June 30, 2000
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
Equity Growth
Income & Growth
Small Cap Quantitative
[american century logo and text logo (reg.sm)]
American
Century
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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
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[photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
James E. Stowers III, seated, with James E. Stowers, Jr.
The first half of 2000 was an extraordinary period for the U.S. stock
market. Several major shifts in investor sentiment led to unprecedented levels
of volatility.
The strong U.S. economy--and the accompanying rise in interest rates--was
one key factor. But so was the "New Economy"--the burgeoning technology and
telecommunications industries. Investors began to question the high valuations
of many New Economy stocks, casting doubt on their profitability and long-term
potential for success.
As a result, the stock market grew increasingly volatile. For example, the
tech-heavy Nasdaq Composite Index lost more than 25% in a single week in early
April, then enjoyed one of its best months ever in June.
For the most part, American Century's quantitative equity funds
successfully weathered this unusual and rapidly changing environment. Our
investment professionals review the period and the funds' performance in more
detail beginning on page 3.
We're proud to announce that American Century's fund performance reports,
like this one, earned the Communications Seal from DALBAR, Inc., an independent
financial services research firm. DALBAR commended us for meeting investors'
needs with an attractive document that's easy to read and understand.
We're also pleased to provide investors with two new investment tools. Fund
Advisor,(1) an online advice engine, is designed to give impartial guidance in
choosing the right no-load mutual funds to meet your financial goals.(2) And
American Century is the program manager for Learning Quest,(SM) an educational
savings program launched by the state of Kansas on July 1 that allows parents to
invest tax-deferred to meet higher education costs. The summer issue of the
American Century investor newsletter provides more details on these tools.
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
(1) Patent pending.
(2) American Century does not receive sales commissions or direct compensation
for recommending any fund, although it may receive management, service, or
other fees from funds recommended through Fund Advisor. These arrangements
are described in Acumation Inc.'s Form ADV Part II.
[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 ................................................ 11
Management Q&A ......................................................... 12
Schedule of Investments ................................................ 15
SMALL CAP QUANTITATIVE
Performance Information ................................................ 20
Management Q&A ......................................................... 21
Schedule of Investments ................................................ 24
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 28
Statement of Operations ................................................ 29
Statement of Changes
in Net Assets ....................................................... 30
Notes to Financial
Statements .......................................................... 32
Financial Highlights ................................................... 36
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 44
Background Information
Investment Philosophy
and Policies ..................................................... 45
Comparative Indices ................................................. 45
Lipper Rankings ..................................................... 45
Investment Team
Leaders .......................................................... 45
Glossary ............................................................... 46
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* U.S. stocks posted mixed returns in a volatile first half of 2000.
* Small- and mid-cap stocks perform-ed well, while large-cap stocks fell
slightly.
* New Economy stocks (technology and telecommunications) soared early in the
year, plunged in April and May, and then rebounded in June.
* During the tech sell-off, investors shifted into undervalued sectors of the
market that had been languishing earlier in the year.
* Economic uncertainty and the speculative fervor surrounding New Economy
stocks caused greater day-to-day volatility.
EQUITY GROWTH
* The fund posted a slightly negative return but outperformed the S&P 500.
* Equity Growth beat the index because of its focus on growth stocks (which
outperformed value shares) and good stock selection.
* Among technology stocks, the fund benefited the most from companies that
supply components and infrastructure for electronic devices.
* Equity Growth's health care and energy stocks were also strong performers.
* Financial services stocks and retailers had a negative impact on fund
performance, as did stock selection among computer hardware stocks.
INCOME & GROWTH
* The fund produced a negative return in the first half of 2000 and trailed
the S&P 500.
* Income & Growth underperformed the index because of weakness in large-cap
value stocks and poor stock selection.
* The fund's semiconductor and computer hardware stocks posted strong returns,
but stock selection within these industries hurt fund performance relative
to the S&P 500.
* Income & Growth benefited from stock selection among health care, computer
software, and defense/aerospace companies.
* Telephone, home products, and retail stocks detracted from fund performance.
SMALL CAP QUANTITATIVE
* The fund posted a strong return and outperformed the S&P SmallCap 600.
* Most of Small Cap Quantitative's outperformance occurred in the first
quarter of the year, when the fund's technology and biotechnology stocks
soared.
* One of the main themes in the portfolio was the human genome project, which
provided a boost to the fund's biotech stocks.
* Another theme was the wireless industry--many of Small Cap Quantitative's
best-performing stocks were tech companies that make circuitry or components
for wireless devices.
* Energy and food & beverage stocks also contributed positively to fund
performance.
* Basic materials stocks, information services firms, and retailers had the
biggest negative impact on fund performance.
[left margin]
EQUITY GROWTH(1)
(BEQGX)
TOTAL RETURNS: AS OF 6/30/00
6 Months -0.22%(2)
1 Year 9.35%
INCEPTION DATE: 5/9/91
NET ASSETS: $2.5 billion(3)
INCOME & GROWTH(1)
(BIGRX)
TOTAL RETURNS: AS OF 6/30/00
6 Months -3.55%(2)
1 Year 3.72%
INCEPTION DATE: 12/17/90
NET ASSETS: $7.2 billion(3)
SMALL CAP QUANTITATIVE(1)
(ASQIX)
TOTAL RETURNS: AS OF 6/30/00
6 Months 9.29%(2)
1 Year 18.69%
INCEPTION DATE: 7/31/98
NET ASSETS: $20.1 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, 11, and 20.
Investment terms are defined in the Glossary on pages 46-47.
2 1-800-345-2021
Market Perspective from Mark Mallon
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[photo of Mark Mallon]
Mark Mallon, head of growth and income equity, specialty, and asset allocation
funds at American Century
OVERVIEW
Volatility was the watchword in the U.S. stock market during the first half
of 2000. Uncertainty about the economy, inflation, and interest rates--along
with the mood swings symptomatic of "dot-com fever"--led to wide fluctuations in
the major stock indexes.
Large-cap stocks posted slightly negative returns, while small- and mid-cap
stocks fared better (see the table at right).
RUNNING WITH THE PACK
After finishing 1999 at record highs, the major stock indexes stumbled out
of the gate in 2000. However, technology and telecommunications stocks--also
known as "New Economy" stocks-- continued to soar, extending their phenomenal
1999 performance. Investors discarded "Old Economy" stocks and snapped up shares
of dot-coms and other tech-oriented firms.
This herd-like behavior pushed the Nasdaq Composite Index, which is
dominated by tech stocks, up by nearly 25% from the end of 1999 to its peak on
March 10, 2000. In contrast, the S&P 500 declined by 5%.
But the speculative fervor surrounding New Economy stocks contributed to
greater market volatility. Day-to-day swings of 2% or more in the major stock
indexes became increasingly common as investors scurried from dot-com to
dot-com, trying to latch on to the next Yahoo! or Amazon.
SHIFTING GEARS
By March, disillusionment brought a sudden change in market sentiment. A
series of interest rate increases by the Federal Reserve threatened to cool off
the hot U.S. economy, which grew at its fastest rate in almost 16 years in the
fourth quarter of 1999. In addition, concerns surfaced about sustainability and
profitability in the New Economy, especially among electronic-commerce and other
Internet-related companies.
As a result, many investors began to turn away from high-flying growth
stocks, seeking out opportunities in undervalued sectors of the market or
sitting on the sidelines entirely. Between mid-March and late May, the Nasdaq
fell 37%, including a record 25% plunge in the second week of April, while the
S&P 500 edged 1% lower.
After this deflation of the New Economy balloon, growth stocks staged a
solid comeback in June. However, the market remained volatile amid mixed signals
about the economy's strength and future Fed interest rate policy.
SMALL WONDERS
After being left behind in 1998 and 1999, small- and mid-cap stocks
attracted more attention during the first half of 2000, outperforming
large-company stocks. Aggressive investors were especially fond of mid-cap
stocks because they had the high growth potential of smaller companies and the
ease of trading associated with larger stocks.
[right margin]
"DAY-TO-DAY SWINGS OF 2% OR MORE IN THE MAJOR STOCK INDEXES BECAME INCREASINGLY
COMMON."
STOCK MARKET RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
S&P 500 -0.42%
S&P MIDCAP 400 9.06%
S&P SMALLCAP 600 6.93%
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
[line graph - data below]
STOCK MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
Value on 6/30/00
S&P 500 $1.00
S&P MidCap 400 $1.09
S&P SmallCap 600 $1.07
S&P 500 S&P MidCap 400 S&P SmallCap 600
12/31/99 $1.00 $1.00 $1.00
1/31/00 $0.95 $0.97 $0.97
2/29/00 $0.93 $1.04 $1.10
3/31/00 $1.02 $1.13 $1.06
4/30/00 $0.99 $1.09 $1.04
5/31/00 $0.97 $1.07 $1.01
6/30/00 $1.00 $1.09 $1.07
Source: Lipper Inc.
www.americancentury.com 3
Equity Growth--Performance
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<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 5/9/91) (INCEPTION 10/9/97) (INCEPTION 1/2/98)
EQUITY MULTI-CAP CORE FUNDS(2) EQUITY EQUITY
GROWTH S&P 500 AVERAGE RETURN FUND'S RANKING GROWTH S&P 500 GROWTH S&P 500
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -0.22% -0.42% 2.53% -- -0.34% -0.42% -0.15% -0.42%
1 YEAR 9.35% 7.24% 11.54% 196 OUT OF 366 9.10% 7.24% 9.59% 7.24%
=======================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 19.96% 19.66% 16.27% 42 OUT OF 213 -- -- -- --
5 YEARS 23.60% 23.80% 19.33% 17 OUT OF 126 -- -- -- --
LIFE OF FUND 18.45% 18.34% 16.48% 13 OUT OF 55 15.13% 17.58% 17.35% 19.15%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 44-46 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 6/30/00
Equity Growth $47,018
S&P 500 $46,630
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 $47,128 $46,832
3/31/00 $48,419 $47,905
6/30/00 $47,018 $46,630
$10,000 investment made 5/9/91
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The S&P
500 is provided for comparison in each graph. Equity Growth's total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the index do not. These graphs are
based on Investor Class shares only; performance for other classes will vary due
to differences in fee structures (see Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Equity Growth S&P 500
DATE RETURN RETURN
6/30/91* -3.60% -2.31%
6/30/92 13.31% 13.36%
6/30/93 19.00% 13.57%
6/30/94 1.37% 1.43%
6/30/95 23.69% 25.99%
6/30/96 24.23% 25.92%
6/30/97 34.53% 34.69%
6/30/98 37.74% 30.03%
6/30/99 14.61% 22.75%
6/30/00 9.35% 7.24%
* From 5/9/91 (the fund's inception date) to 6/30/91.
4 1-800-345-2021
Equity Growth--Q&A
--------------------------------------------------------------------------------
[photo of Jeff Tyler]
An interview with Jeff Tyler, a portfolio manager on the Equity Growth fund
investment team.
HOW DID EQUITY GROWTH PERFORM DURING THE FIRST HALF OF 2000?
The fund posted a slightly negative return but outperformed its benchmark,
the S&P 500. Equity Growth's six-month return was -0.22%, compared with the
-0.42% return of the S&P 500.*
Equity Growth didn't do as well within its peer group--the fund's return
trailed the 2.53% average return of the 414 multi-cap core funds tracked by
Lipper Inc. (See the previous page for more fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM ITS PEER GROUP AVERAGE?
The multi-cap category consists of funds that do not concentrate solely on
one capitalization sector. Although Equity Growth can and does invest in small-
and mid-cap stocks, its main focus is on large-cap stocks. Therefore, when
small- and mid-cap stocks outperform large-caps--as they did in the past six
months--we're more likely to fall short of the category average.
Over the long term, the fund has had better success within its Lipper
category (see the previous page). But our most important target is the fund's
performance benchmark. We're out to beat the S&P 500, as we did during the
six-month period and over the fund's nine-year existence.
THE FUND HAS AN EXCELLENT LONG-TERM RECORD, BUT LET'S LOOK AT THE MOST RECENT
SIX-MONTH PERIOD. WHAT FACTORS HELPED EQUITY GROWTH OUTPERFORM THE S&P 500?
Our growth orientation was one key factor. Within the S&P 500, growth
stocks outperformed value shares by more than six percentage points.
The rest of it came down to successful stock picking. Our results were a
bit mixed, but more often than not, our stock selection models put us in the
right places at the right times.
Actually, these two factors blend together within our quantitative stock
selection model.
HOW SO?
The fund's slight bias toward growth is embedded in the computer model that
picks stocks for the portfolio. This model has always incorporated both growth
measures (such as earnings growth and earnings surprises) and value measures
(such as price/earnings and price/book ratios) into its stock-ranking process.
Within the last year, though, we adjusted the model to emphasize growth
more than value when ranking stocks. We took this a step further when it came to
technology stocks--we now use growth measures almost exclusively when evaluating
companies in this sector.
We give these stock picks what we call a "reasonableness check" and then
run them through another computer model, which puts in a few risk controls and
keeps our industry weightings close to those in the S&P 500. The end result is a
diversified portfolio of stocks with a definite growth tilt.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"MORE OFTEN THAN NOT, OUR STOCK SELECTION MODELS PUT US IN THE RIGHT PLACES AT
THE RIGHT TIMES."
PORTFOLIO AT A GLANCE
6/30/00 12/31/99
NO. OF COMPANIES 175 181
DIVIDEND YIELD 1.11% 1.01%
MEDIAN P/E RATIO 32.3 27.5
PORTFOLIO TURNOVER 35%(1) 86%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.67%(3) 0.68%
(1) Six months ended 6/30/00.
(2) Year ended 12/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 46-47.
www.americancentury.com 5
Equity Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
CAN YOU GIVE SOME EXAMPLES OF YOUR SUCCESSFUL STOCK PICKS?
Technology is a good place to start, since it was the most active and
volatile sector of the market. One of the themes among technology stocks was a
shift away from manufacturers and toward companies that build infrastructure or
provide supplies and components to these manufacturers.
An example from Equity Growth's portfolio is Applied Materials (up 43%
during the first half of the year), which makes equipment for semiconductor
manufacturers. Increased demand for personal computers, cellular phones, and
other electronic devices caused chip makers to boost production, and that in
turn created strong demand for manufacturing equipment.
WHERE ELSE HAS THIS THEME TAKEN HOLD?
We've seen it among companies involved in producing fiber-optic equipment
and components. Fiber-optic networks are the backbone of the developing
infrastructure for high-speed Internet access and data transmission.
A good example is Corning (up 110%), which produces glass fibers for
telecommunications networks. The company is growing as fast as it possibly can
and still has a backlog of orders for its products. Equity Growth held a
substantial overweight in Corning for much of the past six months.
Other top-performing overweights included Integrated Device Technology (up
106%), which produces computer chips for telecommunications; Scientific-Atlanta
(up 167%), which makes set-top boxes that connect digital cable and the Internet
to your TV or computer; and Vishay Intertechnology (up 80%), one of the largest
manufacturers of electronic components and circuitry for cell phones.
THOSE ARE SOME PRETTY BIG WINNERS. ANY LOSERS AMONG TECHNOLOGY STOCKS?
Definitely. Even though Equity Growth's tech stocks outperformed those in
the S&P 500 as a group, there were plenty of missteps to offset our successes.
For example, the fund was underweight in the S&P 500's two biggest
semiconductor stocks, Intel (up 62%) and Texas Instruments (up 42%). In fact,
six months ago we didn't own even a single share of Intel. That turned out to be
our worst individual decision in terms of lost performance relative to the
index.
Stock selection among computer hardware companies was also a weak spot.
Fund overweights in Adaptec (down 54%) and Electronics For Imaging (down 56%)
--both of which are no longer in the portfolio--more than offset a beneficial
overweight in Hewlett-Packard (up 38%).
And of course there's Microsoft, the fund's biggest holding six months ago.
Microsoft's antitrust violations and a possible break-up by the Justice
Department pushed its stock price down by more than 30%. We cut back our
holdings to an underweight position compared with the S&P 500, but Microsoft is
still the fund's third-largest holding.
HOW DID THE PORTFOLIO FARE IN OTHER SECTORS OF THE MARKET?
Health care and energy stocks were by far the best sectors in the
portfolio. Equity Growth was neutral overall in health care, but we were
overweight drug and biotechnology stocks and underweight medical products
companies.
[left margin]
"HEALTH CARE AND ENERGY STOCKS WERE BY FAR THE BEST SECTORS IN THE PORTFOLIO."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
CISCO SYSTEMS INC. 3.8% 2.8%
GENERAL ELECTRIC CO.
(U.S.) 3.3% 2.2%
MICROSOFT CORP. 2.9% 5.3%
PFIZER, INC. 2.9% 0.7%
INTEL CORP. 2.8% --
WAL-MART STORES, INC. 2.5% 3.7%
ORACLE CORP. 2.0% --
CITIGROUP INC. 1.8% 0.6%
VIACOM, INC. CL B 1.7% 0.4%
CHASE MANHATTAN
CORP. 1.7% 2.4%
6 1-800-345-2021
Equity Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
The fund's largest overweights in this sector were two big pharmaceutical
stocks, Pfizer (up 49%) and Warner-Lambert (up 59%). Pfizer, which makes five of
the world's 20 top-selling medicines, recently acquired Warner-Lambert,
providing a boost to both stocks.
Equity Growth also had several biotech holdings that performed very well.
The near-completion of the human genome project generated a great deal of
excitement in these stocks. Small holdings in IVAX (up 142%), Andrx (up 202%),
and Vertex Pharmaceuticals (up 204%) enhanced fund performance.
Among energy stocks, our biggest overweights included Amerada Hess (up 9%),
Apache (up 59%), and Union Pacific Resources (up 74%). These companies are among
the leading oil and natural gas exploration companies, and they benefited from a
30% rise in the price of oil.
AND ON THE NEGATIVE SIDE?
Financial stocks, especially banks, were among the portfolio's weakest
performers. Rising interest rates led to reduced lending activity, and that in
turn squeezed profit margins at many banks. Fund overweights in Chase Manhattan
(down 10%), UnionBanCal (down 52%), and Bank of America (down 13%) were a drag
on fund performance.
Retailers were also something of a disaster area, hurt by worries of a
slowdown in consumer spending. Equity Growth was overweight in Home Depot (down
27%) and top-ten holding Wal-Mart (down 16%), and also held small positions in
decreasingly popular teenage clothing stores like Abercrombie & Fitch (down 54%)
and American Eagle Outfitters (down 69%). These last two stocks are no longer in
the portfolio.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR THE U.S. STOCK MARKET FOR THE REST
OF THE YEAR?
The slight decline in the S&P 500 during the first half of the year allowed
corporate earnings to catch up a bit with the rise in stock prices over the past
several years. Instead of the 25% annual returns that the S&P 500 posted in
recent years, we expect equity returns to be more in line with corporate
earnings growth as we move forward.
That said, we also believe that we're closer to the beginning than the end
of the shakeout among technology companies, and that could mean more volatility
in the coming months.
Investors are taking a harder look at the long-term business plans and
profitability of their technology investments. Prior to this year, venture
capital for technology start-ups flowed freely, and tech firms were going public
at a rate of several per week. In the past six months, however, the market for
initial public offerings dried up, and venture capital became increasingly hard
to get.
As the tech sector continues to evolve, we expect to see more
consolidation. A large number of companies that were built on promises and
little else will likely be bought out or disappear completely. In the end,
though, we expect the survivors to be stronger and in a better position to be
successful and profitable companies over the long term.
WHAT ARE YOUR PLANS FOR EQUITY GROWTH IN THE COMING MONTHS?
Our goal is to outperform the S&P 500 by remaining fully invested in U.S.
stocks and using our quantitative models to help us pick the best stocks in each
industry of the market. That objective won't change.
[right margin]
"WE BELIEVE THAT WE'RE CLOSER TO THE BEGINNING THAN THE END OF THE SHAKEOUT
AMONG TECHNOLOGY COMPANIES, AND THAT COULD MEAN MORE VOLATILITY."
FIVE LARGEST OVERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 6/30/00)
% OF % OF
FUND'S S&P
STOCKS 500
AMERADA HESS CORP. 1.68% 0.04%
QUAKER OATS CO. 1.46% 0.08%
CHASE MANHATTAN
CORP. 1.80% 0.46%
VIACOM, INC. CL B 1.81% 0.83%
MORGAN STANLEY DEAN
WITTER & CO. 1.71% 0.75%
FIVE LARGEST UNDERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 6/30/00)
% OF % OF
FUND'S S&P
STOCKS 500
LUCENT TECHNOLOGIES
INC. 0% 1.54%
EXXON MOBIL CORP. 0.81% 2.19%
AMERICAN
INTERNATIONAL GROUP,
INC. 0.20% 1.45%
COCA-COLA CO. 0% 1.14%
ROYAL DUTCH
PETROLEUM CO.
NEW YORK SHARES 0% 1.06%
www.americancentury.com 7
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.5%
AIRLINES -- 0.1%
31,500 AMR Corp.(1) $ 832,781
28,700 Delta Air Lines Inc. 1,451,144
--------------
2,283,925
--------------
ALCOHOL -- 0.5%
100,200 Anheuser-Busch Companies, Inc. 7,483,688
77,700 Coors (Adolph) Co. Cl B 4,700,850
--------------
12,184,538
--------------
BANKS -- 5.8%
467,000 Bank of America Corp. 20,081,000
946,350 Chase Manhattan Corp. 43,591,247
769,800 Citigroup Inc. 46,380,450
521,700 Fleet Boston Financial Corp. 17,737,800
130,200 Old Kent Financial Corp. 3,482,850
88,900 Silicon Valley Bancshares(1) 3,792,141
275,000 UnionBanCal Corp. 5,104,688
147,000 Wells Fargo & Co. 5,696,250
--------------
145,866,426
--------------
CHEMICALS -- 1.3%
771,900 Dow Chemical Co. 23,301,731
200,800 du Pont (E.I.) de Nemours & Co. 8,785,000
--------------
32,086,731
--------------
CLOTHING STORES -- 0.1%
140,100 TJX Companies, Inc. (The) 2,626,875
--------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 5.5%
171,000 Apple Computer, Inc.(1) 8,950,781
335,500 Dell Computer Corp.(1) 16,554,828
30,000 Digital Lightwave, Inc.(1) 3,017,812
395,800 EMC Corp. (Mass.)(1) 30,451,862
281,200 Hewlett-Packard Co. 35,114,850
65,000 Network Appliances, Inc.(1) 5,230,469
432,100 Sun Microsystems, Inc.(1) 39,307,597
--------------
138,628,199
--------------
COMPUTER SOFTWARE -- 7.0%
165,300 Computer Associates
International, Inc. 8,461,294
229,000 International Business
Machines Corp. 25,089,813
900,000 Microsoft Corp.(1) 71,971,875
584,100 Oracle Corp.(1) 49,082,653
23,000 Siebel Systems, Inc.(1) 3,762,656
189,900 Sybase, Inc.(1) 4,373,634
71,000 Symantec Corp.(1) 3,831,781
75,000 Veritas Software Corp.(1) 8,472,656
--------------
175,046,362
--------------
CONSUMER DURABLES -- 0.3%
160,000 Whirlpool Corp. 7,460,000
--------------
Shares Value
--------------------------------------------------------------------------------
DEFENSE/AEROSPACE -- 0.9%
399,500 Boeing Co. $ 16,704,094
72,700 Northrop Grumman Corp. 4,816,375
--------------
21,520,469
--------------
DEPARTMENT STORES -- 3.0%
105,300 Federated Department Stores,
Inc.(1) 3,553,875
197,400 Sears, Roebuck & Co. 6,440,175
1,110,100 Wal-Mart Stores, Inc. 63,969,512
--------------
73,963,562
--------------
DRUGS -- 8.3%
70,200 Allergan, Inc. 5,229,900
281,400 Amgen Inc.(1) 19,777,144
47,400 Andrx Corp.(1) 3,029,156
93,300 Biogen, Inc.(1) 6,014,934
329,100 Bristol-Myers Squibb Co. 19,170,075
100,000 Elan Corp., plc ADR(1) 4,843,750
162,200 IVAX Corp.(1) 6,731,300
180,000 Jones Pharma Inc. 7,183,125
86,900 MedImmune, Inc.(1) 6,427,884
212,100 Merck & Co., Inc. 16,252,162
1,493,500 Pfizer, Inc. 71,688,000
150,000 Pharmacia Corporation 7,753,125
615,100 Schering-Plough Corp. 31,062,550
40,000 Vertex Pharmaceuticals, Inc.(1) 4,213,750
--------------
209,376,855
--------------
ELECTRICAL EQUIPMENT -- 8.7%
58,700 ADTRAN, Inc.(1) 3,512,828
291,000 AVX Corp. 6,674,812
1,506,700 Cisco Systems Inc.(1) 95,722,534
57,000 Comverse Technology, Inc.(1) 5,302,781
117,700 Corning Inc. 31,764,288
177,500 Credence Systems Corp.(1) 9,790,234
398,000 KEMET Corp.(1) 9,974,875
120,400 KLA-Tencor Corp.(1) 7,054,688
408,800 Nortel Networks Corp. ADR 27,900,600
91,100 Scientific-Atlanta, Inc. 6,786,950
357,600 Vishay Intertechnology, Inc.(1) 13,566,450
--------------
218,051,040
--------------
ELECTRICAL UTILITIES -- 1.9%
147,600 AES Corp. (The)(1) 6,734,250
120,000 Calpine Corp.(1) 7,890,000
193,800 Minnesota Power & Light Co. 3,355,162
360,700 Public Service Enterprise
Group Inc. 12,489,238
314,300 Reliant Energy, Inc. 9,291,494
233,800 Southern Co. 5,450,462
88,800 Texas Utilities Co. 2,619,600
--------------
47,830,206
--------------
ENERGY RESERVES & PRODUCTION -- 5.4%
660,000 Amerada Hess Corp. 40,755,000
385,500 Apache Corp. 22,672,219
8 1-800-345-2021 See Notes to Financial Statements
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
234,356 BP Amoco Plc ADR $ 13,255,761
250,056 Exxon Mobil Corp. 19,629,396
391,800 Kerr-McGee Corp. 23,091,712
309,300 Occidental Petroleum Corp. 6,514,631
434,600 Union Pacific Resources 9,561,200
--------------
135,479,919
--------------
ENTERTAINMENT -- 1.7%
643,700 Viacom, Inc. Cl B(1) 43,892,294
--------------
FINANCIAL SERVICES -- 5.2%
516,600 Fannie Mae 26,960,062
229,800 Federal Home Loan Mortgage
Corporation 9,306,900
43,200 Gallagher (Arthur J.) & Co. 1,814,400
1,555,500 General Electric Co. (U.S.) 82,441,500
116,600 Providian Financial Corp. 10,494,000
--------------
131,016,862
--------------
FOOD & BEVERAGE -- 3.0%
91,000 General Mills, Inc. 3,480,750
269,000 Hormel Foods Corp. 4,522,563
522,600 IBP, Inc. 8,067,638
200,000 PepsiCo, Inc. 8,887,500
469,800 Quaker Oats Co. (The) 35,293,725
228,100 Suiza Foods Corp.(1) 11,148,388
97,200 SYSCO Corp. 4,094,550
--------------
75,495,114
--------------
FOREST PRODUCTS & PAPER -- 0.8%
144,400 International Paper Co. 4,304,925
99,300 Temple-Inland Inc. 4,170,600
98,500 Westvaco Corp. 2,444,031
242,300 Weyerhaeuser Co. 10,418,900
--------------
21,338,456
--------------
GROCERY STORES -- 0.4%
249,100 Safeway Inc.(1) 11,240,638
--------------
HEAVY ELECTRICAL EQUIPMENT -- 0.8%
286,900 CommScope, Inc.(1) 11,762,900
173,200 Cummins Engine Company, Inc. 4,719,700
80,100 Rockwell International Corp. 2,523,150
--------------
19,005,750
--------------
HOME PRODUCTS -- 1.7%
166,700 Avon Products, Inc. 7,418,150
165,400 Colgate-Palmolive Co. 9,903,325
123,800 Fortune Brands, Inc. 2,855,138
188,400 Procter & Gamble Co. (The) 10,785,900
285,000 Ralston Purina Co. 5,682,188
224,900 Tupperware Corp. 4,947,800
--------------
41,592,501
--------------
HOTELS -- 0.1%
99,800 MGM Grand, Inc. 3,206,075
--------------
Shares Value
--------------------------------------------------------------------------------
INDUSTRIAL PARTS -- 1.1%
357,000 Illinois Tool Works Inc. $ 20,349,000
65,700 Ingersoll-Rand Co. 2,644,425
80,400 United Technologies Corp. 4,733,550
--------------
27,726,975
--------------
INDUSTRIAL SERVICES -- 0.2%
201,200 Hertz Corp. Cl A 5,646,175
--------------
INFORMATION SERVICES -- 1.3%
165,000 Automatic Data Processing, Inc. 8,837,812
187,700 Electronic Data Systems Corp. 7,742,625
278,700 MarchFirst, Inc.(1) 5,094,984
276,100 Valassis Communications, Inc.(1) 10,526,312
--------------
32,201,733
--------------
INTERNET -- 1.8%
555,500 America Online Inc.(1) 29,302,625
122,200 Yahoo! Inc.(1) 15,141,344
--------------
44,443,969
--------------
LIFE & HEALTH INSURANCE -- 1.3%
117,500 CIGNA Corp. 10,986,250
612,500 Lincoln National Corp. 22,126,562
--------------
33,112,812
--------------
MEDIA -- 1.8%
424,600 Comcast Corp. Cl A(1) 17,209,569
168,200 Cox Communications, Inc. Cl A(1) 7,663,612
521,100 Disney (Walt) Co. 20,225,194
--------------
45,098,375
--------------
MEDICAL PRODUCTS & SUPPLIES -- 2.4%
220,900 Bard (C.R.), Inc. 10,630,813
388,100 Johnson & Johnson 39,537,688
129,800 Mallinckrodt Inc. 5,638,188
64,800 PE Corp-PE Biosystems Group 4,268,700
--------------
60,075,389
--------------
MEDICAL PROVIDERS & SERVICES -- 1.1%
386,100 Oxford Health Plans, Inc.(1) 9,194,006
79,200 PacifiCare Health Systems, Inc.(1) 4,764,375
154,100 United HealthCare Corp. 13,214,075
--------------
27,172,456
--------------
MINING & METALS -- 0.5%
100,400 Alcan Aluminium Ltd. ADR 3,112,400
232,400 Alcoa Inc. 6,739,600
54,400 Ball Corporation 1,751,000
--------------
11,603,000
--------------
MOTOR VEHICLES & PARTS -- 0.8%
346,400 Ford Motor Co. 14,895,200
89,900 General Motors Corp. 5,219,819
45,355 Visteon Corp.(1) 549,929
--------------
20,664,948
--------------
MULTI-INDUSTRY -- 0.6%
309,700 Tyco International Ltd. 14,672,038
--------------
See Notes to Financial Statements www.americancentury.com 9
Equity Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
OIL REFINING -- 0.1%
57,100 Texaco Inc. $ 3,040,575
--------------
OIL SERVICES -- 0.5%
52,600 BJ Services Co.(1) 3,287,500
262,900 Ensco International Inc. 9,415,106
--------------
12,702,606
--------------
PROPERTY & CASUALTY INSURANCE -- 1.2%
146,700 Ambac Financial Group, Inc. 8,040,994
42,000 American International Group, Inc. 4,935,000
180,000 MGIC Investment Corp. 8,190,000
185,700 Radian Group Inc. 9,609,975
--------------
30,775,969
--------------
PUBLISHING -- 0.8%
365,300 Deluxe Corp. 8,607,381
158,300 Dow Jones & Co., Inc. 11,595,475
--------------
20,202,856
--------------
RAILROADS -- 0.1%
75,000 Union Pacific Corp. 2,789,062
--------------
RESTAURANTS -- 0.6%
235,200 Brinker International, Inc.(1) 6,879,600
292,400 Jack in the Box Inc.(1) 7,200,350
--------------
14,079,950
--------------
SECURITIES & ASSET MANAGEMENT -- 1.9%
25,300 Lehman Brothers Holdings Inc. 2,392,431
33,300 Merrill Lynch & Co., Inc. 3,829,500
497,100 Morgan Stanley Dean Witter & Co. 41,383,575
--------------
47,605,506
--------------
SEMICONDUCTOR -- 7.3%
117,400 Analog Devices, Inc.(1) 8,922,400
271,400 Applied Materials, Inc.(1) 24,604,106
86,000 Cypress Semiconductor Corp.(1) 3,633,500
293,400 Integrated Device Technology,
Inc.(1) 17,604,000
524,900 Intel Corp. 70,156,166
161,600 International Rectifier Corp.(1) 9,049,600
103,500 Kulicke & Soffa Industries, Inc.(1) 6,129,141
282,200 Lam Research Corp.(1) 10,591,319
61,100 LSI Logic Corp.(1) 3,307,038
171,600 National Semiconductor Corp.(1) 9,738,300
157,800 Teradyne, Inc.(1) 11,598,300
100,300 Texas Instruments Inc. 6,889,356
--------------
182,223,226
--------------
SPECIALTY STORES -- 1.9%
99,300 Best Buy Co., Inc.(1) 6,280,725
656,500 Home Depot, Inc. 32,783,969
46,800 Tiffany & Co. 3,159,000
183,800 Zale Corp.(1) 6,708,700
--------------
48,932,394
--------------
Shares Value
--------------------------------------------------------------------------------
TELEPHONE -- 5.6%
604,350 AT&T Corp. $ 19,112,569
160,800 Bell Atlantic Corp. 8,170,650
629,000 BellSouth Corp. 26,811,125
298,000 GTE Corp. 18,550,500
773,015 SBC Communications Inc. 33,432,899
289,300 Sprint Corp. 14,754,300
59,100 U S WEST, Inc. 5,067,825
341,800 WorldCom, Inc.(1) 15,690,756
--------------
141,590,624
--------------
TOBACCO -- 0.1%
133,800 Universal Corp. 2,826,525
--------------
WIRELESS TELECOMMUNICATIONS -- 1.0%
140,000 Nextel Communications, Inc.(1) 8,561,875
149,600 QUALCOMM Inc.(1) 8,971,325
132,300 Sprint PCS(1) 7,871,850
--------------
25,405,050
--------------
TOTAL COMMON STOCKS 2,423,785,010
--------------
(Cost $1,919,199,135)
TEMPORARY CASH INVESTMENTS -- 3.5%*
Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 6.30%, dated 6/30/00,
due 7/3/00 (Delivery value $88,146,253) 88,100,000
--------------
(Cost $88,100,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $2,511,885,010
==============
(Cost $2,007,299,135)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Loss
-------------------------------------------------------------------------------
166 S&P 500 September
Futures 2000 $61,067,250 $(663,170)
=======================================
* Futures contracts typically are based on a stock index, such as the S&P 500,
and 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 have full exposure to stocks and have easy access to the money.
