[front cover]
DECEMBER 31, 1999
AMERICAN CENTURY(reg.sm)
ANNUAL REPORT
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Equity Growth
Income & Growth
Small Cap Quantitative
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American
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[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.
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
Equity investors were well rewarded in 1999, as they were throughout the
1990s. Many public companies in the U.S. posted strong profit growth, enabling
the stock market to put together another year of spectacular returns. The year
was also notable for heightened market volatility, especially in the last six
months.
Although fund investors have benefited from exceptional stock returns over
the past several years, we wish to stress that these results are unprecedented
and not indefinitely sustainable. It is important to remember that market
corrections are an inevitable, even necessary part of the investment process.
For that reason, it is prudent to maintain reasonable expectations for your
fund's future performance.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Today, more than one-third of our equity trades are executed over
alternative trading networks. Savings in this area directly affect the
performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For." In
addition, American Century's investor account statement is the first fund
company statement to win the Communications Seal from DALBAR, Inc., an
independent financial services research firm.
We do not take acknowledgements like these lightly-- they enable us to
recruit talented and dedicated people, from service representatives to
investment professionals. This "intellectual capital" is our most
valuable resource and an essential one in our effort to provide you with
excellent investment management and service.
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 ................................................ 4
Management Q&A ..................................................... 5
Schedule of Investments ................................................ 8
INCOME & GROWTH
Performance Information ................................................ 12
Management Q&A ..................................................... 13
Schedule of Investments ................................................ 16
SMALL CAP QUANTITATIVE
Performance Information ................................................ 21
Management Q&A ..................................................... 22
Schedule of Investments ................................................ 25
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ......................................................... 28
Statements of Operations ............................................... 29
Statements of Changes
in Net Assets ....................................................... 30
Notes to Financial
Statements .......................................................... 32
Financial Highlights ................................................... 36
Report of Independent
Accountants ......................................................... 44
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 45
Background Information
Investment Philosophy
and Policies ..................................................... 46
Comparative Indices ................................................. 46
Lipper Rankings ..................................................... 46
Investment Team
Leaders .......................................................... 46
Glossary ............................................................... 47
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* The U.S. stock market had another spectacular year in 1999, capping one of
the best decades in its history.
* All of the major stock indexes posted double-digit returns for the year
despite a modest decline during the summer.
* Technology stocks outperformed the rest of the market by a wide margin.
* Led by the technology sector, small- and mid-cap stocks rebounded after a
dismal 1998.
* Value stocks--those considered to be attractively valued relative to their
earnings growth--were left behind as investors focused on growth-oriented
shares.
EQUITY GROWTH
* The fund performed well in 1999 but trailed its benchmark index, the S&P
500.
* Equity Growth's underperformance compared with the S&P 500 occurred
during the first quarter of the year, when just a handful of companies were
responsible for the index's performance.
* We shifted to an "industry-neutral" approach relative to the
S&P 500, focusing more on specific stock selection within each industry.
* Stock selection among semiconductor and basic materials companies enhanced
performance, as did selected underweights among consumer products shares.
* Banking and pharmaceutical stock selection detracted the most from fund
performance.
INCOME & GROWTH
* The fund performed well in 1999 but trailed its benchmark index, the S&P
500.
* Income & Growth's underperformance compared with the S&P 500
occurred during the first quarter of the year, when just a handful of
companies were responsible for the index's performance.
* We shifted to an "industry-neutral" approach relative to the
S&P 500, focusing more on specific stock selection within each industry.
* Stock selection among semiconductor and basic materials companies enhanced
performance, as did selected underweights among consumer products shares.
* Banking and pharmaceutical stock selection detracted the most from fund
performance.
SMALL CAP QUANTITATIVE
* The fund performed well in 1999 but trailed its benchmark index, the S&P
SmallCap 600.
* Small Cap Quantitative lagged the S&P 600 in the first quarter of the
year, when some industry overweights hampered fund performance.
* We shifted to an "industry-neutral" approach relative to the
S&P 600 and cut back on the number of stocks in the portfolio.
* Stock selection among semiconductor and medical products companies enhanced
fund performance.
* Financial and insurance stocks detracted the most from fund performance.
[left margin]
EQUITY GROWTH(1)
(BEQGX)
TOTAL RETURNS: AS OF 12/31/99
6 Months 9.58%(2)
1 Year 18.47%
INCEPTION DATE: 5/9/91
NET ASSETS: $2.5 billion(3)
INCOME & GROWTH(1)
(BIGRX)
TOTAL RETURNS: AS OF 12/31/99
6 Months 7.53%(2)
1 Year 17.96%
INCEPTION DATE: 12/17/90
NET ASSETS: $7.2 billion(3)
SMALL CAP QUANTITATIVE(1)
(ASQIX)
TOTAL RETURNS: AS OF 12/31/99
6 Months 8.60%(2)
1 Year 9.76%
INCEPTION DATE: 7/31/98
NET ASSETS: $17.1 million(4)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor, Advisor, and Institutional classes.
(4) Includes Investor and Institutional classes.
See Total Returns on pages 4, 12, and 21. Investment terms are defined in the
Glossary on pages 47-48.
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
A SPECTACULAR DECADE
The U.S. stock market continued to roll in 1999, capping one of the best
decades in its history. Despite some stumbles along the way, the major stock
indexes posted double-digit returns for the year (see the table at right).
How phenomenal were equity returns in the 1990s? The S&P 500 index
soared by 433% during the decade--one of the best 10-year periods in the index's
history--and achieved two unprecedented feats: nine consecutive years of
positive returns, and five straight years with returns of 20% or more.
SUMMER HIATUS
Stocks did not enjoy a smooth ride to their ultimate destination (see the
graph at right). Small-cap stocks swooned early in the year, dropping 10% in
January and February while large-cap stocks eked out a slight gain.
The market also ran into a rough patch during the summer months. Concerns
about inflation, rising interest rates, and historically high stock valuations
led to a modest downturn punctuated by convulsions of volatility.
However, stocks roared back in the fourth quarter as investors regained
confidence in the health of the U.S. economy. Most of the year's gains in the
major stock indexes occurred in the last three months of the year.
TECHNOLOGY RULED
In 1998, the mantra in the U.S. stock market was "bigger is
better" --investors favored the shares of large, well-known companies that
they could buy or sell at a moment's notice.
In 1999, the refrain became "technology is the future"--investors
embraced the potential of electronic commerce and bid up the stock prices of
"dot-coms" and other Internet- and computer-related companies.
As a result, the technology sector outperformed the rest of the market by a
wide margin. The Nasdaq Composite Index, which is dominated by technology
stocks, returned more than 85% in 1999--including 50% in the fourth quarter
alone--and the S&P 500's return would have been less than 5% without the
contributions of the technology shares in the index.
The popularity of technology stocks extended to companies of all sizes,
which helped boost the performance of some small- and mid-cap stocks that had
been ignored in 1998.
SHUNNING TRADITIONAL VALUES
Value stocks--those considered to be attractively valued relative to their
earnings growth--were left out in the cold. Most value stocks tend to be
traditional bricks-and-mortar businesses, and they simply couldn't compete with
the excitement generated by technology shares.
But many of these stocks appear to be remarkable bargains when compared
with the high valuations of most technology and growth-oriented stocks. It may
still take a while, however, for investors to recognize and appreciate this
value.
[right margin]
"INVESTORS EMBRACED THE POTENTIAL OF ELECTRONIC COMMERCE AND BID UP THE
STOCK PRICES OF 'DOT-COMS' AND OTHER INTERNET- AND COMPUTER-RELATED
COMPANIES."
STOCK MARKET RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1999
S&P 500 21.04%
S&P MIDCAP 400 14.72%
S&P SMALLCAP 600 12.41%
Source: Lipper Inc.
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
STOCK MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE YEAR ENDED DECEMBER 31, 1999
Value on 12/31/99
S&P 500 $1.21
S&P MidCap 400 $1.15
S&P SmallCap 600 $1.12
S&P 500 S&P MidCap 400 S&P SmallCap 600
12/31/98 $1.00 $1.00 $1.00
1/31/99 $1.04 $0.96 $0.99
2/28/99 $1.01 $0.91 $0.90
3/31/99 $1.05 $0.94 $0.91
4/30/99 $1.09 $1.01 $0.97
5/31/99 $1.06 $1.01 $0.99
6/30/99 $1.12 $1.07 $1.05
7/31/99 $1.09 $1.05 $1.04
8/31/99 $1.08 $1.01 $1.00
9/30/99 $1.05 $0.98 $1.00
10/31/99 $1.12 $1.03 $1.00
11/30/99 $1.14 $1.08 $1.04
12/31/99 $1.21 $1.15 $1.12
Source: Lipper Inc.
www.americancentury.com 3
Equity Growth--Performance
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TOTAL RETURNS AS OF DECEMBER 31, 1999
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 5/9/91) (INCEPTION 10/9/97) (INCEPTION 1/2/98)
EQUITY S&P MULTI-CAP CORE FUNDS(2) EQUITY S&P EQUITY S&P
GROWTH 500 AVERAGE RETURN FUND'S RANKING GROWTH 500 GROWTH 500
========================================================================================================================
6 MONTHS(1) 9.58% 7.69% 10.96% -- 9.47% 7.69% 9.75% 7.69%
1 YEAR 18.47% 21.04% 22.45% 183 OUT OF 384 18.28% 21.04% 18.78% 21.04%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 26.46% 27.56% 21.79% 44 OUT OF 238 -- -- -- --
5 YEARS 28.20% 28.56% 23.07% 14 OUT OF 143 -- -- -- --
LIFE OF FUND 19.63% 19.54% 16.68% 11 OUT OF 76 18.98% 22.13% 22.20% 24.75%
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 45-47 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 12/31/99
Equity Growth $47,120
S&P 500 $46,832
Equity Growth S&P 500
DATE VALUE VALUE
5/9/91 $10,000 $10,000
6/30/91 $9,640 $9,731
9/30/91 $10,378 $10,252
12/31/91 $11,747 $11,111
3/31/92 $11,128 $10,830
6/30/92 $10,923 $11,035
9/30/92 $11,291 $11,383
12/31/92 $12,232 $11,957
3/31/93 $12,773 $12,479
6/30/93 $12,998 $12,540
9/30/93 $13,697 $12,864
12/31/93 $13,630 $13,162
3/31/94 $12,997 $12,663
6/30/94 $13,178 $12,717
9/30/94 $13,681 $13,338
12/31/94 $13,599 $13,336
3/31/95 $14,867 $14,635
6/30/95 $16,300 $16,032
9/30/95 $17,324 $17,307
12/31/95 $18,301 $18,349
3/31/96 $19,450 $19,334
6/30/96 $20,249 $20,202
9/30/96 $21,173 $20,826
12/31/96 $23,305 $22,561
3/31/97 $23,622 $23,166
6/30/97 $27,243 $27,213
9/30/97 $30,942 $29,249
12/31/97 $31,710 $30,088
3/31/98 $36,739 $34,285
6/30/98 $37,525 $35,417
9/30/98 $32,317 $31,893
12/31/98 $39,782 $38,686
3/31/99 $39,718 $40,616
6/30/99 $43,007 $43,484
9/30/99 $41,420 $40,766
12/31/99 $47,120 $46,832
$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 DECEMBER 31)
Equity Growth S&P 500
DATE RETURN RETURN
12/31/91* 17.48% 11.47%
12/31/92 4.13% 7.61%
12/31/93 11.42% 10.03%
12/31/94 -0.23% 1.36%
12/31/95 34.56% 37.44%
12/31/96 27.34% 22.93%
12/31/97 36.06% 33.36%
12/31/98 25.45% 28.68%
12/31/99 18.47% 21.04%
* From 5/9/91 (the fund's inception date) to 12/31/91.
4 1-800-345-2021
Equity Growth--Q&A
--------------------------------------------------------------------------------
[photos of John Schniedwind and Kurt Borgwardt]
An interview with John Schniedwind and Kurt Borgwardt, portfolio managers
on the Equity Growth fund investment team.
HOW DID EQUITY GROWTH PERFORM IN 1999?
The fund performed well, reflecting the favorable environment for stocks,
but it fell short of its benchmark, the S&P 500. Equity Growth's total
return for the year was 18.47%,* compared with the 21.04% return of the S&P
500 and the 22.45% average return of the 384 multi-cap core funds tracked by
Lipper Inc.
Equity Growth's longer-term performance holds up better--its three-year
return ranked in the top 20% of the multi-cap core category, and its five-year
return placed in the top 10% of its Lipper group. (See the previous page for
other fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM THE S&P 500?
We can break Equity Growth's 1999 performance into two periods--the first
quarter, and the rest of the year. The fund underperformed the S&P 500 in
the first quarter, when just a handful of companies were leading the index
higher. The fund was underweight many of those stocks because they were trading
at what we felt were extremely high prices in relation to their earnings or book
values.
Since then, the fund's relative performance has been much better. Part of
the reason is that the stock market's rally has broadened to include a wider
variety of companies, including many of the fund's holdings. But another
important factor was some adjustments we made to the computer models that help
us make investment decisions.
WHAT MODIFICATIONS DID YOU MAKE?
First, it's important to put these changes in context. The foundations of
our investment process--using quantitative models to select stocks and limit our
overall risk relative to the S&P 500--remain in place.
With that in mind, the most important modification was to shift to an
"industry-neutral" approach. In the past, one of our strategies was to
over- and underweight various industries relative to the S&P 500, based on
the recommendations of our stock-picking model. For example, throughout 1998 the
fund held a larger percentage of financial stocks than the S&P 500.
However, we found that, when looking over the life of the fund, these
industry "bets" weren't contributing significantly to outperformance.
What they were contributing was increased volatility to the fund's returns
compared with the S&P 500. This became especially noticeable in the last
half of 1998 and the first quarter of 1999, when Equity Growth's return lagged
well behind that of the index.
So we've brought the fund's industry weightings closer to those of the
S&P 500. At the same time, we're focusing more closely on a large number of
small, measured bets on individual companies. We believe that this is what our
investment process does best.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"THE FUND PERFORMED WELL, REFLECTING THE FAVORABLE ENVIRONMENT FOR STOCKS,
BUT IT FELL SHORT OF THE S&P 500."
PORTFOLIO AT A GLANCE
12/31/99 12/31/98
NO. OF COMPANIES 181 175
DIVIDEND YIELD 1.01% 1.44%
MEDIAN P/E RATIO 27.5 19.5
PORTFOLIO TURNOVER 86% 89%
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68% 0.69%
Investment terms are defined in the Glossary on pages 47-48.
www.americancentury.com 5
Equity Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
HOW HAS THIS NEW APPROACH WORKED?
It's only been in place since April, so it's hard to draw any meaningful
conclusions from such a short time frame. However, the fund handily beat the
S&P 500 during the last nine months of the year--an 18.66% return vs. 15.29%
for the index--and it tracked the index's performance much better from month to
month.
Equity Growth's portfolio also became more growth-oriented during the year,
and that likely contributed to the fund's improved performance as well.
BUT HASN'T THE FUND ALWAYS BEEN FOCUSED ON GROWTH?
Yes and no. Long-term growth has always been the fund's primary goal, but
our stock-ranking model has used a combination of growth and value measures to
pick stocks for the portfolio. Equity Growth's sister fund, Income & Growth,
follows the same model.
In 1999, however, we tweaked the model for Equity Growth by incorporating
more growth factors into the stock-ranking process. Now the two funds have
different ranking models, and their portfolios will be increasingly different
going forward.
LET'S TALK ABOUT SOME OF YOUR SPECIFIC STOCK PICKS. WHAT WORKED WELL IN 1999?
Early in the year, the fund benefited from key overweights among computer
manufacturers, including Hewlett-Packard and Apple, both of which were top-ten
holdings at mid-year. HP reported strong profit growth from sales of its
printers and imaging equipment, while Apple found success with the introduction
of the iMac.
In the last six months, the fund's semiconductor stocks, such as Applied
Materials and Lam Research, were strong performers. Both of these stocks surged
when demand for computer microchips rebounded in the last half of the year.
Applied Materials rose by more than 75% in the last six months of 1999, while
Lam was up more than 150%.
We also maintained solid weightings in many of the bigger tech stocks, like
Microsoft, the fund's top holding and the largest stock in the S&P 500.
Microsoft returned 70% in 1999 despite anti-trust litigation against the
company.
WERE THERE ANY MISSTEPS IN THE TECHNOLOGY SECTOR?
Just as some of our overweights enhanced performance, several of our tech
underweights detracted from fund performance.
We were underweight some of the larger computer network companies, like Sun
Microsystems and Cisco Systems. Our models indicated that both of these stocks
were very expensive, with extremely high price/earnings ratios. Nonetheless,
they both posted triple-digit returns in 1999.
HOW DID THE FUND FARE IN OTHER SECTORS OF THE MARKET?
Our models found some growth potential in the basic materials sector, which
includes companies that extract or make products from natural resources. The
global economic recovery in 1999 helped increase demand for commodities, and
that boosted profit margins for many basic materials companies.
Equity Growth got excellent performance from several fund overweights in
this area, including Dow Chemical, as well as two forest products companies,
Weyerhaeuser and Georgia Pacific.
One overweight that did well in a difficult industry was Morgan Stanley
Dean Witter, a top-ten holding. Although many financial stocks were punished
because of rising interest rates, Morgan Stanley maintained strong profits
through growth in its fee-based underwriting and mergers-and-acquisitions
business, which is not directly tied to the interest rate environment.
[left margin]
"ONE THING WE DO EXPECT TO SEE IN THE COMING YEAR IS A CONTINUATION OF THE
DAY-TO-DAY VOLATILITY THAT'S BECOME A REGULAR OCCURRENCE IN THE PAST COUPLE OF
YEARS."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
MICROSOFT CORP. 5.3% 4.4%
WAL-MART STORES, INC. 3.7% 2.7%
CISCO SYSTEMS INC. 2.8% 1.2%
MORGAN STANLEY
DEAN WITTER & CO. 2.8% 2.1%
CHASE MANHATTAN
CORP. 2.4% 2.9%
APPLIED MATERIALS, INC. 2.2% --
GENERAL ELECTRIC CO.
(U.S.) 2.2% 1.7%
HOME DEPOT, INC. 2.1% 1.2%
HEWLETT-PACKARD CO. 2.0% 2.0%
ADAPTEC, INC. 2.0% --
6 1-800-345-2021
Equity Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
YOU'VE TALKED A LOT ABOUT THE SUCCESS OF YOUR OVERWEIGHTS IN CERTAIN STOCKS.
WHAT ABOUT UNDERWEIGHTS?
One of our best underweights throughout the year was the Coca-Cola Company.
Coke had a huge run-up in 1997 and 1998, and we felt that it was priced much too
high relative to its earnings growth. As a result, we sold all of our Coke
holdings prior to the start of this year.
Global demand for Coke's products weakened in 1999, and a product recall
and lawsuit in Belgium negatively affected its stock price. Coca-Cola Company
stock finished the year down about 15%.
SOUNDS LIKE WE'VE COVERED MOST OF THE GOOD NEWS. WHAT HURT EQUITY GROWTH'S
PERFORMANCE IN 1999?
The banking sector was one area that detracted from fund performance.
Several of our overweights among bank stocks performed very poorly. For example,
shares of Banc One suffered sizable losses after the company announced an
earnings shortfall in the third quarter. Greater competition in its credit-card
business led to lower credit-card interest rates and narrower profit margins.
Banc One's stock price fell by more than 30% in 1999.
For part of the year, we were also overweight several big drug stocks, like
Pfizer and American Home Products. The larger pharmaceutical companies produce
steady profits regardless of the economic environment, so their stocks tend to
perform best when the economy slows down. But with the economy in high gear
throughout the year, these stocks struggled.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR THE U.S. STOCK MARKET IN 2000?
The 1990s were an incredible period for equity investors, and it's hard to
imagine that stocks will achieve the same kind of returns in the next decade.
But the conditions that produced these stellar equity returns are still in
place. Corporate earnings are expected to grow at a healthy pace in 2000,
inflation remains modest, and the U.S. economic juggernaut keeps rolling
along--the current economic expansion, which will begin its tenth year in
February, is the longest in U.S. history. These are all positive factors for the
stock market.
One thing we do expect to see in the coming year is a continuation of the
day-to-day volatility that's become a regular occurrence in the past couple of
years. When a bull market lasts this long, investors tend to get a little jumpy
and react to any news--good or bad--in swift and dramatic fashion. We'll
probably see more of this behavior going forward.
WHAT ARE YOUR PLANS FOR EQUITY GROWTH IN THE COMING MONTHS?
We don't plan to change our overall strategy. We intend to keep the fund
fully invested in U.S. stocks, using our quantitative computer models to help us
select what we believe are the most attractive companies in each industry.
In addition, our quantitative analysis team (see picture at right) is
continually exploring ways to improve our stock-ranking models. This team has
been critical to the long-term success of Equity Growth, working behind the
scenes to enhance the effectiveness of our quantitative models and the process
we use to manage the portfolio. Any adjustments we make going forward will be
the result of their diligent research.
[right margin]
[photo of Quantitative Analyst Team]
Quantitative Analyst Team
5 LARGEST OVERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 12/31/99)
% OF % OF
FUND'S S&P
STOCKS 500
MORGAN STANLEY
DEAN WITTER & CO. 2.87% 0.65%
ADAPTEC, INC. 2.05% 0.04%
CHASE MANHATTAN
CORP. 2.44% 0.52%
APPLIED MATERIALS,
INC. 2.30% 0.39%
AMERADA HESS CORP. 1.62% 0.04%
5 LARGEST UNDERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 12/31/99)
% OF % OF
FUND'S S&P
STOCKS 500
INTEL CORP. 0% 2.23%
GENERAL ELECTRIC CO. 2.25% 4.12%
EXXON MOBIL CORP. 0.59% 2.26%
ORACLE CORP. 0% 1.30%
MCI WORLDCOM, INC. 0% 1.22%
www.americancentury.com 7
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period. The
securities are grouped by asset class (such as common stocks, corporate bonds,
temporary cash investments, as applicable), and some asset classes are further
broken down by industry or country.
DECEMBER 31, 1999
Shares Value
---------------------------------------------------------------------------------
COMMON STOCKS - 97.7%
AIRLINES -- 0.2%
61,500 AMR Corp.(1) $ 4,120,500
28,700 Delta Air Lines Inc. 1,429,619
--------------
5,550,119
--------------
ALCOHOL -- 0.4%
80,900 Anheuser-Busch Companies, Inc. 5,733,788
77,700 Coors (Adolph) Co. Cl B 4,079,250
--------------
9,813,038
--------------
APPAREL & TEXTILES -- 0.1%
92,400 Jones Apparel Group, Inc.(1) 2,506,350
--------------
BANKS -- 5.7%
283,400 Bank of America Corp. 14,223,138
755,900 Chase Manhattan Corp. 58,723,981
287,800 Citigroup Inc. 15,990,888
270,100 Old Kent Financial Corp. 9,554,788
33,300 Republic New York Corp. 2,397,600
550,000 UnionBanCal Corp. 21,690,625
97,000 Wells Fargo & Co. 3,922,438
210,100 Zions Bancorporation 12,435,294
--------------
138,938,752
--------------
CHEMICALS -- 4.1%
180,400 Dexter Corp. (The) 7,170,900
235,600 Dow Chemical Co. 31,482,050
175,700 du Pont (E.I.) de Nemours
& Co. 11,574,238
602,196 Illinois Tool Works Inc. 40,685,867
131,000 Kerr-McGee Corp. 8,122,000
40,800 Sealed Air Corp.(1) 2,113,950
--------------
101,149,005
--------------
CLOTHING STORES -- 0.6%
120,200 Abercrombie & Fitch Co. Cl A(1) 3,207,838
42,200 American Eagle Outfitters, Inc.(1) 1,899,000
169,800 AnnTaylor Stores Corp.(1) 5,847,488
139,200 Tommy Hilfiger Corp.(1) 3,245,100
--------------
14,199,426
--------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 5.9%
987,800 Adaptec, Inc.(1) 49,235,656
102,700 Dell Computer Corp.(1) 5,234,491
580,700 Electronics for Imaging, Inc.(1) 34,043,538
432,400 Hewlett-Packard Co. 49,266,575
15,200 SanDisk Corp.(1) 1,457,300
89,800 Sun Microsystems, Inc.(1) 6,951,081
--------------
146,188,641
--------------
Shares Value
---------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 8.3%
78,000 Computer Associates
International, Inc. $ 5,455,125
106,400 Comverse Technology, Inc.(1) 15,398,075
229,000 International Business
Machines Corp. 24,732,000
1,115,000 Microsoft Corp.(1) 130,141,406
106,700 NCR Corp.(1) 4,041,262
85,900 Novell, Inc.(1) 3,427,947
236,800 Sybase, Inc.(1) 4,018,200
71,000 Symantec Corp.(1) 4,169,031
417,500 Unisys Corp.(1) 13,333,906
--------------
204,716,952
--------------
CONSTRUCTION & REAL PROPERTY -- 0.2%
86,400 Owens Corning 1,668,600
90,100 Pulte Corp. 2,027,250
--------------
3,695,850
--------------
CONSUMER DURABLES -- 0.1%
28,500 Whirlpool Corp. 1,854,281
--------------
DEFENSE/AEROSPACE -- 1.0%
391,200 Boeing Co. 16,259,250
135,000 General Dynamics Corp. 7,121,250
--------------
23,380,500
--------------
DEPARTMENT STORES -- 3.8%
39,000 Kohl's Corp.(1) 2,815,312
1,313,500 Wal-Mart Stores, Inc. 90,795,688
--------------
93,611,000
--------------
DRUGS -- 7.1%
70,200 Allergan, Inc. 3,492,450
379,000 Amgen Inc.(1) 22,751,844
164,300 Andrx Corp.(1) 6,916,003
100,800 Biogen, Inc.(1) 8,514,450
320,100 Bristol-Myers Squibb Co. 20,546,419
146,900 Forest Laboratories, Inc.(1) 9,025,169
644,000 IVAX Corp.(1) 16,583,000
80,300 Jones Pharma Inc. 3,488,031
64,500 MedImmune, Inc.(1) 10,694,906
94,400 Merck & Co., Inc. 6,330,700
535,400 Pfizer, Inc. 17,367,038
615,100 Schering-Plough Corp. 25,949,531
70,486 Shire Pharmaceuticals Group
PLC ADR(1) 2,039,689
261,600 Warner-Lambert Co. 21,434,850
--------------
175,134,080
--------------
8 1-800-345-2021 See Notes to Financial Statements
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
---------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 7.8%
644,500 Cisco Systems Inc.(1) $ 69,021,922
257,200 Corning Inc. 33,162,725
54,700 Harmonic, Inc.(1) 5,187,953
573,600 Lucent Technologies Inc. 42,912,450
155,700 Millipore Corp. 6,013,912
60,200 Motorola, Inc. 8,864,450
161,700 Nortel Networks Corp. 16,331,700
203,800 Scientific-Atlanta, Inc. 11,336,375
--------------
192,831,487
--------------
ELECTRICAL UTILITIES -- 1.6%
106,400 Energy East Corp. 2,214,450
246,000 Minnesota Power & Light Co. 4,166,625
303,100 Public Service Enterprise
Group Inc. 10,551,669
134,300 Reliant Energy, Inc. 3,072,112
340,800 Southern Co. 8,008,800
88,800 Texas Utilities Co. 3,157,950
419,400 Utilicorp United Inc. 8,152,088
--------------
39,323,694
--------------
ENERGY RESERVES & PRODUCTION -- 4.5%
688,100 Amerada Hess Corp. 39,049,675
77,900 Anadarko Petroleum Corp. 2,658,338
593,900 Apache Corp. 21,937,181
222,900 Atlantic Richfield Co. 19,280,850
174,956 Exxon Mobil Corp. 14,094,893
936,600 Union Pacific Resources 11,941,650
43,100 Vastar Resources, Inc. 2,542,900
--------------
111,505,487
--------------
ENTERTAINMENT -- 0.6%
69,300 Carnival Corp. Cl A 3,313,406
77,500 Pixar, Inc.(1) 2,739,141
147,100 Viacom, Inc. Cl B(1) 8,890,356
--------------
14,942,903
--------------
FINANCIAL SERVICES -- 4.8%
536,600 Fannie Mae 33,503,962
229,800 Federal Home Loan Mortgage
Corporation 10,814,962
129,600 Gallagher (Arthur J.) & Co. 8,391,600
348,900 General Electric Co. (U.S.) 53,992,275
136,400 Providian Financial Corp. 12,420,925
--------------
119,123,724
--------------
FOOD & BEVERAGE -- 2.6%
72,000 ConAgra, Inc. 1,624,500
91,000 General Mills, Inc. 3,253,250
134,500 Hormel Foods Corp. 5,464,062
680,600 IBP, Inc. 12,250,800
431,200 Quaker Oats Co. (The) 28,297,500
250,800 Suiza Foods Corp.(1) 9,937,950
59,146 Unilever N.V. New York Shares 3,219,761
--------------
64,047,823
--------------
Shares Value
---------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 1.2%
71,400 Georgia-Pacific Corp. $ 3,623,550
106,300 Kimberly-Clark Corp. 6,936,075
64,300 Temple-Inland Inc. 4,239,781
197,700 Weyerhaeuser Co. 14,197,331
--------------
28,996,737
--------------
GAS & WATER UTILITIES -- 0.2%
268,500 LG&E Energy Corp. 4,681,969
--------------
HEAVY ELECTRICAL EQUIPMENT -- 0.9%
97,700 American Power Conversion
Corp.(1) 2,573,784
283,700 CommScope, Inc.(1) 11,436,656
73,200 Cummins Engine Company, Inc. 3,536,475
92,700 Rockwell International Corp. 4,438,012
--------------
21,984,927
--------------
HOME PRODUCTS -- 1.6%
123,800 Fortune Brands, Inc. 4,093,138
250,900 Procter & Gamble Co. (The) 27,489,231
148,100 Ralston Purina Co. 4,128,288
141,400 Tupperware Corp. 2,394,962
--------------
38,105,619
--------------
HOTELS -- 0.1%
57,200 Anchor Gaming(1) 2,479,262
--------------
INDUSTRIAL PARTS -- 1.1%
234,900 Ingersoll-Rand Co. 12,934,181
180,200 Tyco International Ltd. 7,005,275
95,700 United Technologies Corp. 6,220,500
--------------
26,159,956
--------------
INDUSTRIAL SERVICES -- 0.4%
201,200 Hertz Corp. Cl A 10,085,150
--------------
INFORMATION SERVICES -- 1.5%
165,000 Automatic Data Processing, Inc. 8,889,375
170,000 Electronic Data Systems Corp. 11,379,375
89,600 MedQuist Inc.(1) 2,304,400
363,700 Valassis Communications, Inc.(1) 15,366,325
--------------
37,939,475
--------------
INTERNET -- 2.5%
447,800 America Online Inc.(1) 33,780,912
175,100 USWeb Corp.(1) 7,786,478
46,300 Yahoo! Inc.(1) 20,034,878
--------------
61,602,268
--------------
LEISURE -- 0.1%
76,800 Station Casinos, Inc.(1) 1,723,200
--------------
LIFE & HEALTH INSURANCE -- 1.2%
54,900 Aetna Inc. 3,064,106
680,500 Lincoln National Corp. 27,220,000
--------------
30,284,106
--------------
See Notes to Financial Statements www.americancentury.com 9
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
---------------------------------------------------------------------------------
MEDIA -- 2.4%
58,800 Adelphia Communications Corp.
