[front cover] May 31, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of side-by-side bridges] International Growth [american century logo and text logo (reg.sm)] Table of Contents Our Message to You ........................................................ 1 INTERNATIONAL GROWTH Performance ............................................................... 2 Performance Review ........................................................ 4 Types of Investments in Portfolio ...................................... 4 Investments by Country ................................................. 4 Top Ten Holdings ....................................................... 5 Top Five Sectors ....................................................... 5 Schedule of Investments ................................................... 6 FINANCIAL STATEMENTS Statement of Assets and Liabilities ....................................... 9 Statement of Operations ................................................... 11 Statement of Changes in Net Assets ........................................ 12 Notes to Financial Statements ............................................. 13 Financial Highlights ...................................................... 19 OTHER INFORMATION Share Class Information ................................................... 25 Retirement Account Information ............................................ 27 Index Definition .......................................................... 28 Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for the International Growth fund for the six months ended May 31, 2003. The report includes comparative performance graphs and tables, portfolio commentary, tables that summarize portfolio investments, full listings of portfolio holdings, financial statements, and highlights (all as of May 31, 2003, except as noted). We hope you will find this information helpful in monitoring your investment. Also, through our Web site, we provide quarterly commentaries on all American Century portfolios, the views of our senior investment officers, and other information about investments, portfolio strategy, and the markets. The next International Growth shareholder report will be the annual report for the year ended November 30, 2003, which should be available in approximately six months. As always, we appreciate your investment with American Century. Sincerely, /*/James E. Stowers, Jr. James E. Stowers, Jr. Founder and Chairman /*/James E. Stowers III James E. Stowers III Co-Chairman of the Board ------ 1 International Growth - Performance TOTAL RETURNS AS OF MAY 31, 2003 -------------------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS -15.25% -3.89% 6.30% 7.73% 5/9/91 - -------------------------------------------------------------------------------- MSCI EAFE INDEX -12.30% -4.31% 2.37% 3.04%(1 -- - -------------------------------------------------------------------------------- Institutional Class -14.93% -3.65% -- 1.14% 11/20/97 - -------------------------------------------------------------------------------- Advisor Class -15.38% -4.11% -- 3.70% 10/2/96 - -------------------------------------------------------------------------------- A Class 1/31/03 No sales charge* -- -- -- 8.52%(2) With sales charge* -- -- -- 2.32%(2) - -------------------------------------------------------------------------------- B Class 1/31/03 No sales charge* -- -- -- 8.20%(2) With sales charge* -- -- -- 3.20%(2) - -------------------------------------------------------------------------------- C Class* -16.22% -- -- -15.45% 6/4/01 - -------------------------------------------------------------------------------- *Sales charges include initial sales charges and contingent deferred sales charges (CDSCs), as applicable. (A Class shares have an initial sales charge and CDSC; B and C Class shares have CDSCs. Please see the Share Class Information pages for more about the applicable sales charges for each share class.) The SEC requires that mutual funds provide performance information net of maximum sales charges in all cases where charges could be applied. (1) Since 4/30/91, the date nearest the Investor Class's inception for which data are available. (2) Returns for periods less than one year are not annualized. (continued) - ------ 2 International Growth - Performance
GROWTH OF $10,000 OVER 10 YEARS
$10,000 investment made May 31, 1993
ONE-YEAR RETURNS OVER 10 YEARS Periods ended May 31 - -------------------------------------------------------------------------------------------------------------- 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------------------------------------- Investor Class 22.93% -2.89% 17.13% 23.36% 30.30% -2.85% 48.27% -22.48% -13.34% -15.25% - -------------------------------------------------------------------------------------------------------------- MSCI EAFE Index 13.57% 4.93% 10.67% 7.54% 11.11% 4.36% 17.14% -17.23% -9.60% -12.30% - -------------------------------------------------------------------------------------------------------------- The charts on the performance pages give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures (see the Total Returns table on the previous page). Past performance does not guarantee future results. None of these charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. ------ 3 International Growth - Performance Review [photo of Keith Creveling, Mark Kopinski and Henrik Strabo] A performance review from Keith Creveling, Mark Kopinski, and Henrik Strabo, portfolio managers on the International Growth investment team. International Growth declined 0.18%* during the six months ending May 31, 2003, while its benchmark, the Morgan Stanley Capital International EAFE Index, gained 3.30%. The economic and market activity during the period covered in this report occurred against a backdrop that included an armed conflict in Iraq involving troops from a variety of nations, including the United States. Foreign stock markets, as measured by the EAFE Index, declined in each of the first four months during this period, and advanced in the last two months. The portfolio's telecommunications sector turned in the period's top performance. Most of the gains came from strength among wireless telecom- TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- Foreign Common Stocks 97.1% 99.2% - -------------------------------------------------------------------------------- U.S. Common Stocks 1.6% 0.6% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 98.7% 99.8% - -------------------------------------------------------------------------------- Temporary Cash Investments 1.3% 0.2% - -------------------------------------------------------------------------------- munications companies, which made up International Growth's second-largest industry stake during the period. The portfolio increased its weighting in the wireless industry during the period, and the group contained International Growth's largest holding as of period end, France Telecom, and the second largest, Vodafone. Those companies were among the largest contributors to the portfolio. International Growth's financial holdings, the largest sector stake, also contributed to performance. The sector advanced mostly on the strength of banks, which represented the portfolio's largest industry weighting. Royal Bank of Scotland and HBOS, both in the United Kingdom and both top-10 holdings at the end of the period, were among banks that contributed. HBOS provided one of the largest contributions to the portfolio. INVESTMENTS BY COUNTRY AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- United Kingdom 18.0% 22.7% - ------------------------------------------------------------------------------- France 15.5% 10.8% - ------------------------------------------------------------------------------- Japan 12.4% 13.0% - ------------------------------------------------------------------------------- Switzerland 8.0% 8.5% - ------------------------------------------------------------------------------- Germany 7.3% 3.2% - ------------------------------------------------------------------------------- Italy 6.7% 6.2% - ------------------------------------------------------------------------------- Spain 6.1% 4.0% - ------------------------------------------------------------------------------- Netherlands 4.1% 10.1% - ------------------------------------------------------------------------------- Ireland 3.3% 2.1% - ------------------------------------------------------------------------------- Russian Federation 3.3% 0.9% - ------------------------------------------------------------------------------- Other(+) 15.3% 18.5% - ------------------------------------------------------------------------------- (+) Includes Temporary Cash Investments. *All fund returns referenced in this review are for Investor Class shares. (continued) - ------ 4 International Growth - Performance Review Elsewhere in the sector, property and casualty insurers declined. Aegon, an insurer based in the Netherlands, detracted from the portfolio. International Growth's energy sector advanced, led by the portfolio's holdings in the oil services industry. In that industry, Eni, an oil company in Italy, was among those that added to performance. The oil refining industry also contributed to the portfolio. The consumer non-cyclical sector provided another source of strength for International Growth, with the portfolio's food and beverage holdings gaining ground. Spain's Altadis and the United Kingdom's Reckitt Benckiser were among the holdings that lifted the industry. But several sectors detracted from International Growth's performance, Including the portfolio's complement of health care companies. Holdings in TOP TEN HOLDINGS AS OF MAY 31, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- France Telecom SA 2.9% 0.3% - -------------------------------------------------------------------------------- Vodafone Group plc 2.7% 2.5% - -------------------------------------------------------------------------------- UniCredito Italiano 2.5% 1.8% - -------------------------------------------------------------------------------- Novartis AG 2.4% 2.0% - -------------------------------------------------------------------------------- HBOS plc 2.4% -- - -------------------------------------------------------------------------------- Roche Holding AG 2.0% 1.5% - -------------------------------------------------------------------------------- Societe Generale Cl A 1.8% -- - -------------------------------------------------------------------------------- Royal Bank of Scotland Group plc 1.8% 2.1% - -------------------------------------------------------------------------------- GlaxoSmithKline plc ADR 1.8% 1.4% - -------------------------------------------------------------------------------- Canon, Inc. 1.7% 1.8% - -------------------------------------------------------------------------------- TOP FIVE SECTORS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Financial 23.6% 21.2% - ------------------------------------------------------------------------------- Telecommunications 15.4% 11.4% - ------------------------------------------------------------------------------- Health Care 12.7% 12.9% - ------------------------------------------------------------------------------- Technology 9.1% 10.4% - ------------------------------------------------------------------------------- Energy 8.4% 6.6% - ------------------------------------------------------------------------------- the drug industry, the portfolio's third-largest industry, accounted for some of the sector's decline. However, two Swiss pharmaceutical companies that were top-10 holdings at period's end--Novartis and Roche Holding--positively contributed. Takeda Chemical Industries and Fujisawa Pharmaceutical Co., both of Japan, were among companies in the portfolio's drug industry that detracted from performance. The technology sector was among the portfolio's biggest detractors. The semiconductor and electrical equipment industries led the decline, with International Growth's computer hardware and software positions also retreating. Among holdings in the semiconductor industry, South Korea's Samsung Electronics was one of the portfolio's largest detractors. However, Canon Inc., a holding in the semiconductor industry and one of the portfolio's 10 largest positions, contributed to International Growth. The performance of the fund was positively impacted by the weakness of the U.S. dollar versus other currencies during the period. ------ 5 International Growth - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ In Thousands) Value - ------------------------------------------------------------------------------- COMMON STOCKS -- 98.7% AUSTRALIA -- 2.4% - ------------------------------------------------------------------------------- 1,110,700 Australia & New Zealand Banking Group Ltd. $ 13,443 - ------------------------------------------------------------------------------- 3,506,726 BHP Billiton Limited 19,698 - ------------------------------------------------------------------------------- 1,596,428 News Corporation Limited 12,116 - ------------------------------------------------------------------------------- 2,113,700 Westpac Banking Corporation 22,503 - ------------------------------------------------------------------------------- 67,760 - ------------------------------------------------------------------------------- AUSTRIA -- 0.2% - ------------------------------------------------------------------------------- 80,970 Erste Bank der Oesterreichischen Sparkassen AG 6,865 - ------------------------------------------------------------------------------- CANADA -- 1.2% - ------------------------------------------------------------------------------- 624,200 EnCana Corp. 22,870 - ------------------------------------------------------------------------------- 3,766,400 Nortel Networks Corp.(1) 11,826 - ------------------------------------------------------------------------------- 34,696 - ------------------------------------------------------------------------------- FINLAND -- 1.0% - ------------------------------------------------------------------------------- 1,634,800 Nokia Oyj ADR 29,491 - ------------------------------------------------------------------------------- FRANCE -- 15.5% - ------------------------------------------------------------------------------- 933,940 Accor SA 35,148 - ------------------------------------------------------------------------------- 2,120,230 Alcatel SA(1) 19,449 - ------------------------------------------------------------------------------- 361,600 Aventis SA 18,897 - ------------------------------------------------------------------------------- 854,295 BNP Paribas SA 42,352 - ------------------------------------------------------------------------------- 3,267,480 France Telecom SA(1) 80,838 - ------------------------------------------------------------------------------- 167,900 Groupe Danone 23,112 - ------------------------------------------------------------------------------- 264,300 Michelin (C.G.D.E.) 9,648 - ------------------------------------------------------------------------------- 1,467,070 Orange SA(1) 13,907 - ------------------------------------------------------------------------------- 540,100 PSA Peugeot Citroen(1) 24,708 - ------------------------------------------------------------------------------- 211,900 Publicis Groupe 5,552 - ------------------------------------------------------------------------------- 336,315 Sanofi-Synthelabo SA 21,524 - ------------------------------------------------------------------------------- 122,993 Schneider SA 5,630 - ------------------------------------------------------------------------------- 838,100 Societe Generale Cl A 51,516 - ------------------------------------------------------------------------------- 1,557,570 STMicroelectronics N.V. New York Shares 35,528 - ------------------------------------------------------------------------------- 194,100 Total SA Cl B 28,456 - ------------------------------------------------------------------------------- 2,698,499 Wanadoo(1) 20,368 - ------------------------------------------------------------------------------- 436,633 - ------------------------------------------------------------------------------- GERMANY -- 7.3% - ------------------------------------------------------------------------------- 176,313 Bayerische Motoren Werke (BMW) AG 6,098 - ------------------------------------------------------------------------------- 494,386 Deutsche Bank AG(1) 28,992 - ------------------------------------------------------------------------------- 729,100 Deutsche Boerse AG 38,421 - ------------------------------------------------------------------------------- 2,360,962 Deutsche Telekom(1) 35,391 - ------------------------------------------------------------------------------- 408,472 E.On AG 21,063 - ------------------------------------------------------------------------------- 233,700 Fresenius Medical Care AG 11,321 - ------------------------------------------------------------------------------- 258,212 Metro AG 8,064 - ------------------------------------------------------------------------------- 263,100 SAP AG 29,572 - ------------------------------------------------------------------------------- 2,953,287 T-Online International AG(1) 27,647 - ------------------------------------------------------------------------------- 206,569 - ------------------------------------------------------------------------------- Shares ($ In Thousands) Value - ------------------------------------------------------------------------------- HUNGARY -- 0.2% - ------------------------------------------------------------------------------- 455,165 OTP Bank Rt. $ 5,161 - ------------------------------------------------------------------------------- IRELAND -- 3.3% - ------------------------------------------------------------------------------- 2,336,042 Allied Irish Banks plc 34,881 - ------------------------------------------------------------------------------- 2,751,900 Bank of Ireland 33,312 - ------------------------------------------------------------------------------- 929,367 CRH plc 14,500 - ------------------------------------------------------------------------------- 283,000 Ryanair Holdings plc ADR(1) 11,735 - ------------------------------------------------------------------------------- 94,428 - ------------------------------------------------------------------------------- ISRAEL -- 1.0% - ------------------------------------------------------------------------------- 561,584 Teva Pharmaceutical Industries Ltd. ADR 28,461 - ------------------------------------------------------------------------------- ITALY -- 6.7% - ------------------------------------------------------------------------------- 1,368,000 Banco Popolare di Verona e Novara Scrl 20,523 - ------------------------------------------------------------------------------- 2,967,300 ENI SpA 47,940 - ------------------------------------------------------------------------------- 9,698,900 IntesaBci SpA 31,065 - ------------------------------------------------------------------------------- 5,483,586 Snam Rete Gas SpA 21,245 - ------------------------------------------------------------------------------- 15,270,600 UniCredito Italiano 69,950 - ------------------------------------------------------------------------------- 190,723 - ------------------------------------------------------------------------------- JAPAN -- 12.4% - ------------------------------------------------------------------------------- 2,026,000 Ajinomoto Co. Inc. 20,162 - ------------------------------------------------------------------------------- 1,164,000 Canon, Inc. 48,754 - ------------------------------------------------------------------------------- 3,420 East Japan Railway Company 16,473 - ------------------------------------------------------------------------------- 583,700 Fanuc Ltd. 26,404 - ------------------------------------------------------------------------------- 649,800 Honda Motor Co., Ltd. 23,461 - ------------------------------------------------------------------------------- 320,000 Hoya Corp. 20,159 - ------------------------------------------------------------------------------- 6,557 KDDI Corp. 22,795 - ------------------------------------------------------------------------------- 107,300 Keyence Corp. 18,912 - ------------------------------------------------------------------------------- 5,669,000 Nissan Motor Co., Ltd. 44,782 - ------------------------------------------------------------------------------- 15,823 NTT DoCoMo, Inc. 33,270 - ------------------------------------------------------------------------------- 1,018,000 Olympus Optical Co., Ltd. 19,273 - ------------------------------------------------------------------------------- 1,263,000 Sharp Corp. 13,913 - ------------------------------------------------------------------------------- 285,000 Takeda Chemical Industries, Ltd. 11,197 - ------------------------------------------------------------------------------- 5,070,000 Toshiba Corp. 15,417 - ------------------------------------------------------------------------------- 1,257 Yahoo Japan Corporation(1) 15,374 - ------------------------------------------------------------------------------- 350,346 - ------------------------------------------------------------------------------- MEXICO -- 0.8% - ------------------------------------------------------------------------------- 732,400 America Movil SA de CV, Series L ADR 13,374 - ------------------------------------------------------------------------------- 3,245,322 Wal-Mart de Mexico SA de CV, Series V 9,220 - ------------------------------------------------------------------------------- 22,594 - ------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 International Growth - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ In Thousands) Value - ------------------------------------------------------------------------------- NETHERLANDS -- 4.1% - ------------------------------------------------------------------------------- 1,248,500 ING Groep N.V. $ 20,141 - ------------------------------------------------------------------------------- 3,628,200 Koninklijke Royal KPN N.V.(1) 25,335 - ------------------------------------------------------------------------------- 1,102,402 Koninklijke Royal Philips Electronics N.V. New York Shares 21,673 - ------------------------------------------------------------------------------- 581,924 Unilever N.V. 34,057 - ------------------------------------------------------------------------------- 465,399 VNU N.V. 13,531 - ------------------------------------------------------------------------------- 114,737 - ------------------------------------------------------------------------------- PEOPLE'S REPUBLIC OF CHINA -- 1.9% - ------------------------------------------------------------------------------- 110,341,385 China Telecom Corporation Limited 23,912 - ------------------------------------------------------------------------------- 8,935,000 CNOOC Ltd. 12,488 - ------------------------------------------------------------------------------- 12,452,000 Huaneng Power International, Inc. 12,933 - ------------------------------------------------------------------------------- 28,966,000 Shanghai Petrochemical Co., Ltd. Cl H 5,274 - ------------------------------------------------------------------------------- 54,607 - ------------------------------------------------------------------------------- RUSSIAN FEDERATION -- 3.3% - ------------------------------------------------------------------------------- 264,082 AO VimpelCom ADR(1) 11,884 - ------------------------------------------------------------------------------- 175,968 Lukoil Holding ADR 12,934 - ------------------------------------------------------------------------------- 343,300 Mobile Telesystems ADR(1) 18,469 - ------------------------------------------------------------------------------- 20,599 Sberbank RF 5,469 - ------------------------------------------------------------------------------- 463,100 Surgutneftegaz ADR 9,540 - ------------------------------------------------------------------------------- 2,812,300 YUKOS 35,434 - ------------------------------------------------------------------------------- 93,730 - ------------------------------------------------------------------------------- SOUTH KOREA -- 1.0% - ------------------------------------------------------------------------------- 65,415 Pohang Iron & Steel Co., Ltd. 5,816 - ------------------------------------------------------------------------------- 42,270 Samsung Electronics Co., Ltd. 11,328 - ------------------------------------------------------------------------------- 691,700 SK Telecom Co. Ltd. ADR 12,416 - ------------------------------------------------------------------------------- 29,560 - ------------------------------------------------------------------------------- SPAIN -- 6.1% - ------------------------------------------------------------------------------- 980,889 Abertiscesa Infraestructuras SA 14,323 - ------------------------------------------------------------------------------- 1,261,700 Altadis, SA 35,865 - ------------------------------------------------------------------------------- 440,300 Banco Popular Espanol SA 23,331 - ------------------------------------------------------------------------------- 912,800 Gas Natural SDG SA 18,627 - ------------------------------------------------------------------------------- 781,800 Grupo Dragados SA 15,715 - ------------------------------------------------------------------------------- 864,080 Grupo Ferrovial SA 23,697 - ------------------------------------------------------------------------------- 1,756,800 Repsol YPF SA 27,804 - ------------------------------------------------------------------------------- 1,157,988 Telefonica SA(1) 13,022 - ------------------------------------------------------------------------------- 172,384 - ------------------------------------------------------------------------------- SWEDEN -- 1.6% - ------------------------------------------------------------------------------- 1,603,800 ForeningsSparbanken AB 22,648 - ------------------------------------------------------------------------------- 305,564 Tele2 AB(1) 11,625 - ------------------------------------------------------------------------------- 11,977,000 Telefonaktiebolaget LM Ericsson B Shares(1) 12,357 - ------------------------------------------------------------------------------- 46,630 - ------------------------------------------------------------------------------- Shares ($ In Thousands) Value - ------------------------------------------------------------------------------- SWITZERLAND -- 8.0% - ------------------------------------------------------------------------------- 573,645 Adecco SA $ 21,479 - ------------------------------------------------------------------------------- 1,185,200 Credit Suisse Group 32,108 - ------------------------------------------------------------------------------- 131,158 Nestle SA 27,558 - ------------------------------------------------------------------------------- 1,729,603 Novartis AG 67,957 - ------------------------------------------------------------------------------- 747,123 Roche Holding AG 57,099 - ------------------------------------------------------------------------------- 372,032 UBS AG 20,101 - ------------------------------------------------------------------------------- 226,302 - ------------------------------------------------------------------------------- TAIWAN (REPUBLIC OF CHINA) -- 1.1% - ------------------------------------------------------------------------------- 19,302,000 Taiwan Semiconductor Manufacturing Co. Ltd.(1) 29,803 - ------------------------------------------------------------------------------- UNITED KINGDOM -- 18.0% - ------------------------------------------------------------------------------- 1,369,600 3i Group plc 13,197 - ------------------------------------------------------------------------------- 1,024,707 Alliance & Leicester plc 14,004 - ------------------------------------------------------------------------------- 862,571 AstraZeneca plc 34,956 - ------------------------------------------------------------------------------- 2,817,400 BAA plc 22,531 - ------------------------------------------------------------------------------- 1,026,700 British Sky Broadcasting plc(1) 11,155 - ------------------------------------------------------------------------------- 1,000,408 Gallaher Group plc 10,074 - ------------------------------------------------------------------------------- 1,242,151 GlaxoSmithKline plc ADR 49,698 - ------------------------------------------------------------------------------- 5,806,380 HBOS plc 67,747 - ------------------------------------------------------------------------------- 2,020,775 Marks & Spencer Group plc 9,470 - ------------------------------------------------------------------------------- 33,573,112 mmO2 plc(1) 33,835 - ------------------------------------------------------------------------------- 2,261,409 Reckitt Benckiser plc 44,062 - ------------------------------------------------------------------------------- 2,786,874 Rentokil Initial plc 8,220 - ------------------------------------------------------------------------------- 1,270,700 Rio Tinto plc 24,905 - ------------------------------------------------------------------------------- 1,975,513 Royal Bank of Scotland Group plc 51,311 - ------------------------------------------------------------------------------- 1,451,500 Smith & Nephew plc 8,801 - ------------------------------------------------------------------------------- 34,573,445 Vodafone Group plc 75,069 - ------------------------------------------------------------------------------- 3,440,652 WPP Group plc 27,627 - ------------------------------------------------------------------------------- 506,662 - ------------------------------------------------------------------------------- UNITED STATES -- 1.6% - ------------------------------------------------------------------------------- 259,300 Alcon, Inc. 11,020 - ------------------------------------------------------------------------------- 766,400 Amdocs Ltd.(1) 14,952 - ------------------------------------------------------------------------------- 445,100 Nabors Industries Ltd.(1) 20,065 - ------------------------------------------------------------------------------- 46,037 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $2,443,198) 2,794,179 - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 1.3% Repurchase Agreement, Bank of America Securities, LLC, (U.S. Treasury obligations), in a joint trading account at 1.20%, dated 5/30/03, due 6/2/03 (Delivery value $35,904) (Cost $35,900) 35,900 - ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $2,479,098) $2,830,079 =============================================================================== See Notes to Financial Statements. (continued) ------ 7 International Growth - Schedule of Investments MAY 31, 2003 (UNAUDITED) Principal Amount ($ In Thousands) Value - ------------------------------------------------------------------------------- COLLATERAL RECEIVED FOR SECURITIES LENDING(2) REPURCHASE AGREEMENTS - -------------------------------------------------------------------------------- Repurchase Agreement, BNP Paribas Securities Corp., (U.S. agency obligations), 1.37%, dated 5/30/03, due 6/2/03 (Delivery value $47,356) $ 47,350 - -------------------------------------------------------------------------------- Repurchase Agreement, CDC IXIS Financial Products, Inc., (AAA asset-backed securities), 1.43% dated 5/30/03, due 6/2/03 (Delivery value $200,024) 200,000 - -------------------------------------------------------------------------------- 247,350 - -------------------------------------------------------------------------------- SHORT-TERM DEBT SECURITIES - -------------------------------------------------------------------------------- $ 50 Caterpillar Financial Services Corp. MTN, Floater, 1.44%, 6/2/03, resets quarterly off the 3-month LIBOR plus 0.10% with no caps 50 - -------------------------------------------------------------------------------- 20,005 Citibank Credit Card Issuance Trust, Series 2000 A2, Floater, 1.29%, 8/7/03, resets quarterly off the 3-month LIBOR plus a floor of 0.05% with no caps 20,005 - -------------------------------------------------------------------------------- 61,368 Credit Industrial et Commercial NY, 1.29%, 6/17/03 61,368 - -------------------------------------------------------------------------------- 24,997 Dorada Finance Inc. MTN, Floater, 1.33%, 6/2/03, resets daily off the prime rate minus 2.92% with no caps 24,997 - -------------------------------------------------------------------------------- 25,022 Ford Credit Floorplan Master Owner Trust, Series 2001-1, Class A, Floater, 1.33%, 6/16/03, resets monthly off the 1-month LIBOR plus a floor of 0.09% with no caps 25,022 - -------------------------------------------------------------------------------- 50,000 Goldman Sachs Group, Inc., 1.27%, 6/16/03 50,000 - -------------------------------------------------------------------------------- 28,000 Merrill Lynch Mortgage Capital, Floater, 1.48%, 6/2/03 28,000 - -------------------------------------------------------------------------------- 25,000 Metropolitan Life Insurance Co., Floater, 1.40%, 6/2/03 25,000 - -------------------------------------------------------------------------------- 50,000 Morgan Stanley, Floater, 1.56%, 6/2/03 50,000 - -------------------------------------------------------------------------------- 25,000 New York Life Insurance Co., Floater, 1.43%, 6/2/03 25,000 - -------------------------------------------------------------------------------- 24,993 Nordea Bank Finland plc, Floater, 1.36%, 6/2/03, resets daily off the prime rate minus 2.89% with no caps 24,993 - -------------------------------------------------------------------------------- 69,000 RACERS[SM), Series 2000-7, Series A3, Zurich Capital Market, Floater, 1.57%, 6/30/03, resets monthly off the 1-month LIBOR plus 0.25% with no caps 69,000 - -------------------------------------------------------------------------------- $ 5,000 Security Benefit Life Insurance Co., Floater, 1.47%, 6/10/03 $ 5,000 - -------------------------------------------------------------------------------- 25,000 Travelers Insurance Company, Floater, 1.53%, 6/2/03 25,000 - -------------------------------------------------------------------------------- 20,000 Wachovia Bank N.A., Floater, 1.47%, 6/2/03, resets daily off the Fed Funds rate plus 0.19% with no caps 20,000 - -------------------------------------------------------------------------------- 453,435 - -------------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $700,785) $ 700,785 ================================================================================ MARKET SECTOR DIVERSIFICATION BASIC MATERIALS 1.8% - ------------------------------------------------------------------------------- COMMERCIAL SERVICES 4.3% - ------------------------------------------------------------------------------- CONSUMER SERVICES 3.5% - ------------------------------------------------------------------------------- CONSUMER (CYCLICAL) 7.1% - ------------------------------------------------------------------------------- CONSUMER (NON-CYCLICAL) 6.9% - ------------------------------------------------------------------------------- ENERGY 8.4% - ------------------------------------------------------------------------------- FINANCIAL 23.6% - ------------------------------------------------------------------------------- HEALTH CARE 12.7% - ------------------------------------------------------------------------------- INDUSTRIALS 1.8% - ------------------------------------------------------------------------------- TECHNOLOGY 9.1% - ------------------------------------------------------------------------------- TELECOMMUNICATIONS 15.4% - ------------------------------------------------------------------------------- TRANSPORTATION 1.5% - ------------------------------------------------------------------------------- UTILITY 2.6% - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS 1.3% - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt LIBOR = London Interbank Offered Rate MTN = Medium Term Note RACERS[sm] = Restructured Asset Certificates with Enhanced Returns resets = The frequency with which a security's coupon changes, based on current market conditions or an underlying index. The more frequently a security resets, the less risk the investor is taking that the coupon will vary significantly from current market rates. (1) Non-income producing. (2) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 8 Statement of Assets and Liabilities MAY 31, 2003 (UNAUDITED) (Amounts In Thousands Except Per-Share Amounts) ASSETS Investment securities, at value (cost of $2,479,098) -- including $835,813 of securities loaned $2,830,079 - ------------------------------------------------------------------------------- Collateral received for securities loaned, at value (cost of $700,785) 700,785 - ------------------------------------------------------------------------------- Cash 10,633 - ------------------------------------------------------------------------------- Foreign currency holdings, at value (cost of $85) 85 - ------------------------------------------------------------------------------- Receivable for investments sold 73,435 - ------------------------------------------------------------------------------- Receivable for capital shares sold 6,346 - ------------------------------------------------------------------------------- Dividends and interest receivable 10,522 - ------------------------------------------------------------------------------- 3,631,885 - ------------------------------------------------------------------------------- LIABILITIES Payable for collateral received on securities loaned 700,785 - ------------------------------------------------------------------------------- Payable for investments purchased 90,561 - ------------------------------------------------------------------------------- Payable for capital shares redeemed 13 - ------------------------------------------------------------------------------- Accrued management fees 2,905 - ------------------------------------------------------------------------------- Distribution fees payable 44 - ------------------------------------------------------------------------------- Service fees payable 44 - ------------------------------------------------------------------------------- 794,352 - ------------------------------------------------------------------------------- NET ASSETS $2,837,533 =============================================================================== See Notes to Financial Statements. (continued) ------ 9 Statement of Assets and Liabilities MAY 31, 2003 (UNAUDITED) (Amounts In Thousands Except Per-Share Amounts) NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $ 4,271,897 - ------------------------------------------------------------------------------- Undistributed net investment income 18,355 - ------------------------------------------------------------------------------- Accumulated net realized loss on investment and foreign currency transactions (1,803,959) - ------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 351,240 - ------------------------------------------------------------------------------- $ 2,837,533 =============================================================================== INVESTOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------- Net assets $2,311,106,513 - ------------------------------------------------------------------------------- Shares outstanding 348,905,190 - ------------------------------------------------------------------------------- Net asset value per share $6.62 - ------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------- Net assets $304,758,852 - ------------------------------------------------------------------------------- Shares outstanding 45,922,785 - ------------------------------------------------------------------------------- Net asset value per share $6.64 - ------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------- Net assets $219,420,978 - ------------------------------------------------------------------------------- Shares outstanding 33,205,546 - ------------------------------------------------------------------------------- Net asset value per share $6.61 - ------------------------------------------------------------------------------- A CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------- Net assets $927,943 - ------------------------------------------------------------------------------- Shares outstanding 140,189 - ------------------------------------------------------------------------------- Net asset value per share $6.62 - ------------------------------------------------------------------------------- Maximum offering price (net asset value divided by 0.9425) $7.02 - ------------------------------------------------------------------------------- B CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------- Net assets $163,830 - ------------------------------------------------------------------------------- Shares outstanding 24,807 - ------------------------------------------------------------------------------- Net asset value per share $6.60 - ------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------- Net assets $1,155,156 - ------------------------------------------------------------------------------- Shares outstanding 175,999 - ------------------------------------------------------------------------------- Net asset value per share $6.56 - ------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 10 Statement of Operations FOR THE SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) INVESTMENT INCOME INCOME: - ------------------------------------------------------------------------------- Dividends (net of foreign taxes withheld of $4,803) $ 34,812 - ------------------------------------------------------------------------------- Interest 284 - ------------------------------------------------------------------------------- Securities lending 1,140 - ------------------------------------------------------------------------------- 36,236 - ------------------------------------------------------------------------------- EXPENSES: - ------------------------------------------------------------------------------- Management fees 16,707 - ------------------------------------------------------------------------------- Distribution fees: - ------------------------------------------------------------------------------- Advisor Class 238 - ------------------------------------------------------------------------------- B Class -- - ------------------------------------------------------------------------------- C Class 3 - ------------------------------------------------------------------------------- Service fees: - ------------------------------------------------------------------------------- Advisor Class 238 - ------------------------------------------------------------------------------- B Class -- - ------------------------------------------------------------------------------- C Class 1 - ------------------------------------------------------------------------------- Service and distribution fees -- A Class -- - ------------------------------------------------------------------------------- Directors' fees and expenses 20 - ------------------------------------------------------------------------------- Other expenses 65 - ------------------------------------------------------------------------------- 17,272 - ------------------------------------------------------------------------------- NET INVESTMENT INCOME 18,964 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: - ------------------------------------------------------------------------------- Investment transactions (340,135) - ------------------------------------------------------------------------------- Foreign currency transactions 143,386 - ------------------------------------------------------------------------------- (196,749) - ------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - ------------------------------------------------------------------------------- Investments 50,354 - ------------------------------------------------------------------------------- Translation of assets and liabilities in foreign currencies 123,090 - ------------------------------------------------------------------------------- 173,444 - ------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS (23,305) - ------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (4,341) =============================================================================== See Notes to Financial Statements. ------ 11 Statement of Changes in Net Assets SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) AND YEAR ENDED NOVEMBER 30, 2002 (Amounts In Thousands) - ------------------------------------------------------------------------------- DECREASE IN NET ASSETS 2003 2002 - ------------------------------------------------------------------------------- OPERATIONS - ------------------------------------------------------------------------------- Net investment income $ 18,964 $ 26,16 - ------------------------------------------------------------------------------- Net realized loss (196,749) (611,007) - ------------------------------------------------------------------------------- Change in net unrealized appreciation 173,444 93,995 - ------------------------------------------------------------------------------- Net decrease in net assets resulting from operations (4,341) (490,848) - ------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS - ------------------------------------------------------------------------------- From net investment income: - ------------------------------------------------------------------------------- Investor Class (20,175) (12,811) - ------------------------------------------------------------------------------- Institutional Class (2,772) (2,126) - ------------------------------------------------------------------------------- Advisor Class (1,186) (301) - ------------------------------------------------------------------------------- Decrease in net assets from distributions (24,133) (15,238) - ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS - ------------------------------------------------------------------------------- Net decrease in net assets from capital share transactions (12,575) (465,220) - ------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS (41,049) (971,306) - ------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------------------------------------------- Beginning of period 2,878,582 3,849,888 - ------------------------------------------------------------------------------- End of period $2,837,533 $2,878,582 =============================================================================== Undistributed net investment income $18,355 $23,805 =============================================================================== See Notes to Financial Statements. - ------ 12 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century World Mutual Funds, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. International Growth Fund (the fund) is one fund in a series issued by the corporation. The fund is diversified under the 1940 Act. The fund's investment objective is to seek capital growth. The fund does this by investing primarily in equity securities of foreign companies in developed countries. The following is a summary of the fund's significant accounting policies. MULTIPLE CLASS -- The fund is authorized to issue the Investor Class, the Institutional Class, the Advisor Class, the A Class, the B Class and the C Class. The A Class may incur an initial sales charge. The A Class, B Class and C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of the 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 fund are allocated to each class of shares based on their relative net assets. Sale of the A Class and B Class commenced on January 31, 2003, at which time the Investor Class was no longer available to new investors. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. Certain countries impose taxes on realized gains on the sale of securities registered in their country. The fund records the foreign tax expense, if any, on an accrual basis. The realized and unrealized tax provision reduces the net realized gain (loss) on investment transactions and net unrealized appreciation (depreciation) on investments, respectively. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on foreign currency transactions and unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The fund records the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The fund may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the fund's exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the fund and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The fund bears the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with institutions that the fund's investment manager, American Century Investment Management, Inc. (ACIM), (continued) ------ 13 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. The fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable the fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to the fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the fund's policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income, if any, are generally declared and paid annually. Distributions from net realized gains, if any, are generally declared and paid twice a year. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. - -------------------------------------------------------------------------------- 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the fund with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the fund, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the fund's average daily closing net assets during the previous month. The annual management fee schedule for each class of the fund is as follows: INVESTOR INSTITUTIONAL ADVISOR A B C CLASS CLASS CLASS CLASS CLASS CLASS - ------------------------------------------------------------------------------- FUND AVERAGE NET ASSETS - ------------------------------------------------------------------------------- First $1 billion 1.50% 1.30% 1.25% 1.50% 1.50% 1.50% - ------------------------------------------------------------------------------- Next $1 billion 1.20% 1.00% 0.95% 1.20% 1.20% 1.20% - ------------------------------------------------------------------------------- Over $2 billion 1.10% 0.90% 0.85% 1.10% 1.10% 1.10% - ------------------------------------------------------------------------------- The effective annual management fee for the six months ended May 31, 2003 for the Investor, Institutional, Advisor, A, B and C Classes was 1.29%, 1.09%, 1.04%, 1.29%, 1.29% and 1.29%, respectively. (continued) - ------ 14 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class (the Advisor Class plan) and a separate Master Distribution and Individual Shareholder Services Plan for each of the A Class, B Class and C Class (collectively with the Advisor Class Plan, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class, B Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - ---------------------------------------------------------------------------- ADVISOR B C - ---------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% 0.75% - ---------------------------------------------------------------------------- Service Fee 0.25% 0.25% 0.25% - ---------------------------------------------------------------------------- The plans provide that the A Class will pay ACIS an annual distribution and service fee of 0.25%. The fees are computed daily and paid monthly in arrears based on each class's average daily closing net assets during the previous month. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the fund. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for A, B and C Class shares. Fees incurred under the plans during the six months ended May 31, 2003, are detailed in the Statement of Operations. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services Corporation. During the six months ended May 31, 2003, the fund invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The fund has a bank line of credit agreement with JPM. The fund has a securities lending agreement with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary of JPM. - -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Purchases and sales of investment securities, excluding short-term investments, for the six months ended May 31, 2003, were $2,415,090 and $2,435,647, respectively. (continued) ------ 15 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the fund were as follows: SHARES AMOUNT - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 1,000,000 ================================================================================ Sold 116,272 $ 721,259 - ------------------------------------------------------- Issued in reinvestment of distributions 2,709 17,260 - ------------------------------------------------------- Redeemed (130,456) (809,630) - -------------------------------------------------------------------------------- Net decrease (11,475) $ (71,111) ================================================================================ YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 1,000,000 ================================================================================ Sold 513,726 $ 3,783,196 - ------------------------------------------------------- Issued in reinvestment of distributions 1,335 10,348 - ------------------------------------------------------- Redeemed (573,378) (4,242,434) - -------------------------------------------------------------------------------- Net decrease (58,317) $ (448,890) ================================================================================ INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 150,000 ================================================================================ Sold 38,576 $ 240,371 - ------------------------------------------------------- Issued in reinvestment of distributions 398 2,535 - ------------------------------------------------------- Redeemed (33,317) (208,259) - -------------------------------------------------------------------------------- Net increase 5,657 $ 34,647 ================================================================================ YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 150,000 ================================================================================ Sold 69,870 $ 502,481 - ------------------------------------------------------- Issued in reinvestment of distributions 241 1,869 - ------------------------------------------------------- Redeemed (74,690) (540,428) - -------------------------------------------------------------------------------- Net decrease (4,579) $ (36,078) ================================================================================ ADVISOR CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 100,000 ================================================================================ Sold 29,418 $ 181,672 - ------------------------------------------------------- Issued in reinvestment of distributions 177 1,127 - ------------------------------------------------------- Redeemed (25,941) (160,157) - -------------------------------------------------------------------------------- Net increase 3,654 $ 22,642 ================================================================================ YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 100,000 ================================================================================ Sold 89,618 $ 649,836 - ------------------------------------------------------- Issued in reinvestment of distributions 37 281 - ------------------------------------------------------- Redeemed (86,331) (631,278) - -------------------------------------------------------------------------------- Net increase 3,324 $ 18,839 ================================================================================ (continued) - ------ 16 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) SHARES AMOUNT - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- PERIOD ENDED MAY 31, 2003(1) SHARES AUTHORIZED 50,000 ================================================================================ Sold 321 $ 1,947 - --------------------------------------------------------- Redeemed (181) (1,088) - -------------------------------------------------------------------------------- Net increase 140 $ 859 ================================================================================ B CLASS - -------------------------------------------------------------------------------- PERIOD ENDED MAY 31, 2003(1) SHARES AUTHORIZED 50,000 ================================================================================ Sold 25 $157 - --------------------------------------------------------- Redeemed -- (3) - -------------------------------------------------------------------------------- Net increase 25 $154 ================================================================================ C CLASS - -------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 50,000 ================================================================================ Sold 53 $326 - --------------------------------------------------------- Redeemed (15) (92) - -------------------------------------------------------------------------------- Net increase 38 $234 ================================================================================ YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 50,000 ================================================================================ Sold 137 $1,024 - --------------------------------------------------------- Redeemed (17) (115) - -------------------------------------------------------------------------------- Net increase 120 $ 909 ================================================================================ (1) January 31, 2003 (commencement of sale) through May 31, 2003. - -------------------------------------------------------------------------------- 5. SECURITIES LENDING As of May 31, 2003, securities in the fund valued at $835,813 were on loan through the lending agent, Chase, to certain approved borrowers. Chase receives and maintains collateral in the form of cash, U.S. Treasury or Government Agency securities and/or letters of credit for the fund. The value of cash collateral received at period end is disclosed in the Statement of Assets and Liabilities and investments made with the cash by the lending agent are listed in the Schedule of Investments. The total value of all collateral received, at this date, was $877,451. The fund's risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the fund may be delayed or limited. - -------------------------------------------------------------------------------- 6. BANK LINE OF CREDIT The fund, along with certain other funds managed by ACIM, has a $620 million unsecured bank line of credit agreement with JPM, which was renewed from $650 million effective December 17, 2002. The fund may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The fund did not borrow from the line during the six months ended May 31, 2003. (continued) ------ 17 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 7. GEOGRAPHIC RISK FACTORS There are certain risks involved in investing in foreign securities. These risks include those resulting from possible future adverse political and economic developments and the possible imposition of currency exchange restrictions or other foreign laws or restrictions. - -------------------------------------------------------------------------------- 8. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of May 31, 2003, the components of investments for federal income tax purposes were as follows: - -------------------------------------------------------------------------------- Federal tax cost of investments $2,527,267 ================================================================================ Gross tax appreciation of investments $336,348 - -------------------------------------------------------------------- Gross tax depreciation of investments (33,536) - -------------------------------------------------------------------------------- Net tax appreciation of investments $302,812 ================================================================================ The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Following are the capital loss carryovers and capital loss deferral amounts at November 30, 2002: - -------------------------------------------------------------------------------- Accumulated capital losses $(1,518,407) - -------------------------------------------------------------------------------- Capital loss deferral $(41,116) - -------------------------------------------------------------------------------- The accumulated capital losses listed above represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2009 through 2010. The capital loss deferrals represent net capital losses incurred in the one-month period ended November 30, 2002. The fund has elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. - ------ 18 International Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000 1999 1998 PER-SHARE DATA Net Asset Value, Beginning of Period $6.69 $7.86 $12.05 $13.02 $9.25 $9.22 - ------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------- Net Investment Income (Loss)(2) 0.04 0.06 0.04 (0.02) (0.01) 0.03 - --------------------------------- Net Realized and Unrealized Gain (Loss) (0.05) (1.20) (2.50) (0.22) 3.95 1.31 - ------------------------------------------------------------------------------------------------------------------- Total From Investment Operations (0.01) (1.14) (2.46) (0.24) 3.94 1.34 - ------------------------------------------------------------------------------------------------------------------- Distributions - --------------------------------- From Net Investment Income (0.06) (0.03) -- (0.01) (0.02) (0.03) - --------------------------------- From Net Realized Gains -- -- (1.73) (0.72) (0.15) (1.28) - ------------------------------------------------------------------------------------------------------------------- Total Distributions (0.06) (0.03) (1.73) (0.73) (0.17) (1.31) - ------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.62 $6.69 $7.86 $12.05 $13.02 $9.25 =================================================================================================================== TOTAL RETURN(3) (0.18)% (14.54)% (24.18)% (2.47)% 43.22% 16.74% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.29%(4) 1.25% 1.21% 1.20% 1.27% 1.33% - --------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.42%(4) 0.76% 0.48% (0.16)% (0.06)% 0.33% - --------------------------------- Portfolio Turnover Rate 92% 215% 178% 116% 117% 190% - --------------------------------- Net Assets, End of Period (in thousands) $2,311,107 $2,410,600 $3,290,867 $4,455,433 $3,701,903 $2,448,162 - ------------------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. ------ 19 International Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000 1999 1998 PER-SHARE DATA Net Asset Value, Beginning of Period $6.71 $7.88 $12.07 $13.05 $9.28 $9.22 - ------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income(2) 0.05 0.07 0.06 0.01 --(3) 0.05 - ----------------------------------- Net Realized and Unrealized Gain (Loss) (0.05) (1.19) (2.50) (0.24) 3.96 1.32 - ------------------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.00 (1.12) (2.44) (0.23) 3.96 1.37 - ------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Investment Income (0.07) (0.05) -- (0.03) (0.04) (0.03) - ----------------------------------- From Net Realized Gains -- -- (1.75) (0.72) (0.15) (1.28) - ------------------------------------------------------------------------------------------------------------------- Total Distributions (0.07) (0.05) (1.75) (0.75) (0.19) (1.31) - ------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.64 $6.71 $7.88 $12.07 $13.05 $9.28 =================================================================================================================== TOTAL RETURN(4) 0.03% (14.33)% (23.96)% (2.35)% 43.40% 17.14% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.09%(5) 1.05% 1.01% 1.00% 1.07% 1.13% - ----------------------------------- Ratio of Net Investment Income to Average Net Assets 1.62%(5) 0.96% 0.68% 0.04% 0.14% 0.53% - ----------------------------------- Portfolio Turnover Rate 92% 215% 178% 116% 117% 190% - ----------------------------------- Net Assets, End of Period (in thousands) $304,759 $270,121 $353,399 $371,255 $132,031 $13,562 - ------------------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - ------ 20 International Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED - ------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS - ------------------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000 1999 1998 PER-SHARE DATA Net Asset Value, Beginning of Period $6.66 $7.83 $12.02 $12.99 $9.24 $9.20 - ------------------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income (Loss)(2) 0.03 0.04 0.02 (0.05) (0.04) --(3) - ----------------------------------- Net Realized and Unrealized Gain (Loss) (0.04) (1.20) (2.51) (0.23) 3.94 1.33 - ------------------------------------------------------------------------------------------------------------------- Total From Investment Operations (0.01) (1.16) (2.49) (0.28) 3.90 1.33 - ------------------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Investment Income (0.04) (0.01) -- --(3) --(3) (0.01) - ----------------------------------- From Net Realized Gains -- -- (1.70) (0.69) (0.15) (1.28) - ------------------------------------------------------------------------------------------------------------------- Total Distributions (0.04) (0.01) (1.70) (0.69) (0.15) (1.29) - ------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $6.61 $6.66 $7.83 $12.02 $12.99 $9.24 =================================================================================================================== TOTAL RETURN(4) (0.13)% (14.81)% (24.45)% (2.72)% 42.86% 16.58% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.54%(5) 1.50% 1.46% 1.45% 1.52% 1.58% - ----------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.17%(5) 0.51% 0.23% (0.41)% (0.31)% 0.08% - ----------------------------------- Portfolio Turnover Rate 92% 215% 178% 116% 117% 190% - ----------------------------------- Net Assets, End of Period (in thousands) $219,421 $196,949 $205,483 $181,263 $61,317 $21,635 - ------------------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another (5) Annualized. See Notes to Financial Statements. ------ 21 International Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED - -------------------------------------------------------------------------------- A CLASS - -------------------------------------------------------------------------------- 2003(1) PER-SHARE DATA Net Asset Value, Beginning of Period $6.10 - -------------------------------------------------------------------------------- Income From Investment Operations - --------------------------------------------------------------------- Net Investment Income(2) 0.05 - --------------------------------------------------------------------- Net Realized and Unrealized Gain 0.47 - -------------------------------------------------------------------------------- Total From Investment Operations 0.52 - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.62 ================================================================================ TOTAL RETURN(3) 8.52% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.55%(4) - --------------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 2.66%(4) - --------------------------------------------------------------------- Portfolio Turnover Rate 92%(5) - --------------------------------------------------------------------- Net Assets, End of Period (in thousands) $928 - -------------------------------------------------------------------------------- (1) January 31, 2003 (commencement of sale) through May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended May 31, 2003. See Notes to Financial Statements. - ------ 22 International Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED - -------------------------------------------------------------------------------- B CLASS - -------------------------------------------------------------------------------- 2003(1) PER-SHARE DATA Net Asset Value, Beginning of Period $6.10 - -------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------------------------------ Net Investment Income(2) 0.05 - ------------------------------------------------------------------ Net Realized and Unrealized Gain 0.45 - ------------------------------------------------------------------ Total From Investment Operations 0.50 - ------------------------------------------------------------------ Net Asset Value, End of Period $6.60 ================================================================================ TOTAL RETURN(3) 8.20% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.29%(4) - ------------------------------------------------------------------ Ratio of Net Investment Income to Average Net Assets 2.34%(4) - ------------------------------------------------------------------ Portfolio Turnover Rate 92%(5) - ------------------------------------------------------------------ Net Assets, End of Period (in thousands) $164 - -------------------------------------------------------------------------------- (1) January 31, 2003 (commencement of sale) through May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended May 31, 2003. See Notes to Financial Statements. ------ 23 International Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2003(1) 2002 2001(2) PER-SHARE DATA Net Asset Value, Beginning of Period $6.60 $7.82 $9.16 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------- Net Investment Income (Loss)(3) 0.02 --(4) (0.04) - ----------------------------------------- Net Realized and Unrealized Loss (0.06) (1.22) (1.30) - -------------------------------------------------------------------------------- Total From Investment Operations (0.04) (1.22) (1.34) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $6.56 $6.60 $7.82 ================================================================================ TOTAL RETURN(5) (0.61)% (15.60)% (14.63)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.29%(6) 2.25% 2.23%(6) - ----------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.42%(6) (0.24)% (0.99)%(6) - ----------------------------------------- Portfolio Turnover Rate 92% 215% 178%(7) - ----------------------------------------- Net Assets, End of Period (in thousands) $1,155 $912 $138 - -------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) June 4, 2001 (commencement of sale) through November 30, 2001. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 2001. See Notes to Financial Statements. - ------ 24 Share Class Information Six classes of shares are authorized for sale by the fund: Investor Class, Institutional Class, Advisor Class, A Class, B Class, and C Class. The total expense ratios of Advisor, A, B, and C Class shares are higher than those of Investor Class shares; the total expense ratio of Institutional Class shares is lower. ON JANUARY 31, 2003, INVESTOR CLASS SHARES BECAME UNAVAILABLE TO NEW INVESTORS. INVESTOR CLASS shares are available for purchase BY EXISTING SHAREHOLDERS in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. A CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as banks, broker-dealers, and insurance companies. A Class shares are sold at their offering price, which is net asset value plus an initial sales charge that ranges from 4.50% to 0.00% for fixed-income funds and 5.75% to 0.00% for equity funds, depending on the amount invested. The initial sales charge is deducted from the purchase amount before it is invested. A Class shares may be subject to a contingent deferred sales charge (CDSC). There is no CDSC on shares acquired through reinvestment of dividends or capital gains. The prospectus contains information regarding reductions and waivers of sales charges for A Class shares. A Class shares also are subject to a 0.25% annual Rule 12b-1 service and distribution fee. (continued) ------ 25 Share Class Information B CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as banks, broker-dealers, and insurance companies. B Class shares redeemed within six years of purchase are subject to a CDSC that declines from 5.00% during the first year after purchase to 0.00% the sixth year after purchase. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. B Class shares also are subject to a 1.00% annual Rule 12b-1 service and distribution fee. B Class shares automatically convert to A Class shares (with lower expenses) eight years after their purchase date. C CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as banks, broker-dealers, and insurance companies. C Class shares redeemed within 12 months of purchase are subject to a CDSC of 1.00%. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. C Class shares also are subject to a Rule 12b-1 service and distribution fee of 1.00% for stock funds and 0.75% for bond funds. All classes of shares represent a pro rata interest in the fund and generally have the same rights and preferences. - ------ 26 Retirement Account Information As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. ------ 27 Index Definition The following index is used to illustrate investment market, sector, or style performance or to serve as fund performance comparison. It is not an investment product available for purchase. Morgan Stanley Capital International (MSCI) has developed several indices that measure the performance of foreign stock markets. The MSCI EAFE(reg.tm) INDEX (Europe, Australasia, Far East) is designed to measure developed market equity performance, excluding the U.S. and Canada. - ------ 28 [back cover] CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 INVESTORS USING ADVISORS: 1-800-378-9878 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY WORLD MUTUAL FUNDS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. American Century Investments PRSRT STD P.O. Box 419200 U.S. POSTAGE PAID Kansas City, MO 64141-6200 AMERICAN CENTURY COMPANIES 0307 American Century Investment Services, Inc. SH-SAN-35030S (c)2003 American Century Services Corporation
[front cover] May 31, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of side-by-side bridges] International Discovery Emerging Markets Global Growth International Opportunities [american century logo and text logo (reg.sm)] Table of Contents Our Message to You ........................................................ 1 INTERNATIONAL DISCOVERY Performance ............................................................... 2 Performance Review ........................................................ 3 Types of Investments in Portfolio ...................................... 3 Investments by Country ................................................. 3 Top Ten Holdings ....................................................... 4 Top Five Sectors ....................................................... 4 Schedule of Investments ................................................... 5 EMERGING MARKETS Performance ............................................................... 8 Performance Review ........................................................ 9 Types of Investments in Portfolio ...................................... 9 Investments by Country ................................................. 9 Top Ten Holdings ....................................................... 10 Top Five Sectors ....................................................... 10 Schedule of Investments ................................................... 11 GLOBAL GROWTH Performance ............................................................... 14 Performance Review ........................................................ 15 Types of Investments in Portfolio ...................................... 15 Investments by Country ................................................. 15 Top Ten Holdings ....................................................... 16 Top Five Sectors ....................................................... 16 Schedule of Investments ................................................... 17 INTERNATIONAL OPPORTUNITIES Performance ............................................................... 20 Performance Review ........................................................ 21 Types of Investments in Portfolio ...................................... 21 Investments by Country ................................................. 21 Top Ten Holdings ....................................................... 22 Top Five Sectors ....................................................... 22 Schedule of Investments ................................................... 23 FINANCIAL STATEMENTS Statement of Assets and Liabilities ....................................... 25 Statement of Operations ................................................... 27 Statement of Changes in Net Assets ........................................ 28 Notes to Financial Statements ............................................. 30 Financial Highlights ...................................................... 38 OTHER INFORMATION Share Class Information ................................................... 51 Retirement Account Information ............................................ 52 Index Definitions ......................................................... 53 Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for International Discovery, Emerging Markets, Global Growth, and International Opportunities for the six months ended May 31, 2003. The report includes comparative performance graphs and tables, portfolio commentary, tables that summarize portfolio investments, full listings of portfolio holdings, financial statements, and highlights (all as of May 31, 2003, except as noted). We hope you will find this information helpful in monitoring your investment. Also, through our Web site, we provide quarterly commentaries on all American Century portfolios, the views of our senior investment officers, and other information about investments, portfolio strategy, and the markets. The next shareholder report will be the annual report for the year ended November 30, 2003, which should be available in approximately six months. As always, we appreciate your investment with American Century. Sincerely, /*/James E. Stowers, Jr. James E. Stowers, Jr. Founder and Chairman /*/James E. Stowers III James E. Stowers III Co-Chairman of the Board ------ 1 International Discovery - Performance TOTAL RETURNS AS OF MAY 31, 2003 ------------------------ AVERAGE ANNUAL RETURNS - ------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - ------------------------------------------------------------------------------- INVESTOR CLASS -8.75% 1.80% 11.16% 4/1/94 - ------------------------------------------------------------------------------- CITIGROUP EMI GROWTH WORLD EX-US -8.73% -4.79% -0.21%(1) -- - ------------------------------------------------------------------------------- MSCI EAFE INDEX -12.30% -4.31% 1.57%(1) -- - ------------------------------------------------------------------------------- Institutional Class -8.53% 1.97% 7.18% 1/2/98 - ------------------------------------------------------------------------------- Advisor Class -8.91% 1.54% 2.82% 4/28/98 - ------------------------------------------------------------------------------- (1) Since 3/31/94, the date nearest the Investor Class's inception for which data are available.
