[front cover]
JUNE 30, 1999
SEMIANNUAL REPORT
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AMERICAN CENTURY
[graphic of stairs]
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EQUITY GROWTH
INCOME & GROWTH
SMALL CAP QUANTITATIVE
[american century logo(reg.sm)]
American
Century
[inside front cover]
Y2K TESTING EFFORTS PAY DIVIDENDS IN PREPAREDNESS
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Y2K, short for the year 2000, refers more specifically to the date change from
December 31, 1999 to January 1, 2000. This date change is significant for
computers because many were originally programmed to process dates with
two-character years -- 99 instead of 1999.
When the calendar rolls to 2000, this can create problems for computers
programmed this way because they will read the date as "00," and may interpret
it as 1900. Most companies have been working to reprogram their computer systems
with four-digit years. Reprogramming is very labor-intensive and requires
testing to ensure that there are no errors and that all lines of code were
successfully changed.
Recognizing the possible impact of the Y2K issue, our senior-level Steering
Committee, programmers, business partners and Y2K team have been working
diligently to make January 1, 2000 a non-event for American Century investors.
Currently, all of our computer systems have been modified, tested and returned
to production. We have an ongoing commitment to testing our systems with our
vendors and business partners and within the industry throughout the rest of the
year.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. American Century transactions with our partner
firms were processed free of Y2K bugs. We also participated in the Market Data
Test conducted by the SIA and Financial Information Forum in May. Again, the
computer scripts were executed successfully with no Y2K-related errors.
In addition to our testing schedule, our Y2K team has developed contingency
plans. These plans will minimize the impact on our investors and help us
maintain operations in the event of any Y2K-related incidents. We will conduct
practice drills of contingency scenarios during the rest of 1999 and refine
those plans to respond quickly and effectively so that the date change is as
seamless as possible for investors. We expect the year 2000 to be business as
usual at American Century.
Year 2000 Readiness Disclosure
[left margin]
EQUITY GROWTH
(BEQGX)
- -------------------------
INCOME & GROWTH
(BIGRX)
- -------------------------
SMALL CAP QUANTITATIVE
(ASQIX)
- -------------------------
Turn to the inside back cover of this report to see a list of American Century
funds classified by objective and risk.
MINIMIZE YOUR MUTUAL FUND TAX HIT
American Century's newest equity fund, Tax-Managed Value, is designed for
long-term growth and to minimize the tax hit you take on your mutual fund
investments each year. The fund is managed to keep taxable distributions to a
minimum by using the following strategies:
* BUY AND HOLD --Low portfolio turnover helps limit realized capital gains
and takes advantage of long-term capital gains tax rates.
* OFFSET GAINS --When gains are realized in the portfolio, they are offset
with capital losses from securities sold in that tax year or losses
carried over from previous years.
* SELL HIGHER-COST SHARES FIRST --Selling shares that cost the most first
helps minimize the taxable gains incurred from a sale.
Our Message to You
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/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
During the six months ended June 30, 1999, we witnessed a surprising
turnaround in the U.S. economic outlook. When we last addressed you in the
annual reports for the American Century Equity Growth, Income & Growth, and
Small Cap Quantitative funds, the Federal Reserve (the U.S. central bank) had
recently cut short-term interest rates to bolster the U.S. economy and help
stabilize markets worldwide.
This came after economic and financial crises in Asia, Russia, and Latin
America, and the near collapse of several hedge funds. The global economic
outlook was still quite uncertain -- many financial observers predicted slow
economic growth in the U.S. in 1999 and further interest rate cuts.
Instead, global economic conditions rebounded. By January 1999, overseas
economies were stabilizing, the U.S. economy was posting strong growth, and
investor confidence had returned. Interest rates rose while the U.S. stock
market soared.
Turning to the corporate front, here's an update on our preparations for
Y2K.* Our senior level Year 2000 Steering Committee, computer programmers,
business partners, and Y2K team have been working diligently to make January 1,
2000, a non-event for American Century investors. All of our computer systems
have been modified, tested, and returned to production. We have an ongoing
commitment to testing our systems with vendors, business partners, and the
mutual fund industry through the rest of the year.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. We also participated in the Market Data Test
conducted by the SIA and Financial Information Forum in May. Again, the computer
scripts were executed successfully with no Y2K-related errors.
Elsewhere on the corporate front, we continued to expand the American
Century investment team, which has doubled over the past three years. We're
committed to building and maintaining a talented management group.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
EQUITY GROWTH
Performance Information .................................................. 5
Management Q&A ........................................................... 6
Schedule of Investments .................................................. 9
INCOME & GROWTH
Performance Information .................................................. 13
Management Q&A ........................................................... 14
Schedule of Investments .................................................. 17
SMALL CAP QUANTITATIVE
Performance Information .................................................. 22
Management Q&A ........................................................... 23
Schedule of Investments .................................................. 26
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ........................................................... 29
Statements of Operations ................................................. 30
Statements of Changes
in Net Assets ......................................................... 31
Notes to Financial
Statements ............................................................ 33
Financial Highlights ..................................................... 37
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................... 44
Background Information
Investment Philosophy
and Policies ....................................................... 45
Comparative Indices ................................................... 45
Lipper Rankings ....................................................... 45
Investment Team
Leaders ............................................................ 45
Glossary ................................................................. 46
* This letter includes a Year 2000 Readiness Disclosure.
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* U.S. stocks performed fairly well during the six months ended June 30, 1999.
Large-cap stocks continued to enjoy above-average gains, while mid- and
small-cap shares posted more historically average returns.
* Large-cap growth stocks won the lion's share of gains during 1998, and that
trend continued into early 1999.
* The second quarter of 1999 clearly demonstrated the value of maintaining a
diversified stock portfolio--investors turned away from large-cap growth
stocks and instead sought attractively priced value and small-company
shares.
* Cyclical stocks--those closely tied to economic ups and downs--also
performed well during the second quarter.
* The Federal Reserve raised short-term interest rates at the end of June to
slow U.S. growth to a less inflationary pace.
EQUITY GROWTH
* The fund posted a notable return from a historical perspective but was
unable to match the gains of its benchmark, the S&P 500.
* Equity Growth's underweight in many of the large-cap companies that drove
the S&P 500's narrowly concentrated, first-quarter gains was the main factor
dampening performance.
* In the second quarter, Equity Growth outperformed the S&P 500 for some of
the same reasons it underperformed during the first quarter.
* Going forward, we're looking to enhance performance through an increased
focus on what our models do best: find attractively valued stocks.
INCOME & GROWTH
* The fund posted solid returns but trailed its benchmark, the S&P 500.
* The main factor detracting from performance was Income & Growth's
underweight in many of the high-profile, blue chip names that drove the S&P
500 during the first quarter.
* As investors began eagerly switching to value and small-cap shares in the
second quarter, Income & Growth outperformed the S&P 500.
* Going forward, we currently plan to stay fully invested in stocks and focus
more on individual stock selection rather than broad industry over- and
underweightings.
SMALL CAP QUANTITATIVE
* The fund finished the first half of 1999 little changed, lagging the return
of the S&P SmallCap 600 Index and the average small-cap fund (according to
Lipper Inc.).
* Small Cap Quantitative underperformed its benchmark because we avoided
Internet shares.
* We concentrated the portfolio in fewer stocks, while bringing the fund's
industry weightings more in line with the index.
* The outlook for small-cap stocks is generally positive--economic growth is
healthy and small stocks look like better relative values than large-cap
stocks.
[left margin]
EQUITY GROWTH(1)
(BEQGX)
TOTAL RETURNS: AS OF 6/30/99
6 Months 8.11%(2)
1 Year 14.61%
INCEPTION DATE: 5/9/91
NET ASSETS: $2.3 billion(3)
INCOME & GROWTH(1)
(BIGRX)
TOTAL RETURNS: AS OF 6/30/99
6 Months 9.69%(2)
1 Year 18.89%
INCEPTION DATE: 12/17/90
NET ASSETS: $6.0 billion(3)
SMALL CAP QUANTITATIVE(1)
(ASQIX)
TOTAL RETURNS: AS OF 6/30/99
6 Months 1.06%(2)
Since Inception 1.47%(2)
INCEPTION DATE: 7/31/98
NET ASSETS: $16.2 million
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor, Advisor, and Institutional classes.
Investment terms are defined in the Glossary on pages 46-47.
2 1-800-345-2021
Market Perspective from Mark Mallon
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/photo of Mark Mallon/
Mark Mallon, head of growth and income equity, specialty, and asset allocation
funds at American Century
MARKET SNAPSHOT
U.S. stocks performed fairly well during the six months ended June 30,
1999. Large-cap stocks continued to enjoy above-average gains, while mid- and
small-cap shares posted more historically average returns. (See the accompanying
table.)
Solid corporate earnings and fairly robust U.S. economic growth kept
investor sentiment high and fueled gains in domestic equities.
THE SEEDS OF CHANGE
Large-cap growth stocks won the lion's share of gains during 1998, and that
trend continued into early 1999. Stocks of companies providing above-average
earnings growth primarily benefited from this trend thanks to investor
willingness to pay unprecedented prices.
In addition, market leadership was very narrow. According to Morgan Stanley
Dean Witter, just five stocks accounted for half of the S&P 500's return during
the first three months of 1999. A mere 18 accounted for the full 100%; the rest
essentially canceled each other out. (Because the S&P 500 is weighted by market
value, the higher the total value of a company's stock, the more it influences
index returns.)
As a result, the performance disparity between large-cap growth and value
stocks remained in place. But bellwether growth names became increasingly
expensive. And with U.S. economic growth showing few signs of wear and tear from
1998's global economic crises, investors became less cautious and began to look
for better values elsewhere.
VALUE AND SMALL-CAP STOCKS SURGE
That was the backdrop as the second quarter of 1999 began--a quarter that
clearly demonstrated the value of maintaining a diversified stock portfolio.
Turning away from large-cap growth stocks, investors sought attractively priced
value and small-company shares. Unlike growth stocks, value stocks tend to have
lower price/earnings ratios, meaning that investors pay less for earnings.
Such shares were clear favorites during the quarter--the S&P 500/BARRA
Value Index, a benchmark for the performance of large-cap value stocks, rose
10.80%, significantly higher than the 3.83% return of the S&P 500/BARRA Growth
Index. More impressive was the performance of small-cap value shares: the S&P
SmallCap 600/BARRA Value Index rose a stellar 19.91%, outpacing the S&P SmallCap
600/BARRA Growth Index, which jumped 11.11%.
Cyclical stocks--those closely tied to economic ups and downs--also
performed well during the second quarter. Investors greeted these stocks with
enthusiasm because of improving global economic conditions.
[right margin]
"LARGE-CAP STOCKS CONTINUED TO ENJOY ABOVE-AVERAGE GAINS, WHILE MID- AND
SMALL-CAP SHARES POSTED MORE HISTORICALLY AVERAGE RETURNS."
STOCK MARKET RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
S&P 500 12.23%
S&P MIDCAP 400 6.87%
S&P SMALLCAP 600 5.04%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
[line graph - data below]
STOCK MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
S&P 500 S&P Midcap 400 S&P SmallCap 600
12/31/1998 $1.00 $1.00 $1.00
1/31/1999 $1.04 $0.96 $0.99
2/28/1999 $1.01 $0.91 $0.90
3/31/1999 $1.05 $0.94 $0.91
4/30/1999 $1.09 $1.01 $0.97
5/31/1999 $1.06 $1.01 $0.99
6/30/1999 $1.12 $1.07 $1.05
Source: Lipper Inc.
These indices are defined on page 45.
www.americancentury.com 3
Market Perspective from Mark Mallon
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(Continued)
That turn of events allowed shares of aluminum, chemicals, construction,
and diversified machinery companies to provide some of the quarter's better
returns. Aluminum was also one of the better performing industries for the
entire six months, as were the brokerage, broadcast/media, industrials, and
semiconductor industries.
ECONOMIC UNDERPINNINGS
The longest economic expansion in 50 years provided the springboard for the
stock market's continued gains. The remarkable U.S. economic engine surged ahead
at a 4.3% annual pace during the first quarter, accompanied by corporate
earnings that were far stronger than expected. Improvements in Pacific Rim
economies--where Korea's industrial production surged, Taiwan's leading
indicators rose, and Japan's economy showed signs of life--enhanced the global
economic outlook.
The U.S. economy slowed some in the second quarter but still grew at an
estimated 2.3% annual pace. Meanwhile, U.S. corporate profits rose 16%--the
largest quarterly gain in nearly four years. By the end of June, the three most
widely recognized U.S. stock indices--the Dow Jones Industrial Average, the S&P
500, and the Nasdaq Composite--all hit record highs.
THE FED INTERVENES
Impressive corporate earnings and economic strength attracted the attention
of the Federal Reserve (the Fed). Just days after a May announcement that
consumer prices experienced their biggest monthly gain in almost nine years, the
Fed announced that it had shifted to a rate-raising bias. On June 30, the Fed
went further, ratcheting short-term interest rates a quarter of a percent
higher. Viewed as a precautionary move, the widely expected increase had little
negative impact on U.S. financial markets.
In fact, stocks staged a relief rally after the Fed revealed that it had
reverted from its tightening bias to a neutral stance. Many market participants
had feared that the quarter-percent hike might be just the first in a series
over the coming months. So investors were pleased with a sign that the Fed wants
further evidence of accelerating inflation before it raises borrowing costs
again.
[left margin]
"THE U.S. ECONOMY SLOWED SOME IN THE SECOND QUARTER BUT STILL GREW AT AN
ESTIMATED 2.3% ANNUAL PACE."
[line graph - data below]
GROWTH VS. VALUE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
S&P 500/BARRA Value S&P 500/BARRA Growth
12/31/1998 $1.00 $1.00
1/31/1999 $1.02 $1.06
2/28/1999 $1.00 $1.02
3/31/1999 $1.03 $1.07
4/30/1999 $1.12 $1.07
5/31/1999 $1.10 $1.04
6/30/1999 $1.14 $1.11
Source: Lipper Inc.
GROWTH VS. VALUE BY MARKET CAPITALIZATION
FOR THE SIX MONTHS ENDED JUNE 30, 1999
S&P 500/BARRA GROWTH 10.98%
S&P 500/BARRA VALUE 13.96%
S&P MIDCAP 400/BARRA GROWTH 8.19%
S&P MIDCAP 400/BARRA VALUE 5.68%
S&P SMALLCAP 600/BARRA GROWTH 1.67%
S&P SMALLCAP 600/BARRA VALUE 8.45%
Source: Russell/Mellon Analytical
4 1-800-345-2021
Equity Growth--Performance
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<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 1999
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 5/9/91) (INCEPTION 10/9/97) (INCEPTION 1/2/98)
EQUITY GROWTH FUNDS(2) EQUITY EQUITY
GROWTH S&P 500 AVERAGE RETURN FUND'S RANKING GROWTH S&P 500 GROWTH S&P 500
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 8.11% 12.23% 11.65% -- 8.05% 12.23% 8.22% 12.23%
1 YEAR 14.61% 22.75% 18.87% 734 OUT OF 1067 14.37% 22.75% 14.84% 22.75%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 28.48% 29.00% 22.76% 125 OUT OF 654 -- -- -- --
5 YEARS 26.68% 27.81% 22.64% 75 OUT OF 399 -- -- -- --
LIFE OF FUND 19.62% 19.79% 16.87% 42 OUT OF 205 18.79% 24.05% 22.86% 27.56%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 44-46 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 6/30/1999
S&P 500 $43,510
Equity Growth $42,999
Equity Growth S&P 500
DATE VALUE VALUE
5/9/1991 $10,000 $10,000
6/30/1991 $9,640 $9,731
9/30/1991 $10,378 $10,252
12/31/1991 $11,747 $11,111
3/31/1992 $11,128 $10,830
6/30/1992 $10,923 $11,035
9/30/1992 $11,291 $11,383
12/31/1992 $12,232 $11,957
3/31/1993 $12,773 $12,479
6/30/1993 $12,998 $12,540
9/30/1993 $13,697 $12,864
12/31/1993 $13,630 $13,162
3/31/1994 $12,997 $12,663
6/30/1994 $13,178 $12,717
9/30/1994 $13,681 $13,338
12/31/1994 $13,599 $13,336
3/31/1995 $14,867 $14,635
6/30/1995 $16,300 $16,032
9/30/1995 $17,324 $17,307
12/31/1995 $18,301 $18,349
3/31/1996 $19,450 $19,334
6/30/1996 $20,249 $20,202
9/30/1996 $21,173 $20,826
12/31/1996 $23,305 $22,561
3/31/1997 $23,622 $23,166
6/30/1997 $27,243 $27,213
9/30/1997 $30,942 $29,249
12/31/1997 $31,710 $30,088
3/31/1998 $36,739 $34,285
6/30/1998 $37,525 $35,417
9/30/1998 $32,317 $31,893
12/31/1998 $39,782 $38,686
3/31/1999 $39,718 $40,616
6/30/1999 $42,999 $43,510
$10,000 investment made 5/9/91
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
500 is provided for comparison in each graph. Equity Growth'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. These graphs are
based on Investor Class shares only; performance for other classes will vary due
to differences in fee structures (see Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Equity Growth S&P 500
DATE RETURN RETURN
6/30/1991* -3.60% -2.31%
6/30/1992 13.31% 13.36%
6/30/1993 19.00% 13.57%
6/30/1994 1.37% 1.43%
6/30/1995 23.69% 25.99%
6/30/1996 24.23% 25.92%
6/30/1997 34.53% 34.69%
6/30/1998 37.74% 30.03%
6/30/1999 14.61% 22.75%
* From 5/9/91 (the fund's inception date) to 6/30/91.
www.americancentury.com 5
Equity Growth--Q&A
- --------------------------------------------------------------------------------
/photo of Kurt Borgwardt and John Schniedwind/
Based on an interview with Kurt Borgwardt and John Schniedwind, portfolio
managers on the Equity Growth fund investment team.
HOW DID EQUITY GROWTH PERFORM FOR THE SIX MONTHS ENDED JUNE 30, 1999?
The fund posted a notable return from a historical perspective but was
unable to match the gains of its benchmark, the S&P 500. Equity Growth's total
return* was 8.11% for the six months, compared with the S&P 500's 12.23% return
and the 11.65% average return of the 1174 "Growth Funds" tracked by Lipper Inc.
Equity Growth's long-term performance remained sound. For the periods ended
June 30, 1999, Equity Growth's three-year, five-year, and life-of-fund returns
ranked the fund among the top 20% of its Lipper group. (Please see the previous
page for fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM?
Equity Growth's underweighting in many of the large-cap companies that
drove the S&P 500's narrowly concentrated, first-quarter gains was the main
factor dampening performance. (See Mark Mallon's Market Perspective on pages 3
and 4.)
A significant factor behind the dominance of such stocks was concern that
1998's global economic crises would translate into slowing economic growth,
dragging on the U.S. economy and the profits of smaller, less-diversified
companies. Investors therefore turned to the largest, most-liquid names, and
price/earnings ratios on these shares rose ever higher, meaning that investors
were willing to pay increasing amounts for these companies' earnings. Simply
put, the prices at which many of these stocks were trading seemed unjustifiably
high to our models, so we maintained underweight positions.
Equity Growth's tendency to maintain a more value-oriented bias than the S&
P 500 means that the stocks in the portfolio were, on average, more reasonably
priced based on their underlying companies' earnings outlook, business
fundamentals, or intrinsic value. Since narrow market leadership prevailed,
however, the attractive stocks that our models helped us find weren't as highly
rewarded as more-normal market conditions might have permitted.
WHAT HAPPENED TO FUND RETURNS IN THE SECOND QUARTER OF 1999, WHEN MARKET
SENTIMENT SHIFTED DIRECTION?
In the second quarter, Equity Growth outperformed the S&P 500 for some of
the same reasons it had underperformed during the first quarter. Those reasons
include the fund's value-stock tilt, as well as its tendency to hold shares of
companies with slightly smaller market capitalizations.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"THE FUND POSTED A NOTABLE RETURN FROM A HISTORICAL PERSPECTIVE BUT WAS UNABLE
TO MATCH THE GAINS OF ITS BENCHMARK, THE S&P 500."
PORTFOLIO AT A GLANCE
6/30/99 12/31/98
NUMBER OF COMPANIES 183 175
DIVIDEND YIELD 1.45% 1.44%
PRICE/EARNINGS RATIO 22.3 19.5
PORTFOLIO TURNOVER 42%(1) 89%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68%(3) 0.69%
(1) Six months ended 6/30/99.
(2) Year ended 12/31/98.
(3) Annualized.
Investment terms are defined in the Glossary on pages 46-47.
6 1-800-345-2021
Equity Growth--Q&A
- --------------------------------------------------------------------------------
(Continued)
As investors began eagerly switching to value and small-cap shares, Equity
Growth's returns were enhanced, helping the fund outpace the S&P 500.
Unfortunately, second-quarter outperformance fell shy of overcoming the
first-quarter deficit.
ONE OF THE BETTER-PERFORMING INDUSTRIES DURING THE FIRST HALF OF 1999 WAS
INVESTMENT BANKING/BROKERAGE. WAS THERE A PARTICULAR STOCK IN THIS AREA THAT
YOUR MODELS LIKED?
Yes. The portfolio's sixth-largest holding at the end of June, Morgan
Stanley Dean Witter, is a good example. The company is a global financial
services firm and market leader in securities, asset management, and credit
services. During their quarter ended May 31, 1999, the company reported a 42%
increase in per-share earnings--a fairly impressive performance.
Although Morgan Stanley Dean Witter's securities and credit services
revenue was impressive, their investment banking performance was particularly
noteworthy. Thanks to proper industry positioning, the company was able to
capitalize on the consolidation trend many industries experienced. We've been
generally pleased by the results we've seen since adding the stock to the fund's
portfolio. Since the beginning of this year, shares of Morgan Stanley Dean
Witter have risen about 45%.
WHAT'S ANOTHER EXAMPLE OF A SOLID-PERFORMING STOCK THAT YOUR MODELS FAVORED?
Shares of VISX, a world leader in the design, manufacture, and marketing of
proprietary technologies and laser systems for vision correction, was one. The
company pioneered the use of excimer lasers to reshape the eye and improve
vision disorders, and its systems are currently sold in over 60 countries
worldwide.
Impressive earnings momentum was one of the things that made this company a
standout to our models. Owning VISX shares was particularly rewarding in the
first half of 1999, when its price increased from $22 to $79. That is a
substantial gain and definitely the kind of performance-enhancing exposure we
like to have for Equity Growth.
WHAT CHOICES DETRACTED FROM RETURNS?
The fund's relative underweighting compared with the S&P 500 in several of
the media industry's better performers certainly didn't help performance.
MediaOne is a prime example. The company provides basic and premium cable
television services to over five million subscribers. Recently, MediaOne
introduced high-speed Internet access, telephone services, and digital
television in some of its service areas. The company also has interests in some
of the fastest-growing wireless communications businesses outside of the U.S.
[right margin]
"UNFORTUNATELY, SECOND-QUARTER OUTPERFORMANCE FELL SHY OF OVERCOMING THE
FIRST-QUARTER DEFICIT."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
MICROSOFT CORP. 4.4% 3.8%
CHASE MANHATTAN
CORP. 2.9% 2.2%
INTEL CORP. 2.9% 2.4%
WAL-MART STORES, INC. 2.7% 1.6%
BELLSOUTH CORP. 2.5% 3.1%
MORGAN STANLEY
DEAN WITTER & CO. 2.1% 1.3%
HEWLETT-PACKARD CO. 2.0% 0.8%
GENERAL ELECTRIC CO.
(U.S.) 1.7% 1.7%
AT&T CORP. 1.7% 3.3%
APPLE COMPUTER, INC. 1.7% 1.2%
www.americancentury.com 7
Equity Growth--Q&A
- --------------------------------------------------------------------------------
(Continued)
When MediaOne became an acquisition target of AT&T, a widely recognized
name in the communications services industry and the most widely held stock in
the United States, its share price rose sharply. However, because media stocks
such as CBS were far more attractively valued, our models favored those instead
WHAT DO YOU SEE IN STORE FOR U.S. STOCKS FOR THE REST OF 1999?
The good news is that corporate profits remained impressive during the
second quarter, and with overseas economies rebounding, we believe prospects for
U.S. equities look fairly bright.
However, the good corporate and economic news has a dark side--it might
cause the Federal Reserve to raise short-term interest rates again.
Since higher borrowing costs tend to depress stocks by diminishing the
present value of future corporate earnings, continued increases in short-term
interest rates by the Fed could conceivably lead to lower overall stock prices.
By the same token, though, if growth moderates, the market's tone could become
more upbeat and stocks could continue to rally.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO FOR THE NEXT SIX
MONTHS?
One thing worth mentioning is that we have recently fine-tuned our
investment approach. We've found that our quantitative process is more effective
at picking individual stocks than industries. So rather than significantly
overweighting and underweighting entire sectors compared with the S&P 500, we
have been bringing our industry positions more in line with the index. We're
looking to enhance performance through an increased focus on what our models do
best: find attractively valued stocks.
Another focus will likely be to keep Equity Growth fully invested in
stocks. When the market rallies, this strategy tends to enhance returns.
However, if the market sells off, being fully invested could also dampen
performance. To hold such a possibility to a minimum, we will continue looking
to add shares of companies with improving earnings forecasts that appear to be
undervalued.
[left margin]
"WE'RE LOOKING TO ENHANCE PERFORMANCE THROUGH AN INCREASED FOCUS ON WHAT OUR
MODELS DO BEST: FIND ATTRACTIVELY VALUED STOCKS."