Cl A(1) $ 3,856,912
525,200 CBS Corp.(1) 33,579,975
118,100 Comcast Corp. Cl A 5,967,741
168,200 Cox Communications, Inc. Cl A(1) 8,662,300
68,400 EchoStar Communications Corp.
Cl A(1) 6,660,450
--------------
58,727,378
--------------
MEDICAL PRODUCTS & SUPPLIES -- 2.0%
220,900 Bard (C.R.), Inc. 11,707,700
90,000 IDEC Pharmaceuticals Corp.(1) 8,834,062
210,000 Johnson & Johnson 19,556,250
129,800 Mallinckrodt Inc. 4,129,262
83,500 VISX, Inc.(1) 4,323,734
--------------
48,551,008
--------------
MEDICAL PROVIDERS & SERVICES -- 0.4%
251,200 Oxford Health Plans, Inc.(1) 3,194,950
79,200 PacifiCare Health Systems, Inc.(1) 4,200,075
54,100 United HealthCare Corp. 2,874,062
--------------
10,269,087
--------------
MINING & METALS -- 0.8%
100,400 Alcan Aluminium Ltd. 4,135,225
78,900 Alcoa Inc. 6,548,700
121,500 Ball Corporation 4,784,062
85,300 Centex Construction Products Inc. 3,326,700
--------------
18,794,687
--------------
MOTOR VEHICLES & PARTS -- 1.3%
115,600 Delphi Automotive Systems Corp. 1,820,700
314,900 Ford Motor Co. 16,827,469
113,500 General Motors Corp. 8,250,031
110,400 PACCAR Inc. 4,888,650
--------------
31,786,850
--------------
OIL REFINING -- 0.2%
69,600 Texaco Inc. 3,780,150
--------------
OIL SERVICES -- 0.3%
262,900 Ensco International Inc. 6,013,838
73,300 Noble Drilling Corp.(1) 2,400,575
--------------
8,414,413
--------------
PROPERTY & CASUALTY INSURANCE -- 1.3%
441,600 Ambac Financial Group, Inc. 23,046,000
42,000 American International Group, Inc. 4,541,250
100,900 Radian Group Inc. 4,817,975
--------------
32,405,225
--------------
PUBLISHING -- 0.4%
395,700 Deluxe Corp. 10,857,019
--------------
Shares Value
---------------------------------------------------------------------------------
RESTAURANTS -- 0.5%
235,200 Brinker International, Inc.(1) $ 5,644,800
73,900 Darden Restaurants, Inc. 1,339,438
292,400 Jack in the Box Inc.(1) 6,049,025
--------------
13,033,263
--------------
SECURITIES & ASSET MANAGEMENT -- 2.9%
33,300 Merrill Lynch & Co., Inc. 2,780,550
483,100 Morgan Stanley Dean Witter
& Co. 68,962,525
--------------
71,743,075
--------------
SEMICONDUCTOR -- 3.8%
436,500 Applied Materials, Inc.(1) 55,285,453
456,700 Integrated Device Technology,
Inc.(1) 13,230,028
70,300 Lam Research Corp.(1) 7,847,238
171,600 National Semiconductor Corp.(1) 7,346,625
117,300 PerkinElmer, Inc. 4,889,944
47,400 Texas Instruments Inc. 4,591,875
--------------
93,191,163
--------------
SPECIALTY STORES -- 2.7%
104,800 Best Buy Co., Inc.(1) 5,259,650
756,000 Home Depot, Inc. 51,833,250
183,800 Zale Corp.(1) 8,891,325
--------------
65,984,225
--------------
TELEPHONE -- 7.4%
704,350 AT&T Corp. 35,745,762
160,800 Bell Atlantic Corp. 9,899,250
620,600 BellSouth Corp. 29,051,838
76,700 Dycom Industries, Inc.(1) 3,379,594
304,700 GTE Corp. 21,500,394
773,015 SBC Communications Inc. 37,684,481
576,800 Sprint Corp. 38,825,850
65,500 U S WEST, Inc. 4,716,000
--------------
180,803,169
--------------
TOBACCO -- 0.1%
154,400 Universal Corp. 3,522,250
--------------
TRUCKING, SHIPPING & AIR FREIGHT -- 0.1%
25,100 United Parcel Service, Inc. Cl B 1,731,900
27,600 USFreightways Corp. 1,314,450
--------------
3,046,350
--------------
WIRELESS TELECOMMUNICATIONS -- 0.9%
70,000 Nextel Communications, Inc.(1) 7,216,562
35,600 QUALCOMM Inc.(1) 6,268,938
82,000 Sprint PCS(1) 8,405,000
--------------
21,890,500
--------------
TOTAL COMMON STOCKS 2,403,355,593
--------------
(Cost $1,738,798,890)
10 1-800-345-2021 See Notes to Financial Statements
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Value
---------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 2.3%
Repurchase Agreement, Merrill Lynch &
Co., Inc., (U.S. Treasury obligations), in a joint
trading account at 3.00%, dated 12/31/99,
due 1/3/00 (Delivery value $57,314,325) $ 57,300,000
--------------
(Cost $57,300,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $2,460,655,593
==============
(Cost $1,796,098,890)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Gain
----------------------------------------------------------------------------------
158 S&P 500 March
Futures 2000 $58,697,000 $3,200,191
======================================
Futures contracts are typically based on a stock index, such as the S&P 500,
and they tend to track the performance of the index while remaining very liquid
(easy to buy and sell). By investing its cash assets in index futures, the fund
can stay fully invested in stocks while having easy access to the money.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 11
Income & Growth--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF DECEMBER 31, 1999
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 12/17/90) (INCEPTION 12/15/97) (INCEPTION 1/28/98)
INCOME & S&P LARGE-CAP VALUE FUNDS(2) INCOME & S&P INCOME & S&P
GROWTH 500 AVERAGE RETURN FUND'S RANKING GROWTH 500 GROWTH 500
========================================================================================================================
6 MONTHS(1) 7.53% 7.69% -0.03% -- 7.42% 7.69% 7.69% 7.69%
1 YEAR 17.96% 21.04% 11.23% 69 OUT OF 279 17.65% 21.04% 18.27% 21.04%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 26.51% 27.56% 19.25% 15 OUT OF 187 -- -- -- --
5 YEARS 28.02% 28.56% 22.35% 6 OUT OF 118 -- -- -- --
LIFE OF FUND 21.43% 20.79%(3) 17.36%(3) 3 OUT OF 47(3) 22.65% 25.10%(4) 23.99% 24.84%
(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.
(4) Since 12/11/97, the date nearest the class's inception for which data are
available.
See pages 45-47 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 12/31/99
Income & Growth $57,172
S&P 500 $55,070
Income & Growth S&P 500
DATE VALUE VALUE
12/20/90 $10,000 $10,000
12/31/90 $10,129 $10,040
3/31/91 $11,821 $11,499
6/30/91 $11,784 $11,472
9/30/91 $12,689 $12,086
12/31/91 $14,083 $13,099
3/31/92 $13,598 $12,768
6/30/92 $13,602 $13,010
9/30/92 $13,997 $13,420
12/31/92 $15,190 $14,096
3/31/93 $15,930 $14,712
6/30/93 $16,296 $14,784
9/30/93 $16,981 $15,166
12/31/93 $16,908 $15,518
3/31/94 $16,147 $14,930
6/30/94 $16,231 $14,992
9/30/94 $16,851 $15,725
12/31/94 $16,814 $15,722
3/31/95 $18,285 $17,254
6/30/95 $20,009 $18,901
9/30/95 $21,672 $20,404
12/31/95 $23,013 $21,632
3/31/96 $24,300 $22,794
6/30/96 $25,284 $23,817
9/30/96 $26,146 $24,553
12/31/96 $28,572 $26,599
3/31/97 $29,081 $27,312
6/30/97 $33,655 $32,083
9/30/97 $37,445 $34,483
12/31/97 $38,419 $35,472
3/31/98 $44,251 $40,421
6/30/98 $45,251 $41,755
9/30/98 $40,142 $37,600
12/31/98 $49,045 $45,609
3/31/99 $49,982 $47,885
6/30/99 $53,801 $51,265
9/30/99 $50,826 $48,061
12/31/99 $57,172 $55,070
$10,000 investment made 12/20/90(3)
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 DECEMBER 31)
Income & Growth S&P 500
DATE RETURN RETURN
12/31/90* 1.29% 2.25%
12/31/91 39.08% 30.33%
12/31/92 7.86% 7.61%
12/31/93 11.31% 10.03%
12/31/94 -0.55% 1.36%
12/31/95 36.88% 37.44%
12/31/96 24.15% 22.93%
12/31/97 34.52% 33.36%
12/31/98 27.67% 28.68%
12/31/99 17.96% 21.04%
* From 12/17/90 (the fund's inception date) to 12/31/90.
12 1-800-345-2021
Income & Growth--Q&A
--------------------------------------------------------------------------------
An interview with John Schniedwind and Kurt Borgwardt (pictured on page 5),
portfolio managers on the Income & Growth fund investment team.
HOW DID INCOME & GROWTH PERFORM IN 1999?
The fund performed well, beating the average large-cap value fund, but it
fell short of its benchmark, the S&P 500. Income & Growth's total return
for the year was 17.96%,* compared with the 21.04% return of the S&P 500 and
the 11.23% average return of the 279 large-cap value funds tracked by Lipper
Inc. The fund's 1999 return ranked it in the top quarter of its Lipper category
Income & Growth's longer-term returns are even better--its three- and
five-year returns placed in the top 10% of the large-cap value category. (See
the previous page for other fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM THE S&P 500?
We can break Income & Growth's 1999 performance into two periods--the
first quarter, and the rest of the year. The fund underperformed the S&P 500
in the first quarter, when just a handful of companies were leading the index
higher. The fund was underweight many of those stocks because they were trading
at what we felt were extremely high prices in relation to their earnings or book
values.
Since then, the fund's relative performance has been much better. Part of
the reason is that the stock market's rally has broadened to include a wider
variety of companies, including many of the fund's holdings. But another
important factor was some adjustments we made to the computer models that help
us make investment decisions.
WHAT MODIFICATIONS DID YOU MAKE?
First, it's important to put these changes in context. The foundations of
our investment process--using quantitative models to select stocks and limit our
overall risk relative to the S&P 500--remain in place.
With that in mind, the most important modification was to shift to an
"industry-neutral" approach. In the past, one of our strategies was to
over- and underweight various industries relative to the S&P 500, based on
the recommendations of our stock-picking model. For example, throughout 1998 the
fund held a larger percentage of financial stocks than the S&P 500.
However, we found that, when looking over the life of the fund, these
industry "bets" weren't contributing significantly to outperformance.
What they were contributing was increased volatility to the fund's returns
compared with the S&P 500. This became especially noticeable in the last
half of 1998 and the first quarter of 1999, when Income & Growth's return
lagged well behind that of the index.
So we've brought the fund's industry weightings closer to those of the
S&P 500. At the same time, we're focusing more closely on a large number of
small, measured bets on individual companies. We believe that this is what our
investment process does best.
HOW HAS THIS NEW APPROACH WORKED?
It's only been in place since April, so it's hard to draw any meaningful
conclusions from such a short time frame. However, the fund beat the S&P 500
during the last nine months of the year--a 15.75% return vs. 15.29% for the
index--and it tracked the index's performance much better from month to month.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"THE FUND PERFORMED WELL, BEATING THE AVERAGE LARGE-CAP VALUE FUND, BUT IT
FELL SHORT OF THE S&P 500."
PORTFOLIO AT A GLANCE
12/31/99 12/31/98
NO. OF COMPANIES 279 274
DIVIDEND YIELD 1.36% 1.72%
MEDIAN P/E RATIO 23.5 20.4
PORTFOLIO TURNOVER 58% 86%
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68% 0.69%
Investment terms are defined in the Glossary on pages 47-48.
www.americancentury.com 13
Income & Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
LET'S TALK ABOUT SOME OF YOUR SPECIFIC STOCK PICKS. WHAT WORKED WELL IN 1999?
Technology stocks were the market leaders, and there were plenty of
opportunities to pick winners in that sector of the market.
Early in the year, the fund benefited from key overweights among computer
manufacturers, including Hewlett-Packard, which was a top-ten holding at
mid-year, and Apple. HP reported strong profit growth from sales of its printers
and imaging equipment, while Apple found success with the introduction of the
iMac.
In the last six months, the fund's semiconductor stocks, such as Applied
Materials and Lam Research, were strong performers. Both of these stocks surged
when demand for computer microchips rebounded in the last half of the year.
Applied Materials rose by more than 75% in the last six months of 1999, while
Lam was up more than 150%.
We also maintained solid weightings in many of the bigger tech stocks, like
Microsoft, the fund's top holding and the largest stock in the S&P 500.
Microsoft returned 70% in 1999 despite anti-trust litigation against the
company.
WERE THERE ANY MISSTEPS IN THE TECHNOLOGY SECTOR?
Just as some of our overweights enhanced performance, several of our tech
underweights detracted from fund performance.
We were underweight some of the larger computer network companies, like Sun
Microsystems and Cisco Systems. Our models indicated that both of these stocks
were very expensive, with extremely high price/earnings ratios. Nonetheless,
they both posted triple-digit returns in 1999.
We also limited our exposure to Internet stocks, which generally had strong
returns despite some extreme volatility during the year.
HOW DID THE FUND FARE IN OTHER SECTORS OF THE MARKET?
Our models found some value in the basic materials sector, which includes
companies that extract or make products from natural resources. The global
economic recovery in 1999 helped increase demand for commodities, and that
boosted profit margins for many basic materials companies.
Income & Growth got excellent performance from several fund overweights
in this area, including Phelps Dodge, a mining company; Dow Chemical; and two
forest products companies, Weyerhaeuser and Georgia Pacific.
One overweight that did well in a difficult industry was Morgan Stanley
Dean Witter, a top-ten holding. Although many financial stocks were punished
because of rising interest rates, Morgan Stanley maintained strong profits
through growth in its fee-based underwriting and mergers-and-acquisitions
business, which is not directly tied to the interest rate environment.
YOU'VE TALKED A LOT ABOUT THE SUCCESS OF YOUR OVERWEIGHTS IN CERTAIN STOCKS.
WHAT ABOUT UNDERWEIGHTS?
One of our best underweights throughout the year was the Coca-Cola Company.
Coke had a huge run-up in 1997 and 1998, and we felt that it was priced much too
high relative to its earnings growth. As a result, we sold virtually all of our
Coke holdings prior to the start of this year.
[left margin]
"ONE THING WE DO EXPECT TO SEE IN THE COMING YEAR IS A CONTINUATION OF THE
DAY-TO-DAY VOLATILITY THAT'S BECOME A REGULAR OCCURRENCE IN THE PAST COUPLE OF
YEARS."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
MICROSOFT CORP. 4.9% 3.9%
GENERAL ELECTRIC CO.
(U.S.) 3.3% 2.7%
CISCO SYSTEMS INC. 2.7% 1.4%
WAL-MART STORES, INC. 2.5% 2.1%
MORGAN STANLEY
DEAN WITTER & CO. 1.8% 1.3%
CHASE MANHATTAN
CORP. 1.7% 2.3%
LUCENT TECHNOLOGIES
INC. 1.6% 1.7%
CITIGROUP INC. 1.6% 0.9%
AT&T CORP. 1.5% 1.8%
SBC COMMUNICATIONS
INC. 1.4% 1.1%
14 1-800-345-2021
Income & Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
Global demand for Coke's products weakened in 1999, and a product recall
and lawsuit in Belgium negatively affected its stock price. Coca-Cola Company
stock finished the year down about 15%.
SOUNDS LIKE WE'VE COVERED MOST OF THE GOOD NEWS. WHAT HURT INCOME & GROWTH'S
PERFORMANCE IN 1999?
The banking sector was one area that detracted from fund performance.
Several of our overweights among bank stocks performed very poorly. For example,
shares of Banc One suffered sizable losses after the company announced an
earnings shortfall in the third quarter. Greater competition in its credit-card
business led to lower credit-card interest rates and narrower profit margins.
Banc One's stock price fell by more than 30% in 1999.
For part of the year, we were also overweight several big drug stocks, like
Pfizer and American Home Products. The larger pharmaceutical companies produce
steady profits regardless of the economic environment, so their stocks tend to
perform best when the economy slows down. But with the economy in high gear
throughout the year, these stocks struggled.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR THE U.S. STOCK MARKET IN 2000?
The 1990s were an incredible period for equity investors, and it's hard to
imagine that stocks will achieve the same kind of returns in the next decade.
But the conditions that produced these stellar equity returns are still in
place. Corporate earnings are expected to grow at a healthy pace in 2000,
inflation remains modest, and the U.S. economic juggernaut keeps rolling
along--the current economic expansion, which will begin its tenth year in
February, is the longest in U.S. history. These are all positive factors for the
stock market.
One thing we do expect to see in the coming year is a continuation of the
day-to-day volatility that's become a regular occurrence in the past couple of
years. When a bull market lasts this long, investors tend to get a little jumpy
and react to any news--good or bad--in swift and dramatic fashion. We'll
probably see more of this behavior going forward.
WHAT ARE YOUR PLANS FOR INCOME & GROWTH IN THE COMING MONTHS?
We don't plan to change our overall strategy. We intend to keep the fund
fully invested in U.S. stocks, using our quantitative computer models to help us
select what we believe are the most attractive companies in each industry.
In addition, our quantitative analysis team (see picture on page 7) is
continually exploring ways to improve our stock-ranking models. This team has
been critical to the long-term success of Income & Growth, working behind
the scenes to enhance the effectiveness of our quantitative models and the
process we use to manage the portfolio. Any adjustments we make going forward
will be the result of their diligent research.
One area where we see some value in the coming year is small-cap stocks.
Small-caps were left out of the rally in 1998, but they began to turn around in
1999, and we like their prospects for 2000. The fund has a smaller average
market capitalization than the S&P 500, so better small-cap performance
would be beneficial for Income & Growth.
[right margin]
"WE'RE FOCUSING MORE CLOSELY ON A LARGE NUMBER OF SMALL, MEASURED BETS ON
INDIVIDUAL COMPANIES. WE BELIEVE THAT THIS IS WHAT OUR INVESTMENT PROCESS DOES
BEST."
5 LARGEST OVERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 12/31/99)
% OF % OF
FUND'S S&P
STOCKS 500
CHASE MANHATTAN
CORP. 1.74% 0.52%
MORGAN STANLEY
DEAN WITTER & CO. 1.83% 0.65%
KERR-MCGEE CORP. 1.21% 0.04%
MARSH & MCLENNAN
COMPANIES, INC. 1.29% 0.21%
ADAPTEC, INC. 0.82% 0.04%
5 LARGEST UNDERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 12/31/99)
% OF % OF
FUND'S S&P
STOCKS 500
AMERICAN
INTERNATIONAL
GROUP, INC. 0.18% 1.36%
COCA-COLA CO. 0.01% 1.17%
INTEL CORP. 1.34% 2.23%
EXXON MOBIL CORP. 1.40% 2.26%
GENERAL ELECTRIC CO. 3.38% 4.12%
www.americancentury.com 15
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period. The
securities are grouped by asset class (such as common stocks, corporate bonds,
temporary cash investments, as applicable), and some asset classes are further
broken down by industry or country.