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made April 1, 1994
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS Periods ended May 31 - ------------------------------------------------------------------------------------------------------------------- 1994* 1995 1996 1997 1998 1999 2000 2001 2002 2003 - ------------------------------------------------------------------------------------------------------------------- Investor Class 9.80% -2.37% 33.00% 23.42% 36.97% -0.37% 63.12% -20.05% -7.80% -8.75% - ------------------------------------------------------------------------------------------------------------------- Citigroup EMI Growth World ex-US 1.16% -0.97% 17.38% 0.40% 6.18% -1.85% 21.21% -21.65% -8.01% -8.73% - ------------------------------------------------------------------------------------------------------------------ MSCI EAFE Index 3.64% 4.93% 10.67% 7.54% 11.11% 4.36% 17.14% -17.23% -9.60% -12.30% - ------------------------------------------------------------------------------------------------------------------- * From 4/1/94, the Investor Class's inception date. Index data from 3/31/94, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ------ 2 International Discovery - Performance Review [photo of Brian Brady, Trevor Gurwich, and Mark Kopinski] A performance review from Brian Brady, Trevor Gurwich, and Mark Kopinski, portfolio managers on the International Discovery investment team. International Discovery gained 6.52%* for the six months ended May 31, 2003, while its benchmark, the Citigroup Extended Market Index (EMI) Growth World ex-US, returned 10.28%. During the period, the Citigroup index replaced the previous benchmark, the Morgan Stanley Capital International EAFE(reg.tm) Index. Most of International Discovery's biggest sector concentrations contributed to performance, including health care, consumer cyclicals, financials and basic materials. However, the technology sector, one of the portfolio's heaviest weightings, detracted most from performance. The portfolio's positive performance was helped by its 20 largest holdings as of May 31, 2003, all of which contributed during the period. International Discovery's investments in the health care sector contributed most TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- Common Stocks 98.1% 98.5% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 98.1% 98.5% - -------------------------------------------------------------------------------- Temporary Cash Investments 1.9% 1.5% - -------------------------------------------------------------------------------- to performance. Drugmakers were among the portfolio's top-performing industries, led by the Israeli company Taro Pharmaceutical Industries. The medical products and supplies group also contributed, led by Centerpulse, a Swiss manufacturer of orthopedic products, such as knee replacements. Centerpulse was the portfolio's top contributor during the period. Telecommunications companies also boosted performance, led by wireless providers Mobistar of Belgium, AO VimpelCom of Russia, and Tele2 AB of Sweden. The consumer cyclical sector advanced because of contributions from construction and real estate companies, apparel and textiles and consumer durables. Among the leaders were Actividades de Construccion y Servicios S.A., a Spanish INVESTMENTS BY COUNTRY - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- United Kingdom 11.8% 17.0% - ------------------------------------------------------------------------------- Japan 9.8% 11.6% - ------------------------------------------------------------------------------- Australia 8.4% 4.3% - ------------------------------------------------------------------------------- United States(+) 7.0% 4.3% - ------------------------------------------------------------------------------- Canada 6.0% 5.0% - ------------------------------------------------------------------------------- Germany 5.5% 4.9% - ------------------------------------------------------------------------------- Italy 4.3% 5.4% - ------------------------------------------------------------------------------- Spain 3.7% 3.7% - ------------------------------------------------------------------------------- France 3.7% 3.2% - ------------------------------------------------------------------------------- Sweden 3.6% 4.5% - ------------------------------------------------------------------------------- South Africa 3.5% 1.9% - ------------------------------------------------------------------------------- Taiwan (Republic of China) 3.4% 1.1% - ------------------------------------------------------------------------------- Other 29.3% 33.1% - ------------------------------------------------------------------------------- (+) Includes temporary cash investments. *All fund returns referenced in this review are for Investor Class shares. (continued) ------ 3 International Discovery - Performance Review construction company, and German sportswear maker Puma AG Rudolf Dassler Sport. In the consumer durables industry, Yamaha Corp. contributed. However, the consumer cyclical sector included one of the period's largest detractors, Britain's Game Group, a large retailer of video games. Some of the portfolio's smaller sector concentrations, including utility stocks and consumer non-cyclicals, contributed as well. The non-cyclical sector contributed on the strength of its food and beverage stocks, such as Molson, the Canadian brewer. The financial sector advanced as some banks, such as Anglo Irish Bank, performed well during the period. But the sector's progress was restrained by financial services stocks, such as the TOP TEN HOLDINGS AS OF MAY 31, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- ACS, Actividades de Construccion y Servicios, S.A. 1.9% 1.2% - -------------------------------------------------------------------------------- AO VimpelCom ADR 1.8% 1.2% - -------------------------------------------------------------------------------- Taro Pharmaceuticals Industries Ltd. 1.7% 1.2% - -------------------------------------------------------------------------------- Molson Inc. 1.7% 1.6% - -------------------------------------------------------------------------------- Technip-Coflexip S.A. 1.5% -- - -------------------------------------------------------------------------------- Puma AG Rudolf Dassler Sport 1.5% 0.8% - -------------------------------------------------------------------------------- Espirit Holdings Limited 1.5% 0.8% - -------------------------------------------------------------------------------- Anglo Irish Bank Corporation 1.5% 2.1% - -------------------------------------------------------------------------------- Minolta Co., Ltd. 1.5% 1.2% - -------------------------------------------------------------------------------- Centerpulse AG 1.4% 1.3% - -------------------------------------------------------------------------------- TOP FIVE SECTORS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Technology 13.4% 15.5% - ------------------------------------------------------------------------------- Financial 12.9% 12.1% - ------------------------------------------------------------------------------- Consumer (Cyclical) 11.4% 15.5% - ------------------------------------------------------------------------------- Consumer Services 10.2% 5.9% - ------------------------------------------------------------------------------- Health Care 9.7% 8.3% - ------------------------------------------------------------------------------- Dutch trading house Van Der Moolen, which declined during the period. Technology detracted most from International Discovery's performance, despite strong performances by some software companies, such as Amdocs. Computer hardware was among the portfolio's worst performing industry groups, exemplified by Norwegian video-conferencing equipment maker Tandberg, the portfolio's largest detractor during the period. Logitech, a producer of computer mice, negatively impacted the fund as well. Many semiconductor and electrical equipment stocks also retreated, including TCL International, a television manufacturer based in the People's Republic of China. Similarly, despite a few examples of positive performance, the portfolio's industrials sector detracted. Losses in the sector's heavy machinery category resulted in that industry being among the portfolio's biggest detractors. Tomra Systems, the Norwegian manufacturer of recycling equipment, was among the heavy machinery makers that detracted. - ------ 4 International Discovery - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.1% AUSTRALIA -- 8.4% - -------------------------------------------------------------------------------- 1,789,317 Amcor Limited $ 9,584 - -------------------------------------------------------------------------------- 974,804 Australian Gas Light Company Ltd. 7,226 - -------------------------------------------------------------------------------- 1,331,300 Coca-Cola Amatil Limited 4,756 - -------------------------------------------------------------------------------- 2,250,961 James Hardie Industries N.V. 9,851 - -------------------------------------------------------------------------------- 2,960,500 John Fairfax Holdings Limited 5,666 - -------------------------------------------------------------------------------- 732,600 Macquarie Bank Limited 13,297 - -------------------------------------------------------------------------------- 740,600 Orica Limited 4,837 - -------------------------------------------------------------------------------- 3,681,369 Promina Group Ltd.(1) 5,122 - -------------------------------------------------------------------------------- 2,225,000 Qantas Airways Limited 4,679 - -------------------------------------------------------------------------------- 1,091,801 QBE Insurance Group Limited 6,404 - -------------------------------------------------------------------------------- 1,725,000 TABCORP Holdings Ltd. 11,582 - -------------------------------------------------------------------------------- 83,004 - -------------------------------------------------------------------------------- BELGIUM -- 1.2% - -------------------------------------------------------------------------------- 284,400 Mobistar SA(1) 11,353 - -------------------------------------------------------------------------------- BRAZIL -- 0.6% - -------------------------------------------------------------------------------- 357,324 Unibanco-Uniao de Bancos Brasileiros SA GDR 6,346 - -------------------------------------------------------------------------------- CANADA -- 6.0% - -------------------------------------------------------------------------------- 180,200 Cognos, Inc.(1) 4,942 - -------------------------------------------------------------------------------- 290,600 Cott Corporation(1) 6,269 - -------------------------------------------------------------------------------- 627,732 Molson Inc. 16,642 - -------------------------------------------------------------------------------- 680,200 Moore Corporation Ltd.(1) 9,640 - -------------------------------------------------------------------------------- 485,000 Research In Motion Ltd.(1) 9,213 - -------------------------------------------------------------------------------- 678,900 Rogers Communications, Inc. Cl B(1) 9,682 - -------------------------------------------------------------------------------- 147,000 Shoppers Drug Mart Corporation(1) 2,489 - -------------------------------------------------------------------------------- 58,877 - -------------------------------------------------------------------------------- CZECH REPUBLIC -- 0.9% - -------------------------------------------------------------------------------- 116,000 Komercni Banka as 9,044 - -------------------------------------------------------------------------------- DENMARK -- 1.1% - -------------------------------------------------------------------------------- 1,420,300 GN Store Nord(1) 6,172 - -------------------------------------------------------------------------------- 170,000 Novozymes A/S Cl B 4,826 - -------------------------------------------------------------------------------- 10,998 - -------------------------------------------------------------------------------- ESTONIA -- 0.2% - -------------------------------------------------------------------------------- 93,613 Hansabank Ltd. 2,018 - -------------------------------------------------------------------------------- FRANCE -- 3.7% - -------------------------------------------------------------------------------- 424,200 Business Objects SA ADR(1) 8,588 - -------------------------------------------------------------------------------- 2,068,000 Havas Advertising SA 9,765 - -------------------------------------------------------------------------------- 158,600 Technip-Coflexip SA 15,202 - -------------------------------------------------------------------------------- 41,800 Unibail 3,069 - -------------------------------------------------------------------------------- 36,624 - -------------------------------------------------------------------------------- GERMANY -- 5.5% - -------------------------------------------------------------------------------- 49,633 Deutsche Boerse AG 2,615 - -------------------------------------------------------------------------------- 260,900 Fresenius Medical Care AG 12,639 - -------------------------------------------------------------------------------- 223,791 Medion AG 10,567 - -------------------------------------------------------------------------------- 500,000 MG Technologies AG 5,199 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- 141,451 Puma AG Rudolf Dassler Sport $ 15,157 - -------------------------------------------------------------------------------- 87,000 Schwarz Pharma AG 3,555 - -------------------------------------------------------------------------------- 72,836 Stada Arzneimittel AG 4,717 - -------------------------------------------------------------------------------- 54,449 - -------------------------------------------------------------------------------- GREECE -- 2.0% - -------------------------------------------------------------------------------- 310,500 Alpha Bank A.E. 4,834 - -------------------------------------------------------------------------------- 474,496 Public Power Corporation(1) 7,589 - -------------------------------------------------------------------------------- 1,060,000 Vodafone Panafon SA(1) 6,840 - -------------------------------------------------------------------------------- 19,263 - -------------------------------------------------------------------------------- HONG KONG -- 1.5% - -------------------------------------------------------------------------------- 7,042,000 Espirit Holdings Limited 14,899 - -------------------------------------------------------------------------------- HUNGARY -- 2.8% - -------------------------------------------------------------------------------- 176,953 Gedeon Richter Rt. 13,209 - -------------------------------------------------------------------------------- 1,233,716 OTP Bank Rt. 13,988 - -------------------------------------------------------------------------------- 27,197 - -------------------------------------------------------------------------------- INDIA -- 1.2% - -------------------------------------------------------------------------------- 939,000 Bharat Heavy Electricals Limited 5,125 - -------------------------------------------------------------------------------- 487,180 Ranbaxy Laboratories Ltd. 7,047 - -------------------------------------------------------------------------------- 12,172 - -------------------------------------------------------------------------------- IRELAND -- 1.5% - -------------------------------------------------------------------------------- 1,664,000 Anglo Irish Bank Corporation 14,637 - -------------------------------------------------------------------------------- ISRAEL -- 1.7% - -------------------------------------------------------------------------------- 353,976 Taro Pharmaceuticals Industries Ltd.(1) 16,810 - -------------------------------------------------------------------------------- ITALY -- 4.3% - -------------------------------------------------------------------------------- 3,703,000 AEM SpA 6,100 - -------------------------------------------------------------------------------- 870,435 Autogrill SpA(1) 9,420 - -------------------------------------------------------------------------------- 1,886,403 Gruppo Editoriale L'Espresso SpA 7,552 - -------------------------------------------------------------------------------- 235,800 Italcementi SpA 2,457 - -------------------------------------------------------------------------------- 795,000 Mondadori (Arnoldo) Editore SpA 6,010 - -------------------------------------------------------------------------------- 1,422,700 Saipem SpA 10,521 - -------------------------------------------------------------------------------- 42,060 - -------------------------------------------------------------------------------- JAPAN -- 9.8% - -------------------------------------------------------------------------------- 731,000 Casio Computer Co., Ltd. 4,391 - -------------------------------------------------------------------------------- 1,220,000 JSR Corp. 13,715 - -------------------------------------------------------------------------------- 2,327,000 Kawasaki Kisen Kaisha Ltd. 5,302 - -------------------------------------------------------------------------------- 520,000 Konica Corporation 4,779 - -------------------------------------------------------------------------------- 2,583,000 Minolta Co., Ltd. 14,454 - -------------------------------------------------------------------------------- 2,112,000 Mitsui OSK Lines Ltd. 5,645 - -------------------------------------------------------------------------------- 656,000 NOK Corporation 9,067 - -------------------------------------------------------------------------------- 431,100 Pioneer Electronic Corp. 9,064 - -------------------------------------------------------------------------------- 82,000 Sumitomo Heavy Industries Ltd.(1) 91 - -------------------------------------------------------------------------------- 1,245,000 Toto Ltd. 6,956 - -------------------------------------------------------------------------------- 128,000 Uni-Charm Corporation 5,565 - -------------------------------------------------------------------------------- 573,000 Uniden Corp. 4,608 - -------------------------------------------------------------------------------- 915,000 Yamaha Corp. 12,394 - -------------------------------------------------------------------------------- 96,031 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ------ 5 International Discovery - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- NETHERLANDS -- 0.5% - -------------------------------------------------------------------------------- 387,822 Van der Moolen Holding N.V.(1) $ 4,795 - -------------------------------------------------------------------------------- NORWAY -- 0.6% - -------------------------------------------------------------------------------- 165,000 Frontline Ltd. 2,392 - -------------------------------------------------------------------------------- 617,600 Tomra Systems ASA 3,074 - -------------------------------------------------------------------------------- 5,466 - -------------------------------------------------------------------------------- PEOPLE'S REPUBLIC OF CHINA -- 1.4% - -------------------------------------------------------------------------------- 16,218,000 Beijing Datang Power Generation Company Ltd. 7,071 - -------------------------------------------------------------------------------- 6,407,000 Cosco Pacific Limited 6,408 - -------------------------------------------------------------------------------- 13,479 - -------------------------------------------------------------------------------- PORTUGAL -- 1.6% - -------------------------------------------------------------------------------- 1,329,025 Brisa-Auto Estradas de Portugal, SA 7,449 - -------------------------------------------------------------------------------- 473,889 PT Multimedia(1) 8,649 - -------------------------------------------------------------------------------- 16,098 - -------------------------------------------------------------------------------- RUSSIAN FEDERATION -- 2.7% - -------------------------------------------------------------------------------- 385,680 AO VimpelCom ADR(1) 17,355 - -------------------------------------------------------------------------------- 3,500,000 Central Telecommunications Company 1,001 - -------------------------------------------------------------------------------- 104,227 Mobile Telesystems ADR(1) 5,607 - -------------------------------------------------------------------------------- 63,000,000 Uralsvyazinform 1,266 - -------------------------------------------------------------------------------- 575,000 VolgaTelecom(1) 1,068 - -------------------------------------------------------------------------------- 26,297 - -------------------------------------------------------------------------------- SINGAPORE -- 2.0% - -------------------------------------------------------------------------------- 3,194,000 Keppel Corporation Limited 8,112 - -------------------------------------------------------------------------------- 2,413,000 Neptune Orient Lines(1) 1,838 - -------------------------------------------------------------------------------- 1,067,000 Venture Manufacturing (Singapore) Ltd. 9,300 - -------------------------------------------------------------------------------- 19,250 - -------------------------------------------------------------------------------- SOUTH AFRICA -- 3.5% - -------------------------------------------------------------------------------- 2,184,800 ABSA Group Limited 9,332 - -------------------------------------------------------------------------------- 247,166 Gencor 4 - -------------------------------------------------------------------------------- 550,000 Harmony Gold Mining Co. Limited 7,178 - -------------------------------------------------------------------------------- 145,888 Impala Platinum Holdings Limited 8,852 - -------------------------------------------------------------------------------- 5,248,500 MTN Group Limited(1) 8,905 - -------------------------------------------------------------------------------- 34,271 - -------------------------------------------------------------------------------- SOUTH KOREA -- 2.3% - -------------------------------------------------------------------------------- 591,653 Baiksan OPC Co., Ltd.(1) 4,478 - -------------------------------------------------------------------------------- 37,650 Daum Communications Corp.(1) 2,002 - -------------------------------------------------------------------------------- 130,000 Hyundai Department Store Co. Ltd. 2,796 - -------------------------------------------------------------------------------- 9,729 NHN Corporation 1,046 - -------------------------------------------------------------------------------- 2,340,000 Samsung Heavy Industries 10,025 - -------------------------------------------------------------------------------- 190,000 Top Engineering Co., Ltd.(1) 2,672 - -------------------------------------------------------------------------------- 23,019 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- SPAIN -- 3.7% - -------------------------------------------------------------------------------- 457,200 ACS, Actividades de Construccion y Servicios, SA $ 19,150 - -------------------------------------------------------------------------------- 400,000 Amadeus Global Travel Distribution SA 2,322 - -------------------------------------------------------------------------------- 143,000 Fomento de Construcciones Y Contratas SA 3,949 - -------------------------------------------------------------------------------- 475,300 Grupo Dragados SA 9,554 - -------------------------------------------------------------------------------- 62,180 Grupo Ferrovial SA 1,705 - -------------------------------------------------------------------------------- 36,680 - -------------------------------------------------------------------------------- SWEDEN -- 3.6% - -------------------------------------------------------------------------------- 1,176,600 Eniro AB 9,863 - -------------------------------------------------------------------------------- 325,000 Modern Times Group AB Cl B(1) 4,464 - -------------------------------------------------------------------------------- 1,500,000 Skandia Forsakrings AB 4,237 - -------------------------------------------------------------------------------- 397,600 Swedish Match AB 3,205 - -------------------------------------------------------------------------------- 348,765 Tele2 AB(1) 13,269 - -------------------------------------------------------------------------------- 35,038 - -------------------------------------------------------------------------------- SWITZERLAND -- 2.6% - -------------------------------------------------------------------------------- 50,861 Centerpulse AG(1) 13,995 - -------------------------------------------------------------------------------- 27,884 SGS Societe Generale de Surveillance Holdings SA 11,524 - -------------------------------------------------------------------------------- 25,519 - -------------------------------------------------------------------------------- TAIWAN (REPUBLIC OF CHINA) -- 3.4% - -------------------------------------------------------------------------------- 3,546,000 Gigabyte Technology Co., Ltd. 6,038 - -------------------------------------------------------------------------------- 4,268,000 Grand Pacific Petrochemical(1) 1,343 - -------------------------------------------------------------------------------- 13,000,000 Nanya Technology Corp.(1) 8,779 - -------------------------------------------------------------------------------- 9,150,000 Taiwan Styrene Monomer Corporation(1) 7,790 - -------------------------------------------------------------------------------- 7,800,000 Via Technologies Inc. 9,612 - -------------------------------------------------------------------------------- 33,562 - -------------------------------------------------------------------------------- THAILAND -- 0.9% - -------------------------------------------------------------------------------- 1,297,750 Advanced Info Service Public Company Limited(1) 1,602 - -------------------------------------------------------------------------------- 1,366,250 Advanced Info Service Public Company Limited 1,654 - -------------------------------------------------------------------------------- 2,273,000 Bangkok Bank Public Company Limited(1) 3,106 - -------------------------------------------------------------------------------- 2,696,400 Siam Commercial Bank Public Company Limited(1) 2,295 - -------------------------------------------------------------------------------- 8,657 - -------------------------------------------------------------------------------- UNITED KINGDOM -- 11.8% - -------------------------------------------------------------------------------- 7,169,000 Aegis Group plc 9,987 - -------------------------------------------------------------------------------- 1,177,400 Alliance Unichem plc 9,604 - -------------------------------------------------------------------------------- 1,500,000 Balfour Beatty plc 4,818 - -------------------------------------------------------------------------------- 371,700 Bovis Homes Group plc 2,372 - -------------------------------------------------------------------------------- 1,472,600 Davis Service Group plc 9,230 - -------------------------------------------------------------------------------- 3,090,500 Dixons Group plc 5,850 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 6 International Discovery - - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- 905,400 Emap plc $ 12,685 - -------------------------------------------------------------------------------- 727,500 Enterprise Inns plc 8,816 - -------------------------------------------------------------------------------- 775,931 ICAP plc 13,479 - -------------------------------------------------------------------------------- 595,800 Kelda Group plc 4,232 - -------------------------------------------------------------------------------- 1,630,000 Lastminute.com plc(1) 3,766 - -------------------------------------------------------------------------------- 261,800 Persimmon plc 1,995 - -------------------------------------------------------------------------------- 1,194,880 Rank Group plc 4,895 - -------------------------------------------------------------------------------- 2,200,000 Royal & Sun Alliance Insurance Group plc 5,128 - -------------------------------------------------------------------------------- 282,200 Schroders plc 3,103 - -------------------------------------------------------------------------------- 932,800 Whitbread plc 9,676 - -------------------------------------------------------------------------------- 2,108,905 Wood Group (John) plc 6,359 - -------------------------------------------------------------------------------- 115,995 - -------------------------------------------------------------------------------- UNITED STATES -- 5.1% - -------------------------------------------------------------------------------- 591,500 Amdocs Ltd.(1) 11,540 - -------------------------------------------------------------------------------- 876,644 Comverse Technology, Inc.(1) 13,382 - -------------------------------------------------------------------------------- 448,400 DSP Group, Inc. 10,409 - -------------------------------------------------------------------------------- 188,400 ResMed Inc.(1) 7,498 - -------------------------------------------------------------------------------- 98,900 UTStarcom Inc.(1) 2,934 - -------------------------------------------------------------------------------- 191,400 Zoran Corporation(1) 3,923 - -------------------------------------------------------------------------------- 49,686 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $791,345) 963,594 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 1.9% Repurchase Agreement, Bank of America Securities, LLC, (U.S. Treasury obligations), in a joint trading account at 1.20%, dated 5/30/03, due 6/2/03 (Delivery value $18,902) (Cost $18,900) 18,900 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $810,245) $982,494 ================================================================================ COLLATERAL RECEIVED FOR SECURITIES LENDING(2) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS - -------------------------------------------------------------------------------- Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Agency obligations), 1.37%, dated 5/30/03, due 6/2/03 (Delivery value $13,759) $ 13,757 - -------------------------------------------------------------------------------- Repurchase Agreement, CDC IXIS Financial Products, Inc., (AAA Asset-backed securities), 1.43% dated 5/30/03, due 6/2/03 (Delivery value $100,012) 100,000 - -------------------------------------------------------------------------------- 113,757 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- SHORT-TERM DEBT SECURITIES - -------------------------------------------------------------------------------- $ 24,021 Ford Credit Floorplan Master Owner Trust, Series 2001-1, Class A, Floater, 1.33%, 6/16/03, resets monthly off the 1-month LIBOR plus a floor of 0.09% with no caps $ 24,021 - -------------------------------------------------------------------------------- 25,000 RACERS(sm), Series 2000-7, Class A3, Zurich Capital Market, Floater, 1.57%, 7/02/03, resets monthly off the 1-month LIBOR plus 0.25% with no caps 25,000 - -------------------------------------------------------------------------------- 20,000 Security Life of Denver Insurance Co., Floater, 1.39%, 8/21/03 20,000 - -------------------------------------------------------------------------------- 5,000 Wachovia Bank N.A., Floater, 1.47%, 6/2/03, resets daily off the Fed Funds rate plus 0.19% with no caps 5,000 - -------------------------------------------------------------------------------- 74,021 - -------------------------------------------------------------------------------- TOTAL COLLATERAL RECEIVED FOR SECURITIES LENDING (Cost $187,778) $187,778 ================================================================================ MARKET SECTOR DIVERSIFICATION (UNAUDITED) BASIC MATERIALS 8.6% - ------------------------------------------------------------------------------- COMMERCIAL SERVICES 8.0% - ------------------------------------------------------------------------------- CONSUMER (CYCLICAL) 11.4% - ------------------------------------------------------------------------------- CONSUMER (NON-CYCLICAL) 3.7% - ------------------------------------------------------------------------------- CONSUMER SERVICES 10.2% - ------------------------------------------------------------------------------- ENERGY 2.0% - ------------------------------------------------------------------------------- FINANCIAL 12.9% - ------------------------------------------------------------------------------- HEALTH CARE 9.7% - ------------------------------------------------------------------------------- INDUSTRIALS 4.1% - ------------------------------------------------------------------------------- TECHNOLOGY 13.4% - ------------------------------------------------------------------------------- TELECOMMUNICATIONS 7.4% - ------------------------------------------------------------------------------- TRANSPORTATION 3.2% - ------------------------------------------------------------------------------- UTILITY 3.5% - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS 1.9% - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt GDR = Global Depositary Receipt LIBOR = London Interbank Offered Rate RACERS(sm) = Restructured Asset Certificates with Enhanced Returns resets = The frequency with which a security's coupon changes, based on current market conditions or an underlying index. The more frequently a security resets, the less risk the investor is taking that the coupon will vary significantly from current market rates. (1) Non-income producing. (2) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. ------ 7 Emerging Markets - Performance TOTAL RETURNS AS OF MAY 31, 2003 ---------------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS -17.03% -1.25% -3.90% 9/30/97 - -------------------------------------------------------------------------------- MSCI EMF INDEX -6.40% -0.83% -5.70% -- - -------------------------------------------------------------------------------- Institutional Class -16.70% -- 4.09% 1/28/99 - -------------------------------------------------------------------------------- Advisor Class -17.17% -- -2.84% 5/12/99 - -------------------------------------------------------------------------------- C Class -17.75% -- -7.28% 12/18/01 - --------------------------------------------------------------------------------
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made September 30, 1997
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS Periods ended May 31 - -------------------------------------------------------------------------------- 1998* 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------- Investor Class -15.00% 1.88% 44.57% -22.82% -0.43% -17.03% - -------------------------------------------------------------------------------- MSCI EMF Index -25.24% 3.46% 17.75% -21.60% 7.28% -6.40% - -------------------------------------------------------------------------------- * From 9/30/97, the Investor Class's inception date. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ------ 8 Emerging Markets - Performance Review [photo of Raymond Kong and Michael Donnelly] A performance review from Raymond Kong and Michael Donnelly, portfolio managers on the Emerging Markets investment team. Emerging Markets gained 6.65%* during the six months ended May 31, 2003. The fund's benchmark, the Morgan Stanley Capital International Emerging Markets Free Index(reg.tm), which measures the performance of stocks in global emerging market countries, gained 6.22%. Emerging Markets' stake in basic materials, one of its largest sector concentrations, contributed most to performance during the period. The bulk of its gains came from mining and metals companies, the portfolio's top-performing industry group. The top contribution in that industry came from a Brazilian steelmaker called Usinas Siderurgicas de Minas Gerais. The fund's telecommunications holdings also lifted the portfolio. Wireless firms led the advance, and resulted in that TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- Common Stocks 87.3% 97.2% - -------------------------------------------------------------------------------- Preferred Stocks 6.6% 2.3% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 93.9% 99.5% - -------------------------------------------------------------------------------- Temporary Cash Investments 6.1% 0.5% - -------------------------------------------------------------------------------- group providing one of the period's best industry performances. The industry provided several contributors, including Mobile Telesystems and Uralsvyazinform, both Russia-based providers of phone service. The consumer cyclical sector, representing one of the portfolio's largest sector stakes at the end of the period, was home to several top-contributing firms. Construction firm Corporacion GEO, based in Mexico, emerged as the portfolio's third-best contributor for the six months. Emerging Markets' energy stake accounted for one of the portfolio's largest contributions. The portfolio's oil services providers and energy reserves and production firms, which together represented the bulk of Emerging Markets' energy exposure, advanced. INVESTMENTS BY COUNTRY - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- South Korea 16.3% 22.5% - ------------------------------------------------------------------------------- Brazil 13.7% 6.7% - ------------------------------------------------------------------------------- Mexico 9.7% 7.3% - ------------------------------------------------------------------------------- Taiwan (Republic of China) 7.3% 10.9% - ------------------------------------------------------------------------------- United States(+) 7.3% 0.5% - ------------------------------------------------------------------------------- South Africa 7.0% 11.4% - ------------------------------------------------------------------------------- Russian Federation 6.3% 9.3% - ------------------------------------------------------------------------------- People's Republic of China 4.9% 10.5% - ------------------------------------------------------------------------------- Thailand 4.7% 2.7% - ------------------------------------------------------------------------------- Indonesia 3.3% 0.7% - ------------------------------------------------------------------------------- Other 19.5% 17.5% - ------------------------------------------------------------------------------- (+) Includes temporary cash investments. *All fund returns referenced in this review are for Investor Class shares. (continued) ------ 9 Emerging Markets - Performance Review Financial holdings also lifted performance. Emerging Markets' stake in this sector increased during the period, from approximately 3% of the portfolio at the beginning of the period to 12% at its close. Banks, which made up the sector's largest industry stake, delivered the sector's largest contribution. Brazil's Unibanco, a top-10 holding at period's end, was among the banks that boosted the portfolio. The portfolio's industrial sector delivered mixed results, with Emerging Markets' positions among heavy machinery firms losing ground. But the industrial parts industry yielded positive contribution. Emerging Markets' technology holdings, which represented one of the portfolio's largest sector exposures, topped the list of detractors at the sector level. Electrical equipment providers and semiconductor firms restrained performance the most. The biggest detractors included South Korean firms Samsung Electronics, which makes semiconductors, and You Eal Electronics, a component manufacturer. Those two companies were partly responsible for South Korea detracting most from the fund's performance on a country basis during the period. Brazil provided the largest contribution, followed by Russia, Mexico, Indonesia and Thailand, where Advanced Info Service was one of the top contributors. The People's Republic of China also contributed to performance. TOP TEN HOLDINGS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Petroleo Brasileiro SA -- Petrobras ADR 2.6% 1.1% - ------------------------------------------------------------------------------- Samsung Electronics Co., Ltd. 2.2% 3.6% - ------------------------------------------------------------------------------- TV Azteca SA de CV ADR 2.2% -- - ------------------------------------------------------------------------------- Tele Norte Leste Participacoes SA ADR 2.2% -- - ------------------------------------------------------------------------------- Via Technologies Inc. 2.0% -- - ------------------------------------------------------------------------------- Unibanco-Uniao de Bancos Brasileiros SA GDR 2.0% -- - ------------------------------------------------------------------------------- Repsol YPF SA ADR 1.9% -- - ------------------------------------------------------------------------------- Fine DNC Co. Ltd. 1.9% -- - ------------------------------------------------------------------------------- Companhia de Bebidas das Americas ADR 1.8% -- - ------------------------------------------------------------------------------- CJ Home Shopping 1.8% -- - ------------------------------------------------------------------------------- TOP FIVE SECTORS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Technology 20.0% 21.7% - ------------------------------------------------------------------------------- Basic Materials 12.3% 19.0% - ------------------------------------------------------------------------------- Financial 12.0% 3.2% - ------------------------------------------------------------------------------- Telecommunications 9.5% 10.1% - ------------------------------------------------------------------------------- Energy 8.6% 8.2% - ------------------------------------------------------------------------------- - ------ 10 Emerging Markets - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 87.3% ARGENTINA -- 0.6% - -------------------------------------------------------------------------------- 51,200 IRSA Inversiones y Representaciones SA GDR $ 451 - -------------------------------------------------------------------------------- 9,073 Tenaris SA ADR(1) 211 - -------------------------------------------------------------------------------- 662 - -------------------------------------------------------------------------------- BRAZIL -- 7.4% - -------------------------------------------------------------------------------- 21,000,000 Companhia de Saneamento Basico do Estado de Sao Paulo 755 - -------------------------------------------------------------------------------- 145,400 Petroleo Brasileiro SA -- Petrobras ADR 2,785 - -------------------------------------------------------------------------------- 192,100 Tele Norte Leste Participacoes SA ADR 2,299 - -------------------------------------------------------------------------------- 117,600 Unibanco-Uniao de Bancos Brasileiros SA GDR 2,089 - -------------------------------------------------------------------------------- 7,928 - -------------------------------------------------------------------------------- CHILE -- 2.9% - -------------------------------------------------------------------------------- 32,400,000 Banco de Chile 1,084 - -------------------------------------------------------------------------------- 84,500 Companhia de Petroleos de Chile SA (COPEC) 407 - -------------------------------------------------------------------------------- 49,200 Empresa Nacional de Telecomunicaciones SA 258 - -------------------------------------------------------------------------------- 49,000 Empresas CMPC SA 506 - -------------------------------------------------------------------------------- 306,300 Sociedad Quimica y Minera de Chile SA 822 - -------------------------------------------------------------------------------- 3,077 - -------------------------------------------------------------------------------- CZECH REPUBLIC -- 2.6% - -------------------------------------------------------------------------------- 316,600 Ceske Energeticke Zavody AS 1,348 - -------------------------------------------------------------------------------- 764,100 Unipetrol AS(1) 1,441 - -------------------------------------------------------------------------------- 2,789 - -------------------------------------------------------------------------------- EGYPT -- 0.8% - -------------------------------------------------------------------------------- 105,000 Orascom Construction Industries(1) 802 - -------------------------------------------------------------------------------- HUNGARY -- 2.4% - -------------------------------------------------------------------------------- 24,960 Gedeon Richter Rt. 1,863 - -------------------------------------------------------------------------------- 64,487 OTP Bank Rt. 731 - -------------------------------------------------------------------------------- 2,594 - -------------------------------------------------------------------------------- INDIA -- 2.4% - -------------------------------------------------------------------------------- 287,024 Bharat Heavy Electricals Limited 1,567 - -------------------------------------------------------------------------------- 259,138 Bharti Televentures(1) 211 - -------------------------------------------------------------------------------- 167,000 Larsen & Toubro Ltd. 791 - -------------------------------------------------------------------------------- 2,569 - -------------------------------------------------------------------------------- INDONESIA -- 3.3% - -------------------------------------------------------------------------------- 3,535,615 PT Astra International Tbk(1) 1,532 - -------------------------------------------------------------------------------- 5,934,000 PT Kalbe Farma Tbk(1) 393 - -------------------------------------------------------------------------------- 2,868,000 PT Telekomunikasi Indonesia(1) 1,613 - -------------------------------------------------------------------------------- 3,538 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- ISRAEL -- 1.6% - -------------------------------------------------------------------------------- 393,800 Bank Hapoalim Ltd.(1) $ 842 - -------------------------------------------------------------------------------- 365,300 Bank Leumi Le-Israel(1) 576 - -------------------------------------------------------------------------------- 102,505 Makhteshim-Agan Industries Ltd. 283 - -------------------------------------------------------------------------------- 1,701 - -------------------------------------------------------------------------------- MALAYSIA -- 1.1% - -------------------------------------------------------------------------------- 69,600 British American Tobacco Malaysia Berhad 719 - -------------------------------------------------------------------------------- 619,300 CIMB BHD(1) 407 - -------------------------------------------------------------------------------- 1,126 - -------------------------------------------------------------------------------- MEXICO -- 9.7% - -------------------------------------------------------------------------------- 183,800 Apasco SA de CV 1,291 - -------------------------------------------------------------------------------- 58,300 Cemex SA ADR 1,293 - -------------------------------------------------------------------------------- 296,000 Consorcio ARA, SA de CV(1) 565 - -------------------------------------------------------------------------------- 298,700 Controladora Comercial Mexicana SA de CV 200 - -------------------------------------------------------------------------------- 466,000 Corporacion GEO, SA de CV, Series B(1) 1,356 - -------------------------------------------------------------------------------- 2,158,901 Empresas ICA Sociedad Controladora SA de CV(1) 508 - -------------------------------------------------------------------------------- 180,000 Grupo Financiero Banorte SA de CV Cl O 524 - -------------------------------------------------------------------------------- 892,000 Grupo Financiero BBVA Bancomer, SA de CV(1) 777 - -------------------------------------------------------------------------------- 16,700 Grupo Televisa SA ADR(1) 516 - -------------------------------------------------------------------------------- 378,700 TV Azteca SA de CV ADR 2,322 - -------------------------------------------------------------------------------- 366,849 Wal-Mart de Mexico SA de CV, Series V 1,042 - -------------------------------------------------------------------------------- 10,394 - -------------------------------------------------------------------------------- PEOPLE'S REPUBLIC OF CHINA -- 4.9% - -------------------------------------------------------------------------------- 2,352,000 Beijing Datang Power Generation Company Ltd. 1,026 - -------------------------------------------------------------------------------- 1,530,000 China Gas Holdings Limited(1) 143 - -------------------------------------------------------------------------------- 13,206,000 Group Sense International Ltd.(1) 533 - -------------------------------------------------------------------------------- 500,000 Huaneng Power International, Inc. 519 - -------------------------------------------------------------------------------- 81,000 SINA.Com ADR(1) 1,307 - -------------------------------------------------------------------------------- 8,520,000 Wah Sang Gas Holdings Limited 896 - -------------------------------------------------------------------------------- 2,928,000 Xinao Gas Holdings Ltd.(1) 835 - -------------------------------------------------------------------------------- 5,259 - -------------------------------------------------------------------------------- PERU -- 0.4% - -------------------------------------------------------------------------------- 13,500 Compania de Minas Buenaventura SAu ADR 398 - -------------------------------------------------------------------------------- POLAND -- 0.5% - -------------------------------------------------------------------------------- 97,000 Softbank SA(1) 507 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ------ 11 Emerging Markets - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- RUSSIAN FEDERATION -- 6.0% - -------------------------------------------------------------------------------- 64,044 Gazprom ADR(1) $ 1,156 - -------------------------------------------------------------------------------- 7,600 Mobile Telesystems ADR(1) 409 - -------------------------------------------------------------------------------- 3,200 Sberbank RF 850 - -------------------------------------------------------------------------------- 8,500,000 Sibirtelecom 252 - -------------------------------------------------------------------------------- 27,400 Surgutneftegaz ADR 564 - -------------------------------------------------------------------------------- 62,506,670 Uralsvyazinform 1,256 - -------------------------------------------------------------------------------- 735,372 VolgaTelecom(1) 1,366 - -------------------------------------------------------------------------------- 47,000 YUKOS 592 - -------------------------------------------------------------------------------- 6,445 - -------------------------------------------------------------------------------- SOUTH AFRICA -- 7.0% - -------------------------------------------------------------------------------- 454,400 ABSA Group Limited 1,941 - -------------------------------------------------------------------------------- 22,500 Anglo American Platinum Corp. Limited 758 - -------------------------------------------------------------------------------- 35,858 Anglo American plc 555 - -------------------------------------------------------------------------------- 155,000 Foschini Limited 263 - -------------------------------------------------------------------------------- 147,700 Gold Fields Limited 1,646 - -------------------------------------------------------------------------------- 391,459 Kumba Resources Limited 1,570 - -------------------------------------------------------------------------------- 331,000 Murray & Roberts Holdings 475 - -------------------------------------------------------------------------------- 62,965 Telkom South Africa Limited(1) 257 - -------------------------------------------------------------------------------- 7,465 - -------------------------------------------------------------------------------- SOUTH KOREA -- 16.3% - -------------------------------------------------------------------------------- 36,134 CJ Home Shopping 1,949 - -------------------------------------------------------------------------------- 44,180 Daelim Industrial Co., Ltd. 826 - -------------------------------------------------------------------------------- 61,430 Daewoo Shipbuilding & Marine Engineering Co. Ltd.(1) 534 - -------------------------------------------------------------------------------- 108,810 Fine DNC Co. Ltd. 1,980 - -------------------------------------------------------------------------------- 100,660 Kodicom Co. Ltd. 776 - -------------------------------------------------------------------------------- 65,800 Kumho Electric Inc. 1,562 - -------------------------------------------------------------------------------- 92,450 LG Petrochemical Co. Ltd. 1,537 - -------------------------------------------------------------------------------- 11,979 NHN Corporation 1,288 - -------------------------------------------------------------------------------- 8,780 Samsung Electronics Co., Ltd. 2,353 - -------------------------------------------------------------------------------- 382,300 Samsung Heavy Industries 1,638 - -------------------------------------------------------------------------------- 273,600 Samsung Techwin Co., Ltd.(1) 1,471 - -------------------------------------------------------------------------------- 242,940 Taesan LCD Co. Ltd. 1,527 - -------------------------------------------------------------------------------- 17,441 - -------------------------------------------------------------------------------- SPAIN -- 1.9% - -------------------------------------------------------------------------------- 129,300 Repsol YPF SA ADR 2,035 - -------------------------------------------------------------------------------- TAIWAN (REPUBLIC OF CHINA) -- 7.3% - -------------------------------------------------------------------------------- 1,114,000 Compal Electronics Inc. 1,280 - -------------------------------------------------------------------------------- 311,000 Gigabyte Technology Co., Ltd. 530 - -------------------------------------------------------------------------------- 142,000 MediaTek Inc. 1,262 - -------------------------------------------------------------------------------- 486,000 Quanta Computer Inc. 975 - -------------------------------------------------------------------------------- 1,056,000 Taiwan Semiconductor Manufacturing Co. Ltd.(1) 1,630 - -------------------------------------------------------------------------------- 1,701,000 Via Technologies Inc. 2,097 - -------------------------------------------------------------------------------- 7,774 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- THAILAND -- 4.7% - -------------------------------------------------------------------------------- 857,200 Advanced Info Service Public Company Limited(1) $ 1,058 - -------------------------------------------------------------------------------- 1,286,000 Bank of Ayudhya Public Company Limited(1) 265 - -------------------------------------------------------------------------------- 480,000 Lalin Property Public Company Limited 380 - -------------------------------------------------------------------------------- 1,012,400 Tipco Asphalt Public Company Limited(1) 505 - -------------------------------------------------------------------------------- 1,955,600 Total Access Communication Public Company Limited(1) 1,779 - -------------------------------------------------------------------------------- 12,032,800 TT&T Public Company Limited(1) 987 - -------------------------------------------------------------------------------- 4,974 - -------------------------------------------------------------------------------- TURKEY -- 2.3% - -------------------------------------------------------------------------------- 197,485,800 Eczacibasi Ilac Sanayi ve Ticaret AS(1) 594 - -------------------------------------------------------------------------------- 785,000,000 Finansbank AS(1) 527 - -------------------------------------------------------------------------------- 240,000,000 Global Menkul Degerler(1) 188 - -------------------------------------------------------------------------------- 154,446,400 Tupras Turkiye Petrol Rafinerileri AS 1,178 - -------------------------------------------------------------------------------- 2,487 - -------------------------------------------------------------------------------- UNITED STATES -- 1.2% - -------------------------------------------------------------------------------- 64,000 Zoran Corporation(1) 1,312 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $80,365) 93,277 - -------------------------------------------------------------------------------- PREFERRED STOCKS -- 6.6% BRAZIL -- 6.3% - -------------------------------------------------------------------------------- 35,100 Aracruz Celulose SA ADR 698 - -------------------------------------------------------------------------------- 17,600,000 Banco Itau SA 1,196 - -------------------------------------------------------------------------------- 98,200 Companhia de Bebidas das Americas ADR 1,964 - -------------------------------------------------------------------------------- 26,000,000 Companhia de Gas de Sao Paulo Cl A 526 - -------------------------------------------------------------------------------- 33,800,000 Companhia Siderurgica de Tubarao 509 - -------------------------------------------------------------------------------- 72,400,000 Lojas Americanas SA 277 - -------------------------------------------------------------------------------- 1,728,000 Sadia SA 792 - -------------------------------------------------------------------------------- 204,000 Usinas Siderurgicas de Minas Gerais SA Cl A(1) 742 - -------------------------------------------------------------------------------- 6,704 - -------------------------------------------------------------------------------- RUSSIAN FEDERATION -- 0.3% - -------------------------------------------------------------------------------- 15,400,000 Sibirtelecom 290 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $5,412) 6,994 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 12 Emerging Markets - Schedule of Investments MAY 31, 2003 (UNAUDITED) ($ in Thousands) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 6.1% Repurchase Agreement, Credit Suisse First Boston Corp., (U.S. Treasury obligations), in a joint trading account at 1.21%, dated 5/30/2003, due 6/2/2003 (Delivery value $1,400) $ 1,400 - -------------------------------------------------------------------------------- Repurchase Agreement, Deutsche Bank, Inc. (U.S. Treasury obligations), in a joint trading account at 1.23%, dated 5/30/2003, due 6/2/2003 (Delivery value $5,101) 5,100 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $6,500) 6,500 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $92,277) $106,771 ================================================================================ ($ in Thousands) Value - ------------------------------------------------------------------------------- COLLATERAL RECEIVED FOR SECURITIES LENDING(2) REPURCHASE AGREEMENTS - ------------------------------------------------------------------------------- Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Agency obligations), 1.37%, dated 5/30/03, due 6/2/03 (Delivery value $6,871) (Cost $6,870) $ 6,870 =============================================================================== FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* ($ In Thousands) Contracts to Sell Settlement Date Value Unrealized Gain - ------------------------------------------------------------------------------- 12,600,000 ZAR 6/18/03 $1,552 $4 ======================================= (Value on Settlement Date $1,556) *FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's foreign investments against declines in foreign currencies (also known as hedging). The contracts are called "forward" because they allow the fund to exchange a foreign currency for U.S. dollars on a specific date in the future -- and at a prearranged exchange rate. MARKET SECTOR DIVERSIFICATION (UNAUDITED) BASIC MATERIALS 12.3% - -------------------------------------------------------------------------------- COMMERCIAL SERVICES 5.1% - -------------------------------------------------------------------------------- CONSUMER (CYCLICAL) 8.3% - -------------------------------------------------------------------------------- CONSUMER (NON-CYCLICAL) 3.2% - -------------------------------------------------------------------------------- CONSUMER SERVICES 2.7% - -------------------------------------------------------------------------------- ENERGY 8.6% - -------------------------------------------------------------------------------- FINANCIAL 12.0% - -------------------------------------------------------------------------------- HEALTH CARE 2.7% - -------------------------------------------------------------------------------- INDUSTRIALS 3.0% - -------------------------------------------------------------------------------- TECHNOLOGY 20.0% - -------------------------------------------------------------------------------- TELECOMMUNICATIONS 9.5% - -------------------------------------------------------------------------------- UTILITY 6.5% - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS 6.1% - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt GDR = Global Depositary Receipt ZAR = South African Rand (1) Non-income producing. (2) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. ------ 13 Global Growth - Performance TOTAL RETURNS AS OF MAY 31, 2003 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS -13.86% 4.63% 12/1/98 - -------------------------------------------------------------------------------- MSCI WORLD FREE INDEX -9.86% -4.13%(1) -- - -------------------------------------------------------------------------------- Institutional Class -13.50% -15.97% 8/1/00 - -------------------------------------------------------------------------------- Advisor Class -13.92% 1.97% 2/5/99 - -------------------------------------------------------------------------------- C Class -14.53% -9.64% 3/1/02 - -------------------------------------------------------------------------------- (1) Since 11/30/98, the date nearest the Investor Class's inception for which data are available.