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
TELEPHONE
COMMUNICATIONS 8.8% 10.4%
COMPUTER SOFTWARE
& SERVICES 8.0% 9.4%
BANKING 7.4% 7.5%
COMPUTER SYSTEMS 6.0% 4.0%
PHARMACEUTICALS 5.9% 7.4%
8 1-800-345-2021
Equity Growth--Schedule of Investments
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--98.1%
AEROSPACE & DEFENSE--2.3%
109,900 Cordant Technologies Inc. $ 4,966,106
117,300 EG&G, Inc. 4,178,812
123,900 General Dynamics Corp. 8,487,150
552,700 Goodrich (B.F.) Company (The) 23,489,750
165,100 United Technologies Corp. 11,835,606
--------------
52,957,424
--------------
AIRLINES--0.3%
35,800 AMR Corp.(1) 2,443,350
27,600 Delta Air Lines Inc. 1,590,450
68,000 Southwest Airlines Co. 2,116,500
17,100 US Airways Group Inc.(1) 744,919
--------------
6,895,219
--------------
AUTOMOBILES & AUTO PARTS--1.7%
112,028 Delphi Automotive Systems Corp. 2,079,520
502,000 Ford Motor Co. 28,331,625
113,500 General Motors Corp. 7,491,000
--------------
37,902,145
--------------
BANKING--7.4%
614,038 Banc One Corp. 36,573,638
314,200 BankAmerica Corp. 23,034,788
766,900 Chase Manhattan Corp. 66,432,712
87,200 Fifth Third Bancorp 5,806,975
288,100 First Union Corp. 13,540,700
157,500 Fleet Financial Group, Inc. 6,989,062
76,200 GreenPoint Financial Corp. 2,500,312
97,000 Wells Fargo & Co. 4,146,750
135,600 Zions Bancorporation 8,627,550
--------------
167,652,487
--------------
BIOTECHNOLOGY--2.4%
453,600 Amgen Inc.(1) 27,598,725
147,400 Biogen, Inc.(1) 9,484,269
138,100 Chiron Corp.(1) 2,861,259
194,900 Genzyme Corp. 9,446,559
64,500 MedImmune, Inc.(1) 4,379,953
--------------
53,770,765
--------------
BROADCASTING & MEDIA--1.7%
34,000 Cablevision Systems Corp. Cl A(1) 2,380,000
485,200 CBS Corp.(1) 21,075,875
185,500 Comcast Corp. Cl A 7,130,156
55,600 EchoStar Communications
Corp. Cl A(1) 8,532,862
--------------
39,118,893
--------------
BUILDING & HOME IMPROVEMENTS--0.1%
85,300 Centex Construction Products Inc. 2,910,862
--------------
Shares Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES & SUPPLIES--0.8%
131,500 Mastech Corp.(1) $ 2,440,969
211,900 Metzler Group, Inc. (The)(1) 5,847,116
240,300 Ogden Corp. 6,473,081
94,300 Valassis Communications, Inc.(1) 3,453,738
--------------
18,214,904
--------------
CHEMICALS & RESINS--1.7%
162,700 Dow Chemical Co. 20,642,562
228,400 du Pont (E.I.) de Nemours & Co. 15,602,575
42,100 Rohm and Haas Co. 1,805,038
--------------
38,050,175
--------------
COMMUNICATIONS EQUIPMENT--4.1%
213,600 CommScope, Inc.(1) 6,568,200
166,500 Comverse Technology, Inc.(1) 12,560,344
292,600 Corning Inc. 20,518,575
573,600 Lucent Technologies Inc. 38,682,150
176,700 Nortel Networks Corp. 15,339,769
--------------
93,669,038
--------------
COMPUTER PERIPHERALS--1.4%
427,000 Cisco Systems Inc.(1) 27,501,469
82,000 Lexmark International Group,
Inc. Cl A(1) 5,417,125
--------------
32,918,594
--------------
COMPUTER SOFTWARE & SERVICES--8.0%
201,500 America Online Inc.(1) 22,265,750
202,200 American Management
System, Inc.(1) 6,476,719
80,800 Concentric Network Corp.(1) 3,209,275
98,800 Concord EFS, Inc.(1) 4,183,562
146,600 Keane, Inc.(1) 3,316,825
1,119,900 Microsoft Corp.(1) 100,930,988
216,900 NCR Corp.(1) 10,587,431
79,000 Network Solutions, Inc.(1) 6,248,406
82,300 Sterling Software, Inc.(1) 2,196,381
582,800 Unisys Corp.(1) 22,692,775
--------------
182,108,112
--------------
COMPUTER SYSTEMS--6.0%
840,700 Apple Computer, Inc.(1) 38,987,462
452,400 Dell Computer Corp.(1) 16,724,662
83,800 Gateway Inc.(1) 4,944,200
460,700 Hewlett-Packard Co. 46,300,350
229,000 International Business
Machines Corp. 29,598,250
--------------
136,554,924
--------------
CONSTRUCTION & PROPERTY
DEVELOPMENT--0.4%
185,100 Centex Corp. 6,952,819
97,200 Pulte Corp. 2,241,675
--------------
9,194,494
--------------
See Notes to Financial Statements
www.americancentury.com 9
Equity Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS--1.5%
217,200 Avon Products, Inc. $ 12,054,600
123,600 Clorox Co. (The) 13,202,025
24,200 Colgate-Palmolive Co. 2,389,750
64,500 Procter & Gamble Co. (The) 5,756,625
24,600 Whirlpool Corp. 1,820,400
--------------
35,223,400
--------------
DIVERSIFIED COMPANIES--2.8%
348,900 General Electric Co. (U.S.) 39,425,700
176,800 Tyco International Ltd. 16,751,800
117,946 Unilever N.V. New York Shares 8,226,734
--------------
64,404,234
--------------
ELECTRICAL & ELECTRONIC
COMPONENTS--3.1%
1,098,900 Intel Corp. 65,350,209
92,700 Rockwell International Corp. 5,631,525
--------------
70,981,734
--------------
ENERGY (PRODUCTION & MARKETING)--5.2%
79,600 Amerada Hess Corp. 4,736,200
214,800 American Power
Conversion Corp.(1) 4,316,138
204,200 Anadarko Petroleum Corp. 7,517,112
306,100 Apache Corp. 11,937,900
135,200 Atlantic Richfield Co. 11,297,650
77,300 Burlington Resources Inc. 3,343,225
263,100 Exxon Corp. 20,291,588
356,400 Mobil Corp. 35,283,600
66,600 Occidental Petroleum Corp. 1,406,925
114,800 Sunoco, Inc. 3,465,525
97,300 Texaco Inc. 6,081,250
460,100 Union Pacific Resources 7,505,381
44,700 Vastar Resources, Inc. 2,343,956
--------------
119,526,450
--------------
ENERGY (SERVICES)--0.7%
340,900 Reliant Energy, Inc. 9,417,362
202,900 Tidewater Inc. 6,188,450
--------------
15,605,812
--------------
FINANCIAL SERVICES--5.1%
557,700 Fannie Mae 38,132,738
286,800 Federal Home Loan Mortgage
Corporation 16,634,400
119,100 Merrill Lynch & Co., Inc. 9,520,556
462,100 Morgan Stanley Dean Witter & Co. 47,365,250
40,900 Providian Financial Corp. 3,824,150
--------------
115,477,094
--------------
FOOD & BEVERAGE--3.9%
60,600 Anheuser-Busch Companies, Inc. 4,298,812
189,900 ConAgra, Inc. 5,056,088
85,000 Coors (Adolph) Co. Cl B 4,207,500
Shares Value
- --------------------------------------------------------------------------------
195,400 Earthgrains Company $ 5,043,762
48,000 General Mills, Inc. 3,858,000
134,500 Hormel Foods Corp. 5,413,625
441,200 IBP, Inc. 10,478,500
396,600 Keebler Foods Co.(1) 12,046,725
409,600 Quaker Oats Co. (The) 27,187,200
267,300 Suiza Foods Corp.(1) 11,193,188
--------------
88,783,400
--------------
HEALTHCARE--0.5%
141,400 Mallinckrodt Inc. 5,143,425
94,800 PacifiCare Health Systems, Inc.(1) 6,822,638
--------------
11,966,063
--------------
INDUSTRIAL EQUIPMENT & MACHINERY--0.9%
298,500 Ingersoll-Rand Co. 19,290,562
--------------
INSURANCE--4.0%
348,200 Allstate Corp. 12,491,675
310,700 Fidelity National Financial, Inc. 6,524,700
475,600 First American Financial Corp. (The) 8,501,350
170,900 Gallagher (Arthur J.) & Co. 8,459,550
102,300 LandAmerica Financial Group, Inc. 2,941,125
653,600 Lincoln National Corp. 34,191,450
240,900 Loews Corp. 19,061,212
--------------
92,171,062
--------------
LEISURE--1.6%
74,900 Anchor Gaming(1) 3,602,222
168,400 Eastman Kodak Co. 11,409,100
70,900 King World Productions, Inc.(1) 2,468,206
442,100 Viacom, Inc. Cl B(1) 19,452,400
--------------
36,931,928
--------------
MACHINERY & EQUIPMENT--0.7%
401,300 Premark International, Inc. 15,048,750
--------------
MEDICAL EQUIPMENT & SUPPLIES--1.8%
99,000 Andrx Corp.(1) 7,632,281
144,200 Bard (C.R.), Inc. 6,894,562
34,889 Genzyme Surgical Products(1) 153,730
134,700 Hillenbrand Industries, Inc. 5,825,775
49,200 Teleflex Inc. 2,137,125
238,500 VISX, Inc.(1) 18,908,578
--------------
41,552,051
--------------
METALS & MINING--0.2%
73,200 Alcoa Inc. 4,529,250
--------------
PAPER & FOREST PRODUCTS--0.4%
44,200 Fort James Corp. 1,674,075
80,800 International Paper Co. 4,080,400
39,700 Weyerhaeuser Co. 2,729,375
--------------
8,483,850
--------------
See Notes to Financial Statements
10 1-800-345-2021
Equity Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.9%
28,500 Allergan, Inc. $ 3,163,500
302,500 Bristol-Myers Squibb Co. 21,307,344
35,000 Herbalife International, Inc. Cl A 381,719
210,000 Johnson & Johnson 20,580,000
154,000 Lilly (Eli) & Co. 11,030,250
112,350 Medicis Pharmaceutical
Corp. Cl A(1) 2,850,881
94,400 Merck & Co., Inc. 6,985,600
65,100 Nature's Sunshine Products, Inc. 703,894
66,500 Pfizer, Inc. 7,298,375
72,200 Roberts Pharmaceutical Corp.(1) 1,750,850
708,600 Schering-Plough Corp. 37,555,800
306,700 Warner-Lambert Co. 21,277,312
--------------
134,885,525
--------------
PRINTING & PUBLISHING--0.8%
484,800 Deluxe Corp. 18,876,900
--------------
RAILROAD--0.1%
50,100 Union Pacific Corp. 2,921,456
--------------
RESTAURANTS--0.6%
81,200 Darden Restaurants, Inc. 1,771,175
168,100 Foodmaker, Inc.(1) 4,769,838
136,700 Tricon Global Restaurants Inc.(1) 7,398,888
--------------
13,939,901
--------------
RETAIL (APPAREL)--0.5%
156,500 AnnTaylor Stores Corp.(1) 7,042,500
72,900 Claire's Stores, Inc. 1,868,062
52,500 Gap, Inc. (The) 2,644,688
--------------
11,555,250
--------------
RETAIL (FOOD & DRUG)--0.9%
36,540 Albertson's, Inc. 1,884,094
268,200 Safeway Inc.(1) 13,275,900
207,100 Universal Corp. 5,889,406
--------------
21,049,400
--------------
RETAIL (GENERAL MERCHANDISE)--3.0%
39,000 Kohl's Corp.(1) 3,010,312
87,900 Neiman-Marcus Group, Inc.(1) 2,257,931
1,293,600 Wal-Mart Stores, Inc. 62,416,200
--------------
67,684,443
--------------
RETAIL (SPECIALTY)--1.9%
104,800 Best Buy Co., Inc.(1) 7,074,000
453,900 Home Depot, Inc. 29,248,181
183,800 Zale Corp.(1) 7,352,000
--------------
43,674,181
--------------
RUBBER & PLASTICS--0.2%
156,300 Tupperware Corp. 3,985,650
--------------
Shares Value
- --------------------------------------------------------------------------------
STEEL(2)
10,500 Bethlehem Steel Corporation(1) $ 80,719
--------------
TELEPHONE COMMUNICATIONS--8.8%
704,350 AT&T Corp. 39,311,534
315,300 Ameritech Corp. 23,174,550
160,800 Bell Atlantic Corp. 10,512,300
1,199,500 BellSouth Corp. 56,226,562
248,200 GTE Corp. 18,801,150
30,000 MCI WorldCom, Inc.(1) 2,580,938
612,200 SBC Communications Inc. 35,507,600
60,600 Sprint Corp. 3,200,438
182,500 U S WEST, Inc. 10,721,875
--------------
200,036,947
--------------
TEXTILES & APPAREL--0.8%
180,400 Dexter Corp. (The) 7,362,575
69,600 Tommy Hilfiger Corp.(1) 5,115,600
121,200 VF Corp. 5,181,300
--------------
17,659,475
--------------
TOBACCO--0.9%
123,800 Fortune Brands, Inc. 5,122,225
354,900 Philip Morris Companies Inc. 14,262,544
--------------
19,384,769
--------------
TRANSPORTATION--0.6%
59,400 FDX Corporation(1) 3,222,450
168,900 Hertz Corp. Cl A 10,471,800
--------------
13,694,250
--------------
UTILITIES--2.2%
101,000 FPL Group, Inc. 5,517,125
301,600 LG&E Energy Corp. 6,333,600
253,700 Minnesota Power & Light Co. 5,042,288
125,200 Northeast Utilities(1) 2,214,475
136,300 Sempra Energy 3,083,788
584,800 Southern Co. 15,497,203
88,800 Texas Utilities Co. 3,663,000
346,050 Utilicorp United Inc. 8,413,341
--------------
49,764,820
--------------
WIRELESS COMMUNICATIONS--0.2%
87,000 Sprint PCS(1) 4,969,875
--------------
TOTAL COMMON STOCKS 2,236,057,237
--------------
(Cost $1,747,968,699)
See Notes to Financial Statements
www.americancentury.com 11
Equity Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS--1.9%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 4.70%, dated 6/30/99,
due 7/1/99 (Delivery value $42,305,523) $ 42,300,000
--------------
(Cost $42,300,000)
TOTAL INVESTMENT SECURITIES--100.0% $2,278,357,237
==============
(Cost $1,790,268,699)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Gain
- ------------------------------------------------------------------------------
135 S&P 500 September
Futures 1999 $46,632,375 $2,024,838
===========================================
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
(2) Industry is less than 0.05% of total investment securities.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percentage of investments in each industry, as applicable
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
12 1-800-345-2021
Income & Growth--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 1999
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 12/17/90) (INCEPTION 12/15/97) (INCEPTION 1/28/98)
INCOME & GROWTH & INCOME FUNDS(2) INCOME & INCOME &
GROWTH S&P 500 AVERAGE RETURN FUND'S RANKING GROWTH S&P 500 GROWTH S&P 500
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 9.69% 12.23% 10.93% -- 9.53% 12.23% 9.82% 12.23%
1 YEAR 18.89% 22.75% 14.48% 247 OUT OF 843 18.56% 22.75% 19.17% 22.75%
==================================================================================================================
AVERAGE ANNUAL
RETURNS
3 YEARS 28.56% 29.00% 21.59% 29 OUT OF 515 -- -- -- --
5 YEARS 27.08% 27.81% 21.72% 12 OUT OF 323 -- -- -- --
LIFE OF FUND 21.80% 21.31% 17.62%(3) 5 OUT OF 164(3) 25.17% 27.90% 27.03% 28.91%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 12/20/90, the date nearest the class's inception for which data are
available.
See pages 44-46 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 6/30/1999
Income & Growth $53,805
S&P 500 $52,014
Income & Growth S&P 500
DATE VALUE VALUE
12/17/1990 $10,000 $10,000
12/31/1990 $10,129 $10,014
3/31/1991 $11,821 $11,469
6/30/1991 $11,784 $11,443
9/30/1991 $12,689 $12,055
12/31/1991 $14,083 $13,065
3/31/1992 $13,598 $12,734
6/30/1992 $13,602 $12,976
9/30/1992 $13,997 $13,385
12/31/1992 $15,190 $14,060
3/31/1993 $15,930 $14,674
6/30/1993 $16,296 $14,746
9/30/1993 $16,981 $15,127
12/31/1993 $16,908 $15,478
3/31/1994 $16,147 $14,891
6/30/1994 $16,231 $14,953
9/30/1994 $16,851 $15,685
12/31/1994 $16,814 $15,682
3/31/1995 $18,285 $17,209
6/30/1995 $20,009 $18,852
9/30/1995 $21,672 $20,351
12/31/1995 $23,013 $21,576
3/31/1996 $24,300 $22,735
6/30/1996 $25,284 $23,756
9/30/1996 $26,146 $24,490
12/31/1996 $28,572 $26,530
3/31/1997 $29,081 $27,241
6/30/1997 $33,655 $32,000
9/30/1997 $37,445 $34,393
12/31/1997 $38,419 $35,380
3/31/1998 $44,251 $40,316
6/30/1998 $45,251 $41,646
9/30/1998 $40,142 $37,503
12/31/1998 $49,045 $45,491
3/31/1999 $49,982 $47,761
6/30/1999 $53,805 $52,014
$10,000 investment made 12/17/90
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
500 is provided for comparison in each graph. Income & Growth'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. These graphs are
based on Investor Class shares only; performance for other classes will vary due
to differences in fee structures (see Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Income & Growth S&P 500
DATE RETURN RETURN
6/30/1991* 17.84% 16.79%
6/30/1992 15.44% 13.36%
6/30/1993 19.82% 13.57%
6/30/1994 -0.40% 1.43%
6/30/1995 23.28% 25.99%
6/30/1996 26.36% 25.92%
6/30/1997 33.10% 34.69%
6/30/1998 34.46% 30.03%
6/30/1999 18.89% 22.75%
* From 12/17/90 (the fund's inception date) to 6/30/91.
www.americancentury.com 13
Income & Growth--Q&A
- --------------------------------------------------------------------------------
Based on an interview with Kurt Borgwardt and John Schniedwind (pictured on
page 6), portfolio managers on the Income & Growth fund investment team.
HOW DID INCOME & GROWTH PERFORM FOR THE SIX MONTHS ENDED JUNE 30, 1999?
The fund posted a noteworthy return but trailed its benchmark, the S&P 500.
Income & Growth's total return* was 9.69% for the six months, compared with the
S&P 500's 12.23% return and the 10.93% average return of the 922 "Growth &
Income Funds" tracked by Lipper Inc.
Income & Growth's long-term returns remained impressive. For the year ended
June 30, 1999, Income & Growth's return ranked the fund among the top third of
its peers, while three-year, five-year, and life-of-fund returns were among the
top 10% of its Lipper group. (Please see the previous page for fund performance
comparisons.)
WHAT CAUSED THE FUND'S UNDERPERFORMANCE RELATIVE TO THE S&P 500?
The main factor detracting from performance was the fund's underweighting
in many of the high-profile, blue chip names that drove the S&P 500 during the
first quarter. (See Mark Mallon's Market Perspective on pages 3 and 4.) A
driving force behind the narrowly focused dominance of such stocks was investor
concern that slower economic growth would follow 1998's global economic crises.
That predicted slowdown in growth was expected to weigh heavily on the
profits of smaller, less-diversified companies. As a result, investors looked to
the perceived safety of the largest, most liquid names, which caused
price/earnings ratios on these stocks to soar as investors demonstrated a
willingness to pay ever-increasing amounts for these companies' earnings. Since
these stocks were trading at what seemed excessive prices to our models, the
fund had a proportionally smaller exposure.
Generally speaking, Income & Growth tends to have a more value-oriented
bias than the S&P 500. So the stocks in the portfolio were, on average, more
reasonably priced based on their underlying companies' business fundamentals,
earnings outlook, or intrinsic value. Unfortunately, that didn't help returns as
much as more-normal market conditions might have allowed.
MARKET SENTIMENT SHIFTED DIRECTION IN THE SECOND QUARTER OF 1999. WHAT HAPPENED
TO FUND RETURNS THEN?
As investors began eagerly switching to value and small-cap shares, Income
& Growth's returns were enhanced. So the same factors that hindered returns
during the first quarter--the fund's value-stock tilt and its tendency to hold
shares of companies with smaller market capitalizations compared with the S&P
500--paid off handsomely, allowing Income & Growth to outperform. Unfortunately,
the fund's second-quarter outperformance of the S&P 500 fell a few percent shy
of overcoming its first-quarter deficit.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"FOR THE YEAR ENDED JUNE 30, 1999, INCOME & GROWTH'S RETURN RANKED THE FUND
AMONG THE TOP THIRD OF ITS PEERS, WHILE THREE-YEAR, FIVE-YEAR, AND LIFE-OF-FUND
RETURNS WERE AMONG THE TOP 10% OF ITS LIPPER GROUP."
PORTFOLIO AT A GLANCE
6/30/99 12/31/98
NUMBER OF COMPANIES 270 274
DIVIDEND YIELD 1.80% 1.72%
PRICE/EARNINGS RATIO 22.2 20.4
PORTFOLIO TURNOVER 27%(1) 86%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68(3) 0.69%
(1) Six months ended 6/30/99.
(2) Year ended 12/31/98.
(3) Annualized.
Investment terms are defined in the Glossary on pages 46-47.
14 1-800-345-2021
Income & Growth--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT WAS ONE OF THE FUND'S BETTER-PERFORMING STOCKS?
Hewlett-Packard (HP) shares certainly fall into that category. HP--the
fund's ninth-largest holding at the end of June--is a leading global provider of
computing and imaging solutions and services for businesses and homes. The
company is also focused on capitalizing on Internet opportunities, as well as
the proliferation of electronic services.
Our models were attracted to HP shares because of their favorable price
relative to the company's earnings, which surpassed market expectations for the
third consecutive quarter. HP cited strong profit performance in its printing
and imaging endeavors and solid earnings from personal computer sales as some of
the main catalysts for the positive results. Not surprisingly, the stock's price
reflected that upbeat performance--shares of HP rose almost 48% during the first
half of 1999.
THE INVESTMENT BANKING/BROKERAGE INDUSTRY WAS ONE OF THE BEST PERFORMERS IN THE
FIRST HALF OF 1999. DID YOU HAVE ANY STOCKS THERE THAT FARED WELL?
Our models favored Morgan Stanley Dean Witter in particular. The company is
a global financial services firm and market leader in securities, asset
management, and credit services. Morgan Stanley Dean Witter reported a 42%
increase in per-share earnings during their quarter ended May 31, 1999, a fairly
noteworthy performance. Behind that gain was impressive revenue from their
securities and credit services operations.
More impressive was their investment banking performance, which benefited
from the trend toward increased consolidation in many industries. Not
surprisingly, the company's solid performance has led to a sharp increase in its
stock: the price has risen about 45% since the beginning of this year.
THE MEDIA INDUSTRY ALSO FARED WELL DURING THE SIX MONTHS. HOW DID YOUR
SELECTIONS IN THIS AREA FACTOR INTO INCOME & GROWTH'S RETURNS?
Though the fund certainly benefited from its holdings in this area, we were
underweight in several of the industry's brighter stars. The main reason we
underweighted such stocks was because their valuations were far less attractive
than shares of many other companies in the media industry, such as those of CBS.
For example, the fund was underweight in shares of MediaOne. The company is
one of the nation's leaders in broadband services, providing basic and premium
cable television services to over five million subscribers. MediaOne recently
introduced high-speed Internet access, telephone services, and digital
television in some of its service areas. The company also has interests in some
of the fastest-growing wireless communications businesses outside of the U.S.
MediaOne shares rose sharply when the company became an acquisition target
of AT&T--a widely recognized name in the communications services industry and
the most widely held stock in the United States. So the fund's underweighting
dampened performance relative to the S&P 500.
[right margin]
"UNFORTUNATELY, THE FUND'S SECOND-QUARTER OUTPERFORMANCE OF THE S&P 500 FELL A
FEW PERCENT SHY OF OVERCOMING ITS FIRST-QUARTER DEFICIT."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
MICROSOFT CORP. 3.9% 3.9%
GENERAL ELECTRIC CO.
(U.S.) 2.7% 2.2%
CHASE MANHATTAN
CORP. 2.3% 1.5%
INTEL CORP. 2.2% 2.4%
WAL-MART STORES, INC. 2.1% 1.7%
INTERNATIONAL BUSINESS
MACHINES CORP. 1.9% 1.4%
AT&T CORP. 1.8% 2.6%
EXXON CORP. 1.7% 0.8%
HEWLET-PACKARD CO. 1.7% 0.9%
LUCENT TECHNOLOGIES
INC. 1.7% 1.3%
www.americancentury.com 15
Income & Growth--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT'S YOUR OUTLOOK FOR U.S. STOCKS FOR THE REST OF 1999?
The good news is that corporate profits remained impressive during the
second quarter, and with overseas economies rebounding, prospects for U.S.
equities look fairly bright. However, we've continued to see a wave of strength
in the latest economic reports. Whether that's a harbinger of continued strong
growth and additional Federal Reserve rate increases or whether those concerns
are overly bearish remains uncertain.
Since higher borrowing costs tend to depress stocks by diminishing the
present value of future corporate earnings, continued increases in short-term
interest rates by the Fed could conceivably lead to lower overall stock prices.
By the same token, though, if growth moderates, the market's tone could become
more upbeat and stocks could continue to rally.
GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO FOR THE NEXT SIX
MONTHS?
Remaining fully invested in stocks will most likely continue to be an
important priority. This strategy tends to enhance returns when the market
rallies. However, if the market sells off, being fully invested could also
dampen returns. To mitigate such a possibility, we will keep looking for shares
of companies with improving earnings forecasts that our models show as
attractively valued. This strategy will hopefully provide investors with sound
returns and an acceptable level of risk.
One thing worth mentioning is that we have recently fine-tuned our
investment approach. We've found that our quantitative process is more effective
at picking individual stocks than industries. So rather than significantly
overweighting and underweighting entire sectors compared with the S&P 500, we
have been bringing our industry positions more in line with the index. We're
looking to enhance performance through our increased focus on what our models do
best: find attractively valued stocks.
For example, the portfolio was slightly overweighted in financial services
stocks compared with the S&P 500 at period end. Going forward, the percentage of
financial services companies in the fund will likely more closely track the
percentage in the index. If we decide to overweight one company, we'd likely
underweight other financial services holdings to keep the overall sector
weighting in line with the index.
[left margin]
"RATHER THAN SIGNIFICANTLY OVERWEIGHTING AND UNDERWEIGHTING ENTIRE SECTORS
COMPARED WITH THE S&P 500, WE HAVE BEEN BRINGING OUR INDUSTRY POSITIONS MORE IN
LINE WITH THE INDEX."
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
TELEPHONE
COMMUNICATIONS 8.0% 8.5%
BANKING 7.9% 7.8%
PHARMACEUTICALS 7.6% 9.0%
COMPUTER SOFTWARE
& SERVICES 7.0% 8.1%
COMPUTER SYSTEMS 5.6% 4.6%
16 1-800-345-2021
Income & Growth--Schedule of Investments
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--97.0%
AEROSPACE & DEFENSE--2.1%
270,300 AlliedSignal Inc. $ 17,028,900
250,800 Boeing Co. 11,082,225
265,600 Cordant Technologies Inc. 12,001,800
297,000 EG&G, Inc. 10,580,625
94,400 General Dynamics Corp. 6,466,400
1,171,700 Goodrich (B.F.) Company (The) 49,797,250
250,500 United Technologies Corp. 17,957,719
--------------
124,914,919
--------------
AIRLINES--0.1%
60,600 AMR Corp.(1) 4,135,950
63,300 Delta Air Lines Inc. 3,647,662
22,300 US Airways Group Inc.(1) 971,444
--------------
8,755,056
--------------
AUTOMOBILES & AUTO PARTS--1.8%
76,200 Fleetwood Enterprises, Inc. 2,014,538
1,363,100 Ford Motor Co. 76,929,956
435,900 General Motors Corp. 28,769,400
--------------
107,713,894
--------------
BANKING--7.9%
1,515,500 Banc One Corp. 90,266,969
1,162,900 BankAmerica Corp. 85,255,106
1,593,700 Chase Manhattan Corp. 138,054,262
1,076,300 Citigroup Inc. 51,124,250
123,300 City National Corp. 4,616,044
50,800 Cullen/Frost Bankers, Inc. 1,400,175
886,600 First Union Corp. 41,670,200
489,500 Fleet Financial Group, Inc. 21,721,562
414,100 GreenPoint Financial Corp. 13,587,656
68,800 Pacific Century Financial Corp. 1,483,500
133,200 UnionBanCal Corp. 4,811,850
323,700 Wells Fargo & Co. 13,838,175
--------------
467,829,749
--------------
BIOTECHNOLOGY--0.9%
709,200 Amgen Inc.(1) 43,150,388
140,400 Biogen, Inc.(1) 9,033,862
--------------
52,184,250
--------------
BROADCASTING & MEDIA--1.8%
1,584,900 CBS Corp.(1) 68,844,094
581,300 Comcast Corp. Cl A 22,343,719
33,400 MediaOne Group Inc.(1) 2,484,125
138,600 Time Warner Inc. 10,187,100
--------------
103,859,038
--------------
BUILDING & HOME IMPROVEMENTS--0.1%
150,000 York International Corporation 6,421,875
--------------
Shares Value
- --------------------------------------------------------------------------------
BUSINESS SERVICES & SUPPLIES--0.9%
60,400 ACNielsen Corp.(1) $ 1,827,100
59,400 Century Business Services, Inc.(1) 857,588
170,900 Kelly Services, Inc. Cl A 5,479,481
104,700 Labor Ready, Inc.(1) 3,402,750
519,400 Ogden Corp. 13,991,338
164,400 Omnicom Group Inc. 13,152,000
122,200 Snyder Communications, Inc.(1) 4,002,050
315,900 True North Communications Inc. 9,477,000
--------------
52,189,307
--------------
CHEMICALS & RESINS--1.5%
34,900 Church & Dwight Co., Inc. 1,518,150
291,400 Dow Chemical Co. 36,971,375
544,200 du Pont (E.I.) de Nemours & Co. 37,175,662
39,900 Eastman Chemical Co. 2,064,825
28,800 Ecolab Inc. 1,256,400
36,100 Grace (W.R.) & Co. (Del.)(1) 663,338
50,400 Hercules Inc. 1,981,350
129,400 International Flavors &
Fragrances Inc. 5,742,125
33,500 Nalco Chemical Co. 1,737,812
44,413 Rohm and Haas Co. 1,904,207
2,400 Union Carbide Corp. 117,000
--------------
91,132,244
--------------
COMMUNICATIONS EQUIPMENT--3.8%
344,750 Comverse Technology, Inc.(1) 26,007,078
161,000 Corning Inc. 11,290,125
1,453,800 Lucent Technologies Inc. 98,040,638
192,700 Motorola, Inc. 18,258,325
337,600 Nortel Networks Corp. 29,307,900
112,900 QUALCOMM Inc.(1) 16,204,678
334,600 Tellabs, Inc.(1) 22,616,869
--------------
221,725,613
--------------
COMPUTER PERIPHERALS--2.0%
411,000 Adaptec, Inc.(1) 14,500,594
1,285,000 Cisco Systems Inc.(1) 82,762,031
366,800 EMC Corp. (Mass.)(1) 20,174,000
--------------
117,436,625
--------------
COMPUTER SOFTWARE & SERVICES--7.0%
608,200 America Online Inc.(1) 67,206,100
103,000 American Management
System, Inc.(1) 3,299,219
104,100 BMC Software, Inc.(1) 5,618,147
92,900 Computer Associates
International, Inc. 5,109,500
245,200 Compuware Corp.(1) 7,792,762
103,400 Concord EFS, Inc.(1) 4,378,344
96,100 Electronic Data Systems Corp. 5,435,656
260,100 Keane, Inc.(1) 5,884,762
2,561,000 Microsoft Corp.(1) 230,810,130
See Notes to Financial Statements
www.americancentury.com 17
Income & Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
257,900 NCR Corp.(1) $ 12,588,744
509,400 Oracle Corp.(1) 18,911,475
50,900 Shared Medical Systems Corp. 3,321,225
71,900 Siebel Systems, Inc.(1) 4,765,622
450,600 Sterling Software, Inc.(1) 12,025,388
633,800 Unisys Corp.(1) 24,678,588
--------------
411,825,662
--------------
COMPUTER SYSTEMS--5.6%
1,178,100 Apple Computer, Inc.(1) 54,634,388
506,800 Compaq Computer Corp. 12,004,825
1,182,600 Dell Computer Corp.(1) 43,719,244
117,600 Gateway Inc.(1) 6,938,400
998,000 Hewlett-Packard Co. 100,299,000
851,700 International Business
Machines Corp. 110,082,225
75,600 Sun Microsystems, Inc.(1) 5,209,312
--------------
332,887,394
--------------
CONSTRUCTION & PROPERTY
DEVELOPMENT--0.5%
274,700 Centex Corp. 10,318,419
123,800 D.R. Horton, Inc. 2,058,175
293,800 Foster Wheeler Corp. 4,149,925
196,500 Kaufman & Broad Home Corp. 4,887,938
122,400 Lafarge Corp. 4,337,550
265,000 Pulte Corp. 6,111,562
--------------
31,863,569
--------------
CONSUMER PRODUCTS--1.6%
27,000 Alberto-Culver Company Cl B 718,875
371,200 Avon Products, Inc. 20,601,600
98,900 Clorox Co. (The) 10,563,756
151,100 National Service Industries, Inc. 5,439,600
461,000 Procter & Gamble Co. (The) 41,144,250
230,800 Whirlpool Corp. 17,079,200
--------------
95,547,281
--------------
DIVERSIFIED COMPANIES--4.3%
1,414,300 General Electric Co. (U.S.) 159,815,900
207,300 Minnesota Mining &
Manufacturing Co. 18,022,144
498,000 Tyco International Ltd. 47,185,500
336,014 Unilever N.V. New York Shares 23,436,976
76,200 Viad Corp 2,357,438
--------------
250,817,958
--------------
ELECTRICAL & ELECTRONIC
COMPONENTS--3.0%
2,193,200 Intel Corp. 130,426,862
178,300 Micron Technology, Inc.(1) 7,187,719
382,000 Rockwell International Corp. 23,206,500
91,000 Texas Instruments Inc. 13,195,000
--------------
174,016,081
--------------
Shares Value
- --------------------------------------------------------------------------------
ENERGY (PRODUCTION & MARKETING)--5.4%
23,500 Ashland Inc. $ 942,938
159,500 Atlantic Richfield Co. 13,328,219
62,700 Chevron Corp. 5,968,256
1,320,900 Exxon Corp. 101,874,412
683,000 Kerr-McGee Corp. 34,278,062
249,500 Keyspan Energy Corp. 6,580,562
531,700 Mobil Corp. 52,638,300
169,300 Occidental Petroleum Corp. 3,576,462
500,000 Royal Dutch Petroleum Co.
