts being undertaken to improve
performance.
SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a
comprehensive package of transfer agency, shareholder, and other services. The
Directors review reports and evaluations of such services at their regular
quarterly meetings, including the annual meeting concerning contract review,
and reports to the board. These reports include, but are not limited to,
information regarding the operational efficiency and accuracy of the
shareholder and transfer agency services provided, staffing levels,
shareholder satisfaction (as measured by external as well as internal
sources), technology support, new products and services offered to fund
shareholders, securities trading activities, portfolio valuation services,
auditing services, and legal and operational compliance activities. Certain
aspects of shareholder and transfer agency service level efficiency and the
quality of securities trading activities are measured by independent third
party providers and are presented in comparison to other fund groups not
managed by the advisor.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor
provides detailed information concerning its cost of providing various
services to the funds, its profitability in managing the funds, its overall
profitability, and its financial condition. The Directors have reviewed with
the advisor the methodology used to prepare this financial information. This
financial information regarding the advisor is considered in order to evaluate
the advisor's financial condition, its ability to continue to provide services
under the management agreement, and the reasonableness of the current
management fee.
ETHICS OF THE ADVISOR. The Directors generally consider the advisor's
commitment to providing quality services to shareholders and to conducting its
business ethically. They noted that the advisor's practices generally meet or
exceed industry best practices.
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54
ECONOMIES OF SCALE. The Directors review reports provided by the advisor on
economies of scale for the complex as a whole and the year-over-year changes
in revenue, costs, and profitability. The Directors concluded that economies
of scale are difficult to measure and predict with precision, especially on a
fund-by-fund basis. This analysis is also complicated by the additional
services and content provided by the advisor and its reinvestment in its
ability to provide and expand those services. Accordingly, the Directors also
seek to evaluate economies of scale by reviewing other information, such as
year-over-year profitability of the advisor generally, the profitability of
its management of the funds specifically, the expenses incurred by the advisor
in providing various functions to the funds, and the breakpoint fees of
competitive funds not managed by the advisor. The Directors believe the
advisor is appropriately sharing economies of scale through its competitive
fee structure, fee breakpoints as the funds increase in size, and through
reinvestment in its business to provide shareholders additional content and
services.
COMPARISON TO OTHER FUNDS' FEES. The funds pay the advisor a single,
all-inclusive (or unified) management fee for providing all services necessary
for the management and operation of the funds, other than brokerage expenses,
taxes, interest, extraordinary expenses, and the fees and expenses of the
funds' independent directors (including their independent legal counsel).
Under the unified fee structure, the advisor is responsible for providing all
investment advisory, custody, audit, administrative, compliance,
recordkeeping, marketing and shareholder services, or arranging and
supervising third parties to provide such services. By contrast, most other
funds are charged a variety of fees, including an investment advisory fee, a
transfer agency fee, an administrative fee, distribution charges and other
expenses. Other than their investment advisory fees and Rule 12b-1
distribution fees, all other components of the total fees charged by these
other funds may be increased without shareholder approval. The board believes
the unified fee structure is a benefit to fund shareholders because it clearly
discloses to shareholders the cost of owning fund shares, and, since the
unified fee cannot be increased without a vote of fund shareholders, it shifts
to the advisor the risk of increased costs of operating the funds and provides
a direct incentive to minimize administrative inefficiencies. Part of the
Directors' analysis of fee levels involves reviewing certain evaluative data
compiled by a 15(c) Provider comparing the funds' unified fee to the total
expense ratio of other funds in the funds' peer group. The unified fee charged
to shareholders of Legacy Large Cap was equal to the median of the total
expense ratio of its peer group. The unified fee charged to shareholders of
Legacy Focused Large Cap was slightly below the median of the total expense
ratios of its peer group. The unified fee charged to shareholders of Legacy
Multi Cap was slightly above the median of the total expense ratios of its
peer group.
COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The
Directors also requested and received information from the advisor concerning
the nature of the services, fees, and profitability of its advisory services
to advisory clients other than the funds. They observed that these varying
types of client accounts require different services and involve different
regulatory and entrepreneurial risks than the management of the funds. The
Directors analyzed this information and concluded that the fees charged and
services provided to the funds were reasonable by comparison.