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 Investment made December 1, 1998
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS Periods ended May 31 - -------------------------------------------------------------------------------- 1999* 2000 2001 2002 2003 - -------------------------------------------------------------------------------- Investor Class 18.60% 61.77% -15.57% -12.17% -13.86% - -------------------------------------------------------------------------------- MSCI World Free Index 8.68% 13.56% -14.95% -12.56% -9.86% - -------------------------------------------------------------------------------- * From 12/1/98, the Investor Class's inception date. Index data from 11/30/98, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ------ 14 Global Growth - Performance Review [photo of Matt Hudson and Henrik Strabo] A performance review from Matt Hudson and Henrik Strabo, portfolio managers on the Global Growth investment team. Global Growth advanced 1.48%* during the six months ended May 31, 2003, while its benchmark, the Morgan Stanley Capital International World Free Index, gained 3.93%. The economic and market activity during the period covered in this report occurred against a backdrop that included an armed conflict in Iraq involving troops from a variety of nations, including the United States. The stock markets in the world's developed countries, as measured by the World Free Index, declined in each of the first four months during this period, and advanced in the last two months. Global Growth's telecommunications sector contributed most to the portfolio, with holdings among wireless telecommunications companies leading the advance. The portfolio's largest TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- U.S. Common Stocks 52.3% 52.3% - -------------------------------------------------------------------------------- Foreign Common Stocks 46.6% 47.4% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 98.9% 99.7% - -------------------------------------------------------------------------------- Temporary Cash Investments 1.1% 0.3% - -------------------------------------------------------------------------------- holding at period's end, France Telecom, which is one of the country's largest phone companies, was among Global Growth's top contributors. Holdings in the telephone industry, however, detracted from performance. The portfolio's financial holdings, which make up Global Growth's largest sector stake, delivered mixed results. Holdings among banks, one of the portfolio's largest industry concentrations, gained ground. HBOS, a bank in the United Kingdom, topped the portfolio's contributors in that industry. The portfolio's stake among financial services companies also lifted performance, and Global Growth's thrift industry holdings advanced. But the portfolio's property and casualty insurers retreated, and included one of the period's largest detractors, American International Group Inc. Life insurers also declined, and the portfolio's stake in the securities and asset managers industry detracted as well. INVESTMENTS BY COUNTRY - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- United States(+) 53.4% 52.6% - ------------------------------------------------------------------------------- Japan 7.3% 8.1% - ------------------------------------------------------------------------------- United Kingdom 5.4% 9.0% - ------------------------------------------------------------------------------- France 4.8% 3.8% - ------------------------------------------------------------------------------- Australia 4.4% 1.3% - ------------------------------------------------------------------------------- Russian Federation 4.1% 1.4% - ------------------------------------------------------------------------------- Germany 3.1% 2.2% - ------------------------------------------------------------------------------- Italy 2.1% 3.1% - ------------------------------------------------------------------------------- Other 15.4% 18.5% - ------------------------------------------------------------------------------- (+) Includes temporary cash investments. *All fund returns referenced in this review are for Investor Class shares. (continued) ------ 15 Global Growth - Performance Review Global Growth's health care stake boosted the portfolio, with the medical products and supplies industry delivering most of the positive performance. Among companies in that industry, the top contributors were Boston Scientific Corp., a top-10 holding, and St. Jude Medical, Inc. In the biotech industry, Amgen, another top-10 holding, led the advance. Boston Scientific Corp., Amgen, and St. Jude Medical, Inc. were among the period's largest contributors to the portfolio. The health care sector advanced despite declines among the portfolio's pharmaceutical companies, including Japan's Fujisawa Pharmaceutical Co. We eliminated the position. The portfolio's technology stake, however, detracted from performance. Global Growth's holdings among semiconductor companies, computer hardware and software makers, defense and aerospace firms and electrical equipment makers set the portfolio back. Microsoft, the U.S. software maker, was one of the period's biggest detractors from performance, a distinction it shared with South Korea's Samsung Electronics, a semiconductor company. One industry defied the trend in technology: Global Growth's group of Internet holdings contributed to performance, and that industry included the company that made one of the period's biggest contributions to the portfolio, E*Trade Group Inc. Global Growth's consumer cyclical holdings also detracted from performance. Department stores and specialty stores incurred the steepest declines in the sector, but makers of motor vehicles and consumer durables also lost ground. TOP TEN HOLDINGS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- France Telecom SA 1.6% -- - ------------------------------------------------------------------------------- Citigroup Inc. 1.5% 2.8% - ------------------------------------------------------------------------------- International Business Machines Corp. 1.5% -- - ------------------------------------------------------------------------------- EMC Corporation 1.4% 0.6% - ------------------------------------------------------------------------------- Intel Corporation 1.3% -- - ------------------------------------------------------------------------------- Boston Scientific Corp. 1.3% 0.5% - ------------------------------------------------------------------------------- Amgen Inc. 1.3% -- - ------------------------------------------------------------------------------- USA Interactive 1.2% -- - ------------------------------------------------------------------------------- UnitedHealth Group Incorporated 1.2% 0.5% - ------------------------------------------------------------------------------- General Electric Co. 1.2% 1.5% - ------------------------------------------------------------------------------- TOP FIVE SECTORS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Financial 24.6% 21.9% - ------------------------------------------------------------------------------- Technology 16.2% 20.2% - ------------------------------------------------------------------------------- Health Care 14.4% 17.1% - ------------------------------------------------------------------------------- Telecommunications 10.5% 8.8% - ------------------------------------------------------------------------------- Energy 6.5% 5.8% - ------------------------------------------------------------------------------- - ------ 16 Global Growth - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.9% AUSTRALIA -- 4.4% - -------------------------------------------------------------------------------- 301,403 BHP Billiton Limited $ 1,693 - -------------------------------------------------------------------------------- 297,100 James Hardie Industries N.V. 1,300 - -------------------------------------------------------------------------------- 1,849,000 Lihir Gold Limited(1) 1,679 - -------------------------------------------------------------------------------- 101,600 Macquarie Bank Limited 1,844 - -------------------------------------------------------------------------------- 870,342 Promina Group Ltd.(1) 1,211 - -------------------------------------------------------------------------------- 590,000 Qantas Airways Limited 1,241 - -------------------------------------------------------------------------------- 178,000 TABCORP Holdings Ltd. 1,195 - -------------------------------------------------------------------------------- 10,163 - -------------------------------------------------------------------------------- BELGIUM -- 0.7% - -------------------------------------------------------------------------------- 39,000 Mobistar SA(1) 1,557 - -------------------------------------------------------------------------------- CANADA -- 1.1% - -------------------------------------------------------------------------------- 41,100 EnCana Corp. 1,506 - -------------------------------------------------------------------------------- 25,654 Precision Drilling Corp.(1) 992 - -------------------------------------------------------------------------------- 2,498 - -------------------------------------------------------------------------------- CZECH REPUBLIC -- 0.5% - -------------------------------------------------------------------------------- 14,600 Komercni Banka as 1,138 - -------------------------------------------------------------------------------- ESTONIA -- 0.8% - -------------------------------------------------------------------------------- 81,300 Hansabank Ltd. 1,753 - -------------------------------------------------------------------------------- FINLAND -- 1.1% - -------------------------------------------------------------------------------- 164,000 Fortum Oyj 1,288 - -------------------------------------------------------------------------------- 71,200 Nokia Oyj ADR 1,284 - -------------------------------------------------------------------------------- 2,572 - -------------------------------------------------------------------------------- FRANCE -- 4.8% - -------------------------------------------------------------------------------- 46,981 BNP Paribas SA 2,329 - -------------------------------------------------------------------------------- 150,816 France Telecom SA(1) 3,731 - -------------------------------------------------------------------------------- 5,600 Groupe Danone 771 - -------------------------------------------------------------------------------- 18,580 Sanofi-Synthelabo SA 1,189 - -------------------------------------------------------------------------------- 23,600 Societe Generale Cl A 1,451 - -------------------------------------------------------------------------------- 211,266 Wanadoo(1) 1,595 - -------------------------------------------------------------------------------- 11,066 - -------------------------------------------------------------------------------- GERMANY -- 3.1% - -------------------------------------------------------------------------------- 35,400 Deutsche Boerse AG 1,865 - -------------------------------------------------------------------------------- 172,798 Deutsche Telekom(1) 2,590 - -------------------------------------------------------------------------------- 25,900 Schwarz Pharma AG 1,058 - -------------------------------------------------------------------------------- 179,837 T-Online International AG(1) 1,684 - -------------------------------------------------------------------------------- 7,197 - -------------------------------------------------------------------------------- HUNGARY -- 1.1% - -------------------------------------------------------------------------------- 15,500 Gedeon Richter Rt. 1,157 - -------------------------------------------------------------------------------- 124,000 OTP Bank Rt. 1,406 - -------------------------------------------------------------------------------- 2,563 - -------------------------------------------------------------------------------- IRELAND -- 0.7% - -------------------------------------------------------------------------------- 141,000 Bank of Ireland 1,707 - -------------------------------------------------------------------------------- ISRAEL -- 0.8% - -------------------------------------------------------------------------------- 35,428 Teva Pharmaceutical Industries Ltd. ADR 1,795 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- ITALY -- 2.1% - -------------------------------------------------------------------------------- 99,500 Banco Popolare di Verona e Novara Scrl $ 1,493 - -------------------------------------------------------------------------------- 112,300 ENI SpA 1,814 - -------------------------------------------------------------------------------- 458,000 IntesaBci SpA 1,467 - -------------------------------------------------------------------------------- 4,774 - -------------------------------------------------------------------------------- JAPAN -- 7.3% - -------------------------------------------------------------------------------- 46,000 Canon, Inc. 1,927 - -------------------------------------------------------------------------------- 31,600 Fanuc Ltd. 1,429 - -------------------------------------------------------------------------------- 19,100 Hoya Corp. 1,203 - -------------------------------------------------------------------------------- 158,000 JSR Corp. 1,776 - -------------------------------------------------------------------------------- 16,800 Nidec Corporation 1,055 - -------------------------------------------------------------------------------- 230,000 Nissan Motor Co., Ltd. 1,817 - -------------------------------------------------------------------------------- 988 NTT DoCoMo, Inc. 2,077 - -------------------------------------------------------------------------------- 79,400 Pioneer Electronic Corp. 1,669 - -------------------------------------------------------------------------------- 161,000 Sharp Corp. 1,774 - -------------------------------------------------------------------------------- 26,000 Uni-Charm Corporation 1,130 - -------------------------------------------------------------------------------- 106 Yahoo Japan Corporation(1) 1,296 - -------------------------------------------------------------------------------- 17,153 - -------------------------------------------------------------------------------- MEXICO -- 0.4% - -------------------------------------------------------------------------------- 49,900 America Movil SA de CV Series L ADR 911 - -------------------------------------------------------------------------------- NETHERLANDS -- 0.7% - -------------------------------------------------------------------------------- 244,800 Koninklijke Royal KPN N.V.(1) 1,709 - -------------------------------------------------------------------------------- PEOPLE'S REPUBLIC OF CHINA -- 0.5% - -------------------------------------------------------------------------------- 5,100,000 China Telecom Corporation Limited 1,105 - -------------------------------------------------------------------------------- PUERTO RICO -- 0.8% - -------------------------------------------------------------------------------- 41,500 Doral Financial Corp. 1,755 - -------------------------------------------------------------------------------- RUSSIAN FEDERATION -- 4.1% - -------------------------------------------------------------------------------- 39,900 AO VimpelCom ADR(1) 1,797 - -------------------------------------------------------------------------------- 2,954,950 Central Telecommunications Company 845 - -------------------------------------------------------------------------------- 27,300 Mobile Telesystems ADR(1) 1,469 - -------------------------------------------------------------------------------- 5,600 Sberbank RF 1,487 - -------------------------------------------------------------------------------- 11,500,000 Sibirtelecom 342 - -------------------------------------------------------------------------------- 73,000,000 Uralsvyazinform 1,467 - -------------------------------------------------------------------------------- 155,100 YUKOS 1,954 - -------------------------------------------------------------------------------- 9,361 - -------------------------------------------------------------------------------- SOUTH KOREA -- 1.4% - -------------------------------------------------------------------------------- 4,460 Samsung Electronics Co., Ltd. 1,195 - -------------------------------------------------------------------------------- 232,000 Samsung Heavy Industries 994 - -------------------------------------------------------------------------------- 56,600 SK Telecom Co. Ltd. ADR 1,016 - -------------------------------------------------------------------------------- 3,205 - -------------------------------------------------------------------------------- SPAIN -- 1.2% - -------------------------------------------------------------------------------- 41,000 Altadis, SA 1,165 - -------------------------------------------------------------------------------- 95,200 Repsol YPF SA 1,507 - -------------------------------------------------------------------------------- 2,672 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ------ 17 Global Growth - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- SWEDEN -- 0.5% - -------------------------------------------------------------------------------- 85,700 ForeningsSparbanken AB $ 1,210 - -------------------------------------------------------------------------------- SWITZERLAND -- 1.5% - -------------------------------------------------------------------------------- 27,540 Novartis AG 1,082 - -------------------------------------------------------------------------------- 41,922 UBS AG 2,265 - -------------------------------------------------------------------------------- 3,347 - -------------------------------------------------------------------------------- TAIWAN (REPUBLIC OF CHINA) -- 1.6% - -------------------------------------------------------------------------------- 1,600,000 Taiwan Semiconductor Manufacturing Co. Ltd.(1) 2,470 - -------------------------------------------------------------------------------- 950,000 Via Technologies Inc. 1,171 - -------------------------------------------------------------------------------- 3,641 - -------------------------------------------------------------------------------- UNITED KINGDOM -- 5.4% - -------------------------------------------------------------------------------- 228,157 HBOS plc 2,662 - -------------------------------------------------------------------------------- 101,640 Reckitt Benckiser plc 1,981 - -------------------------------------------------------------------------------- 90,736 Royal Bank of Scotland Group plc 2,357 - -------------------------------------------------------------------------------- 89,300 Standard Chartered plc 1,069 - -------------------------------------------------------------------------------- 1,140,818 Vodafone Group plc 2,477 - -------------------------------------------------------------------------------- 247,849 WPP Group plc 1,990 - -------------------------------------------------------------------------------- 12,536 - -------------------------------------------------------------------------------- UNITED STATES -- 52.3% - -------------------------------------------------------------------------------- 18,500 3M Co. 2,340 - -------------------------------------------------------------------------------- 26,400 Affiliated Computer Services Inc.(1) 1,223 - -------------------------------------------------------------------------------- 51,500 Aflac Inc. 1,695 - -------------------------------------------------------------------------------- 94,400 Amdocs Ltd.(1) 1,842 - -------------------------------------------------------------------------------- 39,100 American Express Co. 1,629 - -------------------------------------------------------------------------------- 45,500 Amgen Inc.(1) 2,947 - -------------------------------------------------------------------------------- 23,500 Bank of America Corp. 1,744 - -------------------------------------------------------------------------------- 14,000 Bard (C.R.), Inc. 982 - -------------------------------------------------------------------------------- 40,500 Becton Dickinson & Co. 1,620 - -------------------------------------------------------------------------------- 57,000 Boston Scientific Corp.(1) 2,969 - -------------------------------------------------------------------------------- 62,000 Cablevision Systems Corp. Cl A(1) 1,201 - -------------------------------------------------------------------------------- 50,500 Celgene Corp.(1) 1,591 - -------------------------------------------------------------------------------- 37,400 Central European Distribution Corporation(1) 1,161 - -------------------------------------------------------------------------------- 18,200 Chicago Mercantile Exchange(1) 1,119 - -------------------------------------------------------------------------------- 28,400 Chubb Corp. 1,818 - -------------------------------------------------------------------------------- 142,200 Cisco Systems Inc.(1) 2,314 - -------------------------------------------------------------------------------- 83,900 Citigroup Inc. 3,441 - -------------------------------------------------------------------------------- 28,400 Clear Channel Communications, Inc.(1) 1,156 - -------------------------------------------------------------------------------- 37,400 Clorox Company 1,670 - -------------------------------------------------------------------------------- 35,800 Corinthian Colleges, Inc.(1) 1,684 - -------------------------------------------------------------------------------- 42,500 Corporate Executive Board Co. (The)(1) 1,793 - -------------------------------------------------------------------------------- 31,200 Costco Companies, Inc.(1) 1,156 - -------------------------------------------------------------------------------- 25,200 Danaher Corp. 1,687 - -------------------------------------------------------------------------------- 55,700 Dell Computer Corp.(1) 1,744 - -------------------------------------------------------------------------------- 71,000 Digital River Inc.(1) 1,400 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- 299,400 E*TRADE Group Inc.(1) $ 2,290 - -------------------------------------------------------------------------------- 298,900 EMC Corporation(1) 3,235 - -------------------------------------------------------------------------------- 70,000 eResearch Technology, Inc.(1) 1,311 - -------------------------------------------------------------------------------- 46,200 Estee Lauder Companies, Inc. Cl A 1,539 - -------------------------------------------------------------------------------- 47,000 Exxon Mobil Corp. 1,711 - -------------------------------------------------------------------------------- 37,900 Fox Entertainment Group, Inc. Cl A(1) 1,065 - -------------------------------------------------------------------------------- 38,600 FTI Consulting, Inc.(1) 1,417 - -------------------------------------------------------------------------------- 94,500 General Electric Co. 2,712 - -------------------------------------------------------------------------------- 40,200 Harrah's Entertainment, Inc.(1) 1,612 - -------------------------------------------------------------------------------- 22,500 Inamed Corp.(1) 1,158 - -------------------------------------------------------------------------------- 34,300 Ingersoll-Rand Company 1,502 - -------------------------------------------------------------------------------- 146,800 Intel Corporation 3,061 - -------------------------------------------------------------------------------- 38,200 International Business Machines Corp. 3,363 - -------------------------------------------------------------------------------- 36,000 Intuit Inc.(1) 1,660 - -------------------------------------------------------------------------------- 54,000 Laboratory Corporation of America Holdings(1) 1,736 - -------------------------------------------------------------------------------- 61,800 Leapfrog Enterprises Inc.(1) 1,788 - -------------------------------------------------------------------------------- 20,800 Lehman Brothers Holdings Inc. 1,490 - -------------------------------------------------------------------------------- 77,200 Mattel, Inc. 1,661 - -------------------------------------------------------------------------------- 38,400 Maxim Integrated Products, Inc. 1,508 - -------------------------------------------------------------------------------- 30,600 Merck & Co., Inc. 1,701 - -------------------------------------------------------------------------------- 36,000 Mercury Interactive Corp.(1) 1,414 - -------------------------------------------------------------------------------- 69,600 Microsoft Corporation 1,713 - -------------------------------------------------------------------------------- 31,800 Nabors Industries Ltd.(1) 1,433 - -------------------------------------------------------------------------------- 47,000 National-Oilwell, Inc.(1) 1,143 - -------------------------------------------------------------------------------- 151,700 Nextel Communications, Inc.(1) 2,273 - -------------------------------------------------------------------------------- 39,100 Omnicare, Inc. 1,062 - -------------------------------------------------------------------------------- 164,200 Oracle Corp.(1) 2,135 - -------------------------------------------------------------------------------- 76,300 Pall Corp. 1,657 - -------------------------------------------------------------------------------- 54,900 Pfizer, Inc. 1,703 - -------------------------------------------------------------------------------- 22,600 Procter & Gamble Co. (The) 2,076 - -------------------------------------------------------------------------------- 67,656 Prudential Financial Inc. 2,268 - -------------------------------------------------------------------------------- 38,300 ResMed Inc.(1) 1,524 - -------------------------------------------------------------------------------- 98,300 Sovereign Bancorp Inc. 1,604 - -------------------------------------------------------------------------------- 13,200 St. Jude Medical, Inc.(1) 741 - -------------------------------------------------------------------------------- 41,800 Tiffany & Co. 1,369 - -------------------------------------------------------------------------------- 88,300 UICI(1) 1,265 - -------------------------------------------------------------------------------- 29,500 UnitedHealth Group Incorporated 2,830 - -------------------------------------------------------------------------------- 74,500 USA Interactive(1) 2,869 - -------------------------------------------------------------------------------- 39,800 UTStarcom Inc.(1) 1,181 - -------------------------------------------------------------------------------- 27,000 Viacom, Inc. Cl B(1) 1,229 - -------------------------------------------------------------------------------- 56,600 Washington Mutual, Inc. 2,308 - -------------------------------------------------------------------------------- 35,500 Wells Fargo & Co. 1,715 - -------------------------------------------------------------------------------- 40,700 Wyeth 1,785 - -------------------------------------------------------------------------------- 120,743 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $195,550) 228,131 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - ------ 18 Global Growth - Schedule of Investments MAY 31, 2003 (UNAUDITED) ($ in Thousands) Value - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 1.1% Repurchase Agreement, Deutsche Bank, Inc. (U.S. Treasury obligations) in a joint trading account at 1.23%, dated 5/30/2003, due 6/2/2003 (Delivery value $2,500) (Cost $2,500) $ 2,500 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $198,050) $230,631 ================================================================================ COLLATERAL RECEIVED FOR SECURITIES LENDING(2) REPURCHASE AGREEMENTS - -------------------------------------------------------------------------------- Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Agency obligations), 1.37%, dated 5/30/03, due 6/2/03 (Delivery value $30,618) (Cost $30,615) $ 30,615 ================================================================================ MARKET SECTOR DIVERSIFICATION (UNAUDITED) BASIC MATERIALS 3.1% - ------------------------------------------------------------------------------- COMMERCIAL SERVICES 5.5% - ------------------------------------------------------------------------------- CONSUMER (CYCLICAL) 3.4% - ------------------------------------------------------------------------------- CONSUMER (NON-CYCLICAL) 5.0% - ------------------------------------------------------------------------------- CONSUMER SERVICES 5.6% - ------------------------------------------------------------------------------- ENERGY 6.5% - ------------------------------------------------------------------------------- FINANCIAL 24.6% - ------------------------------------------------------------------------------- HEALTH CARE 14.4% - ------------------------------------------------------------------------------- INDUSTRIALS 3.1% - ------------------------------------------------------------------------------- TECHNOLOGY 16.2% - ------------------------------------------------------------------------------- TELECOMMUNICATIONS 10.5% - ------------------------------------------------------------------------------- TRANSPORTATION 0.5% - ------------------------------------------------------------------------------- UTILITY 0.5% - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS 1.1% - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt (1) Non-income producing. (2) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. ------ 19 International Opportunities - Performance TOTAL RETURNS AS OF MAY 31, 2003 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- INVESTOR CLASS -5.48% 4.27% 6/1/01 - -------------------------------------------------------------------------------- CITIGROUP EMI GROWTH WORLD EX-US(1) -8.73% -8.37%(2) -- - -------------------------------------------------------------------------------- Institutional Class -- 12.92%(3) 1/9/03 - -------------------------------------------------------------------------------- (1) Formerly Soloman Smith Barney Emerging Market Index Growth World ex-US. (2) Since 5/31/01, the date nearest the Investor Class's inception for which data are available. (3) Returns less than one year are not annualized.