Temporary cash investments, less the required reserves for futures contracts,
are 1.1%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
10 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 2000
INVESTOR CLASS ADVISOR CLASS INSTITUTIONAL CLASS
(INCEPTION 12/17/90) (INCEPTION 12/15/97) (INCEPTION 1/28/98)
INCOME & LARGE-CAP VALUE FUNDS(2) INCOME & INCOME &
GROWTH S&P 500 AVERAGE RETURN FUND'S RANKING GROWTH S&P 500 GROWTH S&P 500
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -3.55% -0.42% -1.65% -- -3.71% -0.42% -3.47% -0.42%
1 YEAR 3.72% 7.24% -0.93% 107 OUT OF 343 3.44% 7.24% 3.95% 7.24%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 18.36% 19.66% 12.65% 23 OUT OF 232 -- -- -- --
5 YEARS 22.76% 23.80% 18.01% 7 OUT OF 152 -- -- -- --
LIFE OF FUND 19.76% 19.55%(3) 16.48%(3) 5 OUT OF 57(3) 16.12% 19.50%(4) 16.93% 19.02%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 12/20/90, the date nearest the class's inception for which data are
available.
(4) Since 12/11/97, the date nearest the class's inception for which data are
available.
See pages 44-46 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 6/30/00
Income & Growth $55,144
S&P 500 $54,832
Income & Growth S&P 500
DATE VALUE VALUE
12/20/90 $10,000 $10,000
12/31/90 $10,009 $10,014
3/31/91 $11,681 $11,469
6/30/91 $11,644 $11,443
9/30/91 $12,539 $12,055
12/31/91 $13,917 $13,065
3/31/92 $13,436 $12,734
6/30/92 $13,440 $12,976
9/30/92 $13,832 $13,385
12/31/92 $15,010 $14,060
3/31/93 $15,741 $14,674
6/30/93 $16,103 $14,746
9/30/93 $16,779 $15,127
12/31/93 $16,707 $15,478
3/31/94 $15,955 $14,891
6/30/94 $16,038 $14,953
9/30/94 $16,651 $15,685
12/31/94 $16,614 $15,682
3/31/95 $18,068 $17,209
6/30/95 $19,772 $18,852
9/30/95 $21,415 $20,351
12/31/95 $22,741 $21,576
3/31/96 $24,012 $22,735
6/30/96 $24,984 $23,756
9/30/96 $25,836 $24,490
12/31/96 $28,234 $26,530
3/31/97 $28,736 $27,241
6/30/97 $33,257 $32,000
9/30/97 $37,001 $34,393
12/31/97 $37,963 $35,380
3/31/98 $43,726 $40,316
6/30/98 $44,715 $41,646
9/30/98 $39,666 $37,503
12/31/98 $48,464 $45,491
3/31/99 $49,390 $47,761
6/30/99 $53,163 $51,133
9/30/99 $50,223 $47,937
12/31/99 $57,164 $55,070
3/31/00 $57,536 $56,331
6/30/00 $55,144 $54,832
$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 JUNE 30)
Income & Growth S&P 500
DATE RETURN RETURN
6/30/91* 16.44% 16.79%
6/30/92 15.44% 13.36%
6/30/93 19.82% 13.57%
6/30/94 -0.40% 1.43%
6/30/95 23.28% 25.99%
6/30/96 26.36% 25.92%
6/30/97 33.10% 34.69%
6/30/98 34.46% 30.03%
6/30/99 18.89% 22.75%
6/30/00 3.72% 7.24%
* From 12/20/90 (the date nearest the fund's inception for which index data are
available) to 6/30/91.
www.americancentury.com 11
Income & Growth--Q&A
--------------------------------------------------------------------------------
[photo of John Schniedwind] [photo of Kurt Borgwardt]
An interview with John Schniedwind and Kurt Borgwardt, portfolio managers
on the Income & Growth fund investment team.
HOW DID INCOME & GROWTH PERFORM DURING THE FIRST HALF OF 2000?
The fund's six-month return of -3.55% reflected the general weakness of
large-cap stocks.* Income & Growth's performance trailed the -0.42% return of
its benchmark, the S&P 500, as well as the -1.65% average return of the 382
large-cap value funds tracked by Lipper Inc. (See the previous page for other
fund performance comparisons.)
WHY DID THE FUND UNDERPERFORM BOTH THE S&P 500 AND THE AVERAGE LARGE-CAP VALUE
FUND?
We focus on the S&P 500 as our performance target, so we're less concerned
with how our returns stack up against the average large-cap value fund. If we
can consistently beat the S&P 500, our peer group performance should take care
of itself. (See the previous page for the fund's long-term record against its
peer group.)
With regard to the index, part of the reason we lagged was the
outperformance of growth stocks over value stocks in the large-cap market. We
incorporate both growth and value measures into our stock selection process, but
with a slight tilt toward value. This value bias hurt fund performance relative
to the S&P 500--the S&P/BARRA Growth Index returned 2.63% in the first half of
2000, while the S&P/BARRA Value Index returned -4.07%.
But the main reason we underperformed the index--and the average large-cap
value fund, for that matter--was stock selection. Our industry-neutral approach
puts a heavy emphasis on the stock picking of our quantitative models, and
unfortunately this worked against us during the six-month period.
CAN YOU TALK A LITTLE MORE ABOUT YOUR INDUSTRY-NEUTRAL APPROACH AND STOCK
SELECTION PROCESS?
"Industry neutral" means the fund's industry weightings typically match or
come close to the industry weightings of the S&P 500. In other words, we're not
making significant bets on technology, financials, or any other sector of the
market.
This approach increases the importance of our stock selection. We try to
outperform the index by investing in the best-performing companies within each
industry. We use a quantitative analytical model--basically a sophisticated
computer program--that evaluates stocks and ranks them based on their growth
prospects and their relative value.
The human element is also a key part of the process. We review the stock
picks within the context of supplemental information not already reflected in
the model.
Ultimately, we try to own as many high-ranking stocks as we can, within
limitations. These limitations include our industry-neutral positioning, as well
as some controls that keep the fund's risk profile close to that of the S&P 500.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"THE FUND'S SIX-MONTH RETURN REFLECTED THE GENERAL WEAKNESS OF LARGE-CAP
STOCKS."
PORTFOLIO AT A GLANCE
6/30/00 12/31/99
NO. OF COMPANIES 286 279
DIVIDEND YIELD 1.51% 1.36%
MEDIAN P/E RATIO 27.4 23.5
PORTFOLIO TURNOVER 34%(1) 58%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.67%(3) 0.68%
(1) Six months ended 6/30/00.
(2) Year ended 12/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 46-47.
12 1-800-345-2021
Income & Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
WERE THERE ANY SPECIFIC AREAS WHERE YOUR STOCK SELECTION WAS PROBLEMATIC?
Some of the areas where our stock selection struggled the most were
actually ones that contributed positively to the fund's overall return.
Semiconductor stocks are a good example. As a group, the fund's
semiconductor holdings returned about 50% in the first half of this year--the
best industry return in the portfolio. This performance was driven by strong
demand for personal computers, cellular phones, and other electronic devices
requiring computer chips. The stock prices of several fund holdings, including
Integrated Device Technology and Micron, more than doubled.
However, the semiconductor stocks in the S&P 500 returned almost 60% as a
group. Income & Growth's underweights in the two largest semiconductor
companies, Intel (up 62% during the period) and Texas Instruments (up 42%), hurt
fund performance relative to the index. Our models downgraded these two stocks
because of their extremely high prices.
HOW DID THE FUND FARE IN THE REST OF THE TECHNOLOGY SECTOR?
Electrical equipment stocks produced solid returns, especially in the first
quarter. Our best performers included Scientific-Atlanta (up 166%), which was a
fund overweight for most of the period, and Corning (up 110%).
Scientific-Atlanta makes set-top boxes that connect digital cable and the
Internet to a TV or computer, while Corning manufactures glass components for
fiber-optic telecommunications networks.
Computer hardware stocks also performed well thanks to increased PC demand,
but our stock selection hurt us in this area. Although we made some good
decisions among the larger computer makers--overweights in Hewlett-Packard (up
38%) and Apple (up 2%), underweights in Gateway (down 21%) and Dell Computer
(down 3%)--these were overshadowed by heavy weightings in Adaptec (down 54%) and
Electronics For Imaging (down 56%).
The opposite occurred in the fund's computer software holdings--overall
performance was weak, but our stock selection was favorable. We were overweight
Adobe (up 93%), which produces the leading desktop-publishing and photography
software, and we stayed away from BMC Software (down 54%) and Parametric
Technology (down 59%), both of which reported disappointing earnings.
The anti-trust trial and proposed break-up of the biggest software company
of all--Microsoft (down 31%)--weighed heavily on its stock price and the fund's
performance. We shifted to an underweight position in Microsoft relative to the
S&P 500, but it remained one of the fund's largest holdings.
WHAT OTHER SECTORS OF THE MARKET HAD THE BIGGEST IMPACT ON FUND PERFORMANCE?
On the positive side, health care was Income & Growth's best sector,
especially in the second quarter. This included our holdings among drug, medical
products, and medical services stocks.
Evidence of a slower U.S. economy boosted demand for drug stocks, which
tend to produce steady profit growth regardless of economic conditions. The
large drug stocks were also considered a safety play for investors as they
rotated out of technology stocks in the second quarter.
[right margin]
"WE SHIFTED TO AN UNDERWEIGHT POSITION IN MICROSOFT RELATIVE TO THE S&P 500, BUT
IT REMAINED ONE OF THE FUND'S LARGEST HOLDINGS."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
GENERAL ELECTRIC CO.
(U.S.) 4.2% 3.3%
CISCO SYSTEMS INC. 3.3% 2.7%
PFIZER, INC. 3.2% 1.3%
INTEL CORP. 3.0% 1.3%
MICROSOFT CORP. 2.9% 4.9%
CITIGROUP INC. 2.4% 1.6%
ORACLE CORP. 1.9% 1.1%
JOHNSON & JOHNSON 1.7% 1.1%
MERCK & CO., INC. 1.7% 1.2%
EXXON MOBIL CORP. 1.6% 1.4%
www.americancentury.com 13
Income & Growth--Q&A
--------------------------------------------------------------------------------
(Continued)
Among pharmaceutical firms, the fund benefited from an overweight in Pfizer
(up 50%). The company completed the acquisition of one of its biggest
competitors, Warner-Lambert, creating the world's largest pharmaceuticals
company.
Our stock selection among defense and aerospace stocks was significantly
positive. The fund was overweight in Northrop Grumman (up 25%), which sold many
of its low-profit businesses and saw increased orders for its airplanes. In
addition, we didn't own any shares in Honeywell (down 41%) and Raytheon (down
27%).
WHAT ABOUT HOLDINGS THAT DETRACTED FROM FUND PERFORMANCE?
Telephone stocks declined across the board. They went through a sizable
correction after a huge run-up in 1999. The good news is that we were
underweight in two of the worst performers, AT&T (down 37%) and Global Crossing
(down 47%).
In addition, home products companies contributed negatively to fund
performance. The biggest damage was done by Procter & Gamble (down 47%), which
posted disappointing earnings in two consecutive quarters.
Retailers, from department stores to home improvement warehouses, were also
weak performers. Clothing stores like Abercrombie & Fitch (down 54%) and
American Eagle Outfitters (down 69%) were trounced because of concerns about
declining popularity and market share among teenagers. The fund no longer held
these stocks by the end of June.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR THE U.S. STOCK MARKET FOR THE REST
OF THE YEAR?
The performance of the stock market during the second half of 2000 will
hinge on how successful the Federal Reserve is in achieving a "soft landing"
--slowing the economy to a moderate, sustainable growth rate while keeping a lid
on inflation.
So far, the economy has remained healthy, but we're finally starting to see
some evidence that the Fed's six interest rate increases over the past year are
slowing things down.
If the Fed pulls this off successfully, as it did in 1995, it would be
positive for the stock market. If the Fed is unsuccessful--either by failing to
stay ahead of the inflation curve or tightening the screws too hard, causing a
recession--stocks could weaken along with corporate earnings.
We're not likely to see greater market volatility than in the first half of
the year--that would be hard to imagine--but we don't think it will go away any
time soon, either.
WHAT ARE YOUR PLANS FOR INCOME & GROWTH IN THE COMING MONTHS?
We intend to keep following the same disciplined, quantitative approach,
seeking out what our models indicate are the best companies in each industry of
the market.
[left margin]
"THE PERFORMANCE OF THE STOCK MARKET DURING THE SECOND HALF OF 2000 WILL HINGE
ON HOW SUCCESSFUL THE FEDERAL RESERVE IS IN ACHIEVING A 'SOFT LANDING.'"
FIVE LARGEST OVERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 6/30/00)
% OF % OF
FUND'S S&P
STOCKS 500
SEARS, ROEBUCK & CO. 1.10% 0.09%
OCCIDENTAL PETROLEUM
CORP. 1.05% 0.06%
KERR-MCGEE CORP. 1.01% 0.04%
FLEET BOSTON
FINANCIAL CORP. 1.11% 0.25%
CITIGROUP INC. 2.46% 1.63%
FIVE LARGEST UNDERWEIGHTS
COMPARED WITH THE S&P 500 (AS OF 6/30/00)
% OF % OF
FUND'S S&P
STOCKS 500
LUCENT TECHNOLOGIES
INC. 0.13% 1.54%
AMERICAN
INTERNATIONAL GROUP,
INC. 0.33% 1.45%
COCA-COLA CO. 0.06% 1.14%
WAL-MART STORES, INC. 1.31% 2.05%
AMERICAN HOME
PRODUCTS CORP. 0% 0.61%
14 1-800-345-2021
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 98.4%
AIRLINES -- 0.1%
85,200 AMR Corp.(1) $ 2,252,475
75,300 Delta Air Lines Inc. 3,807,356
--------------
6,059,831
--------------
ALCOHOL -- 0.4%
358,700 Anheuser-Busch Companies, Inc. 26,790,406
--------------
APPAREL & TEXTILES -- 0.1%
229,100 Liz Claiborne, Inc. 8,075,775
106,400 Reebok International Ltd.(1) 1,695,750
--------------
9,771,525
--------------
BANKS -- 6.1%
2,074,100 Bank of America Corp. 89,186,300
1,218,500 Chase Manhattan Corp. 56,127,156
2,904,900 Citigroup Inc. 175,020,224
28,400 City National Corp. 1,008,200
311,500 First Union Corp. 7,729,094
2,329,000 Fleet Boston Financial Corp. 79,186,000
211,300 PNC Bank Corp. 9,904,688
262,400 Silicon Valley Bancshares(1) 11,193,000
651,000 UnionBanCal Corp. 12,084,188
--------------
441,438,850
--------------
CHEMICALS -- 1.6%
1,683,900 Dow Chemical Co. 50,832,731
104,400 du Pont (E.I.) de Nemours & Co. 4,567,500
363,600 Engelhard Corp. 6,203,925
526,500 Minnesota Mining &
Manufacturing Co. 43,436,250
669,400 Sherwin-Williams Co. 14,182,912
--------------
119,223,318
--------------
CLOTHING STORES -- 0.5%
1,250,800 Limited, Inc. (The) 27,048,550
134,500 Talbots, Inc. 7,389,094
--------------
34,437,644
--------------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 5.3%
234,600 Adaptec, Inc.(1) 5,344,481
144,000 Advanced Digital Information
Corp.(1) 2,290,500
812,800 Apple Computer, Inc.(1) 42,545,000
52,700 Compaq Computer Corp. 1,347,144
1,234,700 Dell Computer Corp.(1) 60,924,727
218,500 Diebold, Inc. 6,090,688
117,500 Electronics for Imaging, Inc.(1) 2,966,875
715,200 EMC Corp. (Mass.)(1) 55,025,700
60,400 Gateway Inc.(1) 3,427,700
634,200 Hewlett-Packard Co. 79,195,725
160,000 Network Appliances, Inc.(1) 12,875,000
298,400 Pitney Bowes Inc. 11,936,000
Shares Value
--------------------------------------------------------------------------------
72,700 Seagate Technology, Inc.(1) $ 3,998,500
995,800 Sun Microsystems, Inc.(1) 90,586,680
100,900 Xerox Corp. 2,093,675
--------------
380,648,395
--------------
COMPUTER SOFTWARE -- 6.9%
82,700 Adobe Systems Inc. 10,743,247
33,100 BEA Systems, Inc.(1) 1,635,347
435,300 Computer Associates
International, Inc. 22,281,919
806,500 International Business
Machines Corp. 88,362,156
2,578,900 Microsoft Corp.(1) 206,231,409
1,620,700 Oracle Corp.(1) 136,189,447
60,200 Siebel Systems, Inc.(1) 9,848,344
218,100 Sybase, Inc.(1) 5,023,116
157,200 Veritas Software Corp.(1) 17,758,688
--------------
498,073,673
--------------
CONSTRUCTION & REAL PROPERTY -- 0.1%
33,300 Centex Corp. 782,550
32,900 Mastec, Inc.(1) 1,256,369
178,100 USG Corp. 5,409,788
--------------
7,448,707
--------------
CONSUMER DURABLES -- 0.2%
395,000 Whirlpool Corp. 18,416,875
--------------
DEFENSE/AEROSPACE -- 1.3%
949,400 Boeing Co. 39,696,788
850,700 Northrop Grumman Corp. 56,358,875
--------------
96,055,663
--------------
DEPARTMENT STORES -- 2.9%
1,102,000 Federated Department Stores,
Inc.(1) 37,192,500
2,389,800 Sears, Roebuck & Co. 77,967,225
1,615,900 Wal-Mart Stores, Inc. 93,116,238
--------------
208,275,963
--------------
DRUGS -- 7.9%
115,000 Allergan, Inc. 8,567,500
28,900 Andrx Corp.(1) 1,846,891
1,220,300 Bristol-Myers Squibb Co. 71,082,475
74,500 Cardinal Health, Inc. 5,513,000
89,900 Elan Corp., plc ADR(1) 4,354,531
227,600 Jones Pharma Inc. 9,082,662
439,900 Lilly (Eli) & Co. 43,935,012
1,602,700 Merck & Co., Inc. 122,806,888
4,803,400 Pfizer, Inc. 230,563,200
1,427,600 Schering-Plough Corp. 72,093,800
--------------
569,845,959
--------------
ELECTRICAL EQUIPMENT -- 7.5%
466,200 AVX Corp. 10,693,462
100,800 Cabletron Systems, Inc.(1) 2,545,200
3,795,500 Cisco Systems Inc.(1) 241,132,859
136,500 Corning Inc. 36,837,938
See Notes to Financial Statements www.americancentury.com 15
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
290,400 Credence Systems Corp.(1) $ 16,017,375
343,600 Eaton Corp. 23,021,200
653,300 KEMET Corp.(1) 16,373,331
329,800 KLA-Tencor Corp.(1) 19,324,219
159,500 LTX Corp.(1) 5,577,516
152,900 Lucent Technologies Inc. 9,059,325
909,500 Motorola, Inc. 26,432,344
73,000 Nokia Corp. Cl A ADR 3,645,438
1,397,700 Nortel Networks Corp. ADR 95,393,025
259,100 Scientific-Atlanta, Inc. 19,302,950
334,200 Sensormatic Electronics Corp.(1) 5,284,538
12,800 Technitrol, Inc. 1,240,000
349,400 Vishay Intertechnology, Inc.(1) 13,255,362
--------------
545,136,082
--------------
ELECTRICAL UTILITIES -- 2.6%
269,200 Ameren Corp. 9,085,500
120,000 Calpine Corp.(1) 7,890,000
41,500 Conectiv, Inc. Cl A 1,011,562
24,800 Consolidated Edison, Inc. 734,700
111,600 Constellation Energy Group 3,633,975
297,300 Duke Energy Corp. 16,760,288
243,800 Edison International 4,997,900
396,300 GPU Inc. 10,724,869
519,900 Minnesota Power & Light Co. 9,000,769
903,200 PG&E Corp. 22,241,300
111,700 PP&L Resources, Inc. 2,450,419
791,300 Public Service Enterprise
Group Inc. 27,398,762
1,390,400 Reliant Energy, Inc. 41,103,700
198,418 Sempra Energy 3,373,106
392,700 Texas Utilities Co. 11,584,650
320,500 Unicom Corp. 12,399,344
--------------
184,390,844
--------------
ENERGY RESERVES & PRODUCTION -- 5.7%
79,800 Amerada Hess Corp. 4,927,650
917,500 Chevron Corp. 77,815,469
1,503,100 Exxon Mobil Corp. 117,993,350
1,221,100 Kerr-McGee Corp. 71,968,581
3,541,300 Occidental Petroleum Corp. 74,588,631
235,900 Phillips Petroleum Co. 11,957,181
865,200 Royal Dutch Petroleum Co. New
York Shares 53,263,875
--------------
412,514,737
--------------
ENTERTAINMENT -- 0.4%
142,300 Pixar, Inc.(1) 5,020,522
297,222 Viacom, Inc. Cl B(1) 20,266,825
--------------
25,287,347
--------------
EQUITY REAL ESTATE
INVESTMENT TRUST -- 0.2%
442,200 CarrAmerica Realty Corp. 11,718,300
80,900 Spieker Properties, Inc. 3,822,525
--------------
15,540,825
--------------
Shares Value
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 6.7%
107,600 AmeriCredit Corp.(1) $ 1,829,200
163,100 Block (H & R), Inc. 5,280,362
1,118,800 Fannie Mae 58,387,375
198,900 Gallagher (Arthur J.) & Co. 8,353,800
5,660,400 General Electric Co. (U.S.) 300,001,200
90,800 Marsh & McLennan
Companies, Inc. 9,482,925
151,400 MBNA Corp. 4,106,725
525,000 Metris Companies Inc. 13,190,625
113,800 Providian Financial Corp. 10,242,000
499,200 Standard and Poor's 500
Depositary Receipt 72,524,400
--------------
483,398,612
--------------
FOOD & BEVERAGE -- 2.9%
79,000 Archer-Daniels-Midland Co. 775,188
30,200 Bestfoods 2,091,350
77,300 Coca-Cola Company (The) 4,439,919
2,131,400 ConAgra, Inc. 40,629,812
39,500 Heinz (H.J.) Co. 1,728,125
195,200 Hormel Foods Corp. 3,281,800
565,900 IBP, Inc. 8,736,081
144,700 Keebler Foods Co. 5,371,988
449,700 Kellogg Co. 13,378,575
800,400 PepsiCo, Inc. 35,567,775
740,500 Quaker Oats Co. (The) 55,630,062
1,705,600 Supervalu Inc. 32,513,000
61,100 SYSCO Corp. 2,573,838
94,200 Unilever N.V. New York Shares 4,050,600
--------------
210,768,113
--------------
FOREST PRODUCTS & PAPER -- 0.7%
413,004 International Paper Co. 12,312,682
277,900 Temple-Inland Inc. 11,671,800
410,900 Westvaco Corp. 10,195,456
313,700 Weyerhaeuser Co. 13,489,100
--------------
47,669,038
--------------
GAS & WATER UTILITIES -- 0.1%
145,600 Keyspan Energy Corp. 4,477,200
--------------
GOLD -- 0.1%
301,700 Barrick Gold Corp. ADR 5,487,169
269,400 Placer Dome Inc. ADR 2,576,138
--------------
8,063,307
--------------
GROCERY STORES -- 0.2%
219,300 Great Atlantic & Pacific Tea Co.,
Inc. (The) 3,645,862
250,500 Safeway Inc.(1) 11,303,812
--------------
14,949,674
--------------
HEAVY ELECTRICAL EQUIPMENT -- 1.0%
168,400 Cooper Industries, Inc. 5,483,525
706,800 Cummins Engine Company, Inc. 19,260,300
16 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
1,015,500 Dover Corp. $ 41,191,219
200,700 Rockwell International Corp. 6,322,050
--------------
72,257,094
--------------
HOME PRODUCTS -- 1.6%
53,500 Alberto-Culver Company Cl B 1,635,094
132,600 Avon Products, Inc. 5,900,700
153,400 Church & Dwight Co., Inc. 2,761,200
391,200 Colgate-Palmolive Co. 23,423,100
106,900 Fortune Brands, Inc. 2,465,381
171,300 International Flavors &
Fragrances Inc. 5,171,119
519,300 National Service Industries, Inc. 10,126,350
654,800 Procter & Gamble Co. (The) 37,487,300
324,400 Ralston Purina Co. 6,467,725
842,000 Tupperware Corp. 18,524,000
--------------
113,961,969
--------------
HOTELS(2)
46,300 Anchor Gaming(1) 2,220,953
--------------
INDUSTRIAL PARTS -- 0.7%
225,400 Briggs & Stratton Corp. 7,719,950
88,100 Caterpillar Inc. 2,984,388
247,700 Illinois Tool Works Inc. 14,118,900
216,400 ITT Industries, Inc. 6,573,150
566,200 Pall Corp. 10,474,700
230,800 Stanley Works (The) 5,481,500
--------------
47,352,588
--------------
INDUSTRIAL SERVICES -- 0.4%
440,400 Hertz Corp. Cl A 12,358,725
114,600 Manpower Inc. 3,667,200
576,400 Viad Corp. 15,706,900
--------------
31,732,825
--------------
INFORMATION SERVICES -- 1.1%
79,700 Automatic Data Processing, Inc. 4,268,931
39,300 Diamond Technology Partners
Inc.(1) 3,457,172
39,800 Dun & Bradstreet Corp. (The) 1,139,275
632,000 Electronic Data Systems Corp. 26,070,000
132,200 Galileo International, Inc. 2,759,675
645,000 MarchFirst, Inc.(1) 11,791,406
76,600 Omnicom Group Inc. 6,822,188
27,600 Proxicom, Inc.(1) 1,320,488
110,600 TMP Worldwide Inc.(1) 8,160,206
318,900 True North Communications Inc. 14,031,600