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55
COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information
from the advisor concerning collateral benefits it receives as a result of its
relationship with the funds. They concluded that the advisor's primary
business is managing mutual funds and it generally does not use fund or
shareholder information to generate profits in other lines of business, and
therefore does not derive any significant collateral benefits from them. The
Directors noted that the advisor receives proprietary research from
broker-dealers that execute fund portfolio transactions and concluded that
this research is likely to benefit fund shareholders. The Directors also
determined that the advisor is able to provide investment management services
to certain clients other than the funds, at least in part, due to its existing
infrastructure built to serve the fund complex. The Directors concluded,
however, that the assets of those other clients are not material to the
analysis and, in any event, are included with the assets of the funds to
determine breakpoints in the funds' fee schedule, provided they are managed
using the same investment team and strategy.
CONCLUSIONS OF THE DIRECTORS
As a result of this process, the independent directors, in the absence of
particular circumstances and assisted by the advice of legal counsel that is
independent of the advisor, taking into account all of the factors discussed
above and the information provided by the advisor concluded that the
investment management agreement between the funds and the advisor is fair and
reasonable in light of the services provided and should be renewed.
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56
SHARE CLASS INFORMATION
Four classes of shares are authorized for sale by the funds: Investor Class,
Institutional Class, Advisor 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 the Advisor Class 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 certain
financial intermediaries (such as banks, broker-dealers, insurance companies
and investment advisors), which may require payment of a transaction fee to
the financial intermediary.
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 unified
management fee of Institutional Class shares is 0.20% less than the unified
management fee 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
distribution and service fee. The total expense ratio of Advisor Class shares
is 0.25% higher than the total expense ratio of Investor Class shares.
R CLASS shares are sold primarily through employer-sponsored retirement plans
and through institutions such as investment advisors, banks, broker-dealers,
and insurance companies. The unified management fee for R Class shares is the
same as for Investor Class shares. R Class shares are subject to a 0.50%
annual Rule 12b-1 distribution and service fee.
All classes of shares represent a pro rata interest in the funds and generally
have the same rights and preferences.
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57
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' investment advisor,
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 advisor 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 website at americancentury.com and on the Securities and
Exchange Commission's website at sec.gov. Information regarding how the
investment advisor voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 is available on the "About Us" page
at americancentury.com. It is also available at sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The funds file their complete schedule of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third quarters of
each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's
website at sec.gov, and may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make
their complete schedule of portfolio holdings for the most recent quarter of
their fiscal year available on their website at americancentury.com and, upon
request, by calling 1-800-345-2021.
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58
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® INDEX is a market-capitalization weighted, large-cap index
created by Frank Russell Company to measure the performance of the 1,000
largest companies in the Russell 3000 Index (the 3,000 largest publicly traded
U.S. companies, based on total market capitalization).
The RUSSELL 1000® GROWTH INDEX measures the performance of those Russell 1000
Index 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 values.
The RUSSELL 1000® VALUE INDEX measures the performance of those Russell 1000
Index 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 values.
The RUSSELL 2000® INDEX is a market-capitalization weighted index created by
Frank Russell Company to measure the performance of the 2,000 smallest of the
3,000 largest publicly traded U.S. companies, based on total market
capitalization.
The RUSSELL 2000® GROWTH INDEX measures the performance of those Russell 2000
Index 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 values.
The RUSSELL 2000® VALUE INDEX measures the performance of those Russell 2000
Index 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 values.
The RUSSELL 3000® INDEX measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents approximately
98% of the investable U.S. equity market. As of the latest reconstitution, the
average market capitalization was approximately $4 billion; the median market
capitalization was approximately $700 million. The index had a total market
capitalization range of approximately $309 billion to $128 million.
The RUSSELL 3000® GROWTH INDEX measures the performance of those Russell 3000
Index companies (the 3,000 largest U.S. companies based on total market
capitalization) with higher price-to-book ratios and higher forecasted growth
values.
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.
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59
The RUSSELL MIDCAP® GROWTH INDEX measures the performance of those Russell
Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded
U.S. companies, based on total market capitalization) with higher
price-to-book ratios and higher forecasted growth values.
The RUSSELL MIDCAP® VALUE INDEX measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted growth
values.
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.
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[back cover]
CONTACT US
AMERICANCENTURY.COM
AUTOMATED INFORMATION LINE:
1-800-345-8765
INVESTOR SERVICES REPRESENTATIVE:
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 PROFESSIONALS, INSURANCE COMPANIES:
1-800-345-6488
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 or 816-444-3485
AMERICAN CENTURY GROWTH FUNDS, INC.