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made June 1, 2001
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS Periods ended May 31 - -------------------------------------------------------------------------------- 2002* 2003 - -------------------------------------------------------------------------------- Investor Class 15.00% -5.48% - -------------------------------------------------------------------------------- Citigroup EMI Growth World ex-US -8.01% -8.73% - ---------------------------------------------------------------------------------- * From 6/1/01, the Investor Class's inception date. Index data from 5/31/01, the date nearest the Investor Class's inception for which data are available. Not annualized. The charts on the performance page give historical return data for the fund. Returns for the index are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the index do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures. Past performance does not guarantee future results. None of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - ------ 20 International Opportunities - Performance Review [photo of Lynette Schroeder and Henrik Strabo] A performance review from Lynette Schroeder, portfolio manager, and Henrik Strabo, CIO International Equities, on the International Opportunities investment team. International Opportunities climbed 14.90%* during the six months ended May 31, 2003, while its benchmark, the Citigroup Extended Market Index (EMI) Growth World ex-US rose 10.28%. The 107 small-cap international growth funds tracked by Lipper Inc. rose an average of 11.16%. The international equity market advanced during the six months covered by this report, as evidenced by the performance of key benchmark indices. The Morgan Stanley Capital International EAFE Index, which measures the performance of developed markets, rose 3.30%, while the Morgan Stanley Capital International Emerging Markets Free Index, which tracks the progress of companies in global emerging market countries, gained 6.22%. TYPES OF INVESTMENTS IN PORTFOLIO - -------------------------------------------------------------------------------- AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- Common Stocks 94.3% 99.5% - -------------------------------------------------------------------------------- Preferred Stocks 2.8% 0.5% - -------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 97.1% 100.0% - -------------------------------------------------------------------------------- Temporary Cash Investments 2.9% -- - -------------------------------------------------------------------------------- International Opportunities' stake in the basic materials sector contributed most to performance during the six-month period. Positions in the mining and metals industry were especially rewarding and yielded a top-contributor, Brazilian steel maker Usinas Siderurgicas de Minas Gerais. The portfolio's holdings among chemical companies and forest products and paper makers also advanced. The fund's holdings in the telecommunications sector boosted performance. Exposure to the wireless telecom industry was beneficial. The fund's stake in traditional telephone companies also helped and produced the period's top-contributing stock, the Netherlands' Versatel Telecom. The health care sector provided International Opportunities with another INVESTMENTS BY COUNTRY - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Japan 16.8% 5.3% - ------------------------------------------------------------------------------- Germany 10.6% 5.9% - ------------------------------------------------------------------------------- Canada 7.8% 11.3% - ------------------------------------------------------------------------------- United Kingdom 7.5% 14.6% - ------------------------------------------------------------------------------- Australia 5.4% 7.8% - ------------------------------------------------------------------------------- Denmark 5.0% 3.2% - ------------------------------------------------------------------------------- People's Republic of China 4.8% 4.5% - ------------------------------------------------------------------------------- Sweden 4.2% 5.1% - ------------------------------------------------------------------------------- Russian Federation 4.1% -- - ------------------------------------------------------------------------------- Thailand 4.0% 2.7% - ------------------------------------------------------------------------------- Netherlands 3.5% 1.0% - ------------------------------------------------------------------------------- United States(+) 3.4% -- - ------------------------------------------------------------------------------- Other 22.9% 38.6% - ------------------------------------------------------------------------------- (+) Includes temporary cash investments. *All fund returns referenced in this review are for Investor Class shares. (continued) ------ 21 International Opportunities - Performance Review source of strength. Drugmakers, the portfolio's largest industry stake, led the way. Three holdings, Germany's Stada Arzneimittel, China Pharmaceutical, and Indonesia's Kalbe Farma, fared especially well and were among the period's top contributors. Still, not all positions in the industry contributed. One that detracted was Australia's Ansell Ltd. Consumer cyclical companies represented the fund's largest sector stake and also one of the most profitable. In particular, consumer durables positions, which made up the portfolio's second-largest industry stake at period's end, added value. Among them was Japan's Noritsu Koki, which produces and sells photofinishing equipment, and Hong Kong's Techtronic Industries Company. Investments in the clothing store industry, including a top-contributor, China's Fountain Set, also lifted performance. The fund's department store holdings, however, delivered negative results and TOP TEN HOLDINGS AS OF MAY 31, 2003 - -------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - -------------------------------------------------------------------------------- Versatel Telecom International N.V. 2.8% -- - -------------------------------------------------------------------------------- Freenet.de AG 2.7% -- - -------------------------------------------------------------------------------- PSP Swiss Property AG 2.5% 2.9% - -------------------------------------------------------------------------------- Techtronic Industries Company Limited 2.2% 1.7% - -------------------------------------------------------------------------------- APN News & Media Limited 1.9% -- - -------------------------------------------------------------------------------- China Pharmaceutical Group Limited 1.9% -- - -------------------------------------------------------------------------------- United Internet AG 1.8% 0.5% - -------------------------------------------------------------------------------- Topdanmark A/S 1.7% -- - -------------------------------------------------------------------------------- Noritsu Koki Co. Limited 1.7% -- - -------------------------------------------------------------------------------- TOP FIVE SECTORS AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- % OF FUND % OF FUND INVESTMENTS INVESTMENTS AS OF AS OF 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Consumer (Cyclical) 17.6% 27.3% - ------------------------------------------------------------------------------- Financial 13.1% 2.8% - ------------------------------------------------------------------------------- Basic Materials 12.7% 10.5% - ------------------------------------------------------------------------------- Commercial Services 10.0% 5.5% - ------------------------------------------------------------------------------- Technology 9.9% 14.5% - ------------------------------------------------------------------------------- yielded the top-detracting stock for the period, Clas Ohlson. International Opportunities' technology stake delivered mixed results. Internet holdings such as Germany's Freenet.de contributed, as well as some computer software companies, including NDS Group in the United Kingdom. Elsewhere, the fund's stakes in the semiconductor and computer hardware industries weighed on performance. One top detractor from the computer hardware industry was Norway's Tandberg. The portfolio's electrical equipment stake also retreated. Investments in the transportation sector also restrained results during the period. Positions in the airline industry were especially damaging--Canada's Westjet Airlines was among the top detractors. The fund's stake in trucking and shipping companies also hurt performance, though to a lesser extent. Investments in both industries were eliminated. International Opportunities' stake in the industrials sector was another area of weakness. In particular, the fund's holdings in the heavy machinery industry, which included detractors such as South Korea's Sindo Ricoh, delivered negative results. - ------ 22 International Opportunities - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- COMMON STOCKS -- 94.3% AUSTRALIA -- 5.4% - -------------------------------------------------------------------------------- 291,300 APN News & Media Limited $ 647 - -------------------------------------------------------------------------------- 174,500 G.U.D. Holdings Limited 479 - -------------------------------------------------------------------------------- 160,989 Jubilee Mines NL 207 - -------------------------------------------------------------------------------- 140,500 West Australian Newspapers Holdings Ltd. 517 - -------------------------------------------------------------------------------- 1,850 - -------------------------------------------------------------------------------- AUSTRIA -- 0.9% - -------------------------------------------------------------------------------- 3,400 Mayr-Melnhof Karton AG 292 - -------------------------------------------------------------------------------- BELGIUM -- 1.4% - -------------------------------------------------------------------------------- 4,000 Cofinimmo 488 - -------------------------------------------------------------------------------- CANADA -- 7.8% - -------------------------------------------------------------------------------- 37,700 Cinram International Inc. 405 - -------------------------------------------------------------------------------- 28,300 Cogeco Cable, Inc.(1) 360 - -------------------------------------------------------------------------------- 53,300 Coolbrands International, Inc.(1) 368 - -------------------------------------------------------------------------------- 36,800 Ensign Resource Service Group 541 - -------------------------------------------------------------------------------- 17,400 Gildan Activewear Inc.(1) 465 - -------------------------------------------------------------------------------- 6,500 Home Capital Group Inc. 92 - -------------------------------------------------------------------------------- 9,200 Mega Bloks Inc. (Acquired 11/21/02, Cost $108)(1)(2) 137 - -------------------------------------------------------------------------------- 20,300 Mega Bloks Inc.(1) 303 - -------------------------------------------------------------------------------- 2,671 - -------------------------------------------------------------------------------- CZECH REPUBLIC -- 1.5% - -------------------------------------------------------------------------------- 269,400 Unipetrol AS(1) 508 - -------------------------------------------------------------------------------- DENMARK -- 5.0% - -------------------------------------------------------------------------------- 7,373 Bavarian Nordic A/S(1) 276 - -------------------------------------------------------------------------------- 84,900 GN Store Nord(1) 369 - -------------------------------------------------------------------------------- 8,700 Radiometer A/S 495 - -------------------------------------------------------------------------------- 15,300 Topdanmark A/S(1) 582 - -------------------------------------------------------------------------------- 1,722 - -------------------------------------------------------------------------------- EGYPT -- 1.0% - -------------------------------------------------------------------------------- 40,836 MobiNil - Eqyptian Mobile Services 342 - -------------------------------------------------------------------------------- GERMANY -- 9.4% - -------------------------------------------------------------------------------- 63,537 DAB Bank AG(1) 258 - -------------------------------------------------------------------------------- 34,315 Freenet.de AG(1) 913 - -------------------------------------------------------------------------------- 22,184 GfK AG 406 - -------------------------------------------------------------------------------- 8,836 Stada Arzneimittel AG 572 - -------------------------------------------------------------------------------- 40,694 United Internet AG 633 - -------------------------------------------------------------------------------- 11,822 Zapf Creation AG 445 - -------------------------------------------------------------------------------- 3,227 - -------------------------------------------------------------------------------- GREECE -- 1.9% - -------------------------------------------------------------------------------- 21,439 Germanos SA(1) 330 - -------------------------------------------------------------------------------- 32,800 STET Hellas Telecommunications SA ADR 318 - -------------------------------------------------------------------------------- 648 - -------------------------------------------------------------------------------- HONG KONG -- 2.2% - -------------------------------------------------------------------------------- 474,000 Techtronic Industries Company Limited 738 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- INDONESIA -- 1.4% - ------------------------------------------------------------------------------- 6,990,500 PT Kalbe Farma Tbk(1) $ 463 - -------------------------------------------------------------------------------- IRELAND -- 0.5% - -------------------------------------------------------------------------------- 27,573 Paddy Power plc 179 - -------------------------------------------------------------------------------- JAPAN -- 16.8% - -------------------------------------------------------------------------------- 20,900 Arisawa Manufacturing Company Limited 474 - -------------------------------------------------------------------------------- 121,000 Chiyoda Corporation(1) 497 - -------------------------------------------------------------------------------- 63 Faith, Inc. 378 - -------------------------------------------------------------------------------- 98 GEO Co., Ltd. 456 - -------------------------------------------------------------------------------- 37 Goodwill Group, Inc. (The) 136 - -------------------------------------------------------------------------------- 56 Index Corporation(1) 342 - -------------------------------------------------------------------------------- 22,700 Intage Inc. 237 - -------------------------------------------------------------------------------- 92 Kennedy-Wilson Japan(1) 140 - -------------------------------------------------------------------------------- 40,900 Kuraya Sanseido Inc. 301 - -------------------------------------------------------------------------------- 42,000 Mimasu Semiconductor Industry Co., Ltd. 451 - -------------------------------------------------------------------------------- 36,000 Nippon Thompson Co., Ltd. 168 - -------------------------------------------------------------------------------- 18,000 Noritsu Koki Co. Limited 581 - -------------------------------------------------------------------------------- 16,100 Pigeon Corporation 150 - -------------------------------------------------------------------------------- 131 Round One Corp. 295 - -------------------------------------------------------------------------------- 12,000 Sugi Pharmacy Co., Ltd. 518 - -------------------------------------------------------------------------------- 13,000 Tamron Co., Ltd. 273 - -------------------------------------------------------------------------------- 35,300 Yamaichi Electronics Co., Ltd. 363 - -------------------------------------------------------------------------------- 5,760 - -------------------------------------------------------------------------------- LUXEMBOURG -- 0.5% - -------------------------------------------------------------------------------- 14,000 Quilmes Industrial SA ADR(1) 167 - -------------------------------------------------------------------------------- MEXICO -- 1.0% - -------------------------------------------------------------------------------- 115,000 Corporacion GEO, SA de CV, Series B(1) 334 - -------------------------------------------------------------------------------- NETHERLANDS -- 3.5% - -------------------------------------------------------------------------------- 4,966 Sligro Food Group N.V. 240 - -------------------------------------------------------------------------------- 887,642 Versatel Telecom International N.V.(1) 962 - -------------------------------------------------------------------------------- 1,202 - -------------------------------------------------------------------------------- PEOPLE'S REPUBLIC OF CHINA -- 4.8% - -------------------------------------------------------------------------------- 2,018,000 Brilliance China Automotive Holdings Limited 492 - -------------------------------------------------------------------------------- 1,936,000 China Pharmaceutical Group Limited 645 - -------------------------------------------------------------------------------- 30,700 SINA.Com ADR(1) 495 - -------------------------------------------------------------------------------- 1,632 - -------------------------------------------------------------------------------- POLAND -- 0.8% - -------------------------------------------------------------------------------- 20,498 Frantschach Swiecie SA 288 - -------------------------------------------------------------------------------- RUSSIAN FEDERATION -- 4.1% - -------------------------------------------------------------------------------- 8,600 Golden Telecom Inc.(1) 210 - -------------------------------------------------------------------------------- 247,300 Rostelecom 443 - -------------------------------------------------------------------------------- 18,500 Rostelecom ADR 203 - -------------------------------------------------------------------------------- 27,758,141 Uralsvyazinform 558 - -------------------------------------------------------------------------------- 1,414 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) ------ 23 International Opportunities - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- SINGAPORE -- 1.3% - -------------------------------------------------------------------------------- 624,000 Hyflux Limited $ 457 - -------------------------------------------------------------------------------- SOUTH KOREA -- 0.7% - -------------------------------------------------------------------------------- 4,408 CJ Home Shopping 238 - -------------------------------------------------------------------------------- SPAIN -- 1.9% - -------------------------------------------------------------------------------- 14,400 Baron de Ley, SA(1) 509 - -------------------------------------------------------------------------------- 4,909 Miquel y Costas & Miquel, SA 145 - -------------------------------------------------------------------------------- 654 - -------------------------------------------------------------------------------- SWEDEN -- 4.2% - -------------------------------------------------------------------------------- 22,860 Axfood AB 461 - -------------------------------------------------------------------------------- 39,065 Billerud AB 486 - -------------------------------------------------------------------------------- 30,000 Kungsleden AB 503 - -------------------------------------------------------------------------------- 1,450 - -------------------------------------------------------------------------------- SWITZERLAND -- 2.9% - -------------------------------------------------------------------------------- 640 Kuoni Reisen Holding AG 163 - -------------------------------------------------------------------------------- 6,908 PSP Swiss Property AG 843 - -------------------------------------------------------------------------------- 1,006 - -------------------------------------------------------------------------------- TAIWAN (REPUBLIC OF CHINA) -- 1.4% - -------------------------------------------------------------------------------- 167,000 Pro Healthcare International Co,. Ltd. 129 - -------------------------------------------------------------------------------- 271,000 Via Technologies Inc. 334 - -------------------------------------------------------------------------------- 463 - -------------------------------------------------------------------------------- THAILAND -- 4.0% - -------------------------------------------------------------------------------- 2,049,900 Bank of Ayudhya Public Company Limited(1) 423 - -------------------------------------------------------------------------------- 505,800 Banpu Public Company Limited(1) 506 - -------------------------------------------------------------------------------- 531,700 Tipco Asphalt Public Company Limited(1) 265 - -------------------------------------------------------------------------------- 201,000 Total Access Communication Public Company Limited(1) 183 - -------------------------------------------------------------------------------- 1,377 - -------------------------------------------------------------------------------- UNITED KINGDOM -- 7.5% - -------------------------------------------------------------------------------- 89,200 Cairn Energy plc(1) 436 - -------------------------------------------------------------------------------- 267,690 GoshawK Insurance Holdings plc 509 - -------------------------------------------------------------------------------- 90,895 Helphire Group plc(1) 308 - -------------------------------------------------------------------------------- 30,100 NDS Group plc ADR(1) 504 - -------------------------------------------------------------------------------- 308,962 Wellington Underwriting plc(1) 504 - -------------------------------------------------------------------------------- 55,400 Yule Catto & Company plc 312 - -------------------------------------------------------------------------------- 2,573 - -------------------------------------------------------------------------------- UNITED STATES -- 0.5% - -------------------------------------------------------------------------------- 5,840 Central European Distribution Corporation(1) 181 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $26,470) 32,324 - -------------------------------------------------------------------------------- PREFERRED STOCKS -- 2.8% BRAZIL -- 1.6% - -------------------------------------------------------------------------------- 146,000 Usinas Siderurgicas de Minas Gerais SA Cl A(1) 530 - -------------------------------------------------------------------------------- Shares ($ in Thousands) Value - -------------------------------------------------------------------------------- GERMANY -- 1.2% - -------------------------------------------------------------------------------- 10,200 Draegerwerk AG $ 416 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost $530) 946 - -------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS -- 2.9% Repurchase Agreement, Bank of America Securities, LLC, (U.S. Treasury obligations), in a joint trading account at 1.20%, dated 5/30/03, due 6/2/03 (Delivery value $1,000) (Cost $1,000) 1,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $28,000) $34,270 ================================================================================ COLLATERAL RECEIVED FOR SECURITIES LENDING(3) REPURCHASE AGREEMENTS - -------------------------------------------------------------------------------- Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Agency obligations), 1.37%, dated 5/30/03, due 6/2/03 (Delivery value $3,252) (Cost $3,252) $ 3,252 =============================================================================== MARKET SECTOR DIVERSIFICATION (UNAUDITED) BASIC MATERIALS 12.7% - ------------------------------------------------------------------------------- COMMERCIAL SERVICES 10.0% - ------------------------------------------------------------------------------- CONSUMER (CYCLICAL) 17.6% - ------------------------------------------------------------------------------- CONSUMER (NON-CYCLICAL) 3.2% - ------------------------------------------------------------------------------- CONSUMER SERVICES 9.6% - ------------------------------------------------------------------------------- ENERGY 1.3% - ------------------------------------------------------------------------------- FINANCIAL 13.1% - ------------------------------------------------------------------------------- HEALTH CARE 7.8% - ------------------------------------------------------------------------------- INDUSTRIALS 2.5% - ------------------------------------------------------------------------------- TECHNOLOGY 9.9% - ------------------------------------------------------------------------------- TELECOMMUNICATIONS 9.4% - ------------------------------------------------------------------------------- TEMPORARY CASH INVESTMENTS 2.9% - ------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt GDR = Global Depositary Receipt (1) Non-income producing. (2) Security was purchased under Rule 144A of the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. The aggregate value of restricted securities at May 31, 2003, was $137 (in thousands), which represented 0.4% of net assets. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - ------ 24 Statement of Assets and Liabilities MAY 31, 2003 (UNAUDITED) - ----------------------------------------------------------------------------------------------------------------- INTERNATIONAL EMERGING GLOBAL INTERNATIONAL (Amounts In Thousands Except Per-Share Amounts) DISCOVERY MARKETS GROWTH OPPORTUNITIES - ----------------------------------------------------------------------------------------------------------------- ASSETS Investment securities, at value (cost of $810,245, $92,277, $198,050 and $28,000, respectively) -- including $182,035, $6,751, $29,545 and $3,085, respectively, of securities loaned $ 982,494 $106,771 $230,631 $34,270 - ----------------------------------------------- Collateral received on securities loaned, at value (cost of $187,778, $6,870, $30,615 and $3,252, respectively) 187,778 6,870 30,615 3,252 - ----------------------------------------------- Cash -- -- 4,974 305 - ----------------------------------------------- Foreign currency holdings, at value (cost of $2,887, $751, $20, and $19, respectively) 2,879 749 20 19 - ----------------------------------------------- Receivable for investments sold 47,575 2,474 2,542 2 - ----------------------------------------------- Receivable for forward foreign currency exchange contracts -- 4 -- -- - ----------------------------------------------- Receivable for capital shares sold -- -- 2,314 -- - ----------------------------------------------- Dividends and interest receivable 3,172 163 435 69 - ----------------------------------------------------------------------------------------------------------------- 1,223,898 117,031 271,531 37,917 - ----------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for collateral received on securities loaned 187,778 6,870 30,615 3,252 - ----------------------------------------------- Disbursements in excess of demand deposit cash 3,045 724 -- -- - ----------------------------------------------- Payable for investments purchased 51,920 6,506 9,734 -- - ----------------------------------------------- Accrued management fees 1,252 165 246 55 - ----------------------------------------------------------------------------------------------------------------- 243,995 14,265 40,595 3,307 - ----------------------------------------------------------------------------------------------------------------- NET ASSETS $ 979,903 $102,766 $230,936 $34,610 ================================================================================================================= See Notes to Financial Statements. (continued) ------ 25 Statement of Assets and Liabilities MAY 31, 2003 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EMERGING GLOBAL INTERNATIONAL (Amounts In Thousands Except Per-Share Amounts) DISCOVERY MARKETS GROWTH OPPORTUNITIES - ------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $1,004,003 $129,957 $ 325,214 $33,046 - --------------------------------------------------- Undistributed net investment income 3,484 122 251 150 - --------------------------------------------------- Accumulated net realized loss on investment and foreign currency transactions (199,904) (41,804) (127,132) (4,857) - --------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 172,320 14,491 32,603 6,271 - ------------------------------------------------------------------------------------------------------------------- $ 979,903 $102,766 $ 230,936 $34,610 =================================================================================================================== INVESTOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------------------------------------------- Net assets $836,993,135 $71,234,015 $223,325,074 $29,465,664 - --------------------------------------------------- Shares outstanding 84,432,736 18,490,467 40,791,627 5,437,577 - --------------------------------------------------- Net asset value per share $9.91 $3.85 $5.47 $5.42 - ------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------------------------------------------- Net assets $142,799,817 $31,016,608 $7,051,766 $5,143,883 - --------------------------------------------------- Shares outstanding 14,317,695 7,980,064 1,280,214 948,518 - --------------------------------------------------- Net asset value per share $9.97 $3.89 $5.51 $5.42 - ------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------------------------------------------- Net assets $110,132 $363,534 $530,633 N/A - --------------------------------------------------- Shares outstanding 11,214 95,442 97,571 N/A - --------------------------------------------------- Net asset value per share $9.82 $3.81 $5.44 N/A - ------------------------------------------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE ($ AND SHARES IN FULL) - ------------------------------------------------------------------------------------------------------------------- Net assets N/A $151,530 $28,192 N/A - --------------------------------------------------- Shares outstanding N/A 39,904 5,214 N/A - --------------------------------------------------- Net asset value per share N/A $3.80 $5.41 N/A - ------------------------------------------------------------------------------------------------------------------- See Notes to Financial Statements. - ------ 26 Statement of Operations FOR THE SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------- INTERNATIONAL EMERGING GLOBAL INTERNATIONAL (Amounts In Thousands) DISCOVERY MARKETS GROWTH OPPORTUNITIES - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: - -------------------------------------------- Dividends (net of foreign taxes withheld of $985, $120, $133, and $50, respectively) $ 9,967 $ 1,063 $ 1,561 $ 421 - -------------------------------------------- Interest 206 26 18 8 - -------------------------------------------- Securities lending 614 29 28 7 - ------------------------------------------------------------------------------------------------------------- 10,787 1,118 1,607 436 - ------------------------------------------------------------------------------------------------------------- EXPENSES: - -------------------------------------------- Management fees 7,098 939 1,338 265 - -------------------------------------------- Distribution fees -- Advisor Class -- 1 1 -- - -------------------------------------------- Service fees -- Advisor Class -- 1 1 -- - -------------------------------------------- Directors' fees and expenses 6 1 1 -- - -------------------------------------------- Other expenses 9 9 3 1 - ------------------------------------------------------------------------------------------------------------- 7,113 951 1,344 266 - ------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 3,674 167 263 170 - ------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: - -------------------------------------------- Investment transactions (66,506) (2,073) (16,940) (1,945) - -------------------------------------------- Foreign currency transactions 54,057 2,091 5,240 1,179 - ------------------------------------------------------------------------------------------------------------- (12,449) 18 (11,700) (766) - ------------------------------------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - -------------------------------------------- Investments 38,105 5,581 11,927 3,790 - -------------------------------------------- Translation of assets and liabilities in foreign currencies 28,845 374 3,958 1,150 - ------------------------------------------------------------------------------------------------------------- 66,950 5,955 15,885 4,940 - ------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 54,501 5,973 4,185 4,174 - ------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 58,175 $ 6,140 $ 4,448 $ 4,344 ============================================================================================================= See Notes to Financial Statements. ------ 27 Statement of Changes in Net Assets SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) AND YEAR ENDED NOVEMBER 30, 2002 - -------------------------------------------------------------------------------------------------------- (Amounts In Thousands) INTERNATIONAL DISCOVERY EMERGING MARKETS - -------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS 2003 2002 2003 2002 OPERATIONS Net investment income (loss) $ 3,674 $ 4,273 $ 167 $ (407) - ---------------------------------------- Net realized gain (loss) (12,449) (33,579) 18 (14,275) - ---------------------------------------- Change in net unrealized appreciation 66,950 (55,442) 5,955 (1,326) - -------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 58,175 (84,748) 6,140 (16,008) - -------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: - --------------------------------- Investor Class (1,417) -- -- -- - ---------------------------------------- Institutional Class (486) -- -- -- - -------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions (1,903) -- -- -- - -------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions (55,586) (149,498) (5,407) 18,202 - -------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 686 (234,246) 733 2,194 NET ASSETS Beginning of period 979,217 1,213,463 102,033 99,839 - -------------------------------------------------------------------------------------------------------- End of period $979,903 $ 979,217 $102,766 $102,033 ======================================================================================================== Undistributed net investment income $3,484 $1,713 $122 -- ======================================================================================================== See Notes to Financial Statements. (continued) - ------ 28 Statement of Changes in Net Assets SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) AND YEAR ENDED NOVEMBER 30, 2002 - ------------------------------------------------------------------------------------------------------------ (Amounts In Thousands) GLOBAL GROWTH INTERNATIONAL OPPORTUNITIES - ------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 263 $ 314 $ 170 $ 52 - ---------------------------------------- Net realized loss (11,700) (30,380) (766) (3,135) - ---------------------------------------- Change in net unrealized appreciation 15,885 (1,827) 4,940 407 - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 4,448 (31,893) 4,344 (2,676) - ------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: - ---------------------------------------- Investor Class -- -- (61) -- - ------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 9,323 (27,874) 8,350 18,084 - ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS 13,771 (59,767) 12,633 15,408 NET ASSETS Beginning of period 217,165 276,932 21,977 6,569 - ------------------------------------------------------------------------------------------------------------ End of period $230,936 $217,165 $34,610 $21,977 ============================================================================================================ Undistributed net investment income $251 -- $150 $41 ============================================================================================================ See Notes to Financial Statements. ------ 29 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century World Mutual Funds, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. International Discovery Fund (International Discovery), Emerging Markets Fund (Emerging Markets), Global Growth Fund (Global Growth) and International Opportunities Fund (International Opportunities) (collectively, the funds) are four funds in a series issued by the corporation. The funds are diversified under the 1940 Act. The funds' investment objectives are to seek capital growth. The funds do this by investing primarily in equity securities of foreign companies with the exception of Global Growth, which invests in both U.S. and foreign companies. International Discovery invests in securities of issuers in developed or emerging market countries that are small- or medium-sized companies at the time of purchase. Emerging Markets invests in securities of issuers in emerging market countries. Global Growth invests in securities of issuers in developed countries. International Opportunities invests in securities of issuers in developed or emerging market countries that are small-sized companies at the time of purchase. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- International Discovery is authorized to issue the Investor Class, the Institutional Class and the Advisor Class. Emerging Markets and Global Growth are authorized to issue the Investor Class, the Institutional Class, the Advisor Class and the C Class. International Opportunities is authorized to issue the Investor Class and the Institutional Class. The C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. Sale of the Institutional Class for International Opportunities commenced on January 9, 2003. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. Certain countries impose taxes on realized gains on the sale of securities registered in their country. The funds record the foreign tax expense, if any, on an accrual basis. The realized and unrealized tax provision reduces the net realized gain (loss) on investment transactions and net unrealized appreciation (depreciation) on investments, respectively. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on foreign currency transactions and unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign (continued) - ------ 30 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that the funds' investment manager, American Century Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. Each fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable each fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to each fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, each fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the funds' policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income, if any, are generally declared and paid annually. Distributions from net realized gains, if any, are generally declared and paid twice per year. OTHER -- International Discovery, Emerging Markets and International Opportunities may impose a 2% redemption fee on shares held less than 180 days. These redemption fees are recorded as a reduction in the cost of shares redeemed. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. - -------------------------------------------------------------------------------- 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the funds' average daily closing net assets during the previous month. The annual management fee for the Investor Class and Institutional Class of International Opportunities is 2.00% and 1.80%, respectively. Following are the annual management fee schedules for the remaining funds: The annual management fee schedule for each class of International Discovery is as follows: INVESTOR INSTITUTIONAL ADVISOR CLASS CLASS CLASS - ------------------------------------------------------------------------------ FUND AVERAGE NET ASSETS - ------------------------------------------------------------------------------ First $500 million 1.75% 1.55% 1.50% - ------------------------------------------------------------------------------ Next $500 million 1.40% 1.20% 1.15% - ------------------------------------------------------------------------------ Over $1 billion 1.20% 1.00% 0.95% - ------------------------------------------------------------------------------ (continued) ------ 31 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The annual management fee schedule for each class of Emerging Markets is as follows: INVESTOR INSTITUTIONAL ADVISOR C CLASS CLASS CLASS CLASS - ------------------------------------------------------------------------------ FUND AVERAGE NET ASSETS - ------------------------------------------------------------------------------ First $500 million 2.00% 1.80% 1.75% 2.00% - ------------------------------------------------------------------------------ Next $500 million 1.50% 1.30% 1.25% 1.50% - ------------------------------------------------------------------------------ Over $1 billion 1.25% 1.05% 1.00% 1.25% - ------------------------------------------------------------------------------ The annual management fee schedule for each class of Global Growth is as follows: INVESTOR INSTITUTIONAL ADVISOR C CLASS CLASS CLASS CLASS - ------------------------------------------------------------------------------ FUND AVERAGE NET ASSETS - ------------------------------------------------------------------------------ First $1 billion 1.30% 1.10% 1.05% 1.30% - ------------------------------------------------------------------------------ Next $1 billion 1.15% 0.95% 0.90% 1.15% - ------------------------------------------------------------------------------ Over $2 billion 1.05% 0.85% 0.80% 1.05% - ------------------------------------------------------------------------------ The effective annual management fees for the six months ended May 31, 2003, were as follows: INVESTOR INSTITUTIONAL ADVISOR C CLASS CLASS CLASS CLASS - ------------------------------------------------------------------------------ International Discovery 1.59% 1.39% 1.34% N/A - ------------------------------------------------------------------------------ Emerging Markets 2.00% 1.80% 1.75% 2.00% - ------------------------------------------------------------------------------ Global Growth 1.30% 1.10% 1.05% 1.30% - ------------------------------------------------------------------------------ DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class and a Master Distribution and Individual Shareholder Services Plan for the C Class (collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% - -------------------------------------------------------------------------------- The fees are computed daily and paid monthly in arrears based on each class's average daily closing net assets during the previous month. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/dealers or other independent financial intermediaries for C Class shares. Fees incurred under the plans during the six months ended May 31, 2003, are detailed in the Statement of Operations. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services Corporation. During the six months ended May 31, 2003, the funds invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement with JPM. The funds have a securities lending agreement with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary of JPM. (continued) - ------ 32 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended May 31, 2003, were as follows: INTERNATIONAL EMERGING GLOBAL INTERNATIONAL DISCOVERY MARKETS GROWTH OPPORTUNITIES - ------------------------------------------------------------------------------- Purchases $994,177 $149,299 $216,344 $36,271 - ------------------------------------------------------------------------------- Proceeds from sales $1,034,033 $155,903 $207,143 $28,416 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of the funds were as follows: - ----------------------------------------------------------------------------------------------------- INTERNATIONAL DISCOVERY EMERGING MARKETS - ----------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 400,000 100,000 ===================================================================================================== Sold 1,755 $ 15,679 7,294 $ 25,918 - ------------------------------------------ Issued in reinvestment of distributions 148 1,317 -- -- - ------------------------------------------ Redeemed (7,772) (69,681)(1) (11,440) (40,855)(1) - ----------------------------------------------------------------------------------------------------- Net decrease (5,869) $(52,685) (4,146) $(14,937) ===================================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 400,000 100,000 ===================================================================================================== Sold 6,444 $ 66,383 107,771 $ 468,610 - ------------------------------------------ Redeemed (16,964) (171,191)(2) (104,968) (454,975) - ----------------------------------------------------------------------------------------------------- Net increase (decrease) (10,520) $(104,808) 2,803 $ 13,635 ===================================================================================================== INSTITUTIONAL CLASS - ---------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 75,000 12,500 ===================================================================================================== Sold 2,339 $ 21,177 5,677 $ 20,733 - ------------------------------------------ Issued in reinvestment of distributions 40 359 -- -- - ------------------------------------------ Redeemed (2,694) (24,387) (2,908) (10,421) - ----------------------------------------------------------------------------------------------------- Net increase (decrease) (315) $ (2,851) 2,769 $ 10,312 ===================================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 75,000 12,500 ===================================================================================================== Sold 9,355 $ 95,730 5,904 $ 26,133 - ------------------------------------------ Redeemed (13,600) (140,349)(2) (5,255) (22,215) - ----------------------------------------------------------------------------------------------------- Net increase (decrease) (4,245) $ (44,619) 649 $ 3,918 ===================================================================================================== (1) Net of redemption fees of $9 and $128 for International Discovery and Emerging Markets, respectively. (2) Net of redemption fees of $22 and $2 for International Discovery's Investor and Institutional classes, respectively. (continued) ------ 33 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - -------------------------------------------------------------------------------------------------------- INTERNATIONAL DISCOVERY EMERGING MARKETS - -------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 5,000 5,000 ======================================================================================================== Sold 1 $ 9 466 $ 1,650 - ----------------------------------- Redeemed (7) (59) (722) (2,512)(1) - -------------------------------------------------------------------------------------------------------- Net decrease (6) $(50) (256) $ (862) ======================================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 5,000 5,000 ======================================================================================================== Sold 6 $ 59 2,320 $10,194 - ----------------------------------- Redeemed (13) (130) (2,172) (9,613) - -------------------------------------------------------------------------------------------------------- Net increase (decrease) (7) $ (71) 148 $ 581 ======================================================================================================== C CLASS - -------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED N/A 10,000 ======================================================================================================== Sold 160 $ 593 - ----------------------------------- Redeemed (135) (513) - -------------------------------------------------------------------------------------------------------- Net increase 25 $ 80 ======================================================================================================== PERIOD ENDED NOVEMBER 30, 2002(2) SHARES AUTHORIZED N/A 10,000 ======================================================================================================== Sold 24 $101 - ----------------------------------- Redeemed (9) (33) - -------------------------------------------------------------------------------------------------------- Net increase 15 $ 68 ======================================================================================================== (1) Net of redemption fees of $11. (2) December 18, 2001 (commencement of sale) through November 30, 2002 for Emerging Markets. (continued) - ------ 34 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) - --------------------------------------------------------------------------------------------------------------- GLOBAL GROWTH INTERNATIONAL OPPORTUNITIES - --------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 150,000 200,000 =============================================================================================================== Sold 19,615 $ 98,721 2,047 $ 9,762 - ---------------------------------------- Issued in reinvestment of distributions -- -- 13 59 - ---------------------------------------- Redeemed (18,420) (92,716) (1,265) (6,023)(1) - --------------------------------------------------------------------------------------------------------------- Net increase 1,195 $ 6,005 795 $ 3,798 =============================================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 150,000 200,000 =============================================================================================================== Sold 76,175 $ 464,281 4,721 $24,986 - ---------------------------------------- Redeemed (80,677) (492,089) (1,428) (6,902)(1) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) (4,502) $ (27,808) 3,293 $18,084 =============================================================================================================== INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003(2) SHARES AUTHORIZED 5,000 25,000 =============================================================================================================== Sold 736 $3,664 949 $4,552 - ---------------------------------------- Redeemed (63) (317) -- -- - --------------------------------------------------------------------------------------------------------------- Net increase 673 $3,347 949 $4,552 =============================================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 5,000 25,000 =============================================================================================================== Sold 255 $ 1,482 -- -- - ---------------------------------------- Redeemed (279) (1,645) -- -- - --------------------------------------------------------------------------------------------------------------- Net decrease (24) $ (163) -- -- =============================================================================================================== ADVISOR CLASS - --------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 5,000 N/A =============================================================================================================== Sold 404 $ 1,956 - ---------------------------------------- Redeemed (406) (1,988) - --------------------------------------------------------------------------------------------------------------- Net decrease (2) $ (32) =============================================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 5,000 N/A =============================================================================================================== Sold 293 $ 1,811 - ---------------------------------------- Redeemed (294) (1,743) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) (1) $ 68 =============================================================================================================== (1) Net of redemption fees of $11 for the six months ended May 31, 2003, and $114 for the year ended November 30, 2002. (2) January 9, 2003 (commencement of sale) through May 31, 2003 for International Opportunities. (continued) ------ 35 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) GLOBAL GROWTH INTERNATIONAL OPPORTUNITIES - ----------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 10,000 N/A ========================================================================================= Sold -- $3 ========================================================================================= PERIOD ENDED NOVEMBER 30, 2002(1) SHARES AUTHORIZED 10,000 N/A ========================================================================================= Sold 5 $29 ========================================================================================= (1) March 1, 2002 (commencement of sale) through November 30, 2002 for Global Growth. - -------------------------------------------------------------------------------- 5. SECURITIES LENDING As of May 31, 2003, securities in International Discovery, Emerging Markets, Global Growth, and International Opportunities, valued at $182,035, $6,751, $29,545, and $3,085, respectively, were on loan through the lending agent, Chase, to certain approved borrowers. Chase receives and maintains collateral in the form of cash, U.S. Treasury or Government Agency securities and/or letters of credit for the funds. The value of cash collateral received at period end is disclosed in the Statement of Assets and Liabilities and investments made with the cash by the lending agent are listed in the Schedule of Investments. The total value of all collateral received, at this date, was $190,390, $6,870, $30,615, and $3,252, respectively. The funds' risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the funds may be delayed or limited. - -------------------------------------------------------------------------------- 6. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM, have a $620 million unsecured bank line of credit agreement with JPM, which was renewed from $650 million effective December 17, 2002. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended May 31, 2003. - -------------------------------------------------------------------------------- 7. GEOGRAPHIC RISK FACTORS There are certain risks involved in investing in foreign securities. These risks include those resulting from future adverse political and economic developments and the possible imposition of currency exchange restrictions or other foreign laws or restrictions. (continued) - ------ 36 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) (Amounts In Thousands) - -------------------------------------------------------------------------------- 8. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of May 31, 2003, the components of investments for federal income tax purposes were as follows: - ------------------------------------------------------------------------------ INTERNATIONAL EMERGING GLOBAL INTERNATIONAL DISCOVERY MARKETS GROWTH OPPORTUNITIES - ------------------------------------------------------------------------------ Federal tax cost of investments $827,042 $95,013 $199,594 $28,048 ============================================================================== Gross tax appreciation of investments $163,616 $13,590 $32,697 $6,356 - ------------------------ Gross tax depreciation of investments (8,164) (1,832) (1,660) (134) - ------------------------------------------------------------------------------ Net tax appreciation of investments $155,452 $11,758 $31,037 $6,222 ============================================================================== The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on certain forward foreign currency contracts. Following are the capital loss carryovers and capital loss deferral amounts at November 30, 2002: - -------------------------------------------------------------------------------- INTERNATIONAL EMERGING GLOBAL INTERNATIONAL DISCOVERY MARKETS GROWTH OPPORTUNITIES - -------------------------------------------------------------------------------- Accumulated capital losses $(150,148) $(37,435) $(108,994) $(3,397) - -------------------------------------------------------------------------------- Capital loss deferral $(20,631) $(1,696) $(4,876) $(651) - -------------------------------------------------------------------------------- The accumulated capital losses listed above represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2009 through 2010. The capital loss deferrals represent net capital losses incurred in the one-month period ended November 30, 2002. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. ------ 37 International Discovery - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------------ 2003(1) 2002 2001 2000 1999 1998 PER-SHARE DATA Net Asset Value, Beginning of Period $9.32 $10.13 $14.23 $15.20 $9.24 $8.54 - ------------------------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------ Net Investment Income (Loss)(2) 0.03 0.03 0.01 (0.12) (0.07) (0.03) - ------------------------------ Net Realized and Unrealized Gain (Loss) 0.58 (0.84) (2.54) 0.03 6.06 1.22 - ------------------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.61 (0.81) (2.53) (0.09) 5.99 1.19 - ------------------------------------------------------------------------------------------------------------------ Distributions - ------------------------------ From Net Investment Income (0.02) -- -- -- -- (0.02) - ------------------------------ From Net Realized Gains -- -- (1.57) (0.88) (0.03) (0.47) - ------------------------------------------------------------------------------------------------------------------ Total Distributions (0.02) -- (1.57) (0.88) (0.03) (0.49) - ------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $9.91 $9.32 $10.13 $14.23 $15.20 $9.24 - ------------------------------------------------------------------------------------------------------------------ TOTAL RETURN(3) 6.52% (8.00)% (20.17)% (1.27)% 65.12% 14.79% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.60%(4) 1.53% 1.45% 1.36% 1.55% 1.64% - ------------------------------ Ratio of Net Investment Income (Loss) to Average Net Assets 0.78%(4) 0.35% 0.10% (0.64)% (0.65)% (0.36)% - ------------------------------ Portfolio Turnover Rate 114% 224% 180% 113% 110% 178% - ------------------------------ Net Assets, End of Period (in thousands) $836,993 $841,706 $1,021,063 $1,568,872 $1,408,624 $781,551 - ------------------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. See Notes to Financial Statements. - ------- 38 International Discovery - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------------------------ 2003(1) 2002 2001 2000 1999 1998(2) PER-SHARE DATA Net Asset Value, Beginning of Period $9.39 $10.18 $14.26 $15.24 $9.25 $8.18 - ------------------------------------------------------------------------------------------------------------------ Income From Investment Operations - ---------------------------- Net Investment Income (Loss)(3) 0.04 0.06 0.04 (0.08) (0.04) --(4) - ---------------------------- Net Realized and Unrealized Gain (Loss) 0.57 (0.85) (2.55) 0.01 6.06 1.07 - ------------------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.61 (0.79) (2.51) (0.07) 6.02 1.07 - ------------------------------------------------------------------------------------------------------------------ Distributions - ---------------------------- From Net Investment Income (0.03) -- -- -- -- -- - ---------------------------- From Net Realized Gains -- -- (1.57) (0.91) (0.03) -- - ------------------------------------------------------------------------------------------------------------------ Total Distributions (0.03) -- (1.57) (0.91) (0.03) -- - ------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $9.97 $9.39 $10.18 $14.26 $15.24 $9.25 ================================================================================================================== TOTAL RETURN(5) 6.57% (7.76)% (19.97)% (1.13)% 65.37% 13.08% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.40%(6) 1.33% 1.25% 1.16% 1.35% 1.44%(6) - ---------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.98%(6) 0.55% 0.30% (0.44)% (0.45)% --(6) - ---------------------------- Portfolio Turnover Rate 114% 224% 180% 113% 110% 178%(7) - ---------------------------- Net Assets, End of Period (in thousands) $142,800 $137,358 $192,155 $250,930 $182,222 $60,918 - ------------------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) January 2, 1998 (commencement of sale) through November 30, 1998. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 1998. See Notes to Financial Statements. ------ 39 International Discovery - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------ ADVISOR CLASS - ------------------------------------------------------------------------------------------------------------------ 2003(1) 2002 2001 2000 1999 1998(2) PER-SHARE DATA Net Asset Value, Beginning of Period $9.23 $10.05 $14.17 $15.14 $9.22 $10.10 - ------------------------------------------------------------------------------------------------------------------ Income From Investment Operations - --------------------------- Net Investment Income (Loss)(3) 0.02 0.01 --(4) (0.12) (0.07) (0.02) - --------------------------- Net Realized and Unrealized Gain (Loss) 0.57 (0.83) (2.55) (0.01) 6.02 (0.86) - ------------------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.59 (0.82) (2.55) (0.13) 5.95 (0.88) - ------------------------------------------------------------------------------------------------------------------ Distributions - --------------------------- From Net Realized Gains -- -- (1.57) (0.84) (0.03) -- - ------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $9.82 $9.23 $10.05 $14.17 $15.14 $9.22 ================================================================================================================== TOTAL RETURN(5) 6.39% (8.16)% (20.43)% (1.53)% 64.82% (8.71)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.85%(6) 1.78% 1.70% 1.61% 1.80% 1.89%(6) - --------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.53%(6) 0.10% (0.15)% (0.87)% (0.90)% (0.60)%(6) - --------------------------- Portfolio Turnover Rate 114% 224% 180% 113% 110% 178%(7) - --------------------------- Net Assets, End of Period (in thousands) $110 $153 $244 $509 $57 $11 - ------------------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) April 28, 1998 (commencement of sale) through November 30, 1998. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 1998. See Notes to Financial Statements. - ------ 40 Emerging Markets - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------ INVESTOR CLASS - ------------------------------------------------------------------------------------------------------------------ 2003(1) 2002 2001 2000 1999 1998 PER-SHARE DATA Net Asset Value, Beginning of Period $3.61 $4.06 $4.68 $5.62 $3.49 $4.15 - ------------------------------------------------------------------------------------------------------------------ Income From Investment Operations - --------------------------- Net Investment Income (Loss)(2) --(3) (0.02) (0.02) (0.06) (0.01) --(3) - --------------------------- Net Realized and Unrealized Gain (Loss) 0.24 (0.43) (0.43) (0.88) 2.14 (0.66) - ------------------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.24 (0.45) (0.45) (0.94) 2.13 (0.66) - ------------------------------------------------------------------------------------------------------------------ Distributions - --------------------------- From Net Realized Gains -- -- (0.17) -- -- -- - ------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $3.85 $3.61 $4.06 $4.68 $5.62 $3.49 ================================================================================================================== TOTAL RETURN(4) 6.65% (10.86)% (10.28)% (16.73)% 61.03% (15.90)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.02%(5) 2.05% 2.00% 2.00% 2.00% 2.00% - --------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.29%(5) (0.37)% (0.27)% (0.88)% (0.33)% (0.03)% - --------------------------- Portfolio Turnover Rate 164% 387% 326% 196% 168% 270% - --------------------------- Net Assets, End of Period (in thousands) $71,234 $81,756 $80,422 $77,279 $82,359 $21,124 - ------------------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Per-share amount was less than $0.005. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. ------ 41 Emerging Markets - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------------------------ 2003(1) 2002 2001 2000 1999(2) PER-SHARE DATA Net Asset Value, Beginning of Period $3.64 $4.08 $4.70 $5.63 $3.39 - ------------------------------------------------------------------------------------------------------------------ Income From Investment Operations - ---------------------------- Net Investment Income (Loss)(3) 0.01 --(4) (0.01) (0.05) --(4) - ---------------------------- Net Realized and Unrealized Gain (Loss) 0.24 (0.44) (0.44) (0.88) 2.24 - ------------------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.25 (0.44) (0.45) (0.93) 2.24 - ------------------------------------------------------------------------------------------------------------------ Distributions - ---------------------------- From Net Realized Gains -- -- (0.17) -- -- - ------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $3.89 $3.64 $4.08 $4.70 $5.63 ================================================================================================================== TOTAL RETURN(5) 6.87% (10.78)% (10.01)% (16.52)% 66.08% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.82%(6) 1.85% 1.80% 1.80% 1.80%(6) - ---------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.49%(6) (0.17)% (0.07)% (0.68)% (0.05)%(6) - ---------------------------- Portfolio Turnover Rate 164% 387% 326% 196% 168%(7) - ---------------------------- Net Assets, End of Period (in thousands) $31,017 $18,969 $18,602 $21,330 $16,507 - ------------------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) January 28, 1999 (commencement of sale) through November 30, 1999. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 1999. See Notes to Financial Statements. - ------ 42 Emerging Markets - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000 1999(2) PER-SHARE DATA Net Asset Value, Beginning of Period $3.58 $4.03 $4.66 $5.61 $4.44 - --------------------------------------------------------------------------------------------------------- Income From Investment Operations - --------------------------- Net Investment Income (Loss)(3) --(4) (0.01) (0.04) (0.08) --(4) - --------------------------- Net Realized and Unrealized Gain (Loss) 0.23 (0.44) (0.42) (0.87) 1.17 - --------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.23 (0.45) (0.46) (0.95) 1.17 - --------------------------------------------------------------------------------------------------------- Distributions - --------------------------- From Net Realized Gains -- -- (0.17) -- -- - --------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.81 $3.58 $4.03 $4.66 $5.61 ========================================================================================================= TOTAL RETURN(5) 6.42% (11.17)% (10.32)% (16.93)% 26.35% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.26%(6) 2.30% 2.25% 2.25% 2.25%(6) - --------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.05%(6) (0.62)% (0.52)% (1.13)% 0.02%(6) - --------------------------- Portfolio Turnover Rate 164% 387% 326% 196% 168%(7) - --------------------------- Net Assets, End of Period (in thousands) $364 $1,254 $815 $212 $143 - --------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) May 12, 1999 (commencement of sale) through November 30, 1999. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 1999. See Notes to Financial Statements. ------ 43 Emerging Markets - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2003(1) 2002(2) PER-SHARE DATA Net Asset Value, Beginning of Period $3.58 $4.24 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------------- Net Investment Loss(3) (0.02) (0.04) - ---------------------------------------- Net Realized and Unrealized Gain (Loss) 0.24 (0.62) - -------------------------------------------------------------------------------- Total From Investment Operations 0.22 (0.66) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $3.80 $3.58 ================================================================================ TOTAL RETURN(4) 6.15% (15.57)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 3.01%(5) 3.05%(5) - -------------------------------------------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.70)%(5) (1.10)%(5) - -------------------------------------------------------------------------------- Portfolio Turnover Rate 164% 387%(6) - -------------------------------------------------------------------------------- Net Assets, End of Period (in thousands) $152 $54 - -------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) December 18, 2001 (commencement of sale) through November 30, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 2002. See Notes to Financial Statements. - ------ 44 Global Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------------- INVESTOR CLASS - --------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000 1999(2) PER-SHARE DATA Net Asset Value, Beginning of Period $5.39 $6.18 $8.73 $8.33 $5.00 - --------------------------------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------- Net Investment Income (Loss)(3) 0.01 0.01 --(4) (0.05) (0.01) - ---------------------------- Net Realized and Unrealized Gain (Loss) 0.07 (0.80) (1.90) 0.81 3.34 - --------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.08 (0.79) (1.90) 0.76 3.33 - --------------------------------------------------------------------------------------------------------- Distributions - ---------------------------- From Net Realized Gains -- -- (0.65) (0.36) -- - --------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.47 $5.39 $6.18 $8.73 $8.33 ========================================================================================================= TOTAL RETURN(5) 1.48% (12.78)% (23.62)% 8.81% 66.60% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.30%(6) 1.32% 1.30% 1.30% 1.30% - ---------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.26%(6) 0.13% (0.06)% (0.48)% (0.20)% - ---------------------------- Portfolio Turnover Rate 102% 278% 232% 123% 133% - ---------------------------- Net Assets, End of Period (in thousands) $223,325 $213,314 $272,402 $412,631 $233,823 - --------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) December 1, 1998 (inception) through November 30, 1999. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. See Notes to Financial Statements. ------ 45 Global Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - --------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000(2) PER-SHARE DATA Net Asset Value, Beginning of Period $5.41 $6.19 $8.74 $9.73 - --------------------------------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Income (Loss)(3) 0.01 0.02 0.01 (0.01) - ------------------------------------------------------------------------ Net Realized and Unrealized Gain (Loss) 0.09 (0.80) (1.90) (0.98) - --------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.10 (0.78) (1.89) (0.99) - --------------------------------------------------------------------------------------------------------- Distributions - ----------------------------------- From Net Realized Gains -- -- (0.66) -- - --------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.51 $5.41 $6.19 $8.74 ========================================================================================================= TOTAL RETURN(4) 1.85% (12.60)% (23.53)% (10.17)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.10%(5) 1.12% 1.10% 1.10%(5) - ----------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 0.46%(5) 0.33% 0.14% (0.43)%(5) - ----------------------------------- Portfolio Turnover Rate 102% 278% 232% 123%(6) - ----------------------------------- Net Assets, End of Period (in thousands) $7,052 $3,288 $3,907 $5,090 - --------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) August 1, 2000 (commencement of sale) through November 30, 2000. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 2000. See Notes to Financial Statements. - ------ 46 Global Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - --------------------------------------------------------------------------------------------------------- ADVISOR CLASS - --------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000 1999(2) PER-SHARE DATA Net Asset Value, Beginning of Period $5.36 $6.16 $8.72 $8.31 $5.58 - --------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------- Net Investment Loss(3) --(4) (0.01) --(4) (0.06) (0.03) - -------------------------- Net Realized and Unrealized Gain (Loss) 0.08 (0.79) (1.93) 0.82 2.76 - --------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.08 (0.80) (1.93) 0.76 2.73 - --------------------------------------------------------------------------------------------------------- Distributions - -------------------------- From Net Realized Gains -- -- (0.63) (0.35) -- - --------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $5.44 $5.36 $6.16 $8.72 $8.31 ========================================================================================================= TOTAL RETURN(5) 1.49% (12.99)% (23.97)% 8.79% 48.92% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.56%(6) 1.57% 1.55% 1.55% 1.55%(6) - -------------------------- Ratio of Net Investment Loss to Average Net Assets --(6) (0.12)% (0.31)% (0.73)% (0.40)%(6) - -------------------------- Portfolio Turnover Rate 102% 278% 232% 123% 133%(7) - -------------------------- Net Assets, End of Period (in thousands) $531 $537 $623 $301 $112 - --------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) February 5, 1999 (commencement of sale) through November 30, 1999. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 1999. See Notes to Financial Statements. ------ 47 Global Growth - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED - -------------------------------------------------------------------------------- C CLASS - -------------------------------------------------------------------------------- 2003(1) 2002(2) PER-SHARE DATA Net Asset Value, Beginning of Period $5.35 $6.14 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------- Net Investment Loss(3) (0.02) (0.03) - ----------------------------------- Net Realized and Unrealized Gain (Loss) 0.08 (0.76) - -------------------------------------------------------------------------------- Total From Investment Operations 0.06 (0.79) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.41 $5.35 ================================================================================ TOTAL RETURN(4) 1.12% (12.87)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.30%(5) 2.32%(5) - ----------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.74)%(5) (0.60)%(5) - ----------------------------------- Portfolio Turnover Rate 102% 278%(6) - ----------------------------------- Net Assets, End of Period (in thousands) $28 $25 - -------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) March 1, 2002 (commencement of sale) through November 30, 2002. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not reflect applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 2002. See Notes to Financial Statements. - ------ 48 International Opportunities - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------- INVESTOR CLASS - -------------------------------------------------------------------------------- 2003(1) 2002 2001(2) PER-SHARE DATA Net Asset Value, Beginning of Period $4.73 $4.87 $5.00 - -------------------------------------------------------------------------------- Income From Investment Operations - ---------------------------------- Net Investment Income (Loss)(3) 0.03 0.02 (0.02) - ---------------------------------- Net Realized and Unrealized Gain (Loss) 0.67 (0.16) (0.11) - -------------------------------------------------------------------------------- Total From Investment Operations 0.70 (0.14) (0.13) - -------------------------------------------------------------------------------- Distributions - ---------------------------------- From Net Investment Income (0.01) -- -- - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.42 $4.73 $4.87 ================================================================================ TOTAL RETURN(4) 14.90% (2.87)% (2.60)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.01%(5) 2.01% 2.00%(5) - ---------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets 1.23%(5) 0.30% (0.75)%(5) - ---------------------------------- Portfolio Turnover Rate 110% 257% 147% - ---------------------------------- Net Assets, End of Period (in thousands) $29,466 $21,977 $6,569 - -------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) June 1, 2001 (inception) through November 30, 2001. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. ------ 49 International Opportunities - Financial Highlights For a Share Outstanding Throughout the Period Indicated. - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- 2003(1) PER-SHARE DATA Net Asset Value, Beginning of Period $4.80 - -------------------------------------------------------------------------------- Income From Investment Operations - ----------------------------------------------------- Net Investment Income(2) 0.03 - ----------------------------------------------------- Net Realized and Unrealized Gain 0.59 - -------------------------------------------------------------------------------- Total From Investment Operations 0.62 - -------------------------------------------------------------------------------- Net Asset Value, End of Period $5.42 ================================================================================ TOTAL RETURN(3) 12.92% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.81%(4) - ----------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.81%(4) - ----------------------------------------------------- Portfolio Turnover Rate 110%(5) - ----------------------------------------------------- Net Assets, End of Period (in thousands) $5,144 - -------------------------------------------------------------------------------- (1) January 9, 2003 (commencement of sale) through May 31, 2003 (unaudited). (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Annualized. (5) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the six months ended May 31, 2003. See Notes to Financial Statements. - ------ 50 Share Class Information Three classes of shares are authorized for sale by International Discovery: Investor Class, Institutional Class, and Advisor Class. Four classes of shares are authorized for sale by Emerging Markets and Global Growth: Investor Class, Institutional Class, Advisor Class, and C Class. Two classes of shares are authorized for sale by International Opportunities: Investor Class and Institutional Class. The total expense ratios of Advisor and C Class shares are higher than those of Investor Class shares; the total expense ratio of Institutional Class shares is lower. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. C CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as banks, broker-dealers, and insurance companies. C Class shares redeemed within 12 months of purchase are subject to a CDSC of 1.00%. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. C Class shares also are subject to a Rule 12b-1 service and distribution fee of 1.00% for stock funds and 0.75% for bond funds. All classes of shares represent a pro rata interest in the funds and generally have the same rights and preferences. ------ 51 Retirement Account Information As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. - ------ 52 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 CITIGROUP EMI (EXTENDED MARKET INDEX) GROWTH WORLD EX-US represents the smaller-cap universe of stocks of growth companies in developed country markets outside the United States. Morgan Stanley Capital International (MSCI) has developed several indices that measure the performance of foreign stock markets. The MSCI EAFE(reg.tm) INDEX (Europe, Australasia, Far East) is designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI EMF (Emerging Markets Free) INDEX(reg.tm) represents the performance of stocks in global emerging market countries. The MSCI WORLD FREE INDEX represents the performance of stocks in developed countries (including the United States) that are available for purchase by global investors. ------ 53 Notes - ------ 54 Notes ------ 55 Notes - ------ 56 [back cover] CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY WORLD MUTUAL FUNDS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. American Century Investments PRSRT STD P.O. Box 419200 U.S. POSTAGE PAID Kansas City, MO 64141-6200 AMERICAN CENTURY COMPANIES 0307 American Century Investment Services, Inc. SH-SAN-35029S (c)2003 American Century Services Corporation
[front cover] May 31, 2003 American Century Semiannual Report [graphic of market line chart] [graphic of starfish] [graphic of two bridges] Life Sciences Technology [american century logo and text logo (reg. sm)] [inside front cover] Table of Contents Our Message to You ........................................................ 1 LIFE SCIENCES Performance ............................................................... 2 Performance Review ........................................................ 4 Top Ten Holdings ....................................................... 4 Top Industries ......................................................... 5 Types of Investments in Portfolio ...................................... 5 Schedule of Investments ................................................... 6 TECHNOLOGY Performance ............................................................... 8 Performance Review ........................................................ 10 Top Ten Holdings ....................................................... 10 Top Five Industries .................................................... 11 Types of Investments in Portfolio ...................................... 11 Schedule of Investments ................................................... 12 FINANCIAL STATEMENTS Statement of Assets and Liabilities ....................................... 14 Statement of Operations ................................................... 15 Statement of Changes in Net Assets ........................................ 16 Notes to Financial Statements ............................................. 17 Financial Highlights ...................................................... 23 OTHER INFORMATION Share Class Information ................................................... 30 Retirement Account Information ............................................ 31 Comparative Indices ....................................................... 32 Our Message to You [photo of James E. Stowers III and James E. Stowers, Jr.] James E. Stowers III with James E. Stowers, Jr. We are pleased to provide you with the semiannual report for Life Sciences and Technology for the six months ended May 31, 2003. The report includes comparative performance graphs and tables, portfolio commentary, tables that summarize portfolio investments, full listings of portfolio holdings, financial statements, and highlights. We hope you will find this information helpful in monitoring your investment. Also, through our Web site, we provide quarterly commentaries on all American Century portfolios, the views of our senior investment officers, and other information about investments, portfolio strategy, and the markets. The next shareholder report will be the annual report for the year ended November 30, 2003, which should be available in approximately six months. As always, we appreciate your investment with American Century. Sincerely, /*/James E. Stowers, Jr. /*/James E. Stowers III James E. Stowers, Jr. James E. Stowers III Founder and Chairman Co-Chairman of the Board - -------------------------------------------------------------------------------- 1 Life Sciences - Performance TOTAL RETURNS AS OF MAY 31, 2003 -------------- AVERAGE ANNUAL RETURNS - ---------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - ------------------------------------------------------------------------------- =============================================================================== INVESTOR CLASS -18.63% -8.17% 6/30/00 - ------------------------------------------------------------------------------- =============================================================================== S&P SUPERCOMPOSITE 1500 HEALTH CARE INDEX -5.16% -5.25% -- - ------------------------------------------------------------------------------- =============================================================================== S&P 500 INDEX -8.06% -11.88% -- - ------------------------------------------------------------------------------- Institutional Class -18.34% -9.66% 7/17/00 - ------------------------------------------------------------------------------- Advisor Class -18.71% -12.72% 11/14/00 - ------------------------------------------------------------------------------- C Class -19.57% -16.13% 11/29/01 - ------------------------------------------------------------------------------- (continued) - -------------------------------------------------------------------------------- 2 Life Sciences - Performance
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made June 30, 2000