--------------
79,820,941
--------------
INTERNET -- 1.5%
1,305,200 America Online Inc.(1) 68,849,300
30,700 InfoSpace, Inc.(1) 1,697,134
289,200 Yahoo! Inc.(1) 35,833,688
--------------
106,380,122
--------------
Shares Value
--------------------------------------------------------------------------------
LEISURE -- 0.4%
523,500 Brunswick Corp. $ 8,670,469
283,900 Eastman Kodak Co. 16,892,050
--------------
25,562,519
--------------
LIFE & HEALTH INSURANCE -- 1.5%
28,300 American General Corp. 1,726,300
597,600 CIGNA Corp. 55,875,600
1,187,500 Lincoln National Corp. 42,898,438
343,700 MetLife, Inc.(1) 7,239,181
46,300 Torchmark Corp. 1,143,031
--------------
108,882,550
--------------
MEDIA -- 2.6%
833,700 Comcast Corp. Cl A(1) 33,790,903
2,064,700 Disney (Walt) Co. 80,136,169
265,200 Gannett Co., Inc. 15,862,275
95,400 Hispanic Broadcasting Corp.(1) 3,160,125
268,500 MediaOne Group Inc.(1) 17,805,242
239,100 Time Warner Inc. 18,171,600
594,500 Tribune Co. 20,807,500
--------------
189,733,814
--------------
MEDICAL PRODUCTS & SUPPLIES -- 3.0%
258,400 Bard (C.R.), Inc. 12,435,500
319,800 Bausch & Lomb Inc. Cl A 24,744,525
251,800 Baxter International, Inc. 17,704,688
39,600 Beckman Coulter Inc. 2,311,650
95,000 Cytyc Corp.(1) 5,067,656
1,215,600 Johnson & Johnson 123,839,250
621,900 Mallinckrodt Inc. 27,013,781
--------------
213,117,050
--------------
MEDICAL PROVIDERS & SERVICES -- 0.6%
460,500 Oxford Health Plans, Inc.(1) 10,965,656
45,200 PacifiCare Health Systems, Inc.(1) 2,719,062
337,100 United HealthCare Corp. 28,906,325
--------------
42,591,043
--------------
MINING & METALS -- 0.4%
195,100 Alcan Aluminium Ltd. ADR 6,048,100
45,000 Alcoa Inc. 1,305,000
222,400 Ball Corporation 7,158,500
229,000 Nucor Corp. 7,599,938
70,300 USX-U.S. Steel Group 1,304,944
385,300 Worthington Industries, Inc. 4,045,650
--------------
27,462,132
--------------
MOTOR VEHICLES & PARTS -- 1.3%
1,221,700 Ford Motor Co. 52,533,100
464,900 General Motors Corp. 26,993,256
65,500 Johnson Controls, Inc. 3,360,969
183,200 PACCAR Inc. 7,270,750
159,960 Visteon Corp.(1) 1,939,515
--------------
92,097,590
--------------
See Notes to Financial Statements www.americancentury.com 17
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
MULTI-INDUSTRY -- 0.4%
569,400 Tyco International Ltd. $ 26,975,325
--------------
OIL REFINING -- 0.6%
102,200 Texaco Inc. 5,442,150
1,509,800 Ultramar Diamond Shamrock Corp. 37,461,912
--------------
42,904,062
--------------
OIL SERVICES -- 0.5%
213,600 BJ Services Co.(1) 13,350,000
116,100 Ensco International Inc. 4,157,831
137,300 Noble Drilling Corp.(1) 5,655,044
388,400 Tidewater Inc. 13,982,400
--------------
37,145,275
--------------
PROPERTY & CASUALTY INSURANCE -- 1.3%
265,600 Ambac Financial Group, Inc. 14,558,200
202,275 American International Group, Inc. 23,767,312
22,000 Hartford Financial Services Group
Inc. (The) 1,230,625
318,100 MGIC Investment Corp. 14,473,550
429,700 PMI Group, Inc. (The) 20,410,750
395,800 Radian Group Inc. 20,482,650
--------------
94,923,087
--------------
PUBLISHING -- 0.3%
683,900 Deluxe Corp. 16,114,394
131,300 Knight-Ridder, Inc. 6,983,519
--------------
23,097,913
--------------
RAILROADS -- 0.1%
253,300 Burlington Northern Santa Fe Corp. 5,810,069
127,300 Union Pacific Corp. 4,733,969
--------------
10,544,038
--------------
RESTAURANTS -- 0.3%
140,200 Brinker International, Inc.(1) 4,100,850
704,000 Darden Restaurants, Inc. 11,440,000
321,300 Tricon Global Restaurants Inc.(1) 9,076,725
--------------
24,617,575
--------------
SECURITIES & ASSET MANAGEMENT -- 1.8%
52,100 AXA Financial, Inc. 1,771,400
308,500 Lehman Brothers Holdings Inc. 29,172,531
149,300 Merrill Lynch & Co., Inc. 17,169,500
983,000 Morgan Stanley Dean Witter & Co. 81,834,750
--------------
129,948,181
--------------
SEMICONDUCTOR -- 6.5%
51,541 Advanced Energy Industries, Inc.(1) 3,037,698
135,100 Advanced Micro Devices, Inc.(1) 10,436,475
181,183 Agilent Technologies, Inc.(1) 13,362,246
190,400 Analog Devices, Inc.(1) 14,470,400
539,800 Applied Materials, Inc.(1) 48,936,244
194,000 Asyst Technologies, Inc.(1) 6,608,125
Shares Value
--------------------------------------------------------------------------------
184,200 Conexant Systems, Inc.(1) $ 8,973,994
144,000 Cypress Semiconductor Corp.(1) 6,084,000
396,000 Integrated Device Technology, Inc.(1) 23,760,000
1,645,600 Intel Corp. 219,944,725
75,000 International Rectifier Corp.(1) 4,200,000
309,200 Kulicke & Soffa Industries, Inc.(1) 18,310,438
343,600 Lam Research Corp.(1) 12,895,738
135,000 National Semiconductor Corp.(1) 7,661,250
97,700 PerkinElmer, Inc. 6,460,412
67,800 SanDisk Corp.(1) 4,150,631
241,400 Teradyne, Inc.(1) 17,742,900
635,400 Texas Instruments Inc. 43,644,038
15,400 Varian Semiconductor Equipment
Associates, Inc.(1) 967,794
--------------
471,647,108
--------------
SPECIALTY STORES -- 1.7%
145,900 Best Buy Co., Inc.(1) 9,228,175
337,900 Circuit City Stores-Circuit City
Group 11,214,056
1,079,950 Home Depot, Inc. 53,930,003
20,500 Insight Enterprises, Inc.(1) 1,216,547
220,400 Lowe's Companies, Inc. 9,050,175
145,700 Michaels Stores, Inc.(1) 6,679,434
95,900 RadioShack Corp. 4,543,262
176,100 Tiffany & Co. 11,886,750
405,300 Zale Corp.(1) 14,793,450
--------------
122,541,852
--------------
TELEPHONE -- 6.2%
1,236,900 AT&T Corp. 39,116,962
1,249,700 Bell Atlantic Corp. 63,500,381
1,959,000 BellSouth Corp. 83,502,375
89,200 Dycom Industries, Inc.(1) 4,103,200
644,000 GTE Corp. 40,089,000
1,974,700 SBC Communications Inc. 85,405,775
831,100 Sprint Corp. 42,386,100
290,800 U S WEST, Inc. 24,936,100
1,449,800 WorldCom, Inc.(1) 66,554,881
--------------
449,594,774
--------------
THRIFTS -- 0.2%
653,200 GreenPoint Financial Corp. 12,247,500
--------------
TOBACCO -- 0.6%
1,186,800 Philip Morris Companies Inc. 31,524,375
586,700 UST Inc. 8,617,156
--------------
40,141,531
--------------
TRUCKING, SHIPPING & AIR FREIGHT -- 0.1%
98,200 FDX Corp.(1) 3,731,600
46,100 United Parcel Service, Inc. Cl B 2,719,900
--------------
6,451,500
--------------
18 1-800-345-2021 See Notes to Financial Statements
Income & Growth--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS -- 1.2%
165,000 ALLTEL Corp. $ 10,219,688
502,600 Nextel Communications, Inc.(1) 30,737,131
420,000 QUALCOMM Inc.(1) 25,186,875
297,200 Sprint PCS(1) 17,683,400
41,800 Telephone & Data Systems, Inc. 4,190,450
--------------
88,017,544
--------------
TOTAL COMMON STOCKS 7,102,653,043
--------------
(Cost $5,714,675,660)
EQUITY-LINKED DEBT SECURITIES -- 0.1%
SECURITIES & ASSET MANAGEMENT
87,935 Morgan Stanley Group, 8.00%,
4/30/02, EMC Corp. (Mass.),
PERQS 2,242,342
390,000 Morgan Stanley Group, 6.00%,
5/30/02, Home Depot, Inc.,
PERQS 4,972,500
--------------
TOTAL EQUITY-LINKED DEBT SECURITIES 7,214,842
--------------
(Cost $7,511,718)
TEMPORARY CASH INVESTMENTS -- 1.5%*
Repurchase Agreement, BA Security Services,
Inc., (U.S. Treasury obligations), in a joint
trading account at 6.23%, dated 6/30/00,
due 7/3/00 (Delivery value $107,555,810) 107,500,000
--------------
(Cost $107,500,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $7,217,367,885
==============
(Cost $5,829,687,378)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Loss
--------------------------------------------------------------------------------
222 S&P 500 September
Futures 2000 $81,668,250 $(886,890)
=======================================
* Futures contracts typically are based on a stock index, such as the S&P 500,
and 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 have full exposure to stocks and have easy access to the money.
Temporary cash investments, less the required reserves for futures contracts,
are 0.4%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
PERQS = Performance Equity-Linked Redemption Quarterly-Pay Securities
(1) Non-income producing.
(2) Industry or category is less than 0.05% of total investment securities.
See Notes to Financial Statements www.americancentury.com 19
Small Cap Quantitative--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 2000
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
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 9.29% 6.93% 9.20% -- 9.29% 6.93%
1 YEAR 18.69% 14.43% 27.14% 100 OUT OF 194 -- --
========================================================================================================================
AVERAGE ANNUAL RETURNS
LIFE OF FUND 10.20% 10.48% 18.97% 105 OUT OF 167 25.96%(1) 20.25%(1)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
See pages 44-46 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND Value on 6/30/00 S&P SmallCap 600 Index
$12,103 Small Cap Quantitative $12,043
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 $11,019 $11,319
1/31/00 $10,658 $10,968
2/29/00 $12,003 $12,437
3/31/00 $11,862 $11,977
4/30/00 $11,842 $11,772
5/31/00 $11,421 $11,424
6/30/00 $12,043 $12,103
$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.
20 1-800-345-2021
Small Cap Quantitative--Q&A
--------------------------------------------------------------------------------
[photo of Bill Martin] [photo of Matti von Turk]
An interview with Bill Martin and Matti von Turk, portfolio managers on the
Small Cap Quantitative fund investment team.
HOW DID SMALL CAP QUANTITATIVE PERFORM DURING THE FIRST HALF OF 2000?
The fund outperformed both its performance benchmark and the average return
of its peer group. Small Cap Quantitative's six-month return was 9.29%, compared
with the 6.93% return of its benchmark, the S&P SmallCap 600, and the 9.20%
average return of the 217 small-cap core funds tracked by Lipper Inc.* (See the
previous page for other fund performance comparisons.)
WHY DID THE FUND PERFORM SO WELL COMPARED WITH ITS BENCHMARK INDEX?
Most of the fund's outperformance came in the first quarter of the year,
when technology and biotechnology stocks were leading the small-cap market
higher. Our stock selection among tech and biotech companies was quite
successful--eight of Small Cap Quantitative's best performers were in these two
sectors--and it gave us a leg up on the index.
CAN YOU GIVE A REFRESHER ON YOUR STOCK-PICKING PROCESS?
We use a computer model to analyze and rank about 1,500 small-cap stocks.
The model is structured to strike a balance between growth and value, and it
combines several growth and value components into a blended stock-picking
approach. The main component of the model is GARP, which stands for "growth at a
reasonable price."
We use a slightly different model to evaluate technology stocks. We found
that the GARP element was not very effective when it came to tech stocks.
Instead, the model focuses on "growth on a sustainable basis." This new model
has worked well since we began using it at the beginning of the year.
An important part of the stock-picking process is our own analysis. We give
the model's results a "reasonableness check" and review additional information
outside of the model that may affect the rankings.
AND YOU JUST INVEST IN THE HIGHEST- RANKING STOCKS?
Sort of. Our performance target is the S&P SmallCap 600, which we think is
an excellent diversified representation of the small-cap market. We want Small
Cap Quantitative to have many of the same basic characteristics as the index, so
we run our model's favorite stock picks through an "optimizer." This is another
computer program that makes sure the portfolio's industry weightings and risk
features are similar to those of the index.
We count on our stock-picking model to select the stocks that provide the
highest return potential, and we rely on the optimizer to control risk and keep
the fund from straying too far from the index.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"THE FUND OUTPERFORMED BOTH ITS PERFORMANCE BENCHMARK AND THE AVERAGE RETURN OF
ITS PEER GROUP."
PORTFOLIO AT A GLANCE
6/30/00 12/31/99
NO. OF COMPANIES 182 151
DIVIDEND YIELD 0.57% 0.57%
MEDIAN P/E RATIO 20.4 20.5
PORTFOLIO TURNOVER 43%(1) 148%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.88%(3) 0.88%
(1) Six months ended 6/30/00.
(2) Year ended 12/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 46-47.
www.americancentury.com 21
Small Cap Quantitative--Q&A
--------------------------------------------------------------------------------
(Continued)
LET'S TALK ABOUT SOME SPECIFIC FUND HOLDINGS. WHAT STOCKS CONTRIBUTED THE MOST
TO SMALL CAP QUANTITATIVE'S RETURN?
Health care was our best sector, mainly because of the strong performance
of biotechnology stocks. The catalyst was the effort to map out the human genome
and the vast potential for using this knowledge to fight disease. The attention
surrounding the project provided a boost to the entire biotech industry.
The fund held overweights in several top-performing biotech stocks.
Examples included Vertex Pharmaceuticals (up 204% for the six-month period) and
Protein Design Labs (up 136%).
Another favorable overweight--the biggest one currently in the
portfolio--was IDEC Pharmaceuticals (up 19%). IDEC, which has successfully
developed several cancer-treatment therapies, was Small Cap Quantitative's
largest holding six months ago and is still in the fund's top ten.
YOU MENTIONED EARLIER THAT TECHNOLOGY STOCKS WERE ALSO STRONG PERFORMERS. WHAT
STOCKS DID YOUR MODELS LIKE IN THIS AREA?
There were a couple of themes within our technology holdings. The first was
the huge demand for wireless devices like cellular phones and mobile radios. In
1999, cell phone sales numbered 200 million units, and that's expected to more
than double this year.
We focused on companies that make circuitry and components for the wireless
industry. A great example is Powerwave Technologies (up 126%), which makes
amplifiers that increase the signal strength of wireless devices. Another top
performer was Vishay Intertechnology (up 80%), the largest maker of electronic
components for cell phones.
These stocks soared in the first part of the year, but they got beaten up a
little in June as analysts began to reduce their forecasts for wireless demand.
Still, many of these companies have order backlogs beyond the end of this year,
and their earnings continue to grow extremely fast.
Another theme was the expansion of demand for computer chips.
DID THIS ALSO STEM FROM THE WIRELESS EXPLOSION?
Exactly. Chips are now used in everything from cell phones to hand-held
computers. As a result, earnings at semiconductor companies soared, attracting
the attention of our models.
One of our biggest overweights was Integrated Device Technology (up 106%),
a company that has been increasing its production of chips for
telecommunications equipment. Other good performers included International
Rectifier (up 115%), which manufactures chips for electrical power conversion,
and Burr-Brown (up 140%), which was recently acquired by Texas Instruments.
That was another minor theme in the portfolio--several fund holdings were
acquired by other companies.
IS THAT WHY YOU WERE INVESTED IN THOSE COMPANIES?
No, it's just part of the landscape in the small-cap market. Smaller firms
are often acquisition targets for larger companies looking to expand or
diversify. In some cases, a company simply wants to join forces with a growing
competitor.
Other fund holdings involved in acquisitions included Ben & Jerry's (up
76%), the socially responsible ice cream maker that was bought by Unilever, and
US Trust (up 83%), a financial services firm bought by Charles Schwab.
[left margin]
"TECHNOLOGY AND BIOTECHNOLOGY WERE THE BIG POSITIVE STORIES--EIGHT OF OUR TEN
BEST PERFORMERS WERE IN THESE TWO SECTORS."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
EXPEDITORS
INTERNATIONAL OF
WASHINGTON, INC. 1.4% 1.5%
VINTAGE PETROLEUM,
INC. 1.2% 0.9%
KEMET CORP. 1.2% 1.0%
TECHNITROL, INC. 1.2% --
CULLEN/FROST
BANKERS, INC. 1.2% 1.5%
LATTICE SEMI-
CONDUCTOR CORP. 1.2% 0.9%
IDEC PHARMACEUTICALS
CORP. 1.2% 1.9%
EARTHGRAINS COMPANY 1.1% 0.8%
INSIGHT ENTERPRISES,
INC. 1.1% 0.6%
SEI INVESTMENTS CO. 1.1% 1.3%
22 1-800-345-2021
Small Cap Quantitative--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT ABOUT OTHER AREAS IN THE PORTFOLIO?
Energy stocks benefited from rising oil and gasoline prices. Our best
performers included Vintage Petroleum (up 87%), the fund's second-largest
holding, and Oceaneering International (up 27%).
Food and beverage stocks were also positive contributors to fund
performance, especially when evidence of slower economic growth appeared in the
second quarter. Food and beverage stocks tend to be less sensitive to the ebbs
and flows of the economy, so they become most attractive when the economy
weakens.
In addition to good performance from Ben & Jerry's, we benefited from an
overweight in Earthgrains (up 21%), one of our top ten holdings. Earthgrains
makes bread and other baked goods, both in the U.S. and in several overseas
markets.
WE HAVEN'T HEARD ANY BAD NEWS YET. WERE ALL OF THE FUND'S STOCKS UP DURING THE
PERIOD?
Not at all. There are always going to be some disappointments in the
portfolio. The weakest performers across the board were basic materials
stocks--chemicals, forest products, and mining companies. Chemical company
profits were hurt by rising oil and raw materials prices, while many forest
product and mining stocks felt the sting of higher interest rates, which slowed
the economy in general and the housing market in particular.
Another area hit hard by rising rates was retail stores and other cyclical
consumer stocks. Perceptions of reduced consumer spending weighed on many of
these companies.
Technology consulting firms seemed to have a cloud hanging over them.
First, they lost a major source of revenue when Y2K came and went without a
hitch. Then Internet companies began to see their funding dry up, and
consultants were the first to go.
Our worst individual performer was a consulting firm called Marchfirst
(down 66%). The company acquired two other companies but had difficulty
integrating them, and employee turnover was very heavy. We still like
Marchfirst's prospects--its earnings are growing rapidly, and the stock now
looks very attractive from a value perspective.
LOOKING AHEAD, WHAT DO YOU SEE IN STORE FOR SMALL-CAP STOCKS DURING THE REST OF
THE YEAR?
After lagging large-cap stocks for the past few years, small-cap stocks are
finally attracting some attention from investors. The outlook is still bright
for small-caps--earnings growth remains healthy, and despite their recent
outperformance, small-cap stocks continue to have lower valuations than
large-caps.
Right now, we appear to be in a transitional period that is wringing some
of the past excesses out of the market. That's likely to mean more of the
extreme day-to-day volatility we saw in the first half of the year.
The economy may also be an important factor in the second half of the year.
More interest rate increases by the Federal Reserve or further evidence of
slower economic growth could lead to weaker corporate earnings and lower stock
prices.
WHAT ARE YOUR PLANS FOR SMALL CAP QUANTITATIVE IN THE COMING MONTHS?
We intend to stay true to our long-term investment approach, staying fully
invested in small-cap stocks and relying on our quantitative models to steer us
toward the best companies in each industry.
[right margin]
"AFTER LAGGING LARGE-CAP STOCKS FOR THE PAST FEW YEARS, SMALL-CAP STOCKS ARE
FINALLY ATTRACTING SOME ATTENTION FROM INVESTORS."
FIVE LARGEST OVERWEIGHTS
COMPARED WITH THE S&P 600 (AS OF 6/30/00)
% OF % OF
FUND'S S&P
STOCKS 600
IDEC PHARMACEUTICALS
CORP. 1.21% 0%
MERCURY INTERACTIVE
CORP. 1.10% 0%
COMMSCOPE, INC. 1.04% 0%
VALASSIS
COMMUNICATIONS,
INC. 1.03% 0%
INTEGRATED DEVICE
TECHNOLOGY, INC. 0.96% 0%
FIVE LARGEST UNDERWEIGHTS
COMPARED WITH THE S&P 600 (AS OF 6/30/00)
% OF % OF
FUND'S S&P
STOCKS 600
DALLAS SEMICONDUCTOR
CORP. 0% 0.65%
TRUE NORTH
COMMUNICATIONS 0% 0.58%
PLEXUS CORP. 0% 0.55%
HENRY (JACK) &
ASSOCIATES 0% 0.54%
UNIVERSAL HEALTH
SERVICES, INC. CL B 0% 0.52%
www.americancentury.com 23
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.0%
AIRLINES -- 0.4%
2,100 SkyWest, Inc. $ 77,831
-----------
ALCOHOL -- 0.7%
2,800 Canandaigua Brands, Inc. Cl A(1) 141,225
-----------
APPAREL & TEXTILES -- 1.4%
3,400 Guess?, Inc.(1) 47,600
2,600 Quiksilver, Inc.(1) 40,462
2,700 Timberland Co. (The)(1) 191,194
-----------
279,256
-----------
BANKS -- 3.8%
1,500 City National Corp. 53,250
9,000 Cullen/Frost Bankers, Inc. 236,812
6,200 Hamilton Bancorp Inc.(1) 109,081
4,884 Hudson United Bancorp 109,585
3,392 Imperial Bancorp(1) 53,000
4,700 Silicon Valley Bancshares(1) 200,484
-----------
762,212
-----------
CHEMICALS -- 2.1%
8,100 Geon Co. 149,850
2,600 H.B. Fuller Co. 118,219
6,000 Olin Corp. 99,000
1,600 Scotts Co. (The) Cl A(1) 58,400
-----------
425,469
-----------
CLOTHING STORES -- 1.3%
8,700 Cato Corp. Cl A 101,138
11,100 Wilsons The Leather Experts Inc.(1) 161,991
-----------
263,129
-----------
COMPUTER HARDWARE &
BUSINESS MACHINES -- 2.7%
1,500 Black Box Corporation(1) 118,734
2,450 Cybex Computer Products Corp.(1) 103,283
500 Digital Lightwave, Inc.(1) 50,297
4,400 In Focus Systems, Inc.(1) 141,350
3,000 Zebra Technologies Corp. Cl A(1) 132,375
-----------
546,039
-----------
COMPUTER SOFTWARE -- 5.2%
1,200 Adobe Systems Inc. 155,888
2,700 Dendrite International, Inc.(1) 90,028
3,000 FileNet Corp.(1) 55,031
600 HNC Software Inc.(1) 37,125
1,900 J.D. Edwards & Company(1) 28,559
2,500 Lightbridge, Inc.(1) 59,766
1,100 Mercury Computer Systems, Inc.(1) 35,612
2,200 Mercury Interactive Corp.(1) 212,919
1,500 National Instruments Corp.(1) 65,531
4,400 Progress Software Corp.(1) 80,575
1,800 Remedy Corp.(1) 100,406
Shares Value
--------------------------------------------------------------------------------
1,500 Symantec Corp.(1) $ 80,953
1,500 Synopsys, Inc.(1) 51,797
-----------
1,054,190
-----------
CONSTRUCTION & REAL PROPERTY -- 1.8%
3,800 M/I Schottenstein Homes, Inc. 59,850
1,800 NVR, Inc.(1) 102,600
3,600 Pulte Corp. 77,850
5,400 Ryland Group, Inc. (The) 119,475
-----------
359,775
-----------
CONSUMER DURABLES -- 1.0%
5,600 Furniture Brands International,
Inc.(1) 84,700
5,000 Mohawk Industries, Inc.(1) 108,750
-----------
193,450
-----------
DEFENSE/AEROSPACE -- 0.4%
1,100 Alliant Techsystems Inc.(1) 74,181
-----------
DEPARTMENT STORES -- 0.2%
3,400 ShopKo Stores, Inc.(1) 52,275
-----------
DRUGS -- 7.8%
1,900 ALPHARMA INC. 118,275
2,250 Barr Laboratories, Inc.(1) 100,828
3,600 Bio-Technology General Corp.