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 98.1%
AIRLINES -- 0.1%
60,600 AMR Corp.(1) $ 4,060,200
75,300 Delta Air Lines Inc. 3,750,881
--------------
7,811,081
--------------
ALCOHOL -- 0.4%
358,700 Anheuser-Busch Companies, Inc. 25,422,862
--------------
APPAREL & TEXTILES -- 0.1%
38,500 Liz Claiborne, Inc. 1,448,562
286,100 Sara Lee Corp. 6,312,081
--------------
7,760,643
--------------
BANKS -- 6.3%
973,500 AmSouth Bancorporation 18,800,719
526,200 Banc One Corp. 16,871,288
1,797,700 Bank of America Corp. 90,222,069
1,565,300 Chase Manhattan Corp. 121,604,244
2,056,200 Citigroup Inc. 114,247,612
147,200 Cullen/Frost Bankers, Inc. 3,790,400
236,000 First Union Corp. 7,743,750
492,000 Fleet Boston Financial Corp. 17,127,750
196,900 KeyCorp 4,356,412
38,800 North Fork Bancorporation, Inc. 679,000
87,800 Pacific Century Financial Corp. 1,640,762
133,900 PNC Bank Corp. 5,958,550
55,900 Republic New York Corp. 4,024,800
573,000 UnionBanCal Corp. 22,597,688
457,600 Wells Fargo & Co. 18,504,200
--------------
448,169,244
--------------
CHEMICALS -- 3.1%
259,100 Dexter Corp. (The) 10,299,225
527,300 Dow Chemical Co. 70,460,462
168,900 Engelhard Corp. 3,187,988
140,900 Illinois Tool Works Inc. 9,519,556
1,362,200 Kerr-McGee Corp. 84,456,400
373,600 Minnesota Mining &
Manufacturing Co. 36,566,100
331,200 Sherwin-Williams Co. 6,955,200
--------------
221,444,931
--------------
CLOTHING STORES -- 0.3%
293,500 Abercrombie & Fitch Co. Cl A(1) 7,832,781
25,200 AnnTaylor Stores Corp.(1) 867,825
377,800 Ross Stores, Inc. 6,824,012
173,500 TJX Companies, Inc. (The) 3,545,906
214,900 Tommy Hilfiger Corp.(1) 5,009,856
--------------
24,080,380
--------------
Shares Value
--------------------------------------------------------------------------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 5.3%
1,148,200 Adaptec, Inc.(1) $ 57,230,594
396,000 Apple Computer, Inc.(1) 40,701,375
1,110,800 Dell Computer Corp.(1) 56,616,088
62,200 Diebold, Inc. 1,461,700
351,600 Electronics for Imaging, Inc.(1) 20,612,550
398,300 EMC Corp. (Mass.)(1) 43,514,275
38,800 Gateway Inc.(1) 2,796,025
681,000 Hewlett-Packard Co. 77,591,438
515,500 Pitney Bowes Inc. 24,905,094
712,600 Sun Microsystems, Inc.(1) 55,159,694
--------------
380,588,833
--------------
COMPUTER SOFTWARE -- 8.8%
279,400 Adobe Systems Inc. 18,789,650
248,600 Computer Associates
International, Inc. 17,386,462
450,200 Compuware Corp.(1) 16,755,881
150,700 Comverse Technology, Inc.(1) 21,809,116
871,400 International Business Machines
Corp. 94,111,200
3,005,700 Microsoft Corp.(1) 350,821,547
127,900 NCR Corp.(1) 4,844,212
278,000 Novell, Inc.(1) 11,093,938
678,100 Oracle Corp.(1) 75,968,391
450,000 Unisys Corp.(1) 14,371,875
--------------
625,952,272
--------------
CONSTRUCTION & REAL PROPERTY -- 0.2%
252,100 Armstrong World Industries, Inc. 8,413,838
30,900 Pulte Corp. 695,250
122,700 USG Corp. 5,782,238
--------------
14,891,326
--------------
CONSUMER DURABLES -- 0.2%
214,200 Whirlpool Corp. 13,936,388
--------------
DEFENSE/AEROSPACE -- 0.8%
692,000 Boeing Co. 28,761,250
201,500 General Dynamics Corp. 10,629,125
49,500 Goodrich (B.F.) Company (The) 1,361,250
325,200 Northrop Grumman Corp. 17,581,125
--------------
58,332,750
--------------
DEPARTMENT STORES -- 3.4%
24,600 Costco Companies, Inc.(1) 2,243,981
23,900 Dayton Hudson Corp. 1,755,156
510,700 Federated Department Stores,
Inc.(1) 25,822,269
202,700 Penney (J.C.) Company, Inc. 4,041,331
1,091,500 Sears, Roebuck & Co. 33,222,531
2,534,100 Wal-Mart Stores, Inc. 175,169,662
--------------
242,254,930
--------------
16 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
DRUGS -- 6.1%
57,400 American Home Products Corp. $ 2,263,712
348,500 Amgen Inc.(1) 20,920,891
273,700 Andrx Corp.(1) 11,521,059
136,700 Bergen Brunswig Corp. Cl A 1,136,319
245,900 Biogen, Inc.(1) 20,770,866
1,044,100 Bristol-Myers Squibb Co. 67,018,169
134,300 Forest Laboratories, Inc.(1) 8,251,056
13,000 Genentech, Inc.(1) 1,748,500
94,300 Herbalife International, Inc. Cl A 1,337,881
457,800 Lilly (Eli) & Co. 30,443,700
1,232,400 Merck & Co., Inc. 82,647,825
2,923,600 Pfizer, Inc. 94,834,275
700,000 Pharmacia & Upjohn Inc. 31,500,000
1,017,500 Schering-Plough Corp. 42,925,781
225,300 Warner-Lambert Co. 18,460,519
--------------
435,780,553
--------------
ELECTRICAL EQUIPMENT -- 7.1%
213,800 3Com Corp.(1) 10,041,919
15,100 AVX Technology 754,056
1,765,900 Cisco Systems Inc.(1) 189,116,853
169,500 Corning Inc. 21,854,906
60,000 KLA-Tencor Corporation(1) 6,680,625
1,540,200 Lucent Technologies Inc. 115,226,212
382,800 Motorola, Inc. 56,367,300
645,700 Nortel Networks Corp. 65,215,700
232,100 Scientific-Atlanta, Inc. 12,910,562
28,600 Solectron Corp.(1) 2,720,575
334,600 Tellabs, Inc.(1) 21,466,681
32,600 Xircom, Inc.(1) 2,445,000
--------------
504,800,389
--------------
ELECTRICAL UTILITIES -- 2.1%
395,600 Ameren Corp. 12,955,900
41,500 Conectiv, Inc. Cl A 1,229,438
326,700 Constellation Energy Group 9,474,300
351,200 DTE Energy Company 11,018,900
243,900 Duke Energy Corp. 12,225,488
518,100 GPU Inc. 15,510,619
519,900 Minnesota Power & Light Co. 8,805,806
603,400 Public Service Enterprise
Group Inc. 21,005,862
59,100 Reliant Energy, Inc. 1,351,912
1,098,100 Sempra Energy 19,079,488
569,700 Texas Utilities Co. 20,259,956
964,800 Utilicorp United Inc. 18,753,300
--------------
151,670,969
--------------
ENERGY RESERVES & PRODUCTION -- 3.2%
187,600 Amerada Hess Corp. 10,646,300
49,700 Apache Corp. 1,835,794
256,500 Atlantic Richfield Co. 22,187,250
485,300 Chevron Corp. 42,039,112
1,215,900 Exxon Mobil Corp. 97,955,944
Shares Value
--------------------------------------------------------------------------------
2,166,300 Occidental Petroleum Corp. $ 46,846,238
217,600 Phillips Petroleum Co. 10,227,200
--------------
231,737,838
--------------
ENTERTAINMENT -- 1.1%
926,900 Carnival Corp. Cl A 44,317,406
512,800 Viacom, Inc. Cl B(1) 30,992,350
--------------
75,309,756
--------------
EQUITY REAL ESTATE
INVESTMENT TRUST -- 0.1%
352,800 CarrAmerica Realty Corp. 7,452,900
--------------
FINANCIAL SERVICES -- 5.8%
34,100 Aon Corp. 1,364,000
253,500 Block (H & R), Inc. 11,090,625
956,000 Fannie Mae 59,690,250
77,400 Federal Home Loan Mortgage
Corporation 3,642,638
168,900 Gallagher (Arthur J.) & Co. 10,936,275
1,528,100 General Electric Co. (U.S.) 236,473,475
940,900 Marsh & McLennan
Companies, Inc. 90,032,369
151,400 MBNA Corp. 4,125,650
--------------
417,355,282
--------------
FOOD & BEVERAGE -- 3.1%
36,300 Bestfoods 1,908,019
11,300 Coca-Cola Company (The) 658,225
1,844,000 ConAgra, Inc. 41,605,250
281,700 Earthgrains Company 4,542,412
830,100 General Mills, Inc. 29,676,075
62,200 Heinz (H.J.) Co. 2,476,338
97,600 Hormel Foods Corp. 3,965,000
269,400 IBP, Inc. 4,849,200
320,100 Kellogg Co. 9,863,081
2,090,600 Nabisco Group Holdings Corp. 22,212,625
179,300 PepsiCo, Inc. 6,320,325
727,200 Quaker Oats Co. (The) 47,722,500
1,463,100 Supervalu Inc. 29,262,000
271,816 Unilever N.V. New York Shares 14,796,984
--------------
219,858,034
--------------
FOREST PRODUCTS & PAPER -- 1.1%
182,500 Georgia-Pacific Corp. 9,261,875
60,000 International Paper Co. 3,386,250
284,300 Kimberly-Clark Corp. 18,550,575
102,600 Louisiana-Pacific Corp. 1,462,050
129,700 Temple-Inland Inc. 8,552,094
52,600 Westvaco Corp. 1,716,075
460,400 Weyerhaeuser Co. 33,062,475
--------------
75,991,394
--------------
GAS & WATER UTILITIES -- 0.1%
187,100 Keyspan Energy Corp. 4,338,381
78,500 LG&E Energy Corp. 1,368,844
--------------
5,707,225
--------------
See Notes to Financial Statements www.americancentury.com 17
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
GOLD -- 0.1%
301,700 Barrick Gold Corp. $ 5,336,319
144,100 Homestake Mining Co. 1,125,781
--------------
6,462,100
--------------
GROCERY STORES -- 0.3%
61,300 Albertson's, Inc. 1,976,925
141,400 Great Atlantic & Pacific
Tea Co., Inc. (The) 3,941,525
166,700 Kroger Co. (The)(1) 3,146,462
185,100 Safeway Inc.(1) 6,582,619
148,100 Winn-Dixie Stores, Inc. 3,545,144
--------------
19,192,675
--------------
HEAVY ELECTRICAL EQUIPMENT -- 1.1%
662,800 Cummins Engine Company, Inc. 32,021,525
606,200 Dover Corp. 27,506,325
349,100 Rockwell International Corp. 16,713,162
--------------
76,241,012
--------------
HEAVY MACHINERY(2)
35,600 Trinity Industries, Inc. 1,012,375
--------------
HOME PRODUCTS -- 2.5%
27,000 Alberto-Culver Company Cl B 696,938
219,700 Avon Products, Inc. 7,250,100
153,400 Church & Dwight Co., Inc. 4,093,862
15,800 Clorox Co. (The) 795,925
508,200 Fortune Brands, Inc. 16,802,362
209,100 International Flavors &
Fragrances Inc. 7,893,525
519,300 National Service Industries, Inc. 15,319,350
859,000 Procter & Gamble Co. (The) 94,114,188
529,500 Ralston Purina Co. 14,759,812
804,600 Tupperware Corp. 13,627,912
--------------
175,353,974
--------------
HOTELS(2)
46,300 Anchor Gaming(1) 2,006,816
--------------
INDUSTRIAL PARTS -- 1.1%
238,600 Briggs & Stratton Corp. 12,794,925
194,000 Pall Corp. 4,183,125
45,500 Pentair, Inc. 1,751,750
68,400 Stanley Works (The) 2,060,550
1,125,000 Tyco International Ltd. 43,734,375
209,600 United Technologies Corp. 13,624,000
--------------
78,148,725
--------------
INDUSTRIAL SERVICES -- 0.3%
413,100 Hertz Corp. Cl A 20,706,638
47,600 Manpower Inc. 1,790,950
--------------
22,497,588
--------------
INFORMATION SERVICES -- 1.4%
68,300 American Management System,
Inc.(1) 2,136,509
432,900 Dun & Bradstreet Corp. (The) 12,770,550
Shares Value
--------------------------------------------------------------------------------
745,400 Electronic Data Systems Corp. $ 49,895,212
118,600 MedQuist Inc.(1) 3,050,244
74,200 Omnicom Group Inc. 7,420,000
148,000 Paychex, Inc. 5,915,375
108,200 Shared Medical Systems Corp. 5,511,438
318,900 True North Communications Inc. 14,250,844
--------------
100,950,172
--------------
INTERNET -- 1.7%
1,207,600 America Online Inc.(1) 91,098,325
4,400 CMGI Inc.(1) 1,218,112
2,900 Network Solutions, Inc.(1) 631,022
72,600 Yahoo! Inc.(1) 31,415,381
--------------
124,362,840
--------------
LEISURE -- 0.4%
133,100 Brunswick Corp. 2,961,475
333,700 Eastman Kodak Co. 22,107,625
--------------
25,069,100
--------------
LIFE & HEALTH INSURANCE -- 1.0%
392,400 Aetna Inc. 21,900,825
1,218,800 Lincoln National Corp. 48,752,000
--------------
70,652,825
--------------
MEDIA -- 2.0%
1,124,600 CBS Corp.(1) 71,904,112
686,900 Comcast Corp. Cl A 34,709,916
203,200 MediaOne Group Inc.(1) 15,608,300
138,600 Time Warner Inc. 10,039,838
152,900 Tribune Co. 8,419,056
--------------
140,681,222
--------------
MEDICAL PRODUCTS & SUPPLIES -- 2.1%
234,100 Bard (C.R.), Inc. 12,407,300
111,800 Bausch & Lomb Inc. Cl A 7,651,312
468,900 Baxter International, Inc. 29,452,781
849,400 Johnson & Johnson 79,100,375
528,100 Mallinckrodt Inc. 16,800,181
131,500 VISX, Inc.(1) 6,809,234
--------------
152,221,183
--------------
MEDICAL PROVIDERS & SERVICES -- 0.4%
183,100 Oxford Health Plans, Inc.(1) 2,328,803
486,000 United HealthCare Corp. 25,818,750
--------------
28,147,553
--------------
MINING & METALS -- 0.8%
195,100 Alcan Aluminium Ltd. 8,035,681
16,000 Alcoa Inc. 1,328,000
103,900 Ball Corporation 4,091,062
495,100 Crown Cork & Seal Co., Inc. 11,077,862
58,400 Nucor Corp. 3,201,050
407,500 Phelps Dodge Corp. 27,353,438
151,500 Worthington Industries, Inc. 2,504,484
--------------
57,591,577
--------------
18 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 1.7%
40,500 Delphi Automotive Systems Corp. $ 637,875
1,340,000 Ford Motor Co. 71,606,250
580,400 General Motors Corp. 42,187,825
128,100 PACCAR Inc. 5,672,428
--------------
120,104,378
--------------
OIL REFINING -- 0.8%
716,000 Texaco Inc. 38,887,750
659,100 Ultramar Diamond Shamrock
Corp. 14,953,331
--------------
53,841,081
--------------
OIL SERVICES -- 1.1%
240,900 Diamond Offshore Drilling, Inc. 7,362,506
117,000 Noble Drilling Corp.(1) 3,831,750
920,800 Royal Dutch Petroleum Co. New
York Shares 55,650,850
345,700 Tidewater Inc. 12,445,200
--------------
79,290,306
--------------
PROPERTY & CASUALTY INSURANCE -- 1.6%
34,300 Allmerica Financial Corp. 1,907,938
272,200 Ambac Financial Group, Inc. 14,205,438
115,875 American International Group, Inc. 12,528,984
294,000 Loews Corp. 17,842,125
202,300 MGIC Investment Corp. 12,175,931
137,700 PMI Group, Inc. (The) 6,721,481
39,700 Radian Group Inc. 1,895,675
1,250,900 St. Paul Companies, Inc. 42,139,694
185,300 Travelers Property Casualty
Corp. Cl A 6,346,525
--------------
115,763,791
--------------
PUBLISHING -- 0.5%
969,500 Deluxe Corp. 26,600,656
185,900 Donnelley (R.R.) & Sons Co. 4,612,644
62,100 Knight-Ridder, Inc. 3,694,950
75,500 Reader's Digest Association,
Inc. (The) 2,208,375
--------------
37,116,625
--------------
RAILROADS -- 0.1%
134,900 Union Pacific Corp. 5,885,012
--------------
RESTAURANTS -- 0.4%
166,700 Brinker International, Inc.(1) 4,000,800
498,800 Darden Restaurants, Inc. 9,040,750
94,300 Tricon Global Restaurants Inc.(1) 3,642,338
669,200 Wendy's International, Inc. 13,802,250
--------------
30,486,138
--------------
SECURITIES & ASSET MANAGEMENT -- 2.2%
141,000 Lehman Brothers Holdings Inc. 11,940,938
180,000 Merrill Lynch & Co., Inc. 15,030,000
899,700 Morgan Stanley Dean Witter
& Co. 128,432,175
--------------
155,403,113
--------------
Shares Value
--------------------------------------------------------------------------------
SEMICONDUCTOR -- 3.7%
456,100 Applied Materials, Inc.(1) $ 57,767,916
470,200 Integrated Device Technology,
Inc.(1) 13,621,106
1,143,300 Intel Corp. 94,072,153
278,100 Lam Research Corp.(1) 31,042,912
240,000 Micron Technology, Inc.(1) 18,660,000
60,600 National Semiconductor Corp.(1) 2,594,438
297,000 PerkinElmer, Inc. 12,381,188
9,700 SDL, Inc.(1) 2,116,419
318,000 Texas Instruments Inc. 30,806,250
--------------
263,062,382
--------------
SPECIALTY STORES -- 2.2%
349,200 Best Buy Co., Inc.(1) 17,525,475
392,000 Circuit City Stores-Circuit City
Group 17,664,500
1,137,450 Home Depot, Inc. 77,986,416
141,200 Lowe's Companies, Inc. 8,436,700
95,900 Tandy Corp. 4,717,081
24,000 Tiffany & Co. 2,142,000
1,172,100 Toys 'R' Us, Inc.(1) 16,775,681
260,900 Zale Corp.(1) 12,621,038
--------------
157,868,891
--------------
TELEPHONE -- 7.4%
2,155,900 AT&T Corp. 109,411,925
789,400 Bell Atlantic Corp. 48,597,438
1,635,800 BellSouth Corp. 76,575,888
85,100 Dycom Industries, Inc.(1) 3,749,719
807,700 GTE Corp. 56,993,331
1,524,300 MCI WorldCom, Inc.(1) 80,835,534
24,200 NEXTLINK Communications, Inc.
Cl A(1) 2,009,356
2,068,000 SBC Communications Inc. 100,815,000
304,700 Sprint Corp. 20,510,119
37,900 Talk.com, Inc.(1) 671,541
342,500 U S WEST, Inc. 24,660,000
--------------
524,829,851
--------------
THRIFTS -- 0.2%
653,200 GreenPoint Financial Corp. 15,554,325
--------------
TOBACCO -- 0.1%
442,700 Philip Morris Companies Inc. 10,265,106
--------------
TRUCKING, SHIPPING & AIR FREIGHT -- 0.1%
102,900 United Parcel Service, Inc. Cl B 7,100,100
--------------
WIRELESS TELECOMMUNICATIONS -- 2.0%
183,200 ALLTEL Corp. 15,148,350
58,600 Nextel Communications, Inc.(1) 6,041,296
534,400 QUALCOMM Inc.(1) 94,104,500
281,000 Sprint PCS(1) 28,802,500
--------------
144,096,646
--------------
TOTAL COMMON STOCKS 6,997,569,462
--------------
(Cost $5,202,877,301)
See Notes to Financial Statements www.americancentury.com 19
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares/Principal Amount Value
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS(2)
ELECTRICAL UTILITIES
185,900 Avista Corp., Series L, $1.24,
11/1/01 $ 2,834,975
--------------
(Cost $3,389,622)
TEMPORARY CASH INVESTMENTS -- 1.9%
$50,000,000 U.S. Treasury Bills, 4.70%, 1/6/00 49,982,205
--------------
Repurchase Agreement, BA Security Services,
Inc., (U.S. Treasury obligations), in a joint
trading account at 3.00%, dated 12/31/99,
due 1/3/00 (Delivery value $85,221,300) 85,200,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS 135,182,205
--------------
(Cost $135,167,361)
TOTAL INVESTMENT SECURITIES -- 100.0% $7,135,586,642
==============
(Cost $5,341,434,284)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Gain
----------------------------------------------------------------------------------
454 S&P 500 March
Futures 2000 $168,661,000 $11,080,545
=========================================
Futures contracts are typically based on a stock index, such as the S&P 500,
and they tend to track the performance of the index while remaining very liquid
(easy to buy and sell). By investing its cash assets in index futures, the fund
can stay fully invested in stocks while having easy access to the money.
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
(2) Industry or category is less than 0.05% of total investment securities.
20 1-800-345-2021 See Notes to Financial Statements
Small Cap Quantitative--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF DECEMBER 31, 1999
INVESTOR CLASS (INCEPTION 7/31/98) INSTITUTIONAL CLASS (INCEPTION 10/1/99)
SMALL CAP S&P SMALLCAP SMALL-CAP CORE FUNDS(2) SMALL CAP S&P SMALLCAP
QUANTITATIVE 600 INDEX AVERAGE RETURN FUND'S RANKING QUANTITATIVE 600 INDEX
========================================================================================================================
6 MONTHS(1) 8.60% 7.02% 16.29% -- -- --
1 YEAR 9.76% 12.41% 28.26% 133 OUT OF 186 -- --
========================================================================================================================
AVERAGE ANNUAL RETURNS
LIFE OF FUND 7.08% 9.13% 19.30% 114 OUT OF 172 15.25%(1) 12.46%(1)
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 45-47 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 12/31/99 S&P SmallCap 600 Index
$11,319 Small Cap Quantitative $11,020
Small Cap S&P SmallCap
Quantitative 600 Index
DATE VALUE VALUE
7/31/98 $10,000 $10,000
8/31/98 $8,000 $8,070
9/30/98 $8,460 $8,564
10/31/98 $8,840 $8,961
11/30/98 $9,399 $9,466
12/31/98 $10,040 $10,070
1/31/99 $9,679 $9,944
2/28/99 $8,799 $9,048
3/31/99 $8,642 $9,165
4/30/99 $9,404 $9,770
5/31/99 $9,685 $10,008
6/30/99 $10,146 $10,577
7/31/99 $10,046 $10,484
8/31/99 $9,685 $10,023
9/30/99 $9,685 $10,065
10/31/99 $9,745 $10,040
11/30/99 $10,126 $10,462
12/31/99 $11,020 $11,319
$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.
www.americancentury.com 21
Small Cap Quantitative--Q&A
--------------------------------------------------------------------------------
[photos of Bill Martin and Kurt Borgwardt]
An interview with Bill Martin and Kurt Borgwardt, portfolio managers on the
Small Cap Quantitative fund investment team.
HOW DID SMALL CAP QUANTITATIVE PERFORM IN 1999?
The fund's total return for the year was 9.76%,* while the fund's
performance benchmark, the S&P SmallCap 600, returned 12.41%. The average
return of Small Cap Quantitative's peer group, the 186 small-cap core funds
tracked by Lipper Inc., was 28.26%. (See the previous page for other fund
performance comparisons.)
WHY WAS THERE SUCH A LARGE DISPARITY BETWEEN THE FUND'S RETURN AND THE AVERAGE
RETURN OF ITS PEER GROUP?
It was mainly the effect of Internet and other technology stocks. They were
by far the best-performing stocks in the small-cap universe and played a
significant role in many small-cap funds. Small Cap Quantitative owns some of
these stocks, too, but its portfolio is more balanced and diversified than many
of its peers.
Small Cap Quantitative's goal is to outperform its benchmark, the S&P
SmallCap 600. We think that tracking this index will ultimately produce better
long-term returns than chasing our peer group's performance.
BUT THE FUND ALSO TRAILED THE S&P 600 IN 1999. WHAT HAPPENED THERE?
The first quarter of the year was a difficult period for Small Cap
Quantitative. We were overweight several industries--such as title insurance,
construction, and real estate--that were hurt by rising interest rates. In
addition, we were underweight some parts of the technology sector, including the
soaring Internet stocks. The fund also held several stocks that were torpedoed
because of Y2K concerns.
Since then, the fund's relative performance has improved significantly. In
the last nine months of the year, Small Cap Quantitative returned 27.50%, easily
outpacing the 23.52% return of the S&P 600.
WHAT MADE THE DIFFERENCE IN THE LAST NINE MONTHS?
We made a couple of adjustments to our investment approach that we think
contributed to our improved performance. First, we shifted to an "industry-
neutral" approach relative to the S&P 600. In the past, we would often
over- and underweight industries in an effort to enhance fund returns compared
with the index.
However, we found that these industry "bets" weren't adding any
value. All they were really adding was unwanted volatility, which became
abundantly clear in the first quarter's underperformance. So we brought the
fund's industry weightings back in line with those of the S&P 600.
The other change we made was to cut down on the number of stocks in the
portfolio. When the fund opened in mid-1998, it held 200-250 stocks, but we've
pared that back to around 150.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"THE FIRST QUARTER OF THE YEAR WAS A DIFFICULT PERIOD FOR SMALL CAP
QUANTITATIVE."
PORTFOLIO AT A GLANCE
12/31/99 12/31/98
NO. OF COMPANIES 151 230
DIVIDEND YIELD 0.57% 0.65%
MEDIAN P/E RATIO 20.5 15.5
PORTFOLIO TURNOVER 148% 30%(1)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.88% 0.94%(2)
(1) July 31, 1998 (inception), through December 31, 1998.
(2) Annualized.
Investment terms are defined in the Glossary on pages 47-48.
22 1-800-345-2021
Small Cap Quantitative--Q&A
--------------------------------------------------------------------------------
(Continued)
Taken together, these changes increase our ability to focus on the
individual companies that our stock-ranking models like best in each industry.
We think that's where our strengths lie.
HOW HAVE THESE CHANGES AFFECTED SMALL CAP QUANTITATIVE'S HOLDINGS?
The best way to see these adjustments in action is to look at the fund's
top ten holdings (see the table at right). Ten companies, nine widely different
industries--from banks to medical products to semiconductors to international
freight shippers. It even includes a company that makes those coupons you get at
the checkout stand of your local grocery store.
WHICH COMPANY IS THAT?
Catalina Marketing, the fund's fourth-biggest holding. Catalina does a wide
variety of in-store promotions for retailers, including grocery checkout
coupons. The coupons are printed out with your receipt and typically involve
products that you regularly buy, based on your shopping history at that store.
We gradually increased Small Cap Quantitative's holdings of Catalina over
the last six months. The company reported a positive earnings surprise in
December, and its stock performed very well for the year--up about 70%.
WHAT OTHER STOCKS IN SMALL CAP QUANTITATIVE'S PORTFOLIO PERFORMED WELL LAST
YEAR?
Semiconductor stocks were among the fund's best performers. Demand for
computer microchips rebounded, especially in the last half of the year, and this
provided a big boost to the fund's semiconductor shares.
One example is CTS Corp., the fund's fifth-largest holding. CTS makes chips
for both computers and wireless communications, including components for
Motorola's cellular phones. As a result, the company benefited from both
increased chip demand and the explosive growth of the wireless industry. The
stock returned 250% in 1999.
Small Cap Quantitative's other semiconductor holdings did well,
too--Cypress Semiconductor returned 290%, Novellus Systems rose 150%, and
Lattice Semiconductor was up 105%.
The fund's stock selection among medical and drug stocks was also positive
for fund performance.
LIKE YOUR BIGGEST HOLDING, IDEC PHARMACEUTICALS?
That's an excellent example. IDEC is a biotechnology company that is
working on several cancer-related drugs. The company already has a number of
successful products, and it is one of the few biotech companies that is
profitable.
We bought IDEC shares in the last half of the year, and it was our
best-performing stock in the final quarter of 1999 (up 109%).
WHAT STOCKS HURT FUND PERFORMANCE DURING THE YEAR?
The financial services sector was one of the worst areas for the fund. Many
financial companies struggled with rising interest rates and leaner profit
margins. Although our stock selection was somewhat favorable-- especially among
banks, such as top ten holdings Cullen/ Frost and Silicon Valley
Bancshares--most of the fund's financial stocks performed poorly.
[right margin]
"LOOK AT THE FUND'S TOP TEN HOLDINGS. TEN COMPANIES, NINE WIDELY DIFFERENT
INDUSTRIES--FROM BANKS TO MEDICAL PRODUCTS TO SEMICONDUCTORS TO INTERNATIONAL
FREIGHT SHIPPERS."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
IDEC PHARMACUETICALS
CORP. 1.9% --
CULLEN/FROST BANKERS,
INC. 1.5% 2.0%
EXPEDITORS
INTERNATIONAL OF
WASHINGTON, INC. 1.5% 0.8%
CATALINA MARKETING
CORP. 1.4% 0.3%
CTS CORP. 1.3% 0.9%
JONES PHARMA INC. 1.3% 0.3%
SEI INSTRUMENTS CO. 1.3% --
COMMSCOPE, INC. 1.2% 0.8%
ZEBRA TECHNOLOGIES
CORP. CL A 1.2% 0.4%
SILICON VALLEY
BANCSHARES 1.1% 0.5%
www.americancentury.com 23
Small Cap Quantitative--Q&A
--------------------------------------------------------------------------------
(Continued)
Insurance stocks also hurt performance, especially early in the year. Our
overweight in title insurance companies went against us when rising interest
rates reduced home buying and refinancing activity. The fund's property and
casualty insurance stocks suffered losses relating to increased claims and
troubled business relationships.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR SMALL-CAP STOCKS IN 2000?
Small-cap stocks rebounded in 1999 after a weak 1998, and we're optimistic
about their chances for continued improvement in 2000. One point in their favor
is corporate earnings growth, which has been very good among smaller companies.
We think that this strong earnings growth, combined with the outperformance
of large-cap stocks in recent years, means that small-cap shares still look like
great bargains compared with large-caps. We wouldn't be surprised to see
investors start to recognize and take advantage of this value in 2000.
Another positive factor is the healthy economic environment. The U.S.
economy grew by 4% in 1999, the third straight year of 4% or better growth.