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS Periods ended May 31 - ------------------------------------------------------------------------------- 2001* 2002 2003 - ------------------------------------------------------------------------------- =============================================================================== Investor Class 2.62% -6.60% -18.63% - ------------------------------------------------------------------------------- S&P SuperComposite 1500 Health Care Index -1.85% -8.21% -5.16% - ------------------------------------------------------------------------------- S&P 500 Index -12.71% -13.85% -8.06% - ------------------------------------------------------------------------------- * From 6/30/00. Not annualized. The charts on the performance pages give historical return data for the fund. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures (see the Total Returns table on the previous page). Past performance does not guarantee future results. None of these charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - -------------------------------------------------------------------------------- 3 Life Sciences - Performance Review [photo of Arnold Douville and Christy Turner] A performance review from Arnold Douville and Christy Turner, portfolio managers on the Life Sciences investment team. Life Sciences climbed 7.34%* during the six months ended May 31, 2003, ahead of its benchmark, the S&P SuperComposite 1500 Health Care Index, which rose 4.06%. The equity market advanced during the six months covered by this report, as evidenced by the performance of key market indices. The Russell 1000 Growth Index, which measures the performance of larger, growth-oriented companies rose 3.85%, while the Russell 2000 Growth Index, which tracks the progress of smaller growth companies, gained 9.00%. The S&P 500 Index advanced 3.87%. Life Sciences' investments in the medical products and supplies industry -- the fund's largest weighting at period's end -- contributed the most to performance during the six-months. Boston Scientific, which makes stents designed to treat heart disease, was a top contributor. Centerpulse, which produces medical implants, also delivered positive returns, as did Fisher Scientific International, a laboratory supply company. Respironics, which makes respiratory devices, was another top contributor. The fund's stake in the biotechnology industry accounted for a small portion of the portfolio, but was rewarding nonetheless. This group delivered the second-best contribution during the period as several holdings advanced. Amgen, the world's largest biotech company, was the second-best contributor during the six months. Bio-Technology General also added value. Investments in the medical service providers industry delivered some of the best and some of the worst performance. Wellpoint Health Networks was the top-contributing stock for the period. Anthem and Unitedhealth Group, both health-benefits companies, also ranked high among contributors. By contrast, LifePoint Hospitals was the top detractor for the six months. In addition, Triad Hospital, HCA Inc., and Province Healthcare all delivered negative results. =============================================================================== TOP TEN HOLDINGS =============================================================================== AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- =============================================================================== % OF FUND % OF FUND =============================================================================== INVESTMENTS INVESTMENTS =============================================================================== AS OF AS OF =============================================================================== 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Pfizer, Inc. 5.4% 1.9% - ------------------------------------------------------------------------------- Amgen Inc. 4.1% -- - ------------------------------------------------------------------------------- Wellpoint Health Networks Inc. 4.1% 4.3% - ------------------------------------------------------------------------------- UnitedHealth Group Incorporated 3.9% 4.2% - ------------------------------------------------------------------------------- Fisher Scientific International 3.4% 3.3% - ------------------------------------------------------------------------------- Wyeth 3.3% 0.6% - ------------------------------------------------------------------------------- Boston Scientific Corp. 3.3% 5.5% - ------------------------------------------------------------------------------- Medtronic, Inc. 3.0% -- - ------------------------------------------------------------------------------- Johnson & Johnson 2.9% 1.5% - ------------------------------------------------------------------------------- Anthem, Inc. 2.7% 3.2% - ------------------------------------------------------------------------------- *All fund returns referenced in this review are for Investor Class shares. (continued) - -------------------------------------------------------------------------------- 4 Life Sciences - Performance Review Similarly, Life Sciences' exposure to the drug industry was sizeable and positive overall, though several holdings declined. Teva Pharmaceutical and Wyeth were two that contributed. On the downside, Swiss drugmaker Roche Holding, Abbott Laboratories, Pfizer, King Pharmaceuticals, Inc., and Johnson & Johnson all detracted. Despite market volatility and any uncertainty that may present itself in the months ahead, quality companies, those with fundamental strength, should persevere. In any market environment, we will continue to seek the best companies demonstrating earnings acceleration that we believe offer our investors the potential for reward over time. =============================================================================== TOP INDUSTRIES =============================================================================== AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- =============================================================================== % OF FUND % OF FUND =============================================================================== INVESTMENTS INVESTMENTS =============================================================================== AS OF AS OF =============================================================================== 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Medical Products & Supplies 31.9% 21.9% - ------------------------------------------------------------------------------- Drugs 26.5% 26.5% - ------------------------------------------------------------------------------- Medical Providers & Services 25.6% 44.3% - ------------------------------------------------------------------------------- =============================================================================== TYPES OF INVESTMENTS IN PORTFOLIO - ------------------------------------------------------------------------------- =============================================================================== AS OF AS OF =============================================================================== 5/31/03 11/30/02 - ------------------------------------------------------------------------------- U.S. Stocks & Options 85.1% 82.0% - ------------------------------------------------------------------------------- Foreign Stocks 7.7% 9.8% - ------------------------------------------------------------------------------- Convertible Bonds -- 1.4% - ------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 92.8% 93.2% - ------------------------------------------------------------------------------- Temporary Cash Investments 7.2% 6.8% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 5 Life Sciences - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- ================================================================================ COMMON STOCKS - 92.7% BIOTECHNOLOGY - 6.9% - -------------------------------------------------------------------------------- 100,000 Amgen Inc.(1) $6,477,500 - -------------------------------------------------------------------------------- 125,000 Bio-Technology General Corp.(1) 593,750 - -------------------------------------------------------------------------------- 24,000 Connetics Corporation(1) 399,000 - -------------------------------------------------------------------------------- 70,000 Guilford Pharmaceuticals Inc.(1) 391,300 - -------------------------------------------------------------------------------- 23,000 IDEC Pharmaceuticals Corp.(1) 879,520 - -------------------------------------------------------------------------------- 20,000 MGI Pharma Inc.(1) 402,300 - -------------------------------------------------------------------------------- 44,000 SICOR Inc.(1) 932,580 - -------------------------------------------------------------------------------- 39,000 United Therapeutics Corp.(1) 779,805 - -------------------------------------------------------------------------------- 10,855,755 - -------------------------------------------------------------------------------- DRUGS - 26.5% - -------------------------------------------------------------------------------- 36,000 Barr Laboratories, Inc.(1) 1,899,000 - -------------------------------------------------------------------------------- 50,000 Bentley Pharmaceuticals, Inc.(1) 519,000 - -------------------------------------------------------------------------------- 41,500 Biovail Corporation(1) 1,935,560 - -------------------------------------------------------------------------------- 30,000 Forest Laboratories, Inc. Cl A(1) 1,515,000 - -------------------------------------------------------------------------------- 46,000 GlaxoSmithKline plc ADR 1,840,460 - -------------------------------------------------------------------------------- 84,000 Johnson & Johnson 4,565,400 - -------------------------------------------------------------------------------- 75,000 Merck & Co., Inc. 4,168,500 - -------------------------------------------------------------------------------- 82,000 Mylan Laboratories Inc. 2,368,160 - -------------------------------------------------------------------------------- 76,000 Novartis AG ORD 2,986,069 - -------------------------------------------------------------------------------- 275,000 Pfizer, Inc. 8,530,500 - -------------------------------------------------------------------------------- 30,000 Pharmaceutical Resources Inc.(1) 1,231,200 - -------------------------------------------------------------------------------- 278,430 Smith & Nephew plc ORD 1,688,174 - -------------------------------------------------------------------------------- 32,000 Teva Pharmaceutical Industries Ltd. ADR 1,621,760 - -------------------------------------------------------------------------------- 42,000 Watson Pharmaceuticals, Inc.(1) 1,554,840 - -------------------------------------------------------------------------------- 120,000 Wyeth 5,262,000 - -------------------------------------------------------------------------------- 41,685,623 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 1.5% - -------------------------------------------------------------------------------- 71,000 Varian Inc.(1) 2,283,715 - -------------------------------------------------------------------------------- INFORMATION SERVICES - 0.3% - -------------------------------------------------------------------------------- 50,000 WebMD Corporation(1) 495,250 - -------------------------------------------------------------------------------- MEDICAL PRODUCTS & SUPPLIES - 31.9% - -------------------------------------------------------------------------------- 20,000 Alcon, Inc. 850,000 - -------------------------------------------------------------------------------- 20,400 American Medical Systems Holdings, Inc.(1) 325,176 - -------------------------------------------------------------------------------- 35,400 Bard (C.R.), Inc. 2,483,310 - -------------------------------------------------------------------------------- 41,000 Bausch & Lomb Inc. Cl A 1,555,130 - -------------------------------------------------------------------------------- 68,000 Baxter International, Inc. 1,723,120 - -------------------------------------------------------------------------------- 41,000 Beckman Coulter Inc. 1,666,650 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 73,600 Becton Dickinson & Co. $2,944,000 - -------------------------------------------------------------------------------- 100,000 Boston Scientific Corp.(1)(2) 5,210,000 - -------------------------------------------------------------------------------- 7,200 Centerpulse AG ORD(1) 1,981,067 - -------------------------------------------------------------------------------- 17,000 Conceptus Inc.(1) 244,970 - -------------------------------------------------------------------------------- 94,000 Conmed Corp.(1) 1,841,930 - -------------------------------------------------------------------------------- 63,700 CryoLife, Inc.(1) 577,122 - -------------------------------------------------------------------------------- 43,000 Dentsply International Inc. 1,609,060 - -------------------------------------------------------------------------------- 78,000 Edwards Lifesciences Corporation(1) 2,364,960 - -------------------------------------------------------------------------------- 170,000 Fisher Scientific International(1) 5,387,301 - -------------------------------------------------------------------------------- 51,000 Henry Schein, Inc.(1) 2,506,140 - -------------------------------------------------------------------------------- 30,900 Inamed Corp.(1) 1,589,805 - -------------------------------------------------------------------------------- 25,000 Invitrogen Corp.(1) 976,625 - -------------------------------------------------------------------------------- 96,006 Medtronic, Inc. 4,678,372 - -------------------------------------------------------------------------------- 65,000 Respironics Inc.(1) 2,395,900 - -------------------------------------------------------------------------------- 72,000 Steris Corp.(1) 1,623,600 - -------------------------------------------------------------------------------- 37,900 Therasense Inc.(1) 377,863 - -------------------------------------------------------------------------------- 60,000 Thermo Electron Corp.(1) 1,266,000 - -------------------------------------------------------------------------------- 16,500 Varian Medical Systems, Inc.(1) 919,875 - -------------------------------------------------------------------------------- 53,000 Waters Corp.(1) 1,503,080 - -------------------------------------------------------------------------------- 48,000 Zoll Medical Corp.(1) 1,594,800 - -------------------------------------------------------------------------------- 50,195,856 - -------------------------------------------------------------------------------- MEDICAL PROVIDERS & SERVICES - 25.6% - ------------------------------------------------------------------------------- 13,500 AETNA Inc. 775,170 - -------------------------------------------------------------------------------- 55,000 AmerisourceBergen Corp. 3,447,950 - -------------------------------------------------------------------------------- 57,000 Anthem, Inc.(1) 4,180,950 - -------------------------------------------------------------------------------- 100,000 HCA Inc. 3,300,000 - -------------------------------------------------------------------------------- 165,000 Health Management Associates, Inc. Cl A 3,077,250 - -------------------------------------------------------------------------------- 55,000 Laboratory Corporation of America Holdings(1) 1,768,250 - -------------------------------------------------------------------------------- 27,817 LifePoint Hospitals Inc.(1) 593,754 - -------------------------------------------------------------------------------- 60,000 Lincare Holdings Inc.(1) 1,847,400 - -------------------------------------------------------------------------------- 110,000 McKesson Corp. 3,335,200 - -------------------------------------------------------------------------------- 95,000 Omnicare, Inc. 2,579,250 - -------------------------------------------------------------------------------- 25,000 Quest Diagnostics Inc.(1) 1,584,000 - -------------------------------------------------------------------------------- 64,000 UnitedHealth Group Incorporated 6,140,160 - -------------------------------------------------------------------------------- 49,883 WellChoice Inc.(1) 1,258,049 - -------------------------------------------------------------------------------- 75,000 Wellpoint Health Networks Inc.(1) 6,400,500 - -------------------------------------------------------------------------------- 40,287,883 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $132,806,070) 145,804,082 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - -------------------------------------------------------------------------------- 6 Life Sciences - Schedule of Investments MAY 31, 2003 (UNAUDITED) Value - -------------------------------------------------------------------------------- ================================================================================ PURCHASED PUT OPTIONS - 0.1% CONTRACTS - -------------------------------------------------------------------------------- 500 Boston Scientific Corp., strike at $47.50, expires 6/21/03 (Cost $129,000) $ 97,500 - -------------------------------------------------------------------------------- ================================================================================ TEMPORARY CASH INVESTMENTS - 7.2% Repurchase Agreement, Morgan Stanley Group, Inc., (U.S. Treasury obligations), in a joint trading account at 1.20%, dated 5/30/03, due 6/2/03 (Delivery value $3,800,380) 3,800,000 - -------------------------------------------------------------------------------- Repurchase Agreement, Bank of America Securities, LLC, (U.S. Treasury obligations), in a joint trading account at 1.20%, dated 5/30/2003, due 6/2/2003 (Delivery value $7,600,760) 7,600,000 - -------------------------------------------------------------------------------- TOTAL TEMPORARY CASH INVESTMENTS (Cost $11,400,000) 11,400,000 - -------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.0% (Cost $144,335,070) $157,301,582 ================================================================================ Value - ------------------------------------------------------------------------------- =============================================================================== COLLATERAL RECEIVED FOR =============================================================================== SECURITIES LENDING(3) Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Government Agency obligations), 1.37%, dated 5/30/02, due 6/2/03 (Delivery value $10,100,699) (Cost $10,099,546) $ 10,099,546 =============================================================================== FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS* Contracts to Sell Settlement Date Value Unrealized Gain (Loss) - -------------------------------------------------------------------------------- 3,210,800 CHF 6/30/03 $2,473,156 $35,556 - -------------------------------------------------------------------------------- 1,093,394 GBP 6/30/03 1,788,679 (5,616) - -------------------------------------------------------------------------------- $4,261,835 $29,940 ======================================= (Value on Settlement Date $4,291,775) *FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS are designed to protect the fund's foreign investments against declines in foreign currencies (also known as hedging). The contracts are called "forward" because they allow the fund to exchange a foreign currency for U.S. dollars on a specific date in the future -- and at a prearranged exchange rate. ================================================================================ NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt CHF = Swiss Franc GBP = British Pound ORD = Foreign Ordinary Share (1) Non-income producing. (2) Security, or a portion thereof, is being held in connection with an open put option. (3) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 7 Technology - Performance TOTAL RETURNS AS OF MAY 31, 2003 -------------- AVERAGE ANNUAL RETURNS - -------------------------------------------------------------------------------- SINCE INCEPTION 1 YEAR INCEPTION DATE - -------------------------------------------------------------------------------- ================================================================================ INVESTOR CLASS -10.64% -33.41% 6/30/00 - -------------------------------------------------------------------------------- ================================================================================ S&P SUPERCOMPOSITE 1500 TECHNOLOGY INDEX -7.11% -30.74% -- - -------------------------------------------------------------------------------- ================================================================================ S&P 500 INDEX -8.06% -11.88% -- - -------------------------------------------------------------------------------- Institutional Class -10.00% -35.93% 7/14/00 - -------------------------------------------------------------------------------- Advisor Class -10.53% -33.65% 6/30/00 - -------------------------------------------------------------------------------- (continued) - -------------------------------------------------------------------------------- 8 Technology - Performance
GROWTH OF $10,000 OVER LIFE OF INVESTOR CLASS
$10,000 investment made June 30, 2000
ONE-YEAR RETURNS OVER LIFE OF INVESTOR CLASS Periods ended May 31 - -------------------------------------------------------------------------------- 2001* 2002 2003 - -------------------------------------------------------------------------------- ================================================================================ Investor Class -50.80% -30.49% -10.64% - -------------------------------------------------------------------------------- S&P SuperComposite 1500 Technology Index -49.39% -27.13% -7.11% - -------------------------------------------------------------------------------- S&P 500 Index -12.71% -13.85% -8.06% - -------------------------------------------------------------------------------- * From 6/30/00. Not annualized. The charts on the performance pages give historical return data for the fund. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as transaction costs and management fees) that reduce returns, while the total returns of the indices do not. Unless otherwise indicated, the charts are based on Investor Class shares; performance for other classes will vary due to differences in fee structures (see the Total Returns table on the previous page). Past performance does not guarantee future results. None of these charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. - -------------------------------------------------------------------------------- 9 Technology - Performance Review A performance review from Jeff Schuller, Chris Boyd and Tom Telford, portfolio managers on the Technology investment team. Technology advanced 6.11%* during the six-month period ended May 31, 2003. Its benchmark, the S&P SuperComposite 1500 Technology Index, gained only 0.92%, while the science and technology funds tracked by Lipper Inc. rose an average of 6.26%. The fund's results were earned primarily by the team of Chris Boyd, Tom Telford, and Jeff Schuller. Jeff was promoted to portfolio manager in February after serving as an analyst on the fund since January 2002. Chris left the firm in June to pursue another opportunity. Technology shares rebounded during the six months covered by this report. Much of the progress was made in the spring. This was evident in the performance of two widely used barometers of the technology sector. From November 29 through February 13, the Morgan Stanley Technology Index declined 20.37% and the Merrill Lynch 100 Technology Index fell 19.29%. From their period low points on February 13 through May 31, the indices rose 34.72% and 37.77%, respectively. Looking at the portfolio, Technology declined 17.36% from the beginning of the period through February 13, but then rebounded 28.40% to the end of May. Internet stocks were leaders in the tech rally, driving the Goldman Sachs Technology Industry (GSTI) Internet Index to a 69.00% gain from its February 13 low. Technology's Internet holdings also rose, and Yahoo! and eBay were contributors to portfolio performance. Semiconductor stocks also surged, as seen in the Philadelphia Semiconductor Index's 46.61% gain from its February 7 low. The portfolio benefited from this resurgence. A leading contributor was Globespan Virata, a provider of integrated circuits, software, and system designs for broadband communication applications such as digital subscriber lines (DSL). Vitesse Semiconductor was another standout. The company manufactures high-performance integrated circuits, primarily for the communications and storage industries. Not all chip stocks rose, however. For example, Technology's position in Microchip Technology, a manufacturer of micro-controllers, held back returns in the period. =============================================================================== TOP TEN HOLDINGS =============================================================================== AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- =============================================================================== % OF FUND % OF FUND =============================================================================== INVESTMENTS INVESTMENTS =============================================================================== AS OF AS OF =============================================================================== 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Software HOLDRS Trust 3.5% 1.5% - ------------------------------------------------------------------------------- Amdocs Ltd. 3.4% -- - ------------------------------------------------------------------------------- Microsoft Corporation 2.4% 6.1% - ------------------------------------------------------------------------------- UTStarcom Inc. 2.1% -- - ------------------------------------------------------------------------------- Dell Computer Corp. 2.1% 2.9% - ------------------------------------------------------------------------------- Texas Instruments Inc. 2.0% 1.5% - ------------------------------------------------------------------------------- Accenture Ltd. Cl A 2.0% -- - ------------------------------------------------------------------------------- Raytheon Company 1.9% -- - ------------------------------------------------------------------------------- International Business Machines Corp. 1.9% 2.5% - ------------------------------------------------------------------------------- Oracle Corp. 1.8% 1.1% - ------------------------------------------------------------------------------- *All fund returns referenced in this review are for Investor Class shares. (continued) - -------------------------------------------------------------------------------- 10 Technology - Performance Review The software industry benefited from the rally, reflected in the 27.73% return of the GSTI Software Index from its low on March 11. Technology's software stake served the portfolio well. Business-services software seller Amdocs was a top performer in the portfolio. However, Microsoft posted disappointing results for the period. Elsewhere in the tech sector, several positions in the aerospace and defense and the electrical equipment industries detracted from performance. The portfolio's investment in high-tech defense contractor L-3 Communications declined. Electronics manufacturing service provider Celestica also fell. Both stocks were sold. While the near-term outlook for technology stocks remains challenging, Technology's management team continues to focus on owning companies in the technology realm with improving business fundamentals. The management team believes information technology is a critical component of capital expenditures and should rise as corporate profits improve. =============================================================================== TOP FIVE INDUSTRIES =============================================================================== AS OF MAY 31, 2003 - ------------------------------------------------------------------------------- =============================================================================== % OF FUND % OF FUND =============================================================================== INVESTMENTS INVESTMENTS =============================================================================== AS OF AS OF =============================================================================== 5/31/03 11/30/02 - ------------------------------------------------------------------------------- Semiconductor 26.2% 24.1% - ------------------------------------------------------------------------------- Computer Software 26.0% 21.3% - ------------------------------------------------------------------------------- Information Services 11.8% 7.4% - ------------------------------------------------------------------------------- Computer Hardware & Business Machines 10.9% 20.9% - ------------------------------------------------------------------------------- Electrical Equipment 10.1% 9.6% - ------------------------------------------------------------------------------- =============================================================================== TYPES OF INVESTMENTS IN PORTFOLIO - ------------------------------------------------------------------------------- =============================================================================== AS OF AS OF =============================================================================== 5/31/03 11/30/02 - ------------------------------------------------------------------------------- U.S. Common Stocks 84.9% 92.2% - ------------------------------------------------------------------------------- Foreign Stocks 12.0% 6.7% - ------------------------------------------------------------------------------- TOTAL EQUITY EXPOSURE 96.9% 98.9% - ------------------------------------------------------------------------------- Temporary Cash Investments 3.1% 1.1% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 11 Technology - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- ================================================================================ COMMON STOCKS - 96.9% COMPUTER HARDWARE & BUSINESS MACHINES - 10.9% - -------------------------------------------------------------------------------- 51,900 Avocent Corp.(1) $1,532,348 - -------------------------------------------------------------------------------- 155,900 Cisco Systems Inc.(1) 2,537,272 - -------------------------------------------------------------------------------- 199,400 Cray, Inc.(1) 1,604,173 - -------------------------------------------------------------------------------- 100,700 Dell Computer Corp.(1) 3,153,420 - -------------------------------------------------------------------------------- 39,500 Electronics for Imaging, Inc.(1) 784,668 - -------------------------------------------------------------------------------- 71,700 EMC Corporation(1) 775,794 - -------------------------------------------------------------------------------- 108,300 Foundry Networks, Inc.(1) 1,660,781 - -------------------------------------------------------------------------------- 32,200 NetScreen Technologies Inc.(1) 720,958 - -------------------------------------------------------------------------------- 15,500 Qlogic Corp.(1) 775,853 - -------------------------------------------------------------------------------- 107,500 Research In Motion Ltd.(1) 2,041,962 - -------------------------------------------------------------------------------- 16,500 Zebra Technologies Corp. Cl A(1) 1,202,850 - -------------------------------------------------------------------------------- 16,790,079 - -------------------------------------------------------------------------------- COMPUTER SOFTWARE - 26.0% - -------------------------------------------------------------------------------- 264,400 Amdocs Ltd.(1) 5,158,443 - -------------------------------------------------------------------------------- 69,000 BEA Systems, Inc.(1) 748,995 - -------------------------------------------------------------------------------- 156,300 Borland Software Corp.(1) 1,581,756 - -------------------------------------------------------------------------------- 73,200 Citrix Systems, Inc.(1) 1,596,492 - -------------------------------------------------------------------------------- 63,200 Cognos, Inc.(1) 1,733,260 - -------------------------------------------------------------------------------- 77,900 Documentum Inc.(1) 1,651,091 - -------------------------------------------------------------------------------- 85,400 Eclipsys Corporation(1) 979,965 - -------------------------------------------------------------------------------- 45,300 FileNet Corp.(1) 756,284 - -------------------------------------------------------------------------------- 47,700 Hyperion Solutions Corp.(1) 1,501,119 - -------------------------------------------------------------------------------- 34,400 Intuit Inc.(1) 1,586,012 - -------------------------------------------------------------------------------- 46,500 Kronos Inc.(1) 2,273,618 - -------------------------------------------------------------------------------- 104,600 Legato Systems, Inc.(1) 794,437 - -------------------------------------------------------------------------------- 47,600 Mercury Interactive Corp.(1) 1,869,728 - -------------------------------------------------------------------------------- 148,700 Microsoft Corporation 3,658,764 - -------------------------------------------------------------------------------- 217,200 Oracle Corp.(1) 2,825,772 - -------------------------------------------------------------------------------- 46,800 Reynolds & Reynolds Co. Cl A 1,385,280 - -------------------------------------------------------------------------------- 78,700 Serena Software, Inc.(1) 1,555,899 - -------------------------------------------------------------------------------- 172,700 Software HOLDRs Trust 5,441,776 - -------------------------------------------------------------------------------- 12,400 Synopsys, Inc.(1) 759,562 - -------------------------------------------------------------------------------- 71,000 Veritas Software Corp.(1) 1,968,120 - -------------------------------------------------------------------------------- 39,826,373 - -------------------------------------------------------------------------------- CONSUMER DURABLES - 1.5% - -------------------------------------------------------------------------------- 30,900 Harman International Industries Inc. 2,292,780 - -------------------------------------------------------------------------------- DEFENSE/AEROSPACE - 1.9% - -------------------------------------------------------------------------------- 93,200 Raytheon Company 2,986,128 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 10.1% - -------------------------------------------------------------------------------- 112,700 Aeroflex Inc.(1) 880,751 - -------------------------------------------------------------------------------- 51,894 Comverse Technology, Inc.(1) 792,162 - -------------------------------------------------------------------------------- 228,800 Flextronics International Ltd.(1) 2,406,976 - -------------------------------------------------------------------------------- 23,300 Garmin Ltd.(1) 1,124,109 - -------------------------------------------------------------------------------- 106,500 Jabil Circuit, Inc.(1) 2,235,435 - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- 149,400 Nokia Corp. Cl A ADR $2,695,175 - -------------------------------------------------------------------------------- 378,000 Sanmina-SCI Corp.(1) 2,164,050 - -------------------------------------------------------------------------------- 107,300 UTStarcom Inc.(1) 3,183,054 - -------------------------------------------------------------------------------- 15,481,712 - -------------------------------------------------------------------------------- INFORMATION SERVICES - 11.8% - ------------------------------------------------------------------------------- 172,000 Accenture Ltd. Cl A(1) 3,013,440 - -------------------------------------------------------------------------------- 44,900 Affiliated Computer Services Inc.(1) 2,080,666 - -------------------------------------------------------------------------------- 198,400 BearingPoint, Inc.(1) 1,882,816 - -------------------------------------------------------------------------------- 28,200 Computer Sciences Corp.(1) 1,119,540 - -------------------------------------------------------------------------------- 45,299 Corporate Executive Board Co. (The)(1) 1,911,391 - -------------------------------------------------------------------------------- 33,400 International Business Machines Corp. 2,940,536 - -------------------------------------------------------------------------------- 65,800 iPayment Inc.(1) 1,518,335 - -------------------------------------------------------------------------------- 72,800 Paychex, Inc. 2,222,948 - -------------------------------------------------------------------------------- 85,400 Tetra Tech, Inc.(1) 1,449,238 - -------------------------------------------------------------------------------- 18,138,910 - -------------------------------------------------------------------------------- INTERNET - 3.9% - ------------------------------------------------------------------------------- 14,700 eBay Inc.(1) 1,496,313 - -------------------------------------------------------------------------------- 102,300 Macromedia, Inc.(1) 2,064,413 - -------------------------------------------------------------------------------- 106,700 RSA Security Inc.(1) 1,196,641 - -------------------------------------------------------------------------------- 39,700 Yahoo! Inc.(1) 1,184,450 - -------------------------------------------------------------------------------- 5,941,817 - -------------------------------------------------------------------------------- MEDIA - 3.5% - ------------------------------------------------------------------------------- 17,400 Clear Channel Communications, Inc.(1) 708,180 - ------------------------------------------------------------------------------- 57,900 Cox Communications, Inc. Cl A(1) 1,793,742 - -------------------------------------------------------------------------------- 65,300 EchoStar Communications Corp. Cl A(1) 2,193,101 - -------------------------------------------------------------------------------- 20,400 Westwood One, Inc.(1) 690,744 - -------------------------------------------------------------------------------- 5,385,767 - -------------------------------------------------------------------------------- SEMICONDUCTOR - 26.2% - ------------------------------------------------------------------------------- 43,300 Altera Corp.(1) 839,154 - -------------------------------------------------------------------------------- 31,600 Analog Devices, Inc.(1) 1,218,180 - -------------------------------------------------------------------------------- 153,800 Applied Micro Circuits Corp.(1) 772,845 - -------------------------------------------------------------------------------- 52,200 Artisan Components Inc.(1) 1,138,743 - -------------------------------------------------------------------------------- 51,300 ASM International N.V. ADR(1) 793,355 - -------------------------------------------------------------------------------- 121,300 ASML Holding N.V. New York Shares(1) 1,221,491 - -------------------------------------------------------------------------------- 139,300 ATI Technologies Inc.(1) 1,163,852 - -------------------------------------------------------------------------------- 93,800 Broadcom Corp.(1) 2,298,100 - -------------------------------------------------------------------------------- 39,000 DuPont Photomasks, Inc.(1) 817,830 - -------------------------------------------------------------------------------- 320,700 GlobespanVirata Inc.(1) 2,653,792 - -------------------------------------------------------------------------------- 59,500 Integrated Circuit Systems, Inc.(1) 1,550,570 - -------------------------------------------------------------------------------- 105,100 Intel Corporation 2,191,335 - -------------------------------------------------------------------------------- 39,700 Interdigital Communications Corp.(1) 1,021,084 - -------------------------------------------------------------------------------- 103,200 International Rectifier Corp.(1) 2,701,775 - -------------------------------------------------------------------------------- 23,600 KLA-Tencor Corp.(1) 1,091,618 - -------------------------------------------------------------------------------- 64,700 Lam Research Corp.(1) 1,155,866 - -------------------------------------------------------------------------------- See Notes to Financial Statements. (continued) - -------------------------------------------------------------------------------- 12 Technology - Schedule of Investments MAY 31, 2003 (UNAUDITED) Shares Value - -------------------------------------------------------------------------------- 21,700 Linear Technology Corp. $789,012 - -------------------------------------------------------------------------------- 36,700 Novellus Systems, Inc.(1) 1,272,206 - -------------------------------------------------------------------------------- 46,300 OmniVision Technologies, Inc.(1) 1,663,328 - -------------------------------------------------------------------------------- 48,200 Photronics Inc.(1) 813,134 - -------------------------------------------------------------------------------- 61,000 Power Integrations, Inc.(1) 1,622,295 - -------------------------------------------------------------------------------- 193,400 Skyworks Solutions, Inc.(1) 1,443,731 - -------------------------------------------------------------------------------- 228,907 Taiwan Semiconductor Manufacturing Co. Ltd. ADR(1) 2,321,116 - -------------------------------------------------------------------------------- 150,100 Texas Instruments Inc. 3,077,049 - -------------------------------------------------------------------------------- 59,800 Veeco Instruments Inc.(1) 1,152,645 - -------------------------------------------------------------------------------- 312,100 Vitesse Semiconductor Corp.(1) 1,565,182 - -------------------------------------------------------------------------------- 36,000 Xilinx, Inc.(1) 1,075,140 - -------------------------------------------------------------------------------- 36,100 Zoran Corporation(1) 739,870 - -------------------------------------------------------------------------------- 40,164,298 - -------------------------------------------------------------------------------- TELEPHONE - 1.1% - -------------------------------------------------------------------------------- 46,300 Verizon Communications 1,752,455 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $120,215,373) 148,760,319 - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- ================================================================================ TEMPORARY CASH INVESTMENTS - 3.1% Repurchase Agreement, Morgan Stanley Group, Inc., (U.S. Treasury obligations), in a joint trading account at 1.20%, dated 5/30/03, due 6/2/03 (Delivery value $4,700,470) (Cost $4,700,000) $ 4,700,000 - ------------------------------------------------------------------------------- TOTAL INVESTMENT SECURITIES - 100.0% (Cost $124,915,373) $153,460,319 =============================================================================== =============================================================================== COLLATERAL RECEIVED FOR SECURITIES LENDING(2) =============================================================================== Repurchase Agreement, BNP Paribas Securities Corp., (U.S. Government Agency obligations), 1.37%, dated 5/30/03, due 6/2/03 (Delivery value $30,807,860) (Cost $30,804,343) $30,804,343 =============================================================================== NOTES TO SCHEDULE OF INVESTMENTS ADR = American Depositary Receipt HOLDRs = Holding Company Depositary Receipts (1) Non-income producing. (2) Investments represent purchases made by the lending agent with cash collateral received through securities lending transactions. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 13 Statement of Assets and Liabilities MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- LIFE SCIENCES TECHNOLOGY ================================================================================ ASSETS - --------------------------------------------------------- Investment securities, at value (cost of $144,335,070 and $124,915,373, respectively) -- including securities on loan valued at $10,146,361 and $30,297,867, respectively $157,301,582 $153,460,319 - --------------------------------------------------------- Cash -- 367,879 - --------------------------------------------------------- Collateral received on securities loaned, at value (cost of $10,099,546 and $30,804,343, respectively) 10,099,546 30,804,343 - --------------------------------------------------------- Receivable for investments sold -- 8,320,747 - --------------------------------------------------------- Receivable for forward foreign currency contracts 35,556 -- - --------------------------------------------------------- Receivable for capital shares sold 1,300 59,280 - --------------------------------------------------------- Dividends and interest receivable 119,877 16,827 - -------------------------------------------------------------------------------- 167,557,861 193,029,395 - -------------------------------------------------------------------------------- ================================================================================ LIABILITIES - --------------------------------------------------------- Disbursements in excess of demand deposit cash 425,824 -- - --------------------------------------------------------- Payable for collateral received on securities loaned, at value 10,099,546 30,804,343 - --------------------------------------------------------- Payable for investments purchased 3,256,189 8,575,727 - --------------------------------------------------------- Payable for forward foreign currency contracts 5,616 -- - --------------------------------------------------------- Accrued management fees 190,504 179,626 - --------------------------------------------------------- Distribution fees payable 13 8 - --------------------------------------------------------- Service fees payable 9 8 - -------------------------------------------------------------------------------- 13,977,701 39,559,712 - -------------------------------------------------------------------------------- NET ASSETS $153,580,160 $153,469,683 ================================================================================ ================================================================================ NET ASSETS CONSIST OF: - --------------------------------------------------------- Capital (par value and paid-in surplus) $216,719,674 $405,466,150 - --------------------------------------------------------- Accumulated net investment loss (677,551) (712,455) - --------------------------------------------------------- Accumulated net realized loss on investment and foreign currency transactions (75,264,638) (279,828,958) - --------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 12,802,675 28,544,946 - -------------------------------------------------------------------------------- $153,580,160 $153,469,683 ================================================================================ INVESTOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $148,926,080 $143,598,482 - --------------------------------------------------------- Shares outstanding 39,145,381 9,399,395 - --------------------------------------------------------- Net asset value per share $3.80 $15.28 - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $4,610,367 $9,829,581 - --------------------------------------------------------- Shares outstanding 1,203,799 638,740 - --------------------------------------------------------- Net asset value per share $3.83 $15.39 - -------------------------------------------------------------------------------- ADVISOR CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $34,860 $41,620 - --------------------------------------------------------- Shares outstanding 9,232 2,752 - --------------------------------------------------------- Net asset value per share $3.78 $15.12 - -------------------------------------------------------------------------------- C CLASS, $0.01 PAR VALUE - -------------------------------------------------------------------------------- Net assets $8,853 -- - --------------------------------------------------------- Shares outstanding 2,367 -- - --------------------------------------------------------- Net asset value per share $3.74 -- - -------------------------------------------------------------------------------- See Notes to Financial Statements. - -------------------------------------------------------------------------------- 14 Statement of Operations FOR THE SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- LIFE SCIENCES TECHNOLOGY ================================================================================ INVESTMENT LOSS INCOME: - --------------------------------------------------------- Dividends (net of foreign taxes withheld of $13,171 and $3,712, respectively) $ 341,967 $ 150,861 - --------------------------------------------------------- Interest 58,221 31,474 - --------------------------------------------------------- Securities lending 4,841 36,416 - -------------------------------------------------------------------------------- 405,029 218,751 - -------------------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------- Management fees 1,080,084 929,198 - --------------------------------------------------------- Distribution fees: - --------------------------------------------------------- Advisor Class 36 47 - -------------------------------------------------------------------------------- C Class 24 -- - -------------------------------------------------------------------------------- Service fees: - -------------------------------------------------------------------------------- Advisor Class 36 47 - -------------------------------------------------------------------------------- C Class 8 -- - -------------------------------------------------------------------------------- Directors' fees and expenses 926 780 - -------------------------------------------------------------------------------- Other expenses 1,174 1,134 - -------------------------------------------------------------------------------- 1,082,288 931,206 - -------------------------------------------------------------------------------- NET INVESTMENT LOSS (677,259) (712,455) - -------------------------------------------------------------------------------- ================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED LOSS ON: - --------------------------------------------------------- Investment transactions (7,500,784) (1,783,285) - --------------------------------------------------------- Foreign currency transactions (452,009) -- - -------------------------------------------------------------------------------- (7,952,793) (1,783,285) - -------------------------------------------------------------------------------- CHANGE IN NET UNREALIZED APPRECIATION ON: - --------------------------------------------------------- Investments 19,542,414 11,379,668 - --------------------------------------------------------- Translation of assets and liabilities in foreign currencies (163,540) -- - -------------------------------------------------------------------------------- 19,378,874 11,379,668 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN 11,426,081 9,596,383 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,748,822 $8,883,928 ================================================================================ See Notes to Financial Statements. - -------------------------------------------------------------------------------- 15 Statement of Changes in Net Assets SIX MONTHS ENDED MAY 31, 2003 (UNAUDITED) AND YEAR ENDED NOVEMBER 30, 2002 - ------------------------------------------------------------------------------------------------------- LIFE SCIENCES TECHNOLOGY - ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS 2003 2002 2003 2002 ======================================================================================================= OPERATIONS - ------------------------------ Net investment loss $ (677,259) $ (1,734,779) $ (712,455) $ (1,806,788) - ------------------------------ Net realized loss (7,952,793) (33,228,910) (1,783,285) (51,689,977) - ------------------------------ Change in net unrealized appreciation (depreciation) 19,378,874 (25,294,869) 11,379,668 (6,224,919) - ------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 10,748,822 (60,258,558) 8,883,928 (59,721,684) - ------------------------------------------------------------------------------------------------------- ======================================================================================================= CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions (6,889,554) (21,725,721) 8,320,549 12,910,500 - ------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 3,859,268 (81,984,279) 17,204,477 (46,811,184) ======================================================================================================= NET ASSETS Beginning of period 149,720,892 231,705,171 136,265,206 183,076,390 - ------------------------------------------------------------------------------------------------------- End of period $153,580,160 $149,720,892 $153,469,683 $136,265,206 ======================================================================================================= Accumulated net investment loss $(677,551) -- $(712,455) -- ======================================================================================================= See Notes to Financial Statements. - -------------------------------------------------------------------------------- 16 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century World Mutual Funds, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Life Sciences Fund (Life) and Technology Fund (Technology) (collectively, the funds) are two funds in a series issued by the corporation. The funds are non-diversified under the 1940 Act. The funds' investment objectives are to seek long-term capital growth. The funds pursue their objectives by investing primarily in equity securities. Life generally invests in companies that engage in the business of providing products and services that help promote personal health and wellness. Technology invests in companies with business operations in the technology and telecommunications-related sectors. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, the Institutional Class, the Advisor Class, and the C Class. The C Class may be subject to a contingent deferred sales charge. The share classes differ principally in their respective sales charges and shareholder servicing and distribution expenses and arrangements. All shares of each fund represent an equal pro rata interest in the assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the fund are allocated to each class of shares based on their relative net assets. Sale of the C Class for Technology had not commenced as of May 31, 2003. SECURITY VALUATIONS -- Securities traded primarily on a principal securities exchange are valued at the last reported sales price, or at the mean of the latest bid and asked prices where no last sales price is available. Depending on local convention or regulation, securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official close price. Debt securities not traded on a principal securities exchange are valued through a commercial pricing service or at the mean of the most recent bid and asked prices. Discount notes are valued through a commercial pricing service. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Board of Directors. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. FUTURES AND OPTIONS CONTRACTS -- The funds may enter into futures contracts and purchase put options in order to manage the funds' exposure to changes in market conditions. One of the risks of entering into futures contracts and options is the possibility that the change in value of the contract may not correlate with the changes in value of the underlying securities. Options purchased by the funds are accounted for in the same manner as marketable portfolio securities. The proceeds from securities sold through the exercise of put options are decreased by the premium paid to purchase the put options. Upon entering into a futures contract, the funds are required to deposit either cash or securities in an amount equal to a certain percentage of the contract value (initial margin). Subsequent payments (variation margin) are made or received daily, in cash, by the funds. The variation margin is equal to the daily change in the contract value and is recorded as unrealized gains and losses. The funds recognize a realized gain or loss when the contract is closed or expires. Net realized and unrealized gains or losses occurring during the holding period of futures contracts are a component of realized gain (loss) on investment transactions and unrealized appreciation (depreciation) on investments, respectively. FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially expressed in foreign currencies are translated into U.S. dollars at prevailing exchange rates at period end. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. For assets and liabilities, other than investments in securities, net realized and unrealized gains and losses from foreign currency translations arise from changes in currency exchange rates. Net realized and unrealized foreign currency exchange gains or losses occurring during the holding period of investment securities are a component of realized gain (loss) on investment transactions and unrealized appreciation (depre- (continued) - -------------------------------------------------------------------------------- 17 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ciation) on investments, respectively. Certain countries may impose taxes on the contract amount of purchases and sales of foreign currency contracts in their currency. The funds record the foreign tax expense, if any, as a reduction to the net realized gain (loss) on foreign currency transactions. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The funds may enter into forward foreign currency exchange contracts to facilitate transactions of securities denominated in a foreign currency or to hedge the funds' exposure to foreign currency exchange rate fluctuations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the funds and the resulting unrealized appreciation or depreciation are determined daily using prevailing exchange rates. The funds bear the risk of an unfavorable change in the foreign currency exchange rate underlying the forward contract. Additionally, losses may arise if the counterparties do not perform under the contract terms. REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with institutions that the funds' investment manager, American Century Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria adopted by the Board of Directors. Each repurchase agreement is recorded at cost. Each fund requires that the collateral, represented by securities, received in a repurchase transaction be transferred to the custodian in a manner sufficient to enable each fund to obtain those securities in the event of a default under the repurchase agreement. ACIM monitors, on a daily basis, the securities transferred to ensure the value, including accrued interest, of the securities under each repurchase agreement is equal to or greater than amounts owed to each fund under each repurchase agreement. JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, each fund, along with other registered investment companies having management agreements with ACIM, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Agency obligations. INCOME TAX STATUS -- It is the funds' policy to distribute all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for federal or state income taxes. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income, if any, are generally declared and paid annually. Distributions from net realized gains, if any, are generally declared and paid twice per year. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. - -------------------------------------------------------------------------------- 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation has entered into a Management Agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee per class. The Agreement provides that all expenses of the funds, except brokerage commissions, taxes, interest, fees and expenses of those directors who are not considered "interested persons" as defined in the 1940 Act (including counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is computed daily and paid monthly in arrears based on each class's pro rata share of the funds' average daily closing net assets during the previous month. The annual management fee schedule for each class of the funds is as follows: INVESTOR INSTITUTIONAL ADVISOR C CLASS CLASS CLASS CLASS - ------------------------------------------------------------------------------ ============================================================================== FUND AVERAGE NET ASSETS - ---------------------------------------------- First $1 billion 1.50% 1.30% 1.25% 1.50% - ------------------------------------------------------------------------------ Over $1 billion 1.30% 1.10% 1.05% 1.30% - ------------------------------------------------------------------------------ The effective annual management fee for the six months ended May 31, 2003 for the funds was 1.50%, 1.30%, and 1.25% for the Investor, Institutional and Advisor Classes, respectively. The effective annual management fee for Life's C Class was 1.50%. (continued) - -------------------------------------------------------------------------------- 18 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) 2. FEES AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED) DISTRIBUTION AND SERVICE FEES -- The Board of Directors has adopted a Master Distribution and Shareholder Services Plan for the Advisor Class and a Master Distribution and Individual Shareholder Services Plan for the C Class (collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class and C Class will pay American Century Investment Services, Inc. (ACIS) the following annual distribution and service fees: - -------------------------------------------------------------------------------- ADVISOR C - -------------------------------------------------------------------------------- Distribution Fee 0.25% 0.75% - -------------------------------------------------------------------------------- Service Fee 0.25% 0.25% - -------------------------------------------------------------------------------- The fees are computed daily and paid monthly in arrears based on each class's average daily closing net assets during the previous month. The distribution fee provides compensation for expenses incurred in connection with distributing shares of the classes including, but not limited to, payments to brokers, dealers, and financial institutions that have entered into sales agreements with respect to shares of the funds. The service fee provides compensation for shareholder and administrative services rendered by ACIS, its affiliates or independent third party providers for Advisor Class shares and for individual shareholder services rendered by broker/ dealers or other independent financial intermediaries for C Class shares. Fees incurred under the plans during the six months ended May 31, 2003, are detailed in the Statement of Operations. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment manager, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services Corporation. During the six months ended May 31, 2003, the funds invested in a money market fund for temporary purposes, which was managed by J.P. Morgan Fleming Asset Management (USA) Inc. (JPMFAM). JPMFAM is a wholly owned subsidiary of J.P. Morgan Chase & Co. (JPM). JPM is an equity investor in ACC. The funds have a bank line of credit agreement with JPM. The funds have a securities lending agreement with JPMorgan Chase Bank (Chase). Chase is a wholly owned subsidiary of JPM. - -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Investment transactions, excluding short-term investments, for the six months ended May 31, 2003, were as follows: LIFE SCIENCES TECHNOLOGY - -------------------------------------------------------------------------------- Purchases $ 91,594,278 $141,706,93 - -------------------------------------------------------------------------------- Proceeds from sales $100,740,331 $137,015,32 - -------------------------------------------------------------------------------- (continued) - -------------------------------------------------------------------------------- 19 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Capital share transactions in the Technology classes for all periods have been restated to reflect a 1-for-10 reverse share split. See Note 8. Transactions in shares of the funds were as follows: LIFE SCIENCES TECHNOLOGY - ------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------- =========================================================================================== INVESTOR CLASS - --------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 200,000,000 300,000,000 =========================================================================================== Sold 1,947,870 $ 6,902,403 2,725,139 $36,389,899 - ------------------------------- Redeemed (4,177,466) (14,725,314) (2,203,707) (28,806,635) - ------------------------------------------------------------------------------------------- Net increase (decrease) (2,229,596) $(7,822,911) 521,432 $ 7,583,264 =========================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 200,000,000 300,000,000 =========================================================================================== Sold 10,804,587 $ 47,083,635 4,396,413 $71,750,086 - ------------------------------- Redeemed (16,090,674) (69,030,203) (3,842,872) (61,470,938) - ------------------------------------------------------------------------------------------- Net increase (decrease) (5,286,087) $(21,946,568) 553,541 $10,279,148 =========================================================================================== =========================================================================================== INSTITUTIONAL CLASS - --------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 5,000,000 15,000,000 =========================================================================================== Sold 354,108 $1,265,333 323,318 $4,244,104 - ------------------------------- Redeemed (96,467) (341,223) (267,705) (3,493,914) - ------------------------------------------------------------------------------------------- Net increase 257,641 $ 924,110 55,613 $ 750,190 =========================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 5,000,000 15,000,000 =========================================================================================== Sold 588,328 $2,553,934 725,704 $11,779,856 - ------------------------------- Redeemed (532,110) (2,358,946) (581,510) (9,207,171) - ------------------------------------------------------------------------------------------- Net increase 56,218 $ 194,988 144,194 $ 2,572,685 =========================================================================================== =========================================================================================== ADVISOR CLASS - --------------------------------------- SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 5,000,000 5,000,000 =========================================================================================== Sold 7,496 $26,014 45 $ 669 - ------------------------------- Redeemed (5,490) (19,065) (1,077) (13,574) - ------------------------------------------------------------------------------------------- Net increase (decrease) 2,006 $ 6,949 (1,032) $(12,905) =========================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 5,000,000 5,000,000 =========================================================================================== Sold 4,771 $21,334 3,814 $60,484 - ------------------------------- Redeemed (264) (1,097) (87) (1,817) - ------------------------------------------------------------------------------------------- Net increase 4,507 $20,237 3,727 $58,667 =========================================================================================== (continued) - -------------------------------------------------------------------------------- 20 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS (CONTINUED) LIFE SCIENCES TECHNOLOGY - ------------------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------ ========================================================================================== C CLASS - ------------------------------------------------------------------------------------------ SIX MONTHS ENDED MAY 31, 2003 SHARES AUTHORIZED 10,000,000 7,500,000 ========================================================================================== Sold 659 $2,298 ========================================================================================== YEAR ENDED NOVEMBER 30, 2002 SHARES AUTHORIZED 10,000,000 7,500,000 ========================================================================================== Sold 1,195 $5,622 ========================================================================================== - -------------------------------------------------------------------------------- 5. SECURITIES LENDING As of May 31, 2003, securities in Life and Technology valued at $10,146,361 and $30,297,867, respectively, were on loan through the lending agent, Chase, to certain approved borrowers. Chase receives and maintains collateral in the form of cash, U.S. Treasury or Government Agency securities and/or letters of credit for the funds. The value of cash collateral received at period end and investments made with that cash are disclosed in the Statement of Assets and Liabilities and the Schedule of Investments. The total value of all collateral received, at this date, was $10,099,546 and $30,804,343, respectively. The funds' risks in securities lending are that the borrower may not provide additional collateral when required or return the securities when due. If the borrower defaults, receipt of the collateral by the funds may be delayed or limited. - -------------------------------------------------------------------------------- 6. BANK LINE OF CREDIT The funds, along with certain other funds managed by ACIM, have a $620,000,000 unsecured bank line of credit agreement with JPM, which was renewed from $650,000,000 effective December 17, 2002. The funds may borrow money for temporary or emergency purposes to fund shareholder redemptions. Borrowings under the agreement bear interest at the Federal Funds rate plus 0.50%. The funds did not borrow from the line during the six months ended May 31, 2003. - -------------------------------------------------------------------------------- 7. FEDERAL TAX INFORMATION The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts. As of May 31, 2003, the components of investments for federal income tax purposes were as follows: LIFE SCIENCES TECHNOLOGY - -------------------------------------------------------------------------------- Federal tax cost of investments $144,579,391 $129,237,731 ================================================================================ Gross tax appreciation of investments $15,946,001 $27,501,555 - --------------------------------------------------------- Gross tax depreciation of investments (3,223,810) (3,278,967) - -------------------------------------------------------------------------------- Net tax appreciation of investments $12,722,191 $24,222,58 ================================================================================ (continued) - -------------------------------------------------------------------------------- 21 Notes to Financial Statements MAY 31, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- 7. FEDERAL TAX INFORMATION (CONTINUED) The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on certain forward foreign currency contracts. Following are the capital loss carryovers and capital loss deferral amounts as of November 30, 2002: LIFE SCIENCES TECHNOLOGY - -------------------------------------------------------------------------------- Accumulated capital losses $(64,222,705) $(272,930,689) - -------------------------------------------------------------------------------- Capital loss deferral $(2,844,819) $(792,626) - -------------------------------------------------------------------------------- The accumulated capital losses listed above represent net capital loss carryovers that may be used to offset future realized capital gains for federal income tax purposes. The capital loss carryovers expire in 2009 through 2010 for Life and 2008 through 2010 for Technology. The capital loss deferrals represent net capital losses incurred in the one-month period ended November 30, 2002. The funds have elected to treat such losses as having been incurred in the following fiscal year for federal income tax purposes. - -------------------------------------------------------------------------------- 8. TECHNOLOGY REVERSE SHARE SPLIT Effective after the close of business on May 16, 2003, the Technology Investor Class, Institutional Class, and Advisor Class shares underwent a 1-for-10 reverse split. The effect of this transaction was to divide the number of outstanding shares for each class by ten, while multiplying the net asset value per share by ten. The net asset value per share prior to the reverse split was $1.46, $1.47, and $1.44 for the Investor Class, Institutional Class, and the Advisor Class, respectively. The net asset value per share after the reverse split was $14.60, $14.70, and $14.40 for the Investor Class, Institutional Class, and Advisor Class, respectively. There was no change in the aggregate market value of the outstanding shares as a result of these transactions. - -------------------------------------------------------------------------------- 22 Life Sciences - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ----------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000(2) =========================================================================================================== PER-SHARE DATA Net Asset Value, Beginning of Period $3.54 $4.87 $5.28 $5.00 - ----------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------- Net Investment Loss(3) (0.02) (0.04) (0.03) (0.02) - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.28 (1.29) (0.25) 0.30 - ----------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.26 (1.33) (0.28) 0.28 - ----------------------------------------------------------------------------------------------------------- Distributions - -------------------------------------------- From Net Realized Gains -- -- (0.13) -- - ----------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.80 $3.54 $4.87 $5.28 =========================================================================================================== TOTAL RETURN(4) 7.34% (27.31)% (5.35)% 5.60% =========================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50%(5) 1.50% 1.50% 1.50%(5) - -------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.94)%(5) (0.88)% (0.61)% (0.95)%(5) - -------------------------------------------- Portfolio Turnover Rate 67% 272% 206% 64% - -------------------------------------------- Net Assets, End of Period (in thousands) $148,926 $146,324 $227,341 $233,785 - ----------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) June 30, 2000 (inception) through November 30, 2000. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 23 Life Sciences - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000(2) ======================================================================================================== PER-SHARE DATA Net Asset Value, Beginning of Period $3.56 $4.89 $5.28 $5.26 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------- Net Investment Loss(3) (0.01) (0.03) (0.02) (0.02) - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.28 (1.30) (0.24) 0.04 - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.27 (1.33) (0.26) 0.02 - -------------------------------------------------------------------------------------------------------- Distributions - -------------------------------------------- From Net Realized Gains -- -- (0.13) -- - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.83 $3.56 $4.89 $5.28 ======================================================================================================== TOTAL RETURN(4) 7.58% (27.20)% (4.97)% 0.38% ======================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.30%(5) 1.30% 1.30% 1.30%(5) - -------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.74)%(5) (0.68)% (0.41)% (0.80)%(5) - -------------------------------------------- Portfolio Turnover Rate 67% 272% 206% 64%(6) - -------------------------------------------- Net Assets, End of Period (in thousands) $4,610 $3,365 $4,348 $3,363 - -------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) July 17, 2000 (commencement of sale) through November 30, 2000. (3) Computed using average shares outstanding throughout the period. (4) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (5) Annualized. (6) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period June 30, 2000 (inception of fund) through November 30, 2000. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 24 Life Sciences - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - -------------------------------------------------------------------------------------------------------- ADVISOR CLASS - -------------------------------------------------------------------------------------------------------- 2003(1) 2002 2001 2000(2) ======================================================================================================== PER-SHARE DATA Net Asset Value, Beginning of Period $3.51 $4.86 $5.28 $5.48 - -------------------------------------------------------------------------------------------------------- Income From Investment Operations - ------------------------------------------- Net Investment Loss(3) (0.02) (0.05) (0.04) --(4) - ------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.29 (1.30) (0.25) (0.20) - -------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.27 (1.35) (0.29) (0.20) - -------------------------------------------------------------------------------------------------------- Distributions - ------------------------------------------- From Net Realized Gains -- -- (0.13) -- - -------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.78 $3.51 $4.86 $5.28 ======================================================================================================== TOTAL RETURN(5) 7.69% (27.78)% (5.55)% (3.65)% ======================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.75%(6) 1.75% 1.75% 1.75%(6) - ------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (1.19)%(6) (1.13)% (0.86)% (0.99)%(6) - ------------------------------------------- Portfolio Turnover Rate 67% 272% 206% 64%(7) - ------------------------------------------- Net Assets, End of Period (in thousands) $35 $25 $13 $11 - -------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) November 14, 2000 (commencement of sale) through November 30, 2000. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period June 30, 2000 (inception of fund) through November 30, 2000. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 25 Life Sciences- Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ----------------------------------------------------------------------------------------- C CLASS - ----------------------------------------------------------------------------------------- 2003(1) 2002 2001(2) ========================================================================================= PER-SHARE DATA Net Asset Value, Beginning of Period $3.49 $4.87 $4.87 - ----------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------- Net Investment Loss(3) (0.03) (0.08) --(4) - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.28 (1.30) --(4) - ----------------------------------------------------------------------------------------- Total From Investment Operations 0.25 (1.38) --(4) - ----------------------------------------------------------------------------------------- Net Asset Value, End of Period $3.74 $3.49 $4.87 ========================================================================================= TOTAL RETURN(5) 7.16% (28.34)% 0.00% ========================================================================================= RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 2.50%(6) 2.50% 2.50%(6) - -------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (1.94)%(6) (1.88)% (1.46)%(6) - -------------------------------------------- Portfolio Turnover Rate 67% 272% 206%(7) - -------------------------------------------- Net Assets, End of Period (in thousands) $9 $6 $3 - ----------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) November 29, 2001 (commencement of sale) through November 30, 2001. (3) Computed using average shares outstanding throughout the period. (4) Per-share amount was less than $0.005. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any, and does not include applicable sales charges. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the year ended November 30, 2001. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 26 Technology - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------- INVESTOR CLASS - ------------------------------------------------------------------------------------------------------- 2003(1)(2) 2002(2) 2001(2) 2000(2)(3) ======================================================================================================= PER-SHARE DATA Net Asset Value, Beginning of Period $14.40 $20.90 $31.90 $50.00 - ------------------------------------------------------------------------------------------------------- Income From Investment Operations - -------------------------------------------- Net Investment Loss(4) (0.08) (0.20) (0.20) (0.20) - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.96 (6.30) (10.80) (17.90) - ------------------------------------------------------------------------------------------------------- Total From Investment Operations 0.88 (6.50) (11.00) (18.10) - ------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $15.28 $14.40 $20.90 $31.90 ======================================================================================================= TOTAL RETURN(5) 6.11% (31.10)% (34.48)% (36.20)% ======================================================================================================= RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.50%(6) 1.50% 1.50% 1.50%(6) - -------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (1.15)%(6) (1.20)% (0.79)% (0.83)%(6) - -------------------------------------------- Portfolio Turnover Rate 114% 251% 356% 125% - -------------------------------------------- Net Assets, End of Period (in thousands) $143,598 $127,767 $173,877 $195,776 - ------------------------------------------------------------------------------------------------------- (1) Six months ended May 31, 2003 (unaudited). (2) Per-share data has been restated to reflect a 1-for-10 reverse share split that occurred on the close of business on May 16, 2003. (3) June 30, 2000 (inception) through November 30, 2000. (4) Computed using average shares outstanding throughout the period. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 27 Technology - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED) - ------------------------------------------------------------------------------------------------------ INSTITUTIONAL CLASS - ------------------------------------------------------------------------------------------------------ 2003(1)(2) 2002(2) 2001(2) 2000(2)(3) ====================================================================================================== PER-SHARE DATA Net Asset Value, Beginning of Period $14.50 $21.00 $31.90 $55.40 - ------------------------------------------------------------------------------------------------------ Income From Investment Operations - -------------------------------------------- Net Investment Loss(4) (0.06) (0.20) (0.20) (0.10) - -------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.95 (6.30) (10.70) (23.40) - ------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.89 (6.50) (10.90) (23.50) - ------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $15.39 $14.50 $21.00 $31.90 ====================================================================================================== TOTAL RETURN(5) 6.14% (30.95)% (34.17)% (42.42)% ====================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.30%(6) 1.30% 1.30% 1.30%(6) - -------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (0.95)%(6) (1.00)% (0.59)% (0.70)%(6) - -------------------------------------------- Portfolio Turnover Rate 114% 251% 356% 125%(7) - -------------------------------------------- Net Assets, End of Period (in thousands) $9,830 $8,444 $9,198 $7,995 - ------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) Per-share data has been restated to reflect a 1-for-10 reverse share split that occurred on the close of business on May 16, 2003. (3) July 14, 2000 (commencement of sale) through November 30, 2000. (4) Computed using average shares outstanding throughout the period. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. (7) Portfolio turnover is calculated at the fund level. Percentage indicated was calculated for the period June 30, 2000 (inception of fund) through November 30, 2000. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 28 Technology - Financial Highlights FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED NOVEMBER 30 (EXCEPT AS NOTED - ------------------------------------------------------------------------------------------------------ ADVISOR CLASS - ------------------------------------------------------------------------------------------------------ 2003(1)(2) 2002(2) 2001(2) 2000(2)(3) ====================================================================================================== PER-SHARE DATA Net Asset Value, Beginning of Period $14.30 $20.80 $31.90 $50.00 - ------------------------------------------------------------------------------------------------------ Income From Investment Operations - ------------------------------------------- Net Investment Loss(4) (0.09) (0.20) (0.20) (0.20) - ------------------------------------------- Net Realized and Unrealized Gain (Loss) 0.91 (6.30) (10.90) (17.90) - ------------------------------------------------------------------------------------------------------ Total From Investment Operations 0.82 (6.50) (11.10) (18.10) - ------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $15.12 $14.30 $20.80 $31.90 ====================================================================================================== TOTAL RETURN(5) 5.73% (31.25)% (34.80)% (36.20)% ====================================================================================================== RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets 1.75%(6) 1.75% 1.75% 1.75%(6) - ------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (1.40)%(6) (1.45)% (1.04)% (1.08)%(6) - ------------------------------------------- Portfolio Turnover Rate 114% 251% 356% 125% - ------------------------------------------- Net Assets, End of Period (in thousands) $42 $54 $1 $43 - ------------------------------------------------------------------------------------------------------ (1) Six months ended May 31, 2003 (unaudited). (2) Per-share data has been restated to reflect a 1-for-10 reverse share split that occurred on the close of business on May 16, 2003. (3) June 30, 2000 (commencement of sale) through November 30, 2000. (4) Computed using average shares outstanding throughout the period. (5) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (6) Annualized. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 29 Share Class Information Four classes of shares are authorized for sale by the funds: Investor Class, Institutional Class, Advisor Class, and C Class. The total expense ratios of Advisor, and C Class shares are higher than those of Investor Class shares; the total expense ratio of Institutional Class shares is lower. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through a broker-dealer, which may require payment of a transaction fee to the broker. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.50% annual Rule 12b-1 service and distribution fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. C CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as banks, broker-dealers, and insurance companies. C Class shares redeemed within 12 months of purchase are subject to a CDSC of 1.00%. There is no CDSC on shares acquired through reinvestment of dividends or capital gains. C Class shares also are subject to a Rule 12b-1 service and distribution fee of 1.00% for stock funds and 0.75% for bond funds. All classes of shares represent a pro rata interest in the funds and generally have the same rights and preferences. - -------------------------------------------------------------------------------- 30 Retirement Account Information As required by law, any distributions you receive from an IRA or certain 403(b) and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. - -------------------------------------------------------------------------------- 31 Comparative Indices The following indices are used in the report to serve as fund performance comparisons. They are not investment products available for purchase. The GOLDMAN SACHS TECHNOLOGY INDUSTRY (GSTI) INTERNET INDEX is a capitalization-weighted index of selected Internet companies including, access providers, hardware and software, and on-line service providers. The GOLDMAN SACHS TECHNOLOGY INDUSTRY (GSTI) SOFTWARE INDEX is a modified capitalization-weighted index of selected software companies including, client/server, enterprise software, Internet software, and personal computer and entertainment software. The MERRILL LYNCH 100 TECHNOLOGY INDEX is an equal-dollar weighted index of 100 stocks designed to measure the performance of a cross section of large, actively-traded technology stocks and American Depositary Receipts (ADRs). The MORGAN STANLEY TECHNOLOGY INDEX is an equal-dollar weighted index of 35 U.S. companies from technology subsectors including: computer and business services, technical software, enterprise software, Internet and personal computer software, telecommunications equipment, wireline/wireless, data networking/data security, server and enterprise hardware, personal computer hardware and data storage, connectors/electronics manufacturing services, semiconductor capital equipment, and semiconductors. The PHILADELPHIA SEMICONDUCTOR INDEX is a price-weighted index comprised of companies primarily involved in the design, distribution, manufacture, and sale of semiconductors. The RUSSELL 1000 INDEX is a market-capitalization weighted, large-cap index created by Frank Russell Company to measure the performance of the 1,000 largest companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S. companies, based on total market capitalization). The RUSSELL 2000 INDEX is a market-capitalization weighted index created by Frank Russell Company to measure the performance of the 2,000 smallest of the 3,000 largest publicly traded U.S. companies, based on total market capitalization. The S&P 500 INDEX is a market-value weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. The S&P SUPERCOMPOSITE 1500 INDEX combines the S&P 500, MidCap 400 and SmallCap 600 indices. The S&P SUPERCOMPOSITE 1500 HEALTHCARE INDEX represents those S&P SuperComposite 1500 companies in two main industry groups: Healthcare equipment and supplies companies or companies that provide health-care related services, and companies that provide research, development, production and marketing of pharmaceuticals and biotechnology products. The S&P SUPERCOMPOSITE 1500 TECHNOLOGY INDEX represents those S&P SuperComposite 1500 companies in two main industry groups: Technology software and services companies, and technology hardware and equipment companies. - ------------------------------------------------------------------------------- 32 [inside back cover - blank page] CONTACT US WWW.AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR RELATIONS: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL ADVISORS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY MUTUAL FUNDS, INC. INVESTMENT MANAGER: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. 0307 American Century Investment Services, Inc. SH-SAN-35032N (c)2003 American Century Services Corporation
Item 2 - N/A Item 3 - N/A Item 4 - N/A Item 5 - Reserved Item 6 - Reserved Item 7 - N/A Item 8 - Reserved Item 9. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10. Exhibits 10(a) - N/A 10(b) - Attached hereto.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: American Century World Funds, Inc. By: /s/William M. Lyons Name: William M. Lyons Title: President (principal executive officer) Date: July 30, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/William M. Lyons Name: William M. Lyons Title: President (principal executive officer) Date: July 30, 2003 By: /s/Maryanne L. Roepke Name: Maryanne L. Roepke Title: Sr. Vice President, Treasurer and Chief Accounting Officer (principal financial officer) Date: July 30, 2003