ADR(1) 47,475
1,600 Cambrex Corp. 72,000
2,100 Cephalon, Inc.(1) 127,706
1,200 COR Therapeutics, Inc.(1) 102,338
1,200 Enzo Biochem, Inc.(1) 82,800
300 Human Genome Sciences, Inc.(1) 40,003
600 Incyte Pharmaceuticals, Inc.(1) 49,294
4,350 Jones Pharma Inc. 173,592
1,900 Medicis Pharmaceutical Corp.
Cl A(1) 108,300
1,400 Priority Healthcare Corp. Cl B(1) 103,819
1,100 Protein Design Labs, Inc.(1) 181,328
1,700 Regeneron Pharmaceuticals, Inc.(1) 50,734
1,500 ResMed Inc. ADR(1) 40,125
1,700 Vertex Pharmaceuticals, Inc.(1) 179,084
-----------
1,577,701
-----------
ELECTRICAL EQUIPMENT -- 8.7%
2,100 Aspect Telecommunications
Corp.(1) 82,491
1,900 C-COR.net Corp.(1) 51,241
2,600 C-Cube Microsystems Inc.(1) 51,025
2,600 Cognex Corp.(1) 134,469
1,300 Coherent, Inc.(1) 108,916
1,800 Credence Systems Corp.(1) 99,281
4,500 Digital Microwave Corp.(1) 171,422
1,251 Harmonic Inc.(1) 31,080
6,400 InterVoice-Brite, Inc.(1) 42,200
9,700 KEMET Corp.(1) 243,106
800 Polycom, Inc.(1) 75,250
24 1-800-345-2021 See Notes to Financial Statements
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
3,300 Powerwave Technologies, Inc.(1) $ 145,200
2,500 Technitrol, Inc. 242,188
800 Terayon Communication
Systems, Inc.(1) 51,375
3,750 Vishay Intertechnology, Inc.(1) 142,266
1,800 Xircom, Inc.(1) 85,556
-----------
1,757,066
-----------
ELECTRICAL UTILITIES -- 0.6%
4,500 Central Maine Power Co. 131,906
-----------
ENERGY RESERVES & PRODUCTION -- 2.3%
3,000 Newfield Exploration Company(1) 117,375
4,200 Pogo Producing Co. 92,925
11,000 Vintage Petroleum, Inc. 248,188
-----------
458,488
-----------
FINANCIAL SERVICES -- 1.9%
8,600 Doral Financial Corp. ADR 98,094
1,900 Express Scripts, Inc. Cl A(1) 117,266
4,000 Gallagher (Arthur J.) & Co. 168,000
-----------
383,360
-----------
FOOD & BEVERAGE -- 2.7%
11,600 Earthgrains Company 225,475
2,800 Michael Foods, Inc. 69,125
1,400 Pilgrim's Pride Corp. Cl A 7,612
7,300 Supervalu Inc. 139,156
8,000 Tasty Baking Co. 102,500
-----------
543,868
-----------
FOREST PRODUCTS & PAPER -- 0.9%
4,900 Boise Cascade Corp. 126,788
1,700 United Stationers Inc.(1) 55,091
-----------
181,879
-----------
GAS & WATER UTILITIES -- 2.7%
10,900 Cascade Natural Gas Corp. 181,894
1,100 E'town Corp. 73,081
2,900 Equitable Resources Inc. 139,925
2,000 Kinder Morgan, Inc. 69,125
2,800 Piedmont Natural Gas Co., Inc. 74,375
-----------
538,400
-----------
GROCERY STORES -- 0.1%
2,300 Casey's General Stores, Inc. 23,934
-----------
HEAVY ELECTRICAL EQUIPMENT -- 1.5%
4,900 CommScope, Inc.(1) 200,900
4,900 Smith (A.O.) Corp. 102,594
-----------
303,494
-----------
HEAVY MACHINERY -- 0.5%
4,100 Astec Industries, Inc.(1) 104,294
-----------
HOME PRODUCTS -- 0.2%
2,200 Tupperware Corp. 48,400
-----------
Shares Value
--------------------------------------------------------------------------------
HOTELS -- 0.6%
8,500 Aztar Corp.(1) $ 131,750
-----------
INDUSTRIAL PARTS -- 2.7%
2,100 Graco Inc. 68,250
3,700 Helix Technology Corp. 144,184
3,800 Pentair, Inc. 134,900
2,600 Tecumseh Products Cl A 99,369
1,200 The Toro Co. 39,525
2,600 York International Corp. 67,925
-----------
554,153
-----------
INDUSTRIAL SERVICES -- 1.5%
6,200 Avis Rent A Car, Inc.(1) 116,250
3,100 Insurance Auto Auctions, Inc.(1) 64,906
7,000 Spherion Corp.(1) 124,250
-----------
305,406
-----------
INFORMATION SERVICES -- 7.4%
3,700 ADVO, Inc.(1) 155,400
5,900 American Management System,
Inc.(1) 193,594
2,100 Catalina Marketing Corp.(1) 214,200
6,900 MarchFirst, Inc.(1) 126,141
2,700 MAXIMUS, Inc.(1) 59,738
4,500 MedQuist Inc.(1) 153,562
4,900 Profit Recovery Group
International, Inc. (The)(1) 81,309
5,400 SEI Investments Co. 217,012
2,200 Tetra Tech, Inc.(1) 50,394
3,400 URS Corp.(1) 47,600
5,250 Valassis Communications, Inc.(1) 200,156
-----------
1,499,106
-----------
INTERNET -- 1.2%
6,300 Netpliance, Inc.(1) 56,897
1,900 RSA Security Inc.(1) 131,931
1,600 Verity, Inc.(1) 60,800
-----------
249,628
-----------
LEISURE -- 0.9%
4,750 Fossil, Inc.(1) 89,953
5,000 Pinnacle Entertainment, Inc.(1) 97,188
-----------
187,141
-----------
LIFE & HEALTH INSURANCE -- 0.2%
1,100 Delphi Financial Group, Inc. Cl A 37,331
-----------
MEDIA -- 0.2%
1,400 Westwood One, Inc.(1) 47,775
-----------
MEDICAL PRODUCTS & SUPPLIES -- 5.0%
1,000 Biomatrix, Inc.(1) 22,625
4,300 ICU Medical, Inc.(1) 114,756
2,000 IDEC Pharmaceuticals Corp.(1) 234,562
1,800 Invacare Corp. 47,250
1,500 Mentor Corp. 40,734
3,700 Patterson Dental Co.(1) 188,353
See Notes to Financial Statements www.americancentury.com 25
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
1,000 Techne Corp.(1) $ 131,000
2,300 Varian Medical Systems, Inc.(1) 89,988
3,600 Wesley Jessen VisionCare, Inc.(1) 135,338
-----------
1,004,606
-----------
MEDICAL PROVIDERS & SERVICES -- 1.8%
5,100 Oxford Health Plans, Inc.(1) 121,444
1,900 Quest Diagnostics Inc.(1) 135,969
4,400 Renal Care Group Inc.(1) 107,662
-----------
365,075
-----------
MINING & METALS -- 1.5%
1,500 Ball Corporation 48,281
2,300 Commonwealth Industries, Inc. 13,584
4,000 Mueller Industries, Inc.(1) 112,000
2,000 Stillwater Mining Co. (1) 55,750
4,000 Valmont Industries, Inc. 79,375
-----------
308,990
-----------
MOTOR VEHICLES & PARTS -- 1.4%
2,300 Arvin Industries, Inc. 39,962
2,300 Borg-Warner Automotive, Inc. 80,788
4,300 Gentex Corp.(1) 107,769
1,700 Navistar International Corp.(1) 52,806
-----------
281,325
-----------
OIL SERVICES -- 1.4%
7,500 Oceaneering International, Inc.(1) 142,500
4,800 Patterson Energy, Inc.(1) 136,650
-----------
279,150
-----------
PROPERTY & CASUALTY INSURANCE -- 1.2%
2,300 PMI Group, Inc. (The) 109,250
2,400 Radian Group Inc. 124,200
-----------
233,450
-----------
PUBLISHING -- 0.5%
2,800 McClatchy Newspapers, Inc. 92,750
-----------
RESTAURANTS -- 1.4%
8,300 Darden Restaurants, Inc. 134,875
5,700 Jack in the Box Inc.(1) 140,362
-----------
275,237
-----------
SECURITIES & ASSET MANAGEMENT -- 1.7%
1,600 Dain Rauscher Corp. 105,600
6,000 ITLA Capital Corp.(1) 84,375
4,626 Schwab (Charles) Corp. 155,549
-----------
345,524
-----------
SEMICONDUCTOR -- 7.9%
2,000 Alpha Industries, Inc.(1) 88,187
2,100 Burr-Brown Corp.(1) 182,044
1,400 CTS Corp. 63,000
3,600 Cypress Semiconductor Corp.(1) 152,100
Shares Value
--------------------------------------------------------------------------------
1,500 Electro Scientific Industries, Inc.(1) $ 66,047
1,900 Electroglas, Inc.(1) 40,909
3,100 Integrated Device Technology, Inc.(1) 186,000
3,300 International Rectifier Corp.(1) 184,800
2,000 Kulicke & Soffa Industries, Inc.(1) 118,438
3,400 Lattice Semiconductor Corp.(1) 235,131
3,600 Micrel, Inc.(1) 156,488
2,200 Novellus Systems, Inc.(1) 124,506
-----------
1,597,650
-----------
SPECIALTY STORES -- 3.0%
3,700 Insight Enterprises, Inc.(1) 219,572
4,000 Linens 'n Things, Inc.(1) 108,500
2,900 Michaels Stores, Inc.(1) 132,947
5,300 NBTY, Inc.(1) 33,622
3,000 Zale Corp.(1) 109,500
-----------
604,141
-----------
TELEPHONE -- 0.6%
2,150 Dycom Industries, Inc.(1) 98,900
3,700 Talk.com, Inc.(1) 21,391
-----------
120,291
-----------
THRIFTS -- 0.8%
5,300 Golden State Bancorp Inc.(1) 95,400
4,400 Roslyn Bancorp, Inc. 73,150
-----------
168,550
-----------
TRUCKING, SHIPPING & AIR FREIGHT -- 2.0%
5,800 Expeditors International of
Washington, Inc. 274,231
8,400 Yellow Corp.(1) 123,638
-----------
397,869
-----------
WIRELESS TELECOMMUNICATIONS -- 0.2%
1,500 Audiovox Corp. Cl A(1) 33,047
-----------
TOTAL COMMON STOCKS 19,401,767
-----------
(Cost $16,702,175)
TEMPORARY CASH INVESTMENTS -- 4.0%*
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 6.40%, dated 6/30/00,
due 7/3/00 (Delivery value $800,427) 800,000
-----------
(Cost $800,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $20,201,767
===========
(Cost $17,502,175)
26 1-800-345-2021 See Notes to Financial Statements
Small Cap Quantitative--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
FUTURES CONTRACTS
Underlying
Expiration Face Amount Unrealized
Purchased Date at Value Loss
--------------------------------------------------------------------------------
3 Russell 2000 September
Futures 2000 $782,250 $(5,148)
======================================
* Futures contracts typically are based on a stock index, such as the S&P 500,
and 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 have full exposure to stocks and have easy access to the money.
Temporary cash investments, less the required reserves for futures contracts,
are 0.1%.
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 27
<TABLE>
<CAPTION>
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).
EQUITY INCOME & SMALL CAP
JUNE 30, 2000 (UNAUDITED) GROWTH GROWTH QUANTITATIVE
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of
$2,007,299,135, $5,829,687,378,
and $17,502,175,
respectively) (Note 3) ............. $ 2,511,885,010 $ 7,217,367,885 $ 20,201,767
Cash ................................. -- 3,232,259 --
Receivable for investments sold ...... 13,968,624 8,379,534 299,834
Receivable for variation
margin on futures contracts ........ 3,680,915 5,136,579 59,637
Dividends and interest receivable .... 1,555,865 7,612,259 4,530
--------------- --------------- ---------------
2,531,090,414 7,241,728,516 20,565,768
--------------- --------------- ---------------
LIABILITIES
Disbursements in excess
of demand deposit cash ............. 61,777 -- 145,576
Payable for investments purchased .... 20,200,085 8,313,567 312,250
Accrued management fees (Note 2) ..... 1,310,414 3,752,236 13,923
Distribution fees payable (Note 2) ... 41,059 192,630 --
Service fees payable (Note 2) ........ 41,059 192,630 --
Payable for directors' fees
and expenses ....................... 8,622 25,000 68
Accrued expenses and other
liabilities ........................ 101,808 174,997 2,220
--------------- --------------- ---------------
21,764,824 12,651,060 474,037
--------------- --------------- ---------------
Net Assets ........................... $ 2,509,325,590 $ 7,229,077,456 $ 20,091,731
=============== =============== ===============
NET ASSETS CONSIST OF:
Capital (par value and
paid-in surplus) ................... $ 1,864,344,766 $ 5,756,959,139 $ 15,979,796
Accumulated net investment loss ...... (29,568) (79,692) (8,815)
Accumulated undistributed
net realized gain on
investment transactions ............ 141,087,687 85,404,392 1,426,306
Net unrealized appreciation on
investments (Note 3) ............... 503,922,705 1,386,793,617 2,694,444
--------------- --------------- ---------------
$ 2,509,325,590 $ 7,229,077,456 $ 20,091,731
=============== =============== ===============
Investor Class,
$10.00 Par Value
Net assets ........................... $ 2,159,191,515 $ 6,029,989,325 $ 18,774,479
Shares outstanding ................... 83,592,301 184,399,978 3,131,333
Net asset value per share ............ $ 25.83 $ 32.70 $ 6.00
Advisor Class,
$10.00 Par Value
Net assets ........................... $ 200,756,715 $ 947,745,148 N/A
Shares outstanding ................... 7,773,538 28,988,008 N/A
Net asset value per share ............ $ 25.83 $ 32.69 N/A
Institutional Class,
$10.00 Par Value
Net assets ........................... $ 149,377,360 $ 251,342,983 $ 1,317,252
Shares outstanding ................... 5,783,107 7,685,468 219,540
Net asset value per share ............ $ 25.83 $ 32.70 $ 6.00
</TABLE>
28 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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.
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
EQUITY INCOME & SMALL CAP
GROWTH GROWTH QUANTITATIVE
INVESTMENT INCOME (L0SS)
Income:
<S> <C> <C> <C>
Dividends (net of foreign taxes
withheld of $14,381, $134,141,
and $140, respectively) ........ $12,018,311 $49,885,689 $47,745
Interest ......................... 2,172,500 4,818,411 24,348
-------------- -------------- ------------
14,190,811 54,704,100 72,093
-------------- -------------- ------------
Expenses (Note 2):
Management fees .................. 7,688,361 22,226,754 79,033
Distribution fees --
Advisor Class ................. 217,502 1,004,171 --
Service fees -- Advisor Class .... 217,502 1,004,171 --
Directors' fees and expenses ..... 31,155 97,132 1,875
-------------- -------------- ------------
8,154,520 24,332,228 80,908
-------------- -------------- ------------
Net investment income (loss) ..... 6,036,291 30,371,872 (8,815)
-------------- -------------- ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(NOTE 3)
Net realized gain on investments . 147,873,990 117,531,137 1,641,832
Change in net unrealized
appreciation on investments .... (163,834,189) (418,439,286) (180,228)
-------------- -------------- ------------
Net realized and unrealized
gain (loss) on investments ..... (15,960,199) (300,908,149) 1,461,604
-------------- -------------- ------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations ................ $(9,923,908) $(270,536,277) $1,452,789
============== ============== ============
</TABLE>
See Notes to Financial Statements www.americancentury.com 29
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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.
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1999
EQUITY GROWTH INCOME & GROWTH
Increase in Net Assets 2000 1999 2000 1999
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ............ $6,036,291 $17,130,940 $30,371,872 $61,649,574
Net realized gain (loss)
on investments ................. 147,873,990 56,400,161 117,531,137 (12,882,683)
Change in net unrealized
appreciation
on investments ................. (163,834,189) 316,556,243 (418,439,286) 962,722,731
--------------- -------------- -------------- --------------
Net increase (decrease)
in net assets
resulting from operations ...... (9,923,908) 390,087,344 (270,536,277) 1,011,489,622
--------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ................. (5,523,217) (16,885,363) (26,627,278) (58,713,804)
Advisor Class .................. (249,706) (667,458) (2,673,616) (2,682,788)
Institutional Class ............ (385,867) (67,824) (1,150,670) (1,320,265)
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 ................. (22,342,146) (38,041,404) -- --
Advisor Class .................. (1,852,380) (2,103,968) -- --
Institutional Class ............ (675,745) (128,588) -- --
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 ............. (31,029,061) (57,894,605) (30,451,564) (74,833,540)
--------------- -------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS
(NOTE 4)
Net increase in net assets
from capital share
transactions ................... 85,820,216 24,441,106 310,934,382 1,866,804,226
--------------- -------------- -------------- --------------
Net increase in net assets ....... 44,867,247 356,633,845 9,946,541 2,803,460,308
NET ASSETS
Beginning of period ..............2,464,458,343 2,107,824,498 7,219,130,915 4,415,670,607
--------------- -------------- -------------- --------------
End of period ....................$2,509,325,590 $2,464,458,343 $7,229,077,456 $7,219,130,915
=============== ============== ============== ==============
Accumulated undistributed
net investment income
(loss) ......................... $(29,568) $92,931 $(79,692) --
=============== ============== ============== ==============
</TABLE>
30 1-800-345-2021 See Notes to Financial Statements
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
(Continued)
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1999
SMALL CAP QUANTITATIVE
2000 1999
OPERATIONS
Net investment income (loss) ............... $(8,815) $ 8,724
Net realized gain (loss) on investments .... 1,641,832 (184,204)
Change in net unrealized
appreciation on investments .............. (180,228) 1,580,571
-------------- -------------
Net increase in net assets
resulting from operations ................ 1,452,789 1,405,091
-------------- -------------
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 ............... 1,579,567 732,969
-------------- -------------
Net increase in net assets ................. 3,032,356 2,088,721
NET ASSETS
Beginning of period ........................ 17,059,375 14,970,654
-------------- -------------
End of period .............................. $20,091,731 $17,059,375
============== =============
Accumulated net investment loss ............ $(8,815) --
============== =============
See Notes to Financial Statements www.americancentury.com 31
Notes to Financial Statements
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Quantitative Equity Funds (the corporation)
is registered under the Investment Company Act of 1940 (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 Advisor
Class for Small Cap Quantitative 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 twice a 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.
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 a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
32 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the funds with investment advisory and management services
in exchange for a single, unified management fee per class. The Agreement
provides that all expenses of the funds, except brokerage commissions, taxes,
portfolio insurance, interest, fees and expenses of the directors who are not
considered "interested persons" as defined in the 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
six months ended June 30, 2000, the effective annual Investor Class management
fee was 0.67%, 0.67%, and 0.87%, 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 six
months ended June 30, 2000, were $435,004 and $2,008,342 for Equity Growth and
Income & Growth, respectively.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
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, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the six
months ended June 30, 2000, were as follows:
SMALL CAP
EQUITY GROWTH INCOME & GROWTH QUANTITATIVE
Purchases $833,863,388 $2,757,245,212 $9,463,494
Proceeds from sales $813,270,340 $2,363,150,594 $7,663,779
On June 30, 2000, 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:
SMALL CAP
EQUITY GROWTH INCOME & GROWTH QUANTITATIVE
Appreciation $610,508,857 $1,739,180,350 $4,298,014
Depreciation (110,041,196) (370,847,470) (1,675,986)
--------------- --------------- ---------------
Net $500,467,661 $1,368,332,880 $2,622,028
=============== =============== ===============
Federal Tax Cost $2,011,417,349 $5,849,035,005 $17,579,739
=============== =============== ===============
www.americancentury.com 33
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 2,000,000,000 shares to each fund.
Transactions in shares of the funds were as follows:
<TABLE>
EQUITY GROWTH INCOME & GROWTH
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C>
Designated shares ........................1,000,000,000 1,000,000,000
============= ===============
Six months ended June 30, 2000
Sold ..................................... 18,870,380 $483,358,517 50,206,678 $1,643,994,722
Issued in reinvestment of distributions .. 1,018,142 25,852,220 753,889 25,204,810
Redeemed .................................(24,586,025) (628,386,231) (53,421,055) (1,741,764,855)
------------- --------------- --------------- --------------
Net decrease ............................. (4,697,503) $(119,175,494) (2,460,488) $(72,565,323)
============= =============== =============== ==============
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
============= =============== =============== ==============
ADVISOR CLASS
Designated shares ........................ 250,000,000 250,000,000
============= ===============
Six months ended June 30, 2000
Sold ..................................... 4,019,435 $101,879,383 21,837,252 $707,958,640
Issued in reinvestment of distributions .. 80,621 2,038,230 79,016 2,634,053
Redeemed ................................. (1,652,898) (42,306,082) (12,441,845) (398,541,694)
------------- --------------- --------------- --------------
Net increase ............................. 2,447,158 $61,611,531 9,474,423 $312,050,999
============= =============== =============== ==============
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
============= =============== =============== ==============
INSTITUTIONAL CLASS
Designated shares ........................ 250,000,000 250,000,000
============= ===============
Six months ended June 30, 2000
Sold ..................................... 5,844,794 $153,305,995 4,301,587 $144,668,132
Issued in reinvestment of distributions .. 40,479 1,032,685 29,901 995,450
Redeemed ................................. (429,839) (10,954,501) (2,266,981) (74,214,876)
------------- --------------- --------------- --------------
Net increase ............................. 5,455,434 $143,384,179 2,064,507 $71,448,706
============= =============== =============== ==============
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
============= =============== =============== ==============
</TABLE>
34 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
SMALL CAP QUANTITATIVE
SHARES AMOUNT
INVESTOR CLASS
Designated shares ........................... 1,000,000,000
=============
Six months ended June 30, 2000
Sold ........................................ 1,726,917 $9,931,202
Redeemed .................................... (1,703,524) (9,519,201)
------------- -------------
Net increase ................................ 23,393 $412,001
============= =============
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
============= =============
INSTITUTIONAL CLASS
Designated shares ........................... 250,000,000
=============
Six months ended June 30, 2000
Sold ........................................ 269,497 $1,470,314
Redeemed .................................... (50,172) (302,748)
------------- -------------
Net increase ................................ 219,325 $1,167,566
============= =============
Year ended December 31, 1999(1)
Sold ........................................ 4,827 $23,183
Redeemed .................................... (4,612) (21,677)
------------- -------------
Net increase ................................ 215 $1,506
============= =============
(1) October 1, 1999 (commencement of sale) through December 31, 1999.
--------------------------------------------------------------------------------
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
six months ended June 30, 2000.
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
investment 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).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .............. $26.23 $22.71 $19.04 $15.96 $14.25 $11.53
----------- ---------- ----------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ............ 0.07(2) 0.18(2) 0.22(2) 0.27(2) 0.27 0.26
Net Realized and Unrealized
Gain (Loss)
on Investment Transactions ....... (0.13) 3.96 4.53 5.36 3.55 3.70
----------- ---------- ----------- ---------- ---------- ---------
Total From Investment Operations . (0.06) 4.14 4.75 5.63 3.82 3.96
----------- ---------- ----------- ---------- ---------- ---------
Distributions
From Net Investment Income ....... (0.07) (0.19) (0.20) (0.24) (0.26) (0.23)
From Net Realized Gains on
Investment Transactions .......... (0.27) (0.43) (0.88) (2.31) (1.85) (1.01)
----------- ---------- ----------- ---------- ---------- ---------
Total Distributions .............. (0.34) (0.62) (1.08) (2.55) (2.11) (1.24)
----------- ---------- ----------- ---------- ---------- ---------
Net Asset Value, End of Period ..... $25.83 $26.23 $22.71 $19.04 $15.96 $14.25
=========== ========== =========== ========== ========== =========
Total Return(3) .................. (0.22)% 18.47% 25.45% 36.06% 27.34% 34.56%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .............. 0.67%(4) 0.68% 0.69% 0.67% 0.63% 0.71%
Ratio of Net Investment Income
to Average Net Assets .............. 0.51%(4) 0.77% 1.07% 1.39% 1.74% 1.96%
Portfolio Turnover Rate ............ 35% 86% 89% 161% 131% 126%
Net Assets, End of Period
(in thousands) ...................$2,159,192 $2,316,164 $2,026,304 $773,425 $274,433 $159,450
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
36 1-800-345-2021 See Notes to Financial Statements
Equity Growth--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .. $26.23 $22.70 $19.04 $21.61
---------- ---------- --------- ---------
Income From Investment Operations
Net Investment Income(3) ............ 0.03 0.12 0.16 0.05
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ... (0.13) 3.98 4.54 (0.25)
---------- ---------- --------- ---------
Total From Investment Operations .... (0.10) 4.10 4.70 (0.20)
---------- ---------- --------- ---------
Distributions
From Net Investment Income .......... (0.03) (0.14) (0.16) (0.06)
From Net Realized Gains on
Investment Transactions ............. (0.27) (0.43) (0.88) (2.31)
---------- ---------- --------- ---------
Total Distributions ................. (0.30) (0.57) (1.04) (2.37)
---------- ---------- --------- ---------
Net Asset Value, End of Period ........ $25.83 $26.23 $22.70 $19.04
========== ========== ========= =========
Total Return(4) ..................... (0.34)% 18.28% 25.14% (0.50)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.92%(5) 0.93% 0.94% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ................. 0.26%(5) 0.52% 0.82% 1.14%(5)
Portfolio Turnover Rate ............... 35% 86% 89% 161%
Net Assets, End of Period
(in thousands) ...................... $200,757 $139,696 $72,954 $553
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) October 9, 1997 (commencement of sale) through December 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 37
Equity Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Institutional Class
2000(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ... $26.24 $22.71 $19.06
---------- ---------- ----------
Income From Investment Operations
Net Investment Income(3) ............. 0.09 0.23 0.27
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... (0.14) 3.97 4.51
---------- ---------- ----------
Total From Investment Operations ..... (0.05) 4.20 4.78
---------- ---------- ----------
Distributions
From Net Investment Income ........... (0.09) (0.24) (0.25)
From Net Realized Gains on
Investment Transactions .............. (0.27) (0.43) (0.88)
---------- ---------- ----------
Total Distributions .................. (0.36) (0.67) (1.13)
---------- ---------- ----------
Net Asset Value, End of Period ......... $25.83 $26.24 $22.71
========== ========== ==========
Total Return(4) ...................... (0.15)% 18.78% 25.59%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 0.47%(5) 0.48% 0.49%(5)
Ratio of Net Investment Income
to Average Net Assets .................. 0.71%(5) 0.97% 1.27%(5)
Portfolio Turnover Rate ................ 35% 86% 89%
Net Assets, End of Period
(in thousands) ....................... $149,377 $8,598 $8,566
(1) Six months ended June 30, 2000 (unaudited).