Small-cap stocks generally do well when the economy is expanding rapidly.
However, the Federal Reserve appears ready to raise short-term interest
rates more aggressively in 2000 to slow the economy down from its above-trend
growth rate. That could be a negative factor for stocks in general and
small-caps in particular.
WHAT ARE YOUR PLANS FOR SMALL CAP QUANTITATIVE IN THE COMING MONTHS?
We plan to continue following the same basic strategy--keep the fund fully
invested in small-cap U.S. stocks, remain industry-neutral compared with the
S&P 600, and use our quantitative computer models to help us select what we
believe are the most attractive companies in each industry.
One change we're in the process of making is how our models evaluate
technology stocks. Typically, our models look at both growth and value measures
when evaluating each stock, but we've found that traditional value measures are
less applicable to the tech sector. Instead, we plan to use additional growth
measures to help our models evaluate tech stocks more effectively.
[left margin]
"WE THINK THAT STRONG EARNINGS GROWTH, COMBINED WITH THE OUTPERFORMANCE OF
LARGE-CAP STOCKS IN RECENT YEARS, MEANS THAT SMALL-CAP SHARES STILL LOOK LIKE
GREAT BARGAINS COMPARED WITH LARGE-CAPS."
5 LARGEST OVERWEIGHTS
COMPARED WITH THE S&P 600 (AS OF 12/31/99)
% OF % OF
FUND'S S&P
STOCKS 600
CULLEN/FROST
BANKERS, INC. 1.60% 0.37%
CASCADE NATURAL
GAS CORP. 1.19% 0.05%
INTEGRATED DEVICE
TECHNOLOGY, INC. 1.14% 0%
AVIS RENT A CAR, INC. 1.03% 0%
EXPEDITORS
INTERNATIONAL OF
WASHINGTON, INC. 1.55% 0.59%
5 LARGEST UNDERWEIGHTS
COMPARED WITH THE S&P 600 (AS OF 12/31/99)
% OF % OF
FUND'S S&P
STOCKS 600
RSA SECURITY INC. 0% 0.80%
CLARIFY, INC. 0% 0.80%
MICREL, INC. 0% 0.63%
TRUE NORTH
COMMUNICATIONS 0% 0.58%
BURR-BROWN CORP. 0% 0.54%
24 1-800-345-2021
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period. The
securities are grouped by asset class (such as common stocks, corporate bonds,
temporary cash investments, as applicable), and some asset classes are further
broken down by industry or country.
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 95.3%
AIRLINES -- 0.3%
1,900 SkyWest, Inc. $ 53,438
-----------
ALCOHOL -- 0.2%
800 Canandaigua Brands, Inc. Cl A(1) 40,800
-----------
APPAREL & TEXTILES -- 1.8%
3,400 Guess?, Inc.(1) 73,950
1,600 Perry Ellis International, Inc.(1) 18,500
3,600 Quiksilver, Inc.(1) 55,800
2,800 Timberland Co. (The)(1) 148,050
-----------
296,300
-----------
BANKS -- 4.4%
10,000 Cullen/Frost Bankers, Inc. 257,500
3,500 Hamilton Bancorp Inc.(1) 62,344
5,084 Hudson United Bancorp 129,960
2,600 Imperial Bancorp 62,725
2,100 Pacific Century Financial Corp. 39,244
3,900 Silicon Valley Bancshares(1) 193,292
-----------
745,065
-----------
CHEMICALS -- 2.6%
4,300 AMCOL International Corp. 69,338
4,200 Geon Co. 136,500
2,100 H.B. Fuller Co. 117,797
3,700 Schulman (A.), Inc. 60,241
1,200 Scotts Co. (The) Cl A(1) 48,300
-----------
432,176
-----------
CLOTHING STORES -- 1.3%
7,600 Cato Corp. Cl A 95,238
1,100 Footstar, Inc.(1) 33,550
5,200 Wilsons The Leather Experts Inc.(1) 95,875
-----------
224,663
-----------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 3.4%
2,200 Adaptec, Inc.(1) 109,656
5,900 In Focus Systems, Inc.(1) 137,728
2,250 RadiSys Corp.(1) 114,258
3,600 Zebra Technologies Corp. Cl A(1) 208,912
-----------
570,554
-----------
COMPUTER SOFTWARE -- 7.2%
2,200 Adobe Systems Inc. 147,950
3,200 Dendrite International, Inc.(1) 107,800
6,000 FileNet Corp.(1) 154,500
1,700 HNC Software Inc.(1) 180,147
Shares Value
--------------------------------------------------------------------------------
3,200 InfoCure Corp.(1) $ 99,900
1,400 Mercury Interactive Corp.(1) 151,156
2,900 Progress Software Corp.(1) 164,212
3,100 Remedy Corp.(1) 147,444
1,900 Sterling Software, Inc.(1) 59,850
-----------
1,212,959
-----------
CONSTRUCTION & REAL PROPERTY -- 2.0%
3,500 M/I Schottenstein Homes, Inc. 54,469
1,800 NVR, Inc.(1) 85,950
3,200 Pulte Corp. 72,000
5,400 Ryland Group, Inc. (The) 124,538
-----------
336,957
-----------
CONSUMER DURABLES -- 1.2%
5,600 Furniture Brands International, Inc.(1) 123,200
3,200 Mohawk Industries, Inc.(1) 84,400
-----------
207,600
-----------
DEPARTMENT STORES -- 0.5%
3,400 ShopKo Stores, Inc.(1) 78,200
-----------
DRUGS -- 3.1%
4,800 AmeriSource Health Corp.(1) 72,900
10,900 Dura Pharmaceuticals, Inc.(1) 152,259
5,400 IDEXX Laboratories, Inc.(1) 87,412
5,000 Jones Pharma Inc. 217,188
-----------
529,759
-----------
ELECTRICAL EQUIPMENT -- 9.4%
2,100 Advanced Energy Industries, Inc.(1) 103,359
3,100 Digital Microwave Corp.(1) 72,753
2,700 Inter-Tel, Inc. 67,416
6,400 InterVoice-Brite, Inc.(1) 149,200
3,700 KEMET Corp.(1) 166,731
2,600 Millipore Corp. 100,425
1,100 Novellus Systems, Inc.(1) 134,784
4,000 Park Electrochemical Corp. 106,250
2,000 Pinnacle Systems, Inc.(1) 81,062
700 Plantronics, Inc.(1) 50,094
3,100 Powerwave Technologies, Inc.(1) 180,866
8,300 S3 Inc.(1) 95,709
2,400 Vicor Corp.(1) 97,725
2,300 Xircom, Inc.(1) 172,500
-----------
1,578,874
-----------
ELECTRICAL UTILITIES -- 1.3%
4,500 Central Maine Power Co. 124,031
2,800 MidAmerican Energy Holdings
Co.(1) 94,325
-----------
218,356
-----------
See Notes to Financial Statements www.americancentury.com 25
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
ENERGY RESERVES & PRODUCTION -- 1.4%
4,700 Pogo Producing Co. $ 96,350
12,000 Vintage Petroleum, Inc.(1) 144,750
-----------
241,100
-----------
FINANCIAL SERVICES -- 2.1%
7,800 Doral Financial Corp. 96,038
2,200 Express Scripts, Inc. Cl A(1) 141,281
1,400 U.S. Trust Corp. 112,262
-----------
349,581
-----------
FOOD & BEVERAGE -- 1.5%
2,900 Ben & Jerry's Homemade,
Inc. Cl A(1) 71,775
8,300 Earthgrains Company 133,838
6,400 Pilgrim's Pride Corp. Cl A 41,200
-----------
246,813
-----------
FOREST PRODUCTS & PAPER -- 0.8%
3,300 Boise Cascade Corp. 133,650
-----------
GAS & WATER UTILITIES -- 2.8%
11,900 Cascade Natural Gas Corp. 191,888
1,100 E'town Corp. 68,475
2,700 Equitable Resources Inc. 90,112
1,700 Philadelphia Suburban Corp. 35,169
2,600 Piedmont Natural Gas Co., Inc. 78,650
-----------
464,294
-----------
GROCERY STORES -- 0.3%
4,900 Casey's General Stores, Inc. 51,297
-----------
HEAVY ELECTRICAL EQUIPMENT -- 1.8%
5,200 CommScope, Inc.(1) 209,625
4,100 Smith (A.O.) Corp. 89,688
-----------
299,313
-----------
HEAVY MACHINERY -- 0.5%
4,300 Astec Industries, Inc.(1) 81,028
-----------
HOME PRODUCTS -- 0.3%
2,800 Tupperware Corp. 47,425
-----------
HOTELS -- 0.6%
200 Anchor Gaming(1) 8,669
7,800 Aztar Corp.(1) 84,825
-----------
93,494
-----------
INDUSTRIAL PARTS -- 2.1%
2,000 Graco Inc. 71,750
1,000 Helix Technology Corp. 44,844
2,600 Tecumseh Products Cl A 122,606
1,200 The Toro Co. 44,775
2,600 York International Corp. 71,338
-----------
355,313
-----------
INDUSTRIAL SERVICES -- 2.8%
6,500 Avis Rent A Car, Inc.(1) 166,156
1,700 Hertz Corp. Cl A 85,212
Shares Value
--------------------------------------------------------------------------------
4,200 Insurance Auto Auctions, Inc.(1) $ 67,331
4,900 Interim Services Inc.(1) 121,275
3,000 Labor Ready, Inc.(1) 36,375
-----------
476,349
-----------
INFORMATION SERVICES -- 8.1%
3,700 ADVO, Inc.(1) 87,875
5,900 American Management System,
Inc.(1) 184,559
2,100 Catalina Marketing Corp.(1) 243,075
3,900 Lason, Inc.(1) 42,778
2,700 MAXIMUS, Inc.(1) 91,631
4,500 MedQuist Inc.(1) 115,734
3,700 Profit Recovery Group
International, Inc. (The)(1) 98,166
1,800 SEI Investments Co. 214,256
3,400 URS Corp.(1) 73,738
2,550 Valassis Communications, Inc.(1) 107,738
2,000 Whittman-Hart, Inc.(1) 107,312
-----------
1,366,862
-----------
INTERNET -- 1.1%
2,600 Macromedia, Inc.(1) 190,125
-----------
LEISURE -- 1.3%
4,750 Fossil, Inc.(1) 109,992
5,000 Hollywood Park, Inc.(1) 112,188
-----------
222,180
-----------
LIFE & HEALTH INSURANCE -- 0.2%
1,800 FBL Financial Group, Inc. Cl A 36,000
-----------
MEDIA -- 0.3%
700 Westwood One, Inc.(1) 53,200
-----------
MEDICAL PRODUCTS & SUPPLIES -- 4.1%
3,000 ICU Medical, Inc.(1) 46,125
3,200 IDEC Pharmaceuticals Corp.(1) 314,100
3,700 Patterson Dental Co.(1) 157,481
4,800 Wesley Jessen VisionCare, Inc.(1) 181,200
-----------
698,906
-----------
MEDICAL PROVIDERS & SERVICES -- 1.3%
7,000 Oxford Health Plans, Inc.(1) 89,031
1,300 Quest Diagnostics Inc.(1) 39,731
3,900 Renal Care Group Inc.(1) 91,528
-----------
220,290
-----------
MINING & METALS -- 2.5%
2,200 Ball Corporation 86,625
3,000 Centex Construction Products Inc. 117,000
3,200 Commonwealth Industries, Inc. 41,500
1,900 Mueller Industries, Inc.(1) 68,875
3,800 Steel Technologies Inc. 55,338
1,700 Stillwater Mining Co. (1) 54,188
-----------
423,526
-----------
26 1-800-345-2021 See Notes to Financial Statements
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
MOTOR VEHICLES & PARTS -- 2.0%
2,400 Arvin Industries, Inc. $ 68,100
2,500 Borg-Warner Automotive, Inc. 101,250
3,300 Gentex Corp.(1) 91,988
1,700 Navistar International Corp.(1) 80,538
-----------
341,876
-----------
OIL REFINING -- 0.2%
900 Kinder Morgan Energy
Partners, L.P. 37,294
-----------
OIL SERVICES -- 0.7%
7,500 Oceaneering International, Inc.(1) 112,031
-----------
PROPERTY & CASUALTY INSURANCE -- 1.4%
2,100 PMI Group, Inc. (The) 102,506
2,700 Radian Group Inc. 128,925
-----------
231,431
-----------
PUBLISHING -- 0.7%
2,700 McClatchy Newspapers, Inc. 116,775
-----------
RESTAURANTS -- 1.6%
8,000 Darden Restaurants, Inc. 145,000
6,300 Jack in the Box Inc.(1) 130,331
-----------
275,331
-----------
SECURITIES & ASSET MANAGEMENT -- 1.0%
2,000 Dain Rauscher Corp. 93,000
6,000 ITLA Capital Corp.(1) 74,812
-----------
167,812
-----------
SEMICONDUCTOR -- 6.4%
2,100 Applied Science and Technology,
Inc.(1) 70,153
1,800 C-Cube Microsystems Inc.(1) 112,612
2,900 CTS Corp. 218,588
4,300 Cypress Semiconductor Corp.(1) 139,212
5,400 Electroglas, Inc.(1) 136,856
6,300 Integrated Device Technology,
Inc.(1) 182,503
3,100 Lattice Semiconductor Corp.(1) 146,766
1,000 PerkinElmer, Inc. 41,688
500 Rambus Inc.(1) 33,703
-----------
1,082,081
-----------
Shares Value
--------------------------------------------------------------------------------
SPECIALTY STORES -- 2.7%
2,700 Insight Enterprises, Inc.(1) $ 109,266
4,000 Linens 'n Things, Inc.(1) 118,500
2,900 Michaels Stores, Inc.(1) 82,197
2,900 Zale Corp.(1) 140,288
-----------
450,251
-----------
TELEPHONE -- 0.7%
2,700 Dycom Industries, Inc.(1) 118,969
-----------
THRIFTS -- 1.0%
2,000 Golden State Bancorp Inc.(1) 34,500
7,200 Roslyn Bancorp, Inc. 132,525
-----------
167,025
-----------
TRUCKING, SHIPPING & AIR FREIGHT -- 2.3%
5,700 Expeditors International of
Washington, Inc. 248,662
8,100 Yellow Corp.(1) 136,941
-----------
385,603
-----------
TOTAL COMMON STOCKS 16,062,926
-----------
(Cost $13,236,831)
TEMPORARY CASH INVESTMENTS -- 4.7%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 3.30%, dated 12/31/99,
due 1/3/00 (Delivery value $800,220) 800,000
-----------
(Cost $800,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $16,862,926
===========
(Cost $14,036,831)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Gain
----------------------------------------------------------------------------------
3 Russell 2000 March
Futures 2000 $757,500 $48,577
======================================
Futures contracts are typically based on a stock index, such as the S&P 500,
and they tend to track the performance of the index while remaining very liquid
(easy to buy and sell). By investing its cash assets in index futures, the fund
can stay fully invested in stocks while having easy access to the money.
NOTES TO SCHEDULE OF INVESTMENTS
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 27
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
EQUITY INCOME & SMALL CAP
DECEMBER 31, 1999 GROWTH GROWTH QUANTITATIVE
ASSETS
Investment securities, at value
(identified cost of $1,796,098,890,
$5,341,434,284, and $14,036,831,
respectively) (Note 3) ................... $2,460,655,593 $7,135,586,642 $16,862,926
Cash ....................................... 1,710,332 4,678,283 162,930
Receivable for investments sold ............ 9,806,488 46,597,263 --
Receivable for capital shares sold ......... -- 20,614,515 --
Receivable for variation margin
on futures contracts ..................... 3,186,808 7,875,280 41,495
Dividends and interest receivable .......... 2,044,688 8,791,522 3,779
-------------- -------------- --------------
2,477,403,909 7,224,143,505 17,071,130
-------------- -------------- --------------
LIABILITIES
Payable for investments purchased .......... 11,550,045 950,072 --
Accrued management fees (Note 2) ........... 1,331,666 3,784,265 11,675
Distribution fees payable (Note 2) ......... 28,553 132,669 --
Service fees payable (Note 2) .............. 28,553 132,669 --
Payable for directors' fees and expenses ... 3,713 6,474 24
Accrued expenses and other liabilities ..... 3,036 6,441 56
-------------- -------------- --------------
12,945,566 5,012,590 11,755
-------------- -------------- --------------
Net Assets ................................. $2,464,458,343 $7,219,130,915 $17,059,375
============== ============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .... $1,778,524,550 $5,446,024,757 $14,400,229
Undistributed net investment income ........ 92,931 -- --
Accumulated undistributed net
realized gain (loss) on investments ...... 18,083,968 (32,126,745) (215,526)
Net unrealized appreciation
on investments ........................... 667,756,894 1,805,232,903 2,874,672
-------------- -------------- --------------
$2,464,458,343 $7,219,130,915 $17,059,375
============== ============== ==============
Investor Class, $10.00 Par Value
Net assets ................................. $2,316,164,365 $6,363,283,215 $17,058,195
Shares outstanding ......................... 88,289,804 186,860,466 3,107,940
Net asset value per share .................. $26.23 $34.05 $5.49
Advisor Class, $10.00 Par Value
Net assets ................................. $139,696,300 $664,412,103 N/A
Shares outstanding ......................... 5,326,380 19,513,585 N/A
Net asset value per share .................. $26.23 $34.05 N/A
Institutional Class, $10.00 Par Value
Net assets ................................. $8,597,678 $191,435,597 $1,180
Shares outstanding ......................... 327,673 5,620,961 215
Net asset value per share .................. $26.24 $34.06 $5.49
28 1-800-345-2021 See Notes to Financial Statements
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
EQUITY INCOME & SMALL CAP
YEAR ENDED DECEMBER 31, 1999 GROWTH GROWTH QUANTITATIVE
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes
withheld of $197,441,
$621,857, and $244, respectively) ......... $29,240,822 $91,770,359 $109,807
Interest .................................... 3,500,756 9,641,550 28,674
--------------- -------------- --------------
32,741,578 101,411,909 138,481
--------------- -------------- --------------
Expenses (Note 2):
Management fees ............................. 15,011,669 38,019,319 129,434
Distribution fees - Advisor Class ........... 278,400 816,097 --
Service fees - Advisor Class ................ 278,400 816,097 --
Directors' fees and expenses ................ 42,169 110,822 323
--------------- -------------- --------------
15,610,638 39,762,335 129,757
--------------- -------------- --------------
Net investment income ....................... 17,130,940 61,649,574 8,724
--------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain (loss) on investments ..... 56,400,161 (12,882,683) (184,204)
Change in net unrealized appreciation
on investments ............................ 316,556,243 962,722,731 1,580,571
--------------- -------------- --------------
Net realized gain on investments ............ 372,956,404 949,840,048 1,396,367
--------------- -------------- --------------
Net Increase in Net Assets
Resulting from Operations ................. $390,087,344 $1,011,489,622 $1,405,091
=============== ============== ==============
See Notes to Financial Statements www.americancentury.com 29
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
EQUITY GROWTH INCOME & GROWTH
Increase in Net Assets 1999 1998 1999 1998
OPERATIONS
Net investment income ............... $17,130,940 $15,486,425 $61,649,574 $40,218,775
Net realized gain (loss)
on investments .................... 56,400,161 35,760,449 (12,882,683) 142,119,705
Change in net unrealized
appreciation
on investments .................... 316,556,243 272,888,031 962,722,731 559,106,533
-------------- -------------- -------------- --------------
Net increase in net
assets resulting
from operations ................... 390,087,344 324,134,905 1,011,489,622 741,445,013
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .................... (16,885,363) (14,886,016) (58,713,804) (41,096,754)
Advisor Class ..................... (667,458) (240,053) (2,682,788) (261,933)
Institutional Class ............... (67,824) (69,448) (1,320,265) (329,375)
In excess of net investment income:
Investor Class .................... -- -- (263,158) --
Advisor Class ..................... -- -- (26,692) --
Institutional Class ............... -- -- (8,055) --
From net realized gains
on investment transactions:
Investor Class .................... (38,041,404) (58,918,572) -- (168,684,571)
Advisor Class ..................... (2,103,968) (1,190,628) -- (1,905,461)
Institutional Class ............... (128,588) (244,674) -- (1,110,386)
In excess of net realized gains
on investment transactions:
Investor Class .................... -- -- (11,296,136) --
Advisor Class ..................... -- -- (375,184) --
Institutional Class ............... -- -- (147,458) --
-------------- -------------- -------------- --------------
Decrease in net assets
from distributions ................ (57,894,605) (75,549,391) (74,833,540) (213,388,480)
-------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets from
capital share transactions ........ 24,441,106 1,085,260,447 1,866,804,226 2,088,770,763
-------------- -------------- -------------- --------------
Net increase in net assets .......... 356,633,845 1,333,845,961 2,803,460,308 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 .......................$2,464,458,343 $2,107,824,498 $7,219,130,915 $4,415,670,607
============== ============== ============== ==============
Undistributed net
investment income ................. $92,931 $581,971 -- $1,067,283
============== ============== ============== ==============
30 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
(Continued)
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
SMALL CAP QUANTITATIVE
Increase in Net Assets 1999 1998(1)
OPERATIONS
Net investment income ........................ $8,724 $ 5,774
Net realized gain (loss) on investments ...... (184,204) (152)
Change in net unrealized appreciation
on investments ............................. 1,580,571 1,294,101
------------ ------------
Net increase in net assets resulting
from operations ............................ 1,405,091 1,299,723
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ............................. (15,088) --
Institutional Class ........................ (2) --
In excess of net realized gains
on investment transactions:
Investor Class ............................. (34,249) --
------------ ------------
Decrease in net assets from distributions .... (49,339) --
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets from
capital share transactions ................. 732,969 13,670,931
------------ ------------
Net increase in net assets ................... 2,088,721 14,970,654
NET ASSETS
Beginning of period .......................... 14,970,654 --
------------ ------------
End of period ................................$17,059,375 $14,970,654
============ ============
Undistributed net investment income .......... -- $5,774
============ ============
(1) For the period July 31, 1998 (inception) through December 31, 1998.
See Notes to Financial Statements www.americancentury.com 31
Notes to Financial Statements
--------------------------------------------------------------------------------
DECEMBER 31, 1999
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 (the 1940 Act) as an
open-end 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. The funds are diversified under the 1940 Act. 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. The following significant
accounting policies are in accordance with generally accepted accounting
principles; these policies may require the use of estimates by fund management.
MULTIPLE CLASS -- 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
Institutional Class for Small Cap Quantitative commenced on October 1, 1999 and
sale of the Advisor Class had not commenced as of the report date.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
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 is 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.
At December 31, 1999, Income & Growth and Small Cap Quantitative had
accumulated net realized capital loss carryovers for federal income tax purposes
of $1,698,568 and $89,383 (expiring in 2007), respectively, 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.
32 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
--------------------------------------------------------------------------------
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 1940 Act (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% 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 and the Institutional Class are
0.2500% less and 0.2000% less, respectively, at each point within the Complex
Fee range. For the year ended December 31, 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 1940 Act.
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 year
ended December 31, 1999, were $556,800 and $1,632,194 for Equity Growth &
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 year
ended December 31, 1999, were as follows:
EQUITY INCOME & SMALL CAP
GROWTH GROWTH QUANTITATIVE
Purchases $1,882,604,929 $5,038,837,384 $21,757,714
Proceeds from Sales $1,877,583,131 $3,222,633,336 $21,095,934
On December 31, 1999, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:
EQUITY INCOME & SMALL CAP
GROWTH GROWTH QUANTITATIVE
Appreciation $704,307,221 $1,982,402,497 $3,469,550
Depreciation (43,868,731) (207,597,767) (721,019)
----------------- ----------------- ---------------
Net $660,438,490 $1,774,804,730 $2,748,531
================= ================= ===============
Federal Tax Cost $1,800,217,103 $5,360,781,912 $14,114,395
================= ================= ===============
www.americancentury.com 33
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
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:
EQUITY GROWTH INCOME & GROWTH
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Designated Shares ................. 1,000,000,000 1,000,000,000
============= ==============
Year ended December 31, 1999
Sold .............................. 55,155,715 $1,304,199,212 141,394,263 $4,375,918,621
Issued in reinvestment
of distributions ................ 2,163,970 52,015,100 2,193,327 66,909,394
Redeemed .......................... (58,264,405) (1,379,518,575) (104,220,183) (3,246,302,638)
------------- -------------- --------------- ---------------
Net increase (decrease) ........... (944,720) $(23,304,263) 39,367,407 $1,196,525,377
============= ============== =============== ===============
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
============= ==============
Year ended December 31, 1999
Sold .............................. 4,139,828 $97,132,261 19,465,861 $599,301,498
Issued in reinvestment
of distributions ................ 109,282 2,646,424 97,446 3,008,635
Redeemed .......................... (2,136,168) (51,064,956) (2,211,757) (68,108,043)
------------- -------------- --------------- ---------------
Net increase ...................... 2,112,942 $48,713,729 17,351,550 $534,202,090
============= ============== =============== ===============
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
============= ==============
Year ended December 31, 1999
Sold .............................. 299,523 $7,165,345 8,828,731 $278,383,106
Issued in reinvestment
of distributions ................ 6,941 167,422 40,920 1,266,180
Redeemed .......................... (356,037) (8,301,127) (4,578,723) (143,572,527)
------------- -------------- --------------- ---------------
Net increase (decrease) ........... (49,573) $(968,360) 4,290,928 $136,076,759
============= ============== =============== ===============
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
============= ============== =============== ===============
(1) January 2, 1998 (commencement of sale) through December 31, 1 998 for
Equity Growth and January 28, 1998 (commencement of sale) through December
31, 1998 for Income & Growth.
34 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
SMALL CAP QUANTITATIVE
SHARES AMOUNT
INVESTOR CLASS
Designated Shares ................. 1,000,000,000
=============
Year ended December 31, 1999
Sold .............................. 3,722,527 $18,042,033
Issued in reinvestment
of distributions ................ 10,454 48,221
Redeemed .......................... (3,607,006) (17,358,791)
------------- -------------
Net increase ...................... 125,975 $731,463
============= =============
Year ended December 31, 1998(1)
Sold .............................. 4,340,662 $19,938,978
Redeemed .......................... (1,358,697) (6,268,047)
------------- -------------
Net increase ...................... 2,981,965 $13,670,931
============= =============
INSTITUTIONAL CLASS
Designated Shares ................. 250,000,000
=============
Year ended December 31, 1999(2)
Sold .............................. 4,827 $23,183
Redeemed .......................... (4,612) (21,677)
------------- -------------
Net increase ...................... 215 $1,506
============= =============
(1) July 31, 1998 (inception) through December 31, 1998 for Small Cap
Quantitative.
(2) October 1, 1999 (commencement of sale) through December 31, 1999 for Small
Cap Quantitative.