New York Shares 30,125,000
261,500 Sunoco, Inc. 7,894,031
741,500 Texaco Inc. 46,343,750
394,500 Ultramar Diamond Shamrock Corp. 8,605,031
250,500 Union Pacific Resources 4,086,281
--------------
316,241,304
--------------
ENERGY (SERVICES)--0.5%
346,100 Diamond Offshore Drilling, Inc. 9,820,588
120,700 Reliant Energy, Inc. 3,334,338
489,200 Tidewater Inc. 14,920,600
--------------
28,075,526
--------------
ENVIRONMENTAL SERVICES--0.1%
172,600 Browning-Ferris Industries, Inc. 7,421,800
--------------
FINANCIAL SERVICES--3.7%
75,900 Bear Stearns Companies Inc. 3,548,325
184,000 Countrywide Credit Industries, Inc. 7,866,000
913,200 Fannie Mae 62,440,050
502,900 Federal Home Loan Mortgage
Corporation 29,168,200
268,100 Lehman Brothers Holdings Inc. 16,689,225
296,800 Merrill Lynch & Co., Inc. 23,725,450
748,600 Morgan Stanley Dean Witter & Co. 76,731,500
--------------
220,168,750
--------------
FOOD & BEVERAGE--3.6%
265,100 Anheuser-Busch Companies, Inc. 18,805,531
283,200 Bestfoods 14,018,400
103,000 Coca-Cola Company (The) 6,437,500
300,100 ConAgra, Inc. 7,990,162
296,800 Earthgrains Company 7,661,150
477,300 General Mills, Inc. 38,362,988
574,600 Heinz (H.J.) Co. 28,801,825
97,600 Hormel Foods Corp. 3,928,400
128,400 IBP, Inc. 3,049,500
204,700 Lance, Inc. 3,185,644
1,166,000 Nabisco Group Holdings Corp. 22,809,875
135,200 PepsiCo, Inc. 5,230,550
588,700 Quaker Oats Co. (The) 39,074,962
245,500 Sara Lee Corp. 5,569,781
166,000 SYSCO Corp. 4,948,875
--------------
209,875,143
--------------
See Notes to Financial Statements
18 1-800-345-2021
Income & Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
HEALTHCARE--0.8%
214,000 Baxter International, Inc. $ 12,973,750
108,400 Cardinal Health, Inc. 6,951,150
509,600 Mallinckrodt Inc. 18,536,700
112,700 PacifiCare Health Systems, Inc.(1) 8,110,878
18,500 RehabCare Group, Inc.(1) 341,094
46,500 Trigon Healthcare, Inc.(1) 1,691,438
--------------
48,605,010
--------------
INDUSTRIAL EQUIPMENT & MACHINERY--0.6%
135,000 Caterpillar Inc. 8,100,000
386,400 Ingersoll-Rand Co. 24,971,100
--------------
33,071,100
--------------
INSURANCE--4.0%
1,094,200 Allstate Corp. 39,254,425
235,700 Conseco Inc. 7,174,119
281,600 Fidelity National Financial, Inc. 5,913,600
519,700 First American Financial Corp. (The) 9,289,638
178,400 Gallagher (Arthur J.) & Co. 8,830,800
154,600 LandAmerica Financial Group, Inc. 4,444,750
1,410,600 Lincoln National Corp. 73,792,012
495,400 Loews Corp. 39,198,525
650,200 Marsh & McLennan Companies, Inc. 49,090,100
39,900 Travelers Property Casualty
Corp. Cl A 1,561,088
--------------
238,549,057
--------------
LEISURE--1.4%
49,600 Anchor Gaming(1) 2,385,450
569,700 Carnival Corp. Cl A 27,630,450
150,100 Disney (Walt) Co. 4,624,956
389,000 Eastman Kodak Co. 26,354,750
531,400 Viacom, Inc. Cl B(1) 23,381,600
--------------
84,377,206
--------------
MACHINERY & EQUIPMENT--0.5%
69,800 Briggs & Stratton Corp. 4,030,950
34,100 Cummins Engine Company, Inc. 1,947,962
86,000 Pentair, Inc. 3,934,500
488,600 Premark International, Inc. 18,322,500
37,400 SPX Corp.(1) 3,122,900
--------------
31,358,812
--------------
MEDICAL EQUIPMENT & SUPPLIES--0.9%
101,600 Andrx Corp.(1) 7,832,725
348,400 Hillenbrand Industries, Inc. 15,068,300
67,800 St. Jude Medical, Inc.(1) 2,415,375
338,600 VISX, Inc.(1) 26,844,631
--------------
52,161,031
--------------
METALS & MINING--0.2%
149,900 Alcoa Inc. 9,275,062
2,300 ASARCO Inc. 43,269
--------------
9,318,331
--------------
Shares Value
- --------------------------------------------------------------------------------
OFFICE--0.1%
352,800 CarrAmerica Realty Corp. $ 8,820,000
--------------
PACKAGING & CONTAINERS(2)
61,800 Crown Cork & Seal Co., Inc. 1,761,300
--------------
PAPER & FOREST PRODUCTS--0.6%
85,100 Fort James Corp. 3,223,162
205,000 International Paper Co. 10,352,500
261,800 Kimberly-Clark Corp. 14,922,600
102,300 Weyerhaeuser Co. 7,033,125
--------------
35,531,387
--------------
PHARMACEUTICALS--7.6%
453,800 Abbott Laboratories 20,647,900
57,400 American Home Products Corp. 3,300,500
613,600 Bergen Brunswig Corp. Cl A 10,584,600
1,013,900 Bristol-Myers Squibb Co. 71,416,581
141,400 Herbalife International, Inc. Cl A 1,542,144
600,800 Johnson & Johnson 58,878,400
595,000 Lilly (Eli) & Co. 42,616,875
111,200 McKesson HBOC, Inc. 3,572,300
52,200 Medicis Pharmaceutical
Corp. Cl A(1) 1,324,575
789,000 Merck & Co., Inc. 58,386,000
87,600 Nature's Sunshine Products, Inc. 947,175
344,900 Pfizer, Inc. 37,852,775
514,400 Pharmacia & Upjohn Inc. 29,224,350
1,165,000 Schering-Plough Corp. 61,745,000
686,600 Warner-Lambert Co. 47,632,875
--------------
449,672,050
--------------
PRINTING & PUBLISHING--0.9%
1,297,100 Deluxe Corp. 50,505,831
--------------
RAILROAD--0.1%
109,000 Union Pacific Corp. 6,356,062
--------------
REAL ESTATE--0.2%
1,209,100 Host Marriott Corp. 14,358,062
--------------
RESTAURANTS--0.5%
80,600 Brinker International, Inc.(1) 2,191,312
101,800 McDonald's Corp. 4,205,612
67,300 Tricon Global Restaurants Inc.(1) 3,642,612
585,600 Wendy's International, Inc. 16,579,800
--------------
26,619,336
--------------
RETAIL (APPAREL)--0.5%
39,700 Cato Corp. Cl A 461,512
155,610 Intimate Brands, Inc. 7,372,024
127,800 Ross Stores, Inc. 6,425,944
524,900 TJX Companies, Inc. (The) 17,485,731
--------------
31,745,211
--------------
See Notes to Financial Statements
www.americancentury.com 19
Income & Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)--0.8%
264,975 Albertson's, Inc. $ 13,662,773
182,000 Kroger Co. (The)(1) 5,084,625
91,200 Rite Aid Corp. 2,245,800
226,200 Safeway Inc.(1) 11,196,900
584,900 Supervalu Inc. 15,024,619
80,100 Universal Corp. 2,277,844
--------------
49,492,561
--------------
RETAIL (GENERAL MERCHANDISE)--3.2%
38,200 Enesco Group, Inc. 883,375
690,700 Penney (J.C.) Company, Inc. 33,542,119
630,400 Sears, Roebuck & Co. 28,092,200
2,604,400 Wal-Mart Stores, Inc. 125,662,300
--------------
188,179,994
--------------
RETAIL (INTERNET)--0.1%
48,600 Amazon.com, Inc.(1) 6,079,556
--------------
RETAIL (SPECIALTY)--1.7%
452,300 Best Buy Co., Inc.(1) 30,530,250
205,000 Borders Group, Inc.(1) 3,241,562
34,800 Circuit City Stores-Circuit
City Group 3,236,400
251,300 Hollywood Entertainment Corp.(1) 4,908,203
609,400 Home Depot, Inc. 39,268,212
83,000 Lowe's Companies, Inc. 4,705,062
51,500 Starbucks Corp.(1) 1,929,641
260,900 Zale Corp.(1) 10,436,000
--------------
98,255,330
--------------
RUBBER & PLASTICS--0.3%
755,500 Tupperware Corp. 19,265,250
--------------
STEEL--0.1%
24,800 Bethlehem Steel Corporation(1) 190,650
40,200 Nucor Corp. 1,906,988
40,800 USX-U.S. Steel Group 1,101,600
--------------
3,199,238
--------------
TELEPHONE COMMUNICATIONS--8.0%
1,876,550 AT&T Corp. 104,734,947
67,600 ALLTEL Corp. 4,833,400
453,700 Ameritech Corp. 33,346,950
533,800 Bell Atlantic Corp. 34,897,175
1,706,000 BellSouth Corp. 79,968,750
568,600 GTE Corp. 43,071,450
534,900 MCI WorldCom, Inc.(1) 46,018,116
1,101,300 SBC Communications Inc. 63,875,400
178,800 Sprint Corp. 9,442,875
872,400 U S WEST, Inc. 51,253,500
--------------
471,442,563
--------------
Shares Value
- --------------------------------------------------------------------------------
TEXTILES & APPAREL--0.6%
295,200 Dexter Corp. (The) $ 12,047,850
89,900 Tommy Hilfiger Corp.(1) 6,607,650
336,600 VF Corp. 14,389,650
--------------
33,045,150
--------------
TOBACCO--1.1%
411,200 Fortune Brands, Inc. 17,013,400
968,600 Philip Morris Companies Inc. 38,925,612
264,666 R.J. Reynolds Tobacco
Holdings, Inc.(1) 8,336,979
--------------
64,275,991
--------------
TRANSPORTATION--0.2%
201,900 Hertz Corp. Cl A 12,517,800
85,500 Laidlaw Inc. 630,562
19,000 Laidlaw Inc. ORD 137,999
--------------
13,286,361
--------------
UTILITIES--3.3%
186,600 Ameren Corp. 7,160,775
958,500 Central & South West Corp. 22,404,938
547,800 Conectiv, Inc. 13,386,862
41,500 Conectiv, Inc. Cl A 1,743,000
348,300 Constellation Energy Group 10,318,388
409,100 Dominion Resources, Inc. (Va.) 17,719,144
444,400 Duke Energy Corp. 24,164,250
37,500 GPU Inc. 1,582,031
45,600 Hawaiian Electric Industries, Inc. 1,618,800
251,700 LG&E Energy Corp. 5,285,700
305,800 MCN Energy Group Inc. 6,345,350
60,600 MDU Resources Group, Inc. 1,382,438
519,900 Minnesota Power & Light Co. 10,333,012
1,051,000 Sempra Energy 23,778,875
220,100 Southern Co. 5,832,650
224,300 Texas Utilities Co. 9,252,375
1,214,550 Utilicorp United Inc. 29,528,747
--------------
191,837,335
--------------
WIRELESS COMMUNICATIONS--0.5%
471,400 Sprint PCS(1) 26,928,725
--------------
TOTAL COMMON STOCKS 5,721,000,878
--------------
(Cost $4,448,152,522)
PREFERRED STOCK--0.1%
UTILITIES
290,000 Avista Corp. 4,930,000
--------------
(Cost $5,309,832)
See Notes to Financial Statements
20 1-800-345-2021
Income & Growth--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS--2.9%
Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.70%, dated 6/30/99,
due 7/1/99 (Delivery value $159,320,798) $ 159,300,000
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 4.70%, dated 6/30/99,
due 7/1/99 (Delivery value $13,701,789) 13,700,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS 173,000,000
--------------
(Cost $173,000,000)
TOTAL INVESTMENT SECURITIES--100.0% $5,898,930,878
==============
(Cost $4,626,462,354)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Gain
- -----------------------------------------------------------------------------
464 S&P 500 September
Futures 1999 $160,277,200 $6,431,945
=====================================
NOTES TO SCHEDULE OF INVESTMENTS
ORD = Foreign Ordinary Share
(1) Non-income producing.
(2) Industry is less than 0.05% of total investment securities.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percentage of investments in each industry, as applicable
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 21
Small Cap Quantitative--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF JUNE 30, 1999
SMALL CAP S&P SMALLCAP SMALL CAP FUNDS(2)
QUANTITATIVE 600 INDEX AVERAGE RETURN FUND'S RANKING
===============================================================================
6 MONTHS(1) 1.06% 5.04% 8.56% --
===============================================================================
RETURNS
LIFE OF FUND(1) 1.47% 5.78% 9.91% --
The fund's inception date was 7/31/98.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 45-46 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND Value on 6/30/1999 S&P SmallCap 600 Index
$11,318 Small Cap Quantitative $10,147
Small Cap S&P SmallCap
Quantitative 600 Index
DATE VALUE VALUE
7/31/1998 $10,000 $10,000
8/31/1998 $8,000 $8,070
9/30/1998 $8,460 $8,564
10/31/1998 $8,840 $8,961
11/30/1998 $9,399 $9,466
12/31/1998 $10,040 $10,071
1/31/1999 $9,679 $10,492
2/28/1999 $8,799 $10,165
3/31/1999 $8,642 $10,572
4/30/1999 $9,404 $10,981
5/31/1999 $9,685 $10,722
6/30/1999 $10,147 $11,318
$10,000 investment made 7/31/98
The graph at left shows the growth of a $10,000 investment over the life of the
fund. The S&P SmallCap 600 Index is provided for comparison. Small Cap
Quantitative's return includes operating expenses (such as transaction costs and
management fees) that reduce returns, while the return of the index does not.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
22 1-800-345-2021
Small Cap Quantitative--Q&A
- --------------------------------------------------------------------------------
/photo of Kurt Borgwardt and Bill Martin/
An interview with Kurt Borgwardt and Bill Martin, portfolio managers on the
Small Cap Quantitative fund management team.
HOW DID SMALL CAP QUANTITATIVE PERFORM DURING THE SIX MONTHS ENDED JUNE 30,
1999?
Though the period was a volatile one for small-company stocks, returns were
relatively flat (see Mark Mallon's stock market discussion on pages 3 and 4).
For the six months, Small Cap Quantitative returned 1.06%, while the S&P
SmallCap 600 was up 5.04%. By comparison, the average return of the 777 "Small
Cap Funds" tracked by Lipper Inc. was 8.56% for the same period. (See the
previous page for additional performance comparisons.)
WHY DID THE FUND UNDERPERFORM THE LIPPER GROUP?
We can point to two reasons. First, we don't typically invest in initial
public offerings (IPOs), though many small-cap funds do. The IPO market tends to
be volatile, but it has enjoyed tremendous success lately. That limited our
performance relative to the peer group so far in 1999.
Second, we manage the portfolio against the S&P SmallCap 600 Index, while
the vast majority of our peers track the Russell 2000 Index of small-company
stocks. The Russell 2000 was up about 8.5% for the six months, which is right in
line with the peer group average return. The Russell outperformed because of its
heavier weighting in Internet stocks. Internet shares appreciated so much that
they went from about 4% of the Russell index a year ago to around 12% at the end
of June.
WHY DID YOU SELECT THE S&P 600 AS THE FUND'S BENCHMARK?
We chose the S&P 600 for the fund's benchmark because it's put together
with companies selected for size and industry representation. We think that
gives the fund a more sound, diversified benchmark than the Russell index, which
is constructed by taking the 3,000 largest U.S. stocks and simply lopping off
the top 1,000.
EXPLAIN HOW YOU MANAGE SMALL CAP QUANTITATIVE RELATIVE TO THE INDEX.
We use a quantitative approach that relies on sophisticated financial
models to help us make investment decisions. First, we use a stock-ranking model
to analyze more than 2,000 small-cap stocks. The model takes into account things
like earnings growth and relative value in trying to rank these stocks based on
their expected total return. We use another computer model to create a portfolio
of high-ranking stocks that matches the overall risk level of the S&P 600. Then
we conduct a fundamental review of the buy and sell decisions
[right margin]
"THOUGH THE PERIOD WAS A VOLATILE ONE FOR SMALL-COMPANY STOCKS, RETURNS WERE
RELATIVELY FLAT."
PORTFOLIO AT A GLANCE
6/30/99 12/31/98
NUMBER OF COMPANIES 150 230
DIVIDEND YIELD 0.98% 0.65%
PRICE/EARNINGS RATIO 17.3 15.5
PORTFOLIO TURNOVER 91%(1) 30%(2)
EXPENSE RATIO 0.88%(3) 0.94%(3)
(1) Six months ended 6/30/99.
(2) 7/31/98 (inception) through 12/31/98.
(3) Annualized.
Investment terms are defined in the Glossary on pages 46-47.
www.americancentury.com 23
Small Cap Quantitative--Q&A
- --------------------------------------------------------------------------------
(Continued)
the model generates. In addition, we work with a team of experienced
quantitative analysts who are continually refining and improving our management
process.
DID YOU MAKE ANY REFINEMENTS TO THE INVESTMENT APPROACH FOR SMALL CAP
QUANTITATIVE OVER THE LAST SIX MONTHS?
Yes, we did. We've found that our investment process is more effective at
picking individual stocks than industries. So rather than significantly over-
and underweighting entire industries relative to the index, we're bringing our
industry positions more in line with those of the S&P 600.
At the same time, we have been trimming the number of stocks in the
portfolio. We carefully evaluated each name, concentrating the portfolio in
fewer, higher-ranking stocks, as measured by our stock-ranking model. We think
running the fund "industry neutral" with fewer companies puts the portfolio in
the best position to benefit from what our quantitative approach has
historically done best--pick attractively valued individual stocks.
GIVE SOME EXAMPLES OF STOCKS THE MODEL PICKED THAT ENHANCED RETURNS.
Two good examples are Cullen/Frost Bankers and K-Swiss, our two largest
holdings at the end of June. K-Swiss is a stock we've held since the fund's
inception. The company is probably best known for its line of tennis shoes, but
it also markets apparel and accessories. The stock carries a reasonable
valuation, while it's seen healthy earnings growth in recent quarters because of
impressive retail sales in the U.S. For the six months, the stock was up nearly
250%.
However, Cullen/Frost may be a better example of the model's ability to
make solid individual stock picks, finding good names even within down
industries.
CAN YOU TALK A LITTLE MORE ABOUT CULLEN/FROST BANKERS?
Cullen/Frost is a holding company for a group of Texas regional banks. The
stock held up relatively well even though most bank and financial shares fared
poorly in the second quarter because of rising interest rates. The company is
highly profitable and the dominant independent player in its area. Cullen/Frost
shares were buoyed in the second quarter by the announcement of a $100 million
share buy-back plan. In addition, Cullen/Frost also completed the acquisition of
another, smaller Texas bank.
WHAT ABOUT THE PORTFOLIO'S POORER PERFORMERS SO FAR IN 1999?
An example of stocks we held that didn't perform as well as we'd hoped were
those of title insurance companies. Most mortgage lenders require title
insurance before they'll finance a real estate purchase, so the volume of title
insurers' business depends on the number of home sales. Holding several of these
companies was a good play in 1998, when interest rates plummeted and home sales
hit an all-time high. But higher rates so far this year have these stocks
sailing into a headwind. So despite the fact that title insurance companies had
the very characteristics the model likes in a stock, they still performed poorly
over the six months.
[left margin]
"CULLEN/FROST HELD UP RELATIVELY WELL EVEN THOUGH MOST BANK AND FINANCIAL SHARES
FARED POORLY IN THE SECOND QUARTER BECAUSE OF RISING INTEREST RATES."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
CULLEN/FROST BANKERS,
INC. 2.0% 0.4%
K-SWISS INC. CL A 1.7% 1.1%
DARDEN RESTAURANTS,
INC. 1.4% 1.3%
HCC INSURANCE
HOLDINGS, INC. 1.3% 1.4%
AMERICAN
MANAGEMENT
SYSTEM, INC. 1.3% --
VALASSIS
COMMUNICATIONS,
INC. 1.3% 0.7%
IDEXX LABORATORIES,
INC. 1.2% --
DEVON ENERGY CORP. 1.2% --
YORK INTERNATIONAL
CORP. 1.1% 1.5%
PROGRESS SOFTWARE
CORP. 1.1% --
24 1-800-345-2021
Small Cap Quantitative--Q&A
- --------------------------------------------------------------------------------
(Continued)
WERE THERE ANY STOCKS IN THE INDEX YOU AVOIDED THAT ENDED UP PERFORMING WELL?
The most glaring example is E-Trade, an online discount brokerage. The
mania for Internet stocks in late 1998 and early 1999 made E-Trade the
best-performing stock in the S&P 600. In fact, its shares did so well that
E-Trade grew to twice the size of the next largest company in the index. Like
most Internet stocks, E-Trade's valuation was astronomical and earnings still
less than stellar. Of course, our quantitative approach is geared toward the
opposite--earnings momentum at attractive prices. As a result, we largely
avoided E-Trade and other Internet shares. That goes a long way toward
explaining the fund's underperformance relative to the benchmark.
WHAT'S YOUR OUTLOOK FOR SMALL-CAP STOCKS IN THE COMING MONTHS?
We have a generally positive outlook. First, economic growth is good--the
U.S. economy continues to hum along, and we've had better-than-expected economic
news out of Southeast Asia and Japan. Small-cap stocks tend to do better during
periods of robust growth. Value shares also tend to do better in this type of
environment, and value is one of the key considerations in our stock selection
process.
Another potential positive for small-cap shares is the trend toward
consolidation in many industries, including insurance, banking, utilities, and
natural gas, among others. We think mergers and acquisitions of smaller
companies by larger players should help support prices for small-cap stocks in
many parts of the economy.
Finally, small-cap stocks in general remain very attractively valued
relative to large-cap and growth stocks. That means small stocks could hold up
better than larger growth stocks if interest rates continue to rise. That's
because when rates rise, you expect to see the highest-priced stocks get hit
hardest. Because small-cap stocks lagged last year, we feel they're much better
values than the typical large-cap stock right now.
GIVEN THAT OUTLOOK, HOW WILL YOU MANAGE THE FUND?
We're sticking to our marching orders--buying small companies that we
believe are undervalued. That strategy hasn't done as well over the last year,
when only one thing worked--large size. The stock market's narrow focus meant
many investment strategies and disciplines that worked well in the past just
weren't rewarded last year. We think the greater risk, though, is in abandoning
a proven long-term strategy to chase performance for a brief period. As a
result, we currently plan to continue to run the fund industry neutral relative
to the index, trying instead to enhance performance through individual stock
selection.
[right margin]
"WE'RE STICKING TO OUR MARCHING ORDERS--BUYING SMALL COMPANIES THAT WE BELIEVE
ARE UNDERVALUED."