(2) January 2, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
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
investment 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).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............... $34.05 $29.25 $24.31 $20.16 $17.81 $13.92
----------- ---------- ---------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income ............. 0.14(2) 0.33(2) 0.36(2) 0.43(2) 0.44 0.42
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ...................... (1.34) 4.87 6.23 6.40 3.79 4.64
----------- ---------- ---------- ---------- ---------- ---------
Total From Investment Operations .. (1.20) 5.20 6.59 6.83 4.23 5.06
----------- ---------- ---------- ---------- ---------- ---------
Distributions
From Net Investment Income ........ (0.15) (0.33) (0.35) (0.39) (0.44) (0.42)
In Excess of Net
Investment Income ................. -- --(3) -- -- -- --
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 ............... (0.15) (0.40) (1.65) (2.68) (1.88) (1.17)
----------- ---------- ---------- ---------- ---------- ---------
Net Asset Value,
End of Period ..................... $32.70 $34.05 $29.25 $24.31 $20.16 $17.81
=========== ========== ========== ========== ========== =========
Total Return(4) ................... (3.55)% 17.96% 27.67% 34.52% 24.15% 36.88%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 0.67%(5) 0.68% 0.69% 0.65% 0.62% 0.67%
Ratio of Net Investment Income
to Average Net Assets ............... 0.89%(5) 1.08% 1.31% 1.81% 2.32% 2.61%
Portfolio Turnover Rate ............. 34% 58% 86% 102% 92% 70%
Net Assets, End of Period
(in thousands) ....................$6,029,989 $6,363,283 $4,313,575 $1,795,124 $717,695 $373,701
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 39
Income & Growth--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
<TABLE>
<CAPTION>
Advisor Class
2000(1) 1999 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .. $34.05 $29.22 $24.30 $26.36
--------- ---------- ---------- ---------
Income From Investment Operations
Net Investment Income(3) ............ 0.10 0.25 0.31 0.01
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ... (1.36) 4.87 6.22 0.25
--------- ---------- ---------- ---------
Total From Investment Operations .... (1.26) 5.12 6.53 0.26
--------- ---------- ---------- ---------
Distributions
From Net Investment Income .......... (0.10) (0.22) (0.31) (0.03)
In Excess of Net Investment Income .. -- --(4) -- --
From Net Realized Gains on
Investment Transactions ............. -- -- (1.30) (2.29)
In Excess of Net Realized Gains
on Investment Transactions .......... -- (0.07) -- --
--------- ---------- ---------- ---------
Total Distributions ................. (0.10) (0.29) (1.61) (2.32)
--------- ---------- ---------- ---------
Net Asset Value, End of Period ........ $32.69 $34.05 $29.22 $24.30
========= ========== ========== =========
Total Return(5) ..................... (3.71)% 17.65% 27.37% 1.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.92%(6) 0.93% 0.94% 0.94%(6)
Ratio of Net Investment Income
to Average Net Assets ................. 0.64%(6) 0.83% 1.06% 1.22%(6)
Portfolio Turnover Rate ............... 34% 58% 86% 102%
Net Assets, End of Period
(in thousands) ...................... $947,745 $664,412 $63,169 $3,720
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) December 15, 1997 (commencement of sale) through December 31, 1997.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) 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
2000(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period .. $34.06 $29.27 $24.29
--------- ---------- ---------
Income From Investment Operations
Net Investment Income(3) ............ 0.18 0.39 0.39
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ... (1.36) 4.90 6.26
--------- ---------- ---------
Total From Investment Operations .... (1.18) 5.29 6.65
--------- ---------- ---------
Distributions
From Net Investment Income .......... (0.18) (0.43) (0.37)
In Excess of Net Investment Income .. -- --(4) --
From Net Realized Gains on
Investment Transactions ............. -- -- (1.30)
In Excess of Net Realized Gains
on Investment Transactions .......... -- (0.07) --
--------- ---------- ---------
Total Distributions ................. (0.18) (0.50) (1.67)
--------- ---------- ---------
Net Asset Value, End of Period ........ $32.70 $34.06 $29.27
========= ========== =========
Total Return(5) ..................... (3.47)% 18.27% 27.87%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.47%(6) 0.48% 0.49%(6)
Ratio of Net Investment Income
to Average Net Assets ................. 1.09%(6) 1.28% 1.51%(6)
Portfolio Turnover Rate ............... 34% 58% 86%
Net Assets, End of Period
(in thousands) ...................... $251,343 $191,436 $38,926
(1) Six months ended June 30, 2000 (unaudited).
(2) January 28, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) 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
investment 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
2000(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ... $5.49 $5.02 $5.00
----------- ----------- ----------
Income From Investment Operations
Net Investment Income (Loss)(3) ...... --(4) --(4) --(4)
Net Realized and Unrealized Gain
on Investment Transactions ........... 0.51 0.48 0.02
----------- ----------- ----------
Total From Investment Operations ..... 0.51 0.48 0.02
----------- ----------- ----------
Distributions
From Net Investment Income ........... -- --(4) --
In Excess of Net Realized Gains
on Investment Transactions ........... -- (0.01) --
----------- ----------- ----------
Total Distributions .................. -- (0.01) --
----------- ----------- ----------
Net Asset Value, End of Period ......... $6.00 $5.49 $5.02
=========== =========== ==========
Total Return(5) ...................... 9.24% 9.76% 0.40%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 0.88%(6) 0.88% 0.94%(6)
Ratio of Net Investment Income (Loss)
to Average Net Assets ..................(0.10)%(6) 0.06% 0.20%(6)
Portfolio Turnover Rate ................ 43% 148% 30%
Net Assets, End of Period
(in thousands) ....................... $18,774 $17,058 $14,971
(1) Six months ended June 30, 2000 (unaudited).
(2) July 31, 1998 (inception) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) Annualized.
42 1-800-345-2021 See Notes to Financial Statements
Small Cap Quantitative--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
Institutional Class
2000(1) 1999(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ..... $5.49 $4.77
------------ -----------
Income From Investment Operations
Net Investment Income(3) ............... --(4) --(4)
Net Realized and Unrealized Gain
on Investment Transactions ............. 0.51 0.73
------------ -----------
Total From Investment Operations ....... 0.51 0.73
------------ -----------
Distributions
From Net Investment Income ............. -- (0.01)
------------ -----------
Net Asset Value, End of Period ........... $6.00 $5.49
============ ===========
Total Return(5) ........................ 9.32% 15.25%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................... 0.68%(6) 0.68%(6)
Ratio of Net Investment Income
to Average Net Assets .................... 0.10%(6) 0.36%(6)
Portfolio Turnover Rate .................. 43% 148%
Net Assets, End of Period ................$1,317,252 $1,180
(1) Six months ended June 30, 2000 (unaudited).
(2) October 1, 1999 (commencement of sale) through December 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) Annualized.
See Notes to Financial Statements www.americancentury.com 43
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Three classes of shares are authorized for sale by the funds: Investor
Class, Advisor Class, and Institutional Class.
INVESTOR CLASS shareholders do not pay any commissions or other fees for
purchase of fund shares directly from American Century. Investors who buy
Investor Class shares through a broker-dealer may be required to pay the
broker-dealer a transaction fee.
ADVISOR CLASS shares are sold through banks, broker-dealers, insurance
companies, and financial advisors. Advisor Class shares are subject to a 0.50%
Rule 12b-1 service and distribution fee. Half of that fee is available to pay
for recordkeeping and administrative services, and half is available to pay for
distribution services provided by the financial intermediary through which the
Advisor Class shares are purchased. The total expense ratio of the Advisor Class
is 0.25% higher than the total expense ratio of the Investor Class. The Advisor
Class had not commenced as of June 30, 2000, 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.
44 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century's quantitative equity funds are managed using computer
models as key tools in making investment decisions. A stock-ranking model
analyzes a sizable universe of stocks based on their expected return. The model
looks at both growth and value measures such as cash flow, earnings growth, and
price/earnings ratio. Once the stocks are ranked, another model creates
portfolios that balance high-ranking stocks with an overall risk level that is
comparable to each fund's benchmark index.
EQUITY GROWTH seeks capital appreciation by investing in a diversified
portfolio of common stocks. Its goal is to achieve a total return that exceeds
the total return of the S&P 500.
INCOME & GROWTH seeks current income and capital appreciation by investing
in a diversified portfolio of common stocks. Its goal is to achieve a total
return that exceeds the total return of the S&P 500. The fund's management team
also targets a dividend yield that is higher than the yield of the S&P 500.
SMALL CAP QUANTITATIVE seeks capital appreciation by investing in the
common stocks of smaller companies. Its goal is to achieve a total return that
exceeds the total return of the S&P SmallCap 600. Historically, small-cap stocks
have been more volatile than the stocks of larger, more-established companies.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The S&P 500 is composed of 500 large-capitalization stocks traded on
domestic exchanges. It is considered a broad measure of U.S. stock performance.
The S&P MIDCAP 400 is composed of 400 mid-capitalization stocks traded on
domestic exchanges. It is considered a broad measure of mid-sized stock
performance.
The S&P SMALLCAP 600 is composed of 600 small-capitalization stocks traded
on domestic exchanges. It is considered a broad measure of small-company stock
performance.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods of less than one year.
The Lipper categories for the quantitative equity funds are:
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.
[right margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
KURT BORGWARDT
BILL MARTIN
JOHN SCHNIEDWIND
JEFF TYLER
MATTI VON TURK
[photo of Quantitative Analyst Team]
Quantitative Analyst Team
www.americancentury.com 45
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year 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 $8.7 billion. This is Lipper's market-capitalization breakpoint as of June
30, 2000, 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
$2.3 billion and $8.7 billion. This is Lipper's market-capitalization breakpoint
as of June 30, 2000, 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 $2.3 billion. This is Lipper's market-capitalization breakpoint as of June
30, 2000, 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.
46 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 47
Notes
--------------------------------------------------------------------------------
48 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced 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 Technology International Discovery
Giftrust(reg.tm) Life Sciences 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 and text logo (reg.sm)]
American
Century
P.O. BOX 419200
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WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
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AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0008 American Century Investment Services, Inc.
SH-SAN-21702 (c)2000 American Century Services Corporation
<PAGE>
June 30, 2000
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
Global Gold
Global Natural Resources
[american century logo and text logo (reg.sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
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Acumation, Inc.'s Form ADV Part II.
[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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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 first half of 2000 was a period of exceptional volatility in the
financial markets, as strong economic growth ran up against coordinated interest
rate increases by world central banks. Prices for precious metals and other
commodities were further buffeted by concerns about supply and demand.
The performance of natural resources-related stocks was widely divergent,
while worries about the execution of some high-profile mergers weighed on gold
company shares. In times such as these, it pays to recall that American Century
Global Gold and Global Natural Resources are intended to play a small but
important role in diversifying a larger, long-term investment portfolio.
Despite the challenging environment, American Century Global Gold and
Global Natural Resources outperformed their respective benchmarks, though our
more pure-play management approach meant they lagged their Lipper category
averages. Our investment professionals review the period and the funds'
performance in more detail beginning on page 3.
On the corporate front, we're proud to announce that American Century's
fund performance reports, like this one, earned the Communications Seal from
DALBAR, Inc., an independent financial services research firm. DALBAR commended
us for meeting investors' needs with an attractive document that's easy to read
and understand.
We're also pleased to provide investors with two new investment tools. Fund
Advisor,(1) an online advice engine, is designed to give impartial guidance in
choosing the right no-load mutual funds to meet your financial goals.(2) And
American Century is the program manager for Learning Quest,(SM) an educational
savings program launched by the state of Kansas on July 1 that allows parents to
invest tax-deferred to meet higher education costs. The summer issue of the
American Century investor newsletter provides more details on these tools.
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
(1) Patent pending.
(2) American Century does not receive sales commissions or direct compensation
for recommending any fund, although it may receive management, service, or
other fees from funds recommended through Fund Advisor. These arrangements
are described in Acumation Inc.'s Form ADV Part II.
[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 ................................................. 10
Management Q&A .......................................................... 11
Industry Weightings ..................................................... 11
Portfolio at a Glance ................................................... 11
Top Ten Holdings ........................................................ 12
Geographic Composition .................................................. 13
Economic Growth
Forecasts ............................................................ 13
Schedule of Investments ................................................. 14
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities .......................................................... 16
Statement of Operations ................................................. 17
Statement of Changes
in Net Assets ........................................................ 18
Notes to Financial
Statements ........................................................... 19
Financial Highlights .................................................... 22
OTHER INFORMATION
Share Class and Retirement
Account Information .................................................. 26
Background Information
Investment Philosophy
and Policies ...................................................... 27
Comparative Indices .................................................. 27
Lipper Rankings ...................................................... 27
Investment Team
Leaders ........................................................... 27
Glossary ................................................................ 28
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
Gold
* Gold's price was little changed in the first six months of the year,
finishing at about $290 an ounce.
* One negative for gold was more aboveground supply--world central bank sales
and hedging activity by gold producers continued apace.
* While supply increased, demand rose modestly thanks to better global
economic growth.
* Gold stocks finished lower because of negative sentiment after many
companies mishandled their hedging activity late last year.
* By region, the low-cost North American gold producers held up better than
African and Australian companies.
Natural Resources
* Commodity prices diverged sharply in the first half of 2000 as energy prices
rose while most basic materials were flat.
* Energy prices were helped by OPEC's decision to cut back its output, as well
as by better demand and low inventories.
* Higher oil prices meant positive returns for energy stocks. Integrated oil
companies posted mildly positive returns, while small oil exploration and
service stocks performed best because they're more closely tied to the price
of oil.
* Basic materials shares performed poorly. Investors worried that higher
interest rates would slow economic growth and hurt corporate profits.
GLOBAL GOLD
* Global Gold produced negative returns, in line with the broader gold market.
The fund beat its benchmark but lagged its Lipper group.
* The portfolio outdid its benchmark because of some of our company weightings
relative to the index, and because we kept about 5% of assets in more liquid
(easier to buy and sell) platinum and palladium companies.
* Several high-profile mergers failed to boost the gold sector--investors
worried that consolidation would mean much lower production costs, and
ultimately lower prices for the underlying metal.
* Gold seems locked in a trading range between about $260 and $300 an ounce.
However, gold company shares look like they currently have more upside than
downside.
GLOBAL NATURAL RESOURCES
* Global Natural Resources beat its benchmark, though the fund underperformed
its Lipper group.
* The key reason the fund beat the benchmark is that the portfolio was
overweight energy and underweight basic materials relative to the index.
* The stocks that had the biggest positive impact on performance were in the
oil services sector, while those that hurt returns most were steel and paper
company shares.
* We believe economic growth should remain strong through the end of the year,
which would create a positive backdrop for natural resources-related shares.
[left margin]
GLOBAL GOLD(1)
(BGEIX)
TOTAL RETURNS: AS OF 6/30/00
6 Months -15.20%(2)
1 Year -10.91%
INCEPTION DATE: 8/17/88
NET ASSETS: $167.8 million(3)
GLOBAL NATURAL RESOURCES(1)
(BGRIX)
TOTAL RETURNS: AS OF 6/30/00
6 Months 0.47%(2)
1 Year 7.86%
INCEPTION DATE: 9/15/94
NET ASSETS: $52.5 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 5 and 10.
Investment terms are defined in the Glossary on pages 28-29.
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 OVERVIEW
Gold bullion finished the first half of 2000 about where it began the
year--at around $290 an ounce. While gold's price was basically flat, gold
company stocks finished lower.
BULLION LITTLE CHANGED
A key reason gold languished was that inflation remained largely in check.
The Federal Reserve and other world central banks so far have been successful at
raising interest rates to keep a lid on inflation. That's bad for gold because
its price typically rises in an inflationary environment, or one where "real"
interest rates are 0% or less. ("Real" rates equal nominal interest rates minus
the inflation rate.) But with inflation running at only about 3% annually in the
U.S. and Treasury bond yields around 6% or more, we're nowhere near zero real
rates.
Gold sales by world central banks again weighed on the precious metal.
Austria, Canada, the Netherlands, and the U.K. were among the more prominent
central banks to sell gold during the six months. Further blows to the market
were reports that France and Switzerland intended to sell a portion of their
gold reserves.
In addition, gold producers increased their hedging activity. Central bank
sales and hedging by gold producers meant more aboveground supply, which hurt
gold prices.
While supply increased, demand rose modestly. According to the World Gold
Council, gold demand rose 1% in the first quarter of 2000 (the latest period for
which figures are available). Total demand for gold is derived from two sources:
fabrication (gold used in jewelry, for example) and investment. Fabrication
demand rose sharply thanks to better global economic growth. Investment demand
for gold fell, however, after peaking late last year because of Y2K concerns.
GOLD STOCKS LOWER
While the price of gold bullion was little changed, gold shares did not
fare as well. Sentiment surrounding these stocks has remained negative since
late 1999, when many gold companies failed to benefit from a rally in gold's
price because they mismanaged their hedging activity. Being heavily hedged meant
many companies didn't participate fully in gold's brief rally.
By region, North American gold shares held up best. In general, North
American gold companies have lower-than-average production costs, so they tend
to perform better than their competitors when gold's price is relatively low.
African and Australian gold producers fared worse than the market as a
whole. These companies generally have high production costs, which crimped their
profitability with gold trading below $300 an ounce.
In addition, Australian-area gold companies include those in Papua New
Guinea and Indonesia, where labor unrest created an unfavorable environment for
these stocks.
[right margin]
"A KEY REASON GOLD LANGUISHED WAS THAT INFLATION REMAINED LARGELY IN CHECK."
GOLD RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
GOLD BULLION
SPOT PRICE OF GOLD BULLION 2.75%
GOLD STOCK INDICES
FT-SE GOLD MINES INDEX -13.02%
Africa -21.18%
Australia -25.45%
North America -7.19%
Source: Bloomberg Financial Markets
"WHILE GOLD SUPPLY INCREASED, DEMAND ROSE MODESTLY."
www.americancentury.com 3
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
(Continued)
COMMODITIES
Commodity price performance was sharply divided in the first half of 2000,
as oil prices leapt while most other commodities languished. For the six months,
the Goldman Sachs Commodities Index, which is heavily weighted toward energy,
rose almost a third. By comparison, the Commodities Research Bureau Commodities
Index was up about 10%.
The disparity in commodity performance is starkly apparent in some of the
components of the Goldman index. For example, the Goldman Sachs Energy Index was
up almost 60%, while the Goldman Metals Index fell 4%.
Key to the increase in prices for oil and energy-related products were
production cuts by OPEC. While OPEC was cutting back on its output, inventories
ran low because of strong demand for petroleum-based products. Less supply and
higher demand sent oil prices surging.
Basic materials--such as paper, forest products, and nonferrous
metals--faced a more difficult environment. Prices for many of these commodities
came under pressure because of concerns that higher interest rates could mean
slower economic growth going forward.
Base metals in particular performed surprisingly poorly despite tight
supply. A big reason for the disconnect between supply and prices is that metal
consumers are keeping smaller inventories. Without inventory building, demand
for base metals suffered.
NATURAL RESOURCES STOCKS
As with the commodities themselves, performance for natural
resources-related stocks was mixed. Energy shares were helped to positive
returns by the big jump in oil prices, while basic materials shares lagged badly
(see the graph at left).
Within the energy sector, the small oil service and exploration companies
generally performed best. They did better than the big international integrated
oil companies because the smaller companies are a purer play on changes in oil
prices. The big integrated companies are much more diverse, with refining and
chemical sides to their businesses.
Natural gas stocks also posted solid gains. Strong global demand and high
energy prices fueled growth in the sector. In addition, these shares reaped the
rewards from investors' shift from growth to more traditional value stocks in
March and April.
Basic materials companies--such as papers, metals, and mining
companies--hit a rough patch in the first half of 2000 because investors were
worried that coordinated interest rate increases by world central banks would
put the brakes on global growth. The success of these companies is tied to
industrial production and commodity demand, so slower growth threatens their
profits.
By region, shares of U.S. natural resources-related companies were among
the weakest performers globally, while European and Japanese companies held up
better.
[left margin]
"ENERGY SHARES WERE HELPED TO POSITIVE RETURNS BY THE BIG JUMP IN OIL PRICES,
WHILE BASIC MATERIALS SHARES LAGGED BADLY."
[line graph - data below]
ENERGY & BASIC MATERIALS STOCKS
(PERFORMANCE OF $1.00 FOR THE SIX MONTHS ENDED 6/30/00)
DATE Basic Materials Energy
12/31/99 $1.00 $1.00
01/07/00 $1.02 $1.02
01/14/00 $1.00 $1.00
01/21/00 $0.97 $0.10
01/28/00 $0.94 $0.95
02/04/00 $0.93 $0.93
02/11/00 $0.90 $0.92
02/18/00 $0.88 $0.93
02/25/00 $0.83 $0.89
03/03/00 $0.82 $0.94
03/10/00 $0.83 $0.98
03/17/00 $0.85 $0.98
03/24/00 $0.86 $0.99
03/31/00 $0.87 $1.03
04/07/00 $0.87 $1.01
04/14/00 $0.85 $1.00
04/21/00 $0.82 $0.98
04/28/00 $0.82 $0.99
05/05/00 $0.80 $1.01
05/12/00 $0.81 $1.06
05/19/00 $0.81 $1.06
05/26/00 $0.77 $1.04
06/02/00 $0.78 $1.06
06/09/00 $0.78 $1.06
06/16/00 $0.78 $1.09
06/23/00 $0.75 $1.08
06/30/00 $0.76 $1.06
Source: FactSet
4 1-800-345-2021
Global Gold--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 2000
INVESTOR CLASS (INCEPTION 8/17/88) ADVISOR CLASS (INCEPTION 5/6/98)
GLOBAL FUND MSCI WORLD GOLD-ORIENTED FUNDS(2) GLOBAL FUND MSCI WORLD
GOLD BENCHMARK STOCK INDEX AVERAGE RETURN FUND'S RANKING GOLD BENCHMARK STOCK INDEX
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -15.20% -16.25% -2.56% -14.65% -- -15.51% -16.25% -2.56%
1 YEAR -10.91% -11.57% 12.19% -8.44% 24 OUT OF 34 -11.34% -11.57% 12.19%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS -18.78% -16.50% 14.95% -17.75% 19 OUT OF 27 -- -- --
5 YEARS -16.40% -16.24% 17.07% -13.48% 20 OUT OF 24 -- -- --
10 YEARS -6.31% -6.01% 12.00% -5.72% 12 OUT OF 18 -- -- --
LIFE OF FUND -5.41% -4.69%(3) 12.16%(3) -5.16% 10 OUT OF 17 -19.87% -19.73%(4) 13.33%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 8/31/88, the date nearest the class's inception for which data are
available.
(4) Since 4/30/98, the date nearest the class's inception for which data are
available.
See pages 26-28 for more information about share classes, returns, the fund's
benchmark, and Lipper fund rankings.
[mountain graph - data below]
PERFORMANCE OF $10,000 OVER 10 YEARS Value on 6/30/00 MSCI World Stock Index
$31,049 Fund Benchmark $5,459 Global Gold $5,211
MSCI World
Global Gold Stock Index Fund Benchmark
DATE VALUE VALUE VALUE
6/30/90 $10,000 $10,000 $10,000
6/30/91 $9,034 $9,510 $9,102
6/30/92 $8,261 $9,911 $8,409
6/30/93 $12,592 $11,571 $12,954
6/30/94 $12,021 $12,756 $12,392
6/30/95 $12,762 $14,117 $13,051
6/30/96 $13,263 $16,721 $13,446
6/30/97 $9,727 $20,444 $9,287
6/30/98 $6,642 $23,926 $6,641
6/30/99 $5,849 $27,675 $6,173
6/30/00 $5,211 $31,049 $5,459
$10,000 investment made 6/30/90
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 (defined on page 27) and the fund benchmark are provided
for comparison. Global Gold's returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the returns of
the indices do not. These graphs are based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures
(see Total Returns table above). Past performance does not guarantee future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED JUNE 30)
Global Gold Fund Benchmark
DATE RETURN RETURN
6/30/91 -9.66% -8.98%
6/30/92 -8.56% -7.61%
6/30/93 52.43% 54.04%
6/30/94 -4.53% -4.34%
6/30/95 6.16% 5.32%
6/30/96 3.93% 3.03%
6/30/97 -26.66% -30.93%
6/30/98 -31.72% -28.49%
6/30/99 -11.93% -7.06%
6/30/00 -10.91% -11.57%
www.americancentury.com 5
Global Gold--Q&A
--------------------------------------------------------------------------------
[photo of Bill Martin]
An interview with Bill Martin, a portfolio manager on the Global Gold fund
investment team.
HOW DID GLOBAL GOLD PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 2000?
The portfolio finished lower, tracking the broader gold market. For the
first half of the year, Global Gold returned -15.20%, while the 34 gold-oriented
funds tracked by Lipper Inc. had an average return of -14.65%.* By comparison,
the fund's custom benchmark--which is about two-thirds North American, 20% or so
African, and about 10% Australian gold stocks--returned -16.25%. (See the
previous page for additional performance comparisons.)
HOW DO YOU EXPLAIN GLOBAL GOLD'S PERFORMANCE RELATIVE TO ITS BENCHMARK AND THE
LIPPER GROUP?
First, let's define some terms. Our benchmark reflects the state of the
entire gold market; meanwhile, the Lipper group includes funds that invest
two-thirds of their assets or more in gold companies. That means there's a lot
of room for the funds in the Lipper group to hold other, non-gold stocks.
Because we manage Global Gold relative to the benchmark, the portfolio is
more of a pure play on the gold market than the funds in its Lipper group. As a
result, we often underperform when gold stocks fall, while we tend to do better
when gold shares rise.
OKAY, SO GLOBAL GOLD TYPICALLY LAGS THE LIPPER GROUP WHEN GOLD STOCKS DECLINE
AND OUTPERFORMS WHEN GOLD SHARES RISE. BUT HOW DID THE FUND MANAGE TO BEAT ITS
BENCHMARK?
We made good decisions on some of our company weightings, and we continued
to keep a small portion of assets in near-gold stocks, such as platinum,
palladium, and diamond companies. Platinum and palladium stocks outperformed
gold shares, so our modest position in these names helped Global Gold beat its
benchmark.
But we should be clear: we're still committed to delivering an investment
that moves in line with gold. As a result, we're limiting the near-gold slice of
the portfolio to around 5% of assets and holding only stocks that have a very
high correlation to gold shares.
WHAT'S THE ADVANTAGE OF HOLDING A SMALL NUMBER OF NEAR-GOLD STOCKS?
We're holding these stocks because they're more liquid than gold company
shares. That means they're easier to buy and sell, so holding a modest position
in these names helps us save on transaction costs. We think that allows us to
manage cash flows without racking up big trading costs while still providing our
shareholders a nearly pure play on gold.
YOU ALSO MENTIONED THAT SOME INDIVIDUAL GOLD NAMES HELPED THE FUND BEAT ITS
BENCHMARK. CAN YOU GIVE AN EXAMPLE?
We were overweight Barrick Gold relative to the benchmark, which helped our
performance because the stock had a positive return for the six months. Barrick
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"GLOBAL GOLD IS MORE OF A PURE PLAY ON THE GOLD MARKET THAN THE FUNDS IN ITS
LIPPER GROUP."
PORTFOLIO AT A GLANCE
6/30/00 12/31/99
NO. OF COMPANIES 58 63
PORTFOLIO TURNOVER 8%(1) 53%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.67%(3) 0.68%
(1) Six months ended 6/30/00.
(2) Year ended 12/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 28-29.
6 1-800-345-2021
Global Gold--Q&A
--------------------------------------------------------------------------------
(Continued)
performed relatively poorly last year, falling more than 25% in the last few
months of 1999. Because it fell so far so fast, investors now seem to view the
stock as a better value.
Barrick is particularly attractive because it has the lowest production
costs in the industry to go along with sophisticated hedging strategies. In
addition, the stock benefited from positive developments at new mines in Africa
and South America.
BUT MOST GOLD STOCKS FELL. HOW ABOUT AN EXAMPLE OF A GOLD STOCK THAT DECLINED?
Newmont Mining, our second-largest holding, is a good example of a stock
that fell but still held up better than the market as a whole. We like Newmont
because it's another of those large, low-cost, North American producers. But
unlike Barrick, Newmont hedges little of its gold production. Newmont also had
difficulty at its mine in Indonesia, where labor unrest and political problems
have plagued operations.
To its credit, Newmont tried to add value for shareholders by acquiring
gold producer Battle Mountain. The hope is that the deal will add to Newmont's
bottom line by promoting efficiencies and boosting its gold output.
WEREN'T THERE SEVERAL HIGH-PROFILE MERGERS IN THE SECTOR IN RECENT MONTHS?
Yes, gold's low price is forcing consolidation on the entire industry.
Canadian concern Franco Nevada Mining committed to buy South African company
Gold Fields Ltd. The union would create one of the top gold producers in the
world. In addition, Anglogold acquired Australian company Acacia, while Normandy
Mining bought a controlling interest in TVX Gold.
These moves failed to boost the sector, however. Analysts question the
Franco-Gold Fields combination because they don't see obvious synergies or cost
savings from the deal. Instead, they view it largely as a diversification play.