--------------------------------------------------------------------------------
5. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
year ended December 31, 1999.
www.americancentury.com 35
Equity Growth--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $22.71 $19.04 $15.96 $14.25 $11.53
---------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ................. 0.18(1) 0.22(1) 0.27(1) 0.27 0.26
Net Realized and Unrealized Gain on
Investment Transactions ............... 3.96 4.53 5.36 3.55 3.70
---------- ---------- ---------- ---------- ---------
Total From Investment Operations ...... 4.14 4.75 5.63 3.82 3.96
---------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ............ (0.19) (0.20) (0.24) (0.26) (0.23)
From Net Realized Gains on
Investment Transactions ............... (0.43) (0.88) (2.31) (1.85) (1.01)
---------- ---------- ---------- ---------- ---------
Total Distributions ................... (0.62) (1.08) (2.55) (2.11) (1.24)
---------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period .......... $26.23 $22.71 $19.04 $15.96 $14.25
========== ========== ========== ========== =========
Total Return(2) ....................... 18.47% 25.45% 36.06% 27.34% 34.56%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.68% 0.69% 0.67% 0.63% 0.71%
Ratio of Net Investment Income
to Average Net Assets ................. 0.77% 1.07% 1.39% 1.74% 1.96%
Portfolio Turnover Rate ................. 86% 89% 161% 131% 126%
Net Assets, End of Period
(in thousands) ........................$2,316,164 $2,026,304 $773,425 $274,433 $159,450
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
36 1-800-345-2021 See Notes to Financial Statements
Equity Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
1999 1998 1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $22.70 $19.04 $21.61
---------- ---------- ----------
Income From Investment Operations
Net Investment Income(2) .............. 0.12 0.16 0.05
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 3.98 4.54 (0.25)
---------- ---------- ----------
Total From Investment Operations ...... 4.10 4.70 (0.20)
---------- ---------- ----------
Distributions
From Net Investment Income ............ (0.14) (0.16) (0.06)
From Net Realized Gains
on Investment Transactions ............ (0.43) (0.88) (2.31)
---------- ---------- ----------
Total Distributions ................... (0.57) (1.04) (2.37)
---------- ---------- ----------
Net Asset Value, End of Period .......... $26.23 $22.70 $19.04
========== ========== ==========
Total Return(3) ....................... 18.28% 25.14% (0.50)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.93% 0.94% 0.94%(4)
Ratio of Net Investment Income
to Average Net Assets ................. 0.52% 0.82% 1.14%(4)
Portfolio Turnover Rate ................. 86% 89% 161%
Net Assets, End of Period
(in thousands) ........................ $139,696 $72,954 $553
(1) October 9, 1997 (commencement of sale) through December 31, 1997.
(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 37
Equity Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Institutional Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $22.71 $19.06
--------- ---------
Income From Investment Operations
Net Investment Income(2) .............. 0.23 0.27
Net Realized and Unrealized Gain
on Investment Transactions ............ 3.97 4.51
--------- ---------
Total From Investment Operations ...... 4.20 4.78
--------- ---------
Distributions
From Net Investment Income ............ (0.24) (0.25)
From Net Realized Gains
on Investment Transactions ............ (0.43) (0.88)
--------- ---------
Total Distributions ................... (0.67) (1.13)
--------- ---------
Net Asset Value, End of Period .......... $26.24 $22.71
========= =========
Total Return(3) ....................... 18.78% 25.59%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.48% 0.49%(4)
Ratio of Net Investment Income
to Average Net Assets ................. 0.97% 1.27%(4)
Portfolio Turnover Rate ................. 86% 89%
Net Assets, End of Period
(in thousands) ........................ $8,598 $8,566
(1) January 2, 1998 (commencement of sale) through December 31, 1998.
(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.
38 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $29.25 $24.31 $20.16 $17.81 $13.92
---------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ................. 0.33(1) 0.36(1) 0.43(1) 0.44 0.42
Net Realized and Unrealized Gain
on Investment Transactions ............ 4.87 6.23 6.40 3.79 4.64
---------- ---------- ---------- ---------- ---------
Total From Investment Operations ...... 5.20 6.59 6.83 4.23 5.06
---------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ............ (0.33) (0.35) (0.39) (0.44) (0.42)
In Excess of Net Investment Income .... --(2) -- -- -- --
From Net Realized Gains on
Investment Transactions ............... -- (1.30) (2.29) (1.44) (0.75)
In Excess of Net Realized Gains
on Investment Transactions ............ (0.07) -- -- -- --
---------- ---------- ---------- ---------- ---------
Total Distributions ................... (0.40) (1.65) (2.68) (1.88) (1.17)
---------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period .......... $34.05 $29.25 $24.31 $20.16 $17.81
========== ========== ========== ========== =========
Total Return(3) ....................... 17.96% 27.67% 34.52% 24.15% 36.88%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.68% 0.69% 0.65% 0.62% 0.67%
Ratio of Net Investment Income
to Average Net Assets ................. 1.08% 1.31% 1.81% 2.32% 2.61%
Portfolio Turnover Rate ................. 58% 86% 102% 92% 70%
Net Assets, End of Period
(in thousands) ........................$6,363,283 $4,313,575 $1,795,124 $717,695 $373,701
(1) Computed using average shares outstanding throughout the period.
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements www.americancentury.com 39
Income & Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
1999 1998 1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $29.22 $24.30 $26.36
--------- ---------- ---------
Income From Investment Operations
Net Investment Income(2) .............. 0.25 0.31 0.01
Net Realized and Unrealized Gain
on Investment Transactions ............ 4.87 6.22 0.25
--------- ---------- ---------
Total From Investment Operations ...... 5.12 6.53 0.26
--------- ---------- ---------
Distributions
From Net Investment Income ............ (0.22) (0.31) (0.03)
In Excess of Net Investment Income .... --(3) -- --
From Net Realized Gains on
Investment Transactions .............. -- (1.30) (2.29)
In Excess of Net Realized Gains
on Investment Transactions ............ (0.07) -- --
--------- ---------- ---------
Total Distributions ................... (0.29) (1.61) (2.32)
--------- ---------- ---------
Net Asset Value, End of Period .......... $34.05 $29.22 $24.30
========= ========== =========
Total Return(4) ....................... 17.65% 27.37% 1.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.93% 0.94% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ................. 0.83% 1.06% 1.22%(5)
Portfolio Turnover Rate ................. 58% 86% 102%
Net Assets, End of Period
(in thousands) ........................ $664,412 $63,169 $3,720
(1) December 15, 1997 (commencement of sale) through December 31, 1997.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(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.
40 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Institutional Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $29.27 $24.29
---------- ---------
Income From Investment Operations
Net Investment Income(2) .............. 0.39 0.39
Net Realized and Unrealized Gain
on Investment Transactions ............ 4.90 6.26
---------- ---------
Total From Investment Operations ...... 5.29 6.65
---------- ---------
Distributions
From Net Investment Income ............ (0.43) (0.37)
In Excess of Net Investment Income .... --(3) --
From Net Realized Gains on
Investment Transactions ............... -- (1.30)
In Excess of Net Realized Gains
on Investment Transactions ............ (0.07) --
---------- ---------
Total Distributions ................... (0.50) (1.67)
---------- ---------
Net Asset Value, End of Period .......... $34.06 $29.27
========== =========
Total Return(4) ....................... 18.27% 27.87%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.48% 0.49%(5)
Ratio of Net Investment Income
to Average Net Assets ................. 1.28% 1.51%(5)
Portfolio Turnover Rate ................. 58% 86%
Net Assets, End of Period
(in thousands) ........................ $191,436 $38,926
(1) January 28, 1998 (commencement of sale) through December 31, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(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
Small Cap Quantitative--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $5.02 $5.00
-------- --------
Income From Investment Operations
Net Investment Income(2) .............. --(3) --(3)
Net Realized and Unrealized Gain
on Investment Transactions ............ 0.48 0.02
-------- --------
Total From Investment Operations ...... 0.48 0.02
-------- --------
Distributions
From Net Investment Income ............ --(3) --
In Excess of Net Realized Gains
on Investment Transactions ............ (0.01) --
-------- --------
Total Distributions ................... (0.01) --
-------- --------
Net Asset Value, End of Period .......... $5.49 $5.02
======== ========
Total Return(4) ....................... 9.76% 0.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.88% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ................. 0.06% 0.20%(5)
Portfolio Turnover Rate ................. 148% 30%
Net Assets, End of Period
(in thousands) ........................ $17,058 $14,971
(1) July 31, 1998 (inception) through December 31, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(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.
42 1-800-345-2021 See Notes to Financial Statements
Small Cap Quantitative--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED
Institutional Class
1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ............ $4.77
-----------
Income From Investment Operations
Net Investment Income(2) ...................... --(3)
Net Realized and Unrealized Gain
on Investment Transactions .................... 0.73
-----------
Total From Investment Operations .............. 0.73
-----------
Distributions
From Net Investment Income .................... (0.01)
-----------
Net Asset Value, End of Period .................. $5.49
===========
Total Return(4) ............................... 15.25%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ......................... 0.68%(5)
Ratio of Net Investment Income
to Average Net Assets ......................... 0.36%(5)
Portfolio Turnover Rate ......................... 148%
Net Assets, End of Period ....................... $1,180
(1) October 1, 1999 (commencement of sale through December 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(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 43
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Directors of the American Century Quantitative Equity Funds and
Shareholders of the Equity Growth Fund, Income & Growth Fund and Small Cap
Quantitative Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Equity Growth Fund, the Income
& Growth Fund and the Small Cap Quantitative Fund (three of the six funds
comprising the American Century Quantitative Equity Funds, hereafter referred to
as the "Funds") at December 31, 1999, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented in the three years ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
The financial highlights for each of the two years in the period ended December
31, 1996 for Equity Growth and Income & Growth were audited by other
auditors, whose report dated February 7, 1997, expressed an unqualified opinion
on those statements. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 3, 2000
44 1-800-345-2021
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. The Advisor
Class had not commenced as of December 31, 1999, for the Small Cap Quantitative
fund.
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.
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)
account] 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 45
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:
MULTI-CAP CORE FUNDS (Equity Growth) -- funds that invest in a variety of
market capitalizations and strike a balance between growth and value stocks.
LARGE-CAP VALUE FUNDS (Income & Growth) -- funds that invest primarily
in large companies that are considered to be undervalued relative to major stock
indexes.
SMALL-CAP CORE FUNDS (Small Cap Quantitative) -- funds that invest
primarily in small companies and strike a balance between growth and value
stocks.
INVESTMENT TEAM LEADERS
Portfolio Managers
KURT BORGWARDT
BILL MARTIN
JOHN SCHNIEDWIND
JEFF TYLER
46 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 36-43.
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 -- 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 -- stocks that are purchased because they are relatively
inexpensive. These stocks are typically characterized by low P/E ratios.
* LARGE-CAPITALIZATION ("LARGE-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
of more than $9.0 billion. This is Lipper's market-capitalization breakpoint as
of December 31, 1999, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 are
representative indexes of large-cap stock performance.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
between $2.2 billion and $9.0 billion. This is Lipper's market-capitalization
breakpoint as of December 31, 1999, although it may be subject to change based
on market fluctuations. The S&P 400 and Russell 2500 are representative of
mid-cap stock performance.
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
of less than $2.2 billion. This is Lipper's market-capitalization breakpoint as
of December 31, 1999, although it may be subject to change based on market
fluctuations. The S&P 600 and the Russell 2000 are representative of
small-cap stock performance.
www.americancentury.com 47
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
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.
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.
* 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.
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 Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
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]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[american century logo (reg.sm)]
American
Century
P.O. BOX 419200
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SH-ANN-19621 (c)2000 American Century Services Corporation
[front cover]
DECEMBER 31, 1999
AMERICAN CENTURY(reg.sm)
ANNUAL REPORT
[graphic of runners]
Global Gold
Global Natural Resources
[american century logo (reg.sm)]
American
Century
[inside front cover]
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[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.
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In addition to this plan, you can choose from five other business retirement
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Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The global economy staged a remarkable comeback last year, recovering from
the economic and financial crises that wracked Asia, Russia, and Latin America
in 1998. Improving global economic growth meant generally healthy stock market
returns. Indeed, Global Natural Resources enjoyed its best annual performance
since the fund's inception. Global Gold endured a more difficult year, as the
gold market was buffeted by concerns about aboveground supply.
The year was also notable for heightened market volatility, especially in
the last six months. That volatility points up the importance of a
well-diversified investment portfolio. We continue to believe that American
Century Global Gold and Global Natural Resources can play a small but important
role as diversifiers in a larger portfolio.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Many of our trades are executed over alternative trading networks.
Savings in this area directly affect the performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For." In
addition, American Century's investor account statement is the first fund
company statement to win the Communications Seal from DALBAR, Inc., an
independent financial services research firm.
We do not take acknowledgements such as these lightly-- they enable us to
recruit talented and dedicated people, from service representatives to
investment professionals. This "intellectual capital" is our most
valuable resource and an essential one in our effort to provide you with
excellent investment management and service.
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 ................................................. 14
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
Report of Independent
Accountants ......................................................... 28
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 29
Background Information
Investment Philosophy
and Policies ..................................................... 30
Comparative Indices ................................................. 30
Lipper Rankings ..................................................... 30
Investment Team
Leaders .......................................................... 30
Glossary ............................................................... 31
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
Gold
* Gold's price finished 1999 almost exactly where it began the year, at about
$290 an ounce. But that masks some big price swings in the interim.
* World central bank gold sales sent prices to a 20-year low during the
summer, but a plan by some European central banks to limit sales helped
bullion rally sharply in September and October.
* The performance of gold stocks mirrored fluctuations in the price of the
underlying metal. For the year, the FT-SE Gold Mines Index was down just
0.66%, though we saw big swings in the second and third quarters.
* By region, African gold shares performed best. North American gold companies
finished the year down a little less than 7%, while Australian gold stocks
fell about 2%.
Natural Resources
* Commodity prices surged in 1999, causing the Goldman Sachs Commodities Index
to rise more than a third.
* Improved global growth meant more demand for commodities. In addition,
production cuts after a difficult '98 made for generally low inventories and
tight supply.
* Significantly higher oil prices translated into more profits and higher
share prices for energy companies.
* Basic materials stocks performed best last year. Among these, nonferrous
metals companies did very well, as did paper and forest products names.
GLOBAL GOLD
* The Global Gold fund produced a slightly negative return for the year,
reflecting the performance of gold shares generally.
* We run the portfolio as more of a pure play on the gold market than do many
of the funds in the Lipper group. As a result, we tend to outperform when
gold rallies and underperform when gold slumps.
* However, we kept around 5% of the portfolio in stocks of select platinum and
diamond companies, which helped us reduce transaction costs and manage
volatile asset flows.
* We think the outlook for gold and gold shares is significantly better than
it was six months ago. We've seen improvements in supply and demand and
better valuations for gold companies.
GLOBAL NATURAL RESOURCES
* Global Natural Resources produced healthy returns in 1999, though the fund
lagged its benchmark and Lipper group average.
* The primary reason the fund underperformed the Lipper group is that we were
underweight emerging market and basic material shares in the first half of
the year.
* We made some adjustments to the portfolio's positioning over the last six
months, which helped the fund outperform the benchmark and Lipper group
average during the last half of the year.
* The outlook for natural resources-related shares is generally positive--
global economic growth continues to improve, which should mean better
commodities demand and improved profits for natural resources companies.
[left margin]
GLOBAL GOLD(1)
(BGEIX)
TOTAL RETURNS: AS OF 12/31/99
6 Months 5.06%(2)
1 Year -3.18%
INCEPTION DATE: 8/17/88
NET ASSETS: $201.8 million(3)
GLOBAL NATURAL RESOURCES(1)
(BGRIX)
TOTAL RETURNS: AS OF 12/31/99
6 Months 7.36%(2)
1 Year 26.50%
INCEPTION DATE: 9/15/94
NET ASSETS: $53.1 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 5 and 11. Investment terms are defined in the
Glossary on page 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
Though the price of a troy ounce of gold began and ended 1999 at about
$290, there were some big price swings in the interim. For example, gold
bottomed out near $250 an ounce, a 20-year low, in July. But a short-lived rally
in September sent gold's price soaring to near $320 an ounce.
The reason for those large price changes: world central bank involvement in
the gold market. Gold's price plummeted during the summer, when the Bank of
England auctioned off a portion of its gold reserves. In addition, Switzerland
and the International Monetary Fund unveiled plans in the first half of the year
to sell part of their gold reserves.
But gold got a boost during the third quarter when many European central
banks announced that they would limit their gold sales over the next five years.
At the same time, central banks said that they would keep their gold leasing
programs in check.
Gold lease rates--the rate at which producers borrow gold--are important.
Lower lease rates increase gold companies' incentive to sell gold forward,
increasing supply and weighing on prices. Higher rates take away the incentive
to sell forward, limiting supply. Higher lease rates and limits on gold sales by
several large central banks sent prices soaring in the third quarter.
Despite these positive factors, gold gave back its gains in the fourth
quarter. Lease rates returned to normal, and some other central banks sold gold.
As a result, the precious metal finished 1999 almost exactly where it began the
year.
GOLD STOCKS
Returns for gold stocks mirrored the price action of gold itself--the
shares experienced some big swings during 1999 but finished the year about where
they began it. For all of 1999, the FT-SE Gold Mines Index was mildly negative,
with a return of -0.66%.
Generally speaking, gold stocks tend to move 2-3% for every 1% change in
the price of the underlying metal. You can see this at work in the last 12
months. When gold soared in April and September, gold shares rallied sharply.
But the shares surrendered those gains, falling in line with gold, particularly
during May and in the fourth quarter.
By region, African gold shares performed best (see the table at right).
Mergers and acquisitions helped these stocks significantly. Large players such
as Gold Fields Limited and Anglogold Limited snapped up smaller, less profitable
mining companies, helping cut costs and promote efficiency. North American and
Australian gold companies, on the other hand, had slightly negative returns for
the year.
[right margin]
"GOLD GOT A BOOST DURING THE THIRD QUARTER WHEN MANY EUROPEAN CENTRAL BANKS
ANNOUNCED THAT THEY WOULD LIMIT THEIR GOLD SALES OVER THE NEXT FIVE YEARS."
GOLD RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1999
GOLD BULLION
SPOT PRICE OF GOLD BULLION 0.14%
GOLD STOCK INDICES
FT-SE GOLD MINES INDEX -0.66%
Africa 17.21%
North America -6.66%
Australia -2.35%
Source: Bloomberg Financial Markets
"RETURNS FOR GOLD STOCKS MIRRORED THE PRICE ACTION OF GOLD ITSELF--THE
SHARES EXPERIENCED SOME BIG SWINGS DURING 1999 BUT FINISHED THE YEAR ABOUT WHERE
THEY BEGAN IT."
www.americancentury.com 3
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
(Continued)
COMMODITIES
Commodity prices rose sharply in 1999, pushing the Goldman Sachs
Commodities Index up more than a third. By comparison, the Commodities Research
Bureau Commodities Index rose about 13% after bottoming out in early 1999. The
reason for the performance disparity is that the Goldman index is more heavily
weighted toward energy, and prices for oil and other energy-related products
soared last year.
For the year, the price of a barrel of crude oil more than doubled. The
world's major oil-producing countries helped spur the increase by cutting back
their output. Supply is so tight that oil inventories hit a two-year low in
December, 1999. While those production cuts limited supply, better global growth
boosted demand.
The world economy rebounded quickly from the Asian economic crisis of 1998,
which helped demand for energy-related products. In addition, a cold snap late
in the year meant sharply higher demand for heating oil.
Better global growth also meant increased demand for basic materials.
Commodities from steel and aluminum to paper and forest products all saw their
prices stabilize or increase last year. Here again, supply for many of these
commodities was tight as many producers limited production after a difficult
'98.
NATURAL RESOURCES STOCKS
Natural resources stocks performed well last year, rebounding along with
commodity prices and global growth after producing negative returns in 1998.
Basic materials stocks--such as papers, metals, and mining companies--generally
outperformed energy shares, which include oil, oil service, and natural gas
companies (see the graph at left).
Basic materials stocks benefited from the economic recovery in many Asian
countries, which tend to be big consumers of basic materials such as steel and
copper. The first half of the year was very good for these shares--Japan
reported stronger-than-expected growth, and many analysts ratcheted up their
global growth projections.
In addition, basic materials shares saw strong demand. Many investors
apparently believed their decline in 1998 was overdone and that these stocks
represented attractive buying opportunities. Within basic materials, metals and
mining company stocks did very well. But the year wasn't an unqualified
success--gold and some other precious metals shares performed relatively poorly.
Energy stocks also performed relatively well last year as crude oil prices
rebounded. Smaller oil exploration and service stocks outperformed the big
integrated oil companies: because the smaller companies are less diversified,
their fortunes tend to be closely tied to changes in the price of oil.
By region, stocks from emerging market countries performed best. Of course,
these shares were coming off a low base after a difficult 1998. Japanese stocks
also did relatively well after years of poor performance.
[left margin]
"BASIC MATERIALS STOCKS BENEFITED FROM THE ECONOMIC RECOVERY IN JAPAN AND
OTHER ASIAN COUNTRIES."
[line graph - data below]
ENERGY & BASIC MATERIALS STOCKS
(PERFORMANCE OF $1.00 FOR THE YEAR ENDED 12/31/99)
Basic Materials Energy
12/31/98 $1.00 $1.00
01/29/99 $0.99 $0.88
02/26/99 $0.99 $0.88
03/31/99 $1.06 $1.01
04/30/99 $1.30 $1.14
05/28/99 $1.12 $1.10
06/30/99 $1.22 $1.12
07/30/99 $1.26 $1.16
08/31/99 $1.28 $1.15
09/30/99 $1.29 $1.12
10/29/99 $1.26 $1.10
11/30/99 $1.25 $1.11
12/31/99 $1.39 $1.06
Source: FactSet
4 1-800-345-2021
Global Gold--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF DECEMBER 31, 1999
INVESTOR CLASS (INCEPTION 8/17/88) ADVISOR CLASS (INCEPTION 5/6/98)
FUND MSCI WORLD GOLD-ORIENTED FUNDS(2) FUND MSCI WORLD
FUND BENCHMARK STOCK INDEX AVERAGE RETURN FUND'S RANKING FUND BENCHMARK STOCK INDEX
========================================================================================================================
6 MONTHS(1) 5.06% 5.60% 15.14% 6.24% -- 4.93% 5.60% 15.14%
1 YEAR -3.18% -1.80% 24.93% 3.63% 28 OUT OF 38 -3.30% -1.80% 24.93%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS -20.75% -19.02% 21.61% -19.55% 18 OUT OF 31 -- -- --
5 YEARS -11.96% -11.55% 19.76% -11.11% 17 OUT OF 25 -- -- --
10 YEARS -6.31% -5.82% 11.42% -5.84% 13 OUT OF 20 -- -- --
LIFE OF FUND -4.26% -3.39%(3) 12.99%(3) -3.72% 13 OUT OF 18 -16.98% -7.67%(4) 21.51%(4)
(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 5/31/98, the date nearest the class's inception for which data are
available.
See pages 29-31 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 12/31/99 MSCI World Stock Index
$29,495 Fund Benchmark $5,490 Fund $5,211
Fund MSCI World
Fund Benchmark Stock Index
DATE VALUE VALUE VALUE
12/31/89 $10,000 $10,000 $10,000
12/31/90 $8,057 $8,116 $8,298
12/31/91 $7,152 $7,293 $9,815
12/31/92 $6,534 $6,698 $9,302
12/31/93 $11,840 $12,186 $11,394
12/31/94 $9,857 $10,139 $11,973
12/31/95 $10,769 $11,070 $14,454
12/31/96 $10,471 $10,336 $16,403
12/31/97 $6,129 $5,999 $18,988
12/31/98 $5,382 $5,590 $23,609
12/31/99 $5,211 $5,490 $29,495
$10,000 investment made 12/31/89
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 (defined on page 30) 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 DECEMBER 31)
Fund Fund Benchmark
DATE RETURN RETURN
12/31/90 -19.43% -18.84%
12/31/91 -11.23% -10.14%
12/31/92 -8.65% -8.16%
12/31/93 81.22% 81.94%
12/31/94 -16.75% -16.80%
12/31/95 9.25% 9.18%
12/31/96 -2.76% -6.63%
12/31/97 -41.47% -41.97%
12/31/98 -12.18% -7.25%
12/31/99 -3.18% -1.80%
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 1999?
The portfolio performed more or less in line with the broader gold market,
finishing the year with negative returns. For the twelve months, Global Gold had
a return of -3.18%*. The fund's custom benchmark--which is roughly two-thirds
North American, 20% African, and 10% Australian gold stocks--returned -1.80% for
the same period. Meanwhile, the 38 gold-oriented funds tracked by Lipper Inc.
had an average return of 3.63%. (See the previous page for additional
performance comparisons.)
SOUNDS LIKE LAST YEAR WAS ANOTHER FRUSTRATING ONE IN THE GOLD MARKET. ARE THERE
SOME POSITIVES YOU CAN POINT TO FOR SHAREHOLDERS?
We think there are some bright spots. For example, gold put together a few
solid rallies last year, which seems to show that there's still a potential
payoff for investing in gold. An example of this is gold's sharp rally in the
third quarter of 1999. Global Gold shot up 28.85% for the three months. That
performance put Global Gold at the top of its Lipper category, which had an
average return of 19.21% for the quarter.
Of course, shareholders should keep in mind that past performance can't
guarantee future results, but we think the numbers show we've done a good job of
positioning the fund to benefit from any rally in gold and gold shares. It's
also worth repeating that the fund is best suited as a diversifier for your
overall portfolio and isn't intended to be used as a complete investment program
by itself.
SO GLOBAL GOLD BEAT THE LIPPER GROUP IN THE THIRD QUARTER, BUT LAGGED SLIGHTLY
FOR THE FULL YEAR. CAN YOU EXPLAIN THAT PERFORMANCE?
First, keep in mind that a fund only has to invest 65% of its assets in
gold or gold shares to make Lipper's gold-oriented funds category. That leaves a
lot of room for these funds to play other precious metals, or even stocks pretty
far afield from gold shares.
On the other hand, we try to give our investors the broadest exposure to
the gold market. In general, we'd consider putting no more than about 5% of
assets in near-gold shares, such as those of platinum and diamond companies.
Because we manage Global Gold as much more of a pure play on the gold market,
the fund tends to underperform its peers when gold lags. But that also means we
tend to do better when the price of gold rises, as it did in the third quarter.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"GOLD PUT TOGETHER A FEW SOLID RALLIES LAST YEAR, WHICH SEEMS TO SHOW THAT
THERE'S STILL A POTENTIAL PAYOFF FOR INVESTING IN GOLD."
PORTFOLIO AT A GLANCE
12/31/99 12/31/98
NO. OF COMPANIES 63 65
PORTFOLIO TURNOVER 53% 68%
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68% 0.69%
Investment terms are defined in the Glossary on page 31.
6 1-800-345-2021
Global Gold--Q&A
--------------------------------------------------------------------------------
(Continued)
CAN YOU TALK A LITTLE BIT ABOUT THE PORTFOLIO'S MODEST POSITION IN NEAR-GOLD
NAMES?
Sure. We kept around 5% of the portfolio in stocks of select platinum and
diamond companies to improve the fund's liquidity. Liquidity refers to how easy
a stock is to buy and sell. It's an important consideration for us, because gold
shares tend to be relatively thinly traded, so transaction costs for moving in
and out of some of these stocks can add up.
Adding a small position in more liquid platinum names helped us reduce
transaction costs while managing volatile asset flows. We should also point out
that 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.