TOP FIVE INDUSTRIES
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
BUSINESS SERVICES
& SUPPLIES 8.4% 7.6%
ELECTRICAL & ELECTRONIC
COMPONENTS 7.5% 4.4%
BANKING 6.2% 1.9%
COMPUTER SOFTWARE
& SERVICES 5.6% 8.1%
UTILITIES 4.2% 3.2%
www.americancentury.com 25
Small Cap Quantitative--Schedule of Investments
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--95.7%
AEROSPACE & DEFENSE--1.6%
900 Cordant Technologies Inc. $ 40,669
3,500 EG&G, Inc. 124,687
3,600 Triumph Group, Inc.(1) 91,800
-------------
257,156
-------------
AUTOMOBILES & AUTO PARTS--3.1%
2,800 Arvin Industries, Inc. 106,050
2,500 Borg-Warner Automotive, Inc. 137,500
4,200 Fleetwood Enterprises, Inc. 111,037
4,800 Insurance Auto Auctions, Inc.(1) 77,400
1,700 Navistar International Corp.(1) 85,000
-------------
516,987
-------------
BANKING--6.2%
12,200 Cullen/Frost Bankers, Inc. 336,262
2,000 Golden State Bancorp Inc.(1) 44,000
1,400 GreenPoint Financial Corp. 45,938
3,500 Hamilton Bancorp Inc.(1) 83,781
1,800 Hudson United Bancorp 55,125
4,100 Imperial Bancorp 81,231
4,800 Independent Bank Corp. (Mich.) 83,550
1,900 People's Bancshares, Inc. 38,356
3,300 Silicon Valley Bancshares(1) 81,881
6,500 Southwest Bancorporation of
Texas, Inc.(1) 116,594
600 U.S. Trust Corp. 55,500
-------------
1,022,218
-------------
BIOTECHNOLOGY--0.5%
1,100 MedImmune, Inc.(1) 74,697
-------------
BROADCASTING & MEDIA--0.3%
1,300 Westwood One, Inc.(1) 46,394
-------------
BUILDING & HOME IMPROVEMENTS--1.7%
2,800 Centex Construction Products Inc. 95,550
4,400 York International Corporation 188,375
-------------
283,925
-------------
BUSINESS SERVICES & SUPPLIES--8.4%
2,000 Acxiom Corp.(1) 49,938
6,700 ADVO, Inc.(1) 139,025
600 Catalina Marketing Corp.(1) 55,200
8,700 Corrpro Companies, Inc.(1) 75,038
3,600 Fair, Isaac and Co., Inc. 126,225
4,800 Interim Services Inc.(1) 99,000
2,200 Labor Ready, Inc.(1) 71,500
3,700 MAXIMUS, Inc.(1) 106,375
2,200 Metzler Group, Inc. (The)(1) 60,706
3,300 Ogden Corp. 88,894
6,000 RWD Technologies, Inc.(1) 62,438
Shares Value
- --------------------------------------------------------------------------------
10,500 Schawk, Inc. $ 93,844
4,600 URS Corp.(1) 134,838
5,750 Valassis Communications, Inc.(1) 210,593
-------------
1,373,614
-------------
CHEMICALS & RESINS--1.5%
3,600 Geon Co. 116,100
1,600 Hercules Inc. 62,900
3,700 Schulman (A.), Inc. 63,247
-------------
242,247
-------------
COMMUNICATIONS EQUIPMENT--3.2%
4,500 CommScope, Inc.(1) 138,375
3,700 DSP Communications, Inc.(1) 106,838
3,100 Inter-Tel, Inc. 56,188
8,600 InterVoice, Inc.(1) 123,894
1,500 Plantronics, Inc.(1) 97,688
-------------
522,983
-------------
COMPUTER PERIPHERALS--2.6%
3,200 Adaptec, Inc.(1) 112,900
2,600 C-Cube Microsystems Inc.(1) 82,306
8,800 Cirrus Logic, Inc.(1) 77,550
5,200 Xircom, Inc.(1) 156,488
-------------
429,244
-------------
COMPUTER SOFTWARE & SERVICES--5.6%
1,700 Adobe Systems Inc. 139,666
6,700 American Management
System, Inc.(1) 214,609
4,100 CIBER, Inc.(1) 78,412
2,000 Open Text Corp.(1) 59,750
6,400 Progress Software Corp.(1) 182,000
4,600 Sterling Software, Inc.(1) 122,762
4,100 Whittman-Hart, Inc.(1) 130,431
-------------
927,630
-------------
COMPUTER SYSTEMS--1.7%
3,000 Apple Computer, Inc.(1) 139,125
5,600 Insight Enterprises, Inc.(1) 138,425
-------------
277,550
-------------
CONSTRUCTION & PROPERTY
DEVELOPMENT--3.8%
2,000 Centex Corp. 75,125
2,100 Dycom Industries, Inc.(1) 117,600
3,500 M/I Schottenstein Homes, Inc. 64,531
2,600 NVR, Inc.(1) 135,688
3,100 Pulte Corp. 71,494
5,600 Ryland Group, Inc. (The) 166,250
-------------
630,688
-------------
CONSUMER PRODUCTS--0.7%
2,500 Scotts Co. (The) Cl A(1) 119,062
-------------
See Notes to Financial Statements
26 1-800-345-2021
Small Cap Quantitative--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL & ELECTRONIC COMPONENTS--7.5%
2,000 CTS Corp. $ 140,000
8,400 Cypress Semiconductor Corp.(1) 138,600
2,700 Hutchinson Technology Inc.(1) 74,756
3,500 Innovex Inc. 48,562
2,700 Lattice Semiconductor Corp.(1) 167,738
2,200 Novellus Systems, Inc.(1) 150,081
3,800 Park Electrochemical Corp. 109,250
3,200 Pinnacle Systems, Inc.(1) 108,000
700 Sanmina Corp.(1) 53,112
4,300 Smith (A.O.) Corp. 120,400
1,700 Vitesse Semiconductor Corp.(1) 115,016
-------------
1,225,515
-------------
ENERGY (PRODUCTION & MARKETING)--2.6%
2,700 Basin Exploration, Inc.(1) 54,422
5,000 Callon Petroleum Co.(1) 51,562
5,400 Devon Energy Corp. 193,050
2,900 Houston Exploration Co.(1) 54,919
1,800 Kinder Morgan Energy
Partners, L.P. 66,600
-------------
420,553
-------------
ENERGY (SERVICES)--0.8%
8,100 Oceaneering International, Inc.(1) 130,612
-------------
FINANCIAL SERVICES--3.4%
2,200 Dain Rauscher Corp. 119,075
8,300 Doral Financial Corp. 142,916
7,900 ITLA Capital Corp.(1) 122,450
2,400 Legg Mason, Inc. 92,400
5,000 Roslyn Bancorp, Inc. 86,094
-------------
562,935
-------------
FOOD & BEVERAGE--2.9%
5,000 Ben & Jerry's Homemade,
Inc. Cl A(1) 139,375
800 Canandaigua Brands, Inc. Cl A(1) 41,925
4,600 Earthgrains Company 118,738
6,000 Pilgrim's Pride Corp. Cl B 180,000
-------------
480,038
-------------
FURNITURE & FURNISHINGS--0.9%
5,100 Furniture Brands International,
Inc.(1) 142,162
-------------
HEALTHCARE--1.3%
4,000 Oxford Health Plans, Inc.(1) 62,125
3,900 Quest Diagnostics Inc.(1) 106,762
1,500 Renal Care Group Inc.(1) 38,766
-------------
207,653
-------------
Shares Value
- --------------------------------------------------------------------------------
INDUSTRIAL EQUIPMENT & MACHINERY--1.3%
1,900 Tecumseh Products Cl A $ 115,009
3,400 Terex Corp.(1) 103,488
-------------
218,497
-------------
INSURANCE--3.7%
2,700 FBL Financial Group, Inc. Cl A 52,650
5,200 Fidelity National Financial, Inc. 109,200
6,800 First American Financial Corp. (The) 121,550
5,200 Fremont General Corp. 98,150
9,700 HCC Insurance Holdings, Inc. 220,069
-------------
601,619
-------------
LEISURE--1.6%
1,900 Anchor Gaming(1) 91,378
3,300 Avid Technology, Inc.(1) 52,903
4,300 Department 56, Inc.(1) 115,562
-------------
259,843
-------------
MACHINERY & EQUIPMENT--0.7%
2,000 Graco Inc. 58,750
1,700 Zebra Technologies Corp. Cl A(1) 65,184
-------------
123,934
-------------
MEDICAL EQUIPMENT & SUPPLIES--4.0%
2,300 AmeriSource Health Corp.(1) 58,650
2,500 ICU Medical, Inc.(1) 43,672
8,700 IDEXX Laboratories, Inc.(1) 202,003
7,100 Invivo Corp.(1) 94,962
9,100 Minntech Corp. 134,794
3,500 Patterson Dental Co.(1) 121,734
-------------
655,815
-------------
METALS & MINING--2.1%
4,300 AMCOL International Corp. 61,812
2,500 Freeport-McMoran Copper &
Gold, Inc. Cl B 44,844
2,700 Reynolds Metals Co. 159,300
2,300 Stillwater Mining Co.(1) 75,181
-------------
341,137
-------------
PAPER & FOREST PRODUCTS--0.7%
3,200 Chesapeake Corp. 119,800
-------------
PHARMACEUTICALS--2.5%
1,300 Barr Laboratories, Inc.(1) 51,838
7,200 Bergen Brunswig Corp. Cl A 124,200
7,100 Dura Pharmaceuticals, Inc.(1) 84,312
1,100 Jones Medical Industries, Inc. 43,278
4,700 Roberts Pharmaceutical Corp.(1) 113,975
-------------
417,603
-------------
PRINTING & PUBLISHING--0.6%
2,800 McClatchy Newspapers, Inc. 92,750
-------------
See Notes to Financial Statements
www.americancentury.com 27
Small Cap Quantitative--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
RESTAURANTS--2.2%
10,700 Darden Restaurants, Inc. $ 233,394
1,900 Foodmaker, Inc.(1) 53,912
6,600 Taco Cabana, Inc. Cl A(1) 67,650
-------------
354,956
-------------
RETAIL (APPAREL)--1.4%
8,700 Cato Corp. Cl A 101,138
1,500 Footstar, Inc.(1) 55,781
4,900 Wilsons The Leather Experts Inc.(1) 80,697
-------------
237,616
-------------
RETAIL (GENERAL MERCHANDISE)--1.3%
5,900 Casey's General Stores, Inc. 88,316
3,600 ShopKo Stores, Inc.(1) 130,500
-------------
218,816
-------------
RETAIL (SPECIALTY)--1.9%
2,200 Michaels Stores, Inc.(1) 67,100
1,900 Williams-Sonoma, Inc.(1) 66,144
4,500 Zale Corp.(1) 180,000
-------------
313,244
-------------
RUBBER & PLASTICS--0.4%
2,900 Tupperware Corp. 73,950
-------------
TEXTILES & APPAREL--4.1%
3,700 Fossil, Inc.(1) 178,525
6,200 K-Swiss Inc. Cl A 286,944
3,600 Mohawk Industries, Inc.(1) 109,350
1,500 Timberland Co. (The)(1) 102,094
-------------
676,913
-------------
TRANSPORTATION--2.7%
5,000 Expeditors International of
Washington, Inc. 136,406
2,000 Hertz Corp. Cl A 124,000
10,100 Yellow Corp.(1) 177,697
-------------
438,103
-------------
UTILITIES--4.2%
2,900 AGL Resources Inc. $ 53,469
8,600 Cascade Natural Gas Corp. 163,400
4,700 Central Maine Power Co. 123,081
1,800 E'town Corp. 82,350
2,700 Eastern Enterprises 107,325
3,200 MidAmerican Energy
Holdings Co.(1) 110,800
1,900 Philadelphia Suburban Corp. 43,819
-------------
684,244
-------------
TOTAL COMMON STOCKS 15,722,703
-------------
(Cost $13,768,946)
TEMPORARY CASH INVESTMENTS--4.3%
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.72%, dated 6/30/99,
due 7/1/99 (Delivery value $700,092) 700,000
-------------
(Cost $700,000)
TOTAL INVESTMENT SECURITIES--100.0% $16,422,703
=============
(Cost $14,468,946)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Gain
- -----------------------------------------------------------------------------
2 Russell 2000 September
Futures 1999 $462,000 $13,835
==================================
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percentage of investments in each industry, as applicable
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
28 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED) EQUITY INCOME & SMALL CAP
GROWTH GROWTH QUANTITATIVE
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $1,790,268,699,
$4,626,462,354, and $14,468,946,
respectively) (Note 3) .................... $2,278,357,237 $5,898,930,878 $ 16,422,703
Cash ........................................ 28,755,305 47,512,652 19,490
Receivable for investments sold ............. 29,226,324 78,158,626 231,733
Receivable for variation margin
on futures contracts ...................... 3,358,752 13,212,669 27,645
Dividends and interest receivable ........... 2,232,790 4,966,905 7,250
-------------- -------------- --------------
2,341,930,408 6,042,781,730 16,708,821
-------------- -------------- --------------
LIABILITIES
Payable for investments purchased ........... 18,423,873 80,393,452 454,026
Accrued management fees (Note 2) ............ 1,215,840 3,096,690 11,176
Distribution fees payable (Note 2) .......... 22,508 54,701 --
Service fees payable (Note 2) ............... 22,508 54,701 --
Payable for directors' fees and expenses .... 7,872 20,084 55
-------------- -------------- --------------
19,692,601 83,619,628 465,257
-------------- -------------- --------------
Net Assets .................................. $2,322,237,807 $5,959,162,102 $ 16,243,564
============== ============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ..... $1,816,367,655 $4,666,585,959 $ 14,879,319
Undistributed net investment income ......... 385,270 898,571 16,928
Accumulated undistributed net
realized gain (loss) on investments ....... 15,371,506 12,777,103 (620,275)
Net unrealized appreciation
on investments ............................ 490,113,376 1,278,900,469 1,967,592
-------------- -------------- --------------
$2,322,237,807 $5,959,162,102 $ 16,243,564
============== ============== ==============
Investor Class, $10.00 Par Value
Net assets .................................. $2,199,868,248 $5,622,706,780 $ 16,243,564
Shares outstanding .......................... 90,508,059 176,664,124 3,210,874
Net asset value per share ................... $ 24.31 $ 31.83 $ 5.06
Advisor Class, $10.00 Par Value
Net assets .................................. $ 115,693,246 $ 285,144,738 N/A
Shares outstanding .......................... 4,759,999 8,964,883 N/A
Net asset value per share ................... $ 24.31 $ 31.81 N/A
Institutional Class, $10.00 Par Value
Net assets .................................. $ 6,676,313 $ 51,310,584 N/A
Shares outstanding .......................... 274,677 1,612,046 N/A
Net asset value per share ................... $ 24.31 $ 31.83 N/A
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses, if any;
net gains earned on investments but not yet paid to shareholders or net losses
on investments (known as realized gains or losses); and finally, gains or losses
on securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
www.americancentury.com 29
Statements of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
EQUITY INCOME & SMALL CAP
GROWTH GROWTH QUANTITATIVE
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes
withheld of $186,758,
$450,593, and $114,
respectively) ........................ $ 16,118,792 $ 43,192,336 $ 59,184
Interest ............................... 1,749,117 5,009,476 13,534
------------ ------------ ------------
17,867,909 48,201,812 72,718
------------ ------------ ------------
Expenses (Note 2):
Management fees ........................ 7,325,868 17,266,517 61,357
Distribution fees -- Advisor Class ..... 121,335 234,936 --
Service fees -- Advisor Class .......... 121,335 234,936 --
Directors' fees and expenses ........... 32,085 75,042 207
------------ ------------ ------------
7,600,623 17,811,431 61,564
------------ ------------ ------------
Net investment income .................. 10,267,286 30,390,381 11,154
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain (loss)
on investments ....................... 24,732,744 32,238,198 (585,875)
Change in net unrealized
appreciation on investments .......... 138,912,725 436,390,297 673,491
------------ ------------ ------------
Net realized gain on investments ....... 163,645,469 468,628,495 87,616
------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations ............ $173,912,755 $499,018,876 $ 98,770
============ ============ ============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF OPERATIONS--This statement breaks down how each
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* income earned from investments (dividends and interest)
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
30 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1998
EQUITY GROWTH INCOME & GROWTH
Increase in Net Assets 1999 1998 1999 1998
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ............. $ 10,267,286 $ 15,486,425 $ 30,390,381 $ 40,218,775
Net realized gain on investments .. 24,732,744 35,760,449 32,238,198 142,119,705
Change in net unrealized
appreciation on investments ..... 138,912,725 272,888,031 436,390,297 559,106,533
--------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations ...... 173,912,755 324,134,905 499,018,876 741,445,013
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .................. (10,025,552) (14,886,016) (29,334,267) (41,096,754)
Advisor Class ................... (402,050) (240,053) (816,368) (261,933)
Institutional Class ............. (36,385) (69,448) (408,458) (329,375)
From net realized gains
on investment transactions:
Investor Class .................. (10,812,598) (58,918,572) (11,296,695) (168,684,571)
Advisor Class ................... (475,116) (1,190,628) (375,184) (1,905,461)
Institutional Class ............. (31,956) (244,674) (147,458) (1,110,386)
--------------- --------------- --------------- ---------------
Decrease in net assets
from distributions .............. (21,783,657) (75,549,391) (42,378,430) (213,388,480)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4)
Net increase in net assets from
capital share transactions ...... 62,284,211 1,085,260,447 1,086,851,049 2,088,770,763
--------------- --------------- --------------- ---------------
Net increase in net assets ........ 214,413,309 1,333,845,961 1,543,491,495 2,616,827,296
NET ASSETS
Beginning of period ............... 2,107,824,498 773,978,537 4,415,670,607 1,798,843,311
--------------- --------------- --------------- ---------------
End of period ..................... $ 2,322,237,807 $ 2,107,824,498 $ 5,959,162,102 $ 4,415,670,607
=============== =============== =============== ===============
Undistributed net
investment income ............... $ 385,270 $ 581,971 $ 898,571 $ 1,067,283
=============== =============== =============== ===============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
each fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 31
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
(Continued)
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND PERIOD ENDED DECEMBER 31, 1998
SMALL CAP QUANTITATIVE
Increase in Net Assets 1999 1998(1)
OPERATIONS
Net investment income ........................ $ 11,154 $ 5,774
Net realized loss on investments ............. (585,875) (152)
Change in net unrealized
appreciation on investments ................ 673,491 1,294,101
------------ ------------
Net increase in net assets
resulting from operations .................. 98,770 1,299,723
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains on
investment transactions ................... (34,248) --
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets from
capital share transactions ................. 1,208,388 13,670,931
------------ ------------
Net increase in net assets ................... 1,272,910 14,970,654
NET ASSETS
Beginning of period .......................... 14,970,654 --
------------ ------------
End of period ................................ $ 16,243,564 $ 14,970,654
============ ============
Undistributed net
investment income .......................... $ 16,928 $ 5,774
============ ============
(1) For the period July 31, 1998 (inception) through December 31, 1998.
See Notes to Financial Statements
32 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Quantitative Equity Funds (the corporation)
is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Equity Growth Fund (Equity Growth),
Income & Growth Fund (Income & Growth) and Small Cap Quantitative Fund (Small
Cap Quantitative) (the funds) are three of the six funds issued by the
corporation. Equity Growth seeks capital appreciation by investing in common
stocks. Income & Growth seeks dividend growth, current income and capital
appreciation by investing in common stocks. Small Cap Quantitative seeks
long-term capital appreciation by investing primarily in equity securities of
small companies. Each fund is authorized to issue three classes of shares: the
Investor Class, the Advisor Class and the Institutional Class. The three classes
of shares differ principally in their respective 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. Sale of the Advisor
Class and Institutional Class for Small Cap Quantitative had not commenced as of
the report date. The following significant accounting policies are in accordance
with generally accepted accounting principles; these principles may require the
use of estimates by fund management.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or the mean of
the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FUTURES CONTRACTS -- The funds may enter into stock index futures contracts
in order to manage the funds' exposure to changes in market conditions. One of
the risks of entering into futures contracts may include the possibility that
the changes in value of the contract may not correlate with the changes in value
of the underlying securities. Upon entering into a futures contract, the funds
are required to deposit either cash or securities in an amount equal to a
certain percentage of the contract value (initial margin). Subsequent payments
(variation margin) are made or received daily, in cash, by the funds. The
variation margin is equal to the daily change in the contract value and is
recorded as an unrealized gain or loss. 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 investments and unrealized appreciation
(depreciation) on investments, respectively.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements with
institutions that the funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The funds require that the collateral, represented by securities, received
in a repurchase transaction be transferred to the funds' custodian in a manner
sufficient to enable the funds 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 greater than amounts owed to the
funds under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management agreements with 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 the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid quarterly for the funds. Distributions from net realized gains for the
funds are expected to be declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences 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.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the corporation's
distributor. Certain officers of FDI are also officers of the corporation.
www.americancentury.com 33
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
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,
portfolio insurance, interest, fees and expenses of the Directors who are not
considered "interested persons" as defined in the Investment Company Act of 1940
(including counsel fees) and extraordinary expenses, will be paid by ACIM. The
fee is calculated daily and paid monthly. It consists of an Investment Category
Fee based on the average net assets of the funds in a specific fund's investment
category and a Complex Fee based on the average net assets of all the funds
managed by ACIM. The rates for the Investment Category Fee range from 0.3380% to
0.52000% for Equity Growth and Income & Growth and 0.5380% to 0.7200% for Small
Cap Quantitative. The rates for the Complex Fee (Investor Class) range from
0.2900% to 0.3100%. The Advisor Class is 0.2500% less at each point within the
Complex Fee range. For the six months ended June 30, 1999, the effective annual
Investor Class management fee was 0.68%, 0.68%, and 0.88%, for Equity Growth,
Income & Growth, and Small Cap Quantitative, respectively.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The plan provides that the funds will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the funds. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers. Fees incurred
under the plan during the six months ended June 30, 1999, were $242,670 and
$469,872 for Equity Growth and Income & Growth, respectively.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, and
the corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six
months ended June 30, 1999, were as follows:
SMALL CAP
EQUITY GROWTH INCOME & GROWTH QUANTITATIVE
Purchases $935,578,479 $2,341,752,782 $14,095,106
Proceeds from sales $895,156,103 $1,323,272,529 $12,506,586
On June 30, 1999, the composition of unrealized appreciation and depreciaton
of investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:
SMALL CAP
EQUITY GROWTH INCOME & GROWTH QUANTITATIVE
Appreciation $524,336,234 $1,268,841,854 $2,377,654
Depreciation (38,679,052) (1,787,909) (439,027)
-------------- -------------- -------------
Net $485,657,182 $1,267,053,945 $1,938,627
============== ============== =============
Federal Tax Cost $1,792,700,055 $4,631,876,933 $14,484,076
============== ============== =============
34 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 2,000,000,000 shares to each fund.
Transactions in shares of the funds were as follows:
<TABLE>
<CAPTION>
EQUITY GROWTH INCOME & GROWTH
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C>
Designated shares ......... 1,000,000,000 1,000,000,000
============= =============
Six months ended
June 30, 1999
Sold ...................... 26,975,791 $619,028,182 57,803,351 $1,737,779,484
Issued in reinvestment
of distributions ........ 869,865 19,824,881 1,293,308 38,813,838
Redeemed .................. (26,572,121) (609,669,915) (29,925,594) (901,456,882)
------------- -------------- ------------- ---------------
Net increase .............. 1,273,535 $29,183,148 29,171,065 $875,136,440
============= ============== ============= ===============
Year ended
December 31,1998
Sold ...................... 79,167,360 $1,635,239,405 116,830,264 $3,139,123,789
Issued in reinvestment
of distributions ........ 3,338,986 70,931,709 7,289,584 201,730,676
Redeemed .................. (33,884,304) (694,135,413) (50,483,283) (1,344,449,467)
------------- -------------- ------------- ---------------
Net increase .............. 48,622,042 $1,012,035,701 73,636,565 $1,996,404,998
============= ============== ============= ===============
ADVISOR CLASS
Designated shares ......... 250,000,000 250,000,000
============= =============
Six months ended
June 30, 1999
Sold ...................... 2,209,361 $50,676,796 7,809,929 $233,748,439
Issued in reinvestment
of distributions ........ 36,780 838,194 38,930 1,167,525
Redeemed .................. (699,580) (16,138,310) (1,046,011) (31,247,888)
------------- -------------- ------------- ---------------
Net increase .............. 1,546,561 $35,376,680 6,802,848 $203,668,076
============= ============== ============= ===============
Year ended
December 31, 1998
Sold ...................... 3,460,572 $71,291,106 2,114,996 $57,804,915
Issued in reinvestment
of distributions ........ 63,562 1,365,124 75,830 2,115,059
Redeemed .................. (339,759) (7,034,401) (181,840) (4,869,268)
------------- -------------- ------------- ---------------
Net increase .............. 3,184,375 $65,621,829 2,008,986 $55,050,706
============= ============== ============= ===============
INSTITUTIONAL CLASS
Designated shares ......... 250,000,000 250,000,000
============= =============
Six months ended
June 30, 1999
Sold ...................... 81,779 $ 1,871,157 1,570,590 $47,015,645
Issued in reinvestment
of distributions ........ 2,588 58,873 15,422 461,243
Redeemed .................. (186,936) (4,205,647) (1,303,999) (39,430,355)
------------- -------------- ------------- ---------------
Net increase (decrease) ... (102,569) $(2,275,617) 282,013 $ 8,046,533
============= ============== ============= ===============
Period ended
December 31, 1998(1)
Sold ...................... 750,895 $15,738,872 2,515,749 $67,794,606
Issued in reinvestment
of distributions ........ 11,999 254,904 48,266 1,333,067
Redeemed .................. (385,648) (8,390,859) (1,233,982) (31,812,614)
------------- -------------- ------------- ---------------
Net increase .............. 377,246 $7,602,917 1,330,033 $37,315,059
============= ============== ============= ===============
</TABLE>
(1) January 2, 1998 (commencement of sale) through December 31, 1998 for Equity
Growth and January 28, 1998 (commencement of sale) through December 31, 1998
for Income & Growth.
www.americancentury.com 35
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
The corporation is authorized to issue 2,000,000,000 shares to each fund.
Transactions in shares of the funds were as follows:
SMALL CAP QUANTITATIVE
SHARES AMOUNT
INVESTOR CLASS
Designated shares .......................... 1,000,000,000
==============
Six months ended June 30, 1999
Sold ....................................... 2,252,237 $ 10,608,156
Issued in reinvestment of distributions .... 7,597 33,508
Redeemed ................................... (2,030,925) (9,433,276)
-------------- --------------
Net increase ............................... 228,909 $ 1,208,388
============== ==============
Period ended December 31,1998(1)
Sold ....................................... 4,340,662 $ 19,938,978
Issued in reinvestment of distributions .... -- --
Redeemed ................................... (1,358,697) (6,268,047)
-------------- --------------
Net increase ............................... 2,981,965 $ 13,670,931
============== ==============
(1) July 31, 1998 (inception) through December 31, 1998.
- --------------------------------------------------------------------------------
5. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $570,000,000 bank line of credit agreement with Chase Manhattan Bank.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.40%. The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. The funds did not borrow from the line during the six
months ended June 30, 1999.
- --------------------------------------------------------------------------------
6. FUND EVENTS
The following name changes became effective March 1, 1999:
=====================================================================
NEW NAME FORMER NAME
=====================================================================
FUND: Equity Growth Fund American Century Equity Growth
FUND: Income & Growth Fund American Century Income & Growth
FUND: Small Cap Quantitative Fund American Century Small Cap Quantitative
36 1-800-345-2021
Equity Growth--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
1999(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................ $ 22.71 $ 19.04 $ 15.96 $ 14.25 $ 11.53 $ 12.12
----------- ----------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income .............. 0.11(2) 0.22(2) 0.27(2) 0.27 0.26 0.30
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. 1.72 4.53 5.36 3.55 3.70 (0.33)
----------- ----------- ---------- ---------- ---------- ---------
Total From Investment Operations ... 1.83 4.75 5.63 3.82 3.96 (0.03)
----------- ----------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ......... (0.11) (0.20) (0.24) (0.26) (0.23) (0.30)
From Net Realized Gains on
Investment Transactions ............ (0.12) (0.88) (2.31) (1.85) (1.01) (0.26)
----------- ----------- ---------- ---------- ---------- ---------
Total Distributions ................ (0.23) (1.08) (2.55) (2.11) (1.24) (0.56)
----------- ----------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period ....... $ 24.31 $ 22.71 $ 19.04 $ 15.96 $ 14.25 $ 11.53
=========== =========== ========== ========== ========== =========
Total Return(3) .................... 8.11% 25.45% 36.06% 27.34% 34.56% (0.23)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.68%(4) 0.69% 0.67% 0.63% 0.71% 0.75%
Ratio of Net Investment Income
to Average Net Assets ................ 0.94%(4) 1.07% 1.39% 1.74% 1.96% 2.26%
Portfolio Turnover Rate .............. 42% 89% 161% 131% 126% 94%
Net Assets, End of Period
(in thousands) ....................... $ 2,199,868 $ 2,026,304 $ 773,425 $ 274,433 $ 159,450 $ 97,437
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(4) Annualized.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 37
Equity Growth--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
1999(1) 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 22.70 $ 19.04 $ 21.61
----------- ----------- -----------
Income From Investment Operations
Net Investment Income(3) ............. 0.08 0.16 0.05
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... 1.74 4.54 (0.25)
----------- ----------- -----------
Total From Investment Operations ..... 1.82 4.70 (0.20)
----------- ----------- -----------
Distributions
From Net Investment Income ........... (0.09) (0.16) (0.06)
From Net Realized Gains on
Investment Transactions .............. (0.12) (0.88) (2.31)
----------- ----------- -----------
Total Distributions .................. (0.21) (1.04) (2.37)
----------- ----------- -----------
Net Asset Value, End of Period ......... $ 24.31 $ 22.70 $ 19.04
=========== =========== ===========
Total Return(4) ...................... 8.05% 25.14% (0.50)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 0.93%(5) 0.94% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets .................. 0.69%(5) 0.82% 1.14%(5)
Portfolio Turnover Rate ................ 42% 89% 161%
Net Assets, End of Period
(in thousands) ......................... $ 115,693 $ 72,954 $ 553
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) October 9, 1997 (commencement of sale) through December 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
38 1-800-345-2021
Equity Growth--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Institutional Class
1999(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ......... $ 22.71 $ 19.06
--------- ---------
Income From Investment Operations
Net Investment Income(3) ................... 0.13 0.27
Net Realized and Unrealized Gain
on Investment Transactions ................. 1.72 4.51
--------- ---------
Total From Investment Operations ........... 1.85 4.78
--------- ---------
Distributions
From Net Investment Income ................. (0.13) (0.25)
From Net Realized Gains on
Investment Transactions .................... (0.12) (0.88)
--------- ---------
Total Distributions ........................ (0.25) (1.13)
--------- ---------
Net Asset Value, End of Period ............... $ 24.31 $ 22.71
========= =========
Total Return(4) ............................ 8.22% 25.59%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................ 0.48%(5) 0.49%(5)
Ratio of Net Investment Income
to Average Net Assets ........................ 1.14%(5) 1.27%(5)
Portfolio Turnover Rate ...................... 42% 89%
Net Assets, End of Period
(in thousands) ............................... $ 6,676 $ 8,566
(1) Six months ended June 30, 1999 (unaudited).
(2) January 2, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
www.americancentury.com 39
Income & Growth--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
1999(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................. $ 29.25 $ 24.31 $ 20.16 $ 17.81 $ 13.92 $ 15.08
----------- ----------- ----------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income ............... 0.18(2) 0.36(2) 0.43(2) 0.44 0.42 0.44
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. 2.64 6.23 6.40 3.79 4.64 (0.53)
----------- ----------- ----------- ---------- ---------- ----------
Total From Investment Operations .... 2.82 6.59 6.83 4.23 5.06 (0.09)
----------- ----------- ----------- ---------- ---------- ----------
Distributions
From Net Investment Income .......... (0.17) (0.35) (0.39) (0.44) (0.42) (0.43)
From Net Realized Gains on
Investment Transactions ............. (0.07) (1.30) (2.29) (1.44) (0.75) (0.64)
----------- ----------- ----------- ---------- ---------- ----------
Total Distributions ................. (0.24) (1.65) (2.68) (1.88) (1.17) (1.07)
----------- ----------- ----------- ---------- ---------- ----------
Net Asset Value, End of Period ........ $ 31.83 $ 29.25 $ 24.31 $ 20.16 $ 17.81 $ 13.92
=========== =========== =========== ========== ========== ==========
Total Return(3) ..................... 9.69% 27.67% 34.52% 24.15% 36.88% (0.55)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.68%(4) 0.69% 0.65% 0.62% 0.67% 0.73%
Ratio of Net Investment Income
to Average Net Assets ................. 1.18%(4) 1.31% 1.81% 2.32% 2.61% 2.96%
Portfolio Turnover Rate ............... 27% 86% 102% 92% 70% 68%
Net Assets, End of Period
(in thousands) ........................ $ 5,622,707 $ 4,313,575 $ 1,795,124 $ 717,695 $ 373,701 $ 224,939
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
40 1-800-345-2021
Income & Growth--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
1999(1) 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .. $ 29.22 $ 24.30 $ 26.36
----------- ----------- -----------
Income From Investment Operations
Net Investment Income(3) ............ 0.14 0.31 0.01
Net Realized and Unrealized Gain
on Investment Transactions .......... 2.63 6.22 0.25
----------- ----------- -----------
Total From Investment Operations .... 2.77 6.53 0.26
----------- ----------- -----------
Distributions
From Net Investment Income .......... (0.11) (0.31) (0.03)
From Net Realized Gains on
Investment Transactions ............. (0.07) (1.30) (2.29)
----------- ----------- -----------
Total Distributions ................. (0.18) (1.61) (2.32)
----------- ----------- -----------
Net Asset Value, End of Period ........ $ 31.81 $ 29.22 $ 24.30
=========== =========== ===========
Total Return(4) ..................... 9.53% 27.37% 1.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.93%(5) 0.94% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ................. 0.93%(5) 1.06% 1.22%(5)
Portfolio Turnover Rate ............... 27% 86% 102%
Net Assets, End of Period
(in thousands) ........................ $ 285,145 $ 63,169 $ 3,720
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) December 15, 1997 (commencement of sale) through December 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
www.americancentury.com 41
Income & Growth--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Institutional Class
1999(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ....... $ 29.27 $ 24.29
---------- ----------
Income From Investment Operations
Net Investment Income(3) ................. 0.21 0.39
Net Realized and Unrealized Gain
on Investment Transactions ............... 2.65 6.26
---------- ----------
Total From Investment Operations ......... 2.86 6.65
---------- ----------
Distributions
From Net Investment Income ............... (0.23) (0.37)
From Net Realized Gains on
Investment Transactions .................. (0.07) (1.30)
---------- ----------
Total Distributions ...................... (0.30) (1.67)
---------- ----------
Net Asset Value, End of Period ............. $ 31.83 $ 29.27
========== ==========
Total Return(4) .......................... 9.82% 27.87%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................... 0.48%(5) 0.49%(5)
Ratio of Net Investment Income
to Average Net Assets ...................... 1.38%(5) 1.51%(5)
Portfolio Turnover Rate .................... 27% 86%
Net Assets, End of Period
(in thousands) ............................. $ 51,311 $ 38,926
(1) Six months ended June 30, 1999 (unaudited).
(2) January 28, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
42 1-800-345-2021
Small Cap Quantitative--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Investor Class
1999(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........ $ 5.02 $ 5.00
---------- ----------
Income From Investment Operations
Net Realized and Unrealized Gain
on Investment Transactions ................ 0.05 0.02
---------- ----------
Distributions
From Net Realized Gains on
Investment Transactions ................... (0.01) --
---------- ----------
Net Asset Value, End of Period .............. $ 5.06 $ 5.02
========== ==========
Total Return(3) ........................... 1.06% 0.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....................... 0.88%(4) 0.94%(4)
Ratio of Net Investment Income
to Average Net Assets ....................... 0.16%(4) 0.20%(4)
Portfolio Turnover Rate ..................... 91% 30%
Net Assets, End of Period
(in thousands) .............................. $ 16,244 $ 14,971
(1) Six months ended June 30, 1999 (unaudited).
(2) July 31, 1998 (inception) through December 31, 1998.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
www.americancentury.com 43
Share Class and Retirement Account Information
- --------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the funds: Investor
Class, Advisor Class, and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies, and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
is 0.25% higher than the total expense ratio of the Investor Class.
INSTITUTIONAL CLASS shares are available to endowments, foundations,
defined-benefit pension plans, or financial intermediaries serving these
investors. This class recognizes the relatively lower cost of serving
institutional customers and others who invest at least $5 million 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 the Institutional Class is 0.20% less than the
total expense ratio of the Investor Class shares. The Advisor Class and
Institutional Class had not commenced as of June 30, 1999, for the Small Cap
Quantitative fund.
All classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid from the date of
receipt at American Century. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
44 1-800-345-2021
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century's quantitative equity funds are managed using computer
models as key tools in making investment decisions. A stock-ranking model
analyzes a sizable universe of stocks based on their expected return. The model
looks at both growth and value measures such as cash flow, earnings growth, and
price/earnings ratio. Once the stocks are ranked, another model creates
portfolios that balance high-ranking stocks with an overall risk level that is
comparable to each fund's benchmark index.
EQUITY GROWTH seeks capital appreciation by investing in a diversified
portfolio of common stocks. Its goal is to achieve a total return that exceeds
the total return of the S&P 500.
INCOME & GROWTH seeks current income and capital appreciation by investing
in a diversified portfolio of common stocks. Its goal is to achieve a total
return that exceeds the total return of the S&P 500. The fund's management team
also targets a dividend yield that is higher than the yield of the S&P 500.
SMALL CAP QUANTITATIVE seeks capital appreciation by investing in the
common stocks of smaller companies. Its goal is to achieve a total return that
exceeds the total return of the S&P SmallCap 600. Historically, small-cap stocks
have been more volatile than the stocks of larger, more-established companies.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 is composed of 500 large-capitalization stocks traded on
domestic exchanges. It is considered a broad measure of U.S. stock performance.
The S&P MIDCAP 400 is composed of 400 mid-capitalization stocks traded on
domestic exchanges. It is considered a broad measure of mid-sized stock
performance.
The S&P SMALLCAP 600 is composed of 600 small-capitalization stocks traded
on domestic exchanges. It is considered a broad measure of small-company stock
performance.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods of less than one year.
The Lipper categories for the quantitative equity funds are:
GROWTH FUNDS (Equity Growth) --funds that normally invest in companies
whose long-term earnings are expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indices.
GROWTH & INCOME FUNDS (Income & Growth) --funds that combine a
growth-of-earnings orientation and an income requirement for level and/or rising
dividends.
SMALL CAP FUNDS (Small Cap Quantitative) --funds that limit their
investments on the basis of the size of the company.
[right margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
JOHN SCHNIEDWIND
JEFF TYLER
BILL MARTIN
KURT BORGWARDT
www.americancentury.com 45
Glossary
- --------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 37-43.
PORTFOLIO STATISTICS
* NUMBER OF COMPANIES --the number of different companies held by the fund on a
given date.