What's more, there's worry that the current round of merger mania might signal
dramatically lower production costs for the industry as a whole.
LOWER PRODUCTION COSTS SOUND LIKE A GOOD THING. HOW CAN THAT BE VIEWED AS A
NEGATIVE FOR GOLD?
The downside risk is that lower production costs ultimately put pressure on
the price of gold itself. Here's how it works: individual companies benefit when
they lower their production costs faster than the rest of the industry. Lower
costs allow them to book more profits on the sale of gold. But that encourages
them to boost production or borrow gold from dealers and sell it forward. That
argues for more supply and lower prices.
And remember, we're talking about an entire industry consolidating to cut
costs. The decline in production costs in recent years largely explains why gold
supply has increased even as the metal's price declined.
HOW COULD ALL THESE MERGERS BENEFIT THE GOLD MARKET?
The upside to more efficient gold companies operating at lower production
costs would be that high-cost producers will eventually shut down their most
expensive mines or face going out of business entirely. Ultimately, that could
mean less supply of gold, which would lead you to expect higher prices at some
point.
[right margin]
"GOLD'S LOW PRICE IS FORCING CONSOLIDATION ON THE ENTIRE INDUSTRY."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
BARRICK GOLD CORP.
ADR 11.0% 9.2%
NEWMONT MINING
CORP. 7.9% 8.6%
PLACER DOME INC. ADR 7.5% 7.0%
ANGLOGOLD LIMITED 5.9% 6.2%
GOLD FIELDS LIMITED 5.2% 6.2%
NEWCREST MINING
LIMITED 5.1% 4.2%
FRANCO NEVADA
MINING CORP. LTD. 4.7% 6.6%
NORMANDY MINING
LIMITED 4.6% 4.7%
GOLDCORP, INC. CL A 4.6% 2.5%
HARMONY GOLD MINING
CO. LIMITED 4.1% 3.3%
www.americancentury.com 7
Global Gold--Q&A
--------------------------------------------------------------------------------
(Continued)
Another potential positive for gold is that companies have cut their
exploration budgets significantly in recent years. That means they're not
putting much effort into replacing all the gold they're pulling out of the
ground. Here again, that would seem to argue for less supply and a better
pricing situation down the line.
WHAT'S YOUR OUTLOOK FOR GOLD BULLION?
After mine supply, probably the biggest factor for gold is how global
economic growth relates to demand. The global economy continues to improve,
which should boost demand for gold. In addition, gold fabrication demand often
gets a boost in the third quarter prior to the holiday season.
We also think the market's largely over the shock of world central bank
gold sales. But despite some of these positives, it's hard to see gold breaking
out of its current range--between $260 and $300 an ounce--anytime soon.
WHAT'S YOUR OUTLOOK FOR GOLD SHARES AND THE FUND?
We're surprisingly positive on gold shares going forward for a couple
reasons. First, we think it's increasingly likely that the Federal Reserve is
done raising interest rates. Higher rates were one factor keeping inflation--and
gold's price--in check the last year or so. Second, from a risk-return
standpoint, gold shares look like they have much more upside than downside with
gold at current prices. If we're right that gold shares are near a bottom, they
could perform well if gold's price improves.
In terms of the fund, we plan to try to position the portfolio to benefit
from any bounce in the price of gold.
[left margin]
"IF WE'RE RIGHT THAT GOLD SHARES ARE NEAR A BOTTOM, THEY COULD PERFORM WELL IF
GOLD'S PRICE IMPROVES."
[pie charts - data below]
GEOGRAPHIC COMPOSITION
AS OF JUNE 30, 2000
CANADA 44%
SOUTH AFRICA 23%
AUSTRALIA 23%
UNITED STATES 10%
AS OF DECEMBER 31, 1999
CANADA 40%
SOUTH AFRICA 25%
AUSTRALIA 18%
UNITED STATES 14%
OTHER 3%
Investment terms are defined in the Glossary on pages 28-29.
8 1-800-345-2021
Global Gold--Schedule of Investments
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.1%
AUSTRALIA -- 22.8%
600,000 Aurora Gold Limited(1) $ 50,253
2,716,569 Delta Gold NL 2,016,858
1,898,275 Goldfields Limited 1,558,102
399,500 Homestake Mining Co. 2,629,010
717,576 Homestake Mining Co. New
York Shares 4,933,335
15,525,173 Lihir Gold Limited(1) 6,130,037
3,151,062 Newcrest Mining Limited(1) 8,483,053
14,445,996 Normandy Mining Limited 7,778,085
93,465 Normandy Mt Leyshon Limited 92,260
47,506 Normandy NFM Limited(1) 104,019
375,000 Ranger Minerals NL(1) 448,687
1,000,000 Resolute Limited(1) 80,764
1,220,826 Sons of Gwalia Limited 3,841,964
------------
38,146,427
------------
CANADA -- 44.2%
108,800 Agnico-Eagle Mines Ltd. 683,306
634,200 Agnico-Eagle Mines Ltd. ADR 4,082,662
100,000 America Mineral Fields Inc.(1) 41,869
329,500 Banro Resource Corporation(1) 89,006
1,010,066 Barrick Gold Corp. ADR 18,370,575
1,603,500 Battle Mountain Gold Co.(1) 3,507,656
692,700 Bema Gold Corp.(1) 364,874
150,000 Bolivar Goldfields Ltd.(1) 75,972
239,400 Breakwater Resources, Ltd.(1) 459,141
691,300 Cambior, Inc.(1) 326,876
24,600 Dia Met Minerals Ltd. Cl B(1) 332,253
608,200 Echo Bay Mines Ltd. ADR(1) 608,200
50,000 European Goldfields Limited(1) 33,766
105,000 Francisco Gold Corp.(1) 432,536
678,240 Franco Nevada Mining Corp. Ltd. 7,832,252
999,100 Gabriel Resources Ltd. (Acquired
2/25/00-6/28/00, Cost
$1,782,029)(1)(2) 1,889,168
793,800 Glamis Gold Ltd.(1) 1,500,973
1,065,000 Goldcorp, Inc. Cl A(1) 7,623,583
100,000 Golden Star Resources Ltd. ADR(1) 93,750
550,000 IAMGOLD, International African
Mining Gold Corp.(1) 1,132,834
600,000 itemus inc.(1) 628,039
175,000 Ivanhoe Mines Ltd.(1) 141,815
2,711,600 Kinross Gold Corp.(1) 2,416,964
371,380 Kinross Gold Corp. ADR(1) 348,169
117,500 Manhattan Minerals Corp.(1) 253,917
1,006,500 Meridian Gold Inc.(1) 6,142,178
566,300 Miramar Mining(1) 401,530
95,000 Pangea Goldfields Inc.(1) 439,458
1,315,995 Placer Dome Inc. ADR 12,584,202
170,000 Rio Narcea Gold Mines, Ltd.(1) 142,355
793,713 Romarco Minerals, Inc.(1) 268,001
Shares Value
--------------------------------------------------------------------------------
1,165,000 TVX Gold, Inc.(1) $ 676,758
100,000 Viceroy Resource Corp.(1) 32,415
------------
73,957,053
------------
GHANA -- 0.7%
637,499 Ashanti Goldfields Company Ltd.
GDR(1) 1,115,623
------------
SOUTH AFRICA -- 22.5%
55,100 Anglo American Platinum Corp.
Limited 1,587,985
243,601 Anglogold Limited 9,952,430
176,604 Anglogold Limited ADR 3,631,420
2,042,892 Avgold Ltd.(1) 1,084,721
48,300 De Beers 1,175,443
200,000 Durban Roodepoort Deep
Limited(1) 206,490
2,231,434 Gold Fields Limited 8,754,594
1,250,922 Harmony Gold Mining Co. Limited 6,918,816
35,900 Impala Platinum Holdings Limited 1,335,395
1,438,900 JCI Gold Limited(1) 933,799
902,600 Western Areas Limited(1) 2,096,748
------------
37,677,841
------------
UNITED STATES -- 8.9%
26,500 Apex Silver Mines Limited(1) 263,344
418,100 Crown Resources, Inc.(1) 274,378
613,675 Newmont Mining Corp. 13,270,722
40,000 Stillwater Mining Co.(1) 1,115,000
------------
14,923,444
------------
TOTAL COMMON STOCKS 165,820,388
------------
(Cost $230,936,500)
TEMPORARY CASH INVESTMENTS -- 0.9%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations), in
a joint trading account at 6.40%, dated
6/30/00, due 7/3/00 (Delivery value
$1,500,800) 1,500,000
------------
(Cost $1,500,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $167,320,388
============
(Cost $232,436,500)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
(1) Non-income producing.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 and,
unless registered under the Act, or exempted from registration, may only be
sold to qualified institutional investors. The aggregate value of restricted
securities at June 30, 2000, was $1,889,168 which respresented 1.1% of net
assets.
See Notes to Financial Statements www.americancentury.com 9
Global Natural Resources--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 2000
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) 0.47% -2.23% -3.69% 13.34% -- 0.33% -2.23% -3.69%
1 YEAR 7.86% 3.32% 11.25% 15.27% 39 OUT OF 59 7.58% 3.32% 11.25%
========================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 4.06% 4.78% 14.12% 2.34% 22 OUT OF 43 -- -- --
5 YEARS 8.55% 9.86% 16.48% 9.37% 20 OUT OF 31 -- -- --
LIFE OF FUND 7.94% 9.28%(3) 15.50%(3) 9.08% 19 OUT OF 26 9.94% 1.84%(4) 10.90%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 9/30/94, the date nearest the class's inception for which data are
available.
(4) Since 4/30/99, the date nearest the class's inception for which data are
available.
See pages 26-28 for more information about share classes, returns, the fund's
benchmark, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND Value on 6/30/00 DJ World Stock Index
$22,898* Fund Benchmark $16,675* Global Natural Resources $15,559
Global Natural DJ World
Resources Fund Benchmark Stock Index
DATE VALUE VALUE VALUE
9/15/1994 $10,000 $10,000 $10,000
12/31/94 $9,652 $9,711 $9,863
3/31/95 $10,083 $10,157 $10,194
6/30/95 $10,324 $10,409 $10,679
9/30/95 $10,578 $10,673 $11,241
12/31/95 $11,043 $11,173 $11,774
3/31/96 $11,705 $11,818 $12,249
6/30/96 $11,829 $12,086 $12,647
9/30/96 $11,944 $12,283 $12,828
12/31/96 $12,748 $12,956 $13,350
3/31/97 $12,770 $13,200 $13,380
6/30/97 $13,808 $14,480 $15,408
9/30/97 $14,803 $15,308 $15,893
12/31/97 $13,067 $13,560 $15,319
3/31/98 $13,773 $14,614 $17,439
6/30/98 $13,224 $14,136 $17,648
9/30/98 $12,155 $12,944 $15,483
12/31/98 $12,242 $13,174 $18,738
3/31/99 $12,879 $14,157 $19,403
6/30/99 $14,425 $16,121 $20,582
9/30/99 $14,868 $16,559 $20,281
12/31/99 $15,485 $17,035 $23,775
3/31/00 $15,423 $16,620 $23,940
6/30/00 $15,559 $16,675 $22,898
$10,000 investment made 9/15/94
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 (defined on page 27) and fund benchmark are provided for
comparison. Global Natural Resources' returns include operating expenses (such
as transaction costs and management fees) that reduce returns, while the returns
of the indices do not. These graphs are based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures
(see Total Returns table above). Past performance does not guarantee future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Global Natural Resources Fund Benchmark
DATE RETURN RETURN
6/30/95* 4.71% 4.09%
6/30/96 14.57% 16.12%
6/30/97 16.73% 19.81%
6/30/98 -4.23% -2.38%
6/30/99 9.08% 14.04%
6/30/00 7.86% 3.32%
* From 9/30/94 (the date nearest the class's inception for which index data are
available).
10 1-800-345-2021
Global Natural Resources--Q&A
--------------------------------------------------------------------------------
[photo of Joe Sterling]
An interview with Joe Sterling, a portfolio manager on the Global Natural
Resources fund investment team.
HOW DID GLOBAL NATURAL RESOURCES PERFORM DURING THE FIRST HALF OF 2000?
The fund's return was basically flat, reflecting the schizophrenic
performance of natural resources-related stocks generally. Returns for energy
stocks were positive but widely divergent, while basic materials stocks
performed very poorly (see page 4).
On a positive note, Global Natural Resources' 0.47% return beat the -2.23%
return of its custom benchmark.* In addition, the fund outperformed the S&P 500
stock index, which returned -0.42%. That's important because the portfolio is
intended to help investors diversify a portfolio of domestic equities. However,
the fund lagged the 13.34% average return of the 59 natural resource funds
tracked by Lipper (see the previous page for additional performance
comparisons).
WHY DID GLOBAL NATURAL RESOURCES BEAT ITS BENCHMARK BUT TRAIL THE LIPPER GROUP?
We manage Global Natural Resources against a custom benchmark that's based
on the companies in the Basic Materials and Energy sectors of the Dow Jones
World Stock Index. So the key to understanding the fund's relative performance
is sector weightings.
Global Natural Resources outpaced its benchmark because we were slightly
overweight in energy stocks and underweight basic materials shares. But when
comparing the fund with the Lipper group, keep in mind that we try to deliver
returns representative of the entire market for natural resources-related
stocks. That can limit our return relative to the Lipper group when a small
segment of the market--such as oil service and exploration stocks--post
exceptional returns for a short period.
HOW DID YOU STRUCTURE THE FUND'S ENERGY HOLDINGS?
We were neutral to slightly underweight the big, integrated international
oil companies. But because they make up such a large piece of our benchmark,
these companies account for seven of our top 10 holdings (see the table on page
12).
Returns for the international integrated companies were less than stellar.
For the six months, Standard & Poor's international integrated oil company
index--which includes Chevron, Exxon Mobil, Royal Dutch Petroleum, and
Texaco--had a total return of about 2%. With oil prices so high, these companies
produced excellent earnings, but many investors were reluctant to buy these
shares because they felt oil prices had peaked and were likely to fall going
forward.
Instead, we were overweight the smaller oil service and exploration
companies, which did very well because they're more sensitive to changes in the
price of oil. For the six months, oil service shares jumped more than 33%.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
[pie charts - data below]
INDUSTRY WEIGHTINGS
AS OF JUNE 30, 2000
ENERGY 71%
BASIC MATERIALS 29%
AS OF DECEMBER 31, 1999
ENERGY 61%
BASIC MATERIALS 36%
TEMPORARY CASH INVESTMENTS 3%
PORTFOLIO AT A GLANCE
6/30/00 12/31/99
NO. OF COMPANIES 82 79
PORTFOLIO TURNOVER 40%(1) 87%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.67%(3) 0.68%
(1) Six months ended 6/30/00.
(2) Year ended 12/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 28-29.
www.americancentury.com 11
Global Natural Resources--Q&A
--------------------------------------------------------------------------------
(Continued)
CAN YOU GIVE AN EXAMPLE OF SOME OF THESE OIL SERVICE AND OTHER ENERGY STOCKS
THAT CONTRIBUTED SIGNIFICANTLY TO PERFORMANCE?
A great example of an oil service company we like is Schlumberger. It
provides tools, testing and monitoring equipment, and other services to
companies in the oil, gas, and utility sectors. Its stock soared more than 70%
during the first half of the year.
Another of our top-10 holdings that performed very well is El Paso Energy.
Its proposed merger with Coastal Corporation would result in one of the largest
natural gas distributors and suppliers in the U.S. News of the impending merger
drove share prices for both companies higher.
ON THE OTHER HAND, BASIC MATERIALS SHARES PERFORMED POORLY. WHICH STOCKS IN
PARTICULAR DETRACTED FROM FUND PERFORMANCE?
Within the basic materials group, we were slightly overweight paper stocks.
Our bet on paper and forest products detracted from performance--papers were
down more than 20% for the six months. International Paper--a bellwether paper
stock--saw its share price hit a five-year low during the second quarter.
Weyerhaeuser was another paper and forest products company that appeared on our
list of worst performers.
WERE THERE ANY PLAYS YOU MADE WITHIN BASIC MATERIALS THAT ENHANCED FUND
PERFORMANCE?
There were few winners among basic materials shares on an absolute return
basis; however, we helped performance relative to the index by being underweight
steel companies. Steel prices actually held up relatively well, but the shares
suffered from the same factors that hurt other basic materials stocks.
Investors simply took a wait-and-see approach toward many of these stocks
because of interest rate increases by world central banks. The worry was that
attempts by central banks to pre-empt inflation might forestall economic growth
and pull the rug out from under these shares. Examples of some of the steel
producers in the portfolio are Thyssen Krupp in Germany and Nippon Steel in
Japan.
YOU OFTEN SAY GLOBAL GROWTH IS KEY TO THE FUND'S SUCCESS. WHAT'S YOUR OUTLOOK
FOR THE GLOBAL ECONOMY IN THE SECOND HALF OF THE YEAR?
We think the global economy is set to chug along quite nicely through the
end of the year. Indeed, J.P. Morgan analysts estimate that the first quarter
saw the fastest rate of global growth in more than a dozen years. As a result,
they've ramped up their growth projections for the rest of 2000 (see the chart
on the following page).
That rapid growth led the Federal Reserve to raise interest rates in the
U.S. Higher rates mean the U.S. economy may slow somewhat, but a recession seems
unlikely. While the U.S. will likely slow, the global economy is generally more
healthy than it's been in several years. Continued expansion in Europe and
firmer Asian economies bode well for global activity.
WHAT'S THAT OUTLOOK IMPLY FOR COMMODITY PRICES?
We think continued healthy economic growth and tight inventories for many
commodities make for a generally positive backdrop for prices. Of course, the
risk to this view would be if the Fed brings the U.S. economy to a screeching
halt. But in the absence of a recession, inventories of raw materials should be
further depleted to fuel global growth.
[left margin]
"THE FUND BEAT ITS BENCHMARK BECAUSE WE WERE SLIGHTLY OVERWEIGHT IN ENERGY
STOCKS AND UNDERWEIGHT BASIC MATERIALS SHARES."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
BP AMOCO PLC 6.4% 5.0%
TOTAL SA CL B 5.4% 3.5%
EXXON MOBIL CORP. 5.1% 6.9%
CHEVRON CORP. 4.4% 3.7%
ENI S.P.A. 3.9% 3.1%
SCHLUMBERGER LTD. 3.6% 2.1%
ROYAL DUTCH
PETROLEUM CO. 3.3% 3.0%
TEXACO INC. 3.0% 2.0%
EL PASO ENERGY
CORPORATION 2.9% 0.9%
SHELL TRANSPORT &
TRADING CO. PLC 2.3% 2.3%
12 1-800-345-2021
Global Natural Resources--Q&A
--------------------------------------------------------------------------------
(Continued)
One exception to this outlook is oil. OPEC members are talking about
increasing production to bring oil's price back down to around $25 a barrel.
This would help curb inflation and promote sustainable economic growth.
WHAT'S YOUR OUTLOOK FOR GLOBAL NATURAL RESOURCES-RELATED STOCKS?
If we're right about the economic scenario, natural resources-related
stocks could perform well. Many stocks, most notably those in the non-ferrous
metals sector, have already seen their prices discounted for a recession in the
U.S., if not globally. If a recession fails to materialize, these stocks should
respond favorably. In addition, better commodity prices would also likely lead
to a reassessment of natural resources-related companies, which could likely
benefit their share prices.
And despite our forecast for slightly lower oil prices, we think the
outlook for oil companies is positive. The performance of the big integrated
stars has been lackluster because investors saw the elevated price of oil as
unsustainable. A more stable--but still high--price for oil could ultimately
boost oil company stocks.
HOW DO YOU PLAN TO POSITION GLOBAL NATURAL RESOURCES GOING FORWARD?
We'll probably continue to favor the energy sector while modestly
underweighting basic materials shares relative to our benchmark, whose neutral
weighting is about 65% energy and 35% basic materials. Within energy, we
currently plan to emphasize oil service companies as the second half of the year
progresses. That's because we think the small- to mid-sized service stocks still
have a good upside given likely increases in capital expenditures by the major
oil companies.
[bar graph - data below]
ECONOMIC GROWTH FORECASTS
Old 2000 New 2000 2001
Forecast Forecast Forecast
USA 3.0% 4.9% 3.0%
Japan 1.0% 1.9% 2.8%
Euro Area 2.8% 3.7% 3.9%
Emerging Economies 4.6% 5.8% 5.2%
Global 2.9% 4.1% 3.6%
Source: J.P. Morgan
[right margin]
[pie charts - data below]
GEOGRAPHIC COMPOSITION
AS OF JUNE 30, 2000
UNITED STATES 42%
EUROPE 35%
AMERICAS (EXCLUDING U.S.) 11%
ASIA/PACIFIC 10%
SOUTH AFRICA 2%
AS OF DECEMBER 31, 1999
UNITED STATES 42%
EUROPE 34%
AMERICAS (EXCLUDING U.S.) 11%
ASIA/PACIFIC 9%
SOUTH AFRICA 4%
Investment terms are defined in the Glossary on pages 28-29.
www.americancentury.com 13
Global Natural Resources--Schedule of Investments
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.6%
AUSTRALIA -- 2.7%
Basic Materials
300,000 M.I.M. Holdings Limited $ 161,528
115,000 WMC Limited 514,133
Energy
205,000 Oil Search Limited(1) 224,433
63,000 Woodside Petroleum Limited 489,967
-----------
1,390,061
-----------
BRAZIL -- 0.5%
Basic Materials
15,000 Aracruz Celulose S.A. ADR 289,687
-----------
CANADA -- 9.4%
Basic Materials
38,770 Abitibi-Consolidated Inc. 360,000
31,500 Barrick Gold Corp. ADR 572,906
20,000 Franco Nevada Mining Corp. Ltd. 230,956
20,000 Inco Ltd. ADR(1) 307,500
40,000 Meridian Gold Inc.(1) 243,112
45,000 Rio Algom Ltd. 525,729
40,000 Tembec Inc.(1) 390,330
Energy
25,000 Anderson Exploration Ltd.(1) 454,146
40,000 Petro-Canada 746,893
3,500 Suncor Energy, Inc. 81,594
32,000 Suncor Energy, Inc. ADR 739,060
8,000 Talisman Energy, Inc.(1) 264,992
-----------
4,917,218
-----------
FINLAND -- 1.0%
Basic Materials
15,914 Stora Enso Oyj 145,254
15,000 UPM-Kymmene Oyj 372,742
-----------
517,996
-----------
FRANCE -- 5.9%
Energy
2,000 Coflexip SA 242,760
18,500 Total SA Cl B 2,839,629
-----------
3,082,389
-----------
GERMANY -- 0.8%
Basic Materials
25,000 ThyssenKrupp AG 407,388
-----------
HONG KONG -- 0.5%
Basic Materials
3,000,000 Jiangxi Copper Company Ltd.
Cl H(1) 257,838
-----------
Shares Value
--------------------------------------------------------------------------------
ITALY -- 4.5%
Energy
350,000 ENI S.p.A. $ 2,023,801
60,000 Saipem S.p.A. 355,539
-----------
2,379,340
-----------
JAPAN -- 5.6%
Basic Materials
120,000 Mitsubishi Materials Corp. 490,419
60,000 Nippon Paper Industries Co. 409,059
370,000 Nippon Steel Corporation 776,967
60,000 Oji Paper Co. Ltd. 412,449
110,000 Sumitomo Metal Industries(1) 75,616
Energy
96,000 General Sekiyu K.K. 203,399
95,000 Nippon Oil Company 434,766
30,000 Showa Shell Sekiyu 148,030
-----------
2,950,705
-----------
MEXICO -- 0.8%
Basic Materials
30,000 Tubos de Acero de Mexico,
SA ADR 416,250
-----------
NETHERLANDS -- 3.8%
Basic Materials
25,000 Ispat International NV New
York Shares 237,500
Energy
28,000 Royal Dutch Petroleum Co. 1,742,141
-----------
1,979,641
-----------
NORWAY -- 1.1%
Energy
18,000 Petroleum Geo-Services(1) 307,637
15,000 Smedvig ASA Cl A 271,238
-----------
578,875
-----------
PORTUGAL -- 0.3%
Basic Materials
30,000 Portucel Industrial-Empresa
Produtora de Celulose, SA 182,070
-----------
SOUTH AFRICA -- 2.4%
Basic Materials
19,000 Anglo American Platinum Corp.
Limited 547,581
6,000 Anglogold Limited 245,133
19,000 De Beers 462,389
-----------
1,255,103
-----------
SOUTH KOREA -- 0.5%
Basic Materials
11,000 Pohang Iron & Steel Co., Ltd. ADR 264,000
-----------
14 1-800-345-2021 See Notes to Financial Statements
Global Natural Resources--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Shares Value
--------------------------------------------------------------------------------
SPAIN -- 2.7%
Basic Materials
7,000 Acerinox, S.A. $ 202,715
21,270 Asturiana de Zinc, SA(1) 203,288
Energy
50,000 Respol SA 996,369
-----------
1,402,372
-----------
SWEDEN -- 1.4%
Basic Materials
25,000 Assidoman 356,950
20,000 Svenska Cellulosa AB Cl B 381,126
-----------
738,076
-----------
THAILAND -- 0.3%
Energy
35,000 PTT Exploration and Production
Public Company Ltd. 169,686
-----------
UNITED KINGDOM -- 13.6%
Basic Materials
125,000 Billiton Plc 509,873
130,000 Corus Group plc(1) 190,226
50,416 Rio Tinto plc 825,642
Energy
160,066 BG plc 1,036,398
347,706 BP Amoco Plc 3,342,727
145,000 Shell Transport & Trading Co. PLC 1,212,587
-----------
7,117,453
-----------
UNITED STATES -- 41.8%
Basic Materials
33,400 Alcoa Inc. 968,600
8,500 Bowater Inc. 375,062
15,800 Georgia-Pacific Corp. (Timber
Group) 341,675
7,000 Georgia-Pacific Group 183,750
17,829 International Paper Co. 531,527
9,000 Newmont Mining Corp. 194,625
10,000 Nucor Corp. 331,875
4,000 Phelps Dodge Corp. 148,750
9,300 Weyerhaeuser Co. 399,900
Shares Value
--------------------------------------------------------------------------------
Energy
17,000 Anadarko Petroleum Corp. $ 838,312
13,500 Burlington Resources Inc. 516,375
27,500 Chevron Corp. 2,332,344
14,500 Coastal Corp. (The) 882,688
30,000 El Paso Energy Corporation 1,528,125
10,000 Ensco International Inc. 358,125
34,183 Exxon Mobil Corp. 2,683,366
15,000 Forest Oil Corp.(1) 239,062
20,000 Halliburton Co. 943,750
15,200 Noble Affiliates, Inc. 566,200
8,600 Phillips Petroleum Co. 435,912
25,200 Schlumberger Ltd. 1,880,550
5,000 Smith International, Inc.(1) 364,062
30,000 Texaco Inc. 1,597,500
15,000 Tosco Corp. 424,688
14,717 Transocean Sedco Forex, Inc. 786,440
15,000 Unocal Corp. 496,875
13,400 Ultramar Diamond Shamrock Corp. 332,488
15,000 Valero Energy Corp. 476,250
18,500 Williams Companies, Inc. (The) 771,219
-----------
21,930,095
-----------
TOTAL COMMON STOCKS 52,226,243
-----------
(Cost $44,028,388)
TEMPORARY CASH INVESTMENTS -- 0.4%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations), in a
joint trading account at 6.40%, dated
6/30/00, due 7/3/00 (Delivery value
$200,107) 200,000
-----------
(Cost $200,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $52,426,243
===========
(Cost $44,228,388)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
(1) Non-income producing.
See Notes to Financial Statements www.americancentury.com 15
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).