IN THE PAST, YOU'VE MENTIONED THAT IT MADE SENSE TO ADD SOME OF THESE PLATINUM
NAMES BECAUSE THEY WERE BETTER VALUES THAN MANY GOLD STOCKS. HOW DO VALUATIONS
FOR GOLD COMPANIES LOOK NOW?
Gold stocks look like much better values than they did at mid-year.
Historically, gold companies trade at about a 25% premium to their underlying
assets. Though many gold companies currently trade above that premium, we've
still seen considerable improvement over valuations earlier this year. At
mid-year, when the price of gold touched a 20-year low, some of the biggest gold
stocks were trading at two-and-a-half to three times their net asset value.
WHAT'S BEHIND THE IMPROVEMENT IN GOLD COMPANY VALUATIONS?
The most important factor is the rise in gold's price over the last half of
the year. That led to better earnings and a higher value for the gold still in
the ground. Plus, some of these companies reduced their production costs. In
addition, returns for the gold market were slightly negative, meaning we're
paying less for some of these companies. Lower stock prices, better earnings,
and gold trading around $290 an ounce mean these shares are more attractive than
they were six months ago.
YOU MENTIONED IN THE LAST REPORT THAT YOU WERE REDUCING THE WEIGHTING OF SOME OF
THE LARGEST GOLD COMPANIES IN THE FUND. CAN YOU DISCUSS THAT ADJUSTMENT AND HOW
IT AFFECTED PERFORMANCE LAST YEAR?
We've tried to improve the portfolio's diversification by reducing our
exposure to Barrick Gold, which makes up about a quarter of our benchmark index.
We just didn't think it was in our shareholder's best interests to have such a
large weighting in a single stock.
While we were making this change over the last year, Barrick's share price
fell about 10%. So selling this stock and putting the money to work in more
attractively valued mid- and small-cap shares helped performance a little.
WHAT'S THE OUTLOOK FOR SUPPLY AND DEMAND?
The mine supply picture isn't clear. On the one hand, we've seen some
higher-cost mines shut down in the last few years. That would argue for less
supply and higher prices. However, many of those closures were offset by
[right margin]
"GOLD STOCKS LOOK LIKE MUCH BETTER VALUES THAN THEY DID AT MID-YEAR."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
BARRICK GOLD CORP. 9.2% 12.2%
NEWMONT MINING
CORP. 8.6% 7.3%
PLACER DOME INC. 7.0% 8.5%
FRANCO NEVADA
MINING CORP. LTD. 6.6% 5.3%
ANGLOGOLD LIMITED 6.2% 8.0%
GOLD FIELDS LIMITED 6.2% 4.9%
NORMANDY MINING
LIMITED 4.7% 4.2%
NEWCREST MINING
LIMITED 4.2% 2.8%
LIHIR GOLD LIMITED 3.7% 2.9%
HARMONY GOLD
MINING CO. LIMITED 3.3% 1.3%
www.americancentury.com 7
Global Gold--Q&A
--------------------------------------------------------------------------------
(Continued)
openings of some new, lower-cost mines. As a result, we haven't really seen mine
supply drop, as you might expect given gold's price movement. But production
costs for many companies continue to decline, which should help profitability,
even with gold trading at such low levels.
Instead, an abundance of aboveground supply from world central bank sales
and hedging by gold companies put a damper on gold the last couple of years. But
an agreement this year by several leading European central banks to limit sales
and leasing from their gold reserves should help reduce supply and support
prices.
WHAT ABOUT DEMAND?
Better global economic growth means much better demand for gold,
particularly from Asia. The latest information available from the World Gold
Council shows that demand for gold hit a record high in the third quarter. For
the first nine months of 1999, demand for the precious metal was almost a third
higher than for the same period in 1998. As a result, we think supply and demand
factors in the gold market are generally positive.
WHAT DO YOU SEE FOR GOLD SHARES?
The biggest positive for gold stocks is that valuations look good now. That
would lead you to believe that the shares are well positioned to benefit from
any potential increase in the price of gold.
Another factor we're watching closely is the likelihood that a healthier
global economy will cause an uptick in inflation. Admittedly, though, the
Federal Reserve and other world central banks have done a very good job keeping
inflation in check in recent years.
GIVEN THAT OUTLOOK, HOW WILL YOU POSITION THE FUND?
Our goal is to give shareholders an investment diversifier that moves in
line with gold. To do that, we plan to keep working to position the fund to
benefit from any rally in gold or gold shares. However, we're likely to keep a
small portion of assets, say 5% or so, in more liquid near-gold names to try to
increase the fund's liquidity.
[left margin]
"WE THINK SUPPLY AND DEMAND FACTORS IN THE GOLD MARKET ARE GENERALLY
POSITIVE."
[pie charts - data below]
GEOGRAPHIC COMPOSITION
AS OF DECEMBER 31, 1999
Canada 40%
South Africa 25%
Australia 18%
U.S. 14%
Ghana 2%
Papua-New Guinea 1%
AS OF JUNE 30, 1999
Canada 44%
South Africa 20%
Australia 16%
U.S. 16%
Ghana 3%
Papua-New Guinea 1%
8 1-800-345-2021
Global Gold--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period. The
securities are grouped by asset class (such as common stocks, corporate bonds,
temporary cash investments, as applicable), and some asset classes are further
broken down by industry or country.
NOTE: For securities denominated in foreign currencies, the market value is
translated into U.S. dollars based on exchange rates as of the last day of the
reporting period.
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.5%
AUSTRALIA -- 18.3%
600,000 Aurora Gold Limited(1) $ 135,792
2,466,569 Delta Gold NL 3,762,011
1,098,275 Goldfields Limited 785,310
399,500 Homestake Mining Company 3,210,382
10,185,084 Lihir Gold Limited(1) 7,416,371
2,491,062 Newcrest Mining Limited(1) 8,497,511
13,283,279 Normandy Mining Limited 9,410,938
93,465 Normandy Mt Leyshon Limited 128,144
47,506 Normandy NFM Limited(1) 114,060
375,000 Ranger Minerals NL(1) 541,200
1,000,000 Resolute Limited 255,840
798,642 Sons of Gwalia Limited 2,679,515
------------
36,937,074
------------
CANADA -- 40.3%
108,800 Agnico-Eagle Mines Ltd.(1) 798,726
634,200 Agnico-Eagle Mines Ltd. 4,677,225
100,000 America Mineral Fields Inc.(1) 64,409
329,500 Banro Resource Corporation(1) 91,280
1,050,066 Barrick Gold Corp. 18,573,042
1,603,500 Battle Mountain Gold Co.(1) 3,307,219
692,700 Bema Gold Corp.(1) 431,768
239,400 Breakwater Resources, Ltd.(1) 661,546
691,300 Cambior, Inc. 871,222
24,600 Dia Met Minerals Ltd. Cl B(1) 391,855
608,200 Echo Bay Mines Ltd.(1) 722,238
105,000 Francisco Gold Corp.(1) 425,410
873,240 Franco Nevada Mining Corp. Ltd. 13,395,714
793,800 Glamis Gold Ltd.(1) 1,429,379
865,000 Goldcorp, Inc. Cl A(1) 5,062,158
100,000 Golden Star Resources Ltd. ADR(1) 93,750
260,000 Greenstone Resources Ltd.(1)(2) 18,907
550,000 IAMGOLD, International African
Mining Gold Corp. 1,237,966
175,000 Ivanhoe Mines Ltd.(1) 124,835
2,711,600 Kinross Gold Corp.(1) 5,032,920
371,380 Kinross Gold Corp. ADR(1) 696,338
117,500 Manhattan Minerals Corp.(1) 427,228
1,006,500 Meridian Gold Inc.(1) 6,844,638
566,300 Miramar Mining(1) 274,595
1,315,995 Placer Dome Inc. 14,146,946
170,000 Rio Narcea Gold Mines, Ltd.(1) 259,021
293,713 Romarco Minerals, Inc.(1) 199,348
1,165,000 TVX Gold, Inc.(1) 912,013
Shares Value
--------------------------------------------------------------------------------
100,000 Vengold Inc.(1) $ 24,240
100,000 Viceroy Resource Corp.(1) 58,176
------------
81,254,112
------------
GHANA -- 1.4%
1,087,499 Ashanti Goldfields Company
Ltd. GDR 2,854,685
------------
PAPUA-NEW GUINEA -- 0.5%
687,388 Niugini Mining Limited(1) 952,357
------------
SOUTH AFRICA -- 25.4%
55,100 Anglo American Platinum
Corp. Limited 1,674,037
243,601 Anglogold Limited 12,530,313
116,500 Anglogold Limited ADR 2,992,594
105,052 Anglogold Limited CUFS(1) 5,271,930
2,042,892 Avgold Ltd.(1) 1,410,608
48,300 De Beers 1,404,663
200,000 Durban Roodepoort Deep
Limited(1) 336,312
2,581,434 Gold Fields Limited 12,477,280
1,044,100 Harmony Gold Mining Co. Limited 6,700,560
35,900 Impala Platinum Holdings Limited 1,452,331
1,438,900 JCI Gold Limited(1) 1,390,976
608,300 Randfontein Estates Limited 849,940
742,600 Western Areas Limited(1) 2,768,915
------------
51,260,459
------------
UNITED STATES -- 13.6%
150,000 Apex Silver Mines Limited(1) 1,790,625
418,100 Crown Resources, Inc.(1) 790,470
717,576 Homestake Mining Co. 5,606,062
711,675 Newmont Mining Corp. 17,436,038
60,000 Stillwater Mining Co. (1) 1,912,500
------------
27,535,695
------------
TOTAL COMMON STOCKS 200,794,382
------------
(Cost $246,550,876)
TEMPORARY CASH INVESTMENTS -- 0.5%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 3.30%, dated 12/31/99,
due 1/3/00 (Delivery value $1,100,303) 1,100,000
------------
(Cost $1,100,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $201,894,382
============
(Cost $247,650,876)
See Notes to Financial Statements www.americancentury.com 9
Global Gold--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
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 year ended December 31, 1999.)
10 1-800-345-2021 See Notes to Financial Statements
Global Natural Resources--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF DECEMBER 31, 1999
INVESTOR CLASS (INCEPTION 9/15/94) ADVISOR CLASS (INCEPTION 4/26/99)
GLOBAL GLOBAL
NATURAL FUND DJ WORLD NATURAL RESOURCES FUNDS(2) NATURAL FUND DJ WORLD
RESOURCES BENCHMARK STOCK INDEX AVERAGE RETURN FUND'S RANKING RESOURCES BENCHMARK STOCK INDEX
========================================================================================================================
6 MONTHS(1) 7.36% 5.67% 14.72% 2.69% -- 7.22% 5.67% 14.72%
1 YEAR 26.50% 29.31% 24.46% 30.68% 30 OUT OF 54 -- -- --
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 6.70% 9.55% 18.98% 0.49% 8 OUT OF 34 -- -- --
5 YEARS 9.91% 11.90% 16.98% 8.99% 15 OUT OF 25 -- -- --
LIFE OF FUND 8.61% 10.68%(3) 15.70%(3) 7.71% 12 OUT OF 22 11.44%(1) 4.47%(1)(4) 15.89%(1)(4)
(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 29-31 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 12/31/99 DJ World Stock Index
$21,499 Fund Benchmark $17,034 Global Natural Resources $15,707
Global Natural Fund DJ World
Resources Benchmark Stock Index
DATE VALUE VALUE VALUE
9/30/94 $10,000 $10,000 $10,000
12/31/94 $9,789 $9,711 $9,815
3/31/95 $10,227 $10,157 $10,052
6/30/95 $10,471 $10,409 $10,527
9/30/95 $10,729 $10,673 $11,022
12/31/95 $11,200 $11,173 $11,496
3/31/96 $11,872 $11,818 $11,888
6/30/96 $11,997 $12,086 $12,152
9/30/96 $12,114 $12,283 $12,267
12/31/96 $12,929 $12,956 $12,763
3/31/97 $12,951 $13,200 $12,733
6/30/97 $14,004 $14,480 $14,565
9/30/97 $15,014 $15,308 $14,960
12/31/97 $13,252 $13,561 $14,370
3/31/98 $13,968 $14,614 $16,293
6/30/98 $13,412 $14,136 $16,384
9/30/98 $12,327 $12,944 $14,315
12/31/98 $12,416 $13,174 $17,273
3/31/99 $13,062 $14,157 $17,757
6/30/99 $14,630 $16,121 $18,740
9/30/99 $15,079 $16,559 $18,352
12/31/99 $15,707 $17,034 $21,499
$10,000 investment made 9/30/94(3)
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 Dow
Jones World Stock Index and fund benchmark (defined on page 30) 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 DECEMBER 31)
Global Natural Fund
Resources Benchmark
DATE RETURN RETURN
12/31/94* -2.11% -2.89%
12/31/95 14.41% 15.06%
12/31/96 15.45% 15.95%
12/31/97 2.50% 4.67%
12/31/98 -6.30% -2.85%
12/31/99 26.50% 29.31%
* From 9/30/94 (the date nearest the class's inception for which index data are
available) to 12/31/94.
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 1999?
The fund had a healthy 26.50%* return in 1999. That's the portfolio's
biggest annual gain since its inception, and it reflects the improvements in
global growth and commodity prices we saw last year. However, the portfolio
lagged its benchmark and other natural resources funds. For the year, the 54
natural resources funds tracked by Lipper Inc. had an average return of 30.68%.
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 29.31%. (See the
previous page for additional performance comparisons.)
CAN YOU EXPLAIN THE PORTFOLIO'S PERFORMANCE RELATIVE TO THE LIPPER GROUP AND ITS
BENCHMARK FOR THE YEAR?
All the underperformance came in the first half of the year, when we were
underweight some of the highest-flying emerging market and basic materials
shares. That positioning actually helped us rank number one among the 52 funds
in the Lipper group in 1998, when these stocks generally performed poorly. Both
these sectors rebounded early in 1999, sooner than we expected. But we made some
changes around mid-year to the fund's positioning, which helped Global Natural
Resources make up some ground against both the peers and the benchmark in the
last half of the year.
SO THE FUND ACTUALLY OUTPERFORMED THE LIPPER GROUP AND THE BENCHMARK OVER THE
LAST SIX MONTHS. WHY THE IMPROVEMENT?
There are several reasons. First, we made some adjustments to the way we
construct the fund's benchmark. Because we manage the fund against that index,
those changes reduced the portfolio's concentration in the largest oil
companies. Second, we added some basic materials shares, moving closer to a
neutral weighting relative to our benchmark. Third, we bought a few more
emerging market stocks, which performed relatively well in recent months.
LET'S START WITH THE CHANGES TO THE BENCHMARK. WHAT DO THEY MEAN FOR
SHAREHOLDERS?
First, let's keep in mind that we try to deliver a pure play on global
commodity-based industries for shareholders who want a long-term portfolio
diversifier. 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 two-thirds energy and a third basic
materials shares. None of that has changed significantly.
What's new in 1999 is that we've limited any single company to no more than
5% of the benchmark. We felt that change was necessary to better diversify the
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
[pie charts - data below]
INDUSTRY WEIGHTINGS
AS OF DECEMBER 31, 1999
Energy 61%
Basic Materials 36%
Temporary Cash Investments 3%
AS OF JUNE 30, 1999
Energy 72%
Basic Materials 26%
Temporary Cash Investments 2%
PORTFOLIO AT A GLANCE
12/31/99 12/31/98
NO. OF COMPANIES 79 72
PORTFOLIO TURNOVER 87% 76%
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68% 0.69%
Investment terms are defined in the Glossary on page 31.
12 1-800-345-2021
Global Natural Resources--Q&A
--------------------------------------------------------------------------------
(Continued)
portfolio. That's because Exxon and Mobil finalized their merger in the fourth
quarter, creating a company that would be about 20% of the index. Two other
companies, BP Amoco and Shell, make up another 20% or so. Without the changes,
we're looking at three companies making up more than 40% of the index. We just
didn't think it would be in our shareholders' best interests to have the fund so
heavily concentrated in just a few names. But we should point out that we still
have the ability to take relatively big positions in the largest energy stocks
if we feel the need to do so.
YOU ALSO MENTIONED THAT YOU ADDED SOME BASIC MATERIALS SHARES. CARE TO
ELABORATE?
Sure. We brought our weighting in basic materials stocks closer to neutral
relative to the index--that is, to about 35% of the fund. We did that by adding
nonferrous metals and paper and forest product companies. Paper and pulp
companies did well last year because tight inventories and better demand sent
prices soaring. That translated into better earnings, and higher share prices,
for these companies. It was a similar story for the nonferrous metal names we
bought--lower supply and higher demand meant better profits and earnings
estimates.
AND CAN YOU GIVE SOME EXAMPLES OF EMERGING MARKET SHARES YOU LIKED?
A good example of an emerging market stock we liked is Aracruz, a Brazilian
paper company. The company did well last year because of some cost-cutting
measures and the fact that it's tied closely to changes in paper and pulp
prices. This stock performed well overall, though its share price fluctuated
quite a bit, particularly over the last six months of the year. We bought the
stock on the dips, which helped returns. Other emerging market basic material
names we added in the second half were Grupo Mexico and Pohang Iron, both of
which performed relatively well.
WHAT WERE SOME STOCKS THAT WEIGHED ON PERFORMANCE?
A good example of a stock that hurt performance relative to our index was
Inco, a Canadian nickel and copper producer. This stock performed very well last
year, up about 50% in March and April, but we were underweight it relative to
the benchmark. That limited our returns relative to the index. It was a case
where our timing was off--we thought it would be a good buy, but not until later
in 2000. By then, it had already seen a big run-up in price.
WHAT'S THE OUTLOOK FOR THE WORLD ECONOMY?
We're positive on global economic growth and commodity prices going
forward--we keep seeing global growth projections revised higher. Global
growth's important because it determines the level of commodity demand. Last
year was a good example of what improving growth and firmer commodity prices can
mean for fund returns.
Twelve months ago, analysts expected global growth in the neighborhood of
1.5% for 2000. By the end of 1999, those estimates had been revised up to around
3% (see the economic growth forecast graph on page 14). However, Japan is
somewhat of a question mark. Though growth has improved there, we'd still like
to see them tackle fundamental banking reforms.
[right margin]
"WE'RE POSITIVE ON GLOBAL ECONOMIC GROWTH AND COMMODITY PRICES GOING
FORWARD--WE KEEP SEEING GLOBAL GROWTH PROJECTIONS REVISED HIGHER."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
EXXON MOBIL CORP.(1) 6.9% 5.1%(2)
BP AMOCO PLC(3) 5.0% 5.0%(4)
CHEVRON CORP. 3.7% 4.9%
TOTAL SA CL B 3.5% 2.9%
ENI S.P.A. 3.1% 3.5%
ROYAL DUTCH
PETROLEUM CO. 3.0% 3.6%
ALCOA INC. 2.4% 2.1%
SHELL TRANSPORT &
TRADING CO. PLC 2.3% 2.7%
ATLANTIC RICHFIELD CO. 2.2% 1.9%
ENRON CORP. 2.1% 1.8%
(1) Formerly Exxon Corp.
(2) Represents Exxon Corp. shares owned by the fund.
(3) Formerly British Petroleum Co. plc.
(4) Represents British Petroleum Co. plc shares owned by the fund.
www.americancentury.com 13
Global Natural Resources--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT'S YOUR OUTLOOK FOR NATURAL RESOURCES-RELATED STOCKS?
Given our positive outlook for global growth and commodities prices, it's
not surprising that we think natural resources stocks could do well going
forward. We also like these stocks because they're generally more
value-oriented, cyclical companies. Cyclical shares tend to do better later in
the economic cycle when growth is strong. We think value shares would tend to
hold up better if world central banks decided to raise interest rates
aggressively to slow economic growth and head off inflation. That's because
these shares seem to have less room to fall than some of the more high-flying
growth stocks.
But that outlook comes with some caveats. First, we should caution
shareholders that we'd likely have to see momentum investors and other market
players rotate into this sector to get a big rally. Keep in mind, it was
interest from momentum players that helped generate big gains for natural
resources stocks in April and May. Second, oil prices are flirting with $30 a
barrel. Though OPEC has managed to limit supply so far, prices that high tempt
member countries to increase supply, which could cause oil prices to fall (and
hurt the prices of energy stocks).
HOW WILL YOU POSITION GLOBAL NATURAL RESOURCES GOING FORWARD?
In terms of broad sector allocations, we're likely to continue to run the
fund close to its neutral weighting of around 65% energy and 35% basic materials
shares. Of course, we'd likely make some adjustments to those weightings if the
economic or risk/reward outlook changes. Within basic materials, we currently
like nonferrous metals companies, including zinc, aluminum, and platinum
companies. As a result, we're likely to overweight these shares going forward.
Within energy, we're likely to modestly overweight the big integrated oil
producers because we think oil's price is precariously high. If oil's price
comes down, even a little, the share prices of these larger, more diversified
companies would likely hold up better than the small oil service stocks.
[left margin]
[pie charts - data below]
GEOGRAPHIC COMPOSITION
AS OF DECEMBER 31, 1999
U.S. (includes temporary
cash investments) 42%
Europe 34%
Americas (excluding U.S.) 11%
Asia/Pacific 9%
South Africa 4%
AS OF JUNE 30, 1999
U.S. (includes temporary
cash investments) 49%
Europe 32%
Americas (excluding U.S.) 9%
Asia/Pacific 8%
South Africa 2%
[bar graph - data below]
ECONOMIC GROWTH FORECASTS
Old 1999 Old 2000 New 1999 New 2000
Forecast Forecast Forecast Forecast
USA 3.9% 2.7% 4.0% 3.0%
Japan 0.5% -0.7% 0.8% 1.0%
Euro Area 1.8% 2.8% 2.1% 2.8%
Emerging Economies 2.2% 4.3% 3.0% 4.6%
Global 2.3% 2.4% 2.6% 2.9%
Source: J.P. Morgan
14 1-800-345-2021
Global Natural Resources--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period. The
securities are grouped by asset class (such as common stocks, corporate bonds,
temporary cash investments, as applicable), and some asset classes are further
broken down by industry or country.
NOTE: For securities denominated in foreign currencies, the market value is
translated into U.S. dollars based on exchange rates as of the last day of the
reporting period.
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.6%
AUSTRALIA -- 3.1%
Basic Materials
200,000 M.I.M. Holdings Limited $ 205,984
75,000 WMC Limited 413,280
Energy
305,000 Oil Search Limited(1) 400,160
80,000 Woodside Petroleum Limited 590,400
-----------
1,609,824
-----------
AUSTRIA -- 0.8%
Basic Materials
9,000 Boehler-Uddeholm AG 414,817
-----------
BRAZIL -- 1.4%
Basic Materials
28,000 Aracruz Celulose S.A. ADR 735,000
-----------
CANADA -- 7.5%
Basic Materials
25,000 Barrick Gold Corp. 442,188
28,300 Inco Ltd.(1) 665,050
50,000 Meridian Gold Inc.(1) 339,359
40,000 Tembec Inc. Cl A(1) 446,014
Energy
40,000 Anderson Exploration Ltd.(1) 477,872
40,000 Petro-Canada 566,521
15,000 Suncor Energy, Inc. 627,467
8,000 Talisman Energy, Inc.(1) 204,446
25,000 Tesco Corp.(1) 159,291
-----------
3,928,208
-----------
FINLAND -- 1.1%
Basic Materials
15,000 UPM-Kymmene Oyj 603,810
-----------
FRANCE -- 4.2%
Basic Materials
5,000 Pechiney SA Cl A 357,003
Energy
14,000 Total SA Cl B 1,866,779
-----------
2,223,782
-----------
INDONESIA -- 0.9%
Basic Materials
400,000 PT Indah Kiat Pulp & Paper
Corporation Tbk(1) 157,424
Shares Value
--------------------------------------------------------------------------------
Energy
40,000 Gulf Indonesia Resources Ltd.(1) $ 325,000
-----------
482,424
-----------
ITALY -- 3.1%
Energy
300,000 ENI S.p.A. 1,648,401
-----------
JAPAN -- 4.4%
Basic Materials
67,000 Nippon Paper Industries Co. 369,198
295,000 Nippon Steel Corporation 690,075
70,000 Oji Paper Co. Ltd. 421,357
110,000 Sumitomo Metal Industries(1) 82,901
Energy
36,000 General Sekiyu K.K. 80,689
70,000 Nippon Oil Company 308,310
100,000 OSAKA GAS CO., LTD. 240,775
30,000 Showa Shell Sekiyu 132,426
-----------
2,325,731
-----------
MEXICO -- 2.0%
Basic Materials
100,000 Grupo Mexico S.A. Series B 495,515
40,000 Tubos de Acero de Mexico,
SA ADR 542,500
-----------
1,038,015
-----------
NETHERLANDS -- 3.8%
Basic Materials
25,000 Ispat International NV New
York Shares 403,125
Energy
26,000 Royal Dutch Petroleum Co. 1,592,146
-----------
1,995,271
-----------
NORWAY -- 1.3%
Energy
38,000 Petroleum Geo-Services(1) 678,275
-----------
PORTUGAL -- 0.7%
Basic Materials
55,000 Portucel Industrial-Empresa
Produtora de Celulose, SA 378,035
-----------
SOUTH AFRICA -- 3.7%
Basic Materials
26,000 Anglo American Platinum Corp.