* DIVIDEND YIELD --a percentage return calculated by dividing the fund's
dividend distributions over the past year by its current share price.
* PRICE/EARNINGS (P/E) RATIO --a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share are calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
* PORTFOLIO TURNOVER --the percentage of the fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* EXPENSE RATIO --the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
EQUITY TERMS
* BLUE CHIP STOCKS --stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* GROWTH STOCKS --generally considered to be stocks of companies that have
experienced above-average earnings growth and appear likely to continue such
growth. These stocks often sell at high P/E ratios. Examples can include the
stocks of technology, healthcare, and consumer goods companies.
* VALUE STOCKS --generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
* LARGE-CAPITALIZATION (LARGE-CAP) STOCKS --generally considered to be stocks of
larger-sized companies that make up the Dow Jones Industrial Average and the S&P
500.
* MEDIUM-CAPITALIZATION (MID-CAP) STOCKS --generally considered to be stocks of
mid-sized companies that make up the S&P MidCap 400.
* SMALL-CAPITALIZATION (SMALL-CAP) STOCKS --generally considered to be stocks of
smaller-sized companies that make up the S&P SmallCap 600.
46 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income,
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
www.americancentury.com 47
Notes
- --------------------------------------------------------------------------------
48 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Tax-Managed Value
Strategic Allocation -- Income & Growth
Moderate Value
Strategic Allocation -- Equity Income
Conservative
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
New Opportunities Global Gold Emerging Markets
Giftrust(reg.tm) International Discovery
Vista International Growth
Heritage Global Growth
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
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 BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9908 Funds Distributor, Inc.
SH-SAN-17125 (c)1999 American Century Services Corporation
<PAGE>
[front cover]
JUNE 30, 1999
SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY
[graphic of stairs]
- -----------------------
GLOBAL GOLD
GLOBAL NATURAL RESOURCES
[american century logo(reg.sm)]
American
Century
[inside front cover]
Y2K TESTING EFFORTS PAY DIVIDENDS IN PREPAREDNESS
- --------------------------------------------------------------------------------
Y2K, short for the year 2000, refers more specifically to the date change from
December 31, 1999 to January 1, 2000. This date change is significant for
computers because many were originally programmed to process dates with
two-character years -- 99 instead of 1999.
When the calendar rolls to 2000, this can create problems for computers
programmed this way because they will read the date as "00," and may interpret
it as 1900. Most companies have been working to reprogram their computer systems
with four-digit years. Reprogramming is very labor-intensive and requires
testing to ensure that there are no errors and that all lines of code were
successfully changed.
Recognizing the possible impact of the Y2K issue, our senior-level Steering
Committee, programmers, business partners and Y2K team have been working
diligently to make January 1, 2000 a non-event for American Century investors.
Currently, all of our computer systems have been modified, tested and returned
to production. We have an ongoing commitment to testing our systems with our
vendors and business partners and within the industry throughout the rest of the
year.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. American Century transactions with our partner
firms were processed free of Y2K bugs. We also participated in the Market Data
Test conducted by the SIA and Financial Information Forum in May. Again, the
computer scripts were executed successfully with no Y2K-related errors.
In addition to our testing schedule, our Y2K team has developed contingency
plans. These plans will minimize the impact on our investors and help us
maintain operations in the event of any Y2K-related incidents. We will conduct
practice drills of contingency scenarios during the rest of 1999 and refine
those plans to respond quickly and effectively so that the date change is as
seamless as possible for investors. We expect the year 2000 to be business as
usual at American Century.
Year 2000 Readiness Disclosure
[left margin]
GLOBAL GOLD
(BGEIX)
- -------------------------
GLOBAL NATURAL RESOURCES
(BGRIX)
- -------------------------
Turn to the inside back cover of this report to see a list of American Century
funds classified by objective and risk.
MINIMIZE YOUR MUTUAL FUND TAX HIT
American Century's newest equity fund, Tax-Managed Value, is designed for
long-term growth and to minimize the tax hit you take on your mutual fund
investments each year. The fund is managed to keep taxable distributions to a
minimum by using the following strategies:
* BUY AND HOLD --Low portfolio turnover helps limit realized capital gains
and takes advantage of long-term capital gains tax rates.
* OFFSET GAINS --When gains are realized in the portfolio, they are offset
with capital losses from securities sold in that tax year or losses
carried over from previous years.
* SELL HIGHER-COST SHARES FIRST --Selling shares that cost the most first
helps minimize the taxable gains incurred from a sale.
Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
During the six months ended June 30, 1999, we witnessed a surprising
turnaround in the global economic outlook. When we last addressed you in the
annual report for the American Century Global Gold and Global Natural Resources
funds, the Federal Reserve and a number of other world central banks had
recently cut short-term interest rates to bolster the global economy and help
stabilize markets worldwide.
This came after economic and financial crises in Asia, Russia, and Latin
America. Slower global growth sent prices for many commodities to multi-year
lows in 1998.
But global economic conditions improved, and by the second quarter of 1999,
overseas economies had bottomed out or were on the mend. Better economic growth
and reduced supply generally helped commodity prices stabilize. That also led to
positive performance for global natural resource-related stocks. However, gold
and gold shares continued to be hampered by supply concerns caused by world
central bank sales.
At American Century, we continued to expand our investment team, which has
doubled over the past three years. We're committed to building and maintaining a
talented management group.
Elsewhere on the corporate front, here's an update on our preparations for
Y2K.* Our senior level Year 2000 Steering Committee, computer programmers,
business partners, and Y2K team have been working diligently to make January 1,
2000, a non-event for American Century investors. All of our computer systems
have been modified, tested, and returned to production. We have an ongoing
commitment to testing our systems with vendors, business partners, and the
mutual fund industry through the rest of the year.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. We also participated in the Market Data Test
conducted by the SIA and Financial Information Forum in May. Again, the computer
scripts were executed successfully with no Y2K-related errors.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
GLOBAL GOLD
Performance Information .................................................. 5
Management Q&A ........................................................... 6
Portfolio at a Glance .................................................... 6
Top Ten Holdings ......................................................... 7
Geographic Composition ................................................... 8
Schedule of Investments .................................................. 9
GLOBAL NATURAL RESOURCES
Performance Information .................................................. 11
Management Q&A ........................................................... 12
Industry Weightings ...................................................... 12
Portfolio at a Glance .................................................... 12
Top Ten Holdings ......................................................... 13
Geographic Composition ................................................... 13
Economic Growth
Forecasts ................................................................ 14
Schedule of Investments .................................................. 15
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ........................................................... 17
Statements of Operations ................................................. 18
Statements of Changes
in Net Assets ......................................................... 19
Notes to Financial
Statements ............................................................ 20
Financial Highlights ..................................................... 24
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................... 28
Background Information
Investment Philosophy
and Policies ....................................................... 29
Comparative Indices ................................................... 29
Lipper Rankings ....................................................... 29
Investment Team
Leaders ............................................................ 29
Glossary ................................................................. 30
* This letter includes a Year 2000 Readiness Disclosure.
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
Gold
* Gold prices were down 9% for the six months ended June 30, 1999. World
central bank gold sales were the primary reason for the decline.
* The Bank of England auctioned the first of its gold reserves in early July,
sending the price of gold bullion to its lowest level in 20 years.
* A poor performance by gold made for a difficult six months for gold shares.
For the six months, the FT-SE Gold Mines Index was down a little more than
5%.
* By region, African gold shares held up best, while North American gold
companies were down 4.6%. Australian gold stocks performed worst, their
returns limited by the strength of the Australian currency relative to the
U.S. dollar.
Natural Resources
* Commodity prices generally bottomed out or rebounded during the first half
of 1999. Better global growth was key to supporting commodity prices.
* Oil prices rose dramatically because large oil-producing countries did a
good job of cutting back on supply.
* Higher oil prices led to solid returns for energy stocks. Smaller oil
exploration and service companies, which are closely tied to changes in the
price of oil, performed best.
* Basic materials stocks performed very well, particularly in the second
quarter, when many investors rotated out of the largest growth stocks and
into more attractively valued cyclical stocks, such as those of paper,
metal, and mining companies.
GLOBAL GOLD
* The fund's return reflected the generally poor environment for gold and gold
shares over the past six months.
* We reduced our stake in Barrick Gold, the fund's largest holding, to better
diversify the portfolio.
* Because of high transaction costs and volatile asset flows caused by
short-term traders, we've added a 2% redemption fee for Global Gold fund
shares purchased after June 30, 1999 (see page 7 for more details).
* The outlook for gold and gold shares is relatively poor because the specter
of world central bank gold sales continues to weigh on the price of gold.
GLOBAL NATURAL RESOURCES
* For the six months ended June 30, Global Natural Resources produced solid
returns, thanks to the improved outlook for the global economy and
stable-to-higher prices for many commodities.
* The fund lagged its Lipper group and benchmark because we overweighted
energy shares, which underperformed basic materials stocks.
* We modified the fund's benchmark slightly, capping a stock's representation
at 5% of the index. We made the change to diversify the portfolio and reduce
its concentration in a few of the largest energy stocks.
* We have a positive outlook for commodities and global commodity-based
industries. That's because global growth seems to be improving.
[left margin]
GLOBAL GOLD(1)
(BGEIX)
TOTAL RETURNS: AS OF 6/30/99
6 Months -7.84%(2)
1 Year -11.93%
INCEPTION DATE: 8/17/88
NET ASSETS: $206.3 million(3)
GLOBAL NATURAL RESOURCES(1)
(BGRIX)
TOTAL RETURNS: AS OF 6/30/99
6 Months 17.83%(2)
1 Year 9.08%
INCEPTION DATE: 9/15/94
NET ASSETS: $48.7 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
Investment terms are defined in the Glossary on pages 30-31.
2 1-800-345-2021
Market Perspective from Mark Mallon
- --------------------------------------------------------------------------------
/photo of Mark Mallon/
Mark Mallon, head of growth and income equity, specialty, and asset allocation
funds at American Century
GOLD BULLION
The price of gold bullion continued to decline in the first half of 1999,
down about 9% through June 30. Gold fell further to a 20-year low in the first
week of July after the Bank of England auctioned off the first of its gold
reserves.
Despite such low prices, the backdrop of mine supply and fabrication demand
for gold remains surprisingly positive. Gold demand surged early in 1999, up
about two-thirds over the last three months of 1998 according to the World Gold
Council. Better economic growth in Europe and Asia was behind the surge in
demand.
In terms of mine supply, some gold producers have begun to cut back on
higher-cost production, which improves the fundamentals for the gold market. The
World Gold Council estimates that demand currently outstrips mine supply by
about 1,000 metric tons.
The supply shortfall is being made up by above-ground supply, particularly
from world central bank reserves. World central banks are estimated to hold more
than a fifth of all above-ground gold. In mid-March, Switzerland announced a
plan to sell half its gold reserves. The same month, the International Monetary
Fund rolled out a plan to sell gold to help fund a debt relief plan for poor
countries. These actions are bad for market sentiment because the sales mean
gold is viewed less and less as an asset of last resort and more like a typical
commodity.
GOLD STOCKS
Returns for gold stocks were negative, reflecting the poor performance of
the underlying metal. Lower gold prices squeeze profits for gold companies,
bringing down their stock prices. For the six months ended June 30, the FT-SE
Gold Mines Index fell a little more than 5%.
By region, African gold shares held up best. With gold trading so low, some
African companies moved to cut costs by laying off workers and closing mines.
African gold stocks were also helped by weakness in the South African currency,
the rand, which declined against the dollar. Gold is priced in dollars, so South
African companies book more profits when their currency declines relative to the
dollar.
The opposite happened to Australian gold shares--the Australian currency
strengthened against the dollar, limiting profits in local currency terms. In
addition, operational difficulties weighed on the stock prices of two big
Australian gold companies.
North American gold stocks produced negative returns for the six months,
with larger companies holding up best. Smaller gold exploration companies are
closely tied to the performance of the underlying metal, so they tend to
underperform the larger, more-diversified gold companies when gold prices
decline.
[right margin]
"THE PRICE OF GOLD BULLION CONTINUED TO DECLINE IN THE FIRST HALF OF 1999, DOWN
ABOUT 9% THROUGH JUNE 30."
MAJOR GOLD INDEX RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
FT-SE GOLD MINES INDEX -5.29%
Africa -1.06%
North America -4.60%
Australia -16.29%
Spot Price of Gold Bullion -8.85%
Source: Bloomberg Financial Markets
"RETURNS FOR GOLD STOCKS WERE NEGATIVE, REFLECTING THE POOR PERFORMANCE OF THE
UNDERLYING METAL."
www.americancentury.com 3
Market Perspective from Mark Mallon
- --------------------------------------------------------------------------------
(Continued)
COMMODITIES
Commodity prices generally stabilized during the first six months of 1999
after reaching multi-year lows in 1998. For the six months, the Commodity
Research Bureau Commodities Index was down about 3.5%. Meanwhile, the Goldman
Sachs Commodities Index rose about 15%. The reason for the disparity is that the
Goldman index is more heavily weighted toward energy, and oil prices rose
sharply during the six months.
Better global economic growth so far this year helped support prices.
Global growth is key for commodity markets because it helps determine the level
of commodities demand. In the second quarter, Japan and many Southeast Asian
countries reported stronger-than-expected economic figures. In addition, many
analysts upwardly revised their global economic growth projections.
While demand for many commodities firmed up, too much supply kept a lid on
prices. The dramatic slowdown in the world economy last year led to the buildup
of big surpluses for many commodities. That's particularly true of basic
materials, including steel, copper, and aluminum.
Unlike most commodities, oil prices rose dramatically during the six
months. Reduced supply played an important part in the increase. OPEC and many
of the world's other leading oil-producing countries combined to reduce oil
production by more than two million barrels a day. Meanwhile, demand for crude
oil remained strong. Less supply and greater demand helped crude oil prices
rebound from a 12-year low near $10 a barrel in late 1998 to more than $19 a
barrel by June.
NATURAL RESOURCES STOCKS
Stocks of natural resource-related companies bounced back sharply in the
first half of 1999. Shares of basic material companies outperformed those of
energy companies for the six months (see the graph at top left).
Energy stocks benefited from the rebound in oil prices. Large, integrated
oil companies performed well but lagged the shares of mid- and small-sized oil
exploration and service companies (see the graph at bottom left). That's because
the performance of these smaller stocks is more closely tied to the price of
crude oil, which has nearly doubled since late 1998.
So far in 1999, basic materials stocks also have performed much better than
in 1998. The rebound occurred during the second quarter, when the outlook for
the global economy improved. Investors rotated out of large, high-priced growth
stocks and into more attractively valued cyclical stocks. Cyclical stocks are
those that closely track the health of the economy and include the shares of
paper, metal, and mining companies.
[left margin]
"BETTER GLOBAL ECONOMIC GROWTH SO FAR THIS YEAR HELPED SUPPORT PRICES."
[line graph - data below]
ENERGY & BASIC MATERIALS STOCKS
(PERFORMANCE OF $1)
Basic Materials Energy
01-Jan-1999 $1.00 $1.00
08-Jan-1999 $1.05 $0.96
15-Jan-1999 $1.03 $0.92
22-Jan-1999 $0.98 $0.91
29-Jan-1999 $0.99 $0.88
05-Feb-1999 $1.03 $0.92
12-Feb-1999 $1.01 $0.90
19-Feb-1999 $0.98 $0.87
26-Feb-1999 $0.99 $0.88
05-Mar-1999 $1.00 $0.92
12-Mar-1999 $1.03 $0.98
19-Mar-1999 $1.08 $1.01
26-Mar-1999 $1.07 $1.00
02-Apr-1999 $1.08 $1.00
09-Apr-1999 $1.11 $1.02
16-Apr-1999 $1.27 $1.09
23-Apr-1999 $1.26 $1.08
30-Apr-1999 $1.30 $1.14
07-May-1999 $1.32 $1.14
14-May-1999 $1.27 $1.10
21-May-1999 $1.24 $1.12
28-May-1999 $1.12 $1.10
04-Jun-1999 $1.16 $1.11
11-Jun-1999 $1.22 $1.14
18-Jun-1999 $1.24 $1.15
25-Jun-1999 $1.21 $1.11
Source: FactSet
[line graph - data below]
EXPLORATION & PRODUCTION STOCKS VS.
INTEGRATED OIL STOCKS (PERFORMANCE OF $1)
Exploration & Integrated
Production Stocks Oil Stocks
01-Jan-1999 $1.00 $1.00
08-Jan-1999 $1.09 $0.93
15-Jan-1999 $1.04 $0.89
22-Jan-1999 $0.96 $0.88
29-Jan-1999 $0.95 $0.85
05-Feb-1999 $0.96 $0.89
12-Feb-1999 $0.90 $0.87
19-Feb-1999 $0.83 $0.85
26-Feb-1999 $0.82 $0.84
05-Mar-1999 $0.91 $0.89
12-Mar-1999 $1.05 $0.95
19-Mar-1999 $1.07 $0.97
26-Mar-1999 $1.13 $0.96
02-Apr-1999 $1.11 $0.96
09-Apr-1999 $1.12 $1.00
16-Apr-1999 $1.25 $1.06
23-Apr-1999 $1.27 $1.04
30-Apr-1999 $1.35 $1.11
07-May-1999 $1.39 $1.10
14-May-1999 $1.37 $1.06
21-May-1999 $1.35 $1.08
28-May-1999 $1.34 $1.06
04-Jun-1999 $1.37 $1.07
11-Jun-1999 $1.42 $1.08
18-Jun-1999 $1.46 $1.10
25-Jun-1999 $1.46 $1.05
Source: FactSet
4 1-800-345-2021
Global Gold--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 8/17/88) ADVISOR CLASS (INCEPTION 5/6/98)
GLOBAL FUND MSCI WORLD GOLD-ORIENTED FUNDS(2) GLOBAL FUND MSCI WORLD
GOLD BENCHMARK STOCK INDEX AVERAGE RETURN FUND'S RANKING GOLD BENCHMARK STOCK INDEX
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -7.84% -6.13% 8.51% -3.12% -- -7.85% -6.13% 8.51%
1 YEAR -11.93% -7.06% 15.67% -5.17% 35 OUT OF 43 -12.12% -7.06% 15.67%
=====================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS -23.84% -22.86% 18.29% -22.22% 24 OUT OF 36 -- -- --
5 YEARS -13.42% -13.10% 16.75% -12.12% 19 OUT OF 27 -- -- --
10 YEARS -4.33% -3.62% 11.48% -4.21% 15 OUT OF 21 -- -- --
LIFE OF FUND -4.89% -3.95%(3) 12.16%(3) -4.23%(4) 14 OUT OF 19(4) -26.62% -16.09%(5) 16.92%(5)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 8/31/88, the date nearest the class's inception for which data are
available.
(4) Since 8/18/88, the date nearest the class's inception for which data are
available.
(5) Since 5/31/98, the date nearest the class's inception for which data are
available.
See pages 28-30 for more information about share classes, returns, the fund's
benchmark, and Lipper fund rankings.
[mountain graph - data below]
PERFORMANCE OF $10,000 OVER 10 YEARS
Value on 6/30/1999
MSCI World Stock Index $29,638
Fund Benchmark $6,956
Global Gold $6,424
MSCI World
Global Gold Stock Index Fund Benchmark
DATE VALUE VALUE VALUE
6/30/1989 $10,000 $10,000 $10,000
6/30/1990 $10,981 $10,709 $11,270
6/30/1991 $9,920 $10,184 $10,258
6/30/1992 $9,071 $10,614 $9,477
6/30/1993 $13,827 $12,392 $14,599
6/30/1994 $13,201 $13,661 $13,965
6/30/1995 $14,014 $15,118 $14,708
6/30/1996 $14,565 $17,906 $15,154
6/30/1997 $10,682 $21,894 $10,467
6/30/1998 $7,293 $25,623 $7,485
6/30/1999 $6,424 $29,638 $6,956
$10,000 investment made 6/30/99
The graph at left shows the performance of a $10,000 investment in the fund over
10 years, while the graph below shows the fund's year-by-year performance. The
MSCI World Stock Index and the fund benchmark are provided for comparison.
Global Gold's returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the returns of the indices do not.
These graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). Past performance does not guarantee future results. Investment return
and principal value will fluctuate, and redemption value may be more or less
than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED JUNE 30)
Global Gold Fund Benchmark
DATE RETURN RETURN
6/30/1990 9.81% 12.70%
6/30/1991 -9.66% -8.98%
6/30/1992 -8.56% -7.61%
6/30/1993 52.43% 54.04%
6/30/1994 -4.53% -4.34%
6/30/1995 6.16% 5.32%
6/30/1996 3.93% 3.03%
6/30/1997 -26.66% -30.93%
6/30/1998 -31.72% -28.49%
6/30/1999 -11.93% -7.06%
www.americancentury.com 5
Global Gold--Q&A
- --------------------------------------------------------------------------------
/photo of Bill Martin/
An interview with Bill Martin, a portfolio manager on the Global Gold
investment team.
HOW DID GLOBAL GOLD PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1999?
The portfolio's return reflected the poor performance of gold and gold
shares. For the first half of the year, Global Gold had a return of -7.84%,*
while the 43 gold-oriented funds tracked by Lipper Inc. had an average return of
- -3.12%. The fund's custom benchmark--which is about two-thirds North American,
20% or so African, and about 10% Australian gold stocks--returned -6.13% for the
same period. (See the previous page for additional performance comparisons).
WHY DID GLOBAL GOLD UNDERPERFORM THE LIPPER GROUP?
We manage Global Gold as more of a pure play on the gold market than do
many of the funds in the Lipper group. Because they tend to hold more non-gold
stocks than we do, they often outperform when gold falls. But that also means we
tend to do better when gold prices rise, as happened in April.
Unfortunately, news of the intended gold sales by the Bank of England took
the wind out of the market's sails in May (see Mark Mallon's discussion of the
gold market on page 3 for more details). Financial Research Corp. estimates
investors pulled almost $200 million from gold funds after the announcement in
May. The total capitalization of the gold market is only about $30 billion--only
a little bigger than Internet company Yahoo! alone--so volatile asset flows can
have a big impact on gold shares. Not only is the market relatively small, but
it's also thinly traded, which means moving in and out of these stocks can be
costly and exacerbate losses.
ARE HIGH TRANSACTION COSTS AND VOLATILE FUND FLOWS WHY AMERICAN CENTURY APPLIED
A 2% REDEMPTION FEE TO GLOBAL GOLD STARTING JUNE 30, 1999?
Yes. Short-term market timers increase the fund's transaction costs, which
are borne by all shareholders. The fee means we're just asking day traders to
pay their fair share of the cost of doing business in gold. Here's how the
redemption fee works: Shares of Global Gold that are purchased after June 30,
1999, and are redeemed or exchanged within 180 days of purchase will be subject
to a 2% redemption fee. Shares will be redeemed on a first-in/ first-out basis.
Here are the most important points for existing shareholders. First, all
monies invested in the fund prior to June 30, 1999 will be grandfathered and
will not be subject to the redemption fee. Second, the fee is retained by the
fund to benefit long-term shareholders. The policy is intended to encourage
long-term investment in the fund, as
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"THE PORTFOLIO'S RETURN REFLECTS THE POOR PERFORMANCE OF GOLD AND GOLD SHARES
FOR THE SIX MONTHS."
PORTFOLIO AT A GLANCE
6/30/99 12/31/98
NUMBER OF COMPANIES 63 65
PORTFOLIO TURNOVER 35%(1) 68%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68%(3) 0.69%
(1) Six months ended 6/30/99.
(2) Year ended 12/31/98.
(3) Annualized.
Investment terms are defined in the Glossary on pages 30-31.
6 1-800-345-2021
Global Gold--Q&A
- --------------------------------------------------------------------------------
(Continued)
well as to decrease the negative impact that short-term traders have on the
shareholders remaining in the fund.
DID YOU MAKE ANY OTHER CHANGES TO HELP IMPROVE THE FUND'S LIQUIDITY?
Yes. We want to increase the fund's liquidity and reduce the costs of
buying and selling portfolio stocks. But that can be very hard to do by
investing only in gold shares. As a result, we've taken a very modest position
(just 5% or so of assets) in more liquid precious metal names, like Impala, a
platinum stock. We've added only stocks that have a very high correlation to
gold shares. We think that's the best way to add liquidity and still give our
shareholders an investment that moves in line with gold.
YOU ALSO MADE SOME OTHER CHANGES TO THE PORTFOLIO. CAN YOU EXPLAIN THOSE
ADJUSTMENTS?
We made some modest changes to diversify the portfolio. The biggest change
was to reduce our stake in Barrick, the fund's largest holding, from about 19%
to 12% of fund investments (see the chart at right). Barrick is by far the
largest stock in the index, at about a quarter of the benchmark. We're committed
to giving investors exposure to the entire gold market, but we didn't think it
was in our shareholder's best interests to have such a large weighting in a
single company. In addition, having such a highly concentrated portfolio could
have run up against IRS diversification requirements, which prevent us from
holding very large weightings in individual names. But we should point out that
we still have the ability to take relatively big positions in the largest gold
stocks if we feel the need to do so.
HOW DO VALUATIONS FOR GOLD COMPANIES LOOK WITH GOLD PRICES AT SUCH LOW LEVELS?
We were much more comfortable with valuations at the end of 1998, when gold
was trading at around $290 an ounce. But with gold trading at about $250 an
ounce and production costs running at around $200, the premium we're paying for
many gold stocks is high. For example, the very biggest gold stocks are trading
at 2.5-3 times their net asset value, an estimate of the worth of their gold in
the ground that also makes allowances for hedging activity and capital
expenditures. That premium is very high by historical standards. That's another
reason we decided to put a small portion of assets in some near-gold names like
Impala--not only are they more liquid, but they're also just much better values
right now.
YOU OFTEN SAY GOLD STOCKS ARE HIGHLY LEVERAGED TO THE PRICE OF GOLD. CAN YOU
GIVE AN EXAMPLE OF WHAT YOU MEAN?
A good rule of thumb is that for every one percent change in the price of
gold bullion, gold shares should move two to three percent. That's what we mean
by leverage. Here's an example. Today gold is trading at around $250 an ounce,
and let's assume a hypothetical company with production costs of $200 an ounce.
Now if gold were to rally from $250 to $300, that would be an increase of 20% in
the price of the underlying metal. But the profit of the company in the example
doubles from $50 an ounce to $100. So in this example, a 20% increase in the
price of gold translated into a 100% rise in gold company profits. That's what
we mean when we say gold companies are highly leveraged to the price of gold.
[right margin]
"SHARES OF GLOBAL GOLD THAT ARE PURCHASED AFTER JUNE 30, 1999, AND ARE
REDEEMED OR EXCHANGED WITHIN 180 DAYS OF PURCHASE WILL BE SUBJECT TO A 2%
REDEMPTION FEE."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
BARRICK GOLD CORP. 12.2% 18.7%
PLACER DOME INC. 8.5% 6.8%
ANGLOGOLD LIMITED 8.0% 8.4%
NEWMONT MINING
CORP. 7.3% 6.7%
FRANCO NEVADA
MINING CORP. LTD. 5.3% 4.1%
GOLDFIELDS LIMITED 4.9% 3.7%
EURO-NEVADA
MINING CORPORATION 4.5% 4.5%
NORMANDY MINING
LIMITED 4.2% 3.8%
ASHANTI GOLDFIELDS
COMPANY LTD. GDR 3.4% 2.4%
STILLWATER MINING CO. 3.3% 4.3%
www.americancentury.com 7
Global Gold--Q&A
- --------------------------------------------------------------------------------
(Continued)
And that's why we're committed to giving our shareholders exposure to the entire
gold market, positioning the fund to benefit from any increase in gold prices.
WHAT'S THE OUTLOOK FOR GOLD?
Despite a favorable backdrop of more demand and less mine supply, the
outlook for gold and gold shares is relatively poor. That's because above-ground
supply from world central banks and forward sales by gold companies is weighing
on the price of gold bullion. Lower gold prices would lead you to expect
negative returns for gold stocks, but we could see gold stocks perform poorly
even if gold's price is unchanged six months from now. That's because the prices
of gold stocks relative to the value of their underlying assets are so high by
historical standards.
WHAT'S THE RELATIONSHIP BETWEEN CENTRAL BANK GOLD SALES AND FORWARD SELLING BY
CORPORATIONS, AND WHY IS IT IMPORTANT FOR THE GOLD MARKET?
In a forward sale, a mining company borrows gold from a central bank and
sells it to lock in current prices and hedge against future declines in the
price of gold. Central banks are willing to lease gold for forward sales because
they're eager to earn a return on their assets. Heavy forward sales are negative
for the market because they increase supply and indicate that companies expect
gold's price to decline.
But world central bank sales have reduced the amount of gold available to
lease, increasing gold lease rates. Much higher lease rates in recent months
have begun to reduce the incentive for producer forward sales at a time when
gold demand is surging. This is one factor working in gold's favor.
WHAT ARE SOME OTHER POTENTIAL POSITIVES FOR GOLD?
The global economy is improving, which also increases the likelihood of
inflation. Better global growth or unexpected inflation should boost demand for
gold.
Looking out a little further, potential positives for gold are questions
about the reappointment of U.S. Federal Reserve Chairman Alan Greenspan, whose
third term expires June 2000. Greenspan is one of the key architects of the
low-inflation, moderate-growth economy. If his reappointment gets caught up in
election-year politics, that could roil the financial markets and send some
investors looking for the safety of gold and gold shares.
GIVEN THAT OUTLOOK, HOW WILL YOU POSITION THE FUND?
We plan to continue to run the fund for investors who want a long-term
portfolio diversifier. That means we'll try to position the fund to benefit from
a rally in gold or gold shares, similar to what we saw in April. Nevertheless,
we'll keep a small portion of assets, say 5% or so, in more liquid, attractively
valued near-gold names to try and increase the fund's liquidity. That should
help us minimize the impact that volatile asset flows have on the fund.
[left margin]
"DESPITE A FAVORABLE BACKDROP OF INCREASING DEMAND AND SHRINKING MINE SUPPLY,
THE OUTLOOK FOR GOLD AND GOLD SHARES IS RELATIVELY POOR."