GLOBAL NATURAL
JUNE 30, 2000 (UNAUDITED) GLOBAL GOLD RESOURCES
ASSETS
Investment securities, at value
(identified cost of $232,436,500 and
$44,228,388, respectively) (Note 3) .......... $167,320,388 $52,426,243
Cash ........................................... 68,492 64,464
Foreign currency holdings, at value
(identified cost $24,710) .................... 24,710 --
Receivable for investments sold ................ 791,723 --
Dividends and interest receivable .............. 282 64,989
-------------- -------------
168,205,595 52,555,696
-------------- -------------
LIABILITIES
Payable for investments purchased .............. 24,711 --
Payable for capital shares redeemed ............ 260,209 --
Accrued management fees (Note 2) ............... 91,176 29,375
Distribution fees payable (Note 2) ............. 4 10
Service fees payable (Note 2) .................. 4 10
Payable for directors' fees and expenses ....... 433 140
Accrued expenses and other liabilities ......... 7,408 2,235
-------------- -------------
383,945 31,770
-------------- -------------
Net Assets ..................................... $167,821,650 $52,523,926
============== =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ........ $409,565,539 $42,659,780
Accumulated undistributed net
investment income (loss) ..................... 50,898 (466)
Accumulated undistributed net
realized gain (loss) on investment
and foreign currency transactions ............ (176,678,736) 1,666,837
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign
currencies (Note 3) .......................... (65,116,051) 8,197,775
-------------- -------------
$167,821,650 $52,523,926
============== =============
Investor Class, $10.00 Par Value
Net assets ..................................... $167,799,925 $52,479,302
Shares outstanding ............................. 37,619,239 4,069,988
Net asset value per share ...................... $4.46 $12.89
Advisor Class, $10.00 Par Value
Net assets ..................................... $21,725 $44,624
Shares outstanding ............................. 4,879 3,462
Net asset value per share ...................... $4.45 $12.89
16 1-800-345-2021 See Notes to Financial Statements
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.
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
GLOBAL GLOBAL NATURAL
GOLD RESOURCES
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld
of $55,259 and $52,992, respectively) ..... $1,497,911 $634,180
Interest .................................... 56,891 27,848
-------------- -------------
1,554,802 662,028
-------------- -------------
Expenses (Note 2):
Management fees ............................. 581,056 175,003
Distribution fees -- Advisor Class .......... 25 53
Service fees -- Advisor Class ............... 25 53
Directors' fees and expenses ................ 2,966 1,352
-------------- -------------
584,072 176,461
-------------- -------------
Net investment income ....................... 970,730 485,567
-------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY (NOTE 3)
Net realized gain (loss) on:
Investments ................................. (12,867,976) 2,011,757
Foreign currency transactions ............... (58,644) (1,633)
-------------- -------------
............................................ (12,926,620) 2,010,124
-------------- -------------
Change in net unrealized appreciation (depreciation) on:
Investments ................................. (19,359,619) (2,573,237)
Translation of assets and liabilities
in foreign currencies .................... 175 137
-------------- -------------
............................................ (19,359,444) (2,573,100)
-------------- -------------
Net realized and unrealized loss on
investments and foreign currency .......... (32,286,064) (562,976)
-------------- -------------
Net Decrease in Net Assets
Resulting from Operations ................. $(31,315,334) $(77,409)
============== =============
See Notes to Financial Statements www.americancentury.com 17
<TABLE>
<CAPTION>
Statement 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.
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1999
GLOBAL GOLD GLOBAL NATURAL RESOURCES
Increase (Decrease) in Net Assets 2000 1999 2000 1999
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income .............. $970,730 $2,276,097 $485,567 $659,266
Net realized gain (loss) on
investments and
foreign currency transactions .... (12,926,620) (49,644,995) 2,010,124 2,443,985
Change in net unrealized
appreciation (depreciation)
on investments and translation
of assets and liabilities in
foreign currencies ............... (19,359,444) 39,008,977 (2,573,100) 7,581,166
------------- ------------- -------------- -------------
Net increase (decrease)
in net assets
resulting from operations ........ (31,315,334) (8,359,921) (77,409) 10,684,417
------------- ------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ................... (962,344) (2,103,052) (455,057) (669,251)
Advisor Class .................... (96) (120) (328) (139)
From net realized gains on
investment transactions:
Investor Class ................... -- -- (456,636) (12,408)
Advisor Class .................... -- -- (349) (9)
In excess of net investment income:
Investor Class ................... -- -- -- (552,979)
Advisor Class .................... -- -- -- (423)
------------- ------------- -------------- -------------
Decrease in net assets
from distributions ............... (962,440) (2,103,172) (912,370) (1,235,209)
------------- ------------- -------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease) in
net assets from capital
share transactions ............... (1,711,759) (16,514,093) 377,819 3,927,898
------------- ------------- -------------- -------------
Net increase (decrease)
in net assets ................... (33,989,533) (26,977,186) (611,960) 13,377,106
NET ASSETS
Beginning of period ................ 201,811,183 228,788,369 53,135,886 39,758,780
------------- ------------- -------------- -------------
End of period ...................... $167,821,650 $201,811,183 $52,523,926 $53,135,886
============= ============= ============== =============
Accumulated undistributed net
investment income (loss) ......... $50,898 $42,608 $(466) $(30,648)
============= ============= ============== =============
</TABLE>
18 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Quantitative Equity Funds (the corporation)
is registered under the Investment Company Act of 1940 (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.
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.
www.americancentury.com 19
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
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 a distributor of
the corporation. 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 six months ended June 30, 2000, the effective annual Investor Class
management fee was 0.67% 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 six
months ended June 30, 2000, were $50 for Global Gold and $106 for Global Natural
Resources.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
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, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases of securities, excluding short-term investments, for the six
months ended June 30, 2000, for Global Gold and Global Natural Resources totaled
$13,275,469 and $22,370,778, respectively. Sales of securities, excluding
short-term investments, for Global Gold and Global Natural Resources totaled
$20,647,705 and $20,725,651, respectively.
As of June 30, 2000, accumulated net unrealized appreciation (depreciation)
for Global Gold and Global Natural Resources was $(65,116,112) and $7,856,639,
respectively, based on the aggregate cost of investments for federal income tax
purposes of $232,436,500 and $44,569,604, respectively. Accumulated net
unrealized appreciation or depreciation consisted of unrealized appreciation of
$13,060,611 and $11,428,696 for Global Gold and Global Natural Resources and
unrealized depreciation of $78,176,723 and $3,572,057, respectively.
20 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 2,000,000,000 shares to each fund.
Transactions in shares of the funds were as follows:
<TABLE>
<CAPTION>
GLOBAL GOLD GLOBAL NATURAL RESOURCES
SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
<S> <C> <C> <C> <C>
Designated Shares ........................1,000,000,000 1,000,000,000
============= =============
Six months ended June 30, 2000
Sold ..................................... 6,524,703 $30,847,856 1,734,501 $22,060,429
Issued in reinvestment of distributions .. 203,827 909,260 69,040 861,381
Redeemed ................................. (7,242,690) (33,472,785) (1,797,600) (22,548,455)
------------- ------------- ------------- ------------
Net increase (decrease) .................. (514,160) $(1,715,669) 5,941 $373,355
============= ============= ============= ============
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
============= ============= ============= ============
ADVISOR CLASS
Designated Shares ........................ 250,000,000 250,000,000
============= =============
Six months ended June 30, 2000
Sold ..................................... 1,104 $4,934 1,140 $14,379
Issued in reinvestment of distributions .. 22 96 54 676
Redeemed ................................. (270) (1,120) (828) (10,591)
------------- ------------- ------------- ------------
Net increase ............................. 856 $3,910 366 $4,464
============= ============= ============= ============
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
============= ============= ============= ============
</TABLE>
(1) April 26, 1999 (commencement of sale) through December 31, 1999 for Global
Natural Resources.
--------------------------------------------------------------------------------
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
six months June 30, 2000.
www.americancentury.com 21
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
investment 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).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............... $5.29 $5.52 $6.34 $11.33 $12.37 $11.33
--------- ---------- --------- -------- -------- --------
Income From Investment Operations
Net Investment Income ............. 0.03(2) 0.06(2) 0.05(2) 0.09 0.06 0.02
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ...................... (0.83) (0.24) (0.82) (4.79) (0.40) 1.03
--------- ---------- --------- -------- -------- --------
Total From Investment Operations .. (0.80) (0.18) (0.77) (4.70) (0.34) 1.05
--------- ---------- --------- -------- -------- --------
Distributions
From Net Investment Income ........ (0.03) (0.05) (0.05) (0.09) (0.06) (0.01)
From Net Realized Gains on
Investment Transactions ........... -- -- -- (0.20) (0.64) --
--------- ---------- --------- -------- -------- --------
Total Distributions ............... (0.03) (0.05) (0.05) (0.29) (0.70) (0.01)
--------- ---------- --------- -------- -------- --------
Net Asset Value, End of Period ...... $4.46 $5.29 $5.52 $6.34 $11.33 $12.37
========= ========== ========= ======== ======== ========
Total Return(3) ...................(15.20)% (3.18)% (12.18)% (41.47)% (2.76)% 9.25%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...............0.67%(4) 0.68% 0.69% 0.67% 0.62% 0.61%
Ratio of Net Investment Income
to Average Net Assets ...............1.11%(4) 1.04% 0.75% 0.92% 0.46% 0.17%
Portfolio Turnover Rate ............. 8% 53% 68% 28% 45% 28%
Net Assets, End of Period
(in thousands) ....................$167,800 $201,790 $228,771 $246,015 $432,587 $537,693
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
22 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
2000(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period .. $5.29 $5.52 $7.31
--------- ---------- --------
Income From Investment Operations
Net Investment Income(3) ............ 0.02 0.03 0.01
Net Realized and Unrealized Loss
on Investment Transactions .......... (0.84) (0.21) (1.76)
--------- ---------- --------
Total From Investment Operations .... (0.82) (0.18) (1.75)
--------- ---------- --------
Distributions
From Net Investment Income .......... (0.02) (0.05) (0.04)
--------- ---------- --------
Net Asset Value, End of Period ........ $4.45 $5.29 $5.52
========= ========== ========
Total Return(4) ..................... (15.51)% (3.30)% (24.00)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 0.92%(5) 0.93% 0.94%(5)
Ratio of Net Investment Income
to Average Net Assets ................. 0.86%(5) 0.79% 0.20%(5)
Portfolio Turnover Rate ............... 8% 53% 68%
Net Assets, End of Period ............. $21,725 $21,280 $16,938
(1) Six months ended June 30, 2000 (unaudited).
(2) May 6, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 23
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
investment 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).
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Investor Class
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .................$13.06 $10.59 $11.48 $11.91 $10.66 $9.61
-------- -------- -------- --------- -------- --------
Income From Investment Operations
Net Investment Income ...............0.12(2) 0.16(2) 0.19 0.22 0.17 0.16
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ........................(0.07) 2.62 (0.90) 0.08 1.46 1.22
-------- -------- -------- --------- -------- --------
Total From Investment Operations .... 0.05 2.78 (0.71) 0.30 1.63 1.38
-------- -------- -------- --------- -------- --------
Distributions
From Net Investment Income ..........(0.11) (0.17) (0.18) (0.23) (0.17) (0.16)
In Excess of Net Investment Income .. -- --(3) -- -- -- --
From Net Realized Gains on
Investment Transactions .............(0.11) (0.14) -- (0.50) (0.21) (0.17)
-------- -------- -------- --------- -------- --------
Total Distributions .................(0.22) (0.31) (0.18) (0.73) (0.38) (0.33)
-------- -------- -------- --------- -------- --------
Net Asset Value, End of Period ........$12.89 $13.06 $10.59 $11.48 $11.91 $10.66
======== ======== ======== ========= ======== ========
Total Return(4) ..................... 0.47% 26.50% (6.30)% 2.50% 15.45% 14.41%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................0.67%(5) 0.68% 0.69% 0.73%(6) 0.76% 0.76%
Ratio of Net Investment Income
to Average Net Assets ................1.85%(5) 1.34% 1.70% 1.55%(6) 1.78% 2.02%
Portfolio Turnover Rate .............. 40% 87% 76% 41% 53% 39%
Net Assets, End of Period
(in thousands) .....................$52,479 $53,095 $39,749 $46,556 $66,021 $30,157
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(5) Annualized.
(6) A portion of the management fee was waived during the year ended December
31, 1997. In absence of the fee waiver, the ratio of operating expenses to
average net assets would have been 0.77% and the ratio of net investment
income to average net assets would have been 1.51%.
24 1-800-345-2021 See Notes to Financial Statements
Global Natural Resources--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........... $13.06 $11.99
----------- ---------
Income From Investment Operations
Net Investment Income(3) ..................... 0.10 0.07
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ............ (0.06) 1.29
----------- ---------
Total From Investment Operations ............. 0.04 1.36
----------- ---------
Distributions
From Net Investment Income ................... (0.10) (0.15)
In Excess of Net Investment Income ........... -- --(4)
From Net Realized Gains on
Investment Transactions ...................... (0.11) (0.14)
----------- ---------
Total Distributions .......................... (0.21) (0.29)
----------- ---------
Net Asset Value, End of Period ................. $12.89 $13.06
=========== =========
Total Return(5) .............................. 0.33% 11.44%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .......................... 0.92%(6) 0.93%(6)
Ratio of Net Investment Income
to Average Net Assets .......................... 1.60%(6) 0.85%(6)
Portfolio Turnover Rate ........................ 40% 87%
Net Assets, End of Period ...................... $44,624 $40,442
(1) Six months ended June 30, 2000 (unaudited).
(2) April 26, 1999 (commencement of sale) through December 31, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) Annualized.
See Notes to Financial Statements www.americancentury.com 25
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
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
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.
26 1-800-345-2021
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers four "specialty" funds that concentrate their
holdings in specific industries or sectors of the stock market. These funds
typically respond differently than general equity funds to changing market or
economic conditions. The funds are managed to provide a broad representation of
the respective industries. Due to the limited focus of these funds, they may
experience greater volatility than funds with a broader investment strategy.
They are not intended to serve as a complete investment program by themselves.
International investing also involves special risks, such as political
instability and currency fluctuations.
GLOBAL GOLD seeks to realize a total return consistent with investment in
securities of companies that are engaged in mining, processing, fabricating, or
distributing gold or other precious metals throughout the world.
GLOBAL NATURAL RESOURCES seeks to realize a total return consistent with
investment in companies that are engaged in the natural resources industries.
COMPARATIVE INDICES
The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.
The GLOBAL GOLD FUND BENCHMARK was the Benham North American Gold Equities
Index from inception through February 1996. From March 1996 through December
1997, the benchmark was the FT-SE Gold Mines Index. Since January 1998, the
benchmark has been a proprietary index intended to reflect the entire gold
market.
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) (DJWSI), 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 (MSCI) is a widely followed group of
stocks from 22 different countries including the U.S. and Canada.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated.
The Lipper categories for Global Gold and Global Natural Resources are:
GOLD-ORIENTED FUNDS (Global Gold)--funds that invest at least 65% of their
assets in shares of gold mines, gold-oriented mining finance houses, gold coins
or bullion.
NATURAL RESOURCES FUNDS (Global Natural Resources)--funds that invest at
least 65% of their assets in natural resources stocks.
(1) The FT-SE Gold Mines Index is calculated by FT-SE International Limited in
conjunction with the Institute of Actuaries. The FT-SE Gold Mines Index is
a trademark of the London Stock Exchange Limited and the Financial Times
Ltd. and is used by FT-SE International Limited under license. FT-SE
International Limited does not sponsor, endorse, or promote the fund.
(2) The DJWSI is the property of Dow Jones & Company, Inc., which is not
affiliated with American Century.
[right margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
JOE STERLING
Portfolio Managers
BILL MARTIN
BILL MARTIN
JOE STERLING
www.americancentury.com 27
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 22-25.
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 companies with a
market capitalization (the total value of a company's outstanding stock) of more
than $8.7 billion. This is Lipper's market-capitalization breakpoint as of June
30, 2000, 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
$2.3 billion and $8.7 billion. This is Lipper's market-capitalization breakpoint
as of June 30, 2000, 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 $2.3 billion. This is Lipper's market-capitalization breakpoint as of June
30, 2000, 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.
28 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 29
Notes
--------------------------------------------------------------------------------
30 1-800-345-2021
Notes
--------------------------------------------------------------------------------
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 Technology International Discovery
Giftrust(reg.tm) Life Sciences 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 and text 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 PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0008 American Century Investment Services, Inc.
SH-SAN-21705 (c)2000 American Century Services Corporation
<PAGE>
June 30, 2000
AMERICAN CENTURY(reg.sm)
SEMIANNUAL REPORT
Utilities
[american century logo and text logo (reg.sm)]
American
Century
[inside front cover]
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
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want when choosing mutual funds. Now you can get the insight you need with Fund
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To review Fund Advisor's unique perspective, go to www.americancentury.com
and select Fund Advisor at the top of the page. For the initial set-up, you
might want to have available:
* Your latest tax return
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To learn more about this new tool and how it can help you better manage your
financial future, select the "Demo" from the Fund Advisor introduction page.
* Patent pending. It was developed for Acumation, Inc., a registered investment
advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through Fund Advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
[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.
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To sign up for this option, visit www.americancentury.com and log in with
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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 first half of 2000 was an extraordinary period for the U.S. stock
market. Several major shifts in investor sentiment led to unprecedented levels
of volatility.
The strong U.S. economy--and the accompanying rise in interest rates--was
one key factor. But so was the "New Economy"--the burgeoning technology and
telecommunications industries. Investors began to question the high valuations
of many New Economy stocks, casting doubt on their profitability and long-term
potential for success.
As a result, the stock market grew increasingly volatile. For example, the
tech-heavy Nasdaq Composite Index lost more than 25% in a single week in early
April, then enjoyed one of its best months ever in June.
The utilities market, because of its significant exposure to the
telecommunications industry, was affected by this volatility, as was American
Century Utilities. Our investment professionals review the period and the fund's
performance in more detail beginning on page 3.
We're proud to announce that American Century's fund performance reports,
like this one, earned the Communications Seal from DALBAR, Inc., an independent
financial services research firm. DALBAR commended us for meeting investors'
needs with an attractive document that's easy to read and understand.
We're also pleased to provide investors with two new investment tools. Fund
Advisor,(1) an online advice engine, is designed to give impartial guidance in
choosing the right no-load mutual funds to meet your financial goals.(2) And
American Century is the program manager for Learning Quest,(SM) an educational
savings program launched by the state of Kansas on July 1 that allows parents to
invest tax-deferred to meet higher education costs. The summer issue of the
American Century investor newsletter provides more details on these tools.
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
(1) Patent pending.
(2) American Century does not receive sales commissions or direct compensation
for recommending any fund, although it may receive management, service, or
other fees from funds recommended through Fund Advisor. These arrangements
are described in Acumation Inc.'s Form ADV Part II.
[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
Statement of Changes
in Net Assets ........................................................ 13
Notes to Financial
Statements ........................................................... 14
Financial Highlights .................................................... 17
OTHER INFORMATION
Share Class and Retirement
Account Information .................................................. 19
Background Information
Investment Philosophy
and Policies ...................................................... 20
Comparative Indices .................................................. 20
Lipper Rankings ...................................................... 20
Investment Team
Leaders ........................................................... 20
Glossary ................................................................ 21
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
GENERAL U.S. STOCK MARKET PERSPECTIVE
* U.S. stocks posted mixed returns in a volatile first half of 2000.
* Small- and mid-cap stocks performed well, while large-cap stocks fell
slightly.
* New Economy (technology and telecommunications) stocks soared early in the
year, plunged in April and May, and then rebounded in June.
* During the tech sell-off, investors shifted into sectors of the market that
had been languishing earlier in the year.
* Economic uncertainty and the speculative fervor surrounding New Economy
stocks caused greater day-to-day volatility.
UTILITIES MARKET PERSPECTIVE
* Utilities stocks as a group declined in the first half of 2000, lagging the
broader market as represented by the S&P 500.
* The same influences that whipsawed the broader market also pushed and pulled
utilities.
* The rise, fall, and rebound of telecommunications stocks was a key factor.
* So was the more steadying influence of Old Economy sectors. Electric,
natural gas, and energy stocks generally outperformed telecom.
MANAGEMENT Q&A: FUND PERFORMANCE
* The fund's six-month total return surpassed that of its benchmark, but
lagged the average return of the Lipper peer group.
* An overweight position in energy-related companies helped the fund beat the
benchmark.
* The Lipper average was bolstered by funds that held a higher percentage of
traditional electric and natural gas stocks. Those sectors outperformed
telephones and telecom, which were the portfolio's largest weighting.
* The portfolio's relative weightings of telecom, electric, and natural gas
companies reflected the benchmark, which, in turn, mirrored the utilities
industry as a whole.
* The fund paid a bigger-than-usual income distribution on June 30, the result
of a stock distribution by one of the portfolio's larger holdings.
MANAGEMENT Q&A: FUND OUTLOOK
* The fund and its benchmark will likely continue to have their heaviest
weightings in telephone and telecom stocks.
* In the near term, utilities stock prices will be heavily influenced by the
Federal Reserve's interest rate policy and earnings reports.
* Overall, we plan to remain fairly neutral to the benchmark, with slightly
overweight positions in some of our favorite electric and natural gas names.
[left margin]
UTILITIES(1)
(BULIX)
TOTAL RETURNS: AS OF 6/30/00
6 Months -1.22%(2)
1 Year 3.06%
30-DAY SEC YIELD: 2.09%
INCEPTION DATE: 3/1/93
NET ASSETS: $295.4 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 21-22.
2 1-800-345-2021
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
[photo of Mark Mallon]
Mark Mallon, head of growth and income equity, specialty, and asset allocation
funds at American Century
OVERVIEW
Volatility was the watchword in the U.S. stock market during the first half
of 2000. Uncertainty about the economy, inflation, and interest rates--along
with the mood swings symptomatic of "dot-com fever"--led to wide fluctuations in
the major stock indexes.
Large-cap stocks posted slightly negative returns, while small- and mid-cap
stocks fared better (see the table at right).
RUNNING WITH THE PACK
After finishing 1999 at record highs, the major stock indexes stumbled out
of the gate in 2000. However, technology and telecommunications stocks--also
known as "New Economy" stocks-- continued to soar, extending their phenomenal
1999 performance. Investors discarded "Old Economy" shares and snapped up those
of dot-coms and other tech-oriented firms.
This herd-like behavior pushed the Nasdaq Composite Index, which is
dominated by tech stocks, up by nearly 25% from the end of 1999 to its peak on
March 10, 2000. In contrast, the S&P 500 declined by 5%.
But the speculative fervor surrounding New Economy shares contributed to
greater market volatility. Day-to-day swings of 2% or more in the major stock
indexes became increasingly common.
SHIFTING GEARS
By March, disillusionment brought a sudden change in market sentiment. A
series of interest rate increases by the Federal Reserve threatened to cool off
the hot U.S. economy, which grew at its fastest rate in almost 16 years in the
fourth quarter of 1999. In addition, concerns surfaced about sustainability and
profitability in the New Economy, especially among Internet-related companies.
As a result, many investors began to turn away from high-flying growth
stocks, seeking out opportunities in undervalued sectors of the market or
sitting on the sidelines entirely. Between mid-March and late May, the Nasdaq
fell 37%, including a record 25% plunge in the second week of April, while the
S&P 500 edged 1% lower.
After this deflation of the New Economy balloon, growth stocks staged a
solid comeback in June. However, the market remained volatile amid mixed signals
about the economy's strength and future Fed interest rate policy.
SMALL WONDERS
After being left behind in 1998 and 1999, small- and mid-cap stocks
attracted more attention during the first half of 2000, outperforming
large-company stocks. Aggressive investors were especially fond of mid-cap
stocks because they had the high growth potential of smaller companies and the
ease of trading associated with larger stocks.
[right margin]
"DAY-TO-DAY SWINGS OF 2% OR MORE IN THE MAJOR STOCK INDEXES BECAME INCREASINGLY
COMMON."
STOCK MARKET RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
S&P 500 -0.42%
S&P MIDCAP 400 9.06%
S&P SMALLCAP 600 6.93%
These indices represent the performance of large-, medium-, and
small-capitalization stocks.
[line graph - data below]
STOCK MARKET PERFORMANCE (GROWTH OF $1.00)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
Value on 6/30/00
S&P 500 $1.00
S&P MidCap 400 $1.09
S&P SmallCap 600 $1.07
S&P 500 S&P MidCap 400 S&P SmallCap 600
12/31/99 $1.00 $1.00 $1.00
1/31/00 $0.95 $0.97 $0.97
2/29/00 $0.93 $1.04 $1.10
3/31/00 $1.02 $1.13 $1.06
4/30/00 $0.99 $1.09 $1.04
5/31/00 $0.97 $1.07 $1.01
6/30/00 $1.00 $1.09 $1.07
Source: Lipper Inc.
www.americancentury.com 3
Market Perspective from Mark Mallon
--------------------------------------------------------------------------------
(Continued)
UTILITIES MARKET OVERVIEW
In a challenging environment that battered some sectors and rewarded
others, utilities as a group declined in the first half of 2000, lagging the
broader market as represented by the S&P 500. The relatively small decline in
the overall utilities market, however, masked the volatility that occurred and
the divergence in sector performance.
The same influences that whipsawed the broader market also pushed and
pulled utilities. The rise, fall, and rebound of telecommunications stocks was a
key factor. So was the more steadying influence of Old Economy sectors. Electric
utilities contributed generally positive performance, while natural gas and
energy companies produced some of the strongest returns. The electric, gas, and
energy sectors benefited from strong earnings reports.
TELECOM RETREATS
The explosive performance enjoyed by telecommunications stocks during 1999
carried into the first quarter of 2000, driven largely by expanding global
demand for wireless communications. However, not all communications companies
performed well during the quarter--long distance and regional phone companies
struggled amid competitive pressures.
The trend away from growth-oriented technology stocks, which began in March
and continued through most of the second quarter, hit telecommunications stocks
particularly hard. AT&T, Vodafone Airtouch, GTE, and Sprint all posted
significant losses for the second quarter. They suffered from the flight away
from New Economy stocks and skepticism about the future earnings potential of
long-distance phone companies.
ELECTRICS REBOUND
Coming off their worst year in recent history, electric utility stocks,
such as Duke Energy and PG&E, staged a comeback in the first half of 2000. As
the year opened, rising interest rates and concern about competition hampered
performance. However, electric utility company shares rebounded sharply in
April, sparked by first-quarter earnings reports that beat estimates by as much
as 30%. The move from growth to value stocks in the second quarter also added to
the sector's gains.
ENERGY AND NATURAL GAS SOAR
Energy and natural gas stocks--such as Enron and Coastal Corporation--
delivered solid gains in the first half of the year after falling victim to
rising interest rates during the second half of 1999. During the first quarter,
high energy prices and strong global demand for fuel heated the sector.
After stumbling in April, energy and natural gas shares resumed their
ascent, driven by continued strong fuel demand matched with limited supply. This
sector also reaped the rewards from investors' shift from growth to traditional
value stocks.
[left margin]
"THE RELATIVELY SMALL DECLINE IN THE OVERALL UTILITIES MARKET MASKED THE
VOLATILITY THAT OCCURRED AND THE DIVERGENCE IN SECTOR PERFORMANCE."
UTILITIES MARKET RETURNS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
FUND BENCHMARK -1.52%
S&P Telecommunications
(long distance) Index -28.58%
S&P Telephone Index -9.97%
S&P Electric Index 5.64%
S&P Natural Gas Index 36.25%
Source: Bloomberg Financial Markets
These indices are defined on page 20.
4 1-800-345-2021
Utilities--Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF JUNE 30, 2000
INVESTOR CLASS (INCEPTION 3/1/93) ADVISOR CLASS (INCEPTION 6/25/98)
FUND UTILITY FUNDS(2) FUND
UTILITIES S&P 500 BENCHMARK AVERAGE RETURN FUND'S RANKING UTILITIES S&P 500 BENCHMARK
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) -1.22% -0.42% -1.52% 1.38% -- -1.36% -0.42% -1.52%
1 YEAR 3.06% 7.24% 0.83% 8.99% 62 OUT OF 93 2.79% 7.24% 0.83%
=======================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 20.47% 19.66% 22.23% 17.11% 29 OUT OF 80 -- -- --
5 YEARS 19.07% 23.80% 20.78% 16.50% 17 OUT OF 65 -- -- --
LIFE OF FUND 13.92% 20.03% 14.93% 12.53%(3) 6 OUT OF 25(3) 13.88% 14.74%(4) 15.01%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 3/4/93, the date nearest the class's inception for which data are
available.
(4) Since 6/30/98, the date nearest the class's inception for which data are
available.