Limited 789,927
5,000 Anglogold Limited 257,189
See Notes to Financial Statements www.americancentury.com 15
Global Natural Resources--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
13,000 De Beers $ 378,067
55,000 Sappi Limited 543,298
-----------
1,968,481
-----------
SOUTH KOREA -- 0.6%
Basic Materials
9,000 Pohang Iron & Steel Co.,
Ltd. ADR 315,000
-----------
SPAIN -- 2.7%
Basic Materials
21,270 Asturiana de Zinc, SA(1) 273,985
Energy
48,500 Respol SA 1,123,560
-----------
1,397,545
-----------
SWEDEN -- 1.8%
Basic Materials
18,000 Granges AB 375,750
19,000 Svenska Cellulosa AB Cl B 563,095
-----------
938,845
-----------
THAILAND -- 0.8%
Energy
65,000 PTT Exploration and Production
Public Company Ltd.(1) 400,372
-----------
UNITED KINGDOM -- 14.1%
Basic Materials
12,000 Anglo American plc 774,005
125,000 Billiton Plc 737,577
140,000 Corus Group plc 364,134
42,416 Rio Tinto plc 1,024,420
Energy
106,666 BG plc 689,276
260,186 BP Amoco Plc 2,616,557
145,000 Shell Transport & Trading
Co. PLC 1,205,203
-----------
7,411,172
-----------
UNITED STATES -- 38.6%
Basic Materials
15,200 Alcoa Inc. 1,261,600
7,000 Champion International Corp. 433,562
7,000 Georgia-Pacific Corp. 355,250
Shares Value
--------------------------------------------------------------------------------
13,500 Georgia-Pacific Corp. (Timber
Group) $ 332,438
12,000 International Paper Co. 677,250
10,000 Nucor Corp. 548,125
5,000 Rayonier, Inc. 241,562
7,300 Weyerhaeuser Co. 524,231
Energy
10,000 Anadarko Petroleum Corp. 341,250
13,500 Atlantic Richfield Co. 1,167,750
13,000 Barrett Resources Corp.(1) 382,688
12,000 Burlington Resources Inc. 396,750
22,500 Chevron Corp. 1,949,062
10,800 Coastal Corp. (The) 382,725
18,000 Diamond Offshore Drilling, Inc. 550,125
12,000 El Paso Energy Corporation 465,750
25,400 Enron Corp. 1,127,125
45,183 Exxon Mobil Corp. 3,640,055
18,000 Halliburton Co. 724,500
7,200 Phillips Petroleum Co. 338,400
19,200 Schlumberger Ltd. 1,080,000
19,500 Texaco Inc. 1,059,094
50,000 Titan Exploration, Inc.(1) 265,625
20,000 Tom Brown, Inc.(1) 268,750
21,724 Transocean Sedco Forex, Inc. 731,827
15,000 Unocal Corp. 503,440
19,200 Williams Companies, Inc. (The) 586,800
-----------
20,335,734
-----------
TOTAL COMMON STOCKS 50,828,742
-----------
(Cost $40,057,649)
TEMPORARY CASH INVESTMENTS -- 3.4%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 3.30%, dated 12/31/99,
due 1/3/00 (Delivery value $1,800,495) 1,800,000
-----------
(Cost $1,800,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $52,628,742
===========
(Cost $41,857,649)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
16 1-800-345-2021 See Notes to Financial Statements
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
GLOBAL NATURAL
DECEMBER 31, 1999 GLOBAL GOLD RESOURCES
ASSETS
Investment securities, at value
(identified cost of $245,891,298, and
$41,857,649, respectively) (Note 3) ........ $201,875,475 $52,628,742
Investment securities -- affiliated, at
value (identified cost of $1,759,578) ...... 18,907 --
Cash ......................................... 32,550 483,023
Dividends and interest receivable ............ 9,680 53,540
--------------- --------------
201,936,612 53,165,305
--------------- --------------
LIABILITIES
Payable for investments purchased ............ 9,782 --
Accrued management fees (Note 2) ............. 114,496 29,235
Distribution and service fees
payable (Note 2) ........................... 9 17
Payable for directors' fees and expenses ..... 312 80
Accrued expenses and other liabilities ....... 830 87
--------------- --------------
125,429 29,419
--------------- --------------
Net Assets ................................... $201,811,183 $53,135,886
=============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ...... $411,277,298 $42,281,961
Accumulated undistributed net
investment income (loss) ................... 42,608 (30,648)
Accumulated undistributed net
realized gain (loss) on
investments and foreign
currency transactions ...................... (163,752,116) 113,698
Net unrealized appreciation
(depreciation) on investments
and translation
of assets and liabilities in
foreign currencies (Note 3) ................ (45,756,607) 10,770,875
--------------- --------------
$201,811,183 $53,135,886
=============== ==============
Investor Class, $10.00 Par Value
Net assets ................................... $201,789,903 $53,095,444
Shares outstanding ........................... 38,133,399 4,064,047
Net asset value per share .................... $5.29 $13.06
Advisor Class, $10.00 Par Value
Net assets ................................... $21,280 $40,442
Shares outstanding ........................... 4,023 3,096
Net asset value per share .................... $5.29 $13.06
See Notes to Financial Statements www.americancentury.com 17
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
GLOBAL NATURAL
YEAR ENDED DECEMBER 31, 1999 GLOBAL GOLD RESOURCES
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes
withheld of $140,857 and $60,212,
respectively) ............................ $3,680,729 $940,981
Interest ................................... 69,900 50,322
---------------- --------------
3,750,629 991,303
---------------- --------------
Expenses (Note 2):
Management fees ............................ 1,469,940 331,041
Distribution fees -- Advisor Class ......... 31 41
Service fees -- Advisor Class .............. 31 41
Directors' fees and expenses ............... 4,530 914
---------------- --------------
1,474,532 332,037
---------------- --------------
Net investment income ...................... 2,276,097 659,266
---------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
(NOTE 3)
Net realized gain (loss) on:
Investments (includes $(3,512,704)
from affiliates for Global Gold) ......... (49,511,717) 2,465,473
Foreign currency transactions .............. (133,278) (21,488)
---------------- --------------
(49,644,995) 2,443,985
---------------- --------------
Change in net unrealized appreciation
(depreciation) on:
Investments ................................ 39,009,203 7,581,890
Translation of assets and liabilities
in foreign currencies ................... (226) (724)
---------------- --------------
39,008,977 7,581,166
---------------- --------------
Net realized and unrealized gain (loss)
on investments and foreign currency ...... (10,636,018) 10,025,151
---------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ................ $(8,359,921) $10,684,417
================ ==============
18 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
GLOBAL GOLD GLOBAL NATURAL RESOURCES
Increase (Decrease) in Net Assets 1999 1998 1999 1998
OPERATIONS
Net investment income .............. $2,276,097 $1,932,357 $659,266 $737,713
Net realized gain (loss) on
investments and foreign
currency transactions ............ (49,644,995) (77,995,127) 2,443,985 (1,360,231)
Change in net unrealized
appreciation (depreciation)
on investments and translation
of assets and liabilities in
foreign currencies ............... 39,008,977 47,507,318 7,581,166 (1,956,185)
------------- ------------- ------------- -------------
Net increase (decrease) in
net assets resulting
from operations .................. (8,359,921) (28,555,452) 10,684,417 (2,578,703)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ................... (2,103,052) (1,999,679) (669,251) (688,139)
Advisor Class .................... (120) (144) (139) --
In excess of net investment income:
Investor Class ................... -- -- (12,408) --
Advisor Class .................... -- -- (9) --
From net realized gains on
investment transactions:
Investor Class ................... -- -- (552,979) --
Advisor Class .................... -- -- (423) --
------------- ------------- ------------- -------------
Decrease in net assets
from distributions ............... (2,103,172) (1,999,823) (1,235,209) (688,139)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease) in
net assets from capital
share transactions ............... (16,514,093) 13,328,332 3,927,898 (3,530,585)
------------- ------------- ------------- -------------
Net increase (decrease)
in net assets .................... (26,977,186) (17,226,943) 13,377,106 (6,797,427)
NET ASSETS
Beginning of period ................ 228,788,369 246,015,312 39,758,780 46,556,207
------------- ------------- ------------- -------------
End of period ...................... $201,811,183 $228,788,369 $53,135,886 $39,758,780
============= ============= ============= =============
Accumulated undistributed
net investment income (loss) ..... $42,608 $(16,686) $(30,648) $10,124
============= ============= ============= =============
See Notes to Financial Statements www.americancentury.com 19
Notes to Financial Statements
--------------------------------------------------------------------------------
DECEMBER 31, 1999
--------------------------------------------------------------------------------
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 (the 1940 Act) 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 following significant
accounting policies are in accordance with generally accepted accounting
principles; these policies may require the use of estimates by fund management.
MULTIPLE CLASS -- 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.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no last sales price is available.
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)
DECEMBER 31, 1999
At December 31, 1999, Global Gold had accumulated net realized capital loss
carryovers for federal income tax purposes of $132,062,715 (expiring 2005
through 2007) which may be used to offset future taxable gains.
For the two month period ended December 31, 1999, Global Gold and Global
Natural Resources incurred net capital and currency losses of $4,834,031 and
$30,649, respectively. The funds have elected to treat such losses as having
been incurred in the following fiscal year.
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 1940 Act (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 year ended December 31, 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 1940 Act.
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 year
ended December 31, 1999, were $62 for Global Gold and $82 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 the year
ended December 31, 1999, for Global Gold and Global Natural Resources totaled
$114,307,142 and $42,962,614, respectively. Sales of securities, excluding
short-term investments, for Global Gold and Global Natural Resources totaled
$129,163,981 and $41,294,309, respectively.
As of December 31, 1999, accumulated net unrealized appreciation
(depreciation) for Global Gold and Global Natural Resources was $(72,621,881)
and $10,429,877, respectively, based on the aggregate cost of investments for
federal income tax purposes of $274,516,263 and $42,198,865, respectively.
Accumulated net unrealized appreciation or depreciation consisted of unrealized
appreciation of $16,470,796 and $12,271,308 for Global Gold and Global Natural
Resources and unrealized depreciation of $89,092,677 and $1,841,431,
respectively.
www.americancentury.com 21
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
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:
GLOBAL GOLD GLOBAL NATURAL RESOURCES
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Designated Shares ........................ 1,000,000,000 1,000,000,000
============= =============
Year ended December 31, 1999
Sold ..................................... 65,207,249 $355,115,412 7,585,812 $91,638,180
Issued in reinvestment of distributions .. 391,198 1,970,944 92,400 1,167,313
Redeemed ................................. (68,903,309) (373,606,613) (7,370,149) (88,918,348)
------------- --------------- ------------- -------------
Net increase (decrease) .................. (3,304,862) $(16,520,257) 308,063 $3,887,145
============= =============== ============= =============
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
============= =============
Year ended December 31, 1999(1)
Sold ..................................... 6,590 $36,505 6,731 $87,896
Issued in reinvestment of distributions .. 23 120 52 662
Redeemed ................................. (5,657) (30,461) (3,687) (47,805)
------------- --------------- ------------- -------------
Net increase ............................. 956 $6,164 3,096 $40,753
============= =============== ============= =============
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
============= ===============
(1) April 26, 1999 (commencement of sale) through December 31, 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)
DECEMBER 31, 1999
--------------------------------------------------------------------------------
5. AFFILIATED COMPANY TRANSACTIONS
A summary of transactions for each issuer which is or was an affiliate at or
during the year ended December 31, 1999, follows:
SHARE BALANCE PURCHASE SALES REALIZED DECEMBER 31, 1999
FUND/ISSUER 12/31/98 COST COST LOSS INCOME SHARE BALANCE MARKET VALUE
GLOBAL GOLD
Greenstone Resources Ltd. 510,000 -- $3,669,629 $(3,512,704) -- 260,000 $18,907
======= ========== ============ ====== ===========
--------------------------------------------------------------------------------
6. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
year ended December 31, 1999.
www.americancentury.com 23
Global Gold--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value, Beginning of Period .. $5.52 $6.34 $11.33 $12.37 $11.33
--------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ............... 0.06(1) 0.05(1) 0.09 0.06 0.02
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions ............. (0.24) (0.82) (4.79) (0.40) 1.03
--------- ---------- ---------- ---------- ---------
Total From Investment Operations .... (0.18) (0.77) (4.70) (0.34) 1.05
--------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income .......... (0.05) (0.05) (0.09) (0.06) (0.01)
From Net Realized Gains on
Investment Transactions ............. -- -- (0.20) (0.64) --
--------- ---------- ---------- ---------- ---------
Total Distributions ................. (0.05) (0.05) (0.29) (0.70) (0.01)
--------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period ........ $5.29 $5.52 $6.34 $11.33 $12.37
========= ========== ========== ========== =========
Total Return(2) ..................... (3.18)% (12.18)% (41.47)% (2.76)% 9.25%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 0.68% 0.69% 0.67% 0.62% 0.61%
Ratio of Net Investment Income
to Average Net Assets ............... 1.04% 0.75% 0.92% 0.46% 0.17%
Portfolio Turnover Rate ............... 53% 68% 28% 45% 28%
Net Assets, End of Period
(in thousands) ...................... $201,790 $228,771 $246,015 $432,587 $537,693
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
24 1-800-345-2021 See Notes to Financial Statements
Global Gold--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ..... $5.52 $7.31
----------- ----------
Income From Investment Operations
Net Investment Income(2) ............... 0.03 0.01
Net Realized and Unrealized Loss
on Investment Transactions ............. (0.21) (1.76)
----------- ----------
Total From Investment Operations ....... (0.18) (1.75)
----------- ----------
Distributions
From Net Investment Income ............. (0.05) (0.04)
----------- ----------
Net Asset Value, End of Period ........... $5.29 $5.52
=========== ==========
Total Return(3) ........................ (3.30)% (24.00)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 0.93% 0.94%(4)
Ratio of Net Investment Income
to Average Net Assets .................. 0.79% 0.20%(4)
Portfolio Turnover Rate .................. 53% 68%
Net Assets, End of Period ................ $21,280 $16,938
(1) May 6, 1998 (commencement of sale) through December 31, 1998.
(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 25
Global Natural Resources--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $10.59 $11.48 $11.91 $10.66 $9.61
---------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ................. 0.16(1) 0.19 0.22 0.17 0.16
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions ............... 2.62 (0.90) 0.08 1.46 1.22
---------- ---------- ---------- ---------- ---------
Total From Investment Operations ...... 2.78 (0.71) 0.30 1.63 1.38
---------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ............ (0.17) (0.18) (0.23) (0.17) (0.16)
In Excess of Net Investment Income .... --(2) -- -- -- --
From Net Realized Gains on
Investment Transactions ............... (0.14) -- (0.50) (0.21) (0.17)
---------- ---------- ---------- ---------- ---------
Total Distributions ................... (0.31) (0.18) (0.73) (0.38) (0.33)
---------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period .......... $13.06 $10.59 $11.48 $11.91 $10.66
========== ========== ========== ========== =========
Total Return(3) ....................... 26.50% (6.30)% 2.50% 15.45% 14.41%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.68% 0.69% 0.73%(4) 0.76% 0.76%
Ratio of Net Investment Income
to Average Net Assets ................. 1.34% 1.70% 1.55%(4) 1.78% 2.02%
Portfolio Turnover Rate ................. 87% 76% 41% 53% 39%
Net Assets, End of Period
(in thousands) ........................ $53,095 $39,749 $46,556 $66,021 $30,157
(1) Computed using average shares outstanding throughout the period.
(2) Per-share amount is less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(4) 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%.
26 1-800-345-2021 See Notes to Financial Statements
Global Natural Resources--Financial Highlights
--------------------------------------------------------------------------------
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(2) ....................... 0.07
Net Realized and Unrealized Gain
on Investment Transactions ..................... 1.29
----------
Total From Investment Operations ............... 1.36
---------
Distributions
From Net Investment Income ..................... (0.15)
In Excess of Net Investment Income ............. --(3)
From Net Realized Gains
on Investment Transactions ..................... (0.14)
----------
Total Distributions ............................ (0.29)
----------
Net Asset Value, End of Period ................... $13.06
==========
Total Return(4) ................................ 11.44%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .......................... 0.93%(5)
Ratio of Net Investment Income
to Average Net Assets .......................... 0.85%(5)
Portfolio Turnover Rate .......................... 87%
Net Assets, End of Period ........................ $40,442
(1) April 26, 1999 (commencement of sale) through December 31, 1999.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount is less than $0.005.
(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 27
Report of Independent Acountants
--------------------------------------------------------------------------------
To the Directors of the American Century Quantitative Equity Funds and
Shareholders of the Global Gold Fund and Global Natural Resources Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Global Gold Fund and the Global
Natural Resources Fund (two of the six funds comprising the American Century
Quantitative Equity Funds, hereafter referred to as the "Funds") at
December 31, 1999, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States. The financial highlights for each of the two
years in the period ended December 31, 1996 were audited by other auditors,
whose report dated February 7, 1997, expressed an unqualified opinion on those
statements. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 3, 2000
28 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)
account] 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 29
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. Since January 1998, 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.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
BILL MARTIN
JOE STERLING
30 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
wouldhave 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 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 -- the stocks of the
largest publicly traded companies that issue shares. These tend to be the stocks
that make up the Dow Jones Industrial Average and the S&P 500.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- the stocks of mid-sized
publicly traded companies. These tend to be the stocks that make up the S&P
MidCap 400 and the Russell 2500.
* SMALL-CAPITALIZATION (SMALL-CAP) STOCKS -- the stocks of smaller publicly
traded companies. These tend to be the stocks that make up the S&P SmallCap
600 and the Russell 2000.
FUND CLASSIFICATIONS
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.
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.
* 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 Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
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]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[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
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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
Funds Distributor, Inc.
0002 is the distributor for American Century funds
SH-ANN-19623 (c)2000 American Century Services Corporation
[front cover]
DECEMBER 31, 1999
AMERICAN CENTURY(reg.sm)
ANNUAL REPORT
[graphic of runners]
Utilities
[american century logo (reg.sm)]
American
Century
[inside front cover]
Receive Your Annual Reports Online
--------------------------------------------------------------------------------
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Questions about how to choose the Electronic Communication program? Simply
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[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.
Now there are better choices for you and your employees
--------------------------------------------------------------------------------
You always want to do what's best for both your business and your employees,
but you may not know where to turn for answers and assistance. American Century
can help with our personalized attention that caters to business retirement
planning. With the NEW American Century 401(k), your retirement plan can grow as
your business grows.
In addition to this plan, you can choose from five other business retirement
plans that also give you the affordability, variety, and assistance you may
need. Your benefits range from tax-deferred investing and tax-deductible
contributions, to retaining good employees. Give us a call today at
1-800-345-3533, ext. 4001 and let our knowledgeable team of Business Retirement
Specialists help you set up the right business retirement plan for you.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
Equity investors were well rewarded in 1999 as the stock market put
together another year of spectacular returns. Among utilities stocks,
deregulation in recent years has transformed the sector from a collection of
relatively stable, dividend-paying companies into the home of some of the
highest-flying, growth-oriented investments.
And although equity investors have benefited from exceptional stock returns
over the past several years, we wish to stress that these results are
unprecedented and not indefinitely sustainable.
It is important to remember that market corrections are an inevitable, even
necessary, part of the investment process. For that reason, it is prudent to
maintain reasonable expectations for your fund's future performance.
Turning to corporate matters, we are constantly looking for ways to lower
the costs of trading securities and generate better returns for shareholders. To
that end, we have made strategic investments in several companies that allow
buyers and sellers of securities to connect directly, efficiently, and
anonymously. Many of our equity trades are executed over alternative trading
networks. Savings in this area directly affect the performance of your funds.
We're also pleased to announce that American Century has been named by
Fortune magazine as one of its "100 Best Companies to Work For." In
addition, American Century's investor account statement is the first fund
company statement to win the Communications Seal from DALBAR, Inc., an
independent financial services research firm.
We do not take acknowledgements such as these lightly-- they enable us to
recruit talented and dedicated people, from service representatives to
investment professionals. This "intellectual capital" is our most
valuable resource and an essential one in our effort to provide you with
excellent investment management and service.
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
Report of Independent
Accountants ......................................................... 19
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 20
Background Information
Investment Philosophy
and Policies ..................................................... 21
Comparative Indices ................................................. 21
Lipper Rankings ..................................................... 21
Investment Team
Leaders .......................................................... 21
Glossary ............................................................... 22
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* The U.S. stock market had another spectacular year in 1999, capping one of
the best decades in its history.
* All of the major stock indexes posted double-digit returns for the year
despite a modest decline during the summer.
* Technology stocks outperformed the rest of the market by a wide margin. Led
by the technology sector, small- and mid-cap stocks rebounded after a dismal
1998.
* Utilities stocks posted solid returns, but lagged the broader market.
* Stock performance within the utilities sector varied widely--electrics had
negative returns in 1999, while telecommunications stocks performed very
well.
* Natural gas shares finished the year with positive returns, but it was an
uneven ride--after performing well in the first half of the year, higher
interest rates limited returns in the second half.
MANAGEMENT Q&A
* The portfolio's return for the year reflected the mixed performance of the
utilities sector as a whole, producing positive returns but lagging the
broader market and Lipper group average.
* The primary reason the fund underperformed the Lipper group is that we had
only a small position in natural gas stocks. Rather than chase performance,
we try to deliver a pure play on the entire utilities sector. That approach
has served shareholders well over the long haul--the fund's longer-term
returns are all significantly better than average (see page 5).
* The portfolio's largest weighting continues to be in telecommunications
stocks. Several factors helped performance in this sector, including mergers
and acquisitions, technological advancements, and competition spurred by
deregulation.
* The outlook for utilities shares in the coming year is clouded by
competition and consolidation as companies adapt to the new, deregulated
business environment. As a result, we expect continued volatility in this
sector.
[left margin]
UTILITIES(1)
(BULIX)
TOTAL RETURNS: AS OF 12/31/99
6 Months 4.33%(2)
1 Year 11.46%
30-DAY SEC YIELD: 1.97%
INCEPTION DATE: 3/1/93
NET ASSETS: $324.5 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on page 5.
Investment terms are defined in the Glossary on pages 22-23.
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
A SPECTACULAR DECADE
The U.S. stock market continued to roll in 1999, capping one of the best
decades in its history. Despite some stumbles along the way, the major stock
indices posted double-digit returns for the year (see the table at right).
How phenomenal were equity returns in the 1990s? The S&P 500 index
soared by 433% during the decade--one of the best 10-year periods in the index's
history--and achieved two unprecedented feats: nine consecutive years of
positive returns, and five straight years with returns of 20% or more.
SUMMER HIATUS
Stocks did not enjoy a smooth ride to their ultimate destination (see the
graph at right). Concerns about inflation, rising interest rates, and
historically high stock valuations led to a modest downturn in the third
quarter, punctuated by bouts of volatility.
However, stocks roared back in the fourth quarter as investors regained
confidence in the health of the U.S. economy. Most of the year's gains in the
major stock indexes occurred in the final quarter.
TECHNOLOGY RULED
In 1998, the mantra in the U.S. stock market was "bigger is
better"--investors favored the shares of large, well-known companies that
they could buy or sell at a moment's notice. In 1999, the refrain became
"technology is the future"--investors embraced the potential of
electronic commerce and bid up the stock prices of "dot-coms" and
other Internet- and computer-related companies. As a result, the technology
sector outperformed the rest of the market by a wide margin.
The popularity of technology stocks extended to companies of all sizes,
which helped boost the performance of some small- and mid-cap stocks that had
been ignored in 1998.
SHUNNING TRADITIONAL VALUES
Value stocks--those considered to be attractively valued relative to their
earnings growth--were left out in the cold. Most value stocks tend to be
traditional bricks-and-mortar businesses, and they simply couldn't compete with
the excitement generated by technology shares.
But many of these stocks appear to be remarkable bargains when compared
with the high valuations of most technology and growth-oriented stocks. It may
still take a while, however, for investors to recognize and appreciate this
value.
[right margin]
"INVESTORS EMBRACED THE POTENTIAL OF ELECTRONIC COMMERCE AND BID UP THE
STOCK PRICES OF 'DOT-COMS' AND OTHER INTERNET- AND COMPUTER-RELATED
COMPANIES."
BROAD MARKET RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1999
S&P 500 21.04%
S&P MIDCAP 400 14.72%
S&P SMALLCAP 600 12.41%
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 YEAR ENDED DECEMBER 31, 1999
Value on 12/31/99
S&P 500 $1.21
S&P MidCap 400 $1.15
S&P SmallCap 600 $1.12
S&P 500 S&P MidCap 400 S&P SmallCap 600
12/31/98 $1.00 $1.00 $1.00
1/31/99 $1.04 $0.96 $0.99
2/28/99 $1.01 $0.91 $0.90
3/31/99 $1.05 $0.94 $0.91
4/30/99 $1.09 $1.01 $0.97
5/31/99 $1.06 $1.01 $0.99
6/30/99 $1.12 $1.07 $1.05
7/31/99 $1.09 $1.05 $1.04
8/31/99 $1.08 $1.01 $1.00
9/30/99 $1.05 $0.98 $1.00
10/31/99 $1.12 $1.03 $1.00
11/30/99 $1.14 $1.08 $1.04
12/31/99 $1.21 $1.15 $1.12
Source: Lipper Inc.
These indices are defined on page 21.
www.americancentury.com 3
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
(Continued)
UTILITIES MARKET OVERVIEW
As a group, utilities stocks produced positive returns in 1999, but lagged
the broader market, as represented by the S&P 500. But utilities' collective
gains mask widely divergent performances from sector to sector.
Telecommunications and natural gas stocks posted solid gains for the year, while
electric utilities suffered sizable losses.
For all the variation in returns, the entire industry was marked by
unprecedented levels of merger and acquisition activity. In one of the more
dramatic examples, British wireless giant Vodafone AirTouch mounted a more than
$100 billion hostile takeover bid for German telecommunications firm Mannesmann.
The natural gas and electric utility sectors also had their share of
headline-grabbing deals.
TELECOM CATCHES FIRE
After making steady progress in the first nine months of 1999,
telecommunications stocks caught fire in the final quarter of the year.
Investors displayed an insatiable appetite for these leading-edge companies. For
the quarter, the Nasdaq Telecom Index was up more than 60%.
In addition, mobile communications company returns exploded in response to
rapidly expanding global demand for wireless communications. In one of the
year's most stunning developments, the stock price of Qualcomm, an emerging
leader in wireless phone technology, increased nearly 30-fold.
NATURAL GAS SURGES, RETREATS
Natural gas stocks were on a roller coaster in 1999, although they ended
the ride in fairly good shape. These stocks performed very well in the first
half of the year, when the sector benefited from better global economic growth,
merger and acquisition activity, and a rotation into cyclical and value-oriented
shares. The latter half of the year saw these stocks languish, as the winter got
off to a warmer-than-normal start.
Rising interest rates also limited returns. The relatively high dividends
paid by natural gas stocks give them a bond-like quality. And like bonds, these
dividend-paying stocks performed relatively poorly as rates rose in the second
half of the year.
ELECTRICS: 1999'S "HAVE-NOTS"
Electric utility stocks had their worst year in recent memory, with the
Standard & Poor's Electric Utility index falling almost 20%. Rising interest
rates were a big reason for the poor performance of electric utility stocks, but
there were a host of other reasons as well.
Investors were worried about how companies would fare as industry
competition intensified. While deregulation means the sector is full of
potential, investors chose to focus instead on the uncertainty surrounding how
these companies will manage all the cash at their disposal after recovering
"stranded costs" for older power plants and equipment.
[left margin]
"TELECOMMUNICATIONS STOCKS CAUGHT FIRE IN THE FINAL QUARTER OF THE
YEAR."
UTILITIES MARKET RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1999
FUND BENCHMARK 12.36%
S&P Telecommunications
(long distance) Index 16.81%
S&P Telephone Index 5.46%
S&P Electric Index -19.43%
S&P Natural Gas Index 19.07%
Source: Bloomberg Financial Markets
These indices are defined on page 21.