[pie charts - data below]
GEOGRAPHIC COMPOSITION
AS OF JUNE 30, 1999
Canada 44%
South Africa 20%
U.S. 16%
Australia 16%
Ghana 3%
Papua-New Guinea 1%
AS OF DECEMBER 31, 1998
Canada 48%
South Africa 17%
U.S. 17%
Australia 14%
Ghana 3%
Papua-New Guinea 1%
8 1-800-345-2021
Global Gold--Schedule of Investments
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--98.1%
AUSTRALIA--16.2%
2,451,500 Acacia Resources Limited $ 2,834,700
600,000 Aurora Gold Limited(1) 293,373
2,266,569 Delta Gold NL 3,219,916
627,844 Goldfields Limited 398,254
399,500 Homestake Mining Company 3,062,048
8,090,996 Lihir Gold Limited(1) 6,094,583
2,591,062 Newcrest Mining Limited(1) 5,807,254
13,283,279 Normandy Mining Limited 8,829,588
200,000 Ranger Minerals NL(1) 310,552
1,400,000 Resolute Limited 703,038
948,642 Sons of Gwalia Limited 2,492,844
--------------
34,046,150
--------------
CANADA--44.4%
358,800 Agnico-Eagle Mines Ltd.(1) 2,218,936
100,000 America Mineral Fields Inc.(1) 86,207
329,500 Banro Resource Corporation(1) 152,091
1,325,066 Barrick Gold Corp. 25,673,154
1,953,500 Battle Mountain Gold Co. 4,761,656
392,700 Bema Gold Corp.(1) 226,578
100,000 Breakwater Resources, Ltd.(1) 166,305
691,300 Cambior, Inc. 2,228,857
100,000 Dayton Mining Corp.(1) 5,770
74,600 Dia Met Minerals Ltd. Cl B(1) 1,291,271
100,000 DiamondWorks Ltd.(1) 11,879
179,800 Echo Bay Mines Ltd.(1) 258,462
787,000 Euro-Nevada Mining Corporation 9,402,213
17,100 Farallon Resources Ltd.(1) 7,197
105,000 Francisco Gold Corp.(1) 605,824
717,600 Franco Nevada Mining Corp. Ltd. 11,154,657
443,800 Glamis Gold Ltd.(1) 798,310
715,000 Goldcorp, Inc. Cl A(1) 3,518,701
100,000 Golden Star Resources Ltd.(1) 81,250
260,000 Greenstone Resources Ltd.(1)(2) 41,474
545,000 IAMGOLD, International African
Mining Gold Corp.(1) 1,109,829
175,000 Indochina Goldfields Ltd.(1) 172,244
2,170,080 Kinross Gold Corp.(1) 3,666,775
1,316,500 Meridian Gold Inc.(1) 6,108,346
566,300 Miramar Mining(1) 345,984
450,000 Nevsun Resources Ltd.(1) 158,838
74,500 NovaGold Resources Inc.(1) 30,342
1,510,995 Placer Dome Inc. 17,848,628
100,000 Pure Gold Minerals Inc.(1) 9,843
70,000 Rio Narcea Gold Mines, Ltd.(1) 40,388
293,713 Romarco Minerals, Inc.(1) 285,100
715,000 TVX Gold, Inc.(1) 659,946
Shares Value
- --------------------------------------------------------------------------------
100,000 Vengold Inc.(1) $ 5,430
100,000 Viceroy Resource Corp.(1) 85,528
--------------
93,218,013
--------------
GHANA--3.4%
1,029,599 Ashanti Goldfields
Company Ltd. GDR 7,142,843
--------------
PAPUA-NEW GUINEA--0.3%
557,199 Niugini Mining Limited(1) 585,389
--------------
SOUTH AFRICA--20.0%
105,100 Anglo American Platinum
Corp. Limited 2,452,348
388,601 Anglogold Limited 16,743,797
75,000 Anglogold Limited ADR 1,612,500
1,442,892 Avgold Ltd.(1) 786,695
83,300 De Beers 1,996,135
2,986,434 Gold Fields Limited 10,244,717
592,500 Harmony Gold Mining Co. Limited 2,788,582
65,900 Impala Platinum Holdings Limited 1,657,807
1,038,900 JCI Gold Limited(1) 946,920
390,600 Randfontein Estates Limited(1) 673,197
609,600 Western Areas Limited(1) 1,919,443
--------------
41,822,141
--------------
UNITED STATES--13.8%
418,100 Crown Resources, Inc.(1) 666,347
747,576 Homestake Mining Co. 6,120,778
766,675 Newmont Mining Corp. 15,237,666
212,200 Stillwater Mining Co.(1) 6,936,288
--------------
28,961,079
--------------
TOTAL COMMON STOCKS 205,775,615
--------------
(Cost $274,034,278)
TEMPORARY CASH INVESTMENTS--1.9%
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.72%, dated 6/30/99,
due 7/1/99 (Delivery value $3,900,511) 3,900,000
--------------
(Cost $3,900,000)
TOTAL INVESTMENT SECURITIES--100.0% $209,675,615
==============
(Cost $277,934,278)
See Notes to Financial Statements
www.americancentury.com 9
Global Gold--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
(1) Non-income producing.
(2) Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. (See Note 5 in Notes to Financial
Statements for a summary of transactions for each issuer which is or was an
affiliate at or during the six months ended June 30, 1999.)
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percentage of investments in each country, as applicable
See Notes to Financial Statements
10 1-800-345-2021
Global Natural Resources--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 1999
INVESTOR CLASS (INCEPTION 9/15/94) ADVISOR CLASS (INCEPTION 4/26/99)
GLOBAL NATURAL FUND DJ WORLD NATURAL RESOURCES FUNDS(2) GLOBAL NATURAL FUND DJ WORLD
RESOURCES BENCHMARK STOCK INDEX AVERAGE RETURN FUND'S RANKING RESOURCES BENCHMARK STOCK INDEX
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 17.83% 22.37% 7.93% 26.82% -- -- -- --
1 YEAR 9.08% 14.04% 13.66% 2.50% 19 OUT OF 57 -- -- --
============================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 6.83% 10.08% 15.67% 2.43% 11 OUT OF 36 -- -- --
LIFE OF FUND 7.95% 10.58%(3) 14.22%(3) 7.45% 12 OUT OF 26 3.93% -1.14%(4) -0.05%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 9/30/94, the date nearest the class's inception for which data are
available.
(4) Since 4/30/99, the date nearest the class's inception for which data are
available.
See pages 28-30 for more information about share classes, returns, the fund's
benchmark, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND Value on 6/30/1999 DJ World Stock Index
$18,802 Fund Benchmark $16,121 Global Natural Resources $14,631
Global DJ World
Natural Resources Fund Benchmark Stock Index
DATE VALUE VALUE VALUE
9/30/1994(3) $10,000 $10,000 $10,000
12/31/1994 $9,789 $9,711 $9,815
3/31/1995 $10,227 $10,157 $10,053
6/30/1995 $10,471 $10,409 $10,526
9/30/1995 $10,729 $10,673 $11,022
12/31/1995 $11,200 $11,173 $11,496
3/31/1996 $11,872 $11,818 $11,888
6/30/1996 $11,997 $12,086 $12,153
9/30/1996 $12,114 $12,283 $12,268
12/31/1996 $12,929 $12,956 $12,763
3/31/1997 $12,951 $13,200 $12,651
6/30/1997 $14,004 $14,480 $14,470
9/30/1997 $15,014 $15,308 $14,907
12/31/1997 $13,252 $13,561 $14,365
3/31/1998 $13,968 $14,614 $16,193
6/30/1998 $13,412 $14,136 $16,542
9/30/1998 $12,327 $12,944 $14,890
12/31/1998 $12,416 $13,174 $17,420
3/31/1999 $13,062 $14,157 $17,989
6/30/1999 $14,631 $16,121 $18,802
$10,000 investment made 9/30/94
The graph at left shows the growth of a $10,000 investment in over the life of
the fund, while the graph below shows the fund's year-by-year performance. The
Dow Jones World Stock Index and fund benchmark are provided for comparison.
Global Natural Resources' returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the returns of
the indices do not. These graphs are based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures
(see Total Returns table above). Past performance does not guarantee future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Global Natural
Resources Fund Benchmark
DATE RETURN RETURN
6/30/1995* 4.71% 4.09%
6/30/1996 14.57% 16.12%
6/30/1997 16.73% 19.81%
6/30/1998 -4.23% -2.38%
6/30/1999 9.08% 14.04%
* From 9/30/94 (the date nearest the class's inception for which index data are
available) to 6/30/95.
www.americancentury.com 11
Global Natural Resources--Q&A
- --------------------------------------------------------------------------------
/photo of Joe Sterling/
An interview with Joe Sterling, a portfolio manager on the Global Natural
Resources investment team.
HOW DID GLOBAL NATURAL RESOURCES PERFORM DURING THE SIX MONTHS ENDED JUNE 30,
1999?
The fund produced solid returns but lagged its benchmark and other natural
resources funds. For the first half of the year, Global Natural Resources had a
return of 17.83%,* while the 58 natural resources funds tracked by Lipper Inc.
had an average return of 26.82%. The fund's benchmark--an index made up of
companies in the Basic Materials and Energy sectors of the Dow Jones World Stock
Index--returned 22.37% for the period. However, Global Natural Resources
continues to have solid longer-term returns, ranking in the top third of its
Lipper group for the one- and three-year periods ended June 30 (see the previous
page for additional performance comparisons).
CAN YOU EXPLAIN YOUR MANAGEMENT APPROACH FOR GLOBAL NATURAL RESOURCES?
We manage the fund to deliver a pure play on global commodity-based
industries. To do that, we run Global Natural Resources against a benchmark
that's composed of companies from eight industries in 30 countries. In terms of
broad sector weightings, the index is about 75% energy and 25% basic materials
shares.
We use sophisticated financial models to help us decide which sectors to
over- and underweight, as well as determine the level of risk we want to take
relative to the index. Then we conduct a fundamental review of every buy and
sell decision the models generate. Recently, we've instituted a policy that
limits any single company to no more than 5% of the benchmark.
CAN YOU TALK A LITTLE BIT MORE ABOUT THE MINOR ADJUSTMENT YOU MADE TO THE WAY
YOU CONSTRUCT THE BENCHMARK AND WHAT THAT MEANS FOR THE FUND?
We felt it was necessary to cap a stock's representation in the index at no
more than 5% because of some big mergers in the energy sector last year, when
British Petroleum acquired Amoco and Exxon acquired Mobil, though that deal
hasn't closed yet. Those were some of the biggest companies in the index and
four of the fund's five largest holdings last year. If we hadn't made some
adjustment to the benchmark, about 30% of the index would have been concentrated
in just these few stocks.
Because we manage the fund against the benchmark, we would have ended up
with a much more concentrated portfolio. We just didn't think that was in our
shareholders' best interests. That also could have run up against IRS
diversification requirements, which prevent us from holding very large
weightings in individual names.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
{pie charts - data below]
INDUSTRY WEIGHTINGS
AS OF JUNE 30, 1999
Energy 72%
Basic Materials 26%
Temporary Cash
Investments 2%
AS OF DECEMBER 31, 1998
Energy 78%
Basic Materials 20%
Temporary Cash
Investments 2%
PORTFOLIO AT A GLANCE
6/30/99 12/31/98
NUMBER OF COMPANIES 79 72
PORTFOLIO TURNOVER 59%(1) 76%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68%(3) 0.69%
(1) Six months ended 6/30/99.
(2) Year ended 12/31/98.
(3) Annualized.
Investment terms are defined in the Glossary on pages 30-31.
12 1-800-345-2021
Global Natural Resources--Q&A
- --------------------------------------------------------------------------------
(Continued)
In practice, the change means we've reduced our exposure to the largest oil
companies. For example, at the end of last year, Exxon was our largest holding
at 11% of fund investments. Six months later, it still tops the list, but it's
now only about 5% of fund investments (see the graph at right). But we should
point out that we still have the ability to overweight these stocks if we feel
the need to do so.
WHY DID THE FUND UNDERPERFORM ITS BENCHMARK?
The best way to understand fund performance is to look at our sector
weightings. We continued to overweight energy and underweight basic materials
shares relative to the benchmark. Within energy, we preferred large, integrated
oil companies to the smaller (and more volatile) exploration and service stocks.
But basic materials outperformed energy for the six months. In addition, our
preference for larger energy stocks limited returns. When crude oil prices rise
sharply, small- and mid-size energy stocks outperform the shares of larger
energy companies. And that's exactly what happened over the last six months.
LET'S TALK ABOUT THE PORTFOLIO'S PERFORMANCE RELATIVE TO THE PEER GROUP. GLOBAL
NATURAL RESOURCES HAS DONE WELL FOR LONGER PERIODS, BUT CAN YOU EXPLAIN WHY IT
LAGGED THE LIPPER GROUP IN RECENT MONTHS?
Basically, the strategy that worked well last year hasn't paid off so far
in 1999. Last year was difficult for natural resources stocks, with many
small-cap and emerging market stocks experiencing sharp losses. We earned the
top Lipper ranking in 1998 (ranking #1 out of 57 natural resources funds) by
avoiding such volatile sectors, taking limited risks relative to the benchmark,
and overweighting large, integrated oil stocks.
That positioning hasn't worked as well this year. We were underweighted
relative to the Lipper group in the basic materials and emerging market stocks
that performed best in recent months. In general, the worse a sector's or
company's stock market performance in 1998, the better its return so far this
year. Emerging market natural resource-related stocks are a great example of the
phenomenon--after plummeting last year, they've performed very well so far in
1999.
YOU OFTEN SAY GLOBAL GROWTH IS KEY TO THE FUND'S SUCCESS. WHAT'S YOUR OUTLOOK
FOR THE GLOBAL ECONOMY?
We have a generally positive outlook. We expect global growth to be better
than last year, when the world economy expanded only about 1.5%. Better economic
growth would lead you to expect higher commodity prices. We've already seen
commodity prices stabilize this year as a result of stronger demand.
But we shouldn't overstate our enthusiasm. The recovery and growth rates we
see for Europe, Japan, and China--all big commodities consumers--are modest (see
the economic growth forecast chart on the following page). In addition, there
are still large supply overhangs for many commodities. We'd have to work off
some of that excess supply before we get the next leg of the rally.
Nevertheless, the fund's healthy returns in recent months give you an idea how
important even modest improvements in the economic outlook can be for natural
resource-related stocks.
[right martin]
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
EXXON CORP. 5.1% 11.0%
BP AMOCO PLC(1) 5.0% 5.7%(2)
MOBIL CORP. 4.9% 4.6%
CHEVRON CORP. 4.9% 3.8%
ROYAL DUTCH
PETROLEUM CO. 3.6% 5.6%
ENI S.P.A. 3.5% 3.3%
ELF AQUITAINE SA 3.0% 2.2%
TOTAL SA CL B 2.9% 1.3%
SHELL TRANSPORT
& TRADING CO. PLC 2.7% 1.8%
TEXACO INC. 2.5% 2.2%
(1) Formerly British Petroleum Co. plc
(2) Represents British Petroleum Co. plc shares owned by the fund.
[pie charts - data below]
GEOGRAPHIC COMPOSITION
AS OF JUNE 30, 1999
U.S. 49%
Europe 32%
Americas
(excluding U.S.) 9%
Asia/Pacific 8%
South Africa 2%
AS OF DECEMBER 31, 1998
U.S. 54%
Europe 31%
Americas
(excluding U.S.) 8%
Asia/Pacific 5%
South Africa 2%
www.americancentury.com 13
Global Natural Resources--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT'S YOUR OUTLOOK FOR BASIC MATERIALS?
There's been a rotation by investors into this sector, and a stronger
economy also argues for better performance from stocks such as paper, metals,
and chemicals. In addition, we can point to some mine closures, which should
help alleviate supply concerns for metals stocks. And though they've performed
reasonably well so far this year, we believe these shares may have more room to
run.
AND HOW DO ENERGY STOCKS LOOK GOING FORWARD?
Energy stocks track the price of crude oil, which depends on OPEC's ability
to limit production. Assuming they can continue to hold down production, crude
prices and corporate earnings should remain high. What's more, as we approach
winter, demand should pick up. That would argue for higher oil prices. In
addition, some large, integrated oil companies have announced that they're going
to increase their exploration and production budgets. That could be very good
news for smaller oil service companies that depend on this spending.
A warm winter would be a threat to this outlook for oil and oil stocks. In
addition, high oil prices tempt OPEC members to cheat and increase supply. That
situation bears watching, particularly as oil prices creep up above $22 a
barrel.
HOW DO YOU EXPECT TO POSITION GLOBAL NATURAL RESOURCES IN THE COMING MONTHS?
We plan to continue to manage the fund for shareholders that want a pure
play on global growth trends and commodity-based industries. In terms of sector
allocations, we'll make modest adjustments to the portfolio's energy and basic
material sector weightings as the economic and risk/reward outlook dictate.
[left margin]
"THE FUND'S HEALTHY RETURNS IN RECENT MONTHS GIVE YOU AN IDEA HOW IMPORTANT EVEN
MODEST IMPROVEMENTS IN THE ECONOMIC OUTLOOK CAN BE FOR NATURAL RESOURCE-RELATED
STOCKS."
[bar graph - data below]
ECONOMIC GROWTH FORECASTS
Old 1999 Old 2000 New 1999 New 2000
Forecast Forecast Forecast Forecast
USA 1.0% 1.5% 3.9% 2.7%
Japan 0.0% -1.0% 0.5% -0.7%
Euro Area 1.7% 2.7% 1.8% 2.8%
Emerging
Economies 1.2% 4.5% 2.2% 4.3%
Global 1.0% 2.0% 2.3% 2.4%
Source: J.P. Morgan
14 1-800-345-2021
Global Natural Resources--Sched. of Investments
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--97.9%
AUSTRALIA--2.7%
Basic Materials
35,000 Normandy Mining Limited $ 23,265
75,000 WMC Limited 321,620
Energy
275,000 Oil Search Limited(1) 407,204
80,000 Woodside Petroleum Limited 540,758
-------------
1,292,847
-------------
AUSTRIA--0.5%
Basic Materials
5,000 Boehler-Uddeholm AG 247,232
-------------
BRAZIL--0.4%
Basic Materials
10,000 Aracruz Celulose S.A. ADR 220,000
-------------
CANADA--7.4%
Basic Materials
25,000 Abitibi-Consolidated Inc. 284,375
12,000 Barrick Gold Corp. 232,500
23,000 Inco Ltd. 414,000
47,800 Tembec Inc. Cl A(1) 384,490
Energy
42,000 Anderson Exploration Ltd.(1) 551,656
100,000 Beau Canada Exploration Ltd.(1) 152,729
21,000 Petro-Canada 286,519
36,400 Rigel Energy Corp.(1) 277,966
12,000 Suncor Energy, Inc. 491,583
20,000 Talisman Energy, Inc.(1) 543,714
-------------
3,619,532
-------------
FINLAND--0.8%
Basic Materials
14,000 UPM-Kymmene Oyj 401,012
-------------
FRANCE--6.9%
Basic Materials
10,500 Pechiney SA Cl A 450,922
Energy
10,000 Elf Aquitaine SA 1,466,188
11,000 Total SA Cl B 1,417,865
-------------
3,334,975
-------------
ITALY--3.5%
Energy
285,000 ENI S.p.A. 1,700,232
-------------
JAPAN--3.8%
Basic Materials
60,000 Nippon Paper Industries Co. 312,673
190,000 Nippon Steel Corporation 440,930
Shares Value
- --------------------------------------------------------------------------------
75,000 Nisshin Steel Co., Ltd. $ 111,492
60,000 Oji Paper Co. Ltd. 346,864
110,000 Sumitomo Metal Industries(1) 137,176
Energy
36,000 General Sekiyu K.K. 114,465
50,000 Nippon Oil Company 210,596
30,000 Showa Shell Sekiyu 196,969
-------------
1,871,165
-------------
MEXICO--0.7%
Basic Materials
75,000 Grupo Mexico S.A. Series B 319,573
-------------
NETHERLANDS--3.6%
Energy
30,000 Royal Dutch Petroleum Co. 1,755,716
-------------
NORWAY--1.1%
Energy
34,000 Petroleum Geo-Services(1) 511,960
-------------
SOUTH AFRICA--2.3%
Basic Materials
17,000 Anglo American Platinum
Corp. Limited 396,669
5,000 Anglogold Limited 215,437
43,316 Gold Fields Limited 148,592
50,000 Sappi Limited 366,243
-------------
1,126,941
-------------
SOUTH KOREA--0.5%
Basic Materials
8,000 Pohang Iron & Steel Co.,
Ltd. ADR 269,000
-------------
SPAIN--1.5%
Energy
35,000 Respol SA 714,033
-------------
SWEDEN--1.1%
Basic Materials
20,000 Svenska Cellulosa AB Cl B 518,272
-------------
THAILAND--0.7%
Energy
42,000 PTT Exploration and Production
Public Company Ltd.(1) 320,802
-------------
UNITED KINGDOM--13.3%
Basic Materials
8,000 Anglo American plc(1) 373,866
100,500 Billiton Plc 350,489
35,416 Rio Tinto plc 593,693
Energy
120,000 BG plc 732,956
135,493 BP Amoco Plc 2,428,300
See Notes to Financial Statements
www.americancentury.com 15
Global Natural Resources--Sched. of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
215,500 British-Borneo Petroleum
Syndicate plc $ 665,776
175,000 Shell Transport & Trading Co. PLC 1,312,327
-------------
6,457,407
-------------
UNITED STATES--47.1%
Basic Materials
15,000 AK Steel Holding Corp. 337,500
16,200 Alcoa Inc. 1,002,375
8,000 Champion International Corp. 383,000
9,000 Georgia-Pacific Corp. 426,375
13,500 Georgia-Pacific Corp. (Timber
Group) 340,875
9,000 International Paper Co. 454,500
39,000 LTV Corp. 260,812
18,000 Lyondell Chemical Company 371,250
15,000 Smurfit-Stone Container Corp.(1) 307,969
6,000 Weyerhaeuser Co. 412,500
10,900 Willamette Industries, Inc. 502,081
Energy
8,000 Apache Corp. 312,000
11,000 Atlantic Richfield Co. 919,188
12,000 Burlington Resources Inc. 519,000
25,000 Chevron Corp. 2,379,688
8,000 Coastal Corp. (The) 320,000
15,000 Diamond Offshore Drilling, Inc. 425,625
10,000 El Paso Energy Corporation 351,875
10,500 Enron Corp. 858,375
Shares Value
- --------------------------------------------------------------------------------
32,000 Exxon Corp. $ 2,468,000
15,000 Halliburton Co. 678,750
24,200 Mobil Corp. 2,395,800
11,500 Murphy Oil Corp. 561,344
7,200 Phillips Petroleum Co. 362,250
17,800 Schlumberger Ltd. 1,133,638
19,100 Texaco Inc. 1,193,750
20,000 Titan Exploration, Inc.(1) 100,625
37,500 Tom Brown, Inc.(1) 582,422
20,000 Transocean Offshore 525,000
15,000 Unocal Corp. 594,375
10,000 Vastar Resources, Inc. 524,375
21,000 Williams Companies, Inc. (The) 893,812
-------------
22,899,129
-------------
TOTAL COMMON STOCKS 47,579,828
-------------
(Cost $38,772,874)
TEMPORARY CASH INVESTMENTS--2.1%
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.72%, dated 6/30/99,
due 7/1/99 (Delivery value $1,000,131) 1,000,000
-------------
(Cost $1,000,000)
TOTAL INVESTMENT SECURITIES--100.0% $48,579,828
=============
(Cost $39,772,874)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percentage of investments in each country, as applicable
See Notes to Financial Statements
16 1-800-345-2021
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
GLOBAL GLOBAL NATURAL
JUNE 30, 1999 (UNAUDITED) GOLD RESOURCES
ASSETS
Investment securities, at value
(identified cost of $276,174,700, and
$39,772,874, respectively) (Note 3) ......... $ 209,634,141 $ 48,579,828
Investment securities -- affiliated, at
value (identified cost of $1,759,578) ....... 41,474 --
Cash .......................................... -- 47,062
Receivable for investments sold ............... 1,701,628 --
Dividends and interest receivable ............. 9,446 54,619
------------- ------------
211,386,689 48,681,509
------------- ------------
LIABILITIES
Disbursements in excess of
demand deposit cash ......................... 3,564,147 --
Payable for investments purchased ............. 1,383,121 --
Accrued management fees (Note 2) .............. 110,415 27,298
Distribution and service fees payable
(Note 2) .................................... 4 4
Payable for directors' fees and expenses ...... 701 174
------------- ------------
5,058,388 27,476
------------- ------------
Net Assets .................................... $ 206,328,301 $ 48,654,033
============= ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ....... $ 425,344,484 $ 40,094,988
Undistributed net investment income ........... 109,681 7,245
Accumulated net realized loss on
investments and foreign currency
transactions ................................ (150,868,392) (254,568)
Net unrealized appreciation (depreciation)
on investments and translation
of assets and liabilities in foreign
currencies (Note 3) ......................... (68,257,472) 8,806,368
------------- ------------
$ 206,328,301 $ 48,654,033
============= ============
Investor Class, $10.00 Par Value
Net assets .................................... $ 206,319,966 $ 48,643,638
Shares outstanding ............................ 40,789,157 3,935,748
Net asset value per share ..................... $ 5.06 $ 12.36
Advisor Class, $10.00 Par Value
Net assets .................................... $ 8,335 $ 10,395
Shares outstanding ............................ 1,648 841
Net asset value per share ..................... $ 5.06 $ 12.36
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses, if any;
net gains earned on investments but not yet paid to shareholders or net losses
on investments (known as realized gains or losses); and finally, gains or losses
on securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
www.americancentury.com 17
Statements of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED GLOBAL GLOBAL NATURAL
JUNE 30, 1999 (UNAUDITED) GOLD RESOURCES
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes
withheld
of $88,261 and $40,698, respectively) ......... $ 1,939,569 $ 525,904
Interest ........................................ 42,995 36,794
------------ -----------
1,982,564 562,698
------------ -----------
Expenses (Note 2):
Management fees ................................. 748,891 152,400
Distribution fees -- Advisor Class .............. 14 5
Service fees -- Advisor Class ................... 14 5
Directors' fees and expenses .................... 3,332 621
------------ -----------
752,251 153,031
------------ -----------
Net investment income ........................... 1,230,313 409,667
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
(NOTE 3)
Net realized gain (loss) on:
Investments (includes $(3,512,705)
from affiliates for Global Gold) .............. (36,526,319) 1,530,621
Foreign currency transactions ................... (121,321) 9,927
------------ -----------
(36,647,640) 1,540,548
------------ -----------
Change in net unrealized
appreciation (depreciation) on:
Investments ................................... 16,507,034 5,617,750
Translation of assets and
liabilities in foreign currencies ........... 1,078 (1,091)
------------ -----------
16,508,112 5,616,659
------------ -----------
Net realized and unrealized
gain (loss) on investments
and foreign currency .......................... (20,139,528) 7,157,207
------------ -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations .............. $(18,909,215) $ 7,566,874
============ ===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF OPERATIONS--This statement breaks down how each
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* income earned from investments (dividends and interest)
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
18 1-800-345-2021
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1998
GLOBAL GOLD GLOBAL NATURAL RESOURCES
Increase (Decrease) in Net Assets 1999 1998 1999 1998
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ............. $ 1,230,313 $ 1,932,357 $ 409,667 $ 737,713
Net realized gain (loss) on
investments and
foreign currency transactions ... (36,647,640) (77,995,127) 1,540,548 (1,360,231)
Change in net unrealized
appreciation (depreciation)
on investments and translation
of assets and liabilities in
foreign currencies .............. 16,508,112 47,507,318 5,616,659 (1,956,185)
------------- ------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from operations ....... (18,909,215) (28,555,452) 7,566,874 (2,578,703)
------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .................. (1,103,904) (1,999,679) (412,463) (688,139)
Advisor Class ................... (42) (144) (83) --
------------- ------------- ------------ ------------
Decrease in net assets
from distributions .............. (1,103,946) (1,999,823) (412,546) (688,139)
------------- ------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease)
in net assets from capital
share transactions .............. (2,446,907) 13,328,332 1,740,925 (3,530,585)
------------- ------------- ------------ ------------
Net increase (decrease)
in net assets ................... (22,460,068) (17,226,943) 8,895,253 (6,797,427)
NET ASSETS
Beginning of period ............... 228,788,369 246,015,312 39,758,780 46,556,207
------------- ------------- ------------ ------------
End of period ..................... $ 206,328,301 $ 228,788,369 $ 48,654,033 $ 39,758,780
============= ============= ============ ============
Undistributed net
investment income (loss) ........ $ 109,681 $ (16,686) $ 7,245 $ 10,124
============= ============= ============ ============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
each fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* capital share transactions--shareholders' purchases, reinvestments, and
redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 19
Notes to Financial Statements
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Quantitative Equity Funds (the corporation)
is registered under the Investment Company Act of 1940 as an open-end management
investment company. Global Gold Fund (Global Gold) and Global Natural Resources
Fund (Global Natural Resources) (the funds) are two of the six funds issued by
the corporation. The funds are non-diversified under the 1940 Act. Global Gold's
investment objective is to seek to realize a total return (capital growth and
dividends) consistent with investment in securities of companies that are
engaged in mining, processing, fabricating or distributing gold or other
precious metals throughout the world. Global Natural Resources' investment
objective is to seek to realize a total return consistent with investment in
companies that are engaged in the natural resources industry. The funds invest
primarily in equity securities. The funds are authorized to issue two classes of
shares: the Investor Class and the Advisor Class. The two classes of shares
differ principally in their respective shareholder servicing and distribution
expenses and arrangements. All shares of the funds 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. Sale of the Advisor Class for Global
Natural Resources commenced on April 26, 1999. The following significant
accounting policies are in accordance with generally accepted accounting
principles; these principles may require the use of estimates by fund
management.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or the mean of
the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
FOREIGN CURRENCY TRANSACTIONS -- All assets and liabilities initially
expressed in foreign currencies are translated into U.S. dollars at prevailing
exchange rates at period end. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are translated at the rates
of exchange prevailing on the respective dates of such transactions. For assets
and liabilities, other than investments in securities, net realized and
unrealized gains and losses from foreign currency translations arise from
changes in currency exchange rates.
Net realized and unrealized foreign currency exchange gains or losses
occurring during the holding period of investment securities are a component of
realized gain (loss) on investments and unrealized appreciation (depreciation)
on investments, respectively.
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 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 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. The funds require that the collateral, represented by securities, received
in a repurchase transaction be transferred to the fund's custodian in a manner
sufficient to enable the funds 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 greater than amounts owed to the
funds under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management agreements with 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 the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid semiannually. Distributions from net realized gains are declared and
paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Those 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.