See pages 19-21 for more information about share classes, returns, the fund's
benchmark, and Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 6/30/00
S&P 500 $38,155
Fund Benchmark $27,746
Utilities $25,995
Utilities S&P 500 Fund Benchmark
DATE VALUE VALUE VALUE
3/1/1993 $10,000 $10,000 $10,000
3/31/1993 $10,223 $10,211 $10,258
6/30/1993 $10,589 $10,261 $10,455
9/30/1993 $11,262 $10,526 $11,078
12/31/1993 $10,659 $10,770 $10,614
3/31/1994 $9,731 $10,362 $9,699
6/30/1994 $9,639 $10,405 $9,562
9/30/1994 $9,801 $10,914 $9,812
12/31/1994 $9,590 $10,912 $9,618
3/31/1995 $10,161 $11,975 $10,071
6/30/1995 $10,862 $13,118 $10,795
9/30/1995 $11,897 $14,161 $11,822
12/31/1995 $13,014 $15,014 $12,877
3/31/1996 $12,699 $15,820 $12,637
6/30/1996 $13,135 $16,530 $13,237
9/30/1996 $12,506 $17,041 $12,839
12/31/1996 $13,642 $18,461 $13,988
3/31/1997 $13,353 $18,955 $13,740
6/30/1997 $14,870 $22,267 $15,193
9/30/1997 $15,697 $23,932 $16,091
12/31/1997 $18,529 $24,619 $18,814
3/31/1998 $20,750 $28,054 $21,274
6/30/1998 $20,111 $28,979 $20,978
9/30/1998 $20,592 $26,096 $21,585
12/31/1998 $23,611 $31,654 $25,077
3/31/1999 $22,501 $33,234 $24,475
6/30/1999 $25,226 $35,580 $27,520
9/30/1999 $24,204 $33,357 $26,419
12/31/1999 $26,320 $38,320 $28,176
3/31/2000 $28,004 $39,198 $29,804
6/30/2000 $25,995 $38,155 $27,746
$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 20. Utilities' total returns
include operating expenses (such as transaction costs and management fees) that
reduce returns, while the total returns of the indices do not. These graphs are
based on Investor Class shares only; performance for other classes will vary due
to differences in fee structures (see Total Returns table above). Past
performance does not guarantee future results. Investment return and principal
value will fluctuate, and redemption value may be more or less than original
cost.
[bar graph ] data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED JUNE 30)
Utilities Fund Benchmark
DATE RETURN RETURN
6/30/93* 5.90% 4.55%
6/30/94 -8.98% -8.54%
6/30/95 12.68% 12.89%
6/30/96 20.92% 22.63%
6/30/97 13.22% 15.05%
6/30/98 35.25% 38.59%
6/30/99 25.42% 31.18%
6/30/00 3.06% 0.83%
* From 3/1/93 (the fund's inception date) to 6/30/93.
www.americancentury.com 5
Utilities--Q&A
--------------------------------------------------------------------------------
[photo of Joe Sterling] [photo of Bill Martin]
Based on interviews with Joe Sterling and Bill Martin, portfolio managers
on the Utilities fund investment team.
HOW DID THE UTILITIES FUND PERFORM DURING THE FIRST HALF OF 2000?
The fund's total return was -1.22%.* That surpassed the -1.52% return of
its custom market-based benchmark, but lagged the 1.38% average return of the 95
utilities funds tracked by Lipper in the first half. However, the fund's
longer-term performance relative to its peers still looked good--American
Century Utilities continued to outperform its peer group average for the three-
and five-year periods ended June 30, 2000. (See the previous page for other fund
performance comparisons.)
WHY DID THE UTILITIES FUND LAG THE LIPPER PEER AVERAGE FOR THE FIRST HALF?
Energy, natural gas, and electric stocks were the best-performing sectors
of the utilities market, but represented only about 40% of the fund as of June
30. Conversely, telephone and telecommunications stocks struggled and were our
biggest weighting. Funds that had larger weightings in energy, electric, and
natural gas shares, and smaller weightings in telecom tended to outperform our
portfolio.
Of course, we believe that our telephone and telecom focus is one of the
key reasons the fund has performed relatively well against its peers over the
last five years. We think that the long-term outlook for New Economy stocks
remains bright.
WHY DID THE FUND HOLD SUCH A SEEMINGLY SMALL AMOUNT (ABOUT 29% OF THE PORTFOLIO
AS OF JUNE 30) IN ELECTRIC AND NATURAL GAS STOCKS?
Because electric and natural gas companies have a smaller total market
capitalization than the telecom companies. We manage the fund against a custom
index that is designed to mirror the utilities industry in terms of market
capitalization. The index is made up of approximately 165 utilities stocks
consisting of about 55% telephone and communication services companies, 35%
electric and gas utilities, and the remaining 10% or so in utilities-related
service and equipment companies.
We seek to provide performance that reflects the industry as a whole. Over
the long term, we think it's counter-productive to jump in and out of hot
sectors.
WHY DID THE FUND OUTPERFORM ITS BENCHMARK, THE CUSTOM INDEX?
Though the portfolio was underweight in electric and natural gas utilities,
which performed well, it was overweight in energy companies (about 11.5% of the
portfolio as of June 30) that performed even better. In fact, all five
diversified energy companies listed in the fund's June 30, 2000 Schedule of
Investments (see page 9) contributed significantly to positive performance.
Enron was far and away the top contributor to fund performance. One of our
top-ten holdings, the stock was up 45% in the first half. Other energy
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
"AMERICAN CENTURY UTILITIES CONTINUED TO OUTPERFORM ITS PEER GROUP AVERAGE FOR
THE THREE- AND FIVE-YEAR PERIODS ENDED JUNE 30, 2000."
PORTFOLIO AT A GLANCE
6/30/00 12/31/99
NO. OF COMPANIES 73 77
30-DAY SEC YIELD 2.09% 1.97%
MEDIAN P/E RATIO 20.9 23.5
PORTFOLIO TURNOVER 18%(1) 50%(2)
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.67%(3) 0.68%
(1) Six months ended 6/30/00.
(2) Year ended 12/31/99.
(3) Annualized.
Investment terms are defined in the Glossary on pages 21-22.
6 1-800-345-2021
Utilities--Q&A
--------------------------------------------------------------------------------
(Continued)
companies that helped returns were Coastal Corporation (up 72%), Williams
Companies (up 36%), El Paso Energy (up 31%), and Reliant Energy (up 29%). Enron
is the largest buyer and seller of natural gas in the U.S. Coastal and El Paso
benefited from their impending merger, which will create one of the largest
natural gas distributors and suppliers in the U.S.
Energy companies benefited in general from rising fuel prices. For example,
the price of crude oil jumped more than 30% during the first half of 2000.
WHAT OTHER COMPANIES WERE TOP CONTRIBUTORS TO PERFORMANCE?
Not surprisingly, an electric utility made the list--Calpine Corporation
(up 105%). Calpine, based in San Jose, California, is a leading independent
electric power company. It has experienced exceptional growth due to its ability
to rapidly expand its network of power plants in an environment of limited
electrical supply. Fund shareholders benefited from the fact that we
overweighted Calpine in the portfolio.
Unlike most other telecommunications firms, U S WEST (up 19%) and Qwest (up
16%) contributed positively to performance. They merged after the markets closed
on June 30, creating a new Qwest, an $85 billion broadband Internet
communications company.
WHY DID SO MANY TELECOMMUNICATIONS STOCKS UNDERPERFORM?
Given the sector's robust performance in 1999 and the uncertain economic
environment in 2000 as the Federal Reserve raised interest rates, it shouldn't
have been a complete surprise that telecom faltered in the first half. In
addition, one of telecom's earlier underpinnings eroded.
Two key factors helped telecommunications stocks flourish in 1999:
technological advances and industry deregulation. Deregulation allowed companies
that wanted to provide a comprehensive bundled package of telecommunications
services--including local and long-distance phone services, online services, and
high-speed internet connections--to enter the marketplace and compete with
older, more established firms. This was good for the newcomers, but bad for some
of the more established companies, particularly phone companies.
As a result, performance was mixed for the telecom sector during the first
quarter. Deregulation and competition put pressure on long-distance and regional
telephone companies. But while the phone companies struggled, wireless companies
continued to benefit from a growing worldwide demand for wireless
communications.
The second quarter, however, brought negative results for the entire group.
The shift out of New Economy stocks hurt wireless companies. Concerns about
future earnings potential hampered long-distance and regional telephone
companies' performance.
WHICH TELECOMMUNICATIONS STOCKS DETRACTED MOST FROM FUND PERFORMANCE?
It was primarily the long-distance phone companies--AT&T (down 38%), Sprint
(down 24%), GTE (down 12%), and WorldCom (down 13%). Regional phone companies
didn't do much better. For example, SBC Communications was down 11% and
BellSouth declined 9%.
[right margin]
"UNLIKE MOST OTHER TELECOMMUNICATIONS FIRMS, U S WEST AND QWEST CONTRIBUTED
POSITIVELY TO PERFORMANCE."
TOP TEN HOLDINGS
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
WORLDCOM, INC. 5.5% 4.9%
SBC COMMUNICATIONS
INC. 5.2% 4.7%
U S WEST, INC. 5.1% 4.0%
BELL ATLANTIC CORP. 4.9% 4.7%
GTE CORP. 4.8% 4.7%
ENRON CORP. 4.8% 3.2%
BELLSOUTH CORP. 4.7% 4.5%
VODAFONE AIRTOUCH
PLC ADR 4.4% 5.0%
SPRINT CORP. 4.4% 4.5%
QWEST
COMMUNICATIONS
INTERNATIONAL INC. 4.2% 3.1%
www.americancentury.com 7
Utilities--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT FACTORS DO YOU THINK WILL HAVE THE BIGGEST IMPACT ON THE PERFORMANCE OF
UTILITY STOCKS IN THE SECOND HALF OF THE YEAR?
One is interest rates. If rates continue to rise, utility share prices will
most likely decline. Another factor will be second-half earnings and revenue
projections. We expect earnings to be strong for gas and electric companies, at
least into the third quarter. We will monitor telecommunications companies,
keeping an eye on growth forecast numbers and any signs of decelerating
revenues.
The regulatory environment is another key factor. We're already seeing the
impact of tougher regulatory standards in telecommunications. With the
Sprint/WorldCom merger's failure to win approval, we think merger activity in
the telecom area will decrease and the "merger premiums" on some telecom stocks
could evaporate.
WHAT DO YOU ANTICIPATE FOR THE ECONOMY AND INTEREST RATES?
The U.S. economy appears to be achieving the "soft landing" that the
Federal Reserve hoped to engineer. This should help reduce the risk of further
interest rate increases. The fact that this is a presidential election year
should also help stabilize monetary policy in the second half of the year. The
Fed has shown a reluctance to tinker with interest rates before a presidential
election, presumably for fear of being perceived as favoring one party or
candidate over another.
GIVEN THIS ECONOMIC ENVIRONMENT, HOW DO YOU PLAN TO MANAGE AMERICAN CENTURY
UTILITIES?
Overall, we will take a "steady as she goes" approach. We plan to remain
fairly neutral to the fund's benchmark, with slightly overweight positions in
some of our favorite electric and gas names. Additionally, we will watch for
price declines in some of our favorite telecommunications companies as an
opportunity to add to those positions.
WHY DID THE FUND PAY SUCH A LARGE INCOME DISTRIBUTION ON JUNE 30 ($0.77 A
SHARE)?
It was result of a stock distribution by BCE--the parent company of Bell
Canada, and a large fund holding--that was ruled to be an income distribution
and was taxable as ordinary income. During the second quarter, BCE spun off its
network equipment subsidiary, Nortel Networks. BCE distributed its 35% interest
in Nortel to its shareholders--including the Utilities fund--in the form of new
Nortel stock.
This one-time event boosted the fund's quarterly income distribution far
above normal levels. Future quarterly income distributions should return to more
typical levels, about $0.10 a share, totaling about $0.40 a share annually.
[left margin]
"WE BELIEVE THAT OUR TELEPHONE AND TELECOM FOCUS IS ONE OF THE KEY REASONS THE
FUND HAS PERFORMED RELATIVELY WELL AGAINST ITS PEERS OVER THE LAST FIVE YEARS."
INDUSTRY BREAKDOWN
% OF FUND INVESTMENTS
AS OF AS OF
6/30/00 12/31/99
TELEPHONE 52.4% 56.7%
ELECTRICAL UTILITIES 26.2% 27.7%
ENERGY 11.5% --
WIRELESS
TELECOMMUNICATIONS 3.2% 5.1%
NATURAL GAS 2.8% 2.2%
OTHER 3.9% 8.3%
8 1-800-345-2021
Utilities--Schedule of Investments
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
Shares Value
-------------------------------------------------------------------------------
COMMON STOCKS -- 99.8%
ELECTRICAL EQUIPMENT -- 1.1%
45,705 Nortel Networks Corp. $ 3,119,366
------------
ELECTRICAL UTILITIES -- 26.2%
30,000 AES Corp. (The)(1) 1,368,750
104,440 American Electric Power Co., Inc. 3,094,035
50,000 Calpine Corp.(1) 3,287,500
58,700 CMS Energy Corp. 1,298,737
72,850 Conectiv, Inc. 1,133,728
75,000 Consolidated Edison, Inc. 2,221,875
70,000 Constellation Energy Group 2,279,375
109,556 Dominion Resources, Inc. (Va.) 4,697,214
35,000 DQE, Inc. 1,384,688
58,400 DTE Energy Company 1,784,850
145,000 Duke Energy Corp. 8,174,375
100,000 Edison International 2,050,000
39,000 Energy East Corp. 743,438
74,000 Entergy Corp. 2,011,875
67,800 FirstEnergy Corp. 1,584,825
70,600 FPL Group, Inc. 3,494,700
38,000 GPU Inc. 1,028,375
30,000 Kansas City Power & Light Co. 675,000
67,500 LG&E Energy Corp. 1,611,562
50,000 Minnesota Power & Light Co. 865,625
70,000 Montana Power Co. 2,471,875
51,300 New Century Energies, Inc. 1,539,000
58,000 NIPSCO Industries, Inc. 1,080,250
50,000 Northeast Utilities 1,087,500
100,000 Northern States Power Co. (Minn.) 2,018,750
23,021 NSTAR 936,667
70,000 PECO Energy Co. 2,821,875
120,000 PG&E Corp. 2,955,000
35,000 Potomac Electric Power Co. 875,000
47,300 Puget Sound Energy Inc. 1,008,081
95,000 Sempra Energy 1,615,000
246,800 Southern Co. 5,753,525
100,000 Texas Utilities Co. 2,950,000
42,700 UGI Corp. 875,350
78,000 Unicom Corp. 3,017,625
75,000 Utilicorp United Inc. 1,490,625
------------
77,286,650
------------
ENERGY -- 11.5%
73,800 Coastal Corp. (The) 4,492,575
95,000 El Paso Energy Corporation 4,839,062
220,800 Enron Corp. 14,241,600
120,000 Reliant Energy, Inc. 3,547,500
165,600 Williams Companies, Inc. (The) 6,903,450
------------
34,024,187
------------
Shares Value
-------------------------------------------------------------------------------
GAS & WATER UTILITIES -- 1.1%
105,000 Keyspan Energy Corp. $ 3,228,750
------------
MEDIA -- 0.3%
40,000 RCN Corp.(1) 1,013,750
------------
NATURAL GAS -- 2.8%
65,000 Columbia Energy Group 4,265,625
78,400 Kinder Morgan, Inc. 2,709,700
11,600 National Fuel Gas Co. 565,500
100,000 TransCanada Pipelines Ltd. 762,500
------------
8,303,325
------------
OIL REFINING -- 1.2%
50,990 Dynegy Inc. 3,483,254
------------
TELEPHONE -- 52.4%
334,050 AT&T Corp. 10,564,331
145,000 BCE Inc. 3,452,812
283,000 Bell Atlantic Corp. 14,379,938
325,000 BellSouth Corp. 13,853,125
78,900 BroadWing Inc. 2,046,469
15,000 Cable & Wireless plc ADR 750,938
50,000 Century Telephone Enterprises,
Inc. 1,437,500
45,000 Covad Communications Group,
Inc.(1) 724,219
25,000 Global Crossing Holdings Ltd.(1) 658,594
229,000 GTE Corp. 14,255,250
20,000 NEXTLINK Communications, Inc.
Cl A(1) 758,125
10,000 Nippon Telegraph & Telephone
Corp. ADR 683,750
250,000 Qwest Communications
International Inc.(1) 12,421,875
355,520 SBC Communications Inc. 15,376,240
255,000 Sprint Corp. 13,005,000
25,000 Telefonica S.A. ADR 1,601,562
80,000 Telefonos de Mexico, S.A. Cl L
ADR 4,570,000
175,000 U S WEST, Inc. 15,006,250
314,000 Vodafone AirTouch PLC ADR 13,011,375
356,450 WorldCom, Inc.(1) 16,363,283
------------
154,920,636
------------
WIRELESS TELECOMMUNICATIONS -- 3.2%
85,000 ALLTEL Corp. 5,264,688
24,000 Nextel Communications, Inc.(1) 1,467,750
15,100 VoiceStream Wireless Corp.(1) 1,756,319
15,000 Western Wireless Corp. Cl A(1) 817,031
------------
9,305,788
------------
TOTAL COMMON STOCKS 294,685,706
------------
(Cost $239,194,868)
See Notes to Financial Statements www.americancentury.com 9
Utilities--Schedule of Investments
-------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
Value
-------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 0.2%
Repurchase Agreement, Morgan Stanley
Group, Inc., (U.S. Treasury obligations), in a
joint trading account at 6.40%, dated
6/30/00, due 7/3/00 (Delivery value
$700,373) $ 700,000
------------
(Cost $700,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $295,385,706
============
(Cost $239,894,868)
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).
JUNE 30, 2000 (UNAUDITED)
ASSETS
Investment securities, at value (identified
cost of $239,894,868) (Note 3) ............................ $295,385,706
Cash ........................................................ 392,160
Dividends, interest and other receivable .................... 597,515
------------
296,375,381
------------
LIABILITIES
Payable for investments purchased ........................... 791,064
Accrued management fees (Note 2) ............................ 167,700
Distribution fees payable (Note 2) .......................... 1,083
Service fees payable (Note 2) ............................... 1,083
Payable for directors' fees and expenses .................... 800
Accrued expenses and other liabilities ...................... 9,843
------------
971,573
------------
Net Assets .................................................. $295,403,808
============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ..................... $232,840,841
Undistributed net investment income ......................... 19,462
Accumulated undistributed net realized
gain on investment transactions ........................... 7,052,655
Net unrealized appreciation
on investments (Note 3) ................................... 55,490,850
------------
$295,403,808
============
Investor Class, $10.00 Par Value
Net assets .................................................. $290,445,570
Shares outstanding .......................................... 18,904,426
Net asset value per share ................................... $ 15.36
Advisor Class, $10.00 Par Value
Net assets .................................................. $ 4,958,238
Shares outstanding .......................................... 322,710
Net asset value per share ................................... $ 15.36
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.
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld $23,042) ........... $ 16,397,764
Interest .................................................... 51,298
------------
16,449,062
------------
Expenses (Note 2):
Management fees ............................................. 1,027,945
Distribution fees -- Advisor Class .......................... 6,546
Service fees -- Advisor Class ............................... 6,546
Directors' fees and expenses ................................ 5,477
------------
1,046,514
------------
Net investment income ....................................... 15,402,548
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain on investments ............................ 8,326,600
Change in net unrealized
appreciation on investments ............................... (27,033,962)
------------
Net realized and unrealized loss on
investments and foreign currency .......................... (18,707,362)
------------
Net Decrease in Net Assets
Resulting from Operations ................................. $ (3,304,814)
============
12 1-800-345-2021 See Notes to Financial Statements
Statement 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.
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1999
Increase (Decrease) in Net Assets 2000 1999
OPERATIONS
Net investment income ........................ $15,402,548 $6,357,677
Net realized gain on investments ............. 8,326,600 17,099,349
Change in net unrealized
appreciation on investments ................ (27,033,962) 10,228,171
--------------- -------------
Net increase (decrease) in net
assets resulting from operations ........... (3,304,814) 33,685,197
--------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Investor Class ............................. (15,131,611) (6,541,545)
Advisor Class .............................. (251,475) (62,845)
In excess of net investment income:
Investor Class ............................. -- (38,868)
Advisor Class .............................. -- (661)
From net realized gains on investment transactions:
Investor Class ............................. (1,348,157) (17,256,040)
Advisor Class .............................. (22,695) (268,696)
--------------- -------------
Decrease in net assets from distributions .... (16,753,938) (24,168,655)
--------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase (decrease) in net assets
from capital share transactions ............ (9,017,681) 7,111,530
--------------- -------------
Net increase (decrease) in net assets ........ (29,076,433) 16,628,072
NET ASSETS
Beginning of period .......................... 324,480,241 307,852,169
--------------- -------------
End of period ................................ $295,403,808 $324,480,241
=============== =============
Undistributed net investment income .......... $19,462 --
=============== =============
See Notes to Financial Statements www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Quantitative Equity Funds (the corporation)
is registered under the Investment Company Act of 1940 (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.
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.
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.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is a distributor of
the corporation. Certain officers of FDI are also officers of the corporation.
14 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
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 period ended
June 30, 2000, the effective annual Investor Class management fee was 0.67%.
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 six months ended June 30, 2000, were $13,092.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the corporation.
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, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2000 totaled $56,012,965 and $66,408,575,
respectively.
On June 30, 2000, accumulated net unrealized appreciation on investments was
$54,514,438, based on the aggregate cost of investments for federal income tax
purposes of $240,871,268, which consisted of unrealized appreciation of
$71,051,733 and unrealized depreciation of $16,537,295.
www.americancentury.com 15
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
The corporation is authorized to issue 2,000,000,000 shares to the fund.
Transactions in shares of the fund were as follows:
SHARES AMOUNT
INVESTOR CLASS
Designated shares .......................... 1,000,000,000
==============
Six months ended June 30, 2000
Sold ....................................... 2,461,681 $ 41,187,635
Issued in reinvestment of distributions .... 935,827 14,639,583
Redeemed ................................... (3,879,447) (64,747,168)
-------------- --------------
Net decrease ............................... (481,939) $ (8,919,950)
============== ==============
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
============== ==============
ADVISOR CLASS
Designated shares .......................... 250,000,000
==============
Six months ended June 30, 2000
Sold ....................................... 95,786 $ 1,602,581
Issued in reinvestment of distributions .... 14,321 223,688
Redeemed ................................... (114,800) (1,924,000)
-------------- --------------
Net decrease ............................... (4,693) $ (97,731)
============== ==============
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
============== ==============
--------------------------------------------------------------------------------
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
six months ended June 30, 2000.
16 1-800-345-2021
Utilities--Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
investment 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
2000(1) 1999 1998 1997 1996 1995
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ........... $ 16.46 $ 15.96 $ 14.24 $ 11.51 $ 11.44 $ 8.79
----------- ----------- ----------- ----------- ----------- -----------
Income From
Investment Operations
Net Investment Income ......... 0.83(2) 0.33(2) 0.37 0.43 0.45 0.42
Net Realized and Unrealized
Gain on Investment
Transactions .................. (1.02) 1.45 3.39 3.57 0.08 2.65
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations .................... (0.19) 1.78 3.76 4.00 0.53 3.07
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income .... (0.84) (0.35) (0.38) (0.42) (0.46) (0.42)
In Excess of Net
Investment Income ............. -- --(3) -- -- -- --
From Net Realized Gains on
Investment Transactions ....... (0.07) (0.93) (1.66) (0.85) -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........... (0.91) (1.28) (2.04) (1.27) (0.46) (0.42)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .. $ 15.36 $ 16.46 $ 15.96 $ 14.24 $ 11.51 $ 11.44
=========== =========== =========== =========== =========== ===========
Total Return(4) ............... (1.22)% 11.46% 27.43% 35.82% 4.82% 35.70%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .............. 0.67%(5) 0.68% 0.69% 0.72% 0.71% 0.75%
Ratio of Net Investment Income to
Average Net Assets .............. 9.93%(5) 2.02% 2.51% 3.56% 3.88% 4.31%
Portfolio Turnover Rate ......... 18% 50% 98% 92% 93% 68%
Net Assets, End of Period
(in thousands) ................ $ 290,446 $ 319,092 $ 307,777 $ 209,962 $ 145,134 $ 218,794
</TABLE>
(1) Six months ended June 30, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) Per-share amount was less than $0.005.
(4) Total return assumes reinvestment of 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 17
Utilities--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31 (EXCEPT AS NOTED)
Advisor Class
2000(1) 1999 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period .... $16.46 $15.96 $14.90
----------- ----------- ----------
Income From Investment Operations
Net Investment Income ................. 0.82(3) 0.27(3) 0.16
Net Realized and Unrealized
Gain on Investment Transactions ....... (1.04) 1.47 2.52
----------- ----------- ----------
Total From Investment Operations ...... (0.22) 1.74 2.68
----------- ----------- ----------
Distributions
From Net Investment Income ............ (0.81) (0.31) (0.19)
In Excess of Net Investment Income .... -- --(4) --
From Net Realized Gains on
Investment Transactions ............... (0.07) (0.93) (1.43)
----------- ----------- ----------
Total Distributions ................... (0.88) (1.24) (1.62)
----------- ----------- ----------
Net Asset Value, End of Period .......... $15.36 $16.46 $15.96
=========== =========== ==========
Total Return(5) ....................... (1.36)% 11.20% 18.43%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 0.92%(6) 0.93% 0.94%(6)
Ratio of Net Investment Income
to Average Net Assets ................... 9.68%(6) 1.77% 1.94%(6)
Portfolio Turnover Rate ................. 18% 50% 98%
Net Assets, End of Period
(in thousands) ........................ $4,958 $5,388 $76
(1) Six months ended June 30, 2000 (unaudited).
(2) June 25, 1998 (commencement of sale) through December 31, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Per-share amount was less than $0.005.
(5) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(6) Annualized.
18 1-800-345-2021 See Notes to Financial Statements
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the fund: 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
shares is 0.25% higher than the total expense ratio of the Investor Class
shares.
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 19
Background Information
--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers four "specialty" equity funds* that concentrate
their holdings in specific industries or sectors of the stock market. These
funds typically respond differently than general equity funds to changing market
or economic conditions. The funds are managed to provide a broad representation
of their respective industries.
AMERICAN CENTURY UTILITIES seeks current income and long-term growth of
capital and income. The fund invests primarily in the stocks of companies
engaged in the utilities industry, including 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 is
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.
[left margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
BILL MARTIN
JOHN SCHNIEDWIND
JOE STERLING
20 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 17-18.
PORTFOLIO STATISTICS
* NUMBER OF COMPANIES -- the number of different companies held by the fund on a
given date.
* 30-DAY SEC YIELD -- net investment income earned by the fund over a 30-day
period, expressed as an annual percentage rate based on the fund's share price
at the end of the 30-day period. The SEC yield should be regarded as an estimate
of the fund's dividend income, and it may not equal the fund's actual income
distribution rate, the income paid to a shareholder's account, or the income
reported in the fund's financial statements.
* PRICE/EARNINGS (P/E) RATIO -- a stock value measurement calculated by dividing
a company's stock price by its earnings per share, with the result expressed as
a multiple instead of as a percentage. (Earnings per share is calculated by
dividing the after-tax earnings of a corporation by its outstanding shares.)
* PORTFOLIO TURNOVER-- the percentage of the fund's investment portfolio that is
replaced during a given time period, usually a year. Actively managed portfolios
tend to have higher turnover than passively managed portfolios such as index
funds.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF STOCKS
* BLUE CHIP STOCKS -- stocks of the most established companies in American
industry. They are generally large, fairly stable companies that have
demonstrated consistent earnings and usually have long-term growth potential.
Examples include General Electric and Coca-Cola.
* CYCLICAL STOCKS -- 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 $8.7 billion. This is Lipper's market-capitalization breakpoint as of June
30, 2000, 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
$2.3 billion and $8.7 billion. This is Lipper's market-capitalization breakpoint
as of June 30, 2000, 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 $2.3 billion. This is Lipper's market-capitalization breakpoint as of June
30, 2000, 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.
www.americancentury.com 21
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.
22 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 23
Notes
--------------------------------------------------------------------------------
24 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced 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 Technology International Discovery
Giftrust(reg.tm) Life Sciences 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 and text 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 PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0008 American Century Investment Services, Inc.
SH-SAN-21704 (c)2000 American Century Services Corporation