4 1-800-345-2021
Utilities--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF DECEMBER 31, 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
======================================================================================================================
6 MONTHS(1) 4.33% 7.69% 2.39% 7.75% -- 4.21% 7.69% 2.39%
1 YEAR 11.46% 21.04% 12.36% 15.82% 55 OUT OF 100 11.20% 21.04% 12.36%
======================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 24.49% 27.56% 26.29% 19.07% 20 OUT OF 86 -- -- --
5 YEARS 22.36% 28.56% 23.98% 18.39% 10 OUT OF 65 -- -- --
LIFE OF FUND 15.21% 21.70% 16.37% 12.95%(3) 7 OUT OF 30(3) 19.89% 20.46%(4) 21.24%(4)
(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 20-22 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 12/31/99
S&P 500 $38,320
Fund Benchmark $28,176
Utilities $26,316
Utilities S&P 500 Fund Benchmark
DATE VALUE VALUE VALUE
3/1/93 $10,000 $10,000 $10,000
3/31/93 $10,223 $10,211 $10,258
6/30/93 $10,589 $10,261 $10,455
9/30/93 $11,262 $10,526 $11,078
12/31/93 $10,659 $10,770 $10,614
3/31/94 $9,731 $10,362 $9,699
6/30/94 $9,639 $10,405 $9,562
9/30/94 $9,801 $10,914 $9,812
12/31/94 $9,590 $10,912 $9,618
3/31/95 $10,161 $11,975 $10,071
6/30/95 $10,862 $13,118 $10,795
9/30/95 $11,897 $14,161 $11,822
12/31/95 $13,014 $15,014 $12,877
3/31/96 $12,699 $15,820 $12,637
6/30/96 $13,135 $16,530 $13,237
9/30/96 $12,506 $17,041 $12,839
12/31/96 $13,642 $18,461 $13,988
3/31/97 $13,353 $18,955 $13,740
6/30/97 $14,870 $22,267 $15,193
9/30/97 $15,697 $23,932 $16,091
12/31/97 $18,529 $24,619 $18,814
3/31/98 $20,750 $28,054 $21,274
6/30/98 $20,111 $28,979 $20,978
9/30/98 $20,592 $26,096 $21,585
12/31/98 $23,611 $31,654 $25,077
3/31/99 $22,501 $33,234 $24,475
6/30/99 $25,226 $35,580 $27,520
9/30/99 $24,204 $33,357 $26,419
12/31/99 $26,316 $38,320 $28,176
$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. Since 1996, the fund's
benchmark has been a custom utilities index, described on page 21. 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 DECEMBER 31)
Utilities Fund Benchmark
DATE RETURN RETURN
12/31/93* 6.60% 6.14%
12/31/94 -10.03% -9.39%
12/31/95 35.70% 33.89%
12/31/96 4.82% 8.63%
12/31/97 35.82% 34.50%
12/31/98 27.43% 33.29%
12/31/99 11.46% 12.36%
* From 3/1/93 (the fund's inception date) to 12/31/93.
www.americancentury.com 5
Utilities--Q&A
--------------------------------------------------------------------------------
[photos of Joe Sterling and John Schniedwind]
Based on interviews with Joe Sterling and John Schniedwind, portfolio
managers on the Utilities fund investment team.
HOW DID THE UTILITIES FUND PERFORM IN 1999?
The portfolio posted a total return of 11.46%* for the year, tracking the
12.36% return of its custom benchmark. The fund lagged the 15.82% average total
return of the 100 utilities funds tracked by Lipper Inc. last year. However,
Utilities' longer-term performance relative to the Lipper group remained solid.
For the three- and five-year periods ended December 31, 1999, the fund ranked in
the top quarter of its Lipper category. (See the previous page for additional
performance comparisons.)
WHY DID UTILITIES LAG THE LIPPER GROUP IN 1999?
We think the main reason for the fund's underperformance was our relatively
small weighting in natural gas stocks, particularly during the first half of the
year. These shares made up only a little more than 2% of fund investments in
1999.
Natural gas stocks performed very well early in the year, when oil and gas
prices began to firm. Furthermore, in response to low energy prices in 1998,
natural gas producers made cuts to their work forces and operating costs. The
improved pricing environment and cost savings helped natural gas companies enjoy
strong earnings during the first six months of the year.
WHY KEEP SUCH A SMALL PORTION OF THE FUND IN NATURAL GAS STOCKS?
Keep in mind that we manage the portfolio against a custom index of 165
utilities stocks made up of a little more than 55% telecommunications companies,
almost 25% electric utilities, about 5% gas utilities, and the remaining 15% or
so utilities-related service and equipment companies.
Natural gas is a relatively small part of the overall utilities industry,
so it's typically not heavily represented in our benchmark or the fund. And
rather than chase performance by jumping to the hottest utilities sector, we
think it's in the best long-term interests of our shareholders to remain
diversified across an array of utility companies.
SO YOU MANAGE THE FUND RELATIVE TO AN INDEX. WHAT DOES THAT MEAN FOR
SHAREHOLDERS? FOR PERFORMANCE?
We think that our disciplined, benchmark-based approach is key to the
fund's solid long-term returns. Not only has our commitment to that core
investment strategy worked well over the long haul, but we also think it helped
the fund's performance in the second half of 1999. That's when natural gas
stocks languished because interest rates moved higher and investors sought out
technology and telecommunications companies for faster expected growth
prospects.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"RATHER THAN CHASE PERFORMANCE BY JUMPING TO THE HOTTEST UTILITIES SECTOR,
WE THINK IT'S IN THE BEST LONG-TERM INTERESTS OF OUR SHAREHOLDERS TO REMAIN
DIVERSIFIED ACROSS AN ARRAY OF UTILITIES COMPANIES."
PORTFOLIO AT A GLANCE
12/31/99 12/31/98
NO. OF COMPANIES 77 80
30-DAY SEC YIELD 1.97% 2.44%
MEDIAN P/E RATIO 23.5 17.4
PORTFOLIO TURNOVER 50% 98%
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.68% 0.69%
Investment terms are defined in the Glossary on pages 22-23.
6 1-800-345-2021
Utilities--Q&A
--------------------------------------------------------------------------------
(Continued)
SPEAKING OF TELECOMMUNICATIONS COMPANIES, THEY POSTED ATTRACTIVE RETURNS IN
1999. WHAT POWERED THOSE GAINS?
The unifying theme for telecommunications stocks was change--change spurred
by technological advances and industry deregulation. In terms of technology, the
explosion of the Internet has caused data communications to supersede voice
communications. Phone networks were originally designed to handle voice--not
data--traffic, so new entrants supplying state-of-the-art fiber networks have
flourished. In addition, new technologies allow phone calls over the Internet,
giving rise to an entirely new breed of telecommunications company.
Against this backdrop, deregulation paved the way for companies who want to
offer customers a package of services including local and long-distance phone
service, online services, and high-speed Internet connections.
Mergers and acquisitions also helped returns in this sector. Consolidation
reached a fever pitch as rising stock prices gave companies valuable currency to
fund their acquisitions. Among the mega-deals in the telecommunications sector,
MCI WorldCom agreed to buy Sprint, and Vodafone AirTouch launched a bid for
Mannesmann.
WHICH OF THE UTILITIES FUND'S TELECOMMUNICATIONS HOLDINGS CONTRIBUTED MOST TO
ITS 1999 PERFORMANCE AND WHY?
Some of the biggest positive contributors to performance included MCI
WorldCom and Vodafone AirTouch. Both of these stocks were buoyed by excitement
over their acquisition plans. Another strong performer was BCE, the parent
company of Bell Canada, which was boosted by the planned "spin off" of
its network equipment subsidiary, Nortel Networks. Sprint PCS, the nation's
second-largest wireless phone company, posted very strong gains by attracting
more new customers than expected. Long-distance provider Sprint also performed
well, successfully competing for market share. Investors also were enthusiastic
about the company's new nationwide Wireless Web data service, one of the leading
wireless Internet applications.
CAN YOU NAME SOME TELECOMMUNICATIONS STOCKS THAT DIDN'T PERFORM AS WELL LAST
YEAR?
One example was AT&T, which had lackluster returns. Investors shied
away because of concern about AT&T's ability to digest recent acquisition
TCI and its pending purchase of MediaOne. In addition, AT&T faces stiff
competition from some of the regional Bell operating companies once they, too,
enter the long-distance market.
BellSouth also lost ground, primarily because investors negatively viewed
its failure to keep pace with other regional Bell operating companies in the
urge to merge, acquire, or converge with other utility companies.
ELECTRIC UTILITIES, WHICH MADE UP ABOUT A QUARTER OF THE FUND, HIT A ROUGH PATCH
DURING 1999. CAN YOU ELABORATE ON THAT?
There were a number of reasons why electric utilities stock returns were
quite dim. Chief among the problems plaguing the dividend-oriented electric
utilities sector was rising interest rates. In addition, these stocks made their
reputation as value-oriented, defensive investments. Those attributes appealed
to a diminishing group of investors last year. Finally, there were concerns
about how electric companies would fare once competition intensified.
[right margin]
"THE UNIFYING THEME FOR TELECOMMUNICATIONS STOCKS WAS CHANGE--CHANGE
SPURRED BY TECHNOLOGICAL ADVANCES AND INDUSTRY DEREGULATION."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
BCE INC. 5.3% 3.0%
VODAFONE AIRTOUCH
PLC ADR 5.0% 3.0%
AT&T CORP. 4.9% 4.6%
MCI WORLDCOM, INC. 4.9% 4.9%
GTE CORP. 4.7% 5.9%
SBC COMMUNICATIONS
INC. 4.7% 5.3%
BELL ATLANTIC CORP. 4.7% 5.5%
SPRINT CORP. 4.5% 3.3%
BELLSOUTH CORP. 4.5% 4.8%
U S WEST, INC. 4.0% 3.4%
www.americancentury.com 7
Utilities--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT FACTORS WILL SHAPE UTILITIES STOCKS' PERFORMANCE IN 2000?
We believe "change" will continue to be the watchword for
utilities in the coming year. Uncertainty surrounding deregulation and industry
consolidation cloud the outlook, but it seems likely we could be in for a period
of unusual volatility until competition shakes out the winners from the losers.
While we see real opportunity in these stocks, the potential rewards are
balanced by considerable risks. Chief among them is the risk that companies will
fail to execute their business plans and grow profitably. Those challenges are
foreign to many utilities companies, whose biggest problem in the past was
working with government regulators to determine what their profit margin would
be.
WHAT DO YOU SEE FOR THE ECONOMY AND INTEREST RATES?
In our view, the interest rate environment will likely become more
favorable as the year wears on. Although we believe we'll see more rate hikes
early in the year, we don't think the Federal Reserve will have to take drastic
or prolonged action to slow the economy and thwart inflation. That said, we
don't believe the economy will slow enough to materially damage the global
demand for telecom services, electricity, or natural gas.
WITH ALL THESE CHANGES AND CHALLENGES IN MIND, HOW DO YOU PLAN TO MANAGE
AMERICAN CENTURY UTILITIES?
It's a steady-at-the-helm approach. We're committed to giving shareholders
exposure to both the growth potential and current income that utilities shares
provide. To do that, we'll continue to track our benchmark closely in terms of
asset allocation among telecommunications, electric, and natural gas stocks.
This approach has helped the fund to solid long-term returns. From a strategic
standpoint, we'll look for companies that offer a good combination of attractive
valuation and good earnings growth potential over the long term. We also plan to
adhere to our policy of remaining fully invested in the utilities sector.
[left margin]
"WHILE WE SEE REAL OPPORTUNITY IN THESE STOCKS, THE POTENTIAL REWARDS ARE
BALANCED BY CONSIDERABLE RISKS."
INDUSTRY BREAKDOWN
% OF FUND INVESTMENTS
AS OF AS OF
12/31/99 6/30/99
TELEPHONE 56.7% 57.4%
ELECTRICAL UTILITIES 27.7% 29.8%
WIRELESS
COMMUNICATIONS 5.1% 2.4%
GAS & WATER UTILITIES 3.7% 0.8%
NATURAL GAS 2.2% 2.0%
OTHER 4.6% 7.6%
8 1-800-345-2021
Utilities--Schedule of Investments
--------------------------------------------------------------------------------
This schedule lists all investments owned by the fund, as well as each
security's market value, as of the last day of the reporting period. The
securities are grouped by asset class (such as common stocks, corporate bonds,
temporary cash investments, as applicable), and some asset classes are further
broken down by industry or country.
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.5%
ELECTRICAL EQUIPMENT -- 0.8%
17,000 Level 3 Communications, Inc.(1) $ 1,390,812
8,000 Motorola, Inc. 1,178,000
------------
2,568,812
------------
ELECTRICAL UTILITIES -- 27.7%
35,000 AES Corp. (The)(1) 2,616,250
35,000 Calpine Corp.(1) 2,240,000
82,400 Central & South West Corp. 1,648,000
32,000 CMS Energy Corp. 998,000
55,850 Conectiv, Inc. 938,978
61,500 Consolidated Edison, Inc. 2,121,750
75,000 Constellation Energy Group 2,175,000
91,300 Dominion Resources, Inc. (Va.) 3,583,525
50,000 DTE Energy Company 1,568,750
135,000 Duke Energy Corp. 6,766,875
174,700 Edison International 4,574,956
78,200 El Paso Energy Corporation 3,035,138
15,600 Empresa Nacional de Electricidad
S.A. (Chile) ADR 221,325
39,000 Energy East Corp. 811,688
140,000 Entergy Corp. 3,605,000
58,100 FIRSTENERGY CORP. 1,318,144
75,600 FPL Group, Inc. 3,236,625
38,000 GPU Inc. 1,137,625
45,500 Hawaiian Electric Industries, Inc. 1,313,812
50,000 Kansas City Power & Light
Co. 1,103,125
100,600 LG&E Energy Corp. 1,754,212
60,000 MDU Resources Group, Inc. 1,200,000
155,200 Minnesota Power & Light Co. 2,628,700
80,000 Montana Power Co. 2,885,000
51,300 New Century Energies, Inc. 1,558,238
105,000 Northeast Utilities 2,159,062
127,500 Northern States Power Co. (Minn.) 2,486,250
38,021 NSTAR 1,539,850
60,000 PECO Energy Co. 2,085,000
100,000 PG&E Corp. 2,050,000
50,000 Public Service Co. of New Mexico 812,500
47,300 Puget Sound Energy Inc. 916,438
135,200 Reliant Energy, Inc. 3,092,700
124,600 Sempra Energy 2,164,925
260,500 Southern Co. 6,121,750
145,000 Texas Utilities Co. 5,156,562
42,700 UGI Corp. 872,681
Shares Value
--------------------------------------------------------------------------------
72,500 Unicom Corp. $ 2,428,750
95,500 Utilicorp United Inc. 1,856,281
48,500 Western Resources, Inc. 824,500
------------
89,607,965
------------
GAS & WATER UTILITIES -- 3.7%
230,000 Enron Corp. 10,206,250
78,300 Keyspan Energy Corp. 1,815,581
------------
12,021,831
------------
MEDIA -- 0.6%
40,000 RCN Corp.(1) 1,938,750
------------
NATURAL GAS -- 2.2%
40,000 Columbia Energy Group 2,530,000
31,600 Consolidated Natural Gas Co. 2,052,025
46,600 Energen Corp. 841,712
39,800 Kinder Morgan, Inc. 803,462
110,500 TransCanada Pipelines Ltd. 966,875
------------
7,194,074
------------
OIL REFINING -- 2.7%
74,200 Coastal Corp. (The) 2,629,462
71,000 Dynegy Inc. 1,726,188
137,600 Williams Companies, Inc. (The) 4,205,400
------------
8,561,050
------------
TELEPHONE -- 56.7%
315,050 AT&T Corp. 15,988,788
188,600 BCE Inc. 17,009,366
245,000 Bell Atlantic Corp. 15,082,812
310,000 BellSouth Corp. 14,511,875
78,900 BroadWing Inc. 2,909,438
15,000 Cable & Wireless plc ADR 794,062
56,700 Century Telephone Enterprises,
Inc. 2,686,162
63,500 Global Crossing Holdings Ltd.(1) 3,173,016
125,000 GST Telecommunications, Inc.(1) 1,136,719
218,000 GTE Corp. 15,382,625
297,450 MCI WorldCom, Inc.(1) 15,774,145
230,000 Qwest Communications
International Inc. 9,882,812
310,520 SBC Communications Inc. 15,137,850
218,000 Sprint Corp. 14,674,125
3,200 Telecom Corporation of New
Zealand Ltd. ADR 123,200
90,000 Telefonos de Mexico,
S.A. Cl L ADR 10,125,000
181,200 U S WEST, Inc. 13,046,400
330,000 Vodafone AirTouch PLC ADR 16,335,000
------------
183,773,395
------------
See Notes to Financial Statements www.americancentury.com 9
Utilities--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
Shares Value
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 5.1%
90,700 ALLTEL Corp. $ 7,499,756
12,000 Nextel Communications, Inc.(1) 1,237,125
12,000 QUALCOMM Inc.(1) 2,113,125
20,450 Sprint PCS(1) 2,096,125
15,100 VoiceStream Wireless Corp.(1) 2,145,616
22,300 Western Wireless Corp. Cl A(1) 1,487,131
------------
16,578,878
------------
TOTAL COMMON STOCKS 322,244,755
------------
(Cost $239,720,007)
TEMPORARY CASH INVESTMENTS -- 0.5%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 3.30%, dated 12/31/99,
due 1/3/00 (Delivery value $1,700,467) $ 1,700,000
------------
(Cost $1,700,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $323,944,755
============
(Cost $241,420,007)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
10 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's ASSETS (such as securities, cash, and
other receivables) and LIABILITIES (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's NET
ASSETS. For each class of shares, the net assets divided by shares outstanding
is the share price, or NET ASSET VALUE PER SHARE. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
DECEMBER 31, 1999
ASSETS
Investment securities, at
value
(identified cost of $241,420,007)
(Note 3) ........................................ $323,944,755
Cash .............................................. 20,070
Dividends, interest and other receivables ......... 701,514
--------------
324,666,339
--------------
LIABILITIES
Accrued management fees (Note 2) .................. 183,055
Distribution fees payable (Note 2) ................ 1,151
Service fees payable (Note 2) ..................... 1,151
Payable for directors' fees and expenses .......... 384
Accrued expenses and other liabilities ............ 357
--------------
186,098
--------------
Net Assets ........................................ $324,480,241
==============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) ........... $241,858,522
Accumulated undistributed net realized
gain on investment transactions ................. 96,907
Net unrealized appreciation on
investments (Note 3) ............................ 82,524,812
--------------
.................................................. $324,480,241
==============
Investor Class, $10.00 Par Value
Net assets ........................................ $319,092,010
Shares outstanding ................................ 19,386,365
Net asset value per share ......................... $16.46
Advisor Class, $10.00 Par Value
Net assets ........................................ $5,388,231
Shares outstanding ................................ 327,403
Net asset value per share ......................... $16.46
See Notes to Financial Statements www.americancentury.com 11
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of dividend and interest income, fees
and expenses, and investment gains or losses.
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME
Income:
Dividends (net of foreign tax
withheld of $67,162) ............................ $8,404,739
Interest .......................................... 93,999
-------------
8,498,738
-------------
Expenses (Note 2):
Management fees ................................... 2,119,958
Distribution fees -- Advisor Class ................ 7,307
Service fees -- Advisor Class ..................... 7,307
Directors' fees and expenses ...................... 6,489
-------------
2,141,061
-------------
Net investment income ............................. 6,357,677
-------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments .................. 17,099,349
Change in net unrealized
appreciation on investments ..................... 10,228,171
-------------
Net realized and unrealized
gain on investments ............................. 27,327,520
-------------
Net Increase in Net Assets
Resulting from Operations ....................... $33,685,197
=============
12 1-800-345-2021 See Notes to Financial Statements
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows 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 (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Increase in Net Assets 1999 1998
OPERATIONS
Net investment income ..................... $6,357,677 $5,857,584
Net realized gain on
investment transactions ................. 17,099,349 25,812,319
Change in net unrealized
appreciation on investments ............. 10,228,171 29,664,921
--------------- --------------
Net increase in net assets
resulting from operations ............... 33,685,197 61,334,824
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class .......................... (6,541,545) (5,858,812)
Advisor Class ........................... (62,845) (418)
In excess of net investment income:
Investor Class .......................... (38,868) --
Advisor Class ........................... (661) --
From net realized gains on
investment transactions:
Investor Class .......................... (17,256,040) (28,052,659)
Advisor Class ........................... (268,696) (6,429)
--------------- --------------
Decrease in net assets
from distributions ...................... (24,168,655) (33,918,318)
--------------- --------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets
from capital share transactions ......... 7,111,530 70,473,943
--------------- --------------
Net increase in net assets ................ 16,628,072 97,890,449
NET ASSETS
Beginning of period ....................... 307,852,169 209,961,720
--------------- --------------
End of period ............................. $324,480,241 $307,852,169
=============== ==============
Undistributed net
investment income ....................... -- $246,713
=============== ==============
See Notes to Financial Statements www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
DECEMBER 31, 1999
--------------------------------------------------------------------------------
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 (the 1940 Act) as an
open-end management investment company. Utilities Fund (the fund) is one of the
six funds issued by the corporation. The fund is diversified under the 1940 Act.
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 following significant accounting policies are in
accordance with generally accepted accounting principles; these policies may
require the use of estimates by fund management.
MULTIPLE CLASS -- 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.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or at the mean
of the latest bid and asked prices where no 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.
For the two month period ended December 31, 1999, the fund incurred net
capital losses of $287,150. The fund has elected to treat such losses as having
been incurred in the following fiscal year.
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.
14 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
--------------------------------------------------------------------------------
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 1940 Act (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 year ended December 31, 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 1940 Act.
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 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 year ended December 31, 1999 were $14,614.
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, for the
year ended December 31, 1999 totaled $155,905,160 and $165,386,921,
respectively.
On December 31, 1999, accumulated net unrealized appreciation on investments
was $81,548,348, based on the aggregate cost of investments for federal income
tax purposes of $242,396,407, which consisted of unrealized appreciation of
$99,945,569 and unrealized depreciation of $18,397,221.
www.americancentury.com 15
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
DECEMBER 31, 1999
--------------------------------------------------------------------------------
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
=============
Year ended December 31, 1999
Sold ...................................... 12,764,332 $209,639,231
Issued in reinvestment of distributions ... 1,354,578 21,766,013
Redeemed .................................. (14,018,738) (229,526,287)
------------- ---------------
Net increase .............................. 100,172 $1,878,957
============= ===============
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
=============
Year ended December 31, 1999
Sold ...................................... 354,612 $5,758,463
Issued in reinvestment of distributions ... 16,012 258,552
Redeemed .................................. (47,955) (784,442)
------------- ---------------
Net increase .............................. 322,669 $5,232,573
============= ===============
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.
--------------------------------------------------------------------------------
5. BANK LOANS
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
year ended December 31, 1999.
16 1-800-345-2021
Utilities--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including TOTAL RETURN, INCOME RATIO (net
income as a percentage of average net assets), EXPENSE RATIO (operating expenses
as a percentage of average net assets), and PORTFOLIO TURNOVER (a gauge of the
fund's trading activity).
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31
Investor Class
1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
Beginning of Period ................... $15.96 $14.24 $11.51 $11.44 $8.79
---------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ................. 0.33(1) 0.37 0.43 0.45 0.42
Net Realized and Unrealized
Gain on Investment Transactions ....... 1.45 3.39 3.57 0.08 2.65
---------- ---------- ---------- ---------- ---------
Total From Investment Operations ...... 1.78 3.76 4.00 0.53 3.07
---------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ............ (0.35) (0.38) (0.42) (0.46) (0.42)
In Excess of Net Investment Income .... --(2) -- -- -- --
From Net Realized Gains on
Investment Transactions ............... (0.93) (1.66) (0.85) -- --
---------- ---------- ---------- ---------- ---------
Total Distributions ................... (1.28) (2.04) (1.27) (0.46) (0.42)
---------- ---------- ---------- ---------- ---------
Net Asset Value, End of Period .......... $16.46 $15.96 $14.24 $11.51 $11.44
========== ========== ========== ========== =========
Total Return(3) ....................... 11.46% 27.43% 35.82% 4.82% 35.70%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.68% 0.69% 0.72% 0.71% 0.75%
Ratio of Net Investment Income
to Average Net Assets ................. 2.02% 2.51% 3.56% 3.88% 4.31%
Portfolio Turnover Rate ................. 50% 98% 92% 93% 68%
Net Assets, End of Period
(in thousands) ........................ $319,092 $307,777 $209,962 $145,134 $218,794
(1) Computed using average shares outstanding throughout the period.
(2) Per-share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements www.americancentury.com 17
Utilities--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .............. $15.96 $14.90
---------- ---------
Income From Investment Operations
Net Investment Income ........................... 0.27(2) 0.16
Net Realized and Unrealized Gain
on Investment Transactions ...................... 1.47 2.52
---------- ---------
Total From Investment Operations ................ 1.74 2.68
---------- ---------
Distributions
From Net Investment Income ...................... (0.31) (0.19)
In Excess of Net Investment Income .............. --(3) --
From Net Realized Gains on
Investment Transactions ......................... (0.93) (1.43)
---------- ---------
Total Distributions ............................. (1.24) (1.62)
---------- ---------
Net Asset Value, End of Period .................... $16.46 $15.96
========== =========
Total Return(4) ................................. 11.20% 18.43%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........................... 0.93% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ........................... 1.77% 1.94%(5)
Portfolio Turnover Rate ........................... 50% 98%
Net Assets, End of Period
(in thousands) .................................. $5,388 $76
(1) June 25, 1998 (commencement of sale) through December 31, 1998.
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(5) Annualized.
18 1-800-345-2021 See Notes to Financial Statements
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Directors of the American Century Quantitative Equity Funds and
Shareholders of the Utilities Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Utilities Fund (one of the six
funds comprising the American Century Quantitative Equity Funds, hereafter
referred to as the "Fund") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States. The financial highlights for
each of the two years in the period ended December 31, 1996 were audited by
other auditors, whose report dated February 7, 1997, expressed an unqualified
opinion on those statements. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 3, 2000
www.americancentury.com 19
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)
account] 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.
20 1-800-345-2021
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 telecommunications services,
electricity, and natural gas.
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
1999 was approximately 55% telephone and communication services, 30% electric
and natural gas companies, and 15% 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.
[right margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
JOHN SCHNIEDWIND
JOE STERLING
www.americancentury.com 21
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 -- 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 -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
of more than $9.0 billion. This is Lipper's market-capitalization breakpoint as
of December 31, 1999, although it may be subject to change based on market
fluctuations. The Dow Jones Industrial Average and the S&P 500 are
representative indexes of large-cap stock performance.
* MEDIUM-CAPITALIZATION ("MID-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
between $2.2 billion and $9.0 billion. This is Lipper's market-capitalization
breakpoint as of December 31, 1999, although it may be subject to change based
on market fluctuations. The S&P 400 and Russell 2500 are representative of
mid-cap stock performance.
* SMALL-CAPITALIZATION ("SMALL-CAP") STOCKS -- the stocks of companies
with a market capitalization (the total value of a company's outstanding stock)
of less than $2.2 billion. This is Lipper's market-capitalization breakpoint as
of December 31, 1999, although it may be subject to change based on market
fluctuations. The S&P 600 and the Russell 2000 are representative of
small-cap stock performance.
* VALUE STOCKS -- stocks that are purchased because they are relatively
inexpensive. These stocks are typically characterized by low P/E ratios.
22 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
FUND CLASSIFICATIONS
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.
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.
* 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 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 Large Cap Value
Strategic Allocation -- Tax-Managed Value
Moderate Income & Growth
Strategic Allocation -- Value
Conservative Equity Income
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
Veedot(reg.sm) Global Gold Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
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]
Who we are
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
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[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
BANKS AND TRUST COMPANIES, BROKER-DEALERS,
FINANCIAL ADVISORS, INSURANCE COMPANIES
1-800-345-6488
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
Funds Distributor, Inc.
0002 is the distributor for American Century funds
SH-ANN-19622 (c)2000 American Century Services Corporation