20 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
At December 31, 1998, Global Gold and Global Natural Resources had
accumulated net realized capital loss carryovers for federal income tax purposes
of $75,400,427 and $1,574,913, respectively, (expiring 2005 through 2006 for
Global Gold and 2006 for Global Natural Resources) which may be used to offset
future taxable gains.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the corporation's
distributor. Certain officers of FDI are also officers of the corporation.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
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,
portfolio insurance, interest, fees and expenses of the Directors who are not
considered "interested persons" as defined in the Investment Company Act of 1940
(including counsel fees) and extraordinary expenses, will be paid by ACIM. The
fee is calculated daily and paid monthly. It consists of an Investment Category
Fee based on the average net assets of the funds in a specific fund's investment
category and a Complex Fee based on the average net assets of all the funds
managed by ACIM. The rates for the Investment Category Fee range from 0.3380% to
0.5200% and the rates for the Complex Fee (Investor Class) range from 0.2900% to
0.3100%. The Advisor Class is 0.2500% less at each point within the Complex Fee
range. For the six months ended June 30, 1999, the effective annual Investor
Class management fee was 0.68% for Global Gold and Global Natural Resources.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The plan provides that the funds will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the funds. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers. Fees incurred
under the plan during the six months ended June 30, 1999 were $28 for Global
Gold and $10 for Global Natural Resources.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, and
the corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases of securities, excluding short-term investments, for Global Gold
and Global Natural Resources totaled $75,624,056 and $25,715,067, respectively.
Sales of securities, excluding short-term investments, for Global Gold and
Global Natural Resources totaled $75,966,917 and $25,323,024, respectively.
As of June 30, 1999, accumulated net unrealized appreciation (depreciation)
for Global Gold and Global Natural Resources was $(96,396,292) and $8,612,115,
respectively, based on the aggregate cost of investments for federal income tax
purposes of $306,071,907 and $39,967,713, respectively. Accumulated net
unrealized appreciation or depreciation consisted of unrealized appreciation of
$19,809,960 and $10,135,828 for Global Gold and Global Natural Resources and
unrealized depreciation of $116,206,252 and $1,523,713, respectively.
www.americancentury.com 21
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 2,000,000,000 shares to each fund.
Transactions in shares of the funds were as follows:
<TABLE>
<CAPTION>
GLOBAL GOLD GLOBAL NATURAL RESOURCES
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C>
Designated shares ........ 1,000,000,000 1,000,000,000
============= =============
Six months ended
June 30, 1999
Sold ..................... 39,028,732 $212,740,851 3,865,722 $43,602,795
Issued in reinvestment
of distributions ....... 211,547 1,025,780 32,277 394,103
Redeemed ................. (39,889,383) (216,206,358) (3,718,235) (42,266,054)
------------- ------------- ------------- ------------
Net increase (decrease) .. (649,104) $(2,439,727) 179,764 $1,730,844
============= ============= ============= ============
Year ended
December 31, 1998
Sold ..................... 104,258,706 $652,622,550 6,504,958 $73,091,465
Issued in reinvestment
of distributions ....... 333,504 1,863,311 59,439 657,579
Redeemed ................. (101,985,910) (641,175,389) (6,865,254) (77,279,629)
------------- ------------- ------------- ------------
Net increase (decrease) .. 2,606,300 $13,310,472 (300,857) $(3,530,585)
============= ============= ============= ============
ADVISOR CLASS
Designated Shares ........ 250,000,000 250,000,000
============= =============
Six months ended
June 30, 1999(1)
Sold ..................... 1,868 $11,295 834 $9,998
Issued in reinvestment
of distributions ....... 9 42 7 83
Redeemed ................. (3,296) (18,517) -- --
------------- ------------- ------------- ------------
Net increase (decrease) .. (1,419) $(7,180) 841 $10,081
============= ============= ============= ============
Period ended
December 31, 1998(2)
Sold ..................... 21,411 $120,946
Issued in reinvestment
of distributions ....... 26 144
Redeemed ................. (18,370) (103,230)
------------- -------------
Net increase ............. 3,067 $17,860
============= =============
</TABLE>
(1) April 26, 1999 (commencement of sale) through June 30, 1999 for Global
Natural Resources.
(2) May 6, 1998 (commencement of sale) through December 31, 1998.
22 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
5. AFFILIATED COMPANY TRANSACTIONS
A summary of transactions for each issuer which is or was an affiliate at or
during the six months ended June 30, 1999, follows:
<TABLE>
SHARE BALANCE PURCHASE SALES REALIZED JUNE 30, 1999
FUND/ISSUER 12/31/98 COST COST LOSS INCOME SHARE BALANCE MARKET VALUE
GLOBAL GOLD
<S> <C> <C> <C> <C> <C>
Greenstone Resources Ltd. 510,000 -- $3,617,496 $(3,512,705) -- 260,000 $41,474
======== ========== ============ ====== ============
</TABLE>
- --------------------------------------------------------------------------------
6. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $570,000,000 bank line of credit agreement with Chase Manhattan Bank.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.40%. The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. The funds did not borrow from the line during the six
months ended June 30, 1999.
- --------------------------------------------------------------------------------
7. FUND EVENTS
The following name changes became effective March 1, 1999:
==================================================================
NEW NAME FORMER NAME
==================================================================
FUND: Global Gold Fund American Century Global Gold Fund
Global Natural Resources Fund American Century Global Natural
Resources Fund
www.americancentury.com 23
Global Gold--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
1999(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................. $ 5.52 $ 6.34 $ 11.33 $ 12.37 $ 11.33 $ 13.67
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ................ 0.03(2) 0.05(2) 0.09 0.06 0.02 0.03
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... (0.46) (0.82) (4.79) (0.40) 1.03 (2.32)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..... (0.43) (0.77) (4.70) (0.34) 1.05 (2.29)
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ........... (0.03) (0.05) (0.09) (0.06) (0.01) (0.02)
From Net Realized Gains on
Investment Transactions .............. -- -- (0.20) (0.64) -- --
In Excess of Net Realized Gains ...... -- -- -- -- -- (0.03)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions .................. (0.03) (0.05) (0.29) (0.70) (0.01) (0.05)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......... $ 5.06 $ 5.52 $ 6.34 $ 11.33 $ 12.37 $ 11.33
=========== =========== =========== =========== =========== ===========
Total Return(3) ...................... (7.84)% (12.18)% (41.47)% (2.76)% 9.25% (16.75)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 0.68%(4) 0.69% 0.67% 0.62% 0.61% 0.61%
Ratio of Net Investment Income
to Average Net Assets .................. 1.11%(4) 0.75% 0.92% 0.46% 0.17% 0.20%
Portfolio Turnover Rate ................ 35% 68% 28% 45% 28% 42%
Net Assets, End of Period
(in thousands) ......................... $ 206,320 $ 228,771 $ 246,015 $ 432,587 $ 537,693 $ 568,030
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
24 1-800-345-2021
Global Gold--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Advisor Class
1999(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........ $ 5.52 $ 7.31
---------- ----------
Income From Investment Operations
Net Investment Income(3) .................. 0.02 0.01
Net Realized and Unrealized Loss
on Investment Transactions ................ (0.45) (1.76)
---------- ----------
Total From Investment Operations .......... (0.43) (1.75)
---------- ----------
Distributions
From Net Investment Income ................ (0.03) (0.04)
---------- ----------
Net Asset Value, End of Period .............. $ 5.06 $ 5.52
========== ==========
Total Return(4) ........................... (7.85)% (24.00)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....................... 0.93%(5) 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ....................... 0.86%(5) 0.13%(5)
Portfolio Turnover Rate ..................... 35% 68%
Net Assets, End of Period ................... $ 8,335 $ 16,938
(1) Six months ended June 30, 1999 (unaudited).
(2) May 6, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
www.americancentury.com 25
Global Natural Resources--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
1999(1) 1998 1997 1996 1995 1994(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................. $ 10.58 $ 11.48 $ 11.91 $ 10.66 $ 9.61 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income ................ 0.10(3) 0.19 0.22 0.17 0.16 0.07
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... 1.79 (0.91) 0.08 1.46 1.22 (0.42)
---------- ---------- ---------- ---------- ---------- ----------
Total From Investment Operations ..... 1.89 (0.72) 0.30 1.63 1.38 (0.35)
---------- ---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ........... (0.11) (0.18) (0.23) (0.17) (0.16) (0.04)
From Net Realized Gains on
Investment Transactions .............. -- -- (0.50) (0.21) (0.17) --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .................. (0.11) (0.18) (0.73) (0.38) (0.33) (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ......... $ 12.36 $ 10.58 $ 11.48 $ 11.91 $ 10.66 $ 9.61
========== ========== ========== ========== ========== ==========
Total Return(4) ...................... 17.83% (6.30)% 2.50% 15.45% 14.41% (3.48)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 0.68%(5) 0.69% 0.73%(6) 0.76% 0.76% --
Ratio of Net Investment Income
to Average Net Assets .................. 1.82%(5) 1.68% 1.55%(6) 1.78% 2.02% 2.74%(5)
Portfolio Turnover Rate ................ 59% 76% 41% 53% 39% --
Net Assets, End of Period
(in thousands) ......................... $ 48,644 $ 39,749 $ 46,556 $ 66,021 $ 30,157 $ 18,972
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) September 15, 1994 (inception) through December 31, 1994.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
(6) A portion of the management fee was waived during the year ended December
31, 1997. In absence of the fee waiver, the ratio of operating expenses to
average net assets would have been 0.77% and the ratio of net investment
income to average net assets would have been 1.51%.
See Notes to Financial Statements
26 1-800-345-2021
Global Natural Resources--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
Advisor Class
1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .................... $ 11.99
----------
Income From Investment Operations
Net Investment Income ................................. 0.05(2)
Net Realized and Unrealized Gain
on Investment Transactions ............................ 0.42
----------
Total From Investment Operations ...................... 0.47
----------
Distributions
From Net Investment Income ............................ (0.10)
----------
Net Asset Value, End of Period .......................... $ 12.36
==========
Total Return(3) ....................................... 3.93%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................................... 0.93%(4)
Ratio of Net Investment Loss
to Average Net Assets ................................... 2.24%(4)
Portfolio Turnover Rate ................................. 59%
Net Assets, End of Period ............................... $ 10,395
(1) April 26, 1999 (commencement of sale) through June 30, 1999 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Notes to Financial Statements
www.americancentury.com 27
Share Class and Retirement Account Information
- --------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the funds: Investor Class
and Advisor Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies, and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
is 0.25% higher than the total expense ratio of the Investor Class.
Both classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid from the date of
receipt at American Century. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
28 1-800-345-2021
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers four "specialty" funds that concentrate their
holdings in specific industries or sectors of the stock market. These funds
typically respond differently than general equity funds to changing market or
economic conditions. The funds are managed to provide a broad representation of
the respective industries. Due to the limited focus of these funds, they may
experience greater volatility than funds with a broader investment strategy.
They are not intended to serve as a complete investment program by themselves.
International investing also involves special risks, such as political
instability and currency fluctuations.
GLOBAL GOLD seeks to realize a total return consistent with investment in
securities of companies that are engaged in mining, processing, fabricating, or
distributing gold or other precious metals throughout the world.
GLOBAL NATURAL RESOURCES seeks to realize a total return consistent with
investment in companies that are engaged in the natural resources industries.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The Global Gold fund benchmark was the Benham North American Gold Equities
Index from inception through February 1996. From March 1996 through December
1997, the benchmark was the FT-SE Gold Mines Index. From January 1998 to the
present, the benchmark has been a proprietary index described in more detail on
page 6.
The FT-SE(reg.tm) GOLD MINES INDEX(1) consists of 31 gold mining companies
in five countries and is considered a broad measure of the worldwide gold
equities market.
The DOW JONES WORLD STOCK INDEX(2), created by the editors of The Wall
Street Journal, consists of 2,800 stocks in 29 countries and is divided into
nine broad market sectors. We created the Global Natural Resources fund's
benchmark index using the companies represented in two of these sectors--Basic
Materials and Energy. We altered the Basic Materials sector to exclude chemical
companies because they do not stockpile natural resources.
The MORGAN STANLEY WORLD STOCK INDEX is a widely followed group of stocks
from 22 different countries including the U.S. and Canada.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated.
The Lipper categories for Global Gold and Global Natural Resources are:
GOLD-ORIENTED FUNDS (Global Gold)--funds that invest at least 65% of their
assets in shares of gold mines, gold-oriented mining finance houses, gold coins
or bullion.
NATURAL RESOURCES FUNDS (Global Natural Resources)--funds that invest at
least 65% of their assets in natural resources stocks.
(1) The FT-SE Gold Mines Index is calculated by FT-SE International Limited in
conjunction with the Institute of Actuaries. The FT-SE Gold Mines Index is
a trademark of the London Stock Exchange Limited and the Financial Times
Ltd. and is used by FT-SE International Limited under license. FT-SE
International Limited does not sponsor, endorse, or promote the fund.
(2) The DJWSI is the property of Dow Jones & Company, Inc., which is not
affiliated with American Century.
[right margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
BILL MARTIN
JOE STERLING
www.americancentury.com 29
Glossary
- --------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 24-27.
PORTFOLIO STATISTICS
* NUMBER OF COMPANIES --the number of different companies held by a fund on a
given date.
* PORTFOLIO TURNOVER --the percentage of a fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* EXPENSE RATIO --the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF STOCKS
* LARGE-CAPITALIZATION (LARGE-CAP) STOCKS --generally considered to be stocks of
companies with a market capitalization (the total value of a company's
outstanding stock) of more than $5 billion. These tend to be the stocks that
make up the Dow Jones Industrial Average and the S&P 500.
* MEDIUM-CAPITALIZATION (MID-CAP) STOCKS --generally considered to be stocks of
companies with a market capitalization (the total value of a company's
outstanding stock) of between $1 billion and $5 billion. These tend to be the
stocks that make up the S&P MidCap 400.
* SMALL-CAPITALIZATION (SMALL-CAP) STOCKS --generally considered to be stocks of
companies with a market capitalization (the total value of a company's
outstanding stock) of less than $1 billion. These tend to be the stocks that
make up the Russell 2000 and the S&P SmallCap 600.
30 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income,
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
www.americancentury.com 31
Notes
- --------------------------------------------------------------------------------
32 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Tax-Managed Value
Strategic Allocation -- Income & Growth
Moderate Value
Strategic Allocation -- Equity Income
Conservative
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
New Opportunities Global Gold Emerging Markets
Giftrust(reg.tm) International Discovery
Vista International Growth
Heritage Global Growth
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
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 BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9908 Funds Distributor, Inc.
SH-SAN-17127 (c)1999 American Century Services Corporation
<PAGE>
[front cover]
JUNE 30, 1999
SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY
[graphic of stairs]
- -----------------------
UTILITIES
[american century logo(reg.sm)]
American
Century
[inside front cover]
Y2K TESTING EFFORTS PAY DIVIDENDS IN PREPAREDNESS
- --------------------------------------------------------------------------------
Y2K, short for the year 2000, refers more specifically to the date change from
December 31, 1999 to January 1, 2000. This date change is significant for
computers because many were originally programmed to process dates with
two-character years -- 99 instead of 1999.
When the calendar rolls to 2000, this can create problems for computers
programmed this way because they will read the date as "00," and may interpret
it as 1900. Most companies have been working to reprogram their computer systems
with four-digit years. Reprogramming is very labor-intensive and requires
testing to ensure that there are no errors and that all lines of code were
successfully changed.
Recognizing the possible impact of the Y2K issue, our senior-level Steering
Committee, programmers, business partners and Y2K team have been working
diligently to make January 1, 2000 a non-event for American Century investors.
Currently, all of our computer systems have been modified, tested and returned
to production. We have an ongoing commitment to testing our systems with our
vendors and business partners and within the industry throughout the rest of the
year.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. American Century transactions with our partner
firms were processed free of Y2K bugs. We also participated in the Market Data
Test conducted by the SIA and Financial Information Forum in May. Again, the
computer scripts were executed successfully with no Y2K-related errors.
In addition to our testing schedule, our Y2K team has developed contingency
plans. These plans will minimize the impact on our investors and help us
maintain operations in the event of any Y2K-related incidents. We will conduct
practice drills of contingency scenarios during the rest of 1999 and refine
those plans to respond quickly and effectively so that the date change is as
seamless as possible for investors. We expect the year 2000 to be business as
usual at American Century.
Year 2000 Readiness Disclosure
[left margin]
UTILITIES
(BULIX)
- -------------------------
Turn to the inside back cover of this report to see a list of American Century
funds classified by objective and risk.
MINIMIZE YOUR MUTUAL FUND TAX HIT
American Century's newest equity fund, Tax-Managed Value, is designed for
long-term growth and to minimize the tax hit you take on your mutual fund
investments each year. The fund is managed to keep taxable distributions to a
minimum by using the following strategies:
* BUY AND HOLD --Low portfolio turnover helps limit realized capital gains
and takes advantage of long-term capital gains tax rates.
* OFFSET GAINS --When gains are realized in the portfolio, they are offset
with capital losses from securities sold in that tax year or losses
carried over from previous years.
* SELL HIGHER-COST SHARES FIRST --Selling shares that cost the most first
helps minimize the taxable gains incurred from a sale.
Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
During the six months ended June 30, 1999, we witnessed a surprising
turnaround in the U.S. economic outlook. When we last addressed you in the
annual report for American Century Utilities, the Federal Reserve (the U.S.
central bank) had recently cut short-term interest rates to bolster the U.S.
economy and help stabilize markets worldwide.
This came after economic and financial crises in Asia, Russia, and Latin
America, and the near collapse of several hedge funds. The global economic
outlook was still quite uncertain -- many financial observers predicted slow
economic growth in the U.S. in 1999 and further interest rate cuts.
Instead, global economic conditions rebounded. By January 1999, overseas
economies were stabilizing, the U.S. economy was posting strong growth, and
investor confidence had returned. Interest rates rose while the U.S. stock
market soared.
On the corporate front, we continued to expand the American Century
investment team, which has doubled over the past three years. We're committed to
building and maintaining a talented management group.
We also enhanced our Web site (www.americancentury.com). There you'll find
daily fund information, news, and a Forms Center with access to the
most-requested investor forms and applications. You can also sign up to receive
fund prospectuses and shareholder reports electronically.
In the spirit of our ongoing Year 2000 readiness disclosures,* here's an
update on our preparations for Y2K. Our senior level Year 2000 Steering
Committee, computer programmers, business partners, and Y2K team have been
working diligently to make January 1, 2000, a non-event for American Century
investors. All of our computer systems have been modified, tested, and returned
to production. We have an ongoing commitment to testing our systems with
vendors, business partners, and the mutual fund industry through the rest of the
year.
In March and April of this year, we participated in the Security Industry
Association's (SIA) industry-wide test and successfully processed transactions
for dates up to and beyond 2000. We also participated in the Market Data Test
conducted by the SIA and Financial Information Forum in May. Again, the computer
scripts were executed successfully with no Y2K-related errors.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Vice Chairman of the Board and
Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
UTILITIES
Performance Information .................................................. 5
Management Q&A ........................................................... 6
Portfolio at a Glance .................................................... 6
Top Ten Holdings ......................................................... 7
Industry Breakdown ....................................................... 8
Schedule of Investments .................................................. 9
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ........................................................... 11
Statement of Operations .................................................. 12
Statements of Changes
in Net Assets ......................................................... 13
Notes to Financial
Statements ............................................................ 14
Financial Highlights ..................................................... 17
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................... 19
Background Information
Investment Philosophy
and Policies ....................................................... 20
Comparative Indices ................................................... 20
Lipper Rankings ....................................................... 20
Investment Team
Leaders ............................................................ 20
Glossary ................................................................. 21
* This letter includes a Year 2000 Readiness Disclosure.
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
* U.S. stocks performed fairly well during the six months ended June 30, 1999.
Large-cap stocks continued to enjoy above-average gains, while mid- and
small-cap shares posted more historically average returns.
* Solid corporate earnings and fairly robust U.S. economic growth kept
investor optimism high and fueled the generally positive performance of U.S.
stocks. However, it also prompted the Federal Reserve (the U.S. central
bank) to raise short-term interest rates on June 30 in an effort to reduce
inflation pressures.
* Despite higher interest rates, utilities stocks turned in reasonably strong
results. Continued deregulation, industry consolidation, and a boost from
the sector rotation toward energy and value stocks bolstered returns.
* Natural gas and telecommunications were the top-performing utilities
sectors. Electric utilities lagged, stymied by rising interest rates.
MANAGEMENT Q&A
* American Century Utilities' performance for the six months ended June 30,
1999, lagged the average return of its Lipper peer group slightly. The
portfolio had less than a 5% weighting in natural gas stocks, which returned
over 20% on average for the period.
* The fund's longer-term returns were still attractive. American Century
Utilities ranked in the top 10 of the Lipper utilities group for the one-,
three-, and five-year periods ended June 30.
* The relatively small natural gas weighting was consistent with the fund's
benchmark index, which has its heaviest weightings in telecommunications and
electric utilities stocks.
* Mergers, acquisitions, consolidation, and deregulation continued to be major
themes that affected the portfolio. Merger and acquisition activity directly
affected the performance of the fund's top four holdings as of June 30: GTE,
Bell Atlantic, Ameritech, and SBC Communications.
* We continue to believe that long-term trends -- such as Internet expansion
and the growth of wireless communications -- should favor telecommunications
companies.
[left margin]
UTILITIES(1)
(BULIX)
TOTAL RETURNS: AS OF 6/30/99
6 Months 6.84%(2)
1 Year 25.42%
30-DAY SEC YIELD: 1.87%
INCEPTION DATE: 3/1/93
NET ASSETS: $323.7 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
Investment terms are defined in the Glossary on pages 21-22.
2 1-800-345-2021
Market Perspective from Mark Mallon
- --------------------------------------------------------------------------------
/photo of Mark Mallon/
Mark Mallon, head of growth and income equity, specialty, and asset allocation
funds at American Century
MARKET SNAPSHOT
U.S. stocks performed fairly well during the six months ended June 30,
1999. Large-cap stocks continued to enjoy above-average gains, while mid- and
small-cap shares posted more historically average returns. (See the accompanying
stock market returns table.) Solid corporate earnings and fairly robust U.S.
economic growth kept investor optimism high and fueled the generally positive
performance for U.S. stocks.
ECONOMIC UNDERPINNINGS
The longest economic expansion in 50 years provided the springboard for the
stock market's continued gains. The remarkable U.S. economic engine powered
ahead at a 4.3% annual pace during the first quarter, accompanied by corporate
earnings that were far stronger than expected. Improvements in Pacific Rim
economies--where Korea's industrial production surged, Taiwan's leading
indicators rose, and Japan's economy showed signs of life--further enhanced the
global economic outlook.
The U.S. economy slowed in the second quarter but still grew at an
estimated 2.3% annual pace. Meanwhile, U.S. corporate profits rose 16%--the
largest quarterly gain in nearly four years. By the end of June, the three most
popular U.S. stock indices--the Dow Jones Industrial Average, the S&P 500, and
the Nasdaq Composite--all achieved record highs.
THE FED INTERVENES
Economic and corporate earnings strength attracted the full attention of
inflation watchdogs, particularly the Federal Reserve (the Fed -- the U.S.
central bank). Just days after a May announcement that U.S. consumer prices
experienced their biggest monthly gain in almost nine years, the Fed announced
that its bias had shifted toward raising interest rates. On June 30, the Fed
acted upon its bias, pushing short-term interest rates a quarter of a percent
higher in an effort to reduce inflation pressures.
FIRST-QUARTER STOCK RECAP: 1998 REDUX
The dominance of large-cap growth stocks and the narrow market leadership
that characterized 1998 continued into early 1999. The S&P 500 still ruled the
roost and, according to Morgan Stanley Dean Witter, just five stocks accounted
for half of the S&P 500's return during the first three months of 1999. A mere
18 accounted for the full 100%; the rest essentially canceled each other out.
As a result, the bellwether growth names became increasingly expensive.
When the U.S. economy refused to show any signs of slowing down, investors began
to look elsewhere.
[right margin]
"LARGE-CAP STOCKS CONTINUED TO ENJOY ABOVE-AVERAGE GAINS, WHILE MID- AND
SMALL-CAP SHARES POSTED MORE HISTORICALLY AVERAGE RETURNS."
BROAD MARKET RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
S&P 500 12.23%
S&P MIDCAP 400 6.87%
S&P SMALLCAP 600 5.04%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
[line graph - data below]
BROAD MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
S&P 500 S&P Midcap 400 S&P SmallCap 600
12/31/1998 $1.00 $1.00 $1.00
1/31/1999 $1.04 $0.96 $0.99
2/28/1999 $1.01 $0.91 $0.90
3/31/1999 $1.05 $0.94 $0.91
4/30/1999 $1.09 $1.01 $0.97
5/31/1999 $1.06 $1.01 $0.99
6/30/1999 $1.12 $1.07 $1.05
Source: Lipper Inc.
These indices are defined on page 20.
www.americancentury.com 3
Market Perspective from Mark Mallon
- --------------------------------------------------------------------------------
(Continued)
SECOND-QUARTER STOCK RECAP: REVENGE OF THE LAGGARDS
Emboldened by the global economic recovery, investors deserted the big
names and sought attractively priced value and small-company shares. Index
returns tell the story -- the S&P 500/ BARRA Value Index, a benchmark for the
performance of large-cap value stocks, rose 10.80% in the second quarter,
compared with the 3.83% return of the S&P 500/BARRA Growth Index. Even more
impressive was the performance of small-cap value shares: the S&P SmallCap
600/BARRA Value Index jumped 19.91%, outpacing the 11.11% return of the S&P
SmallCap 600/BARRA Growth Index.
Cyclical stocks -- those closely tied to economic ups and downs --also
performed well during the second quarter because of improving global economic
conditions. That allowed shares of aluminum, chemicals, construction, and
diversified machinery companies to provide some of the quarter's better returns.
Aluminum was also one of the better performing industries for the entire six
months, as were the brokerage, broadcast/media, industrials, and semiconductor
industries.
THE UTILITIES MARKET
Despite rising interest rates, utilities stocks turned in reasonably strong
results for the first half of 1999. Continued deregulation, industry
consolidation, and a boost from the sector rotation toward energy and value
stocks bolstered returns.
Consolidation was rampant. Increasing numbers of telecommunications,
electric, and natural gas companies either announced plans to merge or actually
completed mergers and acquisitions to gain footholds in new markets, augment
existing services, and reduce costs.
TELECOM STILL STRONG IN 1999
Merger and acquisition activity and the continued explosion in new
technologies drove telecommunications stocks to double-digit returns, on
average, during the first half of 1999. With Internet traffic estimated to
double about every 100 days or so, the telecommunications companies that provide
Internet access performed well. So did the companies that provide "broadband"
networks capable of efficiently moving data, as the demand for voice and data
connections grew. In addition, the exponential growth of wireless communications
in both the U.S. and abroad helped boost cellular companies.
NATURAL GAS REBOUNDS
One of the biggest surprises was the explosive performance of natural gas
stocks, which had lagged far behind their telecom counterparts in 1998. This
sector benefited from the trends that caused value, energy, and cyclical stocks
to rally. A brightening global economic picture, favorable supply and demand
conditions, and merger and acquisition activity helped push natural gas stock
prices to unexpectedly high levels.
ELECTRIC RETURNS FLICKER
Rising interest rates helped turn electric utilities into the dim bulbs on
the string. Not even a wave of merger activity helped; investors appeared
skeptical about the results. Electrics rebounded somewhat when investors went
searching for value stocks. But renewed inflation fears in June caused electrics
to give back their earlier gains.
[left margin]
"ONE OF THE BIGGEST SURPRISES WAS THE EXPLOSIVE PERFORMANCE OF NATURAL GAS
STOCKS, WHICH HAD LAGGED FAR BEHIND THEIR TELECOM COUNTERPARTS IN 1998."
UTILITIES MARKET RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
Fund Benchmark 9.74%
S&P Telecommunications
(long distance) Index 17.13%
S&P Telephone Index 10.59%
S&P Electric Index -6.06%
S&P Natural Gas Index 24.39%
Source: Bloomberg Financial Markets
These indices are defined on page 20.
4 1-800-345-2021
Utilities--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 1999
INVESTOR CLASS (INCEPTION 3/1/93) ADVISOR CLASS (INCEPTION 6/25/98)
FUND UTILITY FUNDS(2) FUND
UTILITIES S&P 500 BENCHMARK AVERAGE RETURN FUND'S RANKING UTILITIES S&P 500 BENCHMARK
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 6.84% 12.23% 9.74% 7.02% -- 6.71% 12.23% 9.74%
1 YEAR 25.42% 22.75% 31.18% 16.81% 10 OUT OF 101 25.12% 22.75% 31.18%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 24.25% 29.00% 27.63% 18.01% 4 OUT OF 83 -- -- --
5 YEARS 21.21% 27.81% 23.54% 17.21% 6 OUT OF 58 -- -- --
LIFE OF FUND 15.73% 22.29% 17.33% 13.08%(3) 6 OUT OF 31(3) 25.98% 23.33% 31.18%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 3/4/93, the date nearest the class's inception for which data are
available.
(4) Since 6/30/98, the date nearest the class's inception for which data are
available.
See pages 19-21 for more information about share classes, returns, the fund's
benchmark, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 6/30/1999
S&P 500 $35,755
Fund Benchmark $27,520
Utilities $25,223
Utilities S&P 500 Fund Benchmark
DATE VALUE VALUE VALUE
3/1/1993 $10,000 $10,000 $10,000
3/31/1993 $10,223 $10,211 $10,258
6/30/1993 $10,589 $10,261 $10,455
9/30/1993 $11,262 $10,526 $11,078
12/31/1993 $10,659 $10,770 $10,614
3/31/1994 $9,731 $10,362 $9,699
6/30/1994 $9,639 $10,405 $9,562
9/30/1994 $9,801 $10,914 $9,812
12/31/1994 $9,590 $10,912 $9,618
3/31/1995 $10,161 $11,975 $10,071
6/30/1995 $10,862 $13,118 $10,795
9/30/1995 $11,897 $14,161 $11,822
12/31/1995 $13,014 $15,014 $12,877
3/31/1996 $12,699 $15,820 $12,637
6/30/1996 $13,135 $16,530 $13,237
9/30/1996 $12,506 $17,041 $12,839
12/31/1996 $13,642 $18,461 $13,988
3/31/1997 $13,353 $18,955 $13,740
6/30/1997 $14,870 $22,267 $15,193
9/30/1997 $15,697 $23,932 $16,091
12/31/1997 $18,529 $24,619 $18,814
3/31/1998 $20,750 $28,054 $21,274
6/30/1998 $20,111 $28,979 $20,978
9/30/1998 $20,592 $26,096 $21,585
12/31/1998 $23,611 $31,654 $25,077
3/31/1999 $22,501 $33,234 $24,475
6/30/1999 $25,223 $35,755 $27,520
$10,000 investment made 3/1/93
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
500 and the fund's benchmark are provided for comparison. Until 1996, the fund's
benchmark was the NYSE Utilities Index. Beginning in 1996, the fund's benchmark
has been a custom utilities index, described on page 20. Utilities' total
returns include operating expenses (such as transaction costs and management
fees) that reduce returns, while the total returns of the indices do not. These
graphs are based on Investor Class shares only; performance for other classes
will vary due to differences in fee structures (see Total Returns table above).