INVESTMENT ADVISOR:
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 Investment Services, Inc., Distributor
©2007 American Century Proprietary Holdings, Inc. All rights reserved.
The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Proprietary Holdings, Inc.
0709
SH-ANN-56321N
ITEM 2. CODE OF ETHICS.
a. The registrant has adopted a Code of Ethics for Senior Financial Officers
that applies to the registrant's principal executive officer, principal
financial officer, principal accounting officer, and persons performing
similar functions.
b. No response required.
c. None.
d. None.
e. Not applicable.
f. The registrant's Code of Ethics for Senior Financial Officers was filed as
Exhibit 12 (a)(1) to American Century Asset Allocation Portfolios, Inc.'s
Annual Certified Shareholder Report on Form N-CSR, File No. 811-21591, on
September 29, 2005, and is incorporated herein by reference.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board has determined that the registrant has at least
one audit committee financial expert serving on its audit committee.
(a)(2) Donald H. Pratt, Thomas A. Brown and Gale E. Sayers are the
registrant's designated audit committee financial experts. They are
"independent" as defined in Item 3 of Form N-CSR.
(a)(3) Not applicable.
(b) No response required.
(c) No response required.
(d) No response required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees.
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit of
the registrant's annual financial statements or services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for those fiscal years were as follows:
FY 2006: $31,197
FY 2007: $32,288
(b) Audit-Related Fees.
The aggregate fees billed in each of the last two fiscal years for assurance
and related services by the principal accountant that are reasonably related
to the performance of the audit of the registrant's financial statements and
are not reported under paragraph (a) of this Item were as follows:
For services rendered to the registrant:
FY 2006: $0
FY 2007: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2006: $0
FY 2007: $0
(c) Tax Fees.
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning were as follows:
For services rendered to the registrant:
FY 2006: $4,200
FY 2007: $0
These services included review of federal and state income tax forms
for 2006.
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2006: $0
FY 2007: $0
(d) All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products
and services provided by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item were as follows:
For services rendered to the registrant:
FY 2006: $0
FY 2007: $0
Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X (relating to certain engagements for non-audit
services with the registrant's investment adviser and its affiliates):
FY 2006: $0
FY 2007: $0
(e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation
S-X, before the accountant is engaged by the registrant to render
audit or non-audit services, the engagement is approved by the
registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X, the registrant's audit committee also
pre-approves its accountant's engagements for non-audit services with
the registrant's investment adviser, its parent company, and any
entity controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant, if the
engagement relates directly to the operations and financial reporting
of the registrant.
(e)(2) All services described in each of paragraphs (b) through (d) of this
Item were pre-approved before the engagement by the registrant's
audit committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of
Regulation S-X. Consequently, none of such services were required to
be approved by the audit committee pursuant to paragraph
(c)(7)(i)(C).
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the
most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that provides
ongoing services to the registrant for each of the last two fiscal
years of the registrant were as follows:
FY 2006: $168,356
FY 2007: $167,244
(h) The registrant's investment adviser and accountant have notified the
registrant's audit committee of all non-audit services that were
rendered by the registrant's accountant to the registrant's
investment adviser, its parent company, and any entity controlled by,
or under common control with the investment adviser that provides
services to the registrant, which services were not required to be
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X. The notification provided to the registrant's audit
committee included sufficient details regarding such services to
allow the registrant's audit committee to consider the continuing
independence of its principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedule of investments is included as part of the report to stockholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the reporting period, there were no material changes to the procedures by
which shareholders may recommend nominees to the registrant's board.
ITEM 11. 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 second fiscal quarter of the
period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is
the subject of the disclosure required by Item 2 of Form N-CSR, was
filed as Exhibit 12(a)(1) to American Century Asset Allocation
Portfolios, Inc.'s Certified Shareholder Report on Form N-CSR, File
No. 811-21591, on September 29, 2005.
(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 GROWTH FUNDS, INC.
By: /s/ Jonathan S. Thomas
--------------------------------------------
Name: Jonathan S. Thomas
Title: President
Date: September 28, 2007
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/ Jonathan S. Thomas
--------------------------------------------
Name: Jonathan S. Thomas
Title: President
(principal executive officer)
Date: September 28, 2007
By: /s/ Robert J. Leach
--------------------------------------------
Name: Robert J. Leach
Title: Vice President, Treasurer, and
Chief Financial Officer
(principal financial officer)
Date: September 28, 2007