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Utilities Fund Benchmark
DATE RETURN RETURN
6/30/93* 5.90% 4.55%
6/30/94 -8.98% -8.54%
6/30/95 12.68% 12.89%
6/30/96 20.92% 22.63%
6/30/97 13.22% 15.05%
6/30/98 35.25% 38.59%
6/30/99 25.42% 31.18%
* From 3/1/93 (the fund's inception date) to 6/30/93.
www.americancentury.com 5
Utilities--Q&A
- --------------------------------------------------------------------------------
/photo of Joe Sterling, Kurt Borgwardt, and John Schniedwind/
Based on interviews with Joe Sterling, Kurt Borgwardt, and John
Schniedwind, portfolio managers on the Utilities fund investment team.
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED JUNE 30, 1999?
American Century Utilities posted a total return of 6.84%,* slightly
lagging the 7.02% average total return of 101 utilities funds tracked by Lipper
Inc. For the one-year period ended June 30, the results were better. American
Century Utilities returned 25.42%, compared with the 16.81% average return for
the Lipper peer group. The fund's returns placed it in the top 10 of the Lipper
utilities group for the one-, three-, and five-year periods ended June 30.
WHAT CAUSED THE DIFFERENTIAL BETWEEN THE FUND'S RETURN AND THE LIPPER UTILITIES
AVERAGE DURING THE FIRST HALF OF 1999?
As often happens in the portfolio management business, key factors that
boosted performance one year caused returns to lag in the following period. In
1998, American Century Utilities benefited from its large weighting in
telecommunications companies, which were far and away the best-performing
utilities sector that year, and from its relatively small stake in natural gas
stocks, which lagged far behind other sectors.
In the first half of 1999, our small weighting in natural gas stocks (about
3% of fund assets as of June 30) hurt the portfolio. The S&P Natural Gas Index
returned just over 24% for the period, a pace that even the still-hot
telecommunications stocks didn't match. Rising natural gas prices, investors'
appetite for undervalued stocks, a rebound in stocks that stood to benefit from
global economic resurgence, and merger and acquisition activity all helped boost
natural gas stocks.
WHY WAS YOUR WEIGHTING IN NATURAL GAS STOCKS SO SMALL? HOW DO YOU DECIDE WHAT
PORTION OF THE FUND'S INVESTMENTS ARE ALLOCATED TO DIFFERENT UTILITIES SECTORS?
Our weighting for natural gas stocks wasn't much different from their
weighting in the fund's benchmark. American Century Utilities' investment
portfolio tracks a custom index of 165 utilities stocks made up of about 55%
telephone and communications services companies, 35% electric and gas utilities
(primarily electric companies), and about 10% utilities-related companies such
as communications equipment manufacturers.
The sector weightings in the custom index are based on the market
capitalizations of the sectors. In other words, the index reflects the
composition of the utilities market, weighted by the size of the companies, not
their number.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"THE FUND'S RETURNS PLACED IT IN THE TOP 10 OF THE LIPPER UTILITIES GROUP FOR
THE ONE-, THREE-, AND FIVE-YEAR PERIODS ENDED JUNE 30."
PORTFOLIO AT A GLANCE
6/30/99 12/31/98
NUMBER OF COMPANIES 81 80
30-DAY SEC YIELD 1.87% 2.44%
PRICE/EARNINGS RATIO 16.9 17.4
PORTFOLIO TURNOVER 36%(1) 98%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68%(3) 0.69%
(1) Six months ended 6/30/99.
(2) Year ended 12/31/98.
(3) Annualized.
Investment terms are defined in the Glossary on pages 21-22.
6 1-800-345-2021
Utilities--Q&A
- --------------------------------------------------------------------------------
(Continued)
At times, we may under- or overweight a utilities sector if we believe it
is dramatically over- or undervalued. But we generally keep our sector
weightings pretty close to the benchmark. Though past performance doesn't
predict future results, American Century Utilities' long-term performance
appears to have benefited from this disciplined, but growth-oriented approach.
SPEAKING OF GROWTH, TELECOMMUNICATIONS STOCKS CONTINUED TO PERFORM WELL IN THE
FIRST HALF OF 1999. WHAT WAS BEHIND THEIR STRENGTH?
Many of the same factors that drove the telecom sector to high returns in
1998 remained in place. Merger and acquisition activity was still a key factor.
During the past six months, for example, the proposed merger between two major
regional telephone companies -- SBC Communications and Ameritech, both among the
fund's top 10 holdings -- moved closer to becoming reality. Likewise, the
proposed merger between Bell Atlantic and GTE -- two more top 10 holdings --
continued to advance.
Besides the merger and acquisition activity, telecommunications stocks were
boosted by the increased need for voice and computer-data transmissions, the
growth of wireless communication, and the expansion of electronic commerce via
the Internet.
WHAT OTHER TELECOM COMPANIES WERE LEADERS DURING THE PAST SIX MONTHS?
Mexico's largest telephone company, Telefonos de Mexico (Telmex), continued
to post strong earnings despite increased competition from foreign carriers. Its
stock received an added boost from investors' renewed interest in Latin American
stocks. BCE, the parent company of Bell Canada, rallied in response to increased
revenues stemming from growth in its local and access services.
But not all of our telecommunications stocks performed well. MCI WorldCom,
for example, suffered substantial losses on news that it was being investigated
by the SEC for allegedly misleading investors in its pursuit of Skytel
Communications.
HOW DID THE FUND'S ELECTRIC UTILITIES HOLDINGS (ABOUT 30% OF FUND ASSETS AS OF
JUNE 30) PERFORM?
Electric utilities stocks proved to be somewhat disappointing, primarily
because of rising interest rates. However, we continued to maintain a large
position in electrics, in part because we think they are attractively priced. At
the end of June, electric utilities were valued at about 50% of the S&P 500's
price-to-earnings multiple, much cheaper than their historic average of about
70%.
In addition, we believe that continued deregulation of the electric
industry will fuel future merger and acquisition activity, a development that
would most likely boost the sector's longer-term performance.
[right margin]
"WE BELIEVE TELECOMMUNICATIONS AND ELECTRIC COMPANIES PROVIDE THE BEST
LONG-TERM RETURN POTENTIAL IN THE UTILITIES UNIVERSE."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
GTE CORP. 5.9% 4.6%
BELL ATLANTIC CORP. 5.5% 3.6%
AMERITECH CORP. 5.4% 5.1%
SBC COMMUNICATIONS
INC. 5.3% 5.1%
MCI WORLDCOM, INC. 4.9% 4.9%
BELLSOUTH CORP. 4.8% 6.2%
AT&T CORP. 4.6% 7.1%
U S WEST, INC. 3.4% 4.4%
SPRINT CORP. 3.3% 1.8%
VODAFONE GROUP
PLC ADR 3.0% 0.6%
www.americancentury.com 7
Utilities--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT'S YOUR OUTLOOK FOR UTILITIES STOCKS IN GENERAL?
We think that long-term trends favor this sector. As we've mentioned,
deregulation -- which is responsible for much of the sector's gains during the
past several years -- should continue to provide favorable longer-term
underpinnings for the telecommunications, electric, and natural gas industries.
But we wouldn't be surprised if the road toward further deregulation encounters
a regulatory bump or two along the way, which may cause some occasional
challenges for the group.
Focusing on our largest weighting, we believe that telecommunications
companies will post attractive growth rates. Rapid changes in technology seem to
be continually transforming the way we use voice and data communications. The
Internet, for example, is exploding as a means of communication and has emerged
as an important avenue for electronic commerce. Meanwhile, the worldwide
expansion of wireless phone service marches forward. Telecommunications
companies lie at the center of this revolution.
We're also upbeat about the prospects in other areas. Continued
consolidation should pave the way for electric and natural gas companies to
reduce costs and add and expand services.
WON'T THE POSSIBILITY OF HIGHER INTEREST RATES CRIMP THE OUTLOOK FOR UTILITIES
STOCKS?
In the short run, yes. But if rising interest rates eventually lead to an
economic slowdown, utilities stocks, particularly electric utilities, could
benefit. Economic weakness typically throws a spotlight on the relatively
reliable earnings of telephone, electric, and natural gas service providers. In
addition, a slower economy should eventually cause interest rates to fall,
causing bonds, and bond-like securities such as dividend-paying utilities
stocks, to rally.
Unfortunately, some companies in the telecommunications sector are more
sensitive to the economy's ups and downs than electric, natural gas, and
telephone companies. Those telecom companies would face more challenges from a
decline in the business cycle. But those are the same companies that give the
portfolio much of its upside when economic conditions are strong.
WITH ALL THOSE FACTORS IN MIND, HOW DO YOU PLAN TO MANAGE AMERICAN CENTURY
UTILITIES DURING THE REMAINDER OF THE YEAR?
We plan to continue seeking a combination of current income and long-term
growth of capital and income. The utilities sector has undergone a major
transformation during the past 10 years, shedding its somewhat stodgy reputation
as a reliable dividend producer and emerging as one of the stock market's
fastest-growing sectors. We try to harness the best of both of those worlds,
investing in a mix of attractively priced utilities stocks that pay healthy
dividends as well as those that offer the potential for growth.
We're comfortable with the portfolio's current allocation among
telecommunications, electric, and natural gas stocks and will likely continue to
keep it in line with the funds' benchmark. As always, we intend to remain fully
invested in utilities stocks so the fund's performance will continue to reflect
the dynamics of the utilities sector.
[left margin]
"(OUR) INVESTMENT PORTFOLIO TRACKS A CUSTOM INDEX OF 165 UTILITIES STOCKS MADE
UP OF ABOUT 55% TELECOM COMPANIES, 35% ELECTRIC AND GAS UTILITIES, AND ABOUT 10%
UTILITIES-RELATED COMPANIES."
INDUSTRY BREAKDOWN
% OF FUND INVESTMENTS
AS OF AS OF
6/30/99 12/31/98
TELEPHONE
COMMUNICATIONS 55.4% 49.2%
UTILITIES (ELECTRIC) 29.8% 35.0%
ENERGY (PRODUCTION
& MARKETING) 5.4% 3.7%
WIRELESS
COMMUNICATIONS 4.6% 6.0%
NATURAL GAS 2.7% 4.8%
OTHER 2.1% 1.3%
8 1-800-345-2021
Utilities--Schedule of Investments
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--99.5%
BROADCASTING & MEDIA--0.4%
30,000 RCN Corp.(1) $ 1,249,688
--------------
ENERGY (PRODUCTION & MARKETING)--5.4%
52,400 Coastal Corp. (The) 2,096,000
93,000 Enron Corp. 7,602,750
95,200 Keyspan Energy Corp. 2,510,900
117,000 Williams Companies, Inc. (The) 4,979,812
--------------
17,189,462
--------------
ENERGY (SERVICES)--1.2%
135,200 Reliant Energy, Inc. 3,734,900
--------------
NATURAL GAS--2.7%
36,800 Columbia Energy Group 2,306,900
11,100 Consolidated Natural Gas Co. 674,325
60,200 El Paso Energy Corporation 2,118,288
46,600 Energen Corp. 867,925
39,800 KN Energy, Inc. 532,325
133,000 TransCanada Pipelines Ltd. 1,862,000
--------------
8,361,763
--------------
TELEPHONE COMMUNICATIONS--55.4%
262,050 AT&T Corp. 14,625,666
55,000 ALLTEL Corp. 3,932,500
229,800 Ameritech Corp. 16,890,300
190,600 BCE Inc. 9,398,963
265,900 Bell Atlantic Corp. 17,383,212
320,000 BellSouth Corp. 15,000,000
21,100 Cable & Wireless plc ADR 836,088
45,000 Century Telephone Enterprises, Inc. 1,788,750
78,900 Cincinnati Bell Inc. 1,967,569
60,000 Frontier Corp. 3,540,000
246,200 GTE Corp. 18,649,650
49,700 Hong Kong Telecommunications
Ltd. ADR 1,338,794
42,500 ITC/\DeltaCom, Inc.(1) 1,188,672
21,500 IXC Communications Inc.(1) 843,203
181,100 MCI WorldCom, Inc.(1) 15,580,259
194,800 Qwest Communications
International Inc.(1) 6,446,662
287,300 SBC Communications Inc. 16,663,400
196,000 Sprint Corp. 10,351,250
3,200 Telecom Corporation of New
Zealand Ltd. ADR 111,800
90,000 Telefonos de Mexico, S.A. Cl L ADR 7,273,125
185,200 U S WEST, Inc. 10,880,500
26,800 West Teleservices Corp.(1) 251,250
--------------
174,941,613
--------------
Shares Value
- --------------------------------------------------------------------------------
UTILITIES (ELECTRIC)--29.8%
32,500 AES Corp. (The)(1) $ 1,889,062
51,500 BEC Energy 2,124,375
82,400 Central & South West Corp. 1,926,100
52,700 Central Maine Power Co. 1,380,081
46,100 CMS Energy Corp. 1,930,438
78,850 Conectiv, Inc. 1,926,897
13,800 Consolidated Edison, Inc. 624,450
118,900 Constellation Energy Group 3,522,412
78,300 Dominion Resources, Inc. (Va.) 3,391,369
37,000 DTE Energy Company 1,480,000
145,000 Duke Energy Corp. 7,884,375
186,700 Edison International 4,994,225
15,600 Empresa Nacional de Electricidad
S.A. (Chile) ADR 189,150
39,000 Energy East Corp. 1,014,000
195,000 Entergy Corp. 6,093,750
43,900 FIRSTENERGY CORP. 1,360,900
50,400 FPL Group, Inc. 2,753,100
45,500 Hawaiian Electric Industries, Inc. 1,615,250
75,200 Kansas City Power & Light Co. 1,917,600
100,600 LG&E Energy Corp. 2,112,600
68,600 MDU Resources Group, Inc. 1,564,938
165,000 Minnesota Power & Light Co. 3,279,375
34,000 Montana Power Co. 2,397,000
51,300 New Century Energies, Inc. 1,991,081
148,400 Northeast Utilities(1) 2,624,825
127,500 Northern States Power Co. (Minn.) 3,083,906
5,100 Northwestern Corp. 123,356
50,000 PECO Energy Co. 2,093,750
100,000 PG&E Corp. 3,250,000
50,000 Public Service Co. of New Mexico 993,750
47,300 Puget Sound Energy Inc. 1,135,200
124,600 Sempra Energy 2,819,075
30,000 Sierra Pacific Resources 1,091,250
253,400 Southern Co. 6,715,100
120,000 Texas Utilities Co. 4,950,000
42,700 UGI Corp. 862,006
35,100 Unicom Corp. 1,353,544
95,500 Utilicorp United Inc. 2,321,844
48,500 Western Resources, Inc. 1,291,312
--------------
94,071,446
--------------
WIRELESS COMMUNICATIONS--4.6%
25,500 Cellular Communications of
Puerto Rico(1) 725,953
19,500 CommNet Cellular Inc.(1) 516,141
14,500 Nextel Communications, Inc.(1) 728,172
8,900 PanAmSat Corp.(1) 345,988
32,450 Sprint PCS(1) 1,853,706
See Notes to Financial Statements
www.americancentury.com 9
Utilities--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
Shares Value
- --------------------------------------------------------------------------------
48,500 Vodafone Group plc ADR $ 9,554,500
9,400 VoiceStream Wireless Corp.(1) 267,606
14,400 Western Wireless Corp. Cl A(1) 389,250
--------------
14,381,316
--------------
TOTAL COMMON STOCKS 313,930,188
--------------
(Cost $233,926,949)
TEMPORARY CASH INVESTMENTS--0.5%
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.72%, dated 6/30/99,
due 7/1/99 (Delivery value $1,700,223) 1,700,000
--------------
(Cost $1,700,000)
TOTAL INVESTMENT SECURITIES--100.0% $315,630,188
==============
(Cost $235,626,949)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule shows you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the number of shares of each stock
* the market value of each investment
* the percentage of investments in each industry, as applicable
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
10 1-800-345-2021
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $235,626,949)
(Note 3) .................................................. $315,630,188
Cash ........................................................ 580,254
Receivable for investments sold ............................. 12,401,293
Dividends and interest receivable ........................... 704,624
------------
329,316,359
------------
LIABILITIES
Payable for investments purchased ........................... 5,406,493
Accrued management fees (Note 2) ............................ 179,021
Distribution fees payable (Note 2) .......................... 559
Service fees payable (Note 2) ............................... 559
Payable for directors' fees and expenses .................... 1,140
------------
5,587,772
------------
Net Assets .................................................. $323,728,587
============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) ..................... $235,498,296
Undistributed net investment income ......................... 132,180
Accumulated undistributed net
realized gain on investment
transactions .............................................. 8,095,209
Net unrealized appreciation on
investments (Note 3) ...................................... 80,002,902
------------
$323,728,587
============
Investor Class, $10.00 Par Value
Net assets .................................................. $320,817,759
Shares outstanding .......................................... 19,127,123
Net asset value per share ................................... $ 16.77
Advisor Class, $10.00 Par Value
Net assets .................................................. $ 2,910,828
Shares outstanding .......................................... 173,559
Net asset value per share ................................... $ 16.77
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses; net
gains earned on investments but not yet paid to shareholders or net losses on
investments (known as realized gains or losses); and finally, gains or losses on
securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
www.americancentury.com 11
Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
INVESTMENT INCOME
Income:
Dividends (net of foreign tax
withheld of $35,297) ..................................... $ 4,228,722
Interest ................................................... 41,706
-----------
4,270,428
-----------
Expenses (Note 2):
Management fees ............................................ 1,046,383
Distribution fees -- Advisor Class ......................... 1,769
Service fees -- Advisor Class .............................. 1,769
Directors' fees and expenses ............................... 4,538
-----------
1,054,459
-----------
Net investment income ...................................... 3,215,969
-----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ........................... 9,323,252
Change in net unrealized
appreciation on investments .............................. 7,706,261
-----------
Net realized and unrealized
gain on investments ...................................... 17,029,513
-----------
Net Increase in Net Assets
Resulting from Operations ................................ $20,245,482
===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses.It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* income earned from investments (dividend and interest)
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
12 1-800-345-2021
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1998
Increase in Net Assets 1999 1998
OPERATIONS
Net investment income ...................... $ 3,215,969 $ 5,857,584
Net realized gain on investment
transactions ............................. 9,323,252 25,812,319
Change in net unrealized
appreciation on investments .............. 7,706,261 29,664,921
------------- -------------
Net increase in net assets
resulting from operations ............... 20,245,482 61,334,824
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ........................... (3,312,457) (5,858,812)
Advisor Class ............................ (18,045) (418)
From net realized gains on
investment transactions:
Investor Class ........................... (1,784,304) (28,052,659)
Advisor Class ............................ (5,562) (6,429)
------------- -------------
Decrease in net assets
from distributions ....................... (5,120,368) (33,918,318)
------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets from
capital share transactions ............... 751,304 70,473,943
------------- -------------
Net increase in net assets ................. 15,876,418 97,890,449
NET ASSETS
Beginning of period ........................ 307,852,169 209,961,720
------------- -------------
End of period .............................. $ 323,728,587 $ 307,852,169
============= =============
Undistributed net investment income ........ $ 132,180 $ 246,713
============= =============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* share transactions--shareholders' purchases, reinvestments, and redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 13
Notes to Financial Statements
- --------------------------------------------------------------------------------
JUNE 30, 1999 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Quantitative Equity Funds (the corporation)
is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Utilities Fund (the fund) is one of
the six funds issued by the corporation. The fund seeks current income and
long-term growth of capital and income. The fund invests primarily in equity
securities of companies engaged in the utilities industry. The fund is
authorized to issue two classes of shares: the Investor Class and the Advisor
Class. The two classes of shares differ principally in their respective
shareholder servicing and distribution expenses and arrangements. All shares of
the fund represent an equal pro rata interest in the assets of the class to
which such shares belong, and have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. The following significant accounting policies are in accordance with
generally accepted accounting principles; these principles may require the use
of estimates by fund management.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or the mean of
the latest bid and asked prices where no sales price is available. Securities
traded over-the-counter are valued at the mean of the latest bid and asked
prices or, in the case of certain foreign securities, at the last reported sales
price, depending on local convention or regulation. When valuations are not
readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income less foreign taxes withheld (if any) is
recorded as of the ex-dividend date. Interest income is recorded on the accrual
basis and includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is 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 and 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 the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income are declared
and paid quarterly. Distributions from net realized gains are expected to be
declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences 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.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the corporation's
distributor. Certain officers of FDI are also officers of the corporation.
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
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, portfolio
insurance, interest, fees and expenses of the Directors who are not considered
"interested persons" as defined in the Investment Company Act of 1940 (including
counsel fees) and extraordinary expenses, will be paid by ACIM. The fee is
calculated daily and paid monthly. It consists of an Investment Category Fee
based on the average net assets of the funds in a specific fund's investment
category and a Complex Fee based on the average net assets of all the funds
managed by ACIM. The rates for the Investment Category Fee range from 0.3380% to
0.5200% and the rates for the Complex Fee (Investor Class) range from 0.2900% to
0.3100%. The Advisor Class is 0.2500% less at each point within the Complex Fee
range. For the six months ended June 30, 1999, the effective annual Investor
Class management fee was 0.68%.
The Board of Directors has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The plan provides that the fund will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
14 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers. Fees incurred by
the fund under the plan for the six months ended June 30, 1999 were $3,538.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, and
the corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments, totaled
$109,614,470 and $117,112,619, respectively.
On June 30, 1999, accumulated net unrealized appreciation on investments was
$78,785,086, based on the aggregate cost of investments for federal income tax
purposes of $236,845,102, which consisted of unrealized appreciation of
$85,749,858 and unrealized depreciation of $6,964,772.
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 2,000,000,000 shares to the fund.
Transactions in shares of the fund were as follows:
SHARES AMOUNT
INVESTOR CLASS
Designated Shares .......................... 1,000,000,000
===============
Six months ended June 30, 1999
Sold ....................................... 5,582,419 $89,367,996
Issued in reinvestment of distributions .... 293,112 4,627,367
Redeemed ................................... (6,034,601) (95,950,086)
--------------- ---------------
Net decrease ............................... (159,070) $ (1,954,723)
=============== ===============
Year ended December 31, 1998
Sold ....................................... 15,422,169 $231,780,389
Issued in reinvestment of distributions .... 2,000,202 30,697,386
Redeemed ................................... (12,882,858) (192,079,380)
--------------- ---------------
Net increase ............................... 4,539,513 $70,398,395
=============== ===============
ADVISOR CLASS
Designated Shares .......................... 250,000,000
===============
Six months ended June 30, 1999
Sold ....................................... 173,692 $2,784,648
Issued in reinvestment of distributions .... 998 15,951
Redeemed ................................... (5,865) (94,572)
--------------- ---------------
Net increase ............................... 168,825 $2,706,027
=============== ===============
Period Ended December 31, 1998(1)
Sold ....................................... 4,487 $71,713
Issued in reinvestment of distributions .... 247 3,835
--------------- ---------------
Net increase ............................... 4,734 $75,548
=============== ===============
(1) June 25, 1998 (commencement of sale) through December 31, 1998.
www.americancentury.com 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
5. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $570,000,000 bank line of credit agreement with Chase Manhattan Bank.
Borrowings under the agreement bear interest at the Federal Funds rate plus
0.40%. The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. The fund did not borrow from the line during the six
months ended June 30, 1999.
- --------------------------------------------------------------------------------
6. FUND EVENTS
The following name change became effective March 1, 1999:
==================================================================
NEW NAME FORMER NAME
==================================================================
FUND: Utilities Fund American Century Utilities Fund
16 1-800-345-2021
Utilities--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
1999(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................ $ 15.96 $ 14.24 $ 11.51 $ 11.44 $ 8.79 $ 10.24
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income .............. 0.17(2) 0.37 0.43 0.45 0.42 0.44
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .. 0.90 3.39 3.57 0.08 2.65 (1.45)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment Operations ... 1.07 3.76 4.00 0.53 3.07 (1.01)
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ......... (0.17) (0.38) (0.42) (0.46) (0.42) (0.44)
From Net Realized Gains on
Investment Transactions ............ (0.09) (1.66) (0.85) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ................ (0.26) (2.04) (1.27) (0.46) (0.42) (0.44)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ....... $ 16.77 $ 15.96 $ 14.24 $ 11.51 $ 11.44 $ 8.79
=========== =========== =========== =========== =========== ===========
Total Return(3) .................... 6.84% 27.43% 35.82% 4.82% 35.70% (10.03)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.68%(4) 0.69% 0.72% 0.71% 0.75% 0.75%
Ratio of Net Investment Income
to Average Net Assets ................ 2.08%(4) 2.51% 3.56% 3.88% 4.31% 4.67%
Portfolio Turnover Rate .............. 36% 98% 92% 93% 68% 61%
Net Assets, End of Period
(in thousands) ....................... $ 320,818 $ 307,777 $ 209,962 $ 145,134 $ 218,794 $ 152,570
</TABLE>
(1) Six months ended June 30, 1999 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 17
Utilities--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Advisor Class
1999(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period .......... $ 15.96 $ 14.90
--------- ---------
Income From Investment Operations
Net Investment Income ....................... 0.13(3) 0.16
Net Realized and Unrealized
Gain on Investment Transactions ............. 0.92 2.52
--------- ---------
Total From Investment Operations ............ 1.05 2.68
--------- ---------
Distributions
From Net Investment Income .................. (0.15) (0.19)
From Net Realized Gains on
Investment Transactions ..................... (0.09) (1.43)
--------- ---------
Total Distributions ......................... (0.24) (1.62)
--------- ---------
Net Asset Value, End of Period ................ $ 16.77 $ 15.96
========= =========
Total Return(4) ............................. 6.71% 18.43%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ......................... 0.93%(5) 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ......................... 1.83%(5) 1.94%(5)
Portfolio Turnover Rate ....................... 36% 98%
Net Assets, End of Period
(in thousands) .............................. $ 2,911 $ 76
(1) Six months ended June 30, 1999 (unaudited).
(2) June 25, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements
18 1-800-345-2021
Share Class and Retirement Account Information
- --------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the funds: Investor Class
and Advisor Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies, and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
is 0.25% higher than the total expense ratio of the Investor Class.
Both classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid from the date of
receipt at American Century. Even if you plan to roll over the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 19
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers four "specialty" equity funds* that concentrate
their holdings in specific industries or sectors of the stock market. These
funds typically respond differently than general equity funds to changing market
or economic conditions. The funds are managed to provide a broad representation
of their respective industries.
AMERICAN CENTURY UTILITIES seeks current income and long-term growth of
capital and income. The fund invests primarily in the stocks of companies
engaged in the utilities industry, including electricity, natural gas, and
telecommunications services.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 is a capitalization-weighted index of the stocks of 500
publicly traded large-capitalization companies that are considered to be leading
firms in leading industries. Created by Standard & Poor's Corporation, the index
is viewed as a broad measure of U.S. stock market performance.
The S&P MIDCAP 400 is composed of 400 mid-capitalization stocks traded on
domestic exchanges. It is considered a broad measure of mid-sized stock
performance.
The S&P SMALLCAP 600 is composed of 600 small-capitalization stocks traded
on domestic exchanges. It is considered a broad measure of small-company stock
performance.
The FUND BENCHMARK consists of approximately 165 utilities stocks that meet
the fund's investment criteria. The benchmark's composition by industry group in
1998 was approximately 55% telephone and communication services, 35% electric
and natural gas companies, and 10% utilities-related companies, such as
manufacturers of communications equipment.
The S&P ELECTRIC INDEX is composed of 26 electric power companies in the
S&P 500.
The S&P NATURAL GAS INDEX is composed of 11 natural gas distributors and
pipeline companies in the S&P 500.
The S&P TELECOMMUNICATIONS (LONG DISTANCE) INDEX is composed of four
long-distance telephone companies in the S&P 500.
The S&P TELEPHONE INDEX is composed of nine regional telephone companies in
the S&P 500.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objective. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
Lipper's UTILITY FUNDS category consists of funds that invest at least 65%
of their portfolios in utilities stocks.
* Investing in these funds involves special risks resulting from their
concentrated investment objectives. They are not intended to serve as a
complete investment program by themselves.
[left margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
KURT BORGWARDT
JOHN SCHNIEDWIND
JOE STERLING
20 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 17-18.
PORTFOLIO STATISTICS
* NUMBER OF COMPANIES --the number of different companies held by the fund on a
given date.
* 30-DAY SEC YIELD --net investment income earned by the fund over a 30-day
period, expressed as an annual percentage rate based on the fund's share price
at the end of the 30-day period. The SEC yield should be regarded as an estimate
of the fund's dividend income, and it may not equal the fund's actual income
distribution rate, the income paid to a shareholder's account, or the income
reported in the fund's financial statements.
* PRICE/EARNINGS (P/E) RATIO --a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
* PORTFOLIO TURNOVER--the percentage of the fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* EXPENSE RATIO --the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF STOCKS
* BLUE CHIP STOCKS -- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS -- generally considered to be stocks whose price and earnings
fluctuations tend to follow the ups and downs of the business cycle. Examples
include the stocks of automobile manufacturers, steel producers, and textile
operators.
* GROWTH STOCKS -- stocks of companies that have experienced above-average
earnings growth and appear likely to continue such growth. These stocks often
sell at high P/E ratios. Examples can include the stocks of high-tech,
healthcare, and consumer staple companies.
* LARGE-CAPITALIZATION (LARGE-CAP) STOCKS --generally considered to be stocks of
larger-sized companies that make up the Dow Jones Industrial Average and the S&P
500.
www.americancentury.com 21
Glossary
- --------------------------------------------------------------------------------
(Continued)
* MEDIUM-CAPITALIZATION (MID-CAP) STOCKS --generally considered to be stocks of
mid-sized companies that make up the S&P MidCap 400.
* SMALL-CAPITALIZATION (SMALL-CAP) STOCKS --generally considered to be stocks of
smaller-sized companies that make up the Russell 2000 and the S&P SmallCap 600.
* VALUE STOCKS -- generally considered to be stocks that are purchased because
they are relatively inexpensive. These stocks are typically characterized by low
P/E ratios.
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income,
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* GROWTH -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds. Please be aware that the fund's category may change over
time. Therefore, it is important that you read a fund's prospectus or fund
profile carefully before investing to ensure its objectives, policies, and risk
potential are consistent with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
22 1-800-345-2021
Notes
- --------------------------------------------------------------------------------
www.americancentury.com 23
Notes
- --------------------------------------------------------------------------------
24 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Tax-Managed Value
Strategic Allocation -- Income & Growth
Moderate Value
Strategic Allocation -- Equity Income
Conservative
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
New Opportunities Global Gold Emerging Markets
Giftrust(reg.tm) International Discovery
Vista International Growth
Heritage Global Growth
Growth
Ultra(reg.tm)
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
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 BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9908 Funds Distributor, Inc.
SH-SAN-17126 (c)1999 American Century Services Corporation